<PAGE>
As filed with the Securities and Exchange Commission on June 23, 1999
Registration No. 333-78857
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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ftd.com inc.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware 7389 36-4294509
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)
3113 Woodcreek Drive
Downers Grove, Illinois 60515
(630) 724-6200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
-----------------
Michael J. Soenen
President and Chief Executive Officer
3113 Woodcreek Drive
Downers Grove, Illinois 60515
(630) 724-6200
(Name, Address Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies to:
Timothy J. Melton Matthew J. Mallow
Jones, Day, Reavis & Pogue Skadden, Arps, Slate, Meagher & Flom
77 West Wacker Drive LLP
Chicago, Illinois 60601 919 Third Avenue
(312) 782-3939 New York, New York 10022
(212) 735-3000
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Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
-----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 23, 1999
PROSPECTUS
Shares
[LOGO]
ftd.com inc.
Class A Common Stock
-------------
There currently is no public market for the Class A common stock of ftd.com. We
anticipate that the initial public offering price will be between $ and
$ per share. We have applied to have our Class A common stock approved
for quotation on the Nasdaq National Market under the symbol "EFTD."
Investing in our Class A common stock involves a high degree of risk. See "Risk
Factors" beginning on page 7 to read about risks that you should consider
before buying shares of our Class A common stock.
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
-------------
<TABLE>
<CAPTION>
Per
Share Total
--------- ---------
<S> <C> <C>
Public offering price...................................... $ $
Underwriting discounts and commission...................... $ $
Proceeds, before expenses, to us........................... $ $
</TABLE>
-------------
The underwriters may, under some circumstances, purchase up to an additional
shares of Class A common stock from us at the initial public offering
price less the underwriting discount. The underwriters expect to deliver the
shares against payment in New York, New York on , 1999.
-------------
Bear, Stearns & Co. Inc.
Thomas Weisel Partners LLC Volpe Brown Whelan & Company
-------------
Internet Distribution Offered by
E*TRADE Securities, Inc.
The date of this prospectus is , 1999.
<PAGE>
[Description of pictures and captions to come.]
------------------
We are not incorporating the information on our Web site into this
prospectus and we do not intend to make our Web site a part of this prospectus.
FTD(R), the Mercury Man(R) logo and the FTD logo are the property of Florists'
Transworld Delivery, Inc. This prospectus includes trademarks, trade names and
service marks of other companies. Each trademark, trade name or service mark of
any other company appearing in this prospectus is the property of its owner.
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information that you should consider
before investing in the Class A common stock. You should read the entire
prospectus carefully, especially the risks of investing in the Class A common
stock discussed under "Risk Factors." Unless we indicate otherwise in this
prospectus, references to "the Company," "ftd.com," "we" or "our" mean ftd.com
inc., and references to "FTDI" mean Florists' Transworld Delivery, Inc.
ftd.com is an Internet and telephone marketer of flowers and specialty
gifts. We were founded by FTD to sell directly to consumers through our
www.ftd.com Web site and our 1-800-SEND-FTD toll-free telephone number. We
utilize a group of approximately 6,500 FTD florists who adhere to our quality
guarantee and service standards. Through this network, we can provide same-day
delivery of floral orders to over 97% of the U.S. population. We offer over 150
floral arrangements for holidays and other occasions as well as 50 specialty
gifts, such as stuffed animals and other plush toys, gourmet gift baskets,
holiday gift sets and collectible containers. Our products are available at
prices ranging from $29.99 to $176.99. For the three months ended March 31,
1999, our total revenues were $12.4 million and we received a total of 208,845
orders. Internet orders represented 57% of total customer orders during this
period.
The Internet is dramatically affecting the methods by which consumers buy
goods and services. We believe that the number of consumers who purchase
flowers and specialty gifts online and the purchasing frequency of those
consumers will increase substantially over the next few years. We expect this
growth to be driven by several factors, including the consumer's ability to
view and obtain detailed information about the products they are considering
purchasing, the convenience offered by shopping online and the ability to be
personally reminded of upcoming purchasing occasions. Forrester Research
estimates that U.S. retail consumer purchases of goods and services over the
Internet will increase from $7.8 billion in 1998 to over $108 billion in 2003.
Forrester Research also forecasts that the U.S. online market for flowers will
increase from $212 million in 1998 to $906 million in 2003 and that the U.S.
online market for specialty gifts will increase from $63 million in 1998 to
$544 million in 2003. We believe that the flower and specialty gift markets are
fragmented and that our strategies to take advantage of this market
opportunity, combined with our competitive strengths will enable us to grow our
business and build market share.
Competitive Strengths
We believe that we will be able to significantly grow our business by
utilizing the following competitive advantages:
. Highly recognized brand name. The FTD brand and Mercury Man logo are
among the most recognized consumer brands in America.
. Commercially attractive URL. www.ftd.com is an advantageous URL because
of the strength and simplicity of the FTD brand name.
. Fulfilling florist network. Nearly all of our floral orders are filled by
a group of approximately 6,500 FTD florists known as our "fulfilling
florists." Our fulfilling florists are required to adhere to our program
rules and service standards, including our 100% satisfaction guarantee
and same-day delivery.
. Customer service and quality control. We provide trained customer support
at our call center and through online services. Our ongoing quality
control efforts include randomly placing test orders with our fulfilling
florists and monitoring customer feedback to ensure customer
satisfaction.
. Relationships with other popular consumer brands. A variety of our
products incorporate other popular consumer brands, such as The Walt
Disney Company's Winnie The Pooh(R), M&M/Mars, Inc.'s M&M's(R)
characters, Hickory Farms(R) and Vermont Teddy Bears(R).
3
<PAGE>
. Existing online presence. We have established an online advertising
presence with high-traffic Web sites, such as Yahoo!, the Go Network(TM),
Netscape Netcenter, MSN.com and others. This presence allows us to
stimulate brand awareness and drive traffic to our Web site.
. Multi-functional interactive e-commerce platform. Our Web site allows us
to store and analyze customer, sales and Web site activity and
incorporates product search and e-mail reminder services.
Business Strategy
Our objective is to be the leading marketer of flowers and specialty gifts
on the Internet. We intend to pursue this objective by employing the following
strategies:
. Build brand awareness, increase our customer base and increase their
purchasing frequency. We plan to achieve this objective by significantly
expanding our online and traditional advertising, direct
marketing/affinity and retention marketing efforts.
. Enhance our customers' shopping experience. We plan to continue to invest
in technologies that offer customers the most convenient, user-friendly
and secure shopping experience possible.
. Promote our Web site to telephone customers. We intend to encourage
consumers who currently purchase flowers and specialty gifts over the
telephone to make their future purchases through our Web site. We believe
that our Web site provides a superior shopping experience and is a better
medium to retain and market to our customer base.
. Expand our product offerings. We will seek to expand our product
offerings to provide our customers with the best selection of flowers and
specialty gifts.
. Provide quality customer service. By continuing to improve our Web site
and call centers and promoting our 100% customer satisfaction guarantee,
we intend to further develop and strengthen our reputation for customer
service.
. Capitalize on FTD's international fulfillment capability. The 6,500
fulfilling florists who have agreed to our service standards are a subset
of the approximately 20,000 FTD florists located in North America.
Because of our relationship with FTD, we also have access to a network of
approximately 32,000 florists located outside North America to fulfill
our orders abroad. We intend to market our international fulfillment
capabilities to North American consumers who wish to send flowers abroad.
4
<PAGE>
Ownership of ftd.com
ftd.com, formed in May 1999, is a subsidiary of Florists' Transworld
Delivery, Inc., or FTDI. Shortly after the formation of ftd.com, Buena Vista
Internet Group and DBV Investments, L.P., one of MSD Capital, L.P.'s investment
partnerships, made investments in ftd.com. Buena Vista Internet Group is a
wholly owned subsidiary of The Walt Disney Company and MSD Capital is the
private investment firm for Michael S. Dell.
The following chart illustrates the ownership structure of ftd.com prior to
this offering:
[Chart depicting ownership structure of ftd.com prior to this offering,
illustrating that 100% of FTDI is owned by FTD Corporation and that 97% of
ftd.com is owned by FTDI with the remaining 3% owned by Buena Vista Internet
Group and DBV Investments.]
FTDI is the successor to Florists' Transworld Delivery Association, a non-
profit cooperative association that was founded by a group of retail florists
in the U.S. in 1910. FTDI is a wholly owned subsidiary of FTD Corporation and,
through its subsidiaries, operates all of the businesses that were conducted by
Florists' Transworld Delivery Association prior to its acquisition by FTD
Corporation in December 1994, except for various trade association activities.
Those trade association activities are conducted by FTD Association, which is a
member-owned, non-profit trade association, representing the interests of, and
providing educational and governmental lobbying services for, FTD florists.
Neither FTD Corporation nor FTDI has any ownership interest in FTD Association.
5
<PAGE>
In addition to the Internet and toll-free telephone businesses conducted by
ftd.com, FTDI and its subsidiaries operate transaction processing businesses,
which include the Mercury Network(R) and the FTD Clearinghouse. The Mercury
Network is a proprietary telecommunications network that links us, FTDI and
approximately 80% of the FTD florists in the U.S. and Canada, and is used to
transmit orders and send messages. The FTD Clearinghouse provides billing and
collection services to FTD florists, for which FTDI retains a percentage of the
sales price of orders it clears. FTDI's operations also include the FTD
Marketplace(R), a wholesale supplier of hardgoods to retail florists in the
U.S. and Canada. FTD Marketplace products include both FTD-branded and non-
branded floral arrangement containers and products, packaging and promotional
products and a wide variety of other floral-related supplies.
In connection with the December 1994 acquisition, FTDI and FTD Association
entered into a Mutual Support Agreement and a Trademark License Agreement.
These agreements govern some aspects of the relationship between FTDI and FTD
Association. The material provisions of these agreements provide:
. existing and future FTD florists with the exclusive right to use the FTD
logo and other FTD trademarks in connection with the operation of a
retail florist shop;
. access to the Mercury Network, the FTD Clearinghouse, the FTD Marketplace
and FTDI's other services and products for all FTD florists in good
standing;
. order origination fees, representing a percentage of the order value,
paid by FTDI to FTD Association for every floral order cleared through
the FTD Clearinghouse;
. billing and collection by FTDI on behalf of FTD Association of the
monthly fee that is charged by FTD Association to FTD florists; and
. the rights of FTDI and FTD Association to each designate representatives
to serve on the other's board of directors, including subsidiaries of
FTDI, which means that FTD Association has the right to designate members
of our board of directors, see "Certain Transactions--Rights to Designate
Directors."
------------------
Our principal executive office is located at 3113 Woodcreek Drive, Downers
Grove, Illinois 60515, and our telephone number is (630) 724-6200. Our Web site
address is www.ftd.com and our toll-free telephone number is 1-800-SEND-FTD. We
are not incorporating the information on our Web site into this prospectus and
we do not intend to make our Web site a part of this prospectus.
6
<PAGE>
THE OFFERING
The following information assumes that the underwriters do not exercise the
option granted by us to purchase additional shares in this offering. The
following information also excludes shares of Class A common stock issuable
upon exercise of options, which vest over various periods of time, outstanding
as of the date of this prospectus.
<TABLE>
<S> <C>
Class A common stock offered shares
by ftd.com...................
Common stock to be outstanding
after the offering:
Class A common stock........ shares
Class B common stock........ shares
Proposed Nasdaq National EFTD
Market symbol................
Use of proceeds............... We intend to use between $ million and $
million of the net proceeds from the offering
for advertising, promotion and other marketing
activities. We will use approximately $
million for capital expenditures and the
remaining net proceeds for other general
corporate purposes, including working capital.
In the event that we identify suitable
acquisition candidates or investment
opportunities, we may also use a portion of the
net proceeds to acquire or invest in
complementary businesses, services or products.
We currently have no commitments or agreements
with respect to any acquisition or investment
transactions.
Voting rights................. The holders of Class A common stock have voting
rights identical to holders of Class B common
stock, except that holders of Class A common
stock are entitled to one vote per share and
holders of Class B common stock are entitled to
ten votes per share. Holders of both classes of
common stock generally will vote together as a
single class on all matters presented to the
stockholders for their vote or approval, except
as otherwise required by applicable Delaware
law.
</TABLE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
Nine months ended
Year ended June 30, March 31,
---------------------------- ------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(dollars in thousands, except per order
data)
<S> <C> <C> <C> <C> <C>
Statement of Operations:
Total revenues............... $ 18,541 $ 26,255 $ 30,663 $ 19,082 $ 31,183
Gross profit................. 3,110 3,972 4,339 2,281 6,664
Gross profit (%)............. 16.8% 15.1% 14.2% 12.0% 21.4%
Marketing and promotion
expenses.................... $ 4,188 $ 4,864 $ 5,995 $ 3,614 $ 7,797
Loss from operations......... (5,284) (5,705) (6,315) (4,454) (5,755)
Net loss..................... $ (3,306) $ (3,583) $ (3,895) $ (2,774) $ (3,532)
Other Data:
Total orders................. 377,665 513,198 602,396 376,202 538,188
Average order value (1)...... $ 48.96 $ 51.11 $ 50.50 $ 50.70 $ 52.99
Percentage Internet orders... 10.6% 17.0% 33.8% 29.3% 48.9%
</TABLE>
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(1) Average order value represents order revenues and service fees, net of
discounts divided by total orders.
7
<PAGE>
RISK FACTORS
An investment in the Class A common stock involves a high degree of risk.
You should consider carefully the following information about these risks
before buying shares of Class A common stock. The risks described below are not
the only ones facing our company. Additional risks may impair our business
operations. If any of the following risks occur, our business, results of
operations or financial condition could be adversely affected. In that case,
the trading price of our Class A common stock could decline, and you may lose
all or part of your investment. You should also refer to the other information
contained in this prospectus, including our financial statements and the notes
to those statements.
Risks Related to Our Business
We do not have an operating history as an independent company and our
historical financial statements do not reflect operations of an independent
company.
The historical financial statements contained elsewhere in this prospectus
include allocations for technical, human resources, accounting, administrative,
legal and other expenses incurred by FTDI for services rendered to us. These
allocations are not necessarily indicative of, and it is not practical for us
to estimate, the levels of expenses that would have resulted had we been
operating as a separate, stand-alone company. We have also relied on FTDI to
provide financing for our historical operations. As a result, our cash flows to
date are not necessarily indicative of the cash flows that would have resulted
had we been operating as an independent company during the periods presented.
In the event our actual costs as an independent company are significantly
higher than the costs reflected in our historical financial statements, our
business, results of operations and financial condition will be adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
We currently are not profitable and expect to record significant losses for
the foreseeable future.
We have incurred net losses in each of the past three years. We incurred an
aggregate net loss of $10.8 million for the three year period ended June 30,
1998, including net losses of $3.3 million, $3.6 million and $3.9 million for
the years ended June 30, 1996, 1997 and 1998, respectively. We expect to record
significantly greater net losses for the foreseeable future. The principal
causes of our losses have been, and are likely to continue to be, significant
brand development costs, marketing costs and systems and technology development
costs.
Our brand may not achieve the broad recognition necessary to succeed.
We believe that broader recognition and a favorable consumer perception of
the ftd.com brand are essential to our future success. Successful positioning
of the ftd.com brand will largely depend on the success of our advertising,
marketing and promotion efforts and our ability to continue to provide high
quality products and customer service. We believe that many consumers currently
associate the ftd.com brand primarily with the sale of flowers and floral
arrangements. One of our growth strategies involves the expansion of our
specialty gift business. To grow our specialty gift business, we will need to
increase awareness of the ftd.com brand in the specialty gift market. As a
result, we intend to continue to pursue an aggressive brand development
strategy, which will include substantially larger advertising, marketing and
promotional programs than those historically undertaken by us. These
initiatives will involve significant expense. If our brand development strategy
is unsuccessful, these expenses may never be recovered and we may be unable to
generate a profit in the future.
We do not own the FTD trademark and associated logos that we use to promote
our brand.
The FTD trademark and associated logos, which we use to promote the ftd.com
brand, are owned by FTDI and licensed to us for specific uses. The FTD
trademark and associated logos are also licensed to FTD florists, some of whom
also fulfill orders for our competitors or operate their own Web sites. Any use
of the FTD trademark and associated logos by FTDI or another third party that
creates an unfavorable perception of the FTD trademark and associated logos may
dilute our efforts to broaden recognition and enhance the perception of the
ftd.com brand.
8
<PAGE>
Market competition among our existing and potential competitors may
adversely affect our business.
Increased competition may result in lower revenues due to price reductions,
reduced gross margins and loss of market share. We cannot assure you that we
will be able to compete successfully or that competitive pressures will not
adversely affect our business. We compete with both traditional distribution
channels, other Web sites, telephone order originators and catalogs, including
1-800-FLOWERS.COM, INC., Gerald Stevens, Inc. and PC Flowers & Gifts.com Inc.
In addition, competitors who are FTD florists in good standing are not
restricted from using the FTD Clearinghouse and the network of FTD florists to
fill their orders. Some of our existing and potential competitors may have
significant competitive advantages, including larger customer bases and
greater technical expertise, brand recognition or Internet commerce
experience. In addition, some of our existing and potential competitors may be
able to devote significantly greater resources than us to marketing campaigns,
attracting traffic to their Web sites and system development. We expect
competition to continue to increase because there are few barriers to entry in
the floral and specialty gift businesses and because of the relative ease with
which new Web sites can be developed.
Our business could be adversely affected if we are unable to maintain a
significant advertising presence on high-traffic Web sites.
We depend on establishing and maintaining an advertising presence on high-
traffic Web sites, including third party portals and content sites, for a
significant portion of the visits to our Web site. There is intense
competition for placement of advertising on these Web sites, and we may have
to pay significant fees to establish or maintain a presence on these Web sites
in the future. We may be unable to enter into relationships with these sites
on commercially reasonable terms or at all.
Further, many Web sites that we may approach to establish an advertising
presence or who we already have a relationship with may also provide
advertising services for other marketers of flowers and specialty gifts. As a
result, these sites may be reluctant to enter into or maintain relationships
with us. Our business, results of operations and financial condition could be
adversely affected if we do not develop and secure sufficient online
advertising or secure an appropriate presence on commercially reasonable terms
or if these activities do not effectively attract users to our Web site and
lead to a substantial amount of sales.
Consumers may reduce discretionary purchases of flowers and specialty
gifts.
We believe that consumer spending on flowers and specialty gifts is
influenced by general economic conditions and the availability of
discretionary income. Accordingly, companies that compete in these businesses,
including us, may experience sustained periods of declines in sales during
future economic downturns. Any material decline in the amount of discretionary
spending could adversely affect our business, results of operations and
financial condition.
Consumers may not regularly purchase the products we offer over the
Internet or telephone.
There are many other channels through which consumers are able to purchase
flowers and specialty gifts, including retail floral shops, catalogs and
supermarkets and other mass merchants that have floral shops. The success of
our business depends to a large extent on consumers purchasing flowers and
specialty gifts over the Internet or telephone instead of through these other
channels. Our business, results of operations and financial condition would be
adversely affected if consumers purchase these products over the Internet one
or two times because of the novelty of Internet commerce, but then elect to
make future flower and specialty gift purchases through more traditional
channels.
Our business could be adversely affected if we are unable to expand our
business through our marketing arrangements.
We intend to expand our marketing various licensed products, such as
products that incorporate M&M/Mars, Inc.'s M&M's(R) characters and the Walt
Disney Company's Winnie the Pooh.(R) We believe that
9
<PAGE>
our business will benefit when we have the right to market products that
incorporate popular consumer brands. These arrangements typically involve a
non-exclusive license between us or FTDI and the owner of the brand. We expect
to rely on FTDI to develop some of these licensed products. In addition, in
order to maintain these marketing arrangements, it is important that we not
take any action that the licensors believe harms their brands. Our business
could be adversely affected if we are unable to expand these marketing
arrangements with third parties.
Our quarterly operating results are subject to fluctuations and seasonality.
Our revenues and operating results may vary from quarter to quarter due to
factors beyond our control. For example, our revenues and operating results
tend to be lower for the quarter that ends on September 30 because none of the
most popular floral holidays, which include Valentine's Day, Easter, Mother's
Day, Thanksgiving and Christmas, falls within that quarter. In addition, the
popular floral holiday of Easter sometimes falls within the quarter that ends
on March 31 and sometimes falls within the quarter that ends on June 30.
For fiscal 1998, our last completed fiscal year, we recorded 11%, 26%, 25%
and 38% of our total revenues in the quarters ended September 30, December 31,
March 31 and June 30, respectively.
As a result, comparisons of our results of operations from one quarter to
the immediately preceding quarter are of limited relevance in evaluating our
historic financial performance and predicting our future performance. It is
also possible that in some future periods our results of operations may be
below the expectations of public market analysts and investors. In this event,
the price of our Class A common stock may fall.
FTDI's Florists Online(TM) business unit offers FTD florists the opportunity
to establish Web sites that enable consumers to place orders directly with an
FTD florist. Through an agreement with FTDI, we currently host Web sites for
approximately 2,500 FTD florists. These florist Web sites are accessible
through our Web site. Consumers may prefer to place orders directly with these
retail florists instead of placing an order through us. Although we currently
receive a monthly fee from FTDI for hosting those Web sites designed to offset
any migration of sales from our Web site to the Web sites of those retail
florists or to those retail florists directly, there can be no assurance that
these revenues will in fact offset revenue loss through this program. The
Florists Online Hosting Agreement between FTDI and us expires on June , 2000.
FTDI's relationship with the FTD Association limits the way we can operate
and expand our business.
Our operations are materially restricted by the following provisions of the
Mutual Support Agreement and Trademark License Agreement between FTDI and FTD
Association. The Mutual Support Agreement requires us to fill all FTD floral
orders using only FTD florists. Accordingly, our business is dependent in
substantial part on the quality of services provided by FTD florists. The terms
of the Mutual Support Agreement place some limits on our ability to control
this quality. In addition, the terms of the Trademark License Agreement between
FTDI and FTD Association and the Mutual Support Agreement limit the scope of
business activities in which we are permitted to engage by prohibiting us from
using the FTD name and associated logos in the operation of a retail flower
shop. These restrictions may prevent us from competing efficiently in various
extensions to our existing business.
Our business operations depend on the continuing contribution of our key
personnel and our ability to integrate new personnel.
Our future success depends to a significant extent on the continued service
of our key technical, sales and senior management personnel. Loss of the
services of any of Michael J. Soenen, our President and Chief Executive
Officer, Peter K. Poli, our Vice President and Chief Financial Officer,
Frederick K. Johnson, our Chief Information Officer, or Brian G. Chapman, our
Vice President of Strategy and Development, could have an adverse effect on our
business, results of operations and financial condition.
10
<PAGE>
Mr. Poli and Mr. Chapman joined us in the second quarter of 1999. As a
result, our senior management does not have a history of working together as a
team. Failure to maintain an effective team of senior managers would adversely
affect the operation of our business. In addition, we currently anticipate
hiring at least two additional key employees in the marketing and operations
areas.
Our future success also depends on our ability to continue to attract,
retain and motivate highly skilled employees. Competition for employees in our
industry is intense. We may be unable to retain our key employees or attract,
assimilate or retain other highly qualified employees in the future in the
event that we lose any of our key personnel. See "Management."
Conflicts of interest may arise as a result of overlapping management and
boards of directors.
Several of our officers and directors also serve as officers and directors
of FTDI or FTD Corporation. Richard C. Perry, Habib Y. Gorgi, Veronica K. Ho
and Gary K. Silberberg are each directors of ftd.com, FTDI and FTD Corporation.
In addition, Frederick K. Johnson, our Chief Information Officer, is and will
continue to be employed by FTDI.
Service as both a director or officer of ftd.com and a director or officer
of FTDI or FTD Corporation could create or appear to create potential conflicts
of interest when those directors and officers are faced with decisions that
could have different implications for ftd.com and FTDI or FTD Corporation.
These decisions may relate to potential acquisitions of businesses, our
intercompany agreements with FTDI, competition, the issuance or disposition of
securities, the election of new or additional directors, the payment of
dividends by ftd.com and other matters.
Mr. Johnson, our Chief Information Officer, will spend a majority of his
professional time and effort on behalf of FTDI. In many instances, these
efforts will involve activities that are unrelated and in some instances may be
adverse to the interests of ftd.com. We have not established any minimum time
that Mr. Johnson will be required to spend on ftd.com matters.
Mr. Johnson and Michael J. Soenen, our President and Chief Executive
Officer, will continue to participate in FTD Corporation's stock option plan. A
number of ftd.com's employees will continue to hold shares of or options to
purchase shares of common stock of FTD Corporation acquired or granted prior to
the employee's transfer to ftd.com. These employees may not yet have received
comparable interests under our Equity Incentive Plan. In addition, following
the closing of the offering, Mr. Johnson may be eligible to participate in
other benefit plans of FTDI or FTD Corporation that provide opportunities to
receive additional shares of common stock of FTD Corporation. These substantial
equity interests in FTD Corporation may present these officers and employees
with incentives potentially adverse to ftd.com's stockholders.
We may not be able to increase capacity or introduce enhancements to our Web
site in a timely manner or without service disruptions.
A key element of our strategy is to generate a high volume of traffic on our
Web site. Each year, we evaluate our capacity limitations and reengineer our
Web site based on projected order growth. Using this approach, we have been
able to accommodate an increase of approximately 140% in the number of orders
handled by our Web site during the 12 months ended March 31, 1999 compared to
the number of orders handled during the 12 months ended March 31, 1998. Our
inability to add additional hardware and software to upgrade our existing
technology or network infrastructure to accommodate increased traffic as a
result of unanticipated rapid growth in user demand, may cause decreased levels
of customer service and satisfaction. Failure to implement new systems
effectively or within a reasonable period of time could adversely affect our
business, results of operations and financial condition.
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If we fail to continuously improve our Web site, we may be unable to attract
or retain customers.
We intend to introduce additional or enhanced features and services to
retain current users and attract new users to our Web site. If we introduce a
feature or a service that is not favorably received, our current users may not
use our Web site as frequently and we may not be successful in attracting new
users. We may also experience difficulties that could delay or prevent us from
introducing new services and features. Furthermore, these new services or
features may contain errors that are discovered only after they are introduced.
We may need to significantly modify the design of these services or features to
correct errors. If users encounter difficulty with or do not accept new
services or features, our business, results of operations and financial
condition could be adversely affected.
The failure of computer systems on which our operations are dependent could
adversely affect us.
Our operations depend on the ability of FTDI to maintain its computer
systems and equipment in effective working order. We must also rely on FTDI's
ability to protect its computer systems against damage from fire, power loss,
water, telecommunications failures, vandalism and other malicious acts, and
similar unexpected adverse events. The continuing and uninterrupted performance
of these systems is critical to our success. Unanticipated problems affecting
those systems have caused from time to time in the past, and in the future
could cause, interruptions in our services. Any damage or failure that
interrupts or delays our operations may dissatisfy our customers and could
adversely affect our business, results of operations and financial condition.
These systems, which include the Mercury Network and a Hewlett-Packard
system, are located at FTDI's Downers Grove, Illinois facility and provide
communication to our fulfilling florists and consumer order services. We may
experience disruptions or interruptions in service due to failures by this
system. In addition, our Internet customers depend on their Internet service
providers for access to our Web site. These providers have experienced
significant outages in the past and could experience outages, delays and other
difficulties in the future. These types of occurrences could cause users to
perceive our Web site as not functioning properly and therefore cause them to
stop using our services, which could adversely affect our business, results of
operations and financial condition.
We cannot assure you that all of the computer software and systems and
service providers upon which our business depends will be Year 2000 compliant.
We depend heavily upon complex computer software and systems for all phases
of our operations, including, to a significant extent, FTDI's computer systems
and, to a lesser extent, systems of other third parties such as our fulfilling
florists and Sprint Communications, L.P., our telecommunications provider. Many
existing computer software programs and systems use only two digits to identify
a year in the date field. These software programs and systems were designed and
developed without considering the impact of the upcoming turn of the century.
If not corrected, these computer applications could fail or create erroneous
results by or at the Year 2000. In addition to the computer software and
systems we use directly, our operations also depend on the performance of
computer software and systems used by our significant service providers,
including providers of financial, telecommunications and parcel delivery
services. We have not yet developed a contingency plan to address Year 2000
issues in the event that Year 2000 compliance is not timely achieved.
A software or systems Year 2000 compliance failure with respect to FTDI's
internal software and systems, or that of a third party service provider, could
prevent us from being able to process or fulfill orders from our customers or
could disrupt our financial and management controls and reporting systems. Any
of these failures could adversely affect our business, results of operations
and financial condition.
In addition, the vast majority of purchases of merchandise from ftd.com are
made with credit cards, and our business, results of operations and financial
condition could be adversely affected to the extent our customers are unable to
use their credit cards due to Year 2000 issues that are not rectified by the
customers' credit card vendors or third party credit card transaction
processors.
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Our dependence on third parties who fulfill our orders and deliver goods
and services to our customers may adversely affect our business operations.
Our business depends, in large part, on the ability of the network of
independent FTD florists who fulfill the majority of our orders to do so at
high quality levels. Failure of the network of FTD florists to fill our orders
at an acceptable quality level and within the required timeframe would
adversely affect our business, results of operations and financial condition.
We also depend upon a number of third parties to deliver goods and services
to our customers. For example, we rely on third party shippers, including
United Parcel Service and Federal Express, to ship various non-floral
merchandise to our customers. Strikes or other service interruptions affecting
our shippers would have an adverse effect on our ability to deliver
merchandise on a timely basis.
Our success is dependent upon the intellectual property that we use in our
business.
We regard our Internet domain name, copyrights, service marks, trademarks,
trade secrets and similar intellectual property that we use in our business as
critical to our success. We rely on a combination of copyright, trademark and
trade secret laws, confidentiality procedures, contractual provisions and
license and other agreements with employees, customers and others to protect
our intellectual property rights. In addition, we may also rely on the third
party owners of the intellectual property rights we license to protect those
rights. FTDI has pursued and applied for the registration of trademarks and
service marks used in FTDI's and our businesses in the U.S. and various
foreign countries. Effective Internet domain name, copyright, service mark,
trademark and trade secret protection may not be available in every country in
which our products and services are made available online. The steps taken by
us, FTDI and other third parties to protect our intellectual property rights
may not be adequate, and third parties may infringe or misappropriate the
intellectual property and similar proprietary rights used in our business,
which could have an adverse effect on our business, results of operations and
financial condition.
We are also subject to the risk of adverse claims and litigation alleging
infringement of the intellectual property rights we use. The resolution of any
infringement claims may result in lengthy and costly litigation. Moreover,
resolution of a claim may require us to obtain a license to use those
intellectual property rights or possibly to cease using those rights
altogether. Any of those events could have a material adverse effect on our
business, results of operations and financial condition.
Risks associated with potential acquisitions and investments may adversely
affect your investment.
Although we have no present understanding or agreement relating to any
acquisition or investment, we may acquire or make investments in complementary
businesses, products, services or technologies. We cannot assure you that we
will be able to identify suitable acquisition or investment candidates. Even
if we do identify suitable candidates, we cannot assure you that we will be
able to make these acquisitions or investments on commercially acceptable
terms. If we buy a business, we could have difficulty in assimilating the
personnel, operations, products, services or technologies of that business
into our operations. These difficulties could disrupt our ongoing business,
distract our management and employees, increase our expenses, adversely affect
the prevailing market price of our Class A common stock and adversely affect
our business, results of operations and financial condition. Furthermore, we
may incur debt or issue equity securities to pay for any future acquisitions.
The issuance of additional equity securities could be dilutive to our existing
stockholders.
We may be unable to effectively market our international fulfillment
capabilities to U.S. consumers and our business may be adversely affected if
the quality of orders sent abroad suffers.
Although less than 5% of our sales for the three months ended March 31,
1999 were to consumers who live outside North America, we intend to market
FTD's affiliation with 32,000 florists outside of North America to North
American consumers who may be interested in sending flowers to relatives,
friends and
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business associates living abroad. This international aspect of our business is
subject to the risk of inconsistent quality of merchandise and disruptions or
delays in delivery because these florists do not necessarily adhere to the same
quality control standards as the FTD florists who fulfill our orders
domestically. Our business could also be adversely affected if North American
consumers choose not to place subsequent domestic orders with us because they
were not satisfied with the results of an order they sent to someone living
abroad.
Risks Related to Our Relationship with FTDI
Control by FTDI and its principal stockholders may adversely affect the
market price of our Class A common stock.
FTDI owns, and will continue to own after the close of this offering, all of
the shares of our Class B common stock, which, after the close of this
offering, will represent % of the voting power of our common stock. As a
result of its stock ownership and the other rights described in this
prospectus, FTDI will be able to elect a majority of the members of our board
of directors. This concentration of ownership and other rights could also delay
or prevent a change of control.
Also, FTDI is a wholly owned subsidiary of FTD Corporation, which in turn is
controlled by a group of principal stockholders. The principal stockholders of
FTD Corporation are Perry Acquisition Partners, L.P. and a group of investment
funds and related persons affiliated with Bain Capital, Inc. Perry Acquisition
Partners and Bain Capital and its affiliates currently own 60.2% and 21.6%,
respectively, of the voting power of FTD Corporation. Pursuant to an agreement
among FTD Corporation's primary stockholders, Perry Acquisition Partners and
Bain Capital and its affiliates have the right to designate six and two
members, respectively, of the boards of directors of FTDI and ftd.com. In
addition, under this agreement, the directors appointed by the Bain Capital
entities have the contractual right to approve various actions submitted to our
board of directors. These actions are: amendments to our certificate of
incorporation or bylaws; increases or decreases in the number of our directors;
issuance or sales of our securities; a merger, consolidation or other
significant business combination transaction involving us; the repurchase,
exchange or redemption of our securities; and other transactions outside the
ordinary course of business. As a result of their stock ownership of FTD
Corporation and the provisions of that stockholders' agreement, Perry
Acquisition Partners and the Bain Capital entities will be able to control
ftd.com in the same manner that FTDI is able to control us. See "Transactions
with Management--Rights to Designate Directors."
FTDI could elect to sell all or a substantial portion of its equity interest
in ftd.com to a third party. In the event of a sale of FTDI's interest to a
third party, that third party may be able to control ftd.com in the same manner
that FTDI is able to control us. That sale may adversely affect the market
price of our Class A common stock and could adversely affect our business,
financial condition and results of operations. For so long as FTDI maintains a
significant interest in ftd.com, the market price of the Class A common stock
also may be adversely affected by events relating to FTDI that are unrelated to
us.
In addition, under FTDI's credit agreement, all of the Class B common stock
owned by FTDI is pledged to the lenders as security for FTDI's obligations
under that agreement.
Our intercompany arrangements with FTDI may not have been the result of
arm's-length negotiations.
Prior to the closing of this offering, we will enter into a series of
intercompany agreements with FTDI. Because FTDI currently owns nearly all of
our stock, these agreements may not have been the result of arm's-length
negotiations. Although we believe the terms of the intercompany agreements are
no less favorable to us than those that we could obtain from unaffiliated third
parties, we cannot assure you that this is the case. We anticipate using a
portion of the proceeds of this offering to make payments to FTDI each year for
the foreseeable future under the Intercompany Agreements. See "Transactions
with Management and Others--Intercompany Agreements."
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We have a non-exclusive license from FTDI to use trademarks and logos that
are material to our business.
Pursuant to the Trademark License Agreement between FTDI and us, FTDI
licenses to us, on a non-exclusive basis, the FTD and Mercury Man trademarks
and logos and related content in connection with the sale of flowers and
specialty gifts to consumers on the Internet, in our toll-free telephone
business, in our catalogs and in our advertising. The FTD and Mercury Man
trademarks and logos and related content are critical to our marketing and
brand-building activities.
Under the Trademark License Agreement, FTDI can demand that we remove from
our Web site or catalog any content that bears one of FTDI's trademarks that
FTDI determines conflicts with, interferes with or is detrimental to its
reputation or business or for limited other reasons. If FTDI makes this demand,
we are required to remedy the offensive situation, cease using the content in
question or remove FTDI's trademarks. We are also required to conform to FTDI's
guidelines for the use of its trademarks. FTDI has the right to approve all
materials, such as marketing materials, that include any of FTDI's trademarks.
These restrictions may prevent us from marketing our services in the same way
we would if we owned these trademarks.
FTDI can terminate the Trademark License Agreement between FTDI and us in
some circumstances if more than 20% of the voting power of our common stock is
acquired by a person or group.
In the event more than 20% of the voting power of our common stock is
acquired by a single person or, other than from affiliates of FTD Corporation,
FTDI has the right to terminate the Trademark License Agreement between FTDI
and us. If the Trademark License Agreement is terminated, we would need to
change the Internet domain name of our Web site and devote substantial
resources toward building new brand names. These events would have an adverse
effect on our business, results of operations and financial condition. In
addition, these provisions are likely to have the effect of delaying, deferring
or preventing a non-consensual change in control or may adversely affect the
market price of our Class A common stock.
If FTDI fails to adequately perform services for us or we are unable to
satisfactorily perform these services, our business could be adversely
affected.
Pursuant to the Intercompany Services Agreement between FTDI and us, we rely
on FTDI for technical, human resources, accounting, administrative, legal and
other services we request. In particular, substantially all of our sales
currently are processed through FTDI's systems, including the Mercury Network
and the FTD Clearinghouse. If FTDI fails to provide these services
satisfactorily, we would be required to obtain these services from another
provider or perform these services. If we choose to obtain these services from
another provider, we may incur additional costs and we may be unable to obtain
these services on commercially reasonable terms. If we choose to perform these
services ourself, we may not be able to perform them adequately. In either
case, our business, results of operations and financial condition could be
adversely affected. The service obligations under the Intercompany Services
Agreement can be terminated by FTDI under circumstances similar to those giving
rise to a right to terminate the Trademark License Agreement. In addition, FTDI
can terminate the Intercompany Services Agreement in the event FTDI ceases to
own any of our stock.
Contingent liability for tax and pension obligations resulting from our
relationship with FTDI and FTD Corporation may adversely affect our financial
condition.
For so long as FTDI continues to own at least 80% of the voting and economic
interest in ftd.com, we will be included in FTD Corporation's consolidated
group for federal income tax purposes. Under the Tax Sharing Agreement, as
amended, for so long as ftd.com is included in FTD Corporation's consolidated
group, we will pay FTD Corporation our proportionate share of FTD Corporation's
income tax liability computed as if we were a separate taxpayer. FTD
Corporation will be required to repay us for any net operating losses or other
tax loss benefits utilized that are attributable to us. By virtue of its
controlling ownership and the Tax Sharing Agreement, as amended, FTD
Corporation effectively will control all of our tax decisions. Under the Tax
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Sharing Agreement, as amended, for so long as ftd.com is included in FTD
Corporation's consolidated group, FTD Corporation will have sole authority to
respond to and conduct all tax proceedings (including tax audits) relating to
us, to file all income tax returns on our behalf and to determine the amount of
our liability to (or entitlement to payment from) FTD Corporation.
Notwithstanding the Tax Sharing Agreement, as amended, federal law provides
that each member of a consolidated group is liable for the group's entire tax
obligation. As a result, if FTD Corporation or other members of its
consolidated group fail to make any federal income tax payments required by
law, we would be liable for the shortfall. Similar principles apply for state
income tax purposes in many states. See "Certain Transactions--Income Taxes."
For so long as FTDI continues to own at least 80% of the voting power or
value of ftd.com's capital stock, we also will be jointly and severally liable,
together with all other members of FTD Corporation's "control group," for
pension funding, termination and excise taxes and for other pension-related
matters in the event FTD Corporation fails to fully satisfy its legally
required pension obligations. Because the Class B common stock held by FTDI is
entitled to ten votes per share, we expect that FTDI will retain at least an
80% voting interest for the foreseeable future. We believe that none of these
liabilities were outstanding as of May 31, 1999.
The Intercompany Indemnification Agreement provides that FTDI and FTD
Corporation will indemnify us for specific tax and pension liabilities
resulting from our relationship with FTDI and FTD Corporation, including the
costs of defending against any assertion of claims against ftd.com. We cannot
assure you that FTDI or FTD Corporation will be able to fulfill its obligations
under that agreement. In the event we are required to satisfy a significant
obligation for any of these costs, our business, results of operations and
financial condition could be adversely affected.
Potential competition with FTD Corporation or FTDI may adversely affect our
business.
FTDI currently is in the business of providing subscribing florists with the
ability to send and receive floral orders and transaction clearing services.
FTDI also has an extensive product development department, the FTD Marketplace,
that develops branded floral and gift products that florists can purchase at
wholesale from FTDI for resale to consumers. Pursuant to the Trademark License
Agreement, we have agreed to refrain from engaging in activities involving any
business currently conducted by FTDI and FTDI has agreed, on behalf of itself
and its affiliates other than us but including FTD Corporation and its other
subsidiaries, to refrain from engaging in the business of directly selling or
marketing flowers or specialty gifts to consumers. In addition, if we make an
acquisition that includes a business currently conducted by FTDI, we have
agreed to offer to sell that business, or the competitive component, to FTDI or
otherwise dispose of that business or the competitive component. Beyond these
obligations, and except as otherwise required by applicable Delaware law,
neither FTDI nor FTD Corporation is under any obligation to refrain from
competing with us or to share with us any future business opportunities
available to it. As a result, our business could be adversely affected if FTDI
or FTD Corporation engages in any activity that is similar to our business but
is not otherwise prohibited by the Trademark License Agreement or Delaware law.
The ability of FTDI and FTD Corporation to utilize potential ftd.com
corporate opportunities could adversely affect our business.
Pursuant to the terms of our certificate of incorporation:
. FTDI, FTD Corporation and their respective officers, directors,
affiliates and employees will not be liable to ftd.com or our
stockholders for breach of any fiduciary duty by reason of any activities
of FTDI or FTD Corporation in competition with ftd.com;
. FTDI and FTD Corporation will not have any duty to communicate or offer
corporate opportunities to ftd.com and will not be liable for breach of
any fiduciary duty as a stockholder of ftd.com in connection with those
opportunities; and
. if a director or officer of ftd.com who also is a director or officer of
FTDI or FTD Corporation learns of a matter that may be a corporate
opportunity for ftd.com, FTDI or FTD Corporation, that director or
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officer will not be liable to ftd.com or our stockholders for breach of
any fiduciary duty or duty of loyalty or failure to act in the best
interests of ftd.com if the director or officer offers the corporate
opportunity to FTDI or FTD Corporation rather than us.
A "corporate opportunity" is the chance for a business to expand, strengthen
or otherwise improve the business it is conducting or proposes to conduct at
the time the opportunity arises and for which it has the financial resources.
For example, if a third party offered one of our directors the opportunity to
acquire a business that markets gardening tools directly to consumers over the
Internet, that potential acquisition could be considered a "corporate
opportunity" to us. Under Delaware law, that director could be obligated to
offer the acquisition opportunity to us before the director could engage in the
potential business. The provisions of our certificate of incorporation
summarized above, however, provide that that director would have no liability
to us or our stockholders if he or she was also a director or officer of FTDI
or FTD Corporation and offered the "corporate opportunity" to FTDI or FTD
Corporation instead of ftd.com.
Any loss of a "corporate opportunity" of this sort to FTDI or FTD
Corporation could adversely affect our business and our stockholders.
Risks Related to the Internet
Our success is dependent on continued growth of Internet commerce.
Our ability to generate a profit in the future depends substantially upon
the widespread acceptance and use of the Internet as an effective medium of
commerce by consumers. Rapid growth in commercial online businesses is a recent
phenomenon. We cannot assure you that a sufficiently broad base of consumers
will visit, or continue to visit, our Web site. Demand for recently introduced
services and products over the Internet is subject to a high level of
uncertainty. The development of the Internet as a viable means of marketing
products directly to consumers is subject to a number of factors, including
continued growth in the number of users of such services, concerns about
transaction security, continued development of the necessary technological
infrastructure, and the development of complementary services and products.
Failure of the Internet and online businesses to become a viable means of
marketing products directly to consumers would adversely affect our business,
results of operations and financial condition.
Concerns related to collection of personal information about our users and
other privacy concerns could adversely affect our business.
The Federal Trade Commission has proposed regulations regarding the
collection and use of personal identifying information obtained from
individuals when accessing Web sites, with particular emphasis on access by
minors. These regulations may include requirements that we establish procedures
to disclose and notify users of privacy and security policies, obtain consent
from users for collection and use of information and provide users with the
ability to access, correct or delete personal information stored by us. These
regulations may also include enforcement and redress provisions. Moreover, even
in the absence of these regulations, the Federal Trade Commission has begun
investigations into the privacy practices of other companies that collect
information on the Internet. One investigation resulted in a consent decree
pursuant to which an Internet company agreed to establish programs to implement
the principles discussed above. We may become subject to a similar
investigation, or the Federal Trade Commission's regulatory and enforcement
efforts may adversely affect our ability to collect demographic and personal
information from users, which could adversely affect our marketing efforts.
Online security breaches could harm our business.
The secure transmission of confidential information over the Internet is
essential in maintaining consumer confidence in our Web site. Substantial or
ongoing security breaches on our system or other Internet-based systems could
significantly harm our business. While we have not experienced any security
breaches, any
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penetration of our network security or other misappropriation of our users'
personal information could subject us to liability. We may be liable for claims
based on unauthorized purchases with credit card information, impersonation or
other similar fraud claims. Claims could also be based on other misuses of
personal information, such as for unauthorized marketing purposes. These claims
could result in litigation and financial liability. Security breaches also
could damage our reputation and expose us to a risk of loss or litigation and
possible liability. We rely on licensed encryption and authentication
technology to effect secure transmission of confidential information, including
credit card numbers. It is possible that advances in computer capabilities, new
discoveries or other developments could result in a compromise or breach of the
technology used by us to protect customer transaction data.
We may incur substantial expense to protect against and remedy security
breaches and their consequences. A party that is able to circumvent our
security systems could steal proprietary information or cause interruptions in
our operations. Our insurance policies' limits may not be adequate to reimburse
us for losses caused by security breaches. We cannot guarantee that our
security measures will prevent security breaches.
Our insurance policies may not provide adequate coverage for potential
losses.
Although we maintain insurance coverage of the types and scope that we
believe to be adequate for our business, the liabilities that may arise out of
the operation of an Internet commerce business are uncertain. As a result, our
insurance policies may not provide adequate coverage for losses that arise out
of the operation of our business.
Our operating results could be adversely affected if we experience
significant credit card fraud.
A failure to adequately control fraudulent credit card transactions would
reduce our net sales and gross margins because we do not carry insurance
against this risk. We have suffered losses previously as a result of orders
placed with fraudulent credit card data even though the associated financial
institution approved payment for the orders. The losses that we have suffered
to date have not had a material effect on our business, results of operations
or financial condition, however, we would be adversely affected if we
experience significant credit card fraud in the future.
Government regulation and legal uncertainties relating to the Internet and
online commerce could negatively impact our business operations.
Online commerce is new and rapidly changing, and federal and state
regulation relating to the Internet and online commerce is evolving. Currently,
there are few laws or regulations directly applicable to the Internet or online
commerce on the Internet, and the laws governing the Internet that exist remain
largely unsettled. The most recent session of the U.S. Congress resulted in
Internet laws regarding online children's privacy, copyrights and taxation.
This or similar legislation could dampen growth in use and acceptance of the
Internet. Due to the increasing popularity of the Internet, it is possible that
additional laws and regulations may be enacted with respect to the Internet,
covering issues such as user privacy, pricing, taxation, content, copyrights,
distribution, antitrust and quality of products and services. In addition,
applicability to the Internet of existing laws governing issues such as
property ownership, copyrights and other intellectual property issues,
taxation, libel, obscenity and personal privacy is uncertain. The vast majority
of those laws were adopted prior to the advent of the Internet and related
technologies and, as a result, do not contemplate or address the unique issues
of the Internet and related technologies. Further, growth and development of
online commerce may prompt calls for more stringent consumer protection laws,
both in the U.S. and abroad. We also may be subject to regulation not
specifically related to the Internet, including laws affecting direct marketers
and advertisers. The adoption or modification of laws or regulations applicable
to the Internet could adversely affect our business operations.
In addition, several telecommunications carriers have requested the Federal
Communications Commission to regulate telecommunications over the Internet. Due
to the increasing use of the Internet and the burden it has
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placed on the current telecommunications infrastructure, telephone carriers
have requested the FCC to regulate Internet service providers and impose access
fees on those providers. If the FCC imposes access fees, the costs of using the
Internet could increase dramatically. This could result in the reduced use of
the Internet as a medium for commerce, which could adversely affect our
business operations.
We may incur liability for information displayed on and communicated through
our Web sites.
We provide links to Web sites operated by other businesses and we may be
subjected to claims for defamation, negligence, copyright or trademark
infringement or based on other theories relating to the information we publish
on our Web site. These types of claims have been brought, sometimes
successfully, against Internet companies as well as print publications in the
past. Based on links we provide to other Web sites, we could also be subjected
to claims based upon online content we do not control that is accessible from
our Web site.
Our inability to secure and protect our Internet domain name may adversely
affect our business operation.
The ftd.com Internet domain name is our brand on the Internet. The
acquisition and maintenance of Internet domain names generally is regulated by
governmental agencies and their designees. Until recently, Network Solutions,
Inc. was the exclusive registrar for the ".com," ".net" and ".org" generic top-
level Internet domains in the U.S. In April 1999, however, the Internet
Corporation for Assigned Names and Numbers, or ICANN, a new global non-profit
corporation formed to oversee a set of the Internet's core technical management
functions, opened the market for registering Internet domain names to an
initial group of five companies. Network Solutions, Inc. still maintains the
registry containing all the registrations in the generic top-level Internet
domains. The market for registering these Internet domain names in the U.S. and
in foreign countries is expected to undergo further changes in the near future.
We expect the requirements for registering Internet domain names also to be
affected. The relationship between regulations governing Internet domain names
and laws protecting trademarks and similar proprietary rights is unclear. We
may be unable to prevent third parties from acquiring Internet domain names
that are similar to, infringe upon or otherwise decrease the value of our
Internet domain name, the trademarks and other intellectual property rights
used by us and we may need to protect our rights through litigation. If we are
unable to adequately protect our Internet domain name, our trademarks and other
intellectual property rights or incur substantial costs in doing so, it could
have an adverse effect on our business, results of operations and financial
condition.
Changing technology could adversely affect the operation of our Web site.
The Internet, online commerce and online advertising markets are
characterized by rapidly changing technologies, evolving industry standards,
frequent new product and service introductions and changing customer
preferences. Our future success will depend on our ability to adapt to rapidly
changing technologies and address our customers' changing preferences, however,
we may experience difficulties that delay or prevent our being able to do so.
Risks Associated with this Offering
The price for our Class A common stock is likely to be highly volatile.
The market price of our Class A common stock is likely to be highly volatile
as the stock market in general, and the market for Internet-related and
technology companies in particular, has been highly volatile. Investors may not
be able to resell their shares of our Class A common stock following periods of
volatility because the market reacts adversely to volatility. The trading
prices of many technology and Internet-related companies' stocks reached
historical highs within the last 52 weeks and reflect relative valuations that
are substantially above historical levels. During the same period, these
companies' stocks also have recorded lows well below historical highs. We
cannot assure you that our stock will trade at the same levels of other
Internet stocks or that we can sustain our Class A common stock's trading
price.
19
<PAGE>
Many of the factors that might cause volatility in the market price of our
Class A common stock are beyond our control. These factors may materially
adversely affect the market price of our Class A common stock, regardless of
how we operate.
Our management's broad discretion in the use of the proceeds of this
offering may adversely affect your investment.
Our management can spend most of the proceeds from this offering in ways
with which our stockholders may not agree. We intend to use between $
million and $ million of the net proceeds from the offering for advertising,
promotion and other marketing activities. We also intend to use a portion of
the net proceeds for capital expenditures. We expect that the remaining net
proceeds will be available for general corporate purposes, including working
capital. We may, however, also use a portion of the net proceeds to acquire or
invest in complementary business, services or products, although we currently
have no commitments or agreements with respect to transactions of that type.
See "Use of Proceeds."
A substantial number of our shares will be available for sale in the public
market after the offering and sales of those shares could adversely affect our
stock price.
Sales of a substantial number of shares of Class A common stock into the
public market after this offering, or the perception that those sales could
occur, could adversely affect our stock price or could impair our ability to
obtain capital through an offering of equity securities. After the offering, we
will have outstanding shares of Class A common stock ( shares if the
underwriters' option to purchase additional shares is exercised in full). We
will also have outstanding shares of Class B common stock that are
convertible into shares of Class A common stock on a one-for-one basis, all of
which shares are owned by FTDI. Of these shares, the shares sold in this
offering will be freely transferable without restriction or further
registration under the Securities Act, except for any shares purchased by our
affiliates as defined in Rule 144 under the Securities Act.
We have entered into registration rights agreements with FTDI, DBV
Investments, L.P. and Buena Vista Internet Group that enables those parties to
require us to register an aggregate of shares of our Class A common stock,
including shares of Class B common stock that are convertible into Class A
common stock on a one-for-one basis. These registration rights agreements also
require us to include those shares in registrations of common stock made by us
in the future.
The value of your investment will be diluted upon the consummation of the
initial public offering.
Based upon the estimated initial public offering price of $ per share,
purchasers of Class A common stock offered hereby will experience an immediate
dilution in net tangible book value of $ per share of Class A common stock
purchased or $ per share if the underwriters' option to purchase additional
shares of Class A common stock is exercised in full. To the extent outstanding
options to purchase Class A common stock are exercised, there may be further
dilution. See "Dilution."
Provisions in our corporate documents may make it more difficult for a third
party to acquire us.
Our certificate of incorporation and bylaws contain several provisions that
may be deemed to have anti-takeover effects and may discourage, delay or
prevent a takeover attempt that a stockholder might consider in its best
interest. These provisions include a requirement that:
. the number of directors shall not be more than 14; and
. with respect to annual stockholders' meetings, stockholders must comply
with the timing and procedural requirements of the federal proxy rules in
order for a stockholder proposal to be included in our proxy statement.
20
<PAGE>
Our board of directors has the authority to authorize the issuance of
preferred stock. The issuance of preferred stock may have the effect of
delaying, deferring or preventing a change in control of our company, and may
adversely affect the voting and other rights of the holders of our capital
stock.
Investors should not purchase our Class A common stock with the expectation
of receiving cash dividends.
We currently intend to retain any future earnings for funding growth and, as
a result, do not expect to pay any cash dividends in the foreseeable future.
See "Dividend Policy."
21
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the shares
of Class A common stock offered by this prospectus will be approximately $
million. This estimate is based on an assumed initial public offering price of
$ per share, the mid-point of the offering range ($ million if the
underwriters' option to purchase additional shares is exercised in full), and
after deducting the estimated underwriting discounts and commissions and
estimated offering expenses that we will pay. We intend to use between $
million and $ million of the net proceeds for advertising, promotion and
other marketing activities. We also intend to use approximately $ million of
the net proceeds for capital expenditures, including technology and physical
infrastructure. We expect to use any remaining net proceeds to fund general
corporate purposes, including working capital. In the event that we identify
suitable acquisition candidates or investment opportunities in complementary
businesses, services or products, we may use a portion of the net proceeds for
transactions of that type. We currently have no commitments or agreements with
respect to any possible acquisitions or investments.
Pending use, the net proceeds will be invested in short-term investment-
grade instruments, certificates of deposit or direct or guaranteed obligations
of the U.S. government.
DIVIDEND POLICY
We currently intend to retain all of our earnings to finance our operations
and we do not anticipate paying any cash dividends on our capital stock in the
foreseeable future. We may incur indebtedness in the future that may prohibit
or effectively restrict the payment of cash dividends.
22
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of ftd.com as of March 31,
1999:
(1) on a pro forma basis giving effect to:
(a) the formation of ftd.com and the initial contribution of assets by
FTDI and assumption of the liabilities by ftd.com related to the
formation; and
(b) the issuance and sale of 60,000 shares and 30,000 shares of our
Series A 8% Cumulative Redeemable Convertible Preferred Stock to
Buena Vista Internet Group and DBV Investments, L.P. for
consideration of $6.0 million and $3.0 million, respectively; and
(2) on a pro forma as adjusted basis giving effect to:
(a) the sale of the shares of Class A common stock offered by
this prospectus at an assumed initial public offering price of
$ per share, the mid-point of the offering range, and after
deducting the estimated underwriting discounts and commissions and
estimated offering expenses that we will pay; and
(b) the automatic conversion of each share of Series A preferred stock
into shares of Class A common stock upon the closing of this
offering.
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and the notes to those statements included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
March 31, 1999
---------------------
Pro Forma
Pro Forma As Adjusted
--------- -----------
(in thousands, except
share data)
<S> <C> <C>
Series A 8% Cumulative Redeemable Convertible Preferred
Stock, $.01 par value; 90,000 shares issued and
outstanding pro forma; none issued and outstanding pro
forma as adjusted....................................... $ 9,000 $ --
------- ----
Stockholders' equity (deficit):
Preferred stock, $.01 par value; 5,000,000 shares
authorized; 90,000 shares issued and outstanding pro
forma; no shares issued and outstanding pro forma as
adjusted (1)............................................ -- --
Class A common stock, $.01 par value; 250,000,000 shares
authorized; no shares issued and outstanding pro forma;
shares issued and outstanding pro forma as adjusted
(2)..................................................... --
Class B common stock, $.01 par value; 100,000,000 shares
authorized; 3,410,000 shares issued and outstanding pro
forma; shares issued and outstanding pro forma as
adjusted................................................ 34
Retained deficit......................................... (1,403)
------- ----
Total stockholders' equity (deficit)................... (1,369)
------- ----
Total capitalization................................. $ 7,631 $
======= ====
</TABLE>
- ----------
(1) Pursuant to the terms of the outstanding shares of preferred stock, each
share will automatically convert into shares of Class A common stock
upon the closing of this offering.
(2) Excludes shares of Class A common stock issuable upon the exercise of
options outstanding with a weighted average exercise price of $ per
share. Assumes the conversion of the outstanding shares of preferred stock
into Class A common stock.
23
<PAGE>
DILUTION
The pro forma net tangible book value of ftd.com as of March 31, 1999 was
approximately $ , or $ per share of common stock. Pro forma net
tangible book value per share represents the amount of total tangible assets
less total liabilities, divided by the pro forma shares of common stock
outstanding as of March 31, 1999. After giving effect to the issuance and sale
of the shares of Class A common stock offered by this prospectus at an assumed
initial public offering price of $ per share, the mid-point of the offering
range, after deducting estimated underwriting discounts and commissions and
estimated offering expenses that we will pay, the pro forma net tangible book
value of ftd.com as of March 31, 1999 would have been $ million, or $
per share. This represents an immediate increase in pro forma net tangible book
value of $ per share to existing stockholders and an immediate dilution of
$ per share to new investors. The following table illustrates this per
share dilution assuming the underwriters' option to purchase additional shares
of Class A common stock is not exercised:
<TABLE>
<S> <C>
Initial public offering price per share............................... $
Pro forma net tangible book value per share at March 31, 1999......... $
Increase in pro forma net tangible book value per share attributable
to new investors.....................................................
Pro forma net tangible book value per share after offering............
--------
Dilution per share to new investors................................... $
========
</TABLE>
The following table summarizes, on a pro forma basis, as of March 31, 1999,
the differences between the number of shares of common stock purchased from
ftd.com, the aggregate cash consideration paid and the average price per share
paid by existing stockholders and new investors purchasing shares of Class A
common stock in this offering:
<TABLE>
<CAPTION>
(in thousands)
--------------------------------------------
Shares Total
Purchased Consideration
-------------- --------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. % $ % $
New investors......................
------ ----- ------- -----
Total.......................... 100.0% $ 100.0%
====== ===== ======= =====
</TABLE>
The foregoing discussion and table assumes no exercise of any stock options
and the automatic conversion of all outstanding shares of our Series A
preferred stock into shares of Class A common stock upon the
closing of this offering. As of the close of this offering, options to purchase
a total of shares of Class A common stock at a weighted average exercise
price of $ per share will be outstanding.
24
<PAGE>
SELECTED FINANCIAL DATA
ftd.com was formed in May 1999 to own and operate the Internet and telephone
flower and specialty gift business of FTDI. The telephone business was
previously operated by FTD Direct Access, Inc., a wholly owned subsidiary of
Florists' Transworld Delivery Association, which was acquired by FTD
Corporation on December 18, 1994. FTD Direct Access, Inc. continued to operate
this business as a wholly owned subsidiary of FTDI until May 31, 1995 when FTD
Direct Access, Inc. was dissolved and the results of its operations and its
financial position were subsequently accounted for as the consumer floral order
business unit of FTDI.
The following table sets forth selected historical data of FTD Direct
Access, Inc., the Predecessor Company, until its May 31, 1995 dissolution date
and for FTDI's consumer floral order business unit for the period June 1, 1995
to March 31, 1999. Although ftd.com was not formed as a subsidiary until May
1999, the financial statements present the operations of the businesses owned
and operated by ftd.com as if it had been a separate entity since June 1, 1995.
The statement of operations presented below for the years ended June 30,
1994 and 1995 and the selected balance sheet data as of June 30, 1994, 1995 and
1996 are derived from unaudited financial statements not included in this
prospectus. The statement of operations presented below for the years ended
June 30, 1996, 1997 and 1998 and the balance sheet data as of June 30, 1997 and
1998 are derived from our audited financial statements included elsewhere in
this prospectus. Interim data for the nine months ended March 31, 1998 and 1999
are unaudited, but include, in the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of that data. Results for the nine months ended March 31, 1999 are
not necessarily indicative of the results that may be expected for any other
interim period or for the year as a whole. The selected financial data is
qualified by reference to, and should be read in conjunction with, our
financial statements and the notes to those statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
Predecessor Company
------------------------ Nine months ended March
Year ended June 30, 31,
--------------------------------------------------------------- ------------------------
1994 1995 1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Order revenues and
service fees, net of
discounts.............. $ 6,503 $ 14,574 $ 18,490 $ 26,230 $ 30,423 $ 19,072 $ 28,520
Commissions from FTDI... -- -- -- -- -- -- 2,596
Other................... -- -- 51 25 240 10 67
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues....... 6,503 14,574 18,541 26,255 30,663 19,082 31,183
Fulfillment and
processing services.... 5,847 9,629 15,431 22,283 26,324 16,801 24,519
----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit............ 656 4,945 3,110 3,972 4,339 2,281 6,664
Operating Expenses:
Marketing and
promotion............. 1,701 2,668 4,188 4,864 5,995 3,614 7,797
Technology
development........... 217 232 1,251 1,546 1,420 1,019 1,442
General and
administrative........ 1,240 4,082 2,955 3,267 3,239 2,102 3,180
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating
expenses............ 3,158 6,982 8,394 9,677 10,654 6,735 12,419
----------- ----------- ----------- ----------- ----------- ----------- -----------
Loss from operations.... (2,502) (2,037) (5,284) (5,705) (6,315) (4,454) (5,755)
Interest expense........ 263 245 226 267 177 170 131
----------- ----------- ----------- ----------- ----------- ----------- -----------
Loss before income
taxes.................. (2,765) (2,282) (5,510) (5,972) (6,492) (4,624) (5,886)
Income tax benefit...... 1,106 913 2,204 2,389 2,597 1,850 2,354
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss................ $ (1,659) $ (1,369) $ (3,306) $ (3,583) $ (3,895) $ (2,774) $ (3,532)
=========== =========== =========== =========== =========== =========== ===========
Selected Statement of
Operations Percentages: (unaudited) (unaudited) (unaudited) (unaudited)
Total revenues.......... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit............ 10.1 33.9 16.8 15.1 14.2 12.0 21.4
Marketing and promotion. 26.2 18.3 22.6 18.5 19.6 18.9 25.0
Technology and
development............ 3.3 1.6 6.7 5.9 4.6 5.3 4.6
General and
administrative......... 19.1 28.0 15.9 12.4 10.6 11.0 10.2
Balance Sheet Data: (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Total assets............ $ 110 $ 141 $ 148 $ 247 $ 2,212 $ 2,439 $ 1,711
Total liabilities....... 1,989 1,769 1,719 2,265 2,363 1,548 3,080
Stockholder's equity
(deficit).............. (1,879) (1,628) (1,571) (2,018) (151) 891 (1,369)
</TABLE>
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and the notes to those statements that appear elsewhere in this
prospectus. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ from
those discussed in the forward-looking statements. Factors that could cause or
contribute to any differences include, but are not limited to, those discussed
below and elsewhere in this prospectus, particularly in "Risk Factors."
Overview
We began selling our products directly to consumers through our 1-800-SEND-
FTD toll-free telephone number in 1993 and through our www.ftd.com Web site in
1994. Prior to May 19, 1999, our business was conducted through a business unit
of FTDI. As a business unit of FTDI, we relied on FTDI to provide all financing
for our operations.
ftd.com was formed in May 1999 to own and operate the Internet and telephone
flower and specialty gift business of FTDI. The Internet and telephone business
was previously operated by FTDI.
The historical financial statements included elsewhere in this prospectus
and discussed below reflect various assumptions relating to the allocation of
revenues and expenses attributable to our business and the other businesses of
FTDI. These assumptions may not be indicative of the financial results that
would have resulted if we had been an independent company during the periods
presented. The cash flows reflected as contribution from FTDI in the statements
of cash flows represent contributions from FTDI to finance our operations.
These cash flows are not indicative of the cash flows that would have resulted
had we been operating as a separate stand-alone company during the periods
presented. Furthermore, the historical financial information indicates that we
have incurred significant net losses.
As we seek to expand our business, we believe that our operating expenses
will significantly increase as a result of the financial commitments related to
increased advertising, marketing and promotional activities and expenditures
designed to enhance our brand and Web site. We expect that we will continue to
incur losses and generate negative cash flow from operations for the
foreseeable future.
In view of the rapidly changing nature of our business, our limited
operating history and the seasonality of our business, we believe that
comparisons of our operating results for any period with those of the preceding
period are not necessarily meaningful and should not be relied upon as an
indication of future performance. Our revenues and operating results may vary
from quarter to quarter due to a number of factors, some of which are beyond
our control. This fluctuation primarily is attributable to increased sales and
advertising expenditures during the popular floral holiday seasons in the
fiscal quarters ending March 31, June 30 and December 31.
Product inventory is maintained by our fulfilling florists and other third
party manufacturers or distributors. As a result, we offer a large selection of
merchandise without the investment in inventory, the ongoing expense related to
the management of that inventory or the risk of product obsolescence or
spoilage.
Total revenues include order revenues and service fees, net of discounts;
commissions from FTDI; and other revenues. Order revenues and service fees, net
of discounts, represent revenues attributable to the sale of products through
our Web site and 1-800-SEND-FTD, and the service fees charged to our customers
for each order. These service fees are $6.99 for most orders placed through our
Web site and $9.99 for most orders placed through 1-800-SEND-FTD. Commissions
represent a $5.00 commission paid to us by FTDI since July 1998 for each order
that we clear through the FTD Clearinghouse. FTDI will continue to pay us these
commissions pursuant to a three-year agreement expiring on June 30, 2002.
Effective June 30, 1999, we began to earn fees in connection with our hosting
of Florists Online Web sites. Until May 2000, FTDI will pay
26
<PAGE>
us a monthly service fee of $50.00 for each Web site hosted. The monthly
service fee under this agreement will be reviewed, and possibly adjusted, on an
annual basis in the event we agree to continue to provide these hosting
services.
We have a 100% customer satisfaction guarantee. This means that if any of
our customers are unhappy with a purchase, we will credit the customer for the
full amount of the purchase, send a replacement floral arrangement or specialty
gift or give the customer a gift certificate for the full amount of the
purchase. For the nine months ended March 31, 1999 and the year ended June 30,
1998, total refunds as a percentage of total revenues were 1.4% and 1.7%,
respectively.
Costs and expenses related to our revenues consist of fulfillment and
processing services. Fulfillment costs primarily consist of costs of fulfilling
orders and related delivery charges. For orders fulfilled by an FTD florist, we
historically paid FTDI between 73% and 80% of the sales price of the order for
fulfillment. Effective June 30, 1999, this payment was decreased from 80% to
73% of the sales price of the order. For orders that are not fulfilled by an
FTD florist, such as holiday gift baskets, the cost of fulfillment is based on
a prenegotiated price for the product and is paid to the manufacturer or third
party distributor who fulfills the order. Processing services costs primarily
consist of salaries and related expenses of processing service employees, fees
due to FTDI for credit card processing services, a fee of 7% of the sales price
of an order that we pay FTDI for orders that are cleared through the FTD
Clearinghouse and amounts due to the third party call center that processes
orders through our toll-free telephone number.
Marketing and promotion expenses primarily consist of costs related to
advertising and affinity programs. In future periods, we expect that these
expenditures will increase significantly. In addition, in the historical
periods, marketing and promotion expenses included cost allocations from FTDI's
expenditures related to shared advertising and publicity. These allocations
will not be charged in the future. Technology development consists of fees due
to the developer of our Web site, allocated information technology costs from
FTDI related to shared systems and personnel. General and administrative
expenses primarily consist of direct corporate expenses; customer service
costs; royalty expenses; and amounts charged to us in connection with services
provided to us by FTDI related to the utilization of resources, including
executive, accounting and administrative personnel, space and equipment rental,
facilities expenses, recruiting expenses, professional fees and other corporate
expenses.
Interest expense for all periods was allocated using FTDI's weighted average
interest rate applied to average stockholder's deficit which represents FTDI's
cumulative funding of our cash requirements and results of operations until our
date of incorporation. Effective with the May 1999 execution of a $5.0 million
revolving loan agreement with FTDI to provide financing from the date of
incorporation to the closing of this offering, interest expense will be
reflected in our financial statements pursuant to the contractual interest rate
on the loan and borrowings thereunder.
We have entered into an amendment to FTDI's and FTD Corporation's Tax
Sharing Agreement pursuant to which our operating results will be included in
the consolidated tax returns of FTD Corporation, our ultimate parent, and we
will be reimbursed for any tax benefits realized by FTD Corporation as a result
of that inclusion. The tax provisions are based upon management's estimate of
our annualized effective tax rate, which approximates a tax provision computed
on a stand-alone basis as if we filed a separate tax return. Income tax benefit
for the nine months ended March 31, 1999 was $2.4 million compared to $1.8
million for the nine months ended March 31, 1998 and $2.6 million, $2.4 million
and $2.2 million for each of the years ended June 30, 1998, 1997 and 1996,
respectively.
We will incur costs associated with some of our Intercompany Agreements.
Pursuant to our Trademark Licensing Agreement, we will pay FTDI a royalty equal
to 1% of our order revenues and service fees, net of discounts, in exchange for
the right to use FTDI's trademarks in connection with the sale of goods and
services on the Internet, through catalogs and over the telephone. The
Intercompany Services Agreement will require FTDI to provide us with various
corporate services and space sharing. In exchange for FTDI's provision of
27
<PAGE>
corporate services, we will pay FTDI an amount equal to 105% of FTDI's
allocated costs associated with these services. FTDI will allow us to use a
portion of its offices at a cost equal to an estimate of the prevailing market
rate for such space and including 105% of operating expenses. For a more
complete discussion of these Intercompany Agreements, see "Certain
Transactions--Intercompany Agreements."
Results of Operations
Nine months ended March 31, 1999 compared to nine months ended March 31,
1998.
Total revenues increased by $12.1 million, or 63%, to $31.2 million for the
nine months ended March 31, 1999 from $19.1 million for the nine months ended
March 31, 1998. The increase in total revenues was attributable to a
significant increase in the number of orders, as well as an increase in average
order value.
Order revenues and service fees, net of discounts, increased by $9.4
million, or 49%, to $28.5 million for the nine months ended March 31, 1999 from
$19.1 million for the nine months ended March 31, 1998. The increase from the
corresponding period of the prior year was primarily the result of an increase
of Internet order volume as well as an increase in order value and service
fees. During the nine months ended March 31, 1999, 51% of our order revenues
and service fees were generated by telephone orders and 49% through the
Internet compared to 71% by telephone and 29% through the Internet during the
nine months ended March 31, 1998.
Commission revenue was $2.6 million for the nine months ended March 31,
1999. We did not generate any commission revenue during the nine months ended
March 31, 1998. The increase from the corresponding period of the prior year
was the result of the commencement in July 1998 of an incentive program to
gather orders for FTDI. Commission revenue was 8.3% of total revenues for the
nine months ended March 31, 1999.
Other revenues increased by $57,000 to $67,000 for the nine months ended
March 31, 1999 from $10,000 for the nine months ended March 31, 1998. Other
revenues were less than 1% of total revenues for the nine months ended March
31, 1999 and 1998, respectively.
Cost of fulfillment and processing services increased by $7.7 million, or
46%, to $24.5 million for the nine months ended March 31, 1999 from $16.8
million for the nine months ended March 31, 1998. This was the result of
increased order volume, which was primarily attributable to the increase in
Internet sales discussed above. In addition, we realized cost reductions that
resulted from improvements in order processing operations. As a percentage of
total revenues, cost of fulfillment and processing services decreased to 79%
for the nine months ended March 31, 1999 from 88% for the nine months ended
March 31, 1998. This decrease was principally due to the increase in commission
revenue in the nine months ended March 31, 1999.
Marketing and promotion expenses increased by $4.2 million, or 117%, to $7.8
million for the nine months ended March 31, 1999 from $3.6 million for the nine
months ended March 31, 1998. The increase was primarily due to an increase in
Internet advertising, promotion and customer acquisition marketing.
Technology development expenses increased by $423,000, or 42%, to $1.4
million for the nine months ended March 31, 1999 from $1.0 million for the nine
months ended March 31, 1998. The increase was primarily due to costs related to
Web site maintenance and enhancements required to handle the increased volume
on our site as well as to improve the speed of order processing.
General and administrative expenses increased by $1.1 million, or 52%, to
$3.2 million for the nine months ended March 31, 1999 from $2.1 million for the
nine months ended March 31, 1998. The increase was primarily due to our
increased expenses required to handle the growth in Internet sales.
Year ended June 30, 1998 compared to year ended June 30, 1997.
Total revenues increased by $4.4 million, or 17%, to $30.7 million for the
year ended June 30, 1998 from $26.3 million for the year ended June 30, 1997.
The increase in total revenues was attributable to a significant increase in
the number of orders and was partially offset by a decline in average order
value.
28
<PAGE>
Order revenues and service fees, net of discounts, increased by $4.2
million, or 16% to $30.4 million for the year ended June 30, 1998 from $26.2
million for the year ended June 30, 1997. The increase from the corresponding
period of the prior year was primarily the result of an increase of Internet
order volume as well as an increase in order value and service fees. During the
year ended June 30, 1998, 66% of our order revenues and service fees were
generated by telephone orders and 34% through the Internet compared to 83% by
telephone and 17% through the Internet during the year ended June 30, 1997.
Other revenues increased to $215,000 for the year ended June 30, 1998 from
$25,000 for the year ended June 30, 1997. Other revenues were less than 1% of
total revenues for the years ended June 30, 1998 and 1997, respectively.
Cost of fulfillment and processing services increased by $4.0 million, or
18%, to $26.3 million for the year ended June 30, 1998 from $22.3 million for
the year ended June 30, 1997. This increase was the result of increased order
volume, which was primarily attributable to the increase in Internet sales
discussed above, as well as higher product costs attributable to an increase in
the percentage of the floral order value due to florists who fulfill the
orders. As a percentage of total revenues, cost of fulfillment and processing
services was 86% for the year ended June 30, 1998 and 85% for the year ended
June 30, 1997.
Marketing and promotion expenses increased $1.1 million, or 22%, to $6.0
million for the year ended June 30, 1998 from $4.9 million for the year ended
June 30, 1997. The increase was primarily due to an increase in Internet
advertising, and customer acquisition marketing.
Technology development expenses decreased $126,000, or 8%, to $1.4 million
for the year ended June 30, 1998 from $1.5 million for the year ended June 30,
1997. The decrease was primarily due to a decrease in general information
technology expenses from FTDI as a result of a decrease in their expenditures
as well as a new contract with our Web site developer that reduced the variable
expenses for their services.
General and administrative expenses decreased slightly to $3.2 million for
the year ended June 30, 1998 from $3.3 million for the year ended June 30,
1997.
Year ended June 30, 1997 compared to year ended June 30, 1996.
Total revenues, consisting primarily of order revenues and service fees, net
of discounts, increased by $7.8 million, or 42%, to $26.3 million for the year
ended June 30, 1997 from $18.5 million for the year ended June 30, 1996. The
increase in total revenues was attributable to a significant increase in the
numbers of orders, as well as an increase in average order value.
Cost of fulfillment and processing services increased by $6.9 million, or
45%, to $22.3 million for the year ended June 30, 1997 from $15.4 million for
the year ended June 30, 1996. This was the result of increased order volume,
due primarily to the increase in orders from marketing programs discussed
above, as well as higher product costs attributable to an increase in the
percentage of the floral order value due to florists who fulfill the orders. As
a percentage of total revenues, cost of fulfillment and processing services
provided was 85% for the year ended June 30, 1997 and 83% for the year ended
June 30, 1996.
Marketing and promotion expenses increased by $676,000, or 16%, to $4.9
million for the year ended June 30, 1997 from $4.2 million for the year ended
June 30, 1996. The increase was due to increased advertising, promotion and
other customer acquisition marketing related to affinity programs.
Technology development expenses increased by $295,000, or 25%, to $1.5
million for the year ended June 30, 1997 from $1.2 million for the year ended
June 30, 1996. The increase was primarily due to increased costs related to
order processing system development and maintenance required to handle the
increased volume and to better track the source of our orders as well as
customer demographic information.
General and administrative expenses increased by $312,000, or 10%, to $3.3
million for the year ended June 30, 1997 from $3.0 million for the year ended
June 30, 1996. The increase was primarily due to an increase in expenses that
were required to handle the growth of our business.
29
<PAGE>
Quarterly Results of Operations and Seasonality
The following table sets forth unaudited quarterly statement of operations
for the eight quarters ended March 31, 1999. This unaudited quarterly
information has been derived from our unaudited financial statements and, in
the opinion of management, includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the information of
the periods covered. The quarterly data should be read in conjunction with the
financial statements and the notes to those statements that appear elsewhere in
this prospectus. The operating results for any quarter are not necessarily
indicative of the operating results for any future period.
<TABLE>
<CAPTION>
Three months ended
-----------------------------------------------------------------------------------------------
June 30, September 30, December 31, March 31, June 30, September 30, December 31, March 31,
1997 1997 1997 1998 1998 1998 1998 1999
-------- ------------- ------------ --------- -------- ------------- ------------ ---------
(unaudited, dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Order revenues and
service fees, net of
discounts.............. $8,385 $3,383 $ 8,031 $ 7,658 $11,351 $5,574 $11,566 $11,380
Commissions from FTDI... -- -- -- -- -- 530 1,056 1,010
Other................... 4 2 7 1 230 1 66 --
------ ------ ------- ------- ------- ------ ------- -------
Total revenues......... 8,389 3,385 8,038 7,659 11,581 6,105 12,688 12,390
Fulfillment and
processing services.... 6,878 2,990 7,075 6,736 9,523 4,860 9,870 9,789
------ ------ ------- ------- ------- ------ ------- -------
Gross profit............ 1,511 395 963 923 2,058 1,245 2,818 2,601
Operating expenses:
Marketing and promotion. 1,438 532 1,464 1,618 2,381 1,585 3,115 3,097
Technology development.. 294 364 393 262 401 473 396 573
General and
administrative......... 955 559 760 783 1,137 803 1,087 1,290
------ ------ ------- ------- ------- ------ ------- -------
Total operating
expenses............... 2,687 1,455 2,617 2,663 3,919 2,861 4,598 4,960
------ ------ ------- ------- ------- ------ ------- -------
Loss from operations.... (1,176) (1,060) (1,654) (1,740) (1,861) (1,616) (1,780) (2,359)
Interest expense........ 79 84 81 5 7 30 75 26
------ ------ ------- ------- ------- ------ ------- -------
Loss before income
taxes.................. (1,255) (1,144) (1,735) (1,745) (1,868) (1,646) (1,855) (2,385)
Income tax benefit...... 502 458 694 698 747 658 742 954
------ ------ ------- ------- ------- ------ ------- -------
Net loss................ $ (753) $ (686) $(1,041) $(1,047) $(1,121) $ (988) $(1,113) $(1,431)
====== ====== ======= ======= ======= ====== ======= =======
<CAPTION>
Three months ended
-----------------------------------------------------------------------------------------------
June 30, September 30, December 31, March 31, June 30, September 30, December 31, March 31,
1997 1997 1997 1998 1998 1998 1998 1999
-------- ------------- ------------ --------- -------- ------------- ------------ ---------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Order revenues and
service fees, net of
discounts.............. 100.0% 100.0% 99.9% 100.0% 98.0% 91.3% 91.2% 91.8%
Commissions from FTDI... 0.0 0.0 0.0 0.0 0.0 8.7 8.3 8.2
Other................... 0.0 0.0 0.1 0.0 2.0 0.0 0.5 0.0
------ ------ ------- ------- ------- ------ ------- -------
Total revenues......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Fulfillment and
processing services.... 82.0 88.3 88.0 88.0 82.2 79.6 77.8 79.0
------ ------ ------- ------- ------- ------ ------- -------
Gross profit............ 18.0 11.7 12.0 12.0 17.8 20.4 22.2 21.0
Operating expenses:
Marketing and promotion. 17.1 15.7 18.2 21.1 20.5 26.0 24.5 25.0
Technology development.. 3.5 10.8 4.9 3.4 3.5 7.8 3.1 4.6
General and
administrative......... 11.4 16.5 9.5 10.2 9.8 13.1 8.6 10.4
------ ------ ------- ------- ------- ------ ------- -------
Total operating
expenses............... 32.0 43.0 32.6 34.7 33.8 46.9 36.2 40.0
------ ------ ------- ------- ------- ------ ------- -------
Interest expense........ 1.0 2.5 1.0 0.1 0.1 0.5 0.6 0.2
------ ------ ------- ------- ------- ------ ------- -------
Loss from operations.... (14.0) (31.3) (20.6) (22.7) (16.0) (26.5) (14.0) (19.0)
Income tax benefit...... 6.0 13.5 8.6 9.4 6.3 10.8 5.8 7.7
------ ------ ------- ------- ------- ------ ------- -------
Loss before income
taxes.................. (15.0) (33.8) (21.6) (22.8) (16.1) (27.0) (14.6) (19.2)
Net loss................ (9.0)% (20.3)% (13.0)% (13.4)% (9.8)% (16.2)% (8.8)% (11.5)%
====== ====== ======= ======= ======= ====== ======= =======
</TABLE>
30
<PAGE>
Liquidity and Capital Resources
Our liquidity requirements primarily are for capital expenditures and
working capital needs, including substantially increased advertising, promotion
and other marketing expenses. In the fiscal year ended June 30, 1998, we made
capital expenditures of $2.5 million, which related to the purchase of a
distribution agreement for use in interactive advertising. We expect that the
net proceeds of this offering and cash flow from operations will be sufficient
to fund anticipated capital expenditures and working capital needs through
fiscal 2001.
Cash used by operating activities was $1.6 million for the nine months ended
March 31, 1999, compared to cash used by operating activities of $3.2 million
for the nine months ended March 31, 1998. Amortization expense was $1.1 million
and $208,000 for the nine months ended March 31, 1999 and 1998, respectively.
The decrease in cash used in operating activities is primarily due to the net
loss for the period, partially offset by an increase in amortization and
accounts payable for the nine months ended March 31, 1999.
Cash used by investing activities was $689,000 and $2.5 million for the nine
months ended March 31, 1999 and 1998, respectively. During the nine months
ended March 31, 1999 and 1998, cash used by investing activities primarily
consisted of capital expenditures related to the purchase of additional
distribution agreements.
Cash provided by financing activities, which reflects contributions from
FTDI, was $2.3 million for the nine months ended March 31, 1999 compared to
$5.7 million for the nine months ended March 31, 1998.
Cash used by operating activities was $3.3 million for the year ended June
30, 1998 compared to cash used by operating activities of $3.1 million for the
year ended June 30, 1997. Amortization expense was $521,000 for the year ended
June 30, 1998. There were no assets to amortize during the prior ended June 30,
1997. Factors contributing to the increase in cash used in operating activities
were the net loss for the period and a decrease in accounts payable offset by
amortization and an increase in accrued expenses.
Cash used by investing activities was $2.5 million for the year ended June
30, 1998. There was no cash used by investing activities for the year ended
June 30, 1997. As discussed above, cash used by investing activities during the
year ended June 30, 1998 consisted of the purchase of a distribution license
for use in interactive advertising.
Cash provided by financing activities, which reflects contributions from
FTDI, was $5.8 million for the year ended June 30, 1998 compared to $3.1
million for the year ended June 30, 1997.
From the date of incorporation until the completion of this offering, we
will utilize the proceeds from the sale of shares of our Series A preferred
stock to meet our liquidity requirements. Upon completion of this offering, we
intend to utilize a portion of the remaining offering proceeds to fund our
liquidity needs. We expect that the remaining proceeds from the offering will
be sufficient to meet our short-term and long-term liquidity requirements
through fiscal 2001.
Year 2000 Issues
Most of our information technology (IT) functions are performed by FTDI
pursuant to the Intercompany Agreements. Accordingly, we have relied on FTDI to
assist us in assessing Year 2000 issues related to FTDI and us. The information
supplied with respect to these matters has been provided by FTDI. FTDI
conducted a review of our computer systems, as well as those of FTDI, and
identified the systems (IT systems, as well as non-IT systems) that could be
affected by the "Year 2000" issue. The Year 2000 issue is the result of
computer programs being written using two digits rather than four to define the
applicable year. Any of the computer programs used by us that have time-
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in a major system failure or miscalculation.
The Year 2000
31
<PAGE>
issue is believed to affect virtually all companies and organizations, which
would include us and FTDI, as well as systems and applications of our vendors
or customers. FTDI identified various IT systems, such as those internal
systems that reside on FTDI's mainframe, that are considered "mission critical"
and have developed a plan for converting these computer systems for Year 2000
compliance.
As of March 31, 1999, FTDI has contracted with an outside consulting firm,
which has assisted us in the evaluation and selection of a compatible software
package based on our IT system requirements and those of FTDI. FTDI is
currently in the implementation and training process for this new software
package. There are three phases to the software implementation process. Phase 1
consists of the software implementation for the general ledger and accounts
payable systems. Phase 2 consists of the software implementation for FTD
Marketplace distribution, floral order processing and accounts receivable.
Phase 3 consists of the software implementation for credit card processing and
directory publications. As of March 31, 1999, Phase 1 has been completed and
tested. Phase 2 was tested and completed as of April 5, 1999. FTDI expects
Phase 3 of the project to be completed and tested by August 31, 1999. This new
software package will allow FTDI to improve its execution and efficiency in
recording financial and operational information in addition to providing a
solution to the Year 2000 issue with respect to our IT computer systems.
In addition to the computer systems and software we use directly, our
operations also depend on the performance of computer systems and software used
by our significant service providers, including providers of financial,
telecommunications and parcel delivery services. We also cannot assure you that
our service providers have, or will have, operating software and systems that
are Year 2000 compliant.
As part of our Year 2000 compliance efforts with FTDI, our plan includes
contacting suppliers and other third parties whose business interruption could
have a significant impact on our business. Together with FTDI, we have not
completed the assessment of the Year 2000 issue as it relates to these
suppliers and third party vendors and suppliers. However, it should be noted
that there are over 19,000 FTD florists generally available to fulfill our
orders, none of which individually accounts for a material portion of our
revenues or profits. With respect to vendors and suppliers, FTDI has begun
contacting key third parties in order to secure appropriate representation of
Year 2000 compliance and to address the compatibility of systems. These vendors
and suppliers include financial institutions and communication and
transportation providers with whom ftd.com and FTDI do business. FTDI's
business is not significantly dependent on any one vendor or supplier. As of
March 31, 1999, FTDI has received representation of Year 2000 compliance from
approximately 44% of the vendors and suppliers that ftd.com and FTDI use. FTDI
and ftd.com intend to establish alternative sources or strategies in the event
that a vendor or supplier is unable to provide appropriate representations of
Year 2000 compliance.
In addition, the vast majority of purchases of merchandise from ftd.com are
made with credit cards, and our business, results of operations and financial
condition may be adversely affected to the extent our customers are unable to
use their credit cards due to Year 2000 issues that are not rectified by the
customers' credit card vendors or third party credit card transaction
processors.
FTDI has indicated that it has included in its Year 2000 compliance efforts
FTDI products such as Mercury 2000, 3000 and 4000 terminals, Mercury Interface
Box, Mercury Wings and Advantage (Solaris and SCO) computer systems. These
products are sold and leased by FTDI to FTD florists as elements of the Mercury
Network that links FTDI and FTD florists. FTDI has advised ftd.com that it will
complete its efforts to test these systems by the end of the third quarter of
1999 and intends to remedy these systems, if necessary. In the event that
appropriate Year 2000 readiness is not achieved for a service or product
identified by us or FTDI as Year 2000 compliant, FTDI will use commercially
reasonable efforts to repair the affected portion of the service or product.
FTDI has undertaken a review of the non-IT systems that we use and that rely
on embedded computer technology and are in the process of implementing a
remediation program with respect to those systems. The non-IT systems on which
we rely primarily consist of those systems relating to the building and
facilities and are not expected to adversely affect our operations. FTDI is in
the process of replacing any of these systems that are not Year 2000 compliant
and expect to complete this process by June 30, 1999.
32
<PAGE>
To date, we have not been allocated any significant costs incurred by FTDI
in connection with its Year 2000 compliance efforts. Although we expect our
Year 2000 compliance costs to be immaterial, we expect that any Year 2000
compliance costs that we incur after the closing of this offering will be
funded from operating cash flow. The Year 2000 budget has not required the
diversion of funds from or the postponement of the implementation of other
planned IT projects. If FTDI and we are unsuccessful in implementing the
software or if the software does not function as it is expected to, the related
potential effect is expected to adversely affect our business, financial
condition and results of operations. As of March 31, 1999, all scheduled
implementation dates have been met, and we continue to anticipate the
implementation to be completed by August 31, 1999. We intend to develop by
September 30, 1999 and implement, if necessary, appropriate contingency plans
to mitigate, to the extent possible, any significant Year 2000 areas of
noncompliance. We will also assess the scope of Year 2000 issues relating to
our Web site by September 30, 1999 and, if necessary, we will implement
appropriate contingency plans to mitigate any significant Year 2000 areas of
noncompliance.
The economy in general may be adversely affected by risks associated with
the Year 2000 issue. Our business, financial condition and results of
operations could be adversely affected if systems on which we rely, including
systems that are operated by other parties with whom we do business, are not
Year 2000 compliant in time. There can be no assurance that these third party
systems will continue to properly function and interface and will otherwise be
Year 2000 compliant. Although we are not aware of any threatened claims related
to the Year 2000, we may be subject to litigation arising from such claims and,
depending on the outcome, such litigation could adversely affect our business.
Based on the reviews and analysis done to date by us and FTDI, we believe
that the reasonably likely worst-case scenario with respect to the Year 2000
issues could result in difficulty for customers placing orders should the Year
2000 problem disrupt power or communication facilities. Although these events
could have an adverse affect on our business in the short-term, we do not
believe that Year 2000 issues will materially and adversely affect our
business, results of operations or financial condition over the long-term. No
assurances can be given that our expectations will be realized.
The expected costs and completion dates for the Year 2000 project and our
expectations regarding likely outcomes are forward-looking statements based on
management's best estimates, that were derived using numerous assumptions of
future events, including the continued availability of resources, third party
modification plans and other factors. Actual results could differ from these
estimates as a result of factors that include the availability and cost of
trained personnel, the ability to locate and correct all relevant computer
codes, and similar uncertainties.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information," which is
effective for fiscal years beginning after December 15, 1997. SFAS No. 131
requires that public companies report certain information about operating
segments in their annual financial statements and in subsequent condensed
financial statements of interim periods issued to shareholders. This statement
also requires that public companies report certain information about their
products and services, the geographic areas in which they operate and their
major customers. We have determined that the adoption of this new standard does
not have a material effect on our disclosure for all periods presented because
we currently operate in one segment.
------------------
This prospectus contains various "forward-looking statements" that are based
on our current expectations, assumptions, estimates and projections about
ftd.com and our industry. These forward-looking statements involve risks and
uncertainties. Our actual results could differ from those anticipated in the
forward-looking statements as a result of the factors described in this section
and elsewhere in this prospectus.
33
<PAGE>
BUSINESS
ftd.com is an Internet and telephone marketer of flowers and specialty
gifts. We began selling our products directly to consumers through our 1-800-
SEND-FTD toll-free telephone number in 1993 and electronically to consumers
through our www.ftd.com Web site in 1994. We offer same-day delivery of floral
orders to over 97% of the U.S. population. The majority of our floral orders
are fulfilled by a group of approximately 6,500 FTD florists who adhere to our
quality guarantee and service standards. We believe that the process of
purchasing flowers and specialty gifts is significantly enhanced through the
use of the Internet. We also believe that our Web site offers convenience and a
superior shopping experience compared to traditional telephone ordering by
allowing consumers to view pictures of the flowers and specialty gifts they are
considering purchasing and to be personally reminded of upcoming purchasing
occasions. We believe the strength of the FTD brand, our easy-to-remember URL,
our fulfilling florist network and our marketing relationships with The Walt
Disney Company, M&M/Mars, Inc., Hickory Farms, Inc. and The Vermont Teddy Bear
Company will enable us to significantly grow our business and build market
share.
FTD was founded in 1910, and we believe that the FTD brand and the Mercury
Man logo are among the most recognized consumer brands in America. Our product
offerings vary by season and holiday. On average, we offer over 150 floral
arrangements designed by FTD's floral designers for holidays and other
occasions. We also offer over 50 specialty gifts, including stuffed animals and
other plush toys, gourmet gift baskets, holiday gift sets and collectible
containers. Our product offerings are available at prices ranging from $29.99
to $176.99. For the three months ended March 31, 1999, our total revenues were
$12.4 million and we received a total of 208,845 orders. Internet orders
represented 57% of total customer orders during this period.
Industry Background
Growth of online commerce. The Internet is dramatically affecting the
methods by which consumers buy goods and services. The Internet provides online
merchants with the ability to reach a broad audience and to operate with
minimal infrastructure, reduced overhead and greater economies of scale, while
providing consumers with a broad selection, detailed product information and
unparalleled convenience. As a result, a growing number of parties are
transacting business on the Internet. In November 1998, Forrester Research
estimated that U.S. retail consumer purchases of goods and services over the
Internet will increase from approximately $7.8 billion in 1998 to over $108
billion in 2003. According to Forrester Research, almost 9 million households,
or approximately 30% of all current online households in the U.S., made at
least one online purchase in 1998. By 2003, this figure is expected to grow to
over 40 million households, or over 75% of all projected online households in
the U.S., as Internet use becomes more convenient through higher-speed access
and more common through the use of alternative Internet access devices.
Online floral and specialty gift market. The floral and specialty gift
markets are large and growing markets that are both well suited for e-commerce.
According to an October 1997 United States Department of Agriculture Economic
Research Service study, the U.S. retail market for cut flowers and cut greens
was $6.5 billion in 1996 and has grown at a compound annual growth rate of
approximately 5% from 1993 to 1996. In November 1998, Forrester Research
forecasted that the U.S. online market for flowers will increase from $212
million in 1998 to $906 million in 2003 and that the U.S. online market for
specialty gifts will increase from $63 million in 1998 to $544 million in 2003.
In addition, according to a June 1998 report published by the World Conference
on Horticultural Research, the U.S. ranked 13th worldwide in per capita retail
expenditures for cut flowers and cut greens. As a result, we believe that there
are significant opportunities to increase the number of online flower purchases
in the U.S. and that increased advertising and the superior shopping experience
afforded by the Internet will be catalysts for this growth.
34
<PAGE>
Competitive Strengths
We benefit from our ability to utilize the FTD brand. According to an April
1999 Market Facts, Inc. research study commissioned for FTD, the FTD brand is
regarded as the floral industry leader in several key categories, including
first choice when ordering flowers over the Internet, brand awareness, customer
service and convenience. Our URL, www.ftd.com, is commercially attractive and
easy to access. To stimulate brand awareness and increase traffic to our Web
site, we advertise on several high-traffic Web sites, such as Yahoo!, the Go
NetworkTM, Netscape Netcenter, MSN.com and others. We also sell a number of
floral and specialty gift products utilizing other popular consumer brands such
as Winnie The Pooh(R), M&M's(R), Vermont Teddy Bear(R) and Hickory Farms(R).
We believe that our fulfilling florist network and quality control standards
are a significant competitive strength. Through a network of approximately
6,500 FTD florists, who fill the majority of our orders, we can provide same-
day delivery of flowers to 97% of the U.S. population, if the order is received
by 1:00 p.m. in the recipient's time zone. To fulfill our customers' orders,
florists must adhere to our service standards, including our 100% satisfaction
guarantee. We continuously monitor our fulfilling florists by placing random
test orders and monitoring customer feedback to ensure customer satisfaction.
We provide customer service through our call centers and online.
The technologies integrated in our Web site allow us to retain and analyze
customer, sales and Web site activity. Our Web site provides our customers with
a fast and convenient way to shop. It also allows our customers to obtain
detailed information about our products and to be personally reminded of
upcoming purchasing occasions.
Business Strategy
We intend to build further brand awareness and increase our customer base
and purchasing frequency by significantly expanding our advertising, direct
marketing/affinity and retention marketing efforts. We plan to implement a
targeted television, radio and print advertising campaign focused on increasing
customer usage of ftd.com. In addition, we intend to increase our advertising
presence on highly-trafficked Web sites to encourage consumers to visit our Web
site. We will also continue to utilize a direct marketing campaign designed to
acquire new customers. To date, we have developed affinity programs with a
variety of companies, including Citibank, MBNA and United Airlines. These
programs involve monthly statement inserts, e-mails and catalogs that market
our products to their customers and often offer discounts or frequent flier
mileage awards for purchases of our products.
We also intend to strengthen our retention marketing programs. We currently
utilize our customer information to provide a personalized e-mail reminder
service. This voluntary reminder service enables customers to choose to be
reminded of significant flower or gift purchasing occasions, including events
identified by the particular customer such as birthdays and anniversaries. We
also send printed catalogs and offer other incentives designed to increase
purchasing frequency.
We plan to expand our product offerings to continue to provide our customers
with the best selection of flowers and specialty gifts. While our major focus
is and will continue to be selling flowers, we believe that our specialty gifts
complement our floral product offerings. We believe that the strength of the
FTD brand will allow us to continue to enhance our product offerings through
relationships with other popular consumer brands.
We intend to provide quality customer service by continuing to offer our
100% satisfaction guarantee and by investing in our technology platforms. Under
our 100% satisfaction guarantee policy, customers are entitled to a full refund
or a replacement at no additional cost if they are unsatisfied for any reason.
By making additional investments in technology to share information between our
call centers and Web site environments, we believe that we will be able to
continue to enhance our reputation for customer service.
We plan to capitalize on our relationship with FTD. We believe that this
relationship provides us with significant advantages, including our access to
quality-tested fulfilling florists, our ability to use the FTD brand name and
the www.ftd.com URL and the substantial experience of FTD's management.
35
<PAGE>
Our relationship with FTD also allows us access to FTD's international
fulfillment capability. One of FTD's unique capabilities is its affiliation
with approximately 32,000 florists outside North America. These florists,
through their membership in Interflora, a licensing partner of FTD, have agreed
to receive floral orders transmitted by FTD. There are many people living in
North America who may be interested in sending flowers and specialty gifts to
relatives, friends and business associates living abroad. We intend to market
FTD's international fulfillment capabilities to these consumers.
Product Offerings
We sell both floral arrangements whose designs have been created by FTD as
well as traditional floral arrangements that are chosen by the customer. Our
specialty gift products include plush toys, gourmet gift baskets and
collectible containers. These products are available at a wide range of price
points. The following table illustrates a sample of current product offerings.
<TABLE>
<CAPTION>
Retail Price
Product Type Product Examples Range
------------ ---------------- ------------
<S> <C> <C>
FTD Branded Products FTD Anniversary Bouquet $34.99 to $84.99
FTD Thanks A Bunch(R) Bouquet
FTD Birthday Party(R) Bouquet
FTD Licensed Products Winnie The Pooh(R) bouquets $39.99 to $94.99
M&M's(R) character bouquets
Mickey Mouse(R) bouquets
(beginning in late 1999)
Traditional Floral Arrangements Roses and other mixed flower bouquets $29.99 to $176.99
Specialty Gifts Hickory Farms(R) products $36.99 to $89.99
NFL(TM) gift baskets
</TABLE>
FTD branded products. Each year, FTD designs floral and specialty gift
products for significant occasions, such as birthdays and anniversaries, and
major holidays, including the most popular floral holidays of Valentine's Day,
Easter, Mother's Day, Thanksgiving and Christmas. We typically offer
approximately 15 products in this category at any one time. Utilizing
professional floral designers, FTD begins developing new products well in
advance of their expected release dates and conducts extensive testing with
florists and consumers to help ensure the success of these new products.
FTD licensed products. FTD also seeks to enter into licensing arrangements
with other popular consumer brands with the goal of developing new and
innovative products. In this regard, FTDI has developed relationships with
companies that have well recognized brand names, such as The Walt Disney
Company, M&M/Mars, Inc., Hickory Farms, Inc. and The Vermont Teddy Bear
Company. We typically offer approximately four products in this category at any
one time and introduce new products for specific holidays. To date, these
arrangements have not resulted in a material portion of our revenues.
Traditional floral arrangements. Consumers can also purchase traditional
floral arrangements, such as roses and mixed flower bouquets. We typically
offer over 100 products in this category at any one time.
Specialty gifts. We also offer specialty gift products in key categories
such as plush toys, gourmet food, health and beauty and candles/aromatherapy.
These offerings include products from Hickory Farms, Inc. and licensees of the
National Football League, and we typically offer approximately 50 products in
this category at any one time. FTD continuously seeks to add strong brands to
include in this category of product offerings. These products are developed in
a relatively short period of time and are shipped directly from the vendor's
manufacturing facilities or the vendor's third party distributor to the
consumer.
36
<PAGE>
Transaction Execution
The execution of an order consists of the following steps illustrated below:
Order placement
. Internet orders--Once a customer has selected a product, our Web site
prompts the customer to enter a credit card number and provide other
relevant information, including the address of the recipient and any
special delivery instructions; this information is then transmitted
over the Internet to the servers that process our orders and
communicate with the Mercury Network.
. 1-800-SEND-FTD orders--A sales representative collects the relevant
order and credit card payment information; this information is then
transmitted to the servers that process our orders and communicate with
the Mercury Network.
Order fulfillment
. Orders fulfilled by florists--The fulfilling florist fills the order by
delivering the floral or specialty gift order directly to the
recipient.
. Orders fulfilled by manufacturers or third party distributors--The
manufacturer or third party distributor of the specialty gift order
sends the specialty gift order to the recipient through an express
delivery service such as United Parcel Service or Federal Express;
these items typically arrive in one to two days depending on the
delivery method chosen by the customer.
Transaction Economics
Orders placed through our Web site or 1-800-SEND-FTD typically are paid for
using a credit card. For each order generated by us that is fulfilled by an FTD
florist, we pay FTDI a percentage of the sales price of the order. This payment
is allocated between FTDI and the fulfilling florist. A commission of $5.00 is
paid to us by FTDI for each order that we clear through the FTD Clearinghouse.
For orders that are not fulfilled by an FTD florist, such as holiday gift
baskets, we pay a prenegotiated price for the product to the manufacturer or
third party distributor. We do not receive a commission from FTDI for these
orders. In addition, our customers pay us a service fee of $6.99 for most
orders placed through our Web site and $9.99 for most orders placed through 1-
800-SEND-FTD.
Marketing and Promotion
To date, we have focused our marketing and promotion strategy on purchasing
advertising on high-traffic Web sites. We also have conducted a marketing
campaign that targets our proprietary database of customers through the use of
seasonal e-mail solicitations and printed catalogs. We intend to significantly
expand our advertising and marketing efforts with the predominant portion of
proceeds raised from this offering through the development of new online and
traditional advertising.
Online advertising. We believe that we are one of the floral and specialty
gift industries' leaders in establishing a substantial online advertising
presence. We currently maintain a significant advertising presence on several
high-traffic Web sites, including Yahoo!, the Go NetworkTM, Netscape Netcenter,
MSN.com, Disney.com, InfoSpace, Excite, Hotbot, Infoseek and Lycos. We intend
to continue to seek new opportunities to expand this presence within top-tier
portal sites and highly trafficked content sites.
Traditional advertising. We intend to actively pursue a variety of
traditional advertising channels to promote the ftd.com brand. Our efforts in
this area will focus on promoting our brand through television, radio and print
advertisements. While we have not spent significant marketing dollars in this
area in the past, we expect to significantly increase our traditional
advertising campaign in the future.
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Direct marketing/affinity programs. Through an aggressive direct marketing
campaign designed to acquire new customers, we develop relationships with many
companies that have large consumer databases, including United Airlines and
credit card issuers such as Citibank and MBNA. We utilize statement inserts,
e-mail and printed catalogs to market to these consumers and often offer
discounts or frequent flier mileage awards for purchases.
Retention marketing. We use our extensive database of customer information
to enhance our customer retention efforts. For example, we allow our Internet
customers to establish an account with us that stores an address book, credit
card numbers and ordering preferences and allows customers to review their
previous purchases. We intend to continue to expand these efforts.
In addition, FTDI utilizes a variety of advertising channels to promote the
FTD brand and the Mercury Man logo, including television and print
advertisements. FTD has utilized football Hall-of-Famer and actor Merlin Olsen
as a spokesman since 1983. FTDI also has an active sponsorship campaign,
featuring a float in the annual Tournament of RosesTM Parade and sponsorship of
the Champions on IceTM professional ice skating tour.
Technology and Systems
Our Internet technology utilizes FTDI's systems and technology licensed from
other parties, enabling us to offer our customers a convenient and user-
friendly online shopping experience. The overall mix of technologies and
applications that we use allows us to support a distributed, scalable and
secure e-commerce environment.
We use server technology in a fully redundant configuration to power our Web
site. Our hosting location has the ability to handle increases in usage levels
by utilizing data communication links that can add capacity in excess of
historical levels.
Our transaction system primarily is supported by fully redundant processors,
which FTDI owns. The term "redundant processors" means that we have back-up
servers that remain idle or run non-critical tasks when the system is working
properly. If one of the primary processors goes down, than a back-up processor
will start-up and begin to handle customer transactions. These processors
accept and validate floral and non-floral orders, assess product availability,
handle credit card transaction processing and automated customer communications
and facilitate florist selection. With respect to these orders, the processors
communicate with the Mercury Network, which is a scalable, redundant network
that facilitates communication with and among FTD florists, manufacturers and
third party distributors. With respect to the Mercury Network, the term
"redundant network" means that several checks and balances exist to ensure that
a customer order is processed in a timely manner. The Mercury Network
automatically routes an order to a florist based on location and activity
levels. The connection at the florist's shop either electronically accepts,
rejects or does not respond. If no electronic response occurs then a manual
call is placed to alert the florist to the condition. If the florist cannot
immediately rectify the problem, then the order is automatically electronically
routed to another suitable florist.
Orders generated through 1-800-SEND-FTD are processed by call centers
operated by APAC Teleservices, Inc. and, to a lesser degree, by us. The sales
representatives at these customer call centers in Cedar Rapids and Waterloo,
Iowa and LaCrosse, Wisconsin, which provide 24-hour phone services, collect the
billing and order information for each order generated through 1-800-SEND-FTD.
Having access to both an in-house and independent call center gives us the
flexibility to allocate calls during peak hours, facilitates call center
expansion capabilities during the holiday periods without additional capital
expenditures and ensures that we will have adequate call center coverage.
Customer Service
We believe that our ability to establish and maintain long-term
relationships with our customers and encourage repeat visits and purchases
depends, in part, on the strength of our customer service. The Internet
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allows nearly instant user feedback, which we use to promptly address customer
requests and needs. In addition, we value frequent communication with and
feedback from our customers to continually improve our services. We operate
customer call centers that provide problem resolution services through our Web
site and by telephone at 1-800-SEND-FTD, Monday through Friday, 7:00 a.m.
through 7:00 p.m., and Saturday, 7:00 a.m. through 5:00 p.m., Central time.
During holiday periods, customer service is also available Sunday, 8:00 a.m.
through 3:00 p.m., Central time. Our customer service personnel are responsible
for handling general customer inquiries, answering customer questions about the
ordering process and investigating the status of orders, shipments and
payments. In addition, we license software that enables us to provide online,
automated customer service support and reduce our customer service costs.
Competition
The consumer markets for flowers and specialty gifts are highly competitive
and highly fragmented, and there are few barriers to entry in the markets in
which we compete. The number of e-commerce Web sites competing for consumers'
attention has increased rapidly during the past several years. We compete with
marketers of flowers and specialty gifts who sell through various channels,
including retail stores, the Internet, the telephone and catalogs. Our
competitors may have greater resources or more established customer bases than
ours. Our principal competitors are 1-800-FLOWERS.COM, Inc., Gerald Stevens,
Inc. and PC Flowers & Gifts.com Inc.
We believe that the primary competitive factors in our markets are trust in
the brand, brand recognition, site content, ease of use, price, fulfillment
capabilities, customer service and reliability. Our success will depend heavily
on our ability to continue to provide a satisfactory shopping experience. Other
factors that will affect our success include our continued ability to attract
experienced marketing, technology, operations and management talent. We are
aware that some of our competitors have and may continue to adopt aggressive
pricing and marketing strategies. Increased competition may adversely affect
operating margins and result in loss of market share and a diminished brand
franchise. The nature of the Internet as an electronic marketplace, which may,
among other things, lower barriers to entry for our competitors and facilitate
comparison shopping, may render it inherently more competitive than traditional
retailing formats.
Intellectual Property
We regard our Internet domain name, copyrights, service marks, trademarks,
trade secrets and similar intellectual property as critical to our success.
Much of our intellectual property is licensed from third parties, principally
FTDI. These license arrangements include our Trademark License Agreement with
FTDI, pursuant to which we license the right to use the FTD name, including the
use of the FTD trademark and associated logos as part of our Internet domain
name and our toll-free telephone number. In addition, a substantial portion of
the technology incorporated in our Web site is based on technology licensed
from our third party Web site developer, including our database and Internet
server software and the associated source code. To protect our intellectual
property rights, we rely on a combination of copyright, trademark and trade
secret laws, confidentiality procedures, contractual provisions and agreements
with employees, customers, strategic partners and others. We also depend on the
third party owners of the intellectual property rights we license to protect
those rights.
Employees
We currently employ 41 people who devote all or substantially all of their
time to our business. In addition, approximately 130 of FTDI's employees
provide services to us pursuant to an intercompany agreement with FTDI. None of
our employees is represented by a union, and we consider relations with our
employees to be good.
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<PAGE>
Legal Proceedings
We are not involved in any legal proceeding that management believes would
adversely affect our business, results of operations or financial condition.
Facilities
Our principal offices are located at 3113 Woodcreek Drive, Downers Grove,
Illinois 60515, and have historically been shared with FTDI, which owns the
property. Following this offering, we expect to continue to use a portion of
this property under a space-sharing arrangement with FTDI. As we expand, we
expect that suitable additional space will be available on commercially
reasonable terms, although no assurance can be made in this regard. We do not
own any real estate.
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MANAGEMENT
Executive Officers and Directors
Our board of directors consists of five directors, all of whom are elected
for one-year terms at each annual meeting of stockholders. Our executive
officers are elected annually by our board of directors, however, they may be
removed from office at any time by our board of directors.
The following table sets forth, as of June , 1999, the name, age and
position within ftd.com of each of our executive officers and directors. Each
of the individuals identified in the following table other than Mr. Chapman has
served in his or her position within ftd.com since May 19, 1999. Their
respective backgrounds are described following the table.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Richard C. Perry..... 44 Chairman of the Board
Michael J. Soenen.... 29 President, Chief Executive Officer and Director
Peter K. Poli........ 37 Vice President and Chief Financial Officer
Frederick K. Johnson. 52 Chief Information Officer
Brian G. Chapman..... 34 Vice President of Strategy and Development
Habib Y. Gorgi....... 42 Director
Veronica K. Ho....... 39 Director
Gary K. Silberberg... 39 Director
</TABLE>
Some of the current members of our board of directors have been appointed
pursuant to various parties' contractual rights to designate directors under an
FTD Corporation stockholders' agreement. Mr. Perry, Ms. Ho and Mr. Silberberg
are designees of Perry Acquisition Partners, L.P.; and Mr. Gorgi is a designee
of the investment funds and related persons affiliated with Bain Capital, Inc.
These rights to designate directors are more fully described under the caption
"Transactions with Management and Others--Rights to Designate Directors."
Richard C. Perry is the President and Managing Member of Perry Capital LLC,
founded in 1998, and President of Perry Corp., both of which are private money
management firms. He founded Perry Corp. in 1988. Mr. Perry had been an Adjunct
Associate Professor at New York University's Stern School of Business. Mr.
Perry serves as Chairman of the Board of FTDI and FTD Corporation. He is also a
director of Radio & Records, Inc. and Uniplast Industries Co. and a trustee of
the Allen Stevenson School and the National Advisory Board of Facing History
and Ourselves. Mr. Perry received a B.S. from the Wharton School of the
University of Pennsylvania in 1977 and an M.B.A. from New York University's
Stern School of Business in 1980.
Michael J. Soenen is the President and Chief Executive Officer and a
director of ftd.com. He was Vice President--Marketing of FTDI prior to joining
ftd.com in May 1999. From January 1997 until August 1998, he was Director of
Sales Promotion for FTDI. Mr. Soenen was an associate at Perry Corp. from
August 1996 to December 1996. From July 1993 to July 1996, Mr. Soenen worked
for Salomon Brothers Inc, an investment banking firm. Mr. Soenen received a
B.A. from Kalamazoo College in 1992. Mr. Soenen was not elected to our board
pursuant to an arrangement or understanding with any party.
Peter K. Poli was named Vice President and Chief Financial Officer of
ftd.com in April 1999. Prior to joining us, Mr. Poli was Chief Financial
Officer of Discover Brokerage Direct, Inc., an Internet brokerage firm that is
a wholly owned subsidiary of Morgan Stanley Dean Witter & Co., from March 1997
to April 1999. He was also a director of Discover Brokerage Direct from July
1998 to April 1999. From 1987 until he joined Discover Brokerage Direct, Mr.
Poli served in various capacities at Dean Witter Reynolds Inc., an investment
banking firm. Mr. Poli received an A.B. from Brown University in 1983 and an
M.B.A. from Harvard Business School in 1987.
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Frederick K. Johnson joined FTDI as Executive Vice President Technology in
July 1997. Prior to that time, Mr. Johnson was Senior Vice President--MIS for
Fabri-Centers of America, Inc., a retail chain of fabric and craft stores that
is now known as Jo-Ann Stores, Inc., for more than five years. Mr. Johnson
received a B.S. from Case Institute of Technology in 1969 and an M.B.A. from
Case Western Reserve University in 1977.
Brian G. Chapman was named Vice President of Strategy and Development of
ftd.com in June 1999. Prior to joining ftd.com, Mr. Chapman was a director of
VIA International, a management consulting firm, from April 1997 to May 1999.
From March 1990 to April 1997, Mr. Chapman was a management consultant with
Towers Perrin, an international consulting firm. Mr. Chapman received a B.S.
from Northwestern University in 1986.
Habib Y. Gorgi currently is President of Fleet Private Equity Co. Inc., a
subsidiary of Fleet Financial Group, Inc. He was Executive Vice President of
Fleet Private Equity Co. Inc. from 1993 until he became President in January
1996. Mr. Gorgi serves as a director of FTDI and FTD Corporation. He is also a
director of several privately-held companies. Mr. Gorgi received an A.B. from
Brown University in 1978 and an M.B.A. from Columbia University in 1983.
Veronica K. Ho is a Managing Director and Member of Perry Capital LLC and
has been a Managing Director of Perry Corp. since 1993. Ms. Ho serves as a
director of FTDI and FTD Corporation. She is also a director of Radio &
Records, Inc., AT Plastics Inc. and Uniplast Industries Co., and a member of
the New York Advisory Board of Facing History and Ourselves. Ms. Ho received an
A.B. from Brown University in 1982 and an M.B.A. from Harvard Business School
in 1986. Ms. Ho is married to Mr. Silberberg.
Gary K. Silberberg is a Managing Director and Member of Perry Capital LLC
and has been a Managing Director of Perry Corp. since 1994. Mr. Silberberg also
serves as a director of FTDI and FTD Corporation. He is also a director of
Uniplast Industries Co. Mr. Silberberg received an Sc.B. from Brown University
in 1982 and a J.D. from Yale Law School in 1985. Mr. Silberberg is married to
Ms. Ho.
Additional Directors
Prior to or immediately following the closing of this offering, we plan to
add to our board of directors two independent directors who are not affiliated
with ftd.com, FTDI, FTD Corporation or any other party that has a right to
designate a member or members of our board of directors.
Board Committees
Prior to or immediately following the closing of this offering, our board of
directors will establish an audit committee and a compensation committee. The
audit committee will be responsible for reviewing our audited financial
statements and accounting practices, and considering and recommending the
employment of, and approving the fee arrangements with, independent accountants
for both audit functions and for advisory and other consulting services. The
compensation committee will review and approve the compensation and benefits
for our key executive officers, administer our employee benefit plans and make
recommendations to our board of directors regarding those matters.
Director Compensation
Directors who are not employees or affiliates of ftd.com, FTDI or FTD
Corporation are paid for each board or committee meeting attended and
are entitled to reimbursement for all reasonable out-of-pocket expenses
incurred in connection with their attendance at those meetings.
Compensation Committee Interlocks and Insider Participation
Historically, all compensation decisions relating to our executive officers
have been made by the full board of directors of FTDI. Following the closing of
this offering, the compensation committee will make all compensation decisions
regarding our executive officers. No interlocking relationship exists between
the
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compensation committee and the board of directors or compensation committee of
any other company, and no such relationship existed in the past.
Executive Compensation
Prior to the offering, all compensation paid to our executive officers was
paid by FTDI and was attributable, at least in part, to services provided to
FTDI's Internet and telephone floral and specialty gift businesses.
The following table sets forth information concerning the compensation
during our fiscal year ended June 30, 1998 for our Chief Executive Officer and
the other most highly compensated executive officer of the Company whose total
salary and bonus (as determined in accordance with Securities and Exchange
Commission rule) exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
1998 Annual Long-Term
Compensation Compensation Awards
-------------------- ---------------------------
Restricted Securities
Name and Principal Stock Underlying All Other
Position Salary ($) Bonus ($) Awards ($) Options (#)(1) Compensation ($)
- ------------------ ---------- --------- ---------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Michael J. Soenen....... 115,177 9,839 -- 10,000 8,570(2)
President and Chief
Executive Officer
Frederick K. Johnson.... 172,384 15,130 155,000(3) 100,000 21,687(4)
Chief Information
Officer
</TABLE>
- ----------
(1) Represents options to purchase shares of Class A common stock of FTD
Corporation.
(2) Represents $7,402 in compensation for moving expenses and $1,168 in
flexible dollars for use in connection with FTD Corporation's benefit
plans.
(3) As of June 30, 1998, Mr. Johnson held 20,000 restricted shares of Class A
common stock of FTD Corporation with an aggregate value of $210,000. These
restricted shares vest in three equal installments beginning on June 30,
2000.
(4) Represents $19,831 in compensation for moving expenses and $1,856 in
flexible dollars for use in connection with FTD Corporation's benefit
plans.
FTD Corporation Option Grants in Last Fiscal Year
The following information sets forth information concerning grants of
options to purchase shares of Class A common stock of FTD Corporation to the
named executive officers during our fiscal year ended June 30, 1998.
FTD Corporation Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------
Potential
Realizable Value
at Assumed Annual
Number of % of Total Rates of Stock
Securities Options Price Appreciation
Underlying Granted to for Option Term
Options Employees Exercise ------------------
Granted in Fiscal Price Expiration 5% 10%
Name (#) Year ($/sh) Date ($)(3) ($)(3)
- ---- ---------- ---------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Soenen....... 10,000(1) 4.8% 7.75 10/28/07 $162,889 $ 247,585
Frederick K. Johnson.... 50,000(2) 24.2% 7.75 10/28/07 814,447 1,237,923
50,000(2) 24.2% 15.00 10/28/07
</TABLE>
- ----------
(1) Options vest in four equal installments beginning on January 1, 1998.
(2) Options vest in four equal installments beginning on July 1, 1998.
(3) The 5% and 10% rates of appreciation were set by the Securities and
Exchange Commission and are not intended to forecast future appreciation,
if any, of the Class A common stock of FTD Corporation.
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<PAGE>
FTD Corporation Option Exercises in Last Fiscal Year and Year-End Option Values
The following table sets forth information concerning option exercises with
respect to FTD Corporation Class A common stock by our executive officers named
in the table above during our fiscal year ended June 30, 1998.
Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-The-Money Options at
Shares Acquired Value Year-End (#) Fiscal Year-End ($)
Name on Exercise (#) Realized Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---- --------------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Michael J. Soenen....... 0 0 0/10,000 0/13,750
Frederick K. Johnson.... 0 0 0/100,000 0/137,500
</TABLE>
- ----------
(1) Value was calculated by subtracting the exercise price from the fair market
value, which was determined by the FTD Corporation board of directors to be
$10.50 as of June 30, 1998.
Employment Agreements
Pursuant to an offer of employment, we agreed to pay Peter K. Poli an annual
salary of $150,000 to serve as our Vice President and Chief Financial Officer.
We also agreed to pay Mr. Poli a severance payment of one year's salary in the
event his employment is terminated. In accordance with the terms of his offer
of employment and as of the close of the offering, Mr. Poli will be granted
options to purchase shares of our Class A common stock at the initial
public offering price exercise price of $ per share and the same number of
shares at an exercise price of two times the initial public offering price. See
"--Stock Option Grants as of the Offering."
Pursuant to an offer of employment with substantially similar provisions as
Mr. Poli's, we agreed to pay Brian G. Chapman an annual salary of $150,000 to
serve as our Vice President of Strategy and Development, and Mr. Chapman will
be granted options to purchase shares of our Class A common stock at an
exercise price of $ per share as of the close of the offering. See "--
Stock Option Grants as of the Offering."
Equity Incentive Plan
The following description of our 1999 Equity Incentive Plan is a summary and
is qualified in its entirety by reference to the text of the 1999 Equity
Incentive Plan, which will be filed as an exhibit to the registration statement
of which this prospectus is a part.
On , 1999, our board of directors unanimously approved and adopted the
ftd.com inc. 1999 Equity Incentive Plan, subject to the approval of FTDI, our
sole stockholder, which was obtained the same day. The plan affords our board
of directors the ability to design compensatory awards that are responsive to
our needs, and includes authorization for stock options, appreciation rights,
restricted shares, deferred shares, stock payments, performance shares and
performance units. The plan will supplement our current compensation programs
available to eligible employees.
Principal purposes of the plan. The principal purposes of the plan are to
attract and retain directors, officers, consultants and other employees of
ftd.com, FTDI and FTD Corporation and their subsidiaries and to provide to
those people incentives and rewards for superior performance.
Available shares of Class A common stock. Subject to adjustment as provided
in the plan, the number of shares of our Class A common stock that may be
issued or transferred under the plan will not in the aggregate exceed
shares of our Class A common stock, plus any shares relating to awards that
expire, are
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<PAGE>
forfeited or are transferred, surrendered or relinquished upon the payment of
any option price or upon satisfaction of any withholding amount. These shares
may be shares of original issuance or treasury shares or a combination thereof.
Notwithstanding anything else in the plan to the contrary and subject to
adjustment as provided under the plan, (1) the aggregate number of shares of
our Class A common stock actually issued or transferred by ftd.com upon the
exercise of incentive stock options, which meet the requirements of Section 422
of the Internal Revenue Code, will not exceed shares of our Class A common
stock; (2) no plan participant will be granted option rights and appreciation
rights for more than an aggregate of shares of our Class A common stock
during any five-year period under the plan; and (3) the number of shares of our
Class A common stock issued as restricted shares will not in the aggregate
exceed shares of our Class A common stock. In no event will any plan
participant in any calendar year receive an award of performance shares or
performance units having an aggregate maximum value as of their respective
dates of grant in excess of $ .
Directors, officers, consultants and other employees of ftd.com, FTDI or FTD
Corporation and their subsidiaries may be selected by our board of directors to
receive awards under the plan.
Option rights. Option rights may be granted under the plan that will entitle
the plan participant to purchase shares of Class A common stock at a price that
may not be less than the market value per share on the date of grant. Each
grant of option rights will be evidenced by an agreement between ftd.com and
the plan participant containing terms and provisions that are consistent with
the plan and approved by our board of directors.
Each grant of option rights will specify whether the option price is payable
(1) in cash or by check acceptable to ftd.com; (2) by the tender to ftd.com of
shares of Class A common stock owned by the plan participant for at least six
months having a value at the time of exercise equal to the option price; (3) by
delivery of irrevocable instructions to a financial institution or broker to
deliver promptly to ftd.com sale or loan proceeds with respect to the shares
sufficient to pay the total option price; or (4) by any combination of those
payment methods.
On or after the date of grant of any option rights, our board of directors
may provide for the automatic grant of reload option rights to a plan
participant upon the exercise of option rights, including reload option rights,
using shares of Class A common stock or other consideration specified in the
plan. Reload option rights are additional option rights granted automatically
to a plan participant upon the exercise of option rights. Reload option rights
will cover up to the number of shares of our Class A common stock, deferred
shares, stock payments, option rights or performance shares or the number of
shares of our Class A common stock having a value equal to the value of any
performance units surrendered to ftd.com upon any such exercise in payment of
the option price or to meet any withholding obligations. Reload option rights
may have an option price that is less than the applicable market value per
share at the time the reload option right is granted and will be on the other
terms specified by our board of directors, which may be the same as or
different from those of the original option rights.
Option rights granted under the plan may be options that are intended to
qualify as incentive stock options, options that are not intended to so qualify
or combinations of these alternatives.
Our board of directors may, on or after the date of grant of any option
rights, other than the grant of an incentive stock option, provide for the
payment of dividend equivalents to the plan participant on a current, deferred
or contingent basis or may provide that any of those equivalents be credited
against the option price.
No option right will be exercisable more than ten years from the date of
grant. Each grant will specify the period of continuous service with ftd.com,
FTDI or FTD Corporation or any subsidiary or other conditions, including the
achievement of management objectives, that must be satisfied before the option
rights will
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<PAGE>
become exercisable and may provide for the earlier exercise of those option
rights in the case of a change in the control of ftd.com or other events.
Successive grants may be made to the same plan participant whether or not
option rights previously granted to that plan participant remain unexercised.
Appreciation rights. An appreciation right is a right to receive from
ftd.com an amount determined by our board of directors, which will be expressed
as a percentage of the amount, not to exceed 100 percent, at the time of
exercise. If an appreciation right is granted in tandem with an option right,
it is only exercisable if the option right has not been exercised or
terminated. Any grant may specify that the amount payable upon exercise of an
appreciation right may be paid by ftd.com in cash, in Class A common stock or
in any combination thereof, and may grant either to the plan participant or our
board of directors the right to elect among those alternatives.
Any grant may specify that the amount payable upon exercise of an
appreciation right may not exceed a maximum specified by our board of directors
at the date of grant. Any grant may specify waiting periods before exercise and
permissible exercise dates or periods.
Any grant may specify that the appreciation right may be exercised only in
the event of, or earlier in the event of, a change in the control ftd.com or
other event. Any grant may provide for the payment to the plan participant of
dividend equivalents on the grant in cash or shares of our Class A common stock
on a current, deferred or contingent basis. Any grant of appreciation rights
may specify management objectives that must be achieved as a condition to
exercise those rights.
Any grant of tandem appreciation rights will provide that the tandem
appreciation rights may be exercised only at a time when the related option
rights are also exercisable and the spread is positive, and by surrender of the
related option rights for cancellation.
Each grant will specify in respect of each free-standing appreciation right
a base price, which will be equal to or greater or less than the market value
per share on the date of grant. Successive grants may be made to the same plan
participant regardless of whether any free-standing appreciation rights
previously granted to the plan participant remain unexercised. No free-standing
appreciation right granted under the plan may be exercised more than ten years
from the date of grant.
Each grant of appreciation rights will be evidenced by an agreement between
ftd.com and the plan participant containing terms and provisions that are
consistent with the plan and approved by our board of directors.
Restricted shares. A grant of restricted shares involves the immediate
transfer by ftd.com to a plan participant of ownership of a specific number of
shares of our Class A common stock in consideration of the performance of
services. The plan participant is immediately entitled to voting, dividend and
other ownership rights in those shares. The transfer may be made without
additional consideration or in consideration of a payment by the plan
participant that is at or less than the market value per share at the date of
grant. However, any grant of restricted shares made for consideration paid at
the time of grant, including the foregoing of compensation owed by ftd.com to a
plan participant, will not be counted for purposes of the limit on the
permitted number of restricted shares.
Restricted shares must be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Internal Revenue Code for a period to
be determined by our board of directors at the date of grant. An example would
be a provision that the restricted shares would be forfeited if the plan
participant ceased to serve ftd.com as an officer or key employee during a
specified period of years. In order to enforce these forfeiture provisions, the
transferability of restricted shares will be prohibited or restricted in a
manner and to the extent prescribed by our board of directors at the date of
grant. Our board of directors may provide for a shorter period during which the
forfeiture provisions apply in the case of a change in the control of ftd.com
or other events.
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<PAGE>
Any grant of restricted shares may specify management objectives that, if
achieved, will result in termination or early termination of the restrictions
applicable to such shares. Each grant may specify in respect of those
management objectives a minimum acceptable level of achievement. The grant may
set forth a formula for determining the number of restricted shares on which
restrictions will terminate if performance is at or above the minimum level,
but below full achievement of the specified management objectives.
Any grant or sale of restricted shares may require that any or all dividends
or other distributions paid on the restricted shares during the period of a
risk of forfeiture and restrictions on transfer be automatically deferred and
reinvested in additional restricted shares, which may be subject to the same
restrictions as the underlying award.
Each grant of restricted shares will be evidenced by an agreement between
ftd.com and the plan participant containing terms and provisions that are
consistent with the plan and approved by our board of directors.
Deferred shares. A grant of deferred shares constitutes an agreement by
ftd.com to deliver shares of our Class A common stock to the plan participant
in the future in consideration of the performance of services and subject to
the fulfillment of the conditions, if any, as our board of directors may
specify during the deferral period, which is a period equal to . Our
board of directors may provide for a shorter deferral period in the case of a
change in the control of ftd.com or other event. During the deferral period,
the plan participant has no rights of ownership in the deferred shares, no
right to vote those shares and, except as provided under the plan, no right to
transfer any rights under the award. However, our board of directors may, at or
after the date of grant, authorize the payment of dividend equivalents on those
shares on a current, deferred or contingent basis, in either cash or in
additional shares of Class A common stock. Awards of deferred shares may be
made without additional consideration or in consideration of a payment by the
plan participant that is at or less than the market value per share at the date
of grant. However, any grant of deferred shares made for consideration paid at
the time of grant, including the foregoing of compensation owed by ftd.com to a
plan participant, will not be counted for purposes of the limit on the
allowable number of deferred shares.
Each grant of deferred shares will be evidenced by an agreement between
ftd.com and the plan participant containing terms and provisions that are
consistent with the plan and approved by our board of directors.
Stock payments. A stock payment is an agreement by us to (1) deliver shares
of our Class A common stock to the plan participant as payment or (2) permit a
plan participant to exercise an election or other right to receive or purchase
shares of our Class A common stock instead of, or in addition to, all or any
portion of the compensation that would otherwise become payable to a plan
participant in the form of cash. A stock payment may consist of the transfer by
ftd.com to a plan participant of shares of our Class A common stock as
additional compensation for services to ftd.com, without other payment for the
stock payment. The number of shares to be issued pursuant to stock payments
will be determined by our board of directors, and may be based upon criteria
determined to be appropriate by our board of directors on the date that stock
payment is granted or on any later date.
Prior to the receipt of shares of Class A common stock in satisfaction of a
stock payment, a plan participant will not have any rights of ownership in
those shares, will not have any right to vote those shares and, except as
otherwise provided by the plan, will not have any right to transfer any rights
under his or her award. At or after the date of grant, our board of directors
may, however, authorize the payment of dividend equivalents with respect to the
stock payment on a current, deferred or contingent basis, in either cash or
shares of Class A common stock.
Each stock payment will be evidenced by an agreement executed between
ftd.com and the plan participant containing terms and provisions that are
consistent with the plan and approved by our board of directors.
47
<PAGE>
Performance shares and performance units. A performance share is a
bookkeeping unit that records the equivalent of one share of our Class A common
stock and a performance unit is a bookkeeping unit that records the equivalent
of $ . Any grant of performance shares or performance units will specify
management objectives that, if achieved during a specified performance period,
will result in payment or early payment of the award. Each grant may specify in
respect of those specified management objectives a minimum acceptable level of
achievement and a formula for determining the number of performance shares or
performance units that will be earned if performance is at or above the minimum
level, but falls short of full achievement of the specified management
objectives. Each grant of performance shares or performance units must specify
that, before the performance shares or performance units are deemed earned and
paid, ftd.com or a committee of outside directors must certify that the
management objectives have been satisfied.
In addition, any grant of performance shares or performance units may
specify that the amount payable with respect thereto may not exceed a maximum
specified by our board of directors at the date of grant. To the extent earned,
the performance shares and performance units will be paid to the plan
participant at the time and in the manner determined by our board of directors
in cash, shares of our Class A common stock or any combination thereof. The
grant may provide for the payment of dividend equivalents thereon in cash or in
shares of our Class A common stock on a current, deferred or contingent basis.
Each grant of performance shares or performance units will be evidenced by
an agreement between ftd.com and the plan participant containing terms and
provisions that are consistent with the plan and approved by our board of
directors.
Management objectives. The plan requires that our board of directors
establish "management objectives" for purposes of performance shares and
performance units. When so determined by our board of directors, option rights,
appreciation rights, restricted shares and dividend credits may also specify
management objectives. Management objectives may be described in terms of
either company-wide objectives or objectives that are related to the
performance of the individual plan participant or the subsidiary, division,
department, region or function within the company in which the plan participant
is employed. Management objectives may be made relative to the performance of
other corporations. Management objectives applicable to any award to a plan
participant who is, or is determined by our board of directors likely to
become, a "covered employee" within the meaning of Section 162(m) of the
Internal Revenue Code will be limited to specified levels of, or growth in, the
following criteria: market value; book value; earnings per share; market share;
operating profit; net income; cash flow; return on capital; return on assets;
return on equity; margins; product volume growth; earnings, including earnings
before interest, taxes, depreciation and other non-cash items; debt/capital
ratio; costs or expenses; net assets; revenues; total return to shareholders;
and customer satisfaction.
Except where a modification would result in an award to a "covered employee"
no longer qualifying as performance-based compensation within the meaning of
Section 162(m) of the Internal Revenue Code, the plan administrator may modify
those management objectives or the related minimum acceptable level of
achievement, in whole or in part, as the plan administrator deems appropriate
and equitable in the light of various events and circumstances, such as changes
in ftd.com business, operations, corporate structure or capital structure.
Transferability. Except as otherwise determined by our board of directors
but subject to the provisions of the plan, no option right, appreciation right
or other derivative security granted under the plan is transferable by a plan
participant other than by will or the laws of descent and distribution. Except
as otherwise determined by our board of directors, option rights and
appreciation rights are exercisable during the plan participant's lifetime only
by the plan participant or the plan participant's guardian or legal
representative. Notwithstanding the foregoing, but subject to prior board
authorization, option rights (other than incentive stock options), appreciation
rights and other awards granted under the plan may be transferred by a plan
participant, without payment of consideration therefor, to some members of such
plan participant's immediate family (or trusts for the benefit of, or entities
consisting solely of, members of such immediate family), provided that no such
transfer will be effective unless (1) the plan participant has provided us with
reasonable notice thereof, (2) the
48
<PAGE>
transfer is thereafter effected in accordance with any terms and conditions
that have been made applicable by us or our board of directors and (3) the
transferee has agreed to be subject to the same terms and conditions under the
plan as the plan participant.
Our board of directors may specify at the date of grant that part or all of
the shares of Class A common stock that are to be issued or transferred by
ftd.com upon exercise of option rights or appreciation rights, upon termination
of the deferral period applicable to deferred shares or upon payment under any
grant of performance shares, performance units or stock payments are no longer
subject to the substantial risk of forfeiture and restrictions on transfer
referred to in the plan, will be subject to further restrictions on transfer.
Adjustments. Our board of directors will make or provide for adjustments in
the numbers of shares of Class A common stock covered by outstanding option
rights, appreciation rights, deferred shares, stock payments and performance
shares, the prices per share applicable thereto, and the kind of shares or
other securities covered thereby, as our board of directors in its sole
discretion and in good faith determines is required to prevent dilution or
expansion of plan participants' rights that otherwise would result in the event
of stock dividends, stock splits, combinations of shares, recapitalizations,
mergers, consolidations, spin-offs, reorganizations, liquidations, issuances of
rights or warrants, and similar events. In the event of any of those
transactions or events, our board of directors, at its discretion, may provide
in substitution for any or all outstanding awards under the plan alternative
consideration as it, in good faith, may determine to be equitable in the
circumstances and may require the surrender of all awards so replaced. Our
board of directors will also make or provide for those adjustments in the
numbers of shares available for issuance under the plan as it may determine
appropriate to reflect any transaction or event described above.
Administration. The plan is to be administered by our board of directors,
except that our board of directors has the authority under the plan to delegate
any or all of its powers under the plan to a committee of the board, or
subcommittee thereof, consisting of not less than two non-employee directors.
Notwithstanding the foregoing, the grant of any award intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue
Code, and any administrative determinations made in connection therewith, must
be carried out only by a committee of the board, or subcommittee thereof,
consisting of not less than two "outside directors," as defined under Section
162(m), in a manner consistent with the rules governing performance-based
compensation under Section 162(m). Our board of directors is authorized to
interpret the plan and related agreements and other documents.
Amendments. Our board of directors may amend the plan from time to time in
whole or in part without further approval by our stockholders except where
stockholder approval is otherwise required by applicable law or the rules of
the principal exchange or automated quotation system on which the shares of
Class A common stock are then trading.
Federal income tax consequences. The following is a brief summary of some of
the federal income tax consequences of various transactions under the plan
based on federal income tax laws in effect on May , 1999. This summary is not
intended to be complete and does not describe state or local tax consequences.
Section 162(m) considerations. Section 162(m) of the Internal Revenue Code
disallows a publicly held corporation's deduction for compensation in excess of
$1.0 million per taxable year paid to the corporation's chief executive officer
and other four most highly compensated executives unless various exceptions are
satisfied. One of these exceptions allows for the deduction of performance-
based compensation in excess of $1.0 million where a number of criteria are
satisfied. These criteria include (1) payment only on satisfaction of one or
more pre-established, non-discretionary, objective performance goals; (2)
awards being granted at the discretion of a compensation committee comprised of
two or more "outside directors," as defined under Section 162(m); (3)
stockholder approval after disclosure of material terms; and (4) payment of
awards only after certification by the compensation committee that material
terms were satisfied.
49
<PAGE>
Under the plan, awards of performance shares and performance units generally
are intended to qualify, and awards of option rights, appreciation rights and
restricted shares may be intended to qualify, as performance-based compensation
under Section 162(m).
Non-qualified stock options. In general, (1) no income will be recognized by
a plan participant at the time a non-qualified option right is granted; (2) at
the time of exercise of a non-qualified option right, ordinary income will be
recognized by the plan participant in an amount equal to the difference between
the option price paid for the shares and the fair market value of the shares,
if unrestricted, on the date of exercise; and (3) at the time of sale of shares
acquired pursuant to the exercise of a non-qualified option right, appreciation
(or depreciation) in value of the shares after the date of exercise will be
treated as either short-term or long-term capital gain (or loss) depending on
how long the shares have been held.
Incentive stock options. No income generally will be recognized by a plan
participant upon the grant or exercise of an incentive stock option. If shares
of Class A common stock are issued to the plan participant pursuant to the
exercise of an incentive stock option, and if no disqualifying disposition of
those shares is made by that plan participant within two years after the date
of grant or within one year after the transfer of those shares to the plan
participant, then upon sale of those shares, any amount realized in excess of
the option price generally will be taxed to the plan participant as a long-term
capital gain and any loss sustained will be a long-term capital loss.
If shares of Class A common stock acquired upon the exercise of an incentive
stock option are disposed of prior to the expiration of either holding period
described above, the plan participant generally will recognize ordinary income
in the year of disposition in an amount equal to the excess (if any) of the
fair market value of those shares at the time of exercise (or, if less, the
amount realized on the disposition of such shares if a sale or exchange) over
the option price paid for those shares. Any further gain (or loss) realized by
the plan participant generally will be taxed as short-term or long-term capital
gain (or loss) depending on the holding period.
Appreciation rights. No income will be recognized by a plan participant in
connection with the grant of a tandem appreciation right or a free-standing
appreciation right. When the appreciation right is exercised, the plan
participant normally will be required to include as taxable ordinary income in
the year of exercise an amount equal to the amount of cash received and the
fair market value of any unrestricted shares of Class A common stock received
on the exercise.
Restricted shares. A recipient of restricted shares generally will be
subject to tax at ordinary income rates on the fair market value of the
restricted shares (reduced by any amount paid by the plan participant for those
restricted shares) at the time that the shares are no longer subject to
forfeiture or restrictions on transfer for purposes of Section 83 of the
Internal Revenue Code. However, a recipient who elects under Section 83(b) of
the Internal Revenue Code within 30 days of the date of transfer of the shares
will have taxable ordinary income on the date of transfer of the shares equal
to the excess of the fair market value of those shares (determined without
regard to the restrictions mentioned above) over the purchase price, if any, of
those restricted shares. If a Section 83(b) election has not been made, any
dividends received with respect to restricted shares generally will be treated
as compensation that is taxable as ordinary income to the plan participant.
Deferred shares. No income generally will be recognized upon the award of
deferred shares. The recipient of a deferred share award generally will be
subject to tax at ordinary income rates on the fair market value of
unrestricted shares of Class A common stock on the date that those shares are
transferred to the plan participant under the award (reduced by any amount paid
by the plan participant for those deferred shares), and the capital gains/loss
holding period for such shares will also commence on such date.
Stock payments. The recipient of a stock payment generally will be subject
to tax at ordinary income rates on the fair market value of unrestricted shares
of Class A common stock on the date that those shares are transferred to the
plan participant (reduced by any amount paid by the plan participant for the
shares or
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<PAGE>
previously taxable to the plan participant), and the capital gains/loss holding
period for those shares will also commence on such date.
Performance shares and performance units. No income generally will be
recognized upon the grant of performance shares or performance units. Upon
payment in respect of the earn-out of performance shares or performance units,
the recipient generally will be required to include as taxable ordinary income
in the year of receipt an amount equal to the amount of cash received and the
fair market value of any unrestricted shares of Class A common stock received.
Tax consequences to the company for which services are provided. To the
extent that a plan participant recognizes ordinary income in the circumstances
described above, ftd.com or the company for which the plan participant performs
services will be entitled to a corresponding deduction provided that, among
other things, the income meets the test of reasonableness, is an ordinary and
necessary business expense, is not an "excess parachute payment" within the
meaning of Section 280G of the Internal Revenue Code and is not disallowed by
the $1.0 million limitation on some executive compensation under Section 162(m)
of the Internal Revenue Code.
Plan benefits. The types of awards that may be granted in the future under
the plan are subject to the discretion of our board of directors and,
therefore, cannot be determined. It is not possible to determine all amounts
that may be awarded in the future under the plan.
Stock Option Grants as of the Offering
Effective as of the close of this offering, our board of directors has made
the following stock option grants to our executive officers under our 1999
Equity Incentive Plan:
Grants to Purchase Shares of Class A Common Stock of ftd.com
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------
Potential Realizable
Number of % of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation for
Options Employees or Base Option Term
Granted in Fiscal Price Expiration -----------------------
Name (#)(1) Year ($/sh) Date 5% ($)(2) 10% ($)(2)
- ---- ---------- ---------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Soenen.......
Peter K. Poli...........
Frederick K. Johnson....
Brian G. Chapman........
</TABLE>
- ----------
(1) These options will be granted as of the date the offering is completed and
will consist of non-qualified stock options.
(2) The 5% and 10% rates of appreciation were set by the Securities and
Exchange Commission and are not intended to forecast future appreciation,
if any, of our Class A common stock. If our Class A common stock does not
increase in value, then the option grants described in the table will be
valueless.
51
<PAGE>
PRINCIPAL STOCKHOLDERS
FTDI beneficially owns all of the shares of our Class B common stock
outstanding as of the date of this prospectus. Following the closing of this
offering, FTDI will continue to beneficially own 100% of the Class B common
stock and, accordingly, will hold approximately % of the economic interest
in ftd.com and % of the combined voting power of ftd.com.
The following table sets forth information with respect to the beneficial
ownership of our common stock as of May 31, 1999 and as adjusted to reflect the
sale of the shares of Class A common stock offered under this prospectus by:
(1) each person who we know owns beneficially more than 5% of our common stock,
(2) each of our directors individually, (3) each of our named executive
officers individually and (4) all of our executive officers and directors as a
group. The information in the table assumes the underwriters' option to
purchase additional shares is not exercised.
Unless otherwise indicated, to our knowledge, all persons listed below have
sole voting and investment power with respect to their shares of common stock,
except to the extent the applicable law gives spouses shared authority. Each
person listed below disclaims beneficial ownership of their shares, except to
the extent of their pecuniary interests therein. Shares of common stock that an
individual or group has the right to acquire within 60 days of May 31, 1999
pursuant to the exercise of options are deemed to be outstanding for the
purpose of computing the percentage ownership of such person or group, but are
not deemed outstanding for the purpose of calculating the percentage owned by
any other person listed.
<TABLE>
<CAPTION>
Shares of FTD Corporation
Shares of ftd.com Common Stock Common Stock Beneficially
Beneficially Owned Owned
----------------------------------- ---------------------------
Voting Power
-----------------
Percentage Before After Percentage Voting
Number Owned Offering Offering Number Owned Power
------ ---------- -------- -------- --------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Principal Stockholders:
Florists' Transworld 100.0% -- -- --
Delivery, Inc. (1).....
3113 Woodcreek Drive
Downers Grove, Illinois
60515
Perry Acquisition
Partners, L.P. (2)..... 0 0 7,458,862 48.6% 60.2%
Bain Capital, Inc. (3).. 0 0 2,679,616 17.5 21.6
Directors and Executive
Officers:
Richard C. Perry (2).... 0 0 50,000 * *
Michael J. Soenen (4)... 0 0 19,166 * *
Peter K. Poli........... 0 0 0 0 0
Frederick K. Johnson
(5).................... 0 0 51,450 * *
Habib Y. Gorgi (6)...... 0 0 1,262,082 8.2 3.5
Veronica K. Ho.......... 0 0 0 0 0
Gary K. Silberberg...... 0 0 0 0 0
All Directors and
Executive Officers
as a Group (8 persons)
(7).................... 0 0 8,841,560 57.6 71.2
</TABLE>
- ----------
* Less than 1%.
(1) The shares of our Class B common stock owned by FTDI have been pledged as
security under FTDI's credit agreement.
(2) All shares of ftd.com common stock outstanding prior to this offering are
owned by FTDI. Perry Acquisition Partners, L.P. has sole voting and
investment power with respect to 7,458,862 shares, or 60.2% of the voting
power, of FTD Corporation common stock. Because FTDI is a wholly owned
subsidiary of FTD Corporation, Perry Acquisition Partners may be deemed to
share voting power with respect to all the shares of ftd.com common stock
owned by FTDI. As a result, Perry Acquisition Partners
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<PAGE>
may be deemed to be able to exercise control over ftd.com. Richard C. Perry
is the managing member of the sole general partner of Perry Acquisition
Partners. He also beneficially owns 50,000 additional shares of FTD
Corporation common stock. Both Perry Acquisition Partners and Mr. Perry
disclaim beneficial ownership of those shares, except to the extent of
their pecuniary interest therein. The address for each of Perry Acquisition
Partners, L.P. and Mr. Perry is 599 Lexington Avenue, New York, New York
10022.
(3) Represents shares of FTD Corporation common stock beneficially owned by
investment partnerships and other related persons and entities that are
affiliated with Bain Capital, Inc. The address for Bain Capital and its
affiliates is Two Copley Place, Boston, Massachusetts 02116.
(4) Shares of FTD Corporation common stock beneficially owned include 2,500
shares issuable upon the exercise of options and 10,000 restricted shares
that will vest in three equal annual installments beginning on September
30, 2001.
(5) Shares of FTD Corporation common stock beneficially owned include 25,000
shares issuable upon the exercise of options and 20,000 restricted shares
that will vest in three equal annual installments beginning on June 30,
2000.
(6) Represents shares of FTD Corporation common stock beneficially owned by
Fleet Growth Resources, Inc. and affiliated investment partnerships. Mr.
Gorgi is the President of Fleet Growth Resources. Mr. Gorgi disclaims
beneficial ownership of those shares, except to the extent of his
pecuniary interest therein.
(7) Shares of FTD Corporation common stock beneficially owned include 27,500
shares issuable upon the exercise of options and 30,000 restricted shares.
Shares of FTD Corporation common stock beneficially owned also include
shares that Mr. Perry owned by Perry Acquisition Partners with respect to
which may be deemed to have voting and investment power because he is the
managing member of the general partner of Perry Acquisition Partners.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Income Taxes
FTD Corporation is a common parent of an affiliated group of companies
within the meaning of Section 1504(a) of the Internal Revenue Code, which
includes us. The Internal Revenue Code requires that FTD Corporation own at
least an 80% voting and economic ownership interest in ftd.com to continue to
include us in its U.S. consolidated income tax returns.
Following the closing of this offering, in accordance with the terms of the
amended Tax Sharing Agreement among FTDI, FTD Corporation and us, for so long
as we remain a member of FTD Corporation's affiliated group, (1) we will pay
our proportionate share of FTD Corporation's tax liability computed as if we
were filing a separate return and (2) any tax loss benefits attributable to us
will be refunded to us by FTD Corporation.
Historical Relationships
As a subsidiary of FTDI, we receive various services from FTDI, including
technical, human resources, accounting, administrative, legal and other
services. Prior to the closing of this offering, our financial statements have
reflected allocations for these services rendered by FTDI to us. We believe
such allocations have been made on a reasonable and consistent basis; however,
they are not necessarily indicative of, nor is it practicable for us to
estimate, the level of expenses that would have otherwise been incurred had we
operated as a separate, stand-alone company.
53
<PAGE>
The following table sets forth, for each of our last three completed fiscal
years, allocations of various services rendered by FTDI to us:
<TABLE>
<CAPTION>
Year ended June 30,
--------------------------------
Expenses 1996 1997 1998
-------- ---------- ---------- ----------
<S> <C> <C> <C>
Marketing and promotion................. $1,542,990 $1,622,056 $1,853,945
Technology development.................. 1,171,987 1,292,546 1,153,469
General and administrative ............. 1,287,974 1,508,808 1,707,252
---------- ---------- ----------
Total............................... $4,002,951 $4,423,410 $4,714,666
========== ========== ==========
</TABLE>
In addition, we have also relied on FTDI to provide us with financing for
our cash flows. Our cash flows to date therefore are not necessarily indicative
of the cash flows that would have resulted had we been operating as an
independent company. We received an aggregate of $12.3 million in contributions
from FTDI for the three-year period ended June 30, 1988, including
contributions of $3.4 million, $3.1 million and $5.8 million for the years
ended June 30, 1996, 1997 and 1998, respectively.
Intercompany Agreements
We intend to enter into several agreements with FTDI prior to the closing of
this offering. We have summarized the anticipated material terms of these
agreements. These agreements will not have been negotiated on an arm's-length
basis; however, we believe the terms of these agreements are no less favorable
to us than those that could have been obtained from an unaffiliated third
party. So long as (1) FTD Corporation beneficially owns 25% or more of the
voting power of the common stock of ftd.com, and no other person owns a greater
percentage, or (2) directors, officers or affiliates of FTD Corporation or its
subsidiaries constitute a majority of our board of directors, any amendments to
the Intercompany Agreements must be approved by a majority of our board of
directors, which majority must include at least one-half of our independent
directors. For example, if we have only two independent directors, the majority
must include at least one of those independent directors.
Trademark License Agreement. We have the non-exclusive right to use FTDI's
trademarks in connection with the sale of flowers and specialty gifts to
consumers on the Internet and telephone. We pay FTDI a royalty equal to one
percent of our order revenues and service fees, net of discounts and returns.
The agreement has a 99-year term, however, FTDI may terminate the agreement if,
among other things, any person (other than an affiliate of FTDI) acquires 20%
or more of the voting control of ftd.com, or upon various defaults by us.
ftd.com's rights to use FTDI's trademarks will generally cease after
termination of the Trademark License Agreement.
FTDI agrees, on behalf of itself and its affiliates other than us, not to
enter into a business that directly markets flowers and specialty gifts to
consumers. In addition, if FTDI makes an acquisition that includes this type of
prohibited business, it must offer to sell that business, or component thereof,
to us. Within 90 days of our receipt of FTDI's offer, we may deliver to FTDI an
offer to acquire or license the prohibited business on the terms and conditions
we decide. If we do not deliver to FTDI an offer to acquire the prohibited
business, FTDI may enter into the prohibited business. If we do deliver to FTDI
an offer to acquire the prohibited business, then FTDI, within 90 days of
receipt of our offer, must accept our offer or provide us with the terms of the
best bona fide third party offer it has received to acquire or license the
prohibited business. Within 30 days following receipt of the terms of the third
party offer, we must either offer to acquire the prohibited business on the
terms described in the third party offer, or permit FTDI to proceed with the
sale of the prohibited business to the third party offeror. These obligations
will terminate (1) six months after the trademark license terminates if FTDI
terminates the license after the acquisition by a third party of 35% or more of
the voting control of ftd.com with no other person owning a greater percentage,
(2) one year after the trademark license terminates if FTDI terminates the
license as a result of an acquisition of 20% or more of the voting control of
ftd.com, (3) two years after the trademark license terminates if we terminate
due to material
54
<PAGE>
breach by FTDI or its bankruptcy, dissolution or insolvency, or (4) when the
trademark license terminates for any other reason.
We agree not to enter into any business currently being conducted by FTDI.
FTDI currently is in the business of providing subscribing florists with the
ability to send and receive floral orders and transaction clearing services.
FTDI also has an extensive product development department, the FTD Marketplace,
that develops branded floral and gift products that florists can purchase at
wholesale from FTDI for resale to consumers. In addition, if we make an
acquisition that includes a business that FTDI is engaged in, we must offer to
sell that business, or component thereof, to FTDI. Within 90 days of our
receipt of our offer, FTDI may deliver to us an offer to acquire or license the
prohibited business on the terms and conditions it decides. If FTDI does not
deliver to us an offer to acquire the prohibited business, we may enter into
the prohibited business. If FTDI does deliver to us an offer to acquire the
prohibited business, then we, within 90 days of receipt of FTDI's offer, must
accept FTDI's offer or provide FTDI with the terms of the best bona fide third
party offer we have received to acquire or license the prohibited business.
Within 30 days following receipt of the terms of the third party offer, FTDI
must either offer to acquire the prohibited business on the terms described in
the third party offer, or permit us to proceed with the sale of the prohibited
business to the third party offeror. These obligations will terminate two years
after termination of the trademark license if FTDI terminates the trademark
license due to our material breach or our bankruptcy, dissolution or
insolvency, and otherwise will terminate upon the termination of the trademark
license.
Intercompany Services Agreement. Following the closing of this offering,
FTDI will continue to provide corporate services and space-sharing services to
us.
FTDI will continue to provide all of the corporate services it currently
provides to us such as technical, human resources, accounting, administrative,
legal and other services, as well as those services we require by virtue of our
status as a reporting company with the Securities and Exchange Commission. FTDI
provides these services to us at 105% of the cost allocable to ftd.com's use of
those services. FTDI also provides us with access to the Mercury Network, the
FTD Clearinghouse, FTDI's Retrans(R) service, which is its international sale
processing system, and the FTD credit card processing program, for which we pay
an amount comparable to the fee that FTDI charges FTD florists for these
services.
FTDI permits us to use a portion of its offices. Our cost for this space
represents an estimate of the prevailing market rate for similar space,
includes a charge for our proportionate share of building expenses, such as
insurance and maintenance costs and includes an administration fee equal to 5%
of the space sharing costs allocable to ftd.com.
Intercompany Indemnification Agreement. We agree to indemnify FTDI and FTD
Corporation for liabilities in respect of our businesses and FTDI and FTD
Corporation agree to indemnify us for liabilities in respect of their
businesses, and various tax and pension-related liabilities of FTDI and FTD
Corporation resulting from our participation in FTD Corporation's consolidated
tax group. See "Risk Factors--Contingent liability for tax and pension
obligations resulting from our relationship with FTDI and FTD Corporation may
adversely affect our financial condition."
Florists Online Hosting Agreement. We provide FTDI with hosting services for
its FTD Florists Online program pursuant to a Florists Online Hosting Agreement
with FTDI. Our services include hosting Web sites for participating FTD
florists within our Web site. During the term of this Agreement, FTDI is
obligated to pay us a monthly service fee of $50.00 for each florist Web site
hosted on our Web site. This agreement expires on , 2000.
Commission Agreement. We receive at least a $5.00 commission on every order
that we clear through the FTD Clearinghouse pursuant to a Commission Agreement
with FTDI. If FTDI agrees to pay a similarly situated third party a more
economically advantageous commission fee, FTDI must adjust our commission to
reflect the more favorable terms. This type of commission structure has been
adopted by the market over the
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past several years, and we believe this arrangement is structured similarly to
commission structures currently being offered to other flower direct marketers.
The Commission Agreement expires in May 2002.
Rights to Designate Directors
Under an FTD Corporation stockholders' agreement among Perry Acquisition
Partners, L.P., a group of investment funds affiliated with Bain Capital, Inc.
and a group of investment funds affiliated with Fleet Growth Resources, Inc.
Corporation, for so long as Perry Acquisition Partners and the Bain Capital
entities own the FTD Corporation stock that they acquired in connection with
FTD Corporation's December 1994 acquisition of the old Florists' Transworld
Delivery Association, Perry Acquisition Partners has the contractual right to
designate six members of the board of directors of each subsidiary of FTDI,
including us, and Bain Capital has the contractual right to designate two
members of the board of directors of each subsidiary of FTDI, including us.
Perry Acquisition Partners has elected to designate Richard C. Perry,
Veronica K. Ho and Gary K. Silberberg as directors of ftd.com. Perry
Acquisition Partners has elected not to designate the additional three
directors that it has the contractual right to designate under that
stockholders' agreement, however it may elect to designate any of those
additional directors in the future. Bain Capital has elected to designate Habib
Y. Gorgi to the board of directors of ftd.com, but has elected not to designate
the additional director that it has the contractual right to designate under
that stockholders' agreement. Bain Capital may elect to designate that
additional director in the future.
Under this stockholders' agreement, the directors appointed by the Bain
Capital entities have the contractual right to approve various actions
submitted to FTD Corporation's board of directors or its stockholders or any of
its subsidiaries, including us, and their stockholders. The actions that the
directors appointed by the Bain Capital entities have the contractual right to
approve are: amendments to our certificate of incorporation or bylaws;
increases or decreases in the number of our directors; issuances or sales of
our securities; a merger, consolidation or other significant business
combination transaction involving us; the repurchase, exchange or redemption of
our securities by us; and other transactions outside the ordinary course of our
business.
In addition, under the Mutual Support Agreement, as long as we are a
controlled affiliate of FTDI, FTD Association has the contractual right to
designate up to 20% of the members of our board of directors but in no event
less than two members. FTD Association has not exercised this contractual right
to designate directors of ftd.com, however, it may elect to designate one or
both of those directors in the future.
As discussed under the caption "Management," two independent directors will
be added to our board of directors. Neither of these directors will be
designated by Perry Acquisition Partners, Bain Capital or FTD Association.
FTDI Registration Rights Agreement
We entered into a Registration Rights Agreement with FTDI pursuant to which,
at any time after 180 days following the date of this prospectus, FTDI may
demand that we file a registration statement under the Securities Act covering
all or a portion of our securities held by FTDI, its affiliates and their
permitted transferees. However, the securities to be registered must have a
reasonably anticipated aggregate public offering price of at least $ million.
FTDI can effect no more than one demand registration per year.
If and when we become eligible to utilize Form S-3 to register an offering
of our securities, FTDI may request that we file a Registration Statement on
Form S-3, covering all or a portion of our securities held by FTDI, its
affiliates and their permitted transferees, provided that the aggregate public
offering price is at least $ million. FTDI can request one registration on
Form S-3 per year.
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These registration rights will be subject to our right to delay the filing
of a registration statement if our board of directors determines that the
filing of the registration statement would impede, delay or interfere with any
financing, offer or sale of securities, acquisition, corporate reorganization
or other similar transaction, not more than once in any 12-month period, for
not more than days.
In addition, FTDI will have some "piggyback" registration rights. If we
propose to register any Class A common stock under the Securities Act (other
than pursuant to the registration rights noted above) FTDI may require us to
include all or a portion of our securities that it owns in that registration.
However, the managing underwriter, if any, of any such offering will have the
right to limit the number of registrable securities proposed to be included in
such registration. We will bear all registration expenses incurred in
connection with these registrations. FTDI would pay all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of its
securities. The registration rights of FTDI under the Registration Rights
Agreement will terminate when FTDI may sell all of its shares in a three-month
period under Rule 144 under the Securities Act.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 250,000,000 shares of Class A
common stock, par value $.01 per share, 100,000,000 shares of Class B common
stock, par value $.01 per share, and 5,000,000 shares of preferred stock, par
value $.01 per share.
The following descriptions of our capital stock and various provisions of
our certificate of incorporation and bylaws are summaries and are qualified by
reference to the form of our certificate of incorporation and bylaws, copies of
which have been filed with the Securities and Exchange Commission as exhibits
to the Registration Statement of which this prospectus is a part.
Common Stock
There are shares of Class A common stock being offered through this
prospectus ( if the underwriters' option to purchase additional shares is
exercised) and shares are reserved for issuance upon conversion of Class B
common stock into Class A common stock. There are shares of Class B common
stock outstanding, and all of those shares are held by FTDI.
Voting rights. The holders of Class A common stock and Class B common stock
generally have identical voting rights, except that holders of our Class A
common stock are entitled to one vote per share, while holders of our Class B
common stock are entitled to ten votes per share on all matters to be voted on
by stockholders except in the case of conversion upon a tax-free spin-off.
Shares of Class B common stock also have conversion rights, which are described
below. Cumulative voting for the election of directors is not provided for in
our certificate of incorporation, which means that the holders of a majority of
the shares voted can elect all of the directors then outstanding for election.
Amendments to our certificate of incorporation that would alter or change the
powers, preferences or special rights of the Class A common stock or Class B
common stock so as to affect them adversely must be approved by a majority of
the votes entitled to be cast by the holders of the shares affected by the
amendment, voting as a separate class. For purposes of these provisions, any
provision for the voluntary, mandatory or other conversion or exchange of the
Class B common stock into or for Class A common stock will not be deemed to
adversely affect the rights of holders of the Class A common stock. Any
amendment to our certificate of incorporation to increase or decrease the
authorized shares of any class must be approved by the affirmative vote of the
holders of the majority of the voting power of the stock of ftd.com, voting
separately as a class.
Dividends. Holders of Class A common stock and Class B common stock will
share equally on a per-share basis in any dividend declared by our Board of
Directors, subject to the preferential rights of any outstanding shares of
preferred stock. Dividends consisting of shares of Class A common stock or
Class B common stock may be paid only as follows: (1) dividend shares of Class
A common stock may be paid only to holders of Class A common stock, and
dividend shares of Class B common stock may be paid only to holders of Class B
common stock; and (2) shares will be paid proportionally with respect to each
outstanding share of Class A common stock and Class B common stock. We may not
subdivide or combine shares of Class A common stock or Class B common stock
without at the same time proportionally subdividing or combining shares of the
other class.
Conversion. Each share of Class B common stock is convertible, at the option
of the holder, into one share of Class A common stock at any time prior to a
tax-free spin-off of ftd.com to the stockholders of FTD Corporation, any entity
that owns 100% of FTD Corporation's common stock or any successor to FTD
Corporation by merger or consolidation. Following a tax-free spin-off, if any
occurs, shares of Class B common stock will no longer be convertible into
shares of Class A common stock at the option of the holder.
Any shares of Class B common stock transferred to a person other than FTD
Corporation, FTDI, any of their subsidiaries or successors or a strategic
partner prior to a tax-free spin-off automatically will be converted into
shares of Class A common stock (on a one-for-one basis) upon any such transfer.
A "strategic partner"
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means any entity or group of affiliated entities that acquires Class B common
stock constituting, in the aggregate, at least 10% of the number of shares of
all classes of common stock outstanding and that, in the good faith
determination of a majority of our disinterested directors, as determined prior
to the acquisition of the Class B common stock by that entity or group, is
considered to be a strategic alliance in the best interests of our business and
our stockholders. Shares of Class B common stock distributed to the
stockholders of FTD Corporation pursuant to a transaction intended to qualify
as a tax-free spin-off will not convert into shares of Class A common stock in
connection with that transaction. Following a tax-free spin-off, shares of
Class B common stock will be transferable as Class B common stock, subject to
applicable laws. Shares of Class B common stock automatically will convert into
shares of Class A common stock on the fifth anniversary of the tax-free spin-
off, unless prior to the tax-free spin-off, FTD Corporation or FTDI delivers to
us an opinion of counsel reasonably satisfactory to us to the effect that the
automatic conversion could preclude FTD Corporation or FTDI from obtaining a
favorable ruling from the Internal Revenue Service that the distribution of
FTDI's Class B common stock to the stockholders of FTD Corporation would be a
tax-free spin-off. If we receive that opinion, we will submit approval of such
conversion to a vote of the holders of the common stock as soon as practicable
after the fifth anniversary of the tax-free spin-off, unless FTD Corporation or
FTDI delivers to us an opinion of counsel reasonably satisfactory to us prior
to the fifth anniversary that the vote could adversely affect the tax-free
status of the spin-off. Approval of the conversion will require the affirmative
vote of the holders of a majority of the shares of both the Class A common
stock and Class B common stock present and voting, voting together as a single
class, with each share of Class B common stock entitled to only one vote for
that purpose. We cannot assure you that the conversion will in fact be
consummated. The requirement to submit the conversion to a vote of the holders
of common stock is intended to ensure that the desired tax treatment of the
tax-free spin-off is preserved if the Internal Revenue Service were to
challenge the automatic conversion as violating the requirement that FTDI own
80% of the voting power of ftd.com's common stock immediately before the spin-
off distribution. We believe that FTDI has no current plans with respect to a
tax-free spin-off of ftd.com.
All shares of the Class B common stock automatically will convert into Class
A common stock if a tax-free spin-off has not occurred and the number of
outstanding shares of Class B common stock beneficially owned by FTDI falls
below 20% of the aggregate number of outstanding shares of all classes of
common stock. This mechanism will prevent FTDI from decreasing its economic
interest in ftd.com to less than 20% while still retaining control of more than
50% of the voting power of our common stock. All conversions will be effected
on a share-for-share basis.
Other rights. In the event of any merger or consolidation of ftd.com with or
into another company in connection with which our shares of common stock are
converted into or exchangeable for shares of stock, other securities or
property (including cash) of the other company, all holders of Class A common
stock and Class B common stock will be entitled to receive the same kind and
amount of shares of stock and other securities and property (including cash) of
the other company.
On liquidation, dissolution or winding up of ftd.com, after payment in full
of the amounts required to be paid to holders of our preferred stock, if any,
all holders of Class A common stock and Class B common stock are entitled to
share ratably in any of our assets available for distribution to holders of
shares of common stock.
No shares of Class A common stock or Class B common stock are subject to
redemption or have preemptive rights to purchase additional shares of common
stock.
Upon the closing of this offering, all the outstanding shares of Class A
common stock and Class B common stock will be validly issued, fully paid and
nonassessable.
Preferred Stock
Our Board of Directors has the authority, within the limitations and
restrictions stated in our certificate of incorporation, to provide by
resolution for the issuance of shares of preferred stock, in one or more
classes or
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series, and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series of the designation of such series. The issuance of preferred stock could
have the effect of decreasing the market price of the common stock, impeding or
delaying a possible takeover and adversely affecting the voting and other
rights of the holders of common stock.
Stock Options
Effective as of the close of this offering, (1) options to purchase a total
of shares of Class A common stock will be outstanding, none of which will
be vested; and (2) up to additional shares of Class A common stock may be
subject to options granted in the future. All of the options contain standard
anti-dilution provisions. See "Management--Stock Option Grants as of the
Offering."
Anti-Takeover Effects of Various Provisions of Delaware Law and Our Certificate
of Incorporation and Bylaws
Upon the closing of this offering, ftd.com will be subject to the provisions
of Section 203 of the Delaware General Corporation Law. Subject to specific
exceptions, Section 203 prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless:
. the transaction in which such stockholder became an "interested
stockholder" is approved by the Board of Directors prior to the date the
"interested stockholder" attained that status;
. upon consummation of the transaction that 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 those shares owned by persons
who are directors and also officers); or
. on or subsequent to the 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 two-thirds of the
outstanding voting stock that is not owned by the "interested
stockholder."
"Business combinations" include mergers, asset sales and other transactions
resulting in a financial benefit to the "interested stockholder." Subject to
various exceptions, an "interested stockholder" is a person who, together with
his or her affiliates and associates, owns, or within three years did own, 15%
or more of the corporation's voting stock. The restrictions in this statute
would not apply to a "business combination" with FTDI or any of its
subsidiaries; however, they could prohibit or delay the accomplishment of
mergers or other takeover or change-in-control attempts with respect to ftd.com
and, therefore, may discourage attempts to acquire ftd.com.
In addition, various provisions of our certificate of incorporation and
bylaws, which are summarized in the following paragraphs, may be deemed to have
an anti-takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders.
Cumulative voting. Our certificate of incorporation expressly denies
stockholders the right to cumulate votes in the election of directors.
Stockholder action; special meeting of stockholders. Our certificate of
incorporation eliminates the ability of stockholders to act by written consent.
It further provides that special meetings of our stockholders may be called
only by the Chairman of the Board of Directors or a majority of the Board of
Directors.
Advance notice requirements for stockholder proposals and director
nominations. Our Bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate
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candidates for election as directors at an annual meeting of stockholders, must
provide timely notice of that proposal or nomination in writing. To be timely,
a stockholder's notice must be delivered to or mailed and received at our
principal executive offices not less than 60 days nor more than 90 days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders. However, in the event that the annual meeting is called for a
date that is not within 30 days before or after such anniversary date, notice
by the stockholder in order to be timely must be received not later than the
close of business on the tenth day following the date on which notice of the
date of the annual meeting was mailed to stockholders or made public, whichever
first occurs. In the case of a special meeting of stockholders called for the
purpose of electing directors, notice by the stockholder in order to be timely
must be received not later than the close of business on the tenth day
following the day on which notice of the date of the special meeting was mailed
or public disclosure of the date of the special meeting was made, whichever
first occurs. Our Bylaws also specify various requirements as to the form and
content of a stockholder's notice. These provisions may impede stockholders'
ability to bring matters before an annual meeting of stockholders or make
nominations for directors at an annual meeting of stockholders.
Limitations on liability and indemnification of officers and directors. The
Delaware General Corporation Law authorizes corporations to limit or eliminate
the personal liability of directors to corporations and their stockholders for
monetary damages for breaches of directors' applicable duties. Our certificate
of incorporation includes a provision that eliminates the personal liability of
ftd.com's directors for monetary damages for actions taken as a director,
except for liability:
. for any breach of the director's duty of loyalty to ftd.com or its
stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. under Section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; and
. for any transaction from which the director derived an improper personal
benefit.
Our Bylaws provide that:
. we must indemnify our directors and officers to the fullest extent
permitted by Delaware law, subject to very limited exceptions;
. we may indemnify our other employees and agents to the same extent that
we indemnify our officers and directors, unless otherwise required by
law, our certificate of incorporation, our bylaws or other agreements;
and
. we must advance expenses, as incurred, to our directors and executive
officers in connection with legal proceedings to the fullest extent
permitted by Delaware law, subject to very limited exceptions.
Prior to the closing of this offering, we intend to obtain directors' and
officers' insurance providing indemnification for our directors, officers and
certain employees for certain liabilities. We believe that these
indemnification provisions and insurance are necessary to attract and retain
qualified directors and executive officers.
The limitation of liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. These
provisions may also have the effect of reducing the likelihood of derivative
litigation against directors and officers, even though such an action, if
successful, might otherwise benefit us and our stockholders. Furthermore, a
stockholder's investment may be adversely affected to the extent we pay the
costs of settlement and damage awards against directors and officers pursuant
to these indemnification provisions.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees for which indemnification is sought. We
are unaware of any threatened litigation that may result in claims for
indemnification.
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Authorized but unissued shares. The authorized but unissued shares of common
stock and preferred stock are available for future issuance without stockholder
approval. We may use these additional shares for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued shares of common stock and preferred stock could render more
difficult or discourage an attempt to obtain control of ftd.com by means of a
proxy contest, tender offer, merger or otherwise.
The Delaware General Corporation Law provides generally that the affirmative
vote of a majority in interest of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws,
unless a corporation's certificate of incorporation or bylaws, as the case may
be, requires a greater percentage. Following the offering, FTDI, on its own, as
the beneficial owner of approximately % of the voting power of the
outstanding common stock, will be able to cause ftd.com to amend its
certificate of incorporation and bylaws.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is Harris Trust and
Savings Bank. Its address is 311 West Monroe Street, Chicago, IL 60606, and its
telephone number at that location is (312) 461-2121.
Listing
We have applied to have our Class A common stock quoted on the Nasdaq
National Market under the trading symbol "EFTD."
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SHARES ELIGIBLE FOR FUTURE SALE
General
Prior to this offering, there has been no market for our Class A common
stock. We cannot predict the effect, if any, that sales of shares or the
availability of shares for sale will have on the market price of our Class A
common stock prevailing from time to time. Sales of substantial amounts of our
Class A common stock in the public market, or the perception that such sales
may occur, could adversely affect prevailing market prices of our Class A
common stock.
After this offering, we will have shares of Class A common stock
outstanding. If the underwriters exercise their over-allotment option in full,
we will have a total of shares of Class A common stock outstanding. All
of the Class A common stock sold in the offering will be freely transferable
without restriction or further registration under the Securities Act, except
for shares acquired by our affiliates. FTD Corporation, FTDI and our directors
and officers have agreed not to sell, or enter into a derivative transaction
that is the equivalent of a sale of, shares of Class A common stock, including
shares of Class B common stock that are convertible into shares of Class A
common stock, for a period of 180 days after the date of this prospectus,
without Bear, Stearns & Co. Inc.'s prior written consent. DBV Investments, L.P.
has also entered into the same lock-up agreement except that its restricted
period ends the 90th day after the date of this prospectus. We can give no
assurance concerning how long these parties will continue to hold their Class A
common stock after the expiration of those restricted periods.
Shares of our common stock that are held by one of our affiliates will be
subject to the resale limitations of Rule 144 under the Securities Act. Rule
144 defines an affiliate as a person that directly or indirectly, through one
or more intermediaries, controls or is controlled by, or is under common
control with, an issuer.
After this offering, our affiliates may sell shares of our common stock:
. under an effective registration statement under the Securities Act;
. subject to the volume limitations, manner-of-sale provisions and other
conditions of Rule 144; or
. under another exemption from registration.
None of our affiliates, including FTDI, is under any contractual obligation
to retain our common stock, except during the 180-day period noted above.
Rule 144
In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, who has beneficially owned shares of our Class A
common stock (including beneficial ownership of shares of Class B common stock,
which is convertible into Class A common stock) for at least one year would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of:
. 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering; or
. the average weekly trading volume of the Class A common stock on the
Nasdaq National Market during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to the sale.
Sales under Rule 144 are subject to restrictions relating to manner of sale,
notice and the availability of current public information about us. A person
who is not our affiliate at any time during the 90 days preceding a sale and
who has beneficially owned shares for at least two years, including the holding
period of any prior owner other than an affiliate, would be entitled to sell
shares immediately following this offering under Rule 144(k) without regard to
the volume limitations, manner-of-sale provisions or notice requirements of
Rule 144.
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Registration Rights
Prior to the closing of this offering, we will enter into an agreement with
FTDI entitling FTDI to require us to register our shares of Class B common
stock, or shares of Class A common stock into which the Class B common stock is
convertible, after the expiration of the 180-day period above. We have also
entered into registration rights agreements with each of DBV Investments, L.P.
and Buena Vista Internet Group. These registration rights agreements entitle
DBV Investments and Buena Vista Internet Group to require us to register the
shares of Class A common stock owned by them after the date that is 180 days
after the date of this prospectus. See "Transactions with Management and
Others--FTDI Registration Rights Agreement."
Stock Options
As of the close of date hereof, we have granted options to purchase
approximately shares of our Class A common stock. Within 90 days after
this offering, we intend to file a registration statement on Form S-8 covering
all options granted under our Equity Incentive Plan. Shares of our Class A
common stock registered under this registration statement will be available for
sale in the open market, subject to vesting restrictions. Any sales of these
shares will be subject to the volume limitations, manner-of-sale provisions and
other conditions of Rule 144.
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UNDERWRITING
Underwriting Agreement
Subject to the terms and conditions set forth in an agreement between the
underwriters and us, each of the underwriters named below, through their
representatives Bear, Stearns & Co. Inc., Thomas Weisel Partners LLC and Volpe
Brown Whelan & Company, LLC, has severally agreed to purchase from us the
aggregate number of shares of Class A common stock set forth opposite its name
below:
<TABLE>
<CAPTION>
Name Number of Shares
---- ----------------
<S> <C>
Bear, Stearns & Co. Inc.....................................
Thomas Weisel Partners LLC..................................
Volpe Brown Whelan & Company, LLC...........................
------
Total...................................................
======
</TABLE>
The obligations of the underwriters under the underwriting agreement are
several and not joint. This means that each underwriter is obligated to
purchase from us only the number of shares of Class A common stock set forth
opposite its name in the table above. Except in limited circumstances set forth
in the underwriting agreement, an underwriter has no obligation in relation to
the shares of Class A common stock which any other underwriter has agreed to
purchase.
The underwriting agreement provides that the obligations of the several
underwriters are subject to approval of various legal matters by their counsel
and to various other conditions including delivery of legal opinions by our
counsel, the delivery of a letter by our independent auditors and the accuracy
of the representations and warranties made by us in the underwriting agreement.
Under the underwriting agreement, the underwriters are obliged to purchase and
pay for all of the above shares of Class A common stock if any are purchased.
Public Offering Price
The underwriters propose to offer the shares of Class A common stock
directly to the public at the offering price set forth on the cover page of
this prospectus and at that price less a concession not in excess of $ per
share of Class A common stock to other dealers who are members of the National
Association of Securities Dealers, Inc. The underwriters may allow, and those
dealers may reallow, concessions not in excess of $ per share of Class A
common stock to other dealers. After the offering, the offering price,
concessions and other selling terms may be changed by the underwriters. Our
Class A common stock is offered subject to receipt and acceptance by the
underwriters and subject to other conditions, including the right to reject
orders in whole or in part. The underwriters have informed us that the
underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.
The following table summarizes the per share and total public offering price
of the shares of Class A common stock in the offering, the underwriting
compensation to be paid to the underwriters by us, the proceeds of the
offering, before expenses, to us and the estimated expenses of the offering to
be paid by us. The information presented assumes either no exercise or full
exercise by the underwriters of their over-allotment option.
<TABLE>
<CAPTION>
Total
-------------------
Without With
Per Over- Over-
Share allotment allotment
----- --------- ---------
<S> <C> <C> <C>
Public offering price..........................
Underwriting discounts and commissions payable
by us.........................................
Proceeds, before expenses, to us...............
Expenses payable by us.........................
</TABLE>
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The underwriting discount and commission per share is equal to the public
offering price per share of Class A common stock less the amount paid by the
underwriters to us per share of Class A common stock. The underwriting
commissions and fees represent % of the public offering price per share of
Class A common stock.
The following table indicates the expenses payable by us in the offering.
All amounts are estimates other than the Securities and Exchange Commission
registration fee, the NASD fee and the Nasdaq listing fee.
<TABLE>
<S> <C>
Securities Exchange Commission registration fee.................. $25,020
National Association of Securities Dealers, Inc. fee............. 9,500
Nasdaq listing fee...............................................
Accounting fees and expenses.....................................
Legal fees and expenses..........................................
Director and officer insurance expenses..........................
Printing and engraving...........................................
Transfer agent fees and expenses.................................
Miscellaneous expenses...........................................
-------
Total........................................................ $
=======
</TABLE>
Over-Allotment Option to Purchase Additional Shares
We have granted a 30-day over-allotment option to the underwriters to
purchase an amount, up to an aggregate of 15% of the aggregate number of shares
appearing above, of additional shares of our Class A common stock exercisable
at the offering price less the underwriting discounts and commissions, each as
set forth on the cover page of this prospectus. If the underwriters exercise
this option in whole or in part then each of the underwriters will become
obligated, subject to various conditions, to purchase approximately the same
percentage of such additional shares as is approximately the percentage of
shares of Class A common stock that it is obligated to purchase of the total
number of shares under the underwriting agreement as shown in the table set
forth above.
Indemnification and Contribution
The underwriting agreement provides that we must indemnify the underwriters
against liabilities arising out of any alleged misstatements of fact or
omissions in this prospectus and the registration statement under the
Securities Act or will contribute to payments that the underwriters may be
required to make in respect of those liabilities.
Lock-up Agreements
FTD Corporation, FTDI and our directors and officers have agreed not to
sell, or enter into a derivative transaction that is the equivalent of a sale
of, shares of Class A common stock, including shares of Class B common stock
that are convertible into shares of Class A common stock, for a period of 180
days after the date of this prospectus, without Bear, Stearns & Co. Inc.'s
prior written consent. DBV Investments, L.P. has also entered into the same
lock-up agreement except that its restricted period ends the 90th day after the
date of this prospectus.
Nasdaq National Market Quotation
Prior to the offering, there has been no public market for our Class A
common stock. Consequently, the initial offering price for the Class A common
stock will be determined by negotiations between us and the representatives of
the underwriters. Among the factors to be considered in those negotiations, the
primary factors will be our results of operations in recent periods, estimates
of our prospects and the industry in which
66
<PAGE>
we compete, an assessment of our management, the general state of the
securities markets at the time of the offering and the prices of similar
securities of generally comparable companies. We intend to apply for approval
of the quotation of our Class A common stock on the Nasdaq National Market
under the symbol "EFTD." We cannot assure you, however, that an active or
orderly trading market will develop for the Class A common stock or that our
Class A common stock will trade in the public market subsequent to the offering
at or above the initial offering price.
Stabilization, Syndicate Short Position and Penalty Bids
In order to facilitate the offering, persons participating in the offering
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Class A common stock during and after the offering. Specifically,
the underwriters may over-allot or otherwise create a short position in the
Class A common stock for their own account by selling more shares of Class A
common stock than we have actually sold to them. The underwriters may elect to
cover any short position by purchasing shares of Class A common stock in the
open market or by exercising the over-allotment option granted to the
underwriters. In addition, the underwriters may stabilize or maintain the price
of the Class A common stock by bidding for or purchasing shares of Class A
common stock in the open market and may impose penalty bids, under which
selling concessions allowed to syndicate members or other broker-dealers
participating in the offering are reclaimed if shares of Class A common stock
previously distributed in the offering are repurchased in connection with
stabilization transactions or otherwise. The effect of these transactions may
be to stabilize or maintain the market price at a level above that which might
otherwise prevail in the open market. The imposition of a penalty bid may also
affect the price of the Class A common stock to the extent that it discourages
resales of the Class A common stock. No representation is made as to the
magnitude or effect of any of these activities.
Reserved Share Program
The underwriters have reserved for sale, at the initial public offering
price, up to shares of Class A common stock for employees, directors and
other persons associated with us (including FTD florists) who express an
interest in purchasing shares of Class A common stock in the offering. The
number of shares available for sale to the general public in the offering will
be reduced to the extent those persons purchase these reserved shares.
Purchases of reserved shares are to be made through an account at Bear, Stearns
& Co. Inc. in accordance with Bear, Stearns & Co. Inc.'s procedures for opening
an account and transacting in securities. Any reserved shares not so purchased
will be offered by the underwriters to the general public on the same terms as
the other shares offered in this offering.
At our request, the underwriters will reserve at the initial public offering
price up to $5.0 million of Class A common stock for sale to DBV Investments,
L.P., one of MSD Capital, L.P.'s investment partnerships, which has expressed a
non-binding interest in acquiring these shares. MSD Capital, L.P. is the
private investment firm for Michael S. Dell. This sale would represent
shares of Class A common stock at an assumed initial public offering price of
$ , the mid-point of the offering range.
Other Relationships
From time to time, Bear, Stearns & Co. Inc. provides financial advisory
services to ftd.com, FTDI, FTD Corporation and our and their affiliates and
receives customary fees for those services. James C. Cayne, the President and
Chief Executive Officer of Bear, Stearns & Co. Inc., has a limited partnership
interest in Perry Acquisition Partners, L.P., which beneficially owns 7,458,862
shares of common stock of FTD Corporation, representing 48.6% of the
outstanding common stock, and 60.2% of the voting power, of FTD Corporation.
Mr. Cayne does not have the power to vote or dispose of these shares. Richard
C. Perry, Chairman of the Board of FTD Corporation, FTDI and ftd.com and
Managing Member of Perry Investors, LLC, the general partner of Perry
Acquisition Partners, L.P., is Mr. Cayne's nephew.
67
<PAGE>
Thomas Weisel Partners LLC
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners has been named as a lead or co-manager on
filed public offerings of equity securities, of which have been
completed, and has acted as a syndicate member in an additional public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with ftd.com or any of its officers, directors or
controlling persons, except with respect to its contractual relationship with
ftd.com pursuant to the underwriting agreement entered into in connection with
this offering.
LEGAL MATTERS
The validity of the shares of Class A common stock offered by this
prospectus will be passed upon for us by Jones, Day, Reavis & Pogue, Chicago,
Illinois. Various legal matters in connection with this offering will be passed
upon for the underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New
York, New York. Some partners of Skadden, Arps, Slate, Meagher & Flom LLP have
a limited partnership interest in Bain Capital Fund IV, L.P. which has shared
investment and voting power with respect to 718,896 shares of Class A common
stock of FTD Corporation. Those partners do not have the power to vote or
dispose of those shares. In addition, Skadden, Arps, Slate, Meagher & Flom LLP
represented Perry Capital Corp. in connection with the acquisition of Florists'
Transworld Delivery Association by FTD Corporation.
EXPERTS
The financial statements of ftd.com as of June 30, 1997 and 1998, and for
each of the years in the three-year period ended June 30, 1998, have been
included herein and in the registration statement in reliance upon the report
of KPMG LLP, independent certified public accountants, appearing elsewhere
herein and upon the authority of said firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1, including exhibits, schedules and amendments to that
registration statement, under the Securities Act with respect to the shares of
Class A common stock to be sold in this offering. This prospectus does not
contain all the information included in our Registration Statement. For further
information with respect to us and the shares of Class A common stock to be
sold in this offering, we refer you to the Registration Statement. Statements
contained in this prospectus as to the contents of any contract, agreement or
other document referred to are not necessarily complete, and in each instance
we refer you to the copy of that contract, agreement or other document to the
extent filed as an exhibit to the Registration Statement.
You may read and copy all or any portion of the Registration Statement or
any other information we file at the Securities and Exchange Commission's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You
can request copies of these documents, upon payment of a duplicating fee, by
writing to the Securities and Exchange Commission. Please call the Securities
and Exchange Commission at 1-800-SEC-0330 for further information on the
operation of the public reference room. Our Securities and Exchange Commission
filings, including the Registration Statement, are also available to you on the
Securities and Exchange Commission's Web site (http://www.sec.gov). As a result
of this offering, we will become subject to the information and reporting
requirements of the Exchange Act and, in accordance with the Exchange Act, we
will file periodic reports, proxy statements and other information with the
Securities and Exchange Commission. Upon approval of the Class A common stock
for quotation on the Nasdaq National Market, those reports, proxy statements
and other information may also be inspected at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006. We intend to furnish
our stockholders with annual reports containing audited financial statements
and with quarterly reports for the first three quarters of each fiscal year
containing unaudited interim financial information.
68
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ftd.com inc.
<TABLE>
<S> <C>
Independent Auditors' Report.............................................. F-2
Balance Sheets as of June 30, 1997 and 1998 and March 31, 1999
(unaudited).............................................................. F-3
Statements of Operations for the years ended June 30, 1996, 1997 and 1998
and for the nine months ended March 31, 1998 and 1999 (unaudited)........ F-4
Statements of Stockholder's Deficit for the years ended June 30, 1996,
1997 and 1998 and for the nine months ended March 31, 1999 (unaudited)... F-5
Statements of Cash Flows for the years ended June 30, 1996, 1997 and 1998
and for the nine months ended March 31, 1998 and 1999 (unaudited)........ F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholder
ftd.com inc.:
We have audited the accompanying balance sheets of ftd.com inc. (a wholly-
owned subsidiary of Florists' Transworld Delivery, Inc.), as of June 30, 1997
and 1998, and the related statements of operations, stockholder's deficit, and
cash flows for each of the years in the three-year period ended June 30, 1998.
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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ftd.com inc. as of June 30,
1997 and 1998, and the results of its operations and its cash flows for each of
the years in the three-year period ended June 30, 1998 in conformity with
generally accepted accounting principles.
/s/ KPMG LLP
May 14, 1999, except as to note 6,which is as of May 25, 1999
Chicago, Illinois
F-2
<PAGE>
ftd.com inc.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, March 31,
---------------------- -----------
ASSETS 1997 1998 1999
------ ----------- --------- -----------
(Unaudited)
<S> <C> <C> <C>
Current assets:
Accounts receivable....................... $ 217,898 213,725 48,477
Prepaid expenses.......................... 29,224 19,351 127,178
----------- --------- ----------
Total current assets.................. 247,122 233,076 175,655
Distribution agreements, net of
accumulated amortization of $520,833 at
June 30, 1998 and $1,653,333 at March 31,
1999..................................... -- 1,979,167 1,535,417
----------- --------- ----------
Total assets.......................... $ 247,122 2,212,243 1,711,072
=========== ========= ==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
-------------------------------------
Current liabilities:
Accounts payable.......................... $ 2,066,592 1,871,720 2,501,798
Unearned revenue.......................... -- -- 135,870
Accrued liabilities, including amounts due
to FTDI of $112,000, $289,000, and
$160,000 at June 30, 1997, June 30, 1998,
and March 31, 1999, respectively......... 198,267 491,139 442,172
----------- --------- ----------
Total current liabilities............. 2,264,859 2,362,859 3,079,840
----------- --------- ----------
Stockholder's deficit..................... (2,017,737) (150,616) (1,368,768)
----------- --------- ----------
Total liabilities and stockholder's
deficit.............................. $ 247,122 2,212,243 1,711,072
=========== ========= ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ftd.com inc.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months ended
Years ended June 30, March 31,
------------------------------------ ----------------------
1996 1997 1998 1998 1999
------------ ---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Order revenues and
service fees, net of
discounts............ $ 18,489,940 26,230,331 30,423,315 19,072,070 28,519,688
Commissions from FTDI. -- -- -- -- 2,595,710
Other revenues........ 51,191 25,104 239,940 9,924 67,312
------------ ---------- ---------- ---------- ----------
Total revenues...... 18,541,131 26,255,435 30,663,255 19,081,994 31,182,710
Fulfillment and
processing services,
including expenses
from FTDI of
$1,517,027,
$2,150,481 and
$2,520,176 for the
years ended June 30,
1996, 1997, and 1998,
respectively, and
$1,417,012 and
$2,146,604 for the
nine months ended
March 31, 1998 and
1999, respectively... 15,431,163 22,283,726 26,324,568 16,800,747 24,518,905
------------ ---------- ---------- ---------- ----------
Gross profit............ 3,109,968 3,971,709 4,338,687 2,281,247 6,663,805
Operating expenses:
Marketing and
promotion, including
expenses from FTDI of
$1,542,990,
$1,622,056, and
$1,853,945 for the
years ended June 30,
1996, 1997, and 1998,
respectively, and
$1,111,797 and
$2,561,256 for the
nine months ended
March 31, 1998 and
1999, respectively... 4,187,929 4,863,708 5,994,464 3,614,471 7,797,304
Technology
development,
including expenses
from FTDI of
$1,171,987,
$1,292,546, and
$1,153,469 for the
years ended June 30,
1996, 1997, and 1998,
respectively, and
$837,074 and $983,375
for the nine months
ended March 31, 1998
and 1999,
respectively......... 1,250,719 1,546,052 1,420,275 1,018,546 1,441,776
General and
administrative,
including expenses
from FTDI of
$1,287,974,
$1,508,808, and
$1,707,252 for the
years ended June 30,
1996, 1997, and 1998,
respectively, and
$1,113,555 and
$1,594,843 for the
nine months ended
March 31, 1998 and
1999, respectively... 2,955,222 3,267,496 3,239,296 2,102,029 3,179,941
------------ ---------- ---------- ---------- ----------
Total operating
expenses............... 8,393,870 9,677,256 10,654,035 6,735,046 12,419,021
------------ ---------- ---------- ---------- ----------
Loss from operations.... (5,283,902) (5,705,547) (6,315,348) (4,453,799) (5,755,216)
Interest expense........ 225,577 266,633 176,287 169,811 131,046
------------ ---------- ---------- ---------- ----------
Loss before income
taxes.................. (5,509,479) (5,972,180) (6,491,635) (4,623,610) (5,886,262)
Income tax benefit...... 2,203,792 2,388,872 2,596,654 1,849,444 2,354,505
------------ ---------- ---------- ---------- ----------
Net loss................ $ (3,305,687) (3,583,308) (3,894,981) (2,774,166) (3,531,757)
============ ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ftd.com inc.
STATEMENTS OF STOCKHOLDER'S DEFICIT
<TABLE>
<S> <C>
Balance at June 30, 1995.......................................... $(1,628,381)
Contributions from FTDI........................................... 3,363,199
Loss before income taxes.......................................... (5,509,479)
Tax benefit utilized by FTDI...................................... 2,203,792
-----------
Balance at June 30, 1996.......................................... (1,570,869)
Contributions from FTDI........................................... 3,136,440
Loss before income taxes.......................................... (5,972,180)
Tax benefit utilized by FTDI...................................... 2,388,872
-----------
Balance at June 30, 1997.......................................... (2,017,737)
Contributions from FTDI........................................... 5,762,102
Loss before income taxes.......................................... (6,491,635)
Tax benefit utilized by FTDI...................................... 2,596,654
-----------
Balance at June 30, 1998.......................................... (150,616)
Contributions from FTDI (unaudited)............................... 2,313,605
Loss before income taxes (unaudited).............................. (5,886,262)
Tax benefit utilized by FTDI (unaudited).......................... 2,354,505
-----------
Balance at March 31, 1999 (unaudited)............................. $(1,368,768)
===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ftd.com inc.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
Years ended June 30, March 31,
----------------------------------- ----------------------
1996 1997 1998 1998 1999
----------- ---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net loss................ $(3,305,687) (3,583,308) (3,894,981) (2,774,166) (3,531,757)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Amortization of
distribution
agreements........... -- -- 520,833 208,333 1,132,500
Changes in assets and
liabilities:
Accounts receivable. (9,399) (96,406) 4,173 139,683 165,248
Prepaid expenses.... 1,511 (2,351) 9,873 (40,076) (107,827)
Accounts payable.... (79,060) 662,167 (194,872) (801,893) 630,078
Unearned revenue.... -- -- -- -- 135,870
Accrued liabilities. 29,436 (116,542) 292,872 84,952 (48,967)
----------- ---------- ---------- ---------- ----------
Net cash used in
operating activities... (3,363,199) (3,136,440) (3,262,102) (3,183,167) (1,624,855)
Net cash used in
investing activities--
purchases of
distribution
agreements............. -- -- (2,500,000) (2,500,000) (688,750)
Net cash provided by
financing activities--
contributions from
FTDI................... 3,363,199 3,136,440 5,762,102 5,683,167 2,313,605
----------- ---------- ---------- ---------- ----------
Cash at beginning and
end of period.......... $ -- -- -- -- --
=========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
ftd.com inc.
NOTES TO FINANCIAL STATEMENTS
(1) Description of Business
ftd.com inc. (the "Company") operates the www.ftd.com Web site and the 1-
800-SEND-FTD toll-free telephone number, both of which provide consumers with
the ability to order floral and other specialty gift products.
The Company is wholly-owned by Florists' Transworld Delivery, Inc. ("FTDI"),
which is a wholly-owned subsidiary of FTD Corporation ("FTD"). The Company was
incorporated as a Delaware corporation in May of 1999 in connection with the
filing of the Registration Statement described in note 6. The Company was
formed by FTDI's predecessor, Florists' Transworld Delivery Association
("FTDA"), a not-for-profit association, as a wholly owned subsidiary in 1993
and was subsequently merged into FTDI in 1995.
(2) Summary of Significant Accounting Policies
Basis of Presentation
Since the Company's inception, FTDI or its predecessor has provided funding
for working capital. The Company participates in FTDI's cash management system.
As a part of FTDI's central cash management system, all cash generated from and
cash required to support the Company's operations are deposited and received
through FTDI's corporate operating cash accounts. As a result, there are no
separate bank accounts or records for these transactions. Accordingly, the
amounts represented by the caption "Contributions from FTDI" in the Company's
statements of cash flows represent the net effect of all cash transactions
between the Company and FTDI.
For all periods presented, certain expenses reflected in the financial
statements include allocations of expenses from FTDI. These allocations take
into consideration personnel, business volume, or other appropriate bases and
generally include administrative expenses related to general management,
insurance, information management, and other services provided to the Company
by FTDI . Interest expense shown in the financial statements reflects interest
expense associated with the Company's share of the aggregate borrowings of FTDI
for each of the periods presented. Allocations of expenses are estimates based
on management's best assessment of actual expenses incurred by the Company. It
is management's opinion that the expenses charged to the Company are
reasonable.
The financial statements have been prepared as if the Company operated as a
stand-alone entity since Inception. The financial information included herein
may not necessarily reflect the financial position, results of operations, or
cash flows of the Company in the future or what the balance sheets, results of
operations, or cash flows of the Company would have been if it had been a
separate, stand-alone publicly-held corporation during the periods presented.
Accounts Receivable
Accounts receivable includes amounts owed from corporate customers for
purchases of floral, specialty gift products, and gift certificates through the
Company's toll free number. The credit risk associated with collection of
accounts receivable is minimal due to the nature of the quality of the customer
base.
Distribution Agreements
FTDI, on behalf of the Company, has entered into distribution agreements
with various vendors, principally related to Internet advertising. The costs of
these agreements are being amortized over their
F-7
<PAGE>
ftd.com inc.
NOTES TO FINANCIAL STATEMENTS--(Continued)
respective useful lives, which range from one to two years, using the straight-
line method. The Company periodically evaluates whether events and
circumstances that have occurred indicate that the remaining balances of
intangibles may not be recoverable or that the remaining estimated useful lives
may warrant revision. When such factors indicate that intangibles should be
evaluated for possible impairment, the Company uses an estimate of undiscounted
future cash flows to measure whether the intangibles are recoverable, and over
what period. The Company has determined that as of June 30, 1998 there has been
no impairment in the carrying value of the distribution agreements.
Income Taxes
ftd.com inc. is included in the consolidated U.S. income tax return of FTD.
Pursuant to a tax sharing agreement, as amended, effective as of the
consummation of the transaction described in note (6), the provision for income
taxes of ftd.com inc. has been calculated as if the Company were a stand-alone
corporation filing separate tax returns.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes.
Cumulative taxes have been settled through stockholder's deficit.
Revenue and Cost Recognition
Order Revenues and Service Fees
The Company records revenues and costs for fulfillment and processing
services when an order is fulfilled. Generally, when a customer makes a
purchase that will be fulfilled by an FTD florist, the Company receives the
order, charges the customer's credit card, and transmits the order to FTDI.
FTDI then transmits the order to the fulfilling florist. The Company recognizes
100% of the order value as revenue and recognizes associated costs for
fulfillment and processing services. Orders that are not fulfilled by an FTD
florist, such as holiday gift baskets, are fulfilled by a manufacturer or third
party distributor. In addition, the Company receives service fees for
processing all orders. The service fees for orders placed over the Internet
have ranged from $4.95 to $7.99, and the service fees for orders placed over
the telephone have ranged from $8.95 to $9.99. From time to time, discounts are
offered in connection with product promotions or holiday promotions to selected
customer groups. Order revenues and service fees are reported net of discounts.
Commissions
Commissions revenue represents a fee paid to the Company by FTDI for orders
that are cleared through the FTD Clearinghouse. Consistent with industry
practice, commissions revenue is earned pursuant to an arrangement with FTDI
effective as of July 1, 1998 and is recognized when the order is fulfilled.
Unearned Revenue
Unearned revenue relates to gift certificates sold by the Company that the
Company is required to repurchase if the gift certificates are not redeemed by
July 31, 1999. Revenue is only recognized in respect of these certificates upon
redemption.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities in connection with the preparation of
F-8
<PAGE>
ftd.com inc.
NOTES TO FINANCIAL STATEMENTS--(Continued)
these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information," which is
effective for fiscal years beginning after December 15, 1997. SFAS No. 131
requires that public companies report certain information about operating
segments in their annual financial statements and in subsequent condensed
financial statements of interim periods issued to shareholders. This statement
also requires that public companies report certain information about their
products and services, the geographic areas in which they operate and their
major customers. The Company has determined that the adoption of this new
standard did not have an effect on the Company's disclosure for all periods
presented because the Company currently operates as one segment.
Marketing and Promotion Costs
Marketing and promotion costs, which principally consist of advertising, are
charged to expense as incurred and include allocations from FTDI of $1,542,990,
$1,622,056, and $1,853,945 in fiscal 1996, 1997, and 1998, respectively.
Effective as of the consummation of the transaction described in note (6), it
is anticipated that FTDI will no longer allocate these marketing and promotion
costs to the Company.
Concentration of Customer and Credit Risks
The Company's customers are comprised of consumers that utilize the Web site
or toll-free number and purchase products. Financial instruments, which
potentially subject the Company to concentrations of credit risk, consist
principally of accounts receivable. As of June 30, 1997 and 1998, there were no
significant concentrations of accounts receivable nor related credit risks.
Concentration of Suppliers
The Company is dependent upon certain significant vendors to supply
products, the floral fulfillment capability and gift product delivery
capability necessary for the successful fulfillment of customer orders. In
addition, the Company utilizes the communication network of FTDI as an
important component of its operation. Although there are a limited number of
suppliers of this type of system, management believes that other suppliers
could provide a similar network on comparable terms. A change in suppliers,
however, could cause a delay in order processing and fulfillment and a possible
reduction in the quality of service, which could affect operating results
adversely.
The Company currently utilizes hardware, software, and services that support
its web site, an important component of its operation, from a third party
vendor under an operating service agreement. Although there are a limited
number of web site service companies, management believes that other companies
could provide acceptable service. The terms of the agreement provides for
variable payments, which are based on the number of completed orders, and an
annual term with renewal options. The cost to the Company for these services is
therefore derived from the volume of order transactions. A change in service
companies, however, could cause a possible reduction in the quality of service,
which could affect operating results adversely.
Fair Value of Financial Instruments
Financial instruments, including accounts receivable, accounts payable, and
accrued liabilities are reflected in the financial statements at carrying or
contract value. Those values were not materially different from their fair
values.
F-9
<PAGE>
ftd.com inc.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Interim Financial Information
The financial statements as of March 31, 1999 and for the nine months ended
March 31, 1998 and 1999, respectively are unaudited; however, in the opinion of
management, all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of the financial statements for the interim
periods have been included. The results of operations for the nine months ended
March 31, 1999 are not necessarily indicative of the results to be achieved for
the full fiscal year.
(3) Liquidity
Operations for the current and prior years did not generate sufficient cash
flow to satisfy current obligations. FTDI has funded such obligations and has
made a commitment to continue to provide financing to the Company until the
transaction described in note (6) is consummated.
(4) Related Party Transactions
The Company engages in transactions with FTDI in the normal course of its
business. These transactions include purchases of management and administrative
services, network services, facility rental, and intellectual property license
fees, among various other transactions as follows:
FTDI pays the Company commissions for orders that are cleared through the
FTD Clearinghouse. For these orders, FTDI also charges the Company customary
clearing fees. The Company also utilizes FTDI's credit card processing
services. FTDI charges the Company a percentage of the order value to utilize
these credit card processing services. Costs for clearing services and credit
card processing expenses are included in fulfillment and processing services,
and amounted to $1,517,027 in fiscal 1996, $2,150,481 in fiscal 1997,
$2,520,176 in fiscal 1998, and $1,417,012 and $2,146,604 in the nine months
ended March 31, 1998 and 1999, respectively.
The Company uses FTDI's trademarks in connection with the sale of goods and
services through its Web site and toll-free telephone number. The Company
expects to enter into an agreement, effective as of the consummation of the
transaction described in note (6), with FTDI that includes provisions for
royalty payments of 1% of order revenues and service fees, net of discounts, a
99-year term, and termination at FTDI's option in the event that 20% or more of
the Company's ownership is obtained by an organization not affiliated with
FTDI. Consistent with management's decision to allocate various historical
costs and expenses between the Company and FTDI, this royalty expense has been
included in general and administrative expenses. This royalty expense amounted
to $184,899, $262,303, $304,233 in fiscal 1996, 1997 and 1998 respectively, and
$190,721 and $285,197 in the nine months ended March 31, 1998 and 1999,
respectively.
Administration costs for services provided by FTDI to the Company were
determined by identifying all of FTDI's personnel who supported the Company.
Their pay, based on the estimated number of hours of service provided, plus
benefits, was used to calculate these costs.
The Company does not maintain separate physical facilities. It uses space of
FTDI and is charged a market rate estimate. The Company is also charged a pro-
rata share, based on square footage, of the utilities, property taxes, and
other occupancy costs. Internet/telecom usage costs include an allocation of
monthly depreciation for all hardware and software based on usage by the
Company, as well as monthly rates for telecommunications expenses consumed by
the Company.
F-10
<PAGE>
ftd.com inc.
NOTES TO FINANCIAL STATEMENTS--(Continued)
FTDI also provides the Company with various services, including technical,
human resources, accounting, administrative, legal and other. In consideration
for these services, FTDI has allocated a portion of its overhead costs related
to such services to the Company. The allocations were estimated using
proportional cost allocation methods.
Operating expenses include $3,818,052, $4,161,107 and $4,410,433 in fiscal
1996, 1997 and 1998, respectively, and $2,871,705 and $4,854,277 in the nine
months ended March 31, 1998 and 1999, respectively, in allocated expenses
related to above described administration costs, facilities, occupancy,
internet/telecom usage and overhead costs related to the various services
provided by FTDI. In management's opinion, the methods to identify and allocate
costs to the Company for these services provided by FTDI are reasonable.
Employees of the Company are eligible for various benefits under programs
maintained by FTDI. Any related assets or liabilities are not included in the
Company's financial statements, but rather, are reported as part of
stockholder's deficit.
(5) Income Taxes
Income tax benefit for the years ended June 30, 1996, 1997, and 1998
consists of:
<TABLE>
<CAPTION>
Current Deferred Total
---------- -------- ----------
<S> <C> <C> <C>
Year ended June 30, 1996:
U.S. Federal................................... $1,780,113 $ 0 $1,780,113
State and local................................ 423,679 0 423,679
---------- -------- ----------
$2,203,792 $ 0 $2,203,792
========== ======== ==========
Year ended June 30, 1997:
U.S. Federal................................... 1,929,611 0 1,929,611
State and local................................ 459,261 0 459,261
---------- -------- ----------
$2,388,872 $ 0 $2,388,872
========== ======== ==========
Year ended June 30, 1998:
U.S. Federal................................... 1,951,603 145,844 2,097,447
State and local................................ 464,495 34,712 499,207
---------- -------- ----------
$2,416,098 $180,556 $2,596,654
========== ======== ==========
</TABLE>
Income tax benefit differed from the amounts computed by applying the U.S.
Federal income tax rate of 35% to losses before income tax expense as a result
of the net-of-tax effect of state and local income taxes.
Deferred income tax expense for the year ended June 30, 1998 is derived from
the excess amortization of the distribution agreement for financial reporting
purposes over tax reporting in the amount of $451,389.
At June 30, 1998, cumulative taxes since the acquisition of FTDA by FTD
Corporation of $7,645,818, representing $7,465,262 of tax loss benefits and
$180,556 of deferred taxes associated with the distribution agreement, have
been settled through stockholder's deficit.
(6) Subsequent Events
On May 19, 1999, the Company was incorporated and was capitalized through
the authorization of 250,000,000 shares of Class A common stock and 100,000,000
shares of Class B common stock and the issuance of 3,410,000 Class B common
stock to FTDI. The Company intends to file a registration statement with the
Securities and Exchange Commission to offer shares of Class A common stock to
the public. In addition, in connection with the Company's incorporation,
5,000,000 shares of preferred stock were authorized.
F-11
<PAGE>
ftd.com inc.
NOTES TO FINANCIAL STATEMENTS--(Concluded)
On May 19, 1999, the Company designated 90,000 shares of preferred stock as
Series A 8% Cumulative Redeemable Convertible Preferred Stock (the "Series A
Preferred Stock"). On May 20, 1999, 30,000 shares of the Series A Preferred
Stock were issued and sold to an investor for consideration of $3,000,000. On
May 25, 1999, 60,000 shares of the Series A Preferred Stock were issued and
sold to an investor for consideration of $6,000,000. Each share of Series A
Preferred Stock will convert into a number of shares of Class A common stock
pursuant to the conversion ratio described in the certificate of amendment to
the Company's certificate of incorporation, which is filed as an exhibit to the
registration statement. The conversion will occur after the closing of the
public offering contemplated by the registration statement. In the event the
public offering is not consummated prior to February 20, 2000, the Series A
Preferred Stock will be redeemable at the option of the Company or the holders
thereof, in an amount equal to 100% of the liquidation preference plus accrued
and unpaid dividends. In addition, if the Company fails to make the payments
required in connection with the holders' exercise of their optional redemption
rights, the holders of the Series A Preferred Stock have the right to designate
one director of the Company.
Upon closing of the sale of Class A common stock to the public, the Company
and its Parent expect to enter into certain agreements governing various
interim and ongoing relationships, including an intercompany services
agreement, commission agreement, indemnification agreement and trademark
license agreement, and an amendment to an existing tax sharing agreement. The
terms of such agreements generally provide for services to be rendered by FTDI
similar to those described in note (4). The costs of general corporate services
will be charged based on FTDI cost plus five percent. The costs of space
sharing will be charged based on prevailing market prices with respect to usage
and FTDI cost plus five percent with respect to attributable operating
expenses. FTDI will provide access to the Mercury Network, the FTD
Clearinghouse, FTDI's Retrans service and the FTD credit card processing
program. The rates or amounts to be paid by the Company under these agreements
are not expected to be materially different than the rates or amounts currently
being charged by FTDI.
The Company also entered into an amendment to FTDI's and FTD's tax sharing
agreement pursuant to which the Company's operating results will be included in
the consolidated tax returns of FTD and the Company will pay its proportionate
share of FTD's tax liability computed as if it were filing a separate return or
it will be refunded any tax loss benefit attributable to it. The amendment to
the tax sharing agreement is effective upon the closing of the sale of Class A
common stock to the public.
The Company and FTDI also intend to enter into a service agreement under
which FTDI will obtain online hosting services from the Company, which will
provide FTDI member florists with listings in an Internet directory and
opportunities to operate Web sites within a directory for a fee. The agreement
will have a one-year term subject to adjustment annually.
FTDI is a party to a credit agreement that imposes various restrictions on
FTDI and its subsidiaries, including restrictions that limit the incurrence of
additional debt, pay dividends or make other payments or investments,
consummate asset sales, incur liens, merge, consolidate, or dispose of
substantial assets, among other restrictions. In addition, substantially all of
the assets of FTDI and its subsidiaries are pledged as security under the
credit agreement. In connection with the capitalization of the Company, the
credit agreement has been amended to exclude the Company from these terms and
restrictions in exchange for FTDI's pledge of its shares in the Company and
other monetary consideration.
F-12
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Prospective investors may rely only on the information contained in this
prospectus. Neither ftd.com nor any underwriter has authorized anyone to
provide prospective investors with different or additional information. This
prospectus is not an offer to sell nor is it seeking an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted. The
information contained in this prospectus is correct only as of the date of
this prospectus, regardless of the time of the delivery of this prospectus or
any sale of these securities.
No action is being taken in any jurisdiction outside the U.S. to permit a
public offering of the common stock or possession or distribution of this
prospectus in any of these jurisdictions. Persons who come into possession of
this prospectus in jurisdictions outside the U.S. and Canada are required to
inform themselves about and to observe the restrictions of that jurisdiction
related to this offering and the distribution of this prospectus.
-----------------------
TABLE OF CONTENTS
-----------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
Use of Proceeds........................................................... 22
Dividend Policy........................................................... 22
Capitalization............................................................ 23
Dilution.................................................................. 24
Selected Financial Data................................................... 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 26
Business.................................................................. 34
Management................................................................ 41
Principal Stockholders.................................................... 52
Transactions with Management and Others................................... 53
Description of Capital Stock.............................................. 58
Shares Eligible for Future Sale........................................... 63
Underwriting.............................................................. 65
Legal Matters............................................................. 68
Experts................................................................... 68
Where You Can Find More Information....................................... 68
Index to Financial Statements............................................. F-1
</TABLE>
----------------
Dealer Prospectus Delivery Obligation:
Until , 1999 (25 days after the date of this prospectus), all dealers that
buy, sell or trade these shares of Class A common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ftd.com inc.
[LOGO]
Shares
Class A Common Stock
------------
PROSPECTUS
------------
Bear, Stearns & Co. Inc.
Thomas Weisel
Partners LLC
Volpe Brown Whelan
& Company
Internet Distribution Offered by
E*TRADE Securities, Inc.
, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
Item 13. Other Expenses of Issuance and Distribution.
The following table indicates the expenses to be incurred in connection with
the offering described in this Registration Statement, all of which will be
paid by the Company. All amounts are estimates, other than the Securities and
Exchange Commission registration fee, the NASD fee and the Nasdaq listing fee.
<TABLE>
<S> <C>
Securities Exchange Commission Registration fee.................. $25,020
National Association of Securities Dealers, Inc. fee............. 9,500
Nasdaq listing fee............................................... *
Accounting fees and expenses..................................... *
Legal fees and expenses.......................................... *
Director and officer insurance expenses.......................... *
Printing and engraving........................................... *
Transfer agent fees and expenses................................. *
Miscellaneous expenses........................................... *
-------
Total........................................................ $ *
=======
</TABLE>
- ----------
* To be completed by amendment.
Item 14. Indemnification of Directors and Officers.
Section 102 of the Delaware General Corporation Law, as amended ("DGCL"),
allows a corporation to eliminate the personal liability of directors of a
corporation to the corporation or its stockholders for monetary damages for a
breach of fiduciary duty as a director, except where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of the DGCL or obtained an improper personal
benefit.
Section 145 of the DGCL provides, among other things, that the Company may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (other than
an action by or in the right of the Company) by reason of the fact that the
person is or was a director, officer, agent or employee of the Company or is or
was serving at the Company's request as a director, officer, agent, or employee
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding. The power to indemnify applies (a) if such
person is successful on the merits or otherwise in defense of any action, suit
or proceeding, or (b) if such person acted in good faith and in a manner he or
she reasonably believed to be in the best interest, or not opposed to the best
interest, of the Company, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The power to indemnify applies to actions brought by or in the right of the
Company as well, but only to the extent of defense expenses (including
attorneys' fees but excluding amounts paid in settlement) actually and
reasonably incurred and not to any satisfaction of judgment or settlement of
the claim itself, and with the further limitation that in such actions no
indemnification shall be made in the event of any adjudication of negligence or
misconduct in the performance of his or her duties to the Company, unless the
court believes that in the light of all the circumstances indemnification
should apply.
Section 174 of the DGCL provides, among other things, that a director, who
willfully or negligently approves of an unlawful payment of dividends or an
unlawful stock purchase or redemption, may be held liable for such actions. A
director who was either absent when the unlawful actions were approved or
dissented at the time may avoid liability by causing his or her dissent to such
actions to be entered in the books containing the minutes of the meetings of
the board of directors at the time such action occurred or immediately after
such absent director receives notice of the unlawful acts.
II-1
<PAGE>
Our Certificate of Incorporation includes a provision that eliminates the
personal liability of our directors for monetary damages for breach of
fiduciary duty as a director, except for liability:
. for any breach of the director's duty of loyalty to ftd.com or its
stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. under the section 174 of the DGCL regarding unlawful dividends and stock
purchases; or
. for any transaction from which the director derived an improper personal
benefit.
These provisions are permitted under Delaware law.
Our Bylaws provide that:
. we must indemnify our directors and officers to the fullest extent
permitted by Delaware law;
. we may indemnify our other employees and agents to the same extent that
we indemnified our officers and directors, unless otherwise determined by
our Board of Directors; and
. we must advance expenses, as incurred, to our directors and executive
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware law.
The indemnification provisions contained in ftd.com's Certificate of
Incorporation and Bylaws are not exclusive of any other rights to which a
person may be entitled by law, agreement, vote of stockholders or disinterested
directors or otherwise. In addition, ftd.com maintains insurance on behalf of
its directors and executive officers insuring them against any liability
asserted against them in their capacities as directors or officers or arising
out of such status.
Item 15. Recent Sales of Unregistered Securities.
Prior to the completion of the offering described herein, ftd.com issued
3,410,000 shares of Class B common stock to Florists' Transworld Delivery, Inc.
in connection with the formation of ftd.com. This transaction is exempt from
the registration requirements of the Securities Act pursuant to Section 4(2)
thereof because it was a transaction by an issuer not involving any public
offering in accordance with Rule 152 under the Securities Act.
In May 1999, we sold 30,000 shares of our Series A 8% Cumulative Redeemable
Convertible Preferred Stock to DBV Investments, L.P. for consideration of $3.0
million in a transaction exempt from the registration requirements of the
Securities Act pursuant to Rule 506 of Regulation D.
In May 1999, we sold 60,000 shares of our Series A 8% Cumulative Redeemable
Convertible Preferred Stock to Buena Vista Internet Group for consideration of
$6.0 million in a transaction exempt from the registration requirements of the
Securities Act pursuant to Rule 506 of Regulation D.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
------- ----------------------
<C> <S>
1.1* Underwriting Agreement
3.1+ Certificate of Incorporation of ftd.com
3.2 Certificate of Amendment to Certificate of Incorporation of
ftd.com relating to Series A 8% Cumulative Redeemable
Convertible Preferred Stock
3.3+ Bylaws of ftd.com
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
------- ----------------------
<C> <S>
4.1* Specimen certificate for ftd.com's Class A common stock
4.2+ Stockholders' Agreement, dated as of December 19, 1994, among
Perry Acquisition Partners, L.P. and the Co-Investors named
therein
4.3 Registration Rights Agreement, dated as of May 20, 1999,
between ftd.com and DBV Investments, L.P.
4.4 Registration Rights Agreement between FTDI and ftd.com
4.5 Registration Rights Agreement, dated as of May 25, 1999,
between ftd.com and Buena Vista Internet Group
5.1* Opinion of Jones, Day, Reavis & Pogue
10.1+ Formation Agreement, dated as of May 19, 1999, between FTDI and
ftd.com
10.2 Form of Intercompany Services Agreement between FTDI and
ftd.com
10.3 Form of Trademark License Agreement between FTDI and ftd.com
10.4 Form of Intercompany Indemnification Agreement among FTD
Corporation, FTDI and ftd.com
10.5+ Tax Sharing Agreement, dated as of December 19, 1994, between
Perry Capital Corp. and FTDI.
10.6 Form of First Amendment to Tax Sharing Agreement among FTD
Corporation, FTDI and ftd.com
10.7 Form of Florists Online Hosting Agreement between FTDI and
ftd.com
10.8 Form of Commission Agreement between FTDI and ftd.com
10.9+ Agreement and Plan of Merger, dated as of August 2, 1994, among
Florists' Transworld Delivery Association, Perry Capital Corp.
and IRIS Acquisition Corp.
10.10+ Mutual Support Agreement, dated as of December 18, 1994,
between Florists' Transworld Delivery Association and FTD
Association
10.11+ Supplemental Mutual Support Agreement, dated as of January 11,
1996, between Florists' Transworld Delivery Association and FTD
Association
10.12+ Trademark License Agreement, dated as of December 18, 1994,
between Florists' Transworld Delivery Association and FTD
Association
10.13+ Letter Agreement regarding employment of Peter K. Poli
10.14 ftd.com inc. 1999 Equity Incentive Plan
10.15 Form of Non-qualified Stock Option Agreement to be used in
connection with grants of stock options under the 1999 Equity
Incentive Plan
10.16 Letter Agreement regarding employment of Brain G. Chapman
23.1 Consent of KPMG LLP
23.2* Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1)
24.1 Power of Attorney (contained on the signature page of this
Registration Statement)
</TABLE>
- ----------
* To be filed by amendment.
+ Previously filed.
(b) Financial Statement Schedules:
No financial statement schedules are provided, because the information
called for is not required or is shown either in the financial statements or
the notes thereto.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes to provide to the
Underwriters at the closing certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to each
purchaser.
II-3
<PAGE>
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the provisions described in Item 14, or otherwise,
the registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is therefore unenforceable. In the event that
a claim for indemnification by the registrant against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Chicago, State of Illinois, on June 23, 1999.
ftd.com inc.
/s/ Michael J. Soenen
By __________________________________
Michael J. Soenen
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities indicated and on the 23 day of June, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<C> <S>
* Chairman of the Board
____________________________________
Richard C. Perry
/s/ Michael J. Soenen President, Chief Executive
____________________________________ Officer and Director
Michael J. Soenen (Principal Executive
Officer)
/s/ Peter K. Poli Vice President and Chief
____________________________________ Financial Officer
Peter K. Poli (Principal Financial and
Accounting Officer)
* Director
____________________________________
Habib Y. Gorgi
* Director
____________________________________
Veronica K. Ho
* Director
____________________________________
Gary K. Silberberg
</TABLE>
* The undersigned by signing his name hereunto has hereby signed this
Amendment No. 1 to Registration Statement on behalf of the above-named
directors, on June 23, 1999, pursuant to a power of attorney executed on
behalf of each such director and filed with the Securities and Exchange
Commission.
/s/ Michael J. Soenen
By: ______________________
Michael J. Soenen
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
------- ----------------------
<C> <S>
1.1* Underwriting Agreement
3.1+ Certificate of Incorporation of ftd.com
3.2 Certificate of Amendment to Certificate of Incorporation of ftd.com
relating to Series A 8% Cumulative Redeemable Convertible Preferred
Stock of ftd.com
3.3+ Bylaws of ftd.com
4.1* Specimen certificate for ftd.com's Class A common stock
4.2+ Stockholders' Agreement, dated as of December 19, 1994, among Perry
Acquisition Partners, L.P. and the Co-Investors named therein
4.3 Registration Rights Agreement, dated as of May 20, 1999, between
ftd.com and DBV Investments, L.P.
4.4 Registration Rights Agreement between FTDI and ftd.com
4.5 Registration Rights Agreement, dated as of May 25, 1999, between
ftd.com and Buena Vista Internet Group
5.1* Opinion of Jones, Day, Reavis & Pogue
10.1+ Formation Agreement, dated as of May 19, 1999, between FTDI and
ftd.com
10.2 Form of Intercompany Services Agreement between FTDI and ftd.com
10.3 Form of Trademark License Agreement between FTDI and ftd.com
10.4 Form of Intercompany Indemnification Agreement among FTD Corporation,
FTDI and ftd.com
10.5+ Tax Sharing Agreement, dated as of December 19, 1994, between Perry
Capital Corp. and FTDI.
10.6 Form of First Amendment to Tax Sharing Agreement among FTD
Corporation, FTDI and ftd.com
10.7 Form of Florists Online Hosting Agreement between FTDI and ftd.com
10.8 Form of Commission Agreement between FTDI and ftd.com
10.9+ Agreement and Plan of Merger, dated as of August 2, 1994, among
Florists' Transworld Delivery Association, Perry Capital Corp. and
IRIS Acquisition Corp.
10.10+ Mutual Support Agreement, dated as of December 18, 1994, between
Florists' Transworld Delivery Association and FTD Association
10.11+ Supplemental Mutual Support Agreement, dated as of January 11, 1996,
between Florists' Transworld Delivery Association and FTD Association
10.12+ Trademark License Agreement, dated as of December 18, 1994, between
Florists' Transworld Delivery Association and FTD Association
10.13+ Letter Agreement regarding employment of Peter K. Poli
10.14 ftd.com inc. 1999 Equity Incentive Plan
10.15 Form of Non-qualified Stock Option Agreement to be used in connection
with grants of stock options under the 1999 Equity Incentive Plan
10.16 Letter Agreement regarding employment of Brain G. Chapman
23.1 Consent of KPMG LLP
23.2* Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1)
24.1+ Power of Attorney
</TABLE>
- ----------
* To be filed by amendment.
+ Previously filed.
<PAGE>
Exhibit 3.2
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
of
ftd.com inc.
We, Michael J. Soenen, Chief Executive Officer, and Peter K. Poli,
Secretary, of ftd.com inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), in
accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY:
FIRST: That on May 25, 1999, the Board of Directors of the Corporation
pursuant to a unanimous written action in lieu of a meeting pursuant to Section
141(f) of the General Corporation Law of the State of Delaware adopted a
resolution proposing and declaring advisable the following amendment to the
Corporation's certificate of incorporation, which amends and restates the
Designation, Preferences and Rights of Series A Cumulative Redeemable
Convertible Preferred Stock as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Cumulative Redeemable Convertible Preferred Stock"
(referred to hereinafter as the "Series A Preferred Stock"), and the number of
shares constituting such series shall be ninety thousand (90,000).
Section 2. Certain Definitions. Capitalized terms used but not defined
herein shall have the meanings given to them in the Corporation's Certificate of
Incorporation.
Section 3. Voting and Preemptive Rights.
(a) In addition to any voting rights to which holders of Series A
Preferred Stock may be entitled by law or otherwise provided in the
Corporation's Certificate of Incorporation, holders of Series A Preferred Stock
shall have the following voting rights:
(i) except as otherwise provided in clauses (ii) and (iii)
below, the right to cast the number of votes per share thereof on each
matter submitted to the Corporation's stockholders for voting as is equal
to the Conversion Rate (as hereinafter defined) in effect on the applicable
record date. Such votes shall be cast together with those cast by the
holders of Common Stock as one class except as otherwise provided in the
Corporation's Certificate of Incorporation or by law. Holders of Series A
Preferred Stock shall be entitled to notice of any stockholders' meetings
in accordance with the Bylaws of the Corporation, which notice provisions
will be substantially similar to those generally applicable to the holders
of the Corporation's common stock.
(ii) if the Corporation shall have failed to timely pay the
Redemption Exercise Price (as hereinafter defined) in accordance with the
terms of Section 6 of this
<PAGE>
Certificate of Designation, the holders of the outstanding shares of Series
A Preferred Stock shall have the exclusive right to elect one (1) (or if
more than 30,000 shares of the Series A Preferred Stock are outstanding
(adjusted to reflect any dividends, splits or similar adjustments) two (2))
members of the Board of Directors of the Corporation at a special meeting
of the holders of the Series A Preferred Stock held no later than March 20,
2000, and at each annual meeting of stockholders thereafter. At elections
for such director(s), each holder of Series A Preferred Stock shall be
entitled to one vote for each share held. Upon the vesting of such right of
the holders of Series A Preferred Stock, the maximum authorized number of
members of the Board of Directors shall automatically be increased by a
number sufficient to accommodate the director(s) to be elected pursuant to
this Section 3 and the vacancy so created shall be filled by vote of the
holders of the outstanding shares of Series A Preferred Stock.
If the office of a director elected by the holders of Series A Preferred
Stock voting as a class becomes vacant by reason of death, resignation,
retirement, disqualification, removal from office, or otherwise, the
Corporation shall call a special meeting of the holders of the Series A
Preferred Stock to elect a successor who shall hold office for the
unexpired term in respect of which such vacancy occurred. Such special
meeting shall be held within 60 days of the date such vacancy occurs.
A "Qualifying Initial Public Offering" shall mean the sale of Class A
Common Stock in a firm commitment, underwritten public offering registered
under the Securities Act of 1933 (other than a registration on Form S-4
under the Securities Act of 1933 (or any successor to such form) or
relating to any employee benefit plan of the Corporation) at a price per
share of Class A Common Stock of not less than 140% of the Series A
Liquidation Preference (as hereinafter defined) divided by the Conversion
Rate (as hereinafter defined) that results in aggregate proceeds to the
Corporation or selling stockholders of not less than $30,000,000 and the
listing of the Class A Common Stock on a national stock exchange or NASDAQ.
(b) Holders of Series A Preferred Stock shall not be entitled to any
cumulative voting rights or to any statutory preemptive rights upon the issuance
or sale of any securities of the Corporation.
Section 4. Dividend Rights.
(a) Cumulative Dividends. Holders of Series A Preferred Stock shall
be entitled to receive dividends at the rate of 8% of the Series A Liquidation
Preference per annum (as adjusted for any stock dividends, combinations or
splits with respect to such shares) payable in cash out of funds legally
available therefor; provided, however, that no dividends shall be due or payable
with respect to the Series A Preferred Stock in the event a Qualifying Initial
Public Offering occurs on or before February 20, 2000. Such dividends shall be
payable only as, if and when declared by the Board of Directors or as provided
in Sections 5 and 6, with all unpaid dividends on the Series A Preferred Stock
to accrue on a cumulative basis commencing May 21, 1999, whether or not funds of
the Corporation are legally available therefor. Except as specifically set forth
herein, no right shall accrue to holders of Series A Preferred Stock by reason
of the fact that dividends on such shares are not declared in any year, nor
shall any undeclared or unpaid dividend bear or accrue any interest.
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(b) Other Distributions. In the event that the Corporation shall
declare a distribution on shares of Common Stock other than (i) cash dividends,
(ii) additional shares of Common Stock or (iii) any distribution described in
Section 5 or 6, then in each such case each holder of shares of Series A
Preferred Stock shall be entitled to receive a proportionate share of any such
distribution determined as the amount thereof such holder would have received
had such holder's shares of Series A Preferred Stock been converted into shares
of Class A Common Stock pursuant to Section 7 immediately prior to the record
date of such distribution.
(c) No Other Rights. Except as provided in this Section 4, no
dividend or distribution in cash or other property (other than for a liquidating
distribution or a redemption made pursuant to Section 5 or Section 6,
respectively) shall be declared, paid or set apart for payment by the
Corporation on the Series A Preferred Stock.
Section 5. Liquidation Rights.
(a) Preferences. If the Corporation shall be voluntarily or
involuntarily liquidated, dissolved or wound up, then the holders of the Series
A Preferred Stock shall be entitled to receive for each share of Series A
Preferred Stock held by them, prior and in preference to any distribution of any
of the assets or surplus funds of the Corporation to the holders of Common Stock
by reason of their ownership thereof, an amount equal to the then Series A
Liquidation Preference, together with all accrued or declared but unpaid
dividends thereon. The Series A Liquidation Preference amount shall be
appropriately adjusted for any stock dividends, combinations or splits with
respect to the Series A Preferred Stock. The "Series A Liquidation Preference"
shall initially be $100 per share of Series A Preferred Stock.
(b) Insufficient Assets. If upon the occurrence of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the Corporation's property legally available for distribution among the holders
of Series A Preferred Stock shall be insufficient to permit the payment to such
holders of the full amount of their respective Series A Liquidation Preference
amounts, then the entire property of the Corporation legally available for
distribution shall be distributed ratably among the holders of Series A
Preferred Stock in proportion to their respective aggregate Series A Liquidation
Preference amounts.
(c) Participation. After payment to the holders of the Series A
Preferred Stock of the Series A Liquidation Preference amounts, the entire
remaining property of the Corporation legally available for distribution, if
any, shall be distributed among the holders of the Series A Preferred Stock and
the Common Stock (treated as one class), with each such holder to receive with
respect thereto such portion of such remaining property as (i) the sum of such
holder's Common Stock plus the number of shares of Class A Common Stock into
which such holder's Series A Preferred Stock are then convertible pursuant to
Section 7 bears to (ii) the sum of the number of shares of Common Stock
outstanding immediately prior to such liquidation, dissolution or winding up
plus the number of shares of Class A Common Stock into which all outstanding
shares of Series A Preferred Stock are then convertible pursuant to Section 7.
(d) Certain Transactions. For purposes of this Section 5, (i) any
acquisition of control of the Corporation by means of a merger, consolidation,
reorganization or other form of corporate transaction transferring control of
the Corporation or (ii) any sale of all or substantially all of the assets of
the Corporation, shall be deemed a liquidation, dissolution or winding up of the
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Corporation. A corporate transaction shall be deemed to transfer control of the
Corporation if the pre-transaction Corporation stockholders hold securities in
the surviving corporation or other resulting entity entitling them to cast less
than 50 percent of the votes entitled to be cast for the election of members to
the Board of Directors or other governing body of such surviving corporation or
other resulting entity. Except as set forth in this Subsection 5(d), neither the
consolidation or merger of the Corporation with or into any other corporation or
corporations, nor any reduction of the authorized or issued shares of any class
or series of stock, whether now or hereafter authorized, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
any of the provisions of this Section 5.
(e) Valuation. Whenever any distribution provided for in this Section
5 shall be payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or property as
determined in good faith by the Board of Directors.
Section 6. Redemption.
(a) Company's Redemption Option. The outstanding shares of Series A
Preferred Stock shall be noncallable prior to February 20, 2000. On and after
February 20, 2000, the Series A Preferred Stock may be redeemed at the option of
the Corporation, as a whole at any time or in part from time to time, at 100% of
the liquidation preference thereof plus all dividends accrued and unpaid to the
date of redemption (subject to the right of the holder of record of shares of
Series A Preferred Stock on a record date for the payment of a dividend on the
Series A Preferred Stock to receive the dividend due on such shares of Series A
Preferred Stock on the corresponding dividend payment date) (the "Company
Redemption Price").
No sinking fund shall be established for the Series A Preferred Stock.
Notice (the "Company Redemption Notice") of any proposed optional
redemption of shares of Series A Preferred Stock shall be mailed by means of
first class mail, postage paid, addressed to the holders of record of the shares
of Series A Preferred Stock to be redeemed, at their respective addresses then
appearing on the books of the Corporation, at least ten (10) but not more than
sixty (60) days prior to the date fixed for such redemption (the "Company
Redemption Date"). Each such Company Redemption Notice shall specify (i) the
Company Redemption Date, (ii) the place for payment and for delivering the stock
certificate(s) and transfer instrument(s) in order to collect the Company
Redemption Price, (iii) the shares of Series A Preferred Stock to be redeemed
and (iv) the number of shares of Class A Common Stock into which a share of
Series A Preferred Stock is then convertible and that the right of holders of
shares of Series A Preferred Stock being redeemed to exercise their conversion
right, if such conversion exists of the date of the Company Redemption Notice or
if such conversion rights will exist as of a date no later than the fifth (5th)
day prior to the Redemption Exercise Date, shall terminate as to such shares at
the close of business on the fifth (5th) day preceding the Company Redemption
Date (provided that no default by the Corporation in the payment of the
applicable Company Redemption Price (including any accrued and unpaid dividends)
shall have occurred and be continuing). Any Company Redemption Notice mailed in
such manner shall be conclusively deemed to have been duly given whether or not
such notice is in fact received. If less than all the outstanding shares of
Series A Preferred Stock are to be redeemed, the Corporation will select those
to be redeemed pro rata, by lot or by a substantially equivalent method. In
order to facilitate the redemption of the Series A Preferred Stock, the Board of
Directors may fix a record date for determination of holders of Series A
Preferred Stock to be
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redeemed, which shall not be more than sixty (60) days prior to the Company
Redemption Date with respect thereto.
The holder of any shares of Series A Preferred Stock redeemed upon any
exercise of the Corporation's optional redemption right shall not be entitled to
receive payment of the Company Redemption Price for such shares until such
holder shall cause to be delivered to the place specified in the Company
Redemption Notice given with respect to such redemption (i) the certificate(s)
representing such shares of Series A Preferred Stock and (ii) transfer
instrument(s) satisfactory to the Corporation and sufficient to transfer such
shares of Series A Preferred Stock to the Corporation free of any adverse
interest. No interest shall accrue on the Company Redemption Price of any share
of Series A Preferred Stock after the Company Redemption Date.
In the event that any shares of Series A Preferred Stock shall be
converted into Class A Common Stock, then (i) the Corporation shall not have the
right to redeem such shares and (ii) any funds that shall have been deposited
for the payment of the Company Redemption Price for such shares shall be
returned to the Corporation immediately after such conversion (subject to
declared dividends payable to holders of shares of Series A Preferred Stock on
the record date for such dividends being so payable, regardless of whether such
shares are converted subsequent to such record date and prior to the related
dividend payment date).
(b) Holders' Redemption Exercise. At any time on or after February
20, 2000, the holders of at least 30,000 shares of Series A Preferred Stock may
deliver a written notice (a "Redemption Exercise") to the Corporation at its
principal executive office requesting that the Corporation redeem all, but not
less than all, of the outstanding shares of Series A Preferred Stock held by
such holders. Promptly after receipt of such a Redemption Exercise, the
Corporation shall give written notice of such Redemption Exercise to all non-
requesting holders of Series A Preferred Stock. Upon the receipt by the
Corporation of a Redemption Exercise, the Corporation shall redeem (to the
extent permitted by applicable law) all of the Series A Preferred Stock held by
the holders of Series A Preferred Stock (i) making such Redemption Exercise and
(ii) who request to have such holders' Series A Preferred Stock included in the
Redemption Exercise by providing the Corporation with written notice of such
request within 10 days after receipt of the notice of Redemption Exercise by
paying to each such holder in cash the applicable Series A Liquidation
Preference amount together with all accrued or declared or unpaid dividends
thereon (the "Redemption Exercise Price"), such redemption to be effected not
later than 90 days following the Company's receipt of the Redemption Exercise.
(c) Redemption Date and Notice. Not less than 15 days prior to the
date (a "Redemption Exercise Date") of any redemption to be made pursuant to
Subsection 6(b), the Corporation shall mail written notice (a "Redemption
Exercise Notice"), first class U. S. Mail, postage prepaid, to each holder of
Series A Preferred Stock subject to such Redemption Exercise (as at the close of
business on the business day next preceding the day on which such notice is
given), at the address last shown on the records of the Corporation for such
holder, notifying such holder of the Redemption Exercise Date, the Redemption
Exercise Price and the place at which payment may be obtained, and shall call
upon each holder of Series A Preferred Stock subject to such Redemption Exercise
to surrender to the Corporation, in the manner and at the place designated in
the Redemption Exercise Notice, such holder's certificate or certificates
representing the shares of such stock. Except as provided in Subsection 6(e)
below, on or after the Redemption Exercise Date each holder of Series A
Preferred Stock subject to such Redemption Exercise shall surrender to the
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<PAGE>
Corporation the certificate or certificates representing such holder's shares of
such stock in the manner and at the place designated in the Redemption Exercise
Notice, as applicable. The Redemption Exercise Price of such shares shall
thereupon be payable to the order of the person whose name appears on such
certificate or certificates of Series A Preferred Stock as the owner thereof.
Each share of Series A Preferred Stock so redeemed shall be canceled and shall
not be reissued by the Corporation.
(d) Rights Following Redemption. Subject to Subsection 6(e), on or
prior to any Company Redemption Date or Redemption Exercise Date, as applicable,
the Corporation shall deposit with a bank or trust company selected by the Board
of Directors, as a trust fund for the benefit of holders of shares to be
redeemed on such Company Redemption Date or Redemption Exercise Date, as
applicable, an amount of cash equal to the aggregate Company Redemption Price or
Redemption Exercise Price, as applicable, required to redeem all outstanding
shares to be redeemed on such Company Redemption Date or Redemption Exercise
Date. The Corporation shall give to such bank or trust company irrevocable
instructions and authority to pay to each holder of shares to be redeemed on any
Company Redemption Date or Redemption Exercise Date, as applicable, on or after
such Company Redemption Date or Redemption Exercise Date, the Company Redemption
Price or the Redemption Exercise Price, as applicable, for such holder's shares
to be redeemed on such Company Redemption Date or Redemption Exercise Date upon
receipt of notification from the Corporation that such holder has surrendered
such holder's share certificate or certificates to the Corporation in accordance
with the Company Redemption Notice or the Redemption Exercise Notice, as
applicable. As of any Company Redemption Date or Redemption Exercise Date, as
applicable, the deposit shall constitute full payment for the shares to be
redeemed on such Company Redemption Date or Redemption Exercise Date, as
applicable, to the holders thereof, and from and after the Company Redemption
Date or the Redemption Exercise Date, as the case may be, the shares so called
for redemption shall be redeemed and shall be deemed to be no longer
outstanding, and the holders thereof shall cease to be stockholders of the
Corporation with respect to such shares and shall have no rights with respect
thereto except the right to receive from the bank or trust company payment of
the Company Redemption Price or the Redemption Exercise Price, as the case may
be, for such shares, without interest, upon surrender of their certificates
therefor. If any certificate for shares to be redeemed shall be lost, mutilated
or destroyed, then the holder thereof may tender to the Corporation an affidavit
to such effect together with an indemnity undertaking satisfactory to the
Corporation, which tender shall be deemed a tender of the certificate so lost,
mutilated or destroyed for all purposes of this Section 6. The balance of any
moneys deposited by the Corporation pursuant to this Subsection 6(d) remaining
unclaimed at the expiration of 60 days following any Company Redemption Date or
Redemption Exercise Date shall be returned to the Corporation upon its request
expressed in a resolution of the Board of Directors, and any claims for payment
of the Company Redemption Price or the Redemption Exercise Price, as the case
may be, shall thereafter be submitted directly to the Corporation. Any interest
earned on any funds so deposited by the Corporation with any bank or trust
company shall be the property of, and shall be payable to, the Corporation.
(e) Insufficient Redemption Funds. Where funds of the Corporation
legally available for the redemption of stock on any Company Redemption Date or
Redemption Exercise Date are insufficient to permit the Corporation to pay in
full the Company Redemption Price or Redemption Exercise Price, as applicable,
of shares to be redeemed on such Company Redemption Date or Redemption Exercise
Date plus the redemption price of all other securities to be redeemed on such
Company Redemption Date or Redemption Exercise Date, then those funds that are
legally
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available for the redemption of stock shall be used to satisfy, to the maximum
extent possible, the Corporation's obligation to redeem such shares of Series A
Preferred Stock and other securities, with payments to be made to the holders of
such shares of Series A Preferred Stock and other securities ratably in
accordance with the redemption payments owing to each, subject to the relative
preferences applicable to such securities. The shares of Series A Preferred
Stock not redeemed shall remain outstanding and entitled to all of the rights
and preferences provided herein. At any time thereafter as the Corporation has
funds available for the redemption of Series A Preferred Stock, such funds will
immediately be used to redeem the balance of the Series A Preferred Stock that
were not so redeemed.
Section 7. Conversion. The holders of Series A Preferred Stock shall have
the following conversion rights:
(a) Right To Convert. Subject to the provisions of this Section 7,
the Series A Preferred Stock held by each holder thereof shall be convertible,
at the option of the holder thereof at any time after March 20, 2000, at the
principal office of the Corporation or any transfer agent for the Series A
Preferred Stock, into such number of fully paid and nonassessable shares of
Class A Common Stock determined by multiplying the number of shares of Series A
Preferred Stock held by each holder by the Conversion Rate. The initial
"Conversion Rate" shall be 1.0.
(b) Mandatory Conversion. Immediately upon the closing of a
Qualifying Initial Public Offering, the Series A Preferred Stock held by each
holder thereof shall be automatically converted into such number of fully paid
and nonassessable shares of Class A Common Stock determined by multiplying the
number of shares of Series A Preferred Stock held by each holder by the
Conversion Rate.
(c) Method of Conversion.
(i) Optional Conversion. In order to convert Series A Preferred
Stock into shares of Class A Common Stock, the holder of Series A Preferred
Stock shall surrender the certificates therefor, duly endorsed, at the
principal office of the Corporation or of any transfer agent for the Series
A Preferred Stock, and shall give written notice to the Corporation at such
office that such holder elects to convert the same and shall state therein
the name or names in which such holder wishes the certificate or
certificates for Class A Common Stock to be issued. The Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such
holder of Series A Preferred Stock a certificate or certificates for the
number of shares of Class A Common Stock to which such holder shall be
entitled by reason of such conversion. Such conversion shall be deemed to
have been effected immediately prior to the close of business on the date
of surrender of the Series A Preferred Stock to be converted, and the
person or persons entitled to receive the Class A Common Stock issuable
upon such conversion shall be treated for all purposes as the holder or
holders of such Class A Common Stock on such date.
(ii) Mandatory Conversion. If Series A Preferred Stock shall be
automatically converted to Class A Common Stock pursuant to Section 7, the
Corporation shall promptly mail written notice of such fact by first class
mail, postage prepaid, to each holder of such shares at the address of such
holder last shown on the records of the Corporation. Such notice shall
specify the date on which the automatic conversion occurred
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and shall call upon such holder to surrender to the Corporation, in the
manner and at the place designated in such notice, the certificate or
certificates representing the Series A Preferred Stock so converted. The
automatic conversion shall be deemed to have been effected at the opening
of business on the date specified therefor in Section 7.
(iii) Unavailable Certificates. If any certificate for Series A
Preferred Stock shall be lost, mutilated or destroyed, then the holder
thereof may tender to the Corporation an affidavit to such effect together
with an indemnity undertaking satisfactory to the Corporation, which tender
shall be deemed a tender of the certificate so lost, mutilated or destroyed
for all purposes of this Section 7.
(d) Stock Dividends and Distributions. If the Corporation at any
time, or from time to time, after the date of the original issuance of the
Series A Preferred Stock shall declare or pay any dividend or make any
distribution on the Class A Common Stock payable in Class A Common Stock or
declare or pay any dividend or make any distribution on the Class B Common Stock
payable in Class B Common Stock, or effect a subdivision of the outstanding
shares of Class A Common Stock or Class B Common Stock (by reclassification or
otherwise than by payout of a dividend in Class A Common Stock) then and in any
such event, the Conversion Rate shall be adjusted proportionately immediately
after the close of business on the record date for determination of holders of
the Class A Common Stock or Class B Common Stock, or in the case of any such
subdivision, at the close of business on the date immediately prior to the date
upon which the corporate action becomes effective. If such record date is fixed
and such dividend is not fully paid on the date fixed therefor, the adjustment
previously made in the Conversion Rate, which became effective on such record
date, shall be canceled as of the close of business on such record date and
thereafter the Conversion Rate will be adjusted pursuant to the preceding
sentence as of the time of actual payment of such dividend.
(e) Reclassifications and Reorganizations. If the Class A Common
Stock issuable upon conversion of the Series A Preferred Stock shall be changed
into the same or a different number of shares of any other class or classes of
stock, securities, the securities of any other person or any other property,
whether by capital reorganization, reclassification or otherwise, then the terms
of each outstanding Series A Preferred Stock shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the holder thereof shall receive upon conversion thereof, in
lieu of each share of Class A Common Stock which such holder would otherwise
have received, such number of shares of such other class or classes of stock,
securities or other securities or property receivable upon such reorganization
or reclassification by the holder of one share of Class A Common Stock issuable
upon such conversion had conversion occurred immediately prior to such
reorganization or reclassification.
(f) Issuance of Additional Shares. If, prior to the closing of a
Qualifying Initial Public Offering, the Corporation issues additional shares of
any class of common stock of the Corporation or any securities convertible into
such common stock (other than options, warrants or similar securities issued to
employees, consultants or directors of the Corporation or its affiliates) at a
price per share (assuming conversion of any convertible securities) below the
then applicable Series A Liquidation Preference and resulting in proceeds to the
Corporation of at least $100,000, then the Conversion Rate shall be adjusted to
equal the product of the Conversion Rate in effect prior to such issuance times
a fraction, the numerator of which is equal to the Series A Liquidation
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Preference and the denominator of which is equal to the per share purchase price
of such additional securities.
(g) Issue Taxes. The Corporation shall pay any and all issue and
other similar taxes that may be payable in respect of any issue or delivery of
Class A Common Stock upon conversion of Series A Preferred Stock pursuant
hereto; provided, however, that the Corporation shall not be obligated to pay
any transfer taxes resulting from any transfer of stock requested by any holder
in connection with any such conversion, nor any income or similar taxes as a
result of any such conversion or transfer.
(h) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Class A Common Stock, solely for the purpose of effecting the
conversion of the Series A Preferred Stock then outstanding, such number of
shares of Class A Common Stock as shall from time to time be sufficient to
effect the conversion of all then outstanding Series A Preferred Stock. If at
any time the number of authorized but unissued shares of Class A Common Stock
shall not be sufficient to effect the conversion of all then outstanding Series
A Preferred Stock, the Corporation shall take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but unissued
Class A Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to the Certificate of
Incorporation.
(i) Fractional Shares. No fractional shares of Class A Common Stock
shall be issued upon the conversion of any Series A Preferred Stock. All shares
of Class A Common Stock (including fractions thereof) issuable upon conversion
of more than one share of Series A Preferred Stock by a holder thereof shall be
aggregated for purposes of determining whether the conversion would result in
the issue of any fractional shares of Class A Common Stock. If, after the
aforementioned aggregation, the conversion would result in the issue of a
fractional share of Class A Common Stock, then the Corporation shall, in lieu of
issuing such fractional share, pay to the holder otherwise entitled to receive
such fractional share a sum in cash equal to such fraction multiplied by the
fair market value of a share of Class A Common Stock as determined in good faith
by the Board of Directors.
(j) Notices. Any notice required by the provisions of this Section 7
to be given to any holder of Series A Preferred Stock shall be deemed given 3
business days after being deposited in the United States mail, first class
postage prepaid, and addressed to such holder at such holder's address appearing
on the books of the Corporation.
Section 8. Restrictions and Limitations. The Corporation shall not,
without the approval by vote or written consent of the holders of a majority of
the Series A Preferred Shares then outstanding:
(a) pay any cash dividends on the Common Stock;
(b) create or authorize the creation of any additional class or
series of shares of Common Stock other than for Junior Shares, or increase the
authorized amount of Series A Preferred Shares or increase the authorized amount
of any additional class or series of shares of stock other than Junior Shares,
or create or authorize any obligation or security convertible into Series A
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Preferred Shares or into shares of any other class or series of Common Stock
other than Junior Shares, whether any such creation, authorization or increase
shall be by means of amendment to the Certificate of Incorporation or by merger,
consolidation or otherwise;
(c) redeem, purchase or otherwise acquire for value any shares of
stock;
(d) engage in a merger, consolidation, reorganization or other form
of corporate transaction transferring control of the Corporation unless the
holders of the Series A Preferred Stock as of the record date fixed for
determining the holders of capital stock entitled to receive the consideration,
if any, to be received by such holders as a result of such transaction will be
entitled to receive a per share amount at least equal to the Series A
Liquidation Preference then in effect. A corporate transaction shall be deemed
to transfer control of the Corporation if the pre-transaction Corporation
stockholders hold securities in the surviving corporation or other resulting
entity entitling them to cast less than 50 percent of the votes entitled to be
cast for the election of members to the Board of Directors or other governing
body of such surviving corporation or other resulting entity; or
(e) amend or repeal any provision of, or add any provision to, the
Corporation's Certificate of Incorporation or Bylaws, if such action would
adversely alter or change the Series A Preferred Shares or any right or
preference thereof.
As used herein, "Junior Shares" shall mean shares of Corporation stock
ranking junior to the Series A Preferred Shares as to the distribution of assets
on the liquidation, dissolution or winding up of the Corporation.
SECOND: That in lieu of a meeting and vote of stockholders, the sole
stockholder of the Corporation's outstanding shares of Class B Common Stock and
the sole stockholder of the Corporation's outstanding shares of Series A
Cumulative Redeemable Convertible Preferred Stock have given written consent to
such amendment in accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware.
THIRD: That such amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
[Remainder of page intentionally blank]
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IN WITNESS WHEREOF, ftd.com inc. has caused this Certificate of Amendment
to be duly executed by its President and Chief Executive Officer and attested to
by its Secretary this 25th day of May, 1999.
ftd.com inc.
By /s/ Michael J. Soenen
--------------------------------------
President and Chief Executive Officer
ATTEST:
/s/ Peter K. Poli
- -------------------------------
Secretary
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Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of May 20, 1999 (this "Agreement"),
by and among ftd.com inc., a corporation organized under the laws of the State
of Delaware, with headquarters located at 3113 Woodcreek Drive, Downers Grove,
Illinois 60515 (the "Company"), and the undersigned (the "Investors").
WHEREAS, pursuant to that certain Series A Preferred Securities Purchase
Agreement, dated as of May 20, 1999 (the "Purchase Agreement"), by and among the
Company and the Investors, the Investors have agreed to acquire 90,000 shares of
Series A 8% Cumulative Redeemable Convertible Preferred Stock, par value $.01
per share, of the Company (the "Preferred Stock"), all of which may be converted
into the Company's Class A common stock, par value $.01 per share (the "Common
Stock"), pursuant to the terms of the Preferred Stock; and
WHEREAS, in connection with the Purchase Agreement, the Company has agreed
to register for sale by the Investors and certain transferees, the Common Stock
received by the Investors upon conversion of the Preferred Stock; and
WHEREAS, the parties hereto desire to enter into this Agreement to evidence
the foregoing agreement of the Company and the mutual covenants of the parties
relating thereto;
NOW, THEREFORE, in consideration of the foregoing and the covenants of the
parties set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, subject to the terms
and conditions set forth herein, the parties hereby agree as follows:
Section 1. Certain Definitions. In this Agreement the following terms shall
have the following respective meanings:
"Affiliate" means, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the relevant time.
"Holders" shall mean (i) the Investors and (ii) each Person holding
Registrable Stock or Preferred Stock which is convertible into Registrable Stock
as a result of a transfer or assignment to that Person of Registrable Stock
permitted pursuant to Section 9 of this Agreement.
<PAGE>
"Indemnified Party" has the meaning ascribed to it in Section 6(c) of
this Agreement.
"Indemnifying Party" has the meaning ascribed to it in Section 6(c) of
this Agreement.
"Person" means an individual, corporation, partnership, estate, trust,
association, private foundation, joint stock company or other entity.
"Piggyback Notice" has the meaning ascribed to it in Section 3(a) of
this Agreement.
"Piggyback Registration" has the meaning ascribed to it in Section
3(a) of this Agreement.
"Preferred Stock" has the meaning ascribed to it in the recitals to
this Agreement.
The terms "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act providing for the sale by the Holders of
Registrable Stock in accordance with the method or methods of distribution
designated by the Holders, and the declaration or ordering of the effectiveness
of such registration statement by the Commission.
"Registrable Stock" means the Common Stock received by the Investors
upon conversion of the Preferred Stock acquired by the Investors pursuant to the
Purchase Agreement, except that as to any particular Registrable Stock, once
issued such securities shall cease to be Registrable Stock when (a) a
registration statement with respect to the sale of such securities becomes
effective under the Securities Act and such securities are disposed of in
accordance with such registration statement, (b) such securities are sold in
accordance with Rule 144 (or any successor provision) under the Securities Act
or (c) such Securities become transferrable within any consecutive 90-day period
in accordance with Rule 144.
"Registration Request" has the meaning ascribed to it in Section 2(a)
of this Agreement.
"Rule 144" means Rule 144 (or any successor provision) promulgated by
the Commission under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the relevant time.
Section 2. Demand Registration.
(a) Upon receipt of a written request (a "Registration Request"),
delivered not earlier than 180 days after the date of the closing of the initial
public offering by the Company of the Common Stock, from Holders holding at
least 33 1/3% of the aggregate of the number of Shares of Registrable Stock then
outstanding (assuming for purposes of such calculation the conversion of all
outstanding shares of Preferred Stock), the Company shall (i) promptly give
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<PAGE>
written notice of the Registration Request to all non-requesting Holders and
(ii) prepare and file with the Commission, within 60 days after its receipt of
such Registration Request, a registration statement for the purpose of effecting
a Registration of the sale of all Registrable Stock by each of the Holders which
submitted such Registration Request and any other Holder who requests to have
such Holder's Registrable Stock included in such registration statement within
10 days after receipt of notice by such Holder of the Registration Request;
provided, however, that the Company will not be required to effect the
Registration of Registrable Stock unless the Registrable Stock is offered at an
aggregate offering price of not less than $5,000,000. The Company shall use its
reasonable best efforts to effect such Registration as soon as practicable
(including, without limitation, the execution of an undertaking to file post-
effective amendments and appropriate qualification under applicable state
securities laws). In the event such Registration Request is delivered on or
before the first anniversary of the closing of the Company's initial public
offering of the Common Stock, any offering effected pursuant to the Registration
related to such Registration Request shall be an underwritten offering. In the
event such Registration Request is delivered after the first anniversary of the
closing of the Company's initial public offering of the Common Stock and the
Company is eligible to register such Registrable Stock on a continuous basis
under Rule 415 of the Securities Act by filing a Registration Statement on Form
S-3, the Company shall, at the request of requesting Holders, effect such
Registration on a Registration Statement on Form S-3 pursuant to Rule 415. The
Company shall use its reasonable best efforts to keep such Registration
continuously effective until the earlier of (i) the second anniversary of the
date hereof, (ii) the date on which all Registrable Stock have been sold
pursuant to such registration statement or Rule 144 and (iii) the date on which
all of the Registrable Stock held by such Holder may be sold in any consecutive
three month period in accordance with Rule 144; provided, however, that the
Company shall not be obligated to maintain the effectiveness of any Registration
that is not effected under Rule 415 for a period in excess of 90 days; provided,
further, that the Company shall not be obligated to take any action to effect
any such Registration, qualification or compliance pursuant to this Section 2 in
any particular jurisdiction in which the Company would be required to (x)
execute a general consent to service of process in effecting such Registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction or (y) qualify as a foreign corporation in any jurisdiction in
which the Company is not then qualified.
Notwithstanding the foregoing, the Company shall have the right (the
"Suspension Right") to defer such filing (or suspend sales under any filed
registration statement or defer the updating of any filed registration statement
and suspend sales thereunder) for a period of not more than 120 days during any
one-year period ending on December 31, if the Company furnishes to the Holders a
certificate signed by an executive officer or any director of the Company
stating that, in the good faith judgment of the Company, it would be detrimental
to the Company and its stockholders to file such registration statement or
amendment thereto at such time (or continue sales under a filed registration
statement) and therefore the Company has elected to defer the filing of such
registration statement (or suspend sales under a filed registration statement).
(b) The Company is not required to effect more than two (2)
Registrations pursuant to this Section 2.
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<PAGE>
Section 3. Piggyback Registrations.
(a) At any time after the 180th day after the date of the closing of
the initial public offering by the Company of the Common Stock, so long as the
Investors and their Affiliates hold at least 25% of the Registrable Stock
originally issued pursuant to the Purchase Agreement, if the Company proposes to
register any of its common equity securities or any securities convertible into
its common equity securities under the Securities Act (other than pursuant to
(i) a registration statement filed pursuant to Rule 415 under the Securities
Act, (ii) a registration on Form S-4 or any successor form, or (iii) an offering
of securities in connection with an employee benefit, share dividend, share
ownership or dividend reinvestment plan) and the registration form to be used
may be used for the registration of Registrable Stock, the Company will give
prompt written notice to all holders of Registrable Stock of its intention to
effect such a registration (each a "Piggyback Notice") and, subject to
subparagraph 3(c) below, the Company will include in such registration all
Registrable Stock with respect to which the Company has received written
requests for inclusion therein within ten days after the date of sending the
Piggyback Notice (a "Piggyback Registration"), unless, if the Piggyback
Registration is not an underwritten offering, the Company in its reasonable
judgement determines that, or in the case of an underwritten Piggyback
Registration the managing underwriters advise the Company that, the inclusion of
Registrable Stock would adversely interfere with such offering, affect the
Company's securities in the public markets or otherwise adversely affect the
Company. Nothing herein shall affect the right of the Company to withdraw any
such registration in its sole discretion.
(b) If a Piggyback Registration is a primary registration on behalf of
the Company and, if the Piggyback Registration is not an underwritten offering,
the Company in its reasonable judgement determines that, or in the case of an
underwritten Piggyback Registration, the managing underwriters advise the
Company that the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner within a
price range acceptable to the Company, the Company will include in such
registration (i) first, the securities the Company proposes to sell and (ii)
second, the Registrable Stock requested to be included in such Registration and
any other securities requested to be included in such registration, pro rata
among the holders of Registrable Stock requesting such registration and the
holders of such other securities on the basis of the number of shares of such
Registrable Stock and other securities requested for inclusion in such
registration by each such holder.
(c) If a Piggyback Registration is a secondary registration on behalf
of holders of the Company's securities other than the holders of Registrable
Stock, and, if the Piggyback Registration is not an underwritten offering, the
Company determines that, or in the case of an underwritten Piggyback
Registration, the managing underwriters advise the Company that the number of
securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the holders initially requesting such registration, the Company
will include in such registration the securities requested to be included
therein by the holders requesting such registration and the Registrable Stock
requested to be included in such registration, pro rata among the holders of
securities requesting such registration on the basis of the number of shares of
such Registrable Stock and other securities requested for inclusion in such
registration by each such holder.
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<PAGE>
(d) In the case of an underwritten Piggyback Registration, the Company
will have the right to select the investment banker(s) and manager(s) to
administer the offering. If requested by the underwriters for any underwritten
offerings by Holders, under a registration requested pursuant to Section 2(a),
the Company will enter into a customary underwriting agreement with such
underwriters for such offering, to contain such representations and warranties
by the Company and such other terms which are customarily contained in
agreements of this type. The Holders shall be a party to such underwriting
agreement and may, at their option, require that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of Holders. The Holders
shall not be required to make any representations or warranties to or agreement
with the Company or the underwriters other than representations, warranties or
agreements regarding the Holders, the Holders' right and interest in the
Registrable Stock and the Holders' intended method of distribution and any other
representation or warranties required by law.
Section 4. Registration Procedures.
(a) The Company shall promptly notify the Holders of the occurrence of
the following events:
(i) when any registration statement relating to the Registrable
Stock or post-effective amendment thereto filed with the Commission has
become effective;
(ii) the issuance by the Commission of any stop order suspending
the effectiveness of any registration statement relating to the Registrable
Stock;
(iii) the suspension of an effective registration statement by
the Company in accordance with the last paragraph of Section 2(a) hereof;
(iv) the Company's receipt of any notification of the suspension
of the qualification of any Registrable Stock covered by a registration
statement for sale in any jurisdiction; and
(v) the existence of any event, fact or circumstance of which
the Company has knowledge, that results in a registration statement or
prospectus relating to Registrable Stock or any document incorporated
therein by reference containing an untrue statement of material fact or
omitting to state a material fact required to be stated therein or
necessary to make the statements therein not misleading during the
distribution of securities.
The Company agrees to use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of any such registration
statement or any state qualification as promptly as possible. The Investors
agree by acquisition of the Registrable Stock that upon receipt of any notice
from the Company of the occurrence of any event of the type described in Section
4(a)(ii), (iii), (iv) or (v) to immediately discontinue their disposition of
Registrable Stock pursuant to any registration statement relating to such
securities until the Investors' receipt of written notice from the Company that
such disposition may be made.
5
<PAGE>
(b) The Company shall provide to the Holders, at no cost to the
Holders, a copy of the registration statement and any amendment thereto used to
effect the Registration of the Registrable Stock, each prospectus contained in
such registration statement or post-effective amendment and any amendment or
supplement thereto and such other documents as the requesting Holders may
reasonably request in order to facilitate the disposition of the Registrable
Stock covered by such registration statement. The Company consents to the use of
each such prospectus and any supplement thereto by the Holders in connection
with the offering and sale of the Registrable Stock covered by such registration
statement or any amendment thereto. If the Common Stock is listed on a "national
securities exchange" as defined in Rule 153 under the Securities Act at any time
during the period in which the Company is obligated to keep the registration
statement effective pursuant to Section 2(a), the Company shall also file a
sufficient number of copies of the prospectus and any post-effective amendment
or supplement thereto with such national securities exchange (or, if the Common
Stock is no longer listed thereon, with such other securities exchange or market
on which the Common Stock is then listed) so as to enable the Holders to have
the benefits of the prospectus delivery provisions of Rule 153 under the
Securities Act.
(c) The Company agrees to use its reasonable best efforts to cause the
Registrable Stock covered by a registration statement to be registered with or
approved by such state securities authorities as may be necessary to enable the
Holders to consummate the disposition of such stock pursuant to the plan of
distribution set forth in the registration statement; provided, however, that
the Company shall not be obligated to take any action to effect any such
Registration, qualification or compliance pursuant to this Section 4 in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such Registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction or qualify as a foreign corporation in any jurisdiction in
which the Company is not then qualified.
(d) Subject to the Company's Suspension Right, if any event, fact or
circumstance requiring an amendment to a registration statement relating to the
Registrable Stock or supplement to a prospectus relating to the Registrable
Stock shall exist, as promptly as practicable upon becoming aware thereof the
Company agrees to notify the Holders and prepare and furnish to the Holders a
post-effective amendment to the registration statement or supplement to the
prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Stock, the prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of
circumstances under which such statements were made.
(e) The Company agrees to use its reasonable efforts (including the
payment of any listing fees) to obtain the listing of all Registrable Stock
covered by the registration statement on each securities exchange on which
securities of the same class or series are then listed.
(f) The Company agrees to use its reasonable efforts to comply with
the Securities Act and the Exchange Act in connection with the offer and sale of
Registrable Stock pursuant to a registration statement, and, as soon as
reasonably practicable following the end of
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<PAGE>
any fiscal year during which a registration statement effecting a Registration
of the Registrable Stock shall have been effective, to make available to its
security holders an earnings statement satisfying the provisions of Section
11(a) of the Securities Act.
(g) The Company agrees to cooperate with the selling Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Stock sold pursuant to a Registration and not bearing any Securities
Act legend and to enable certificates for such Registrable Stock to be issued
for such numbers of stock and registered in such names as the Holders may
reasonably request.
Section 5. Expenses of Registration. All reasonable expenses, other than
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2, 3 and 4 hereof,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company and the reasonable fees and disbursements of one counsel selected by
the Holders to the extent related to the Registration and Registrable Stock
hereunder shall be borne by the Company.
Section 6. Indemnification.
(a) The Company will indemnify each Holder, each Holder's officers and
directors, and each person controlling such Holder within the meaning of Section
15 of the Securities Act, against all expenses, claims, losses, damages and
liabilities (including reasonable legal expenses), arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement or prospectus relating to the Registrable Stock,
or any amendment or supplement thereto, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided, however, that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with information furnished in writing to the
Company by such Holder or underwriter for inclusion therein.
(b) Each Holder will indemnify the Company, each of its directors and
each of its officers who signs the registration statement, each underwriter, if
any, of the Company's securities covered by such registration statement, and
each person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (including reasonable legal fees and expenses) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement or prospectus, or any amendment or
supplement thereto, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement or prospectus, in
reliance upon and in conformity with information furnished in writing to the
Company by such Holder for inclusion therein.
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<PAGE>
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
omission to so notify the Indemnifying Party shall not relieve it from any
liability which it may have to the Indemnified Party pursuant to the provisions
of this Section 6 except to the extent of the actual damages suffered by such
delay in notification. The Indemnifying Party shall assume the defense of such
action, including the employment of counsel to be chosen by the Indemnifying
Party to be reasonably satisfactory to the Indemnified Party, and payment of
expenses. The Indemnified Party shall have the right to employ its own counsel
in any such case, but the legal fees and expenses of such counsel shall be at
the expense of the Indemnified Party, unless the employment of such counsel
shall have been authorized in writing by the Indemnifying Party in connection
with the defense of such action, or the Indemnifying Party shall not have
employed counsel to take charge of the defense of such action or the Indemnified
Party shall have reasonably concluded that there are defenses available to it or
them which are different from or additional to those available to the
Indemnifying Party (in which case the Indemnifying Party shall not have the
right to direct the defense of such action on behalf of the Indemnified Party),
in any of which events such fees and expenses shall be borne by the Indemnifying
Party. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, which consent shall
not be unreasonably withheld, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
(d) If the indemnification provided for in this Section 6 is
unavailable to a party that would have been an Indemnified Party under this
Section 6 in respect of any expenses, claims, losses, damages and liabilities
referred to herein, then each party that would have been an Indemnifying Party
hereunder shall, in lieu of indemnifying such Indemnified Party, contribute to
the amount paid or payable by such Indemnified Party as a result of such
expenses, claims, losses, damages and liabilities in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and such Indemnified Party on the other in connection with the statement or
omission which resulted in such expenses, claims, losses, damages and
liabilities, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Indemnifying Party or such Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 6(d).
(e) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) In no event shall any Holder be liable for any expenses, claims,
losses, damages or liabilities pursuant to this Section 6 in excess of the net
proceeds to such Holder of any Registrable Stock sold by such Holder.
8
<PAGE>
Section 7. Information to be Furnished by Holders. Each Holder shall
furnish to the Company such information as the Company may reasonably request
and as shall be required in connection with the Registration and related
proceedings referred to in Section 2 or Section 3 hereof. If any Holder fails to
provide the Company with such information within 10 days of receipt of the
Company's request, the Company's obligations under Section 2 or Section 3
hereof, as applicable, with respect to such Holder or the Registrable Stock
owned by such Holder shall be suspended until such Holder provides such
information.
Section 8. Rule 144 Sales.
(a) The Company covenants that it will use its reasonable efforts to
file the reports required to be filed by the Company under the Exchange Act, so
as to enable any Holder to sell Registrable Stock pursuant to Rule 144 under the
Securities Act.
(b) In connection with any sale, transfer or other disposition by any
Holder of any Registrable Stock pursuant to Rule 144 under the Securities Act,
the Company shall cooperate with such Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Stock sold and
not bearing any Securities Act legend and to enable certificates for such
Registrable Stock to be issued for such number of shares and registered in such
names as the selling Holder may reasonably request.
Section 9. Assignment of Registration Rights. Subject to any transfer
restrictions otherwise applicable to the Preferred Stock or the Registrable
Stock, the rights of the Holders hereunder, including the right to have the
Company register Registrable Stock pursuant to this Agreement, shall be
assignable by each Holder to any transferee of all or any portion of the shares
of Preferred Stock or the Registrable Stock if: (i) the transfer to such
transferee is permitted under the Securities Act and applicable state securities
law or exemptions therefrom, (ii) the aggregate amount of Registrable Stock that
will be held by the transferee after giving effect to such transfer is not less
than 15% of the Registrable Stock outstanding on the date hereof, assuming
conversion of all of Preferred Stock, (iii) the Holder agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company after such assignment, (iv) the Company is furnished
with written notice of (a) the name and address of such transferee or assignee,
and (b) the securities with respect to which such registration rights are being
transferred or assigned, (v) following such transfer or assignment, the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act and applicable state securities laws, (vi) the transferee or
assignee agrees in writing for the benefit of the Company to be bound by all of
the provisions contained herein, and (vii) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement.
Section 10. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
made and to be performed in the State of Delaware. The Company and Investors
agree that service of process upon the Company and Investors, respectively,
mailed by first class mail, shall be deemed in every respect effective service
of process upon the Company and Investors, respectively, in any
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<PAGE>
such suit or proceeding. Nothing herein shall affect the right of the Company or
the right of any Investor to serve process in any other manner permitted by law.
(b) Entire Agreement. This Agreement, the Purchase Agreement and the
Certificate of Designation, Preferences and Rights of the Preferred Stock
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof.
(c) Amendment. No supplement, modification, waiver or termination of
this Agreement shall be binding unless executed in writing by the party to be
bound thereby.
(d) Notices, etc. Each notice, demand, request, request for approval,
consent, approval, disapproval, designation or other communication (each of the
foregoing being referred to herein as a notice) required or desired to be given
or made under this Agreement shall be in writing (except as otherwise provided
in this Agreement), and shall be effective and deemed to have been received (i)
when delivered in person, (ii) when sent by fax with receipt acknowledged, (iii)
five (5) days after having been mailed by certified or registered United States
mail, postage prepaid, return receipt requested, or (iv) the next business day
after having been sent by a nationally recognized overnight mail or courier
service, receipt requested. Notices shall be addressed as follows: (a) if to an
Investor, at the Investor's address or fax number set forth below its signature
hereon, or at such other address or fax number as the Investor shall have
furnished to the Company in writing, or (b) if to any assignee or transferee of
an Investor, at such address or fax number as such assignee or transferee shall
have furnished the Company in writing, or (c) if to the Company, at the address
of its principal executive offices and addressed to the attention of the
President, or at such other address or fax number as the Company shall have
furnished to the Investors or any assignee or transferee. Any notice or other
communication required to be given hereunder to a Holder in connection with a
registration may instead be given to the designated representative of such
Holder.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
to be physically delivered to the other party within five days of the execution
hereof.
(f) Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
(g) Section Titles. Section titles are for descriptive purposes only
and shall not control or alter the meaning of this Agreement as set forth in the
text.
(h) Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ftd.com inc.
By: /s/
_____________________________________________
Name:__________________________________________
Title:___________________________________________
DBV INVESTMENTS, L.P.
By: /s/
_____________________________________________
Name:__________________________________________
Title:___________________________________________
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Exhibit 4.4
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
, 1999, is by and between ftd.com inc., a Delaware corporation (the
"Company"), and Florists' Transworld Delivery, Inc., a Michigan corporation
("FTDI").
RECITALS:
--------
WHEREAS, the Company has consummated an initial public offering of
its Class A Common Stock;
WHEREAS, pursuant to the Stock Subscription Agreement, the Company
has issued to FTDI shares of Class B Common Stock representing Registrable
Shares;
WHEREAS, the Company has agreed to provide to FTDI certain
registration rights with respect to such Registrable Shares; and
WHEREAS, the Company and FTDI are entering into this Agreement to
set forth the terms and conditions applicable to the grant and exercise of such
registration rights;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, FTDI and the Company do hereby agree as follows:
AGREEMENTS:
----------
Section 1. Definitions.
For the purposes of this Agreement the following terms shall have
the following meanings:
"Common Stock" shall mean the Company's Class A common stock, par
value $.01 per share, and Class B common stock, par value $.01 per share, and
any shares of such Common Stock issued or issuable with respect to any Class A
Common Stock or Class B Common Stock by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise.
"Exchange Act" shall mean the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder, as the same may be amended
from time to time.
"Form S-3" means a Registration Statement on Form S-3 as promulgated
by the SEC or any successor form that is substantially similar thereto.
<PAGE>
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Person" shall mean any individual, corporation, partnership, trust,
joint stock company, business trust, unincorporated association, joint venture
or other entity of any nature whatsoever.
"Permitted Interruption" is defined in Section 8(a) hereof.
"Prospectus" means the Prospectus included in any Registration
Statement, as amended or supplemented by any Prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Shares covered by
such Registration Statement and all other amendments and supplements to the
Prospectus, including post-effective amendments and all material incorporated by
reference in such Prospectus.
"Registrable Shares" means: (i) shares of Common Stock now or
hereafter issued by the Company to FTDI (including without limitation any shares
of Class A Common Stock issued upon conversion of the Class B Common Stock),
(ii) shares of Class B Common Stock issued as, or upon the conversion or
exercise of other securities issued as, a dividend or other distribution with
respect to or in replacement of other Registrable Shares and (iii) any equity
securities of the Company issued or issuable with respect to the securities
referred to in clauses (i) and (ii) by way of a stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. For purposes of this Agreement, a Person
will be deemed to be a holder of Registrable Shares whenever such Person has the
unqualified right to acquire such Registrable Shares (by conversion or
otherwise, but disregarding any legal restrictions upon the exercise of such
right), whether or not such acquisition has actually been effected. As to any
particular Registrable Shares, once issued such Registrable Shares shall cease
to be Registrable Shares when (a) a Registration Statement with respect to the
sale of such Registrable Shares shall have become effective under the Securities
Act and such Registrable Shares shall have been disposed of in accordance with
such Registration Statement, (b) they shall have been distributed to the public
pursuant to Rule 144 (or any successor provision) under the Securities Act after
a public offering, (c) they shall have been transferred pursuant to Rule 144A
(or any successor provision) under the Securities Act or (d) they shall have
ceased to be outstanding.
"Registration Request" is defined in Section 2(a) hereof.
"Registration Statement" means any appropriate Registration Statement
of the Company in a registration that covers the sale of any of the Registrable
Shares pursuant to the provisions of Sections 2, 3 or 4 of this Agreement,
including the Prospectus, amendments and supplements to such Registration
Statement, post-effective amendments, all exhibits and all material incorporated
by reference in such Registration Statement.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933 and the rules
and regulations promulgated thereunder, as the same may be amended from time to
time.
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"Stock Subscription Agreement" shall mean the Common Stock
Subscription Agreement dated as of May _____, 1999 between FTDI and the Company.
Section 2. Demand Registration
(a) Registration Request. Subject to the provisions of Section 11, at
any time and from time to time after the initial date that is 180 days after the
date hereof, upon the written request to the Company (a "Registration Request")
from FTDI that the Company effect the registration under the Securities Act of
all or part of the Registrable Shares owned by FTDI, the Company will use its
best efforts to effect the registration under the Securities Act of such
Registrable Shares within 30 days after the giving of written notice of such
Registration Request; provided, however, that the Registrable Shares covered by
any such Registration Request shall have a reasonably anticipated aggregate
price to the public of at least $ ; provided further, that if, prior
to the effective date of such registration, circumstances arise that would,
after such date, constitute a Permitted Interruption, the Company shall be
entitled to delay the Registration for a period not to exceed the Permitted
Interruption. The Company will give FTDI not less than ten days prior written
notice of its intention to comply with the provisions of this Section 2(a) and,
in reasonable detail, the date and circumstances relating thereto. No other
securities of the Company except Registrable Shares held by FTDI shall be
included in a registration under this Section 2(a).
(b) Priority in Demand Registration. In a registration pursuant to this
Section 2 involving an underwritten offering, if the managing underwriter of
such underwritten offering shall inform the Company and FTDI by letter of its
belief that the amount of Registrable Shares to be included in such registration
would adversely affect the ability to effect such offering, then the Company
will be required to include in such registration only the amount of securities
that it is so advised should be included in such offering. In such event, the
Company will include in such registration prior to the inclusion of any
securities that are not Registrable Shares the maximum number of Registrable
Shares that in the opinion of such underwriters can be included in such
offering.
(c) Registration Statement Form. Registrations under this Section 2
shall be on such appropriate registration form of the SEC (i) as shall be
selected by the Company and (ii) as shall permit the disposition of the
Registrable Shares being registered in accordance with the intended method or
methods of disposition specified in the Registration Request. The Company agrees
to include in any such Registration Statement all information that, in the
opinion of counsel to the underwriters and the Company, is required to be
included.
(d) Effective Registration Statement. A registration requested pursuant
to this Section 2 shall not be deemed to have been effected (i) unless a
Registration Statement with respect thereto has become effective and FTDI has
sold at least seventy-five percent (75%) of the Registrable Shares included by
them in such Registration Statement or (ii) if after it has become effective,
such registration is interfered with by any stop order, injunction or other
order or requirement of the SEC or other Governmental Authority for any reason
not attributable to FTDI and has not thereafter become effective.
(e) Limitations on Demand Registrations. Notwithstanding anything in
this Section 2 to the contrary, in no event will (i) the Company be required to
effect more than one registration
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pursuant to Section 2(a) within any 360-day period or (ii) FTDI be entitled to
more than five registrations pursuant to Section 2(a), unless in the case of
clauses (ii) above, FTDI agrees to pay all of the costs and expenses of each
such additional registration (unless either (x) a registration so requested is
not effected for a reason not attributable to FTDI or (y) the amount of
Registrable Shares sought to be included by FTDI in such registration is reduced
by more than 25% pursuant to the provisions of Section 2(b)).
(f) Withdrawn Request. FTDI may withdraw a request for registration
under this Section 2 at any time prior to the effective date of the Registration
Statement related to such registration, provided that if it elects to remain
liable for all expenses incurred in conjunction therewith then such withdrawn
Registration Statement shall not be considered to be a demand registration for
the purposes of Section 2(e).
Section 3. Incidental Registration.
(a) Right to Include Registrable Shares. If the Company at any time
proposes or is requested to register any shares of Common Stock under the
Securities Act (except registrations on such form(s) solely for registration of
Common Stock in connection with any employee benefit plan or dividend
reinvestment plan or a merger or consolidation), whether or not for sale for its
own account, it will each such time as soon as practicable give written notice
of its intention to do so to FTDI. Upon the written request (which request
shall specify the total amount of Registrable Shares intended to be disposed of
by FTDI) of FTDI made within 30 days after the receipt of any such notice (15
days if the Company gives telephonic notice with written confirmation to follow
promptly thereafter, stating that (i) such registration will be on Form S-3 and
(ii) such shorter period of time is required because of a planned filing date),
the Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Shares held that the Company has been so
requested to register for sale in the manner initially proposed by the Company.
If the Company thereafter determines for any reason not to register or to delay
registration of the Registrable Shares, the Company may, at its election, give
written notice of such determination to FTDI and (x) in the case of a
determination not to register, shall be relieved of the obligation to register
such Registrable Shares in connection with such registration, without prejudice,
however, subject to any right FTDI may have to request that such registration be
effected as a registration under Section 2(a) and (y) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Shares of FTDI for the same period as the delay in registration of
such other securities. No registration effected under this Section 3(a) shall
relieve the Company of any obligation to effect a registration upon a
Registration Request under Section 2(a).
(b) Priority in Incidental Registration. In a registration pursuant to
this Section 3 (and not involving a Registration Request) involving an
underwritten offering, if the managing underwriter of such underwritten offering
shall inform the Company and FTDI by letter of its belief that the amount of
Registrable Shares to be included in such registration would adversely affect
the ability to effect such offering, then the Company will be required to
include in such registration only the amount of securities that it is so advised
should be included in such offering. In such event: (i) in cases initially
involving the registration for sale of Common Stock for the Company's own
account, securities shall be registered in such offering as follows: (A) first,
the securities the Company proposes to sell, (B) second, the Registrable Shares
requested to be included in such registration that in the opinion of such
underwriters can be sold and (C) third,
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other securities requested to be included in such registration; and (ii) in
cases not initially involving the registration for sale of Common Stock for the
Company's own account, securities shall be registered in such offering as
follows: (A) first, the Registrable Shares requested to be included in such
registration that in such opinion of such underwriters can be sold and (B)
second, other securities requested to be included in such registration.
Section 4. Form S-3 Registration.
In case the Company shall receive from FTDI a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by FTDI, then the Company will:
(a) Registration. As soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of
Registrable Securities as are specified in such request, provided, however, that
the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 4:
(i) if Form S-3 is not available for such offering by FTDI;
(ii) if FTDI, together with any other holders of securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public of less than $1,000,000; or
(iii) notwithstanding Section 8(a), if the Company shall furnish
to FTDI a certificate signed by the President or Chief Executive Officer of the
Company stating that it would be seriously detrimental to the Company and its
stockholders for such Form S-3 registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
Registration Statement no more than once during any twelve month period for a
period of not more than 120 days after receipt of the request of FTDI under this
Section 4 or such earlier time as such a certificate could no longer be given in
good faith.
(b) Not Demand Registration. Form S-3 registrations shall not be deemed
to be demand registrations as described in Section 2 above.
(c) Number of Registrations. Notwithstanding anything to the contrary
herein, the Company is obligated to effect only one registration on Form S-3
within any 360-day period pursuant to this Section 4.
(d) Withdrawn Request. FTDI may withdraw its request for registration
under this Section 4 at any time prior to the effective date of the Registration
Statement related to such registration, provided that if it elects to remain
liable for all expenses incurred in conjunction therewith then such withdrawn
Registration Statement shall not be considered to be a Form S-3 registration for
the purposes of this Section 4.
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Section 5. Registration Procedures.
-----------------------
In connection with the Company's obligations pursuant to Sections 2,
3 and 4 hereof, the Company will use its best efforts to effect such
registration and the Company will promptly:
(a) prepare and file with the SEC as soon as practicable after request
for registration hereunder the requisite Registration Statement to effect such
registration and use its best efforts to cause such Registration Statement to
become effective and to remain continuously effective until the earlier to occur
of (i) 180 days following the date on which such Registration Statement is
declared effective or (ii) the termination of the offering being made
thereunder;
(b) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement until such securities have
been sold or such lesser period of time as the Company, any seller of such
securities or any underwriter is required under the Securities Act to deliver a
Prospectus in accordance with the intended methods of disposition by the sellers
of such securities set forth in such Registration Statement or supplement to
such Prospectus;
(c) furnish to FTDI and the managing underwriter, if any, such number of
conformed copies of such Registration Statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of copies
of the Prospectus contained in such Registration Statement (including each
preliminary Prospectus and any summary Prospectus) and any other Prospectus
filed under Rule 424 under the Securities Act, as may reasonably be requested by
FTDI;
(d) use its best efforts (i) to register or qualify all securities
covered by such Registration Statement under the securities or "blue sky" laws
of such jurisdictions where an exemption is not available as FTDI shall
reasonably request, (ii) to keep such registration or qualification in effect
for so long as such Registration Statement remains in effect and (iii) to take
any other action which may be reasonably necessary or advisable to enable FTDI
to consummate the disposition in such jurisdictions of such securities; provided
that the Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified, subject itself to taxation in
any such jurisdiction or take any action that would subject it to general
service of process in any such jurisdiction;
(e) notify FTDI and the managing underwriter, if any, promptly, and
confirm such advice in writing (i) when a Registration Statement, Prospectus or
any Prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related Prospectus or for additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any of the registered
securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (v) of the happening of any event or information
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becoming known that requires the making of any changes in a Registration
Statement or related Prospectus so that such documents will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
(vi) of the Company's reasonable determination that a post-effective amendment
to a Registration Statement would be appropriate and (vii) if at any time the
representations and warranties of the Company made as contemplated by Section 5
cease to be true and correct;
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification of any of the registered securities for sale in
any jurisdiction, at the earliest possible moment;
(g) upon the occurrence of any event contemplated by clause (e) (v)
above, prepare a supplement or post-effective amendment to the applicable
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the securities being sold thereunder, such
Prospectus will not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading;
(h) use its best efforts to cause the Registrable Shares covered by the
applicable Registration Statement to be registered with or approved by such
other Governmental Authorities as may be necessary to enable FTDI or the
underwriters, if any, to consummate the disposition of such Registrable Shares;
(i) cause all Registrable Shares covered by the Registration Statement
to be listed on each securities exchange or automated quotation system, if any,
on which any securities of the same class as the Registrable Shares are then
listed if requested by the managing underwriters, if any, or FTDI and entitled
hereunder to be so listed;
(j) cooperate and assist in any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD") and in the
performance of any due diligence investigation by any underwriter (including any
"qualified independent underwriter" that is required to be retained in
accordance with the rules and regulations of the NASD);
(k) as soon as practicable prior to the filing of any document that is
to be incorporated by reference into the Registration Statement or the
Prospectus (after initial filing of the Registration Statement) provide copies
of such document to counsel to FTDI and to the managing underwriters, if any,
and make the Company's representatives available for discussion of such document
and consider in good faith making such changes in such document prior to the
filing thereof as counsel for FTDI or the underwriters, if any, may reasonably
request; and
(l) provide and cause to be maintained a transfer agent and registrar
for all Registrable Shares covered by such Registration Statement from and after
a date not later than the effective date of such Registration Statement.
The Company may require FTDI to furnish to the Company such
information regarding FTDI and the distribution of such securities as the
Company may from time to time reasonably request in writing in order to comply
with the Securities Act.
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FTDI agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5(e) (ii), (iii), (iv),
(v) or (vi) hereof, it will forthwith discontinue disposition pursuant to such
Registration Statement of any Registrable Shares covered by such Registration
Statement or Prospectus until their receipt of the copies of the supplemented or
amended Prospectus relating to such Registration Statement or Prospectus or
until they are advised in writing by the Company that the use of the applicable
Prospectus may be resumed (and the period of such discontinuance shall be
excluded from the calculation of the period specified in clause (x) of Section
5(a)) and, if so directed by the Company, will deliver to the Company (at the
Company's expense, except as otherwise provided in Section 2(e)) all copies,
other than permanent file copies then in their possession, of the Prospectus
covering such securities in effect at the time of receipt of such notice. FTDI
agrees to furnish the Company with a signed counterpart, addressed to the
Company and the underwriters, if any, of an opinion of counsel for FTDI covering
substantially the same matters with respect to such Registration Statement (and
the Prospectus included therein) as are customarily covered in opinions of
selling stockholder's counsel delivered to the underwriters in underwritten
public offerings of securities (and dated the dates such opinions are
customarily dated) and such other legal matters as the Company or the
underwriters may reasonably request.
Section 6. Underwritten Offerings.
----------------------
(a) Demand Underwritten Offerings. In any underwritten offering
pursuant to a registration requested under Section 2, the Company will use its
best efforts to enter into an underwriting agreement for such offering with the
underwriters selected by FTDI, such agreement and underwriters to be reasonably
satisfactory in form and substance to the Company, FTDI and the underwriters and
to contain such representations and warranties by the Company and such other
terms as are generally prevailing in agreements of that type. FTDI shall be a
party to such underwriting agreement and may, at its option, require that any or
all of the representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of FTDI and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to FTDI's obligations. The Company may, at its
option, require that any or all of the representations and warranties by, and
the other agreements on the part of FTDI to and for the benefit of such
underwriters shall also be made to and for the benefit of the Company with due
regard to the amount of Registrable Shares being sold by FTDI and the nature of
such representations, warranties and agreements and the underwriting.
(b) Incidental Underwritten Offerings. If the Company at any time
proposes to register any shares of its Common Stock under the Securities Act as
contemplated by Section 3 and such shares of Common Stock are to be distributed
by or through one or more underwriters, FTDI shall be a party to the
underwriting agreement between the Company and such underwriters and may, at its
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of FTDI and that any or
all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to FTDI's obligations. The
Company may, at its option, require that any or all of the representations and
warranties by, and the other agreements on the part of FTDI to and for the
benefit of such underwriters shall also be made to and for the benefit of the
Company
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with due regard to the amount of Registrable Shares being sold by FTDI and the
nature of such representations, warranties and agreements and the underwriting.
Section 7. Preparation; Reasonable Investigation.
-------------------------------------
In connection with the preparation and filing of each Registration
Statement under the Securities Act pursuant to this Agreement, the Company will
give FTDI, the underwriters and their respective counsel and accountants the
opportunity (but such Persons shall not have the obligation) to participate in
the preparation of such Registration Statement, each Prospectus included therein
or filed with the SEC, and, to the extent practicable, each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records (to the extent customarily given to the underwriters of the Company's
securities), and such opportunities to discuss the business of the Company with
its officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of FTDI's and the
underwriters' respective outside counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
Section 8. Limitations, Conditions and Qualifications to Obligations under
---------------------------------------------------------------
Registration Covenants.
----------------------
The obligations of the Company to use its best efforts to cause
Registrable Shares to be registered under the Securities Act are subject to each
of the following limitations, conditions and qualifications:
(a) The Company shall be entitled to postpone for a reasonable period of
time the filing or effectiveness of, or suspend the rights of FTDI to make sales
pursuant to, any Registration Statement otherwise required to be prepared, filed
and made and kept effective by it hereunder (but the duration of such
postponement or suspension may not exceed the earlier to occur of (i) 15 days
after the cessation of the circumstances requiring such postponement or
suspension as described below or (ii) 120 days after the date of the
determination of the Board of Directors referred to below, and the duration of
such postponement or suspension shall be excluded from the calculation of the
period specified in clause (i) of Section 5(a)) if the Board of Directors of the
Company determines in good faith that the filing or effectiveness of, or sales
pursuant to, such Registration Statement would impede, delay or interfere with
any financing, offer or sale of securities, acquisition, corporate
reorganization or other significant transaction involving the Company or any of
its affiliates or require disclosure of material information that the Company
has a bona fide business purpose for preserving as confidential (each a
"Permitted Interruption"). If the Company shall so delay the filing of a
Registration Statement, it shall, as promptly as possible, notify FTDI of such
determination, and FTDI shall have the right (y) in the case of a postponement
of the filing or effectiveness of a Registration Statement, to withdraw the
request for registration by giving written notice to the Company within ten days
after receipt of the Company's notice or (z) in the case of a suspension of the
right to make sales, to receive an extension of the registration period equal to
the number of days of the suspension.
(b) The Company shall not be required hereby to include Registrable
Shares in a Registration Statement if, in the written opinion of outside counsel
to the Company of recognized standing in securities law matters, the beneficial
owners of such Registrable Shares seeking
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registration would be free to sell all of such Registrable Shares within the
current calendar quarter without registration under Rule 144 under the
Securities Act.
(c) The Company's obligations shall be subject to the obligations of
FTDI, which FTDI acknowledges, to furnish all information and materials and to
take any and all actions as may be required under applicable federal and state
securities laws and regulations to permit the Company to comply with all
applicable requirements of the SEC and to obtain any acceleration of the
effective date of such Registration Statement.
(d) The Company shall not be obligated to cause any special audit to be
undertaken in connection with any registration pursuant hereto unless such audit
is requested by the underwriters with respect to such registration.
Section 9. Expenses.
--------
Except as otherwise provided in Section 2(e), the Company will pay
all reasonable out-of-pocket costs and expenses incurred in connection with each
registration of Registrable Shares pursuant to this Agreement, including,
without limitation, the reasonable fees and disbursements of a single firm of
outside counsel retained by FTDI, any and all filing fees payable to the SEC,
fees with respect to filings required to be made with stock exchanges, The
Nasdaq Stock Market, Inc. or the NASD, printing expenses, fees and disbursements
of counsel and accountants of the Company, including costs associated with
comfort letters, and fees and expenses of other Persons retained by the Company,
but excluding underwriters' expenses (including discounts, commissions or fees
of underwriters and expenses included therein, selling brokers, dealer managers
or similar securities industry professionals relating to the distribution of the
securities being registered or legal expenses of any Person other than the
Company and FTDI). The Company shall, in any event in all cases, pay its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), and the
expense of securities law liability insurance fees, if any.
Section 10. Participation in Underwritten Registrations.
-------------------------------------------
FTDI may not participate in any underwritten registration hereunder
unless FTDI (a) agrees to sell its securities on the basis provided in and in
compliance with any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and to comply with Regulation M under the
Exchange Act, and (b) completes and executes all questionnaires, appropriate and
limited powers of attorney, escrow agreements, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements; provided that all such documents shall be consistent
with the provisions hereof.
Section 11. Rule 144.
--------
The Company hereby covenants that it will file in a timely manner
all reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the SEC thereunder and will take
such further action as FTDI may reasonably request to the extent required from
time to time to enable FTDI to sell Registrable Shares under Rule 144 under the
Securities Act.
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Section 12. Holdback Agreements.
(a) FTDI agrees that, with respect to any Registration Statement filed by
the Company in connection with an underwritten public offering, it shall not
effect any public sale or distribution of equity securities of the Company
during the 30 days prior to or for a period of up to 180 days beginning on the
effective date of such Registration Statement (except as part of such
registration) if and to the extent reasonably requested in writing (with
reasonable prior notice) by the managing underwriter of the underwritten public
offering.
(b) The Company agrees not to effect any primary public sale or
distribution of any equity securities of the Company during the 30 days prior to
and the 180-day period beginning on the effective date of any Registration
Statement in which FTDI is participating in connection with an underwritten
public offering of Registrable Shares if and to the extent reasonably requested
in writing (with reasonable prior notice) by the managing underwriter of the
underwritten public offering.
Section 13. Indemnification.
(a) Indemnification by the Company. In connection with any registration
pursuant hereto in which Registrable Shares are to be disposed of, the Company
shall indemnify and hold harmless, to the full extent permitted by law, FTDI
and, when applicable, its officers, directors, stockholders, partners, agents
and employees and each Person who controls FTDI (within the meaning of the
Securities Act or the Exchange Act) against all losses, claims, damages,
liabilities and expenses caused by any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
Prospectus or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, including, without limitation, any loss, claim, damage, liability or
expense resulting from the failure to keep a Prospectus current, except insofar
as the same (i) are caused by or contained in any information relating to FTDI
furnished in writing to the Company by FTDI expressly for use therein or (ii)
are caused by FTDI's failure to deliver a copy of the current Prospectus
simultaneously with or prior to such sale after the Company has furnished FTDI
with a sufficient number of copies of such Prospectus correcting such material
misstatement or omission or (iii) arise in respect of any offers to sell or
sales made during any period when FTDI is required to discontinue sales under
Section 5(e) (and after FTDI has received the notice contemplated by Section
5(e)). The Company shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, their officers and directors and each Person who controls such
Persons (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of FTDI, and shall enter into
an indemnification agreement with such Persons containing such terms, if
requested.
(b) Indemnification by FTDI. In connection with each Registration
Statement effected pursuant hereto in which Registrable Shares are to be
disposed of, FTDI shall indemnify and hold harmless, to the full extent
permitted by law, the Company and its respective directors, officers,
stockholders, partners, agents and employees and each Person who controls the
Company (within the meaning of the Securities Act or the Exchange Act) against
any losses, claims, damages, liabilities and expenses resulting from any untrue
statement of a material fact or
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any omission of a material fact required to be stated in such Registration
Statement or Prospectus or preliminary Prospectus or necessary to make the
statements therein not misleading, to the extent, but only to the extent, that
such untrue statement or omission relates to FTDI and is contained in any
information furnished in writing by FTDI to the Company expressly for inclusion
in such Registration Statement or Prospectus. In no event shall the liability of
FTDI hereunder be greater in amount than the dollar amount of the proceeds
actually received by FTDI upon the sale of the securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder shall give prompt notice to the indemnifying party of
any claim with respect to which it shall seek indemnification and shall permit
such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided, however, that any
Person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such Person unless (i)
the indemnifying party shall have agreed to pay such fees or expenses, or (ii)
the indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such Person or (iii) in the opinion of
outside counsel to such Person there may be one or more legal defenses available
to such Person which are different from or in addition to those available to the
indemnifying party with respect to such claims (in which case, if the Person
notifies the indemnifying party in writing that such Person elects to employ
separate counsel at the expense of the indemnifying party because of a reason
described in clause (iii) above, the indemnifying party shall not have the right
to assume the defense of such claim on behalf of such Person). No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement of any such action which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such action the defense of which has been
assumed by an indemnifying party (or assumed by the indemnified party because of
a reason described in clause (iii) above) without the consent of such
indemnifying party. An indemnifying party who is not entitled to, or elects not
to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one firm of counsel (and, if necessary, local counsel) for
all parties indemnified by such indemnifying party with respect to such claim,
unless in the written opinion of outside counsel to an indemnified party a
conflict of interest as to the subject matter exists between such indemnified
party and another indemnified party with respect to such claim, in which event
the indemnifying party shall be obligated to pay the fees and expenses of
additional counsel for such indemnified party.
(d) Contribution. If for any reason the indemnification provided for
herein is unavailable to an indemnified party or is insufficient to hold it
harmless as contemplated hereby, then the indemnifying party shall contribute to
the amount paid or payable by the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations;
provided that in no event shall the liability of FTDI for such contribution and
indemnification exceed, in the aggregate, the dollar amount of the proceeds
received by FTDI upon the sale of securities giving rise to such indemnification
and contribution obligation.
12
<PAGE>
Section 14. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to FTDI in this Agreement.
(b) Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
(c) Waivers and Amendments. This Agreement may be amended or modified
in whole or in part only by a writing that makes reference to this Agreement and
is executed by FTDI and the Company. The obligations of any party hereunder may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only with the written consent of the party claimed to have
given the waiver; provided, however, that any waiver by any party of any
violation of, breach of, or default under any provision of this Agreement or any
other agreement provided for herein shall not be construed as, or constitute, a
continuing waiver of such provision, or waiver of any other violation of, breach
of or default under any other provision of this Agreement or any other agreement
provided for herein.
(d) Entire Agreement. This Agreement, the Stock Subscription
Agreement and the other agreements and instruments expressly provided for herein
and therein, together set forth the entire understanding of the parties hereto
and supersede in their entirety all prior contracts, agreements, arrangements,
communications, discussions, representations and warranties, whether oral or
written, among the parties.
(e) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(f) Governing Law. This Agreement shall in all respects be governed
by and construed in accordance with the internal substantive laws of the State
of Delaware without giving effect to the principles of conflicts of law thereof.
(g) Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent, postage prepaid, by registered, certified or express mail or
reputable overnight courier service and shall be deemed given when so delivered
by hand, or if mailed, three days after mailing (one business day in the case of
express mail or overnight courier service), as follows:
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i. if to the Company,
ftd.com inc.
3113 Woodcreek Drive
Downers Grove, IL 60515
Attention: President
ii. if to FTDI,
Florists' Transworld Delivery, Inc.
3113 Woodcreek Drive
Downers Grove, IL 60515
Attention: President
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together will constitute one and the same instrument.
(i) Successors and Assigns. Subject to the provisions of this clause
(i), this Agreement shall be binding upon and shall inure to the benefit of, and
shall be binding upon, the successors and permitted assigns of FTDI.
Notwithstanding anything herein to the contrary, the registration rights of FTDI
under Section 2 hereof shall inure to the benefit of and be binding upon its
successors and assigns; provided, however that (a) no party may be assigned any
of the foregoing rights until the Company is given written notice by FTDI at the
time of such assignment stating the name and address of the assignee and
identifying the securities of the Company as to which the particular rights in
question are being assigned; and (b) any such assignee shall receive such
assigned rights subject to all the terms and conditions of this Agreement.
Notwithstanding anything to the contrary contained herein, no assignment of
rights hereunder shall increase the obligations of the Company hereunder and, in
any event, the Company shall not be obligated to effect more than one
registration pursuant to Section 2 in any 12-month period.
(j) Third Parties. This Agreement is for the sole benefit of the
parties hereto and, except as provided in Section 13, nothing expressed or
implied in this Agreement is intended, or shall be construed, to confer upon or
give any Person or entity other than the parties hereto any rights or remedies
under or by reason of this Agreement.
(k) Headings. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed, or have caused
their duly authorized officer or representative to execute, this Agreement as of
the date first above written.
ftd.com inc., a Delaware corporation
By:
------------------------------------------
Its:
-----------------------------------------
Florists' Transworld Delivery, Inc., a Michigan
corporation
By:
------------------------------------------
Its:
-----------------------------------------
15
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Exhibit 4.5
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of May 25, 1999 (this "Agreement"),
by and among ftd.com inc., a corporation organized under the laws of the State
of Delaware, with headquarters located at 3113 Woodcreek Drive, Downers Grove,
Illinois 60515 (the "Company"), and the undersigned (the "Investors").
WHEREAS, pursuant to that certain Series A Preferred Securities Purchase
Agreement, dated as of May 25, 1999 (the "Purchase Agreement"), by and among the
Company and the Investors, the Investors have agreed to acquire 60,000 shares of
Series A 8% Cumulative Redeemable Convertible Preferred Stock, par value $.01
per share, of the Company (the "Preferred Stock"), all of which may be converted
into the Company's Class A common stock, par value $.01 per share (the "Common
Stock"), pursuant to the terms of the Preferred Stock; and
WHEREAS, in connection with the Purchase Agreement, the Company has agreed
to register for sale by the Investors and certain transferees, the Common Stock
received by the Investors upon conversion of the Preferred Stock; and
WHEREAS, the parties hereto desire to enter into this Agreement to evidence
the foregoing agreement of the Company and the mutual covenants of the parties
relating thereto;
NOW, THEREFORE, in consideration of the foregoing and the covenants of the
parties set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, subject to the terms
and conditions set forth herein, the parties hereby agree as follows:
Section 1. Certain Definitions. In this Agreement the following terms
shall have the following respective meanings:
"Affiliate" means, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the relevant time.
"Holders" shall mean (i) the Investors and (ii) each Person holding
Registrable Stock or Preferred Stock which is convertible into Registrable Stock
as a result of a transfer or assignment to that Person of Registrable Stock
permitted pursuant to Section 9 of this Agreement.
<PAGE>
"Indemnified Party" has the meaning ascribed to it in Section 6(c) of
this Agreement.
"Indemnifying Party" has the meaning ascribed to it in Section 6(c) of
this Agreement.
"Person" means an individual, corporation, partnership, estate, trust,
association, private foundation, joint stock company or other entity.
"Piggyback Notice" has the meaning ascribed to it in Section 3(a) of
this Agreement.
"Piggyback Registration" has the meaning ascribed to it in Section
3(a) of this Agreement.
"Preferred Stock" has the meaning ascribed to it in the recitals to
this Agreement.
The terms "Register," "Registered" and "Registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act providing for the sale by the Holders of
Registrable Stock in accordance with the method or methods of distribution
designated by the Holders, and the declaration or ordering of the effectiveness
of such registration statement by the Commission.
"Registrable Stock" means the Common Stock received by the Investors
upon conversion of the Preferred Stock acquired by the Investors pursuant to the
Purchase Agreement, except that as to any particular Registrable Stock, once
issued such securities shall cease to be Registrable Stock when (a) a
registration statement with respect to the sale of such securities becomes
effective under the Securities Act and such securities are disposed of in
accordance with such registration statement, (b) such securities are sold in
accordance with Rule 144 (or any successor provision) under the Securities Act
or (c) such Securities become transferrable within any consecutive 90-day period
in accordance with Rule 144.
"Registration Request" has the meaning ascribed to it in Section 2(a)
of this Agreement.
"Rule 144" means Rule 144 (or any successor provision) promulgated by
the Commission under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the relevant time.
Section 2. Demand Registration.
(a) Upon receipt of a written request (a "Registration Request"),
delivered not earlier than 180 days after the date of the closing of the initial
public offering by the Company of the Common Stock, from Holders holding at
least 50% of the aggregate of the number of Shares of Registrable Stock then
outstanding (assuming for purposes of such calculation the conversion of all
outstanding shares of Preferred Stock), the Company shall (i) promptly give
written notice
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<PAGE>
of the Registration Request to all non-requesting Holders and (ii) prepare and
file with the Commission, within 60 days after its receipt of such Registration
Request, a registration statement for the purpose of effecting a Registration of
the sale of all Registrable Stock by each of the Holders which submitted such
Registration Request and any other Holder who requests to have such Holder's
Registrable Stock included in such registration statement within 10 days after
receipt of notice by such Holder of the Registration Request; provided, however,
that the Company will not be required to effect the Registration of Registrable
Stock unless the Registrable Stock is offered at an aggregate offering price of
not less than $3,000,000. The Company shall use its reasonable best efforts to
effect such Registration as soon as practicable (including, without limitation,
the execution of an undertaking to file post-effective amendments and
appropriate qualification under applicable state securities laws). In the event
such Registration Request is delivered on or before the first anniversary of the
closing of the Company's initial public offering of the Common Stock, any
offering effected pursuant to the Registration related to such Registration
Request shall be an underwritten offering. In the event such Registration
Request is delivered after the first anniversary of the closing of the Company's
initial public offering of the Common Stock and the Company is eligible to
register such Registrable Stock on a continuous basis under Rule 415 of the
Securities Act by filing a Registration Statement on Form S-3, the Company
shall, at the request of requesting Holders, effect such Registration on a
Registration Statement on Form S-3 pursuant to Rule 415. The Company shall use
its reasonable best efforts to keep such Registration continuously effective
until the earlier of (i) the second anniversary of the date hereof, (ii) the
date on which all Registrable Stock have been sold pursuant to such registration
statement or Rule 144 and (iii) the date on which all of the Registrable Stock
held by such Holder may be sold in any consecutive three month period in
accordance with Rule 144; provided, however, that the Company shall not be
obligated to maintain the effectiveness of any Registration that is not effected
under Rule 415 for a period in excess of 90 days; provided, further, that the
Company shall not be obligated to take any action to effect any such
Registration, qualification or compliance pursuant to this Section 2 in any
particular jurisdiction in which the Company would be required to (x) execute a
general consent to service of process in effecting such Registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction or (y) qualify as a foreign corporation in any jurisdiction in
which the Company is not then qualified.
Notwithstanding the foregoing, the Company shall have the right (the
"Suspension Right") to defer such filing (or suspend sales under any filed
registration statement or defer the updating of any filed registration statement
and suspend sales thereunder) for a period of not more than 120 days during any
one-year period ending on December 31, if the Company furnishes to the Holders a
certificate signed by an executive officer or any director of the Company
stating that, in the good faith judgment of the Company, it would be detrimental
to the Company and its stockholders to file such registration statement or
amendment thereto at such time (or continue sales under a filed registration
statement) and therefore the Company has elected to defer the filing of such
registration statement (or suspend sales under a filed registration statement).
(b) The Company is not required to effect more than one (1)
Registrations pursuant to this Section 2.
3
<PAGE>
Section 3. Piggyback Registrations.
-----------------------
(a) At any time after the 180th day after the date of the closing of
the initial public offering by the Company of the Common Stock, so long as the
Investors and their Affiliates hold at least 25% of the Registrable Stock
originally issued pursuant to the Purchase Agreement, if the Company proposes to
register any of its common equity securities or any securities convertible into
its common equity securities under the Securities Act (other than pursuant to
(i) a registration statement filed pursuant to Rule 415 under the Securities
Act, (ii) a registration on Form S-4 or any successor form, or (iii) an offering
of securities in connection with an employee benefit, share dividend, share
ownership or dividend reinvestment plan) and the registration form to be used
may be used for the registration of Registrable Stock, the Company will give
prompt written notice to all holders of Registrable Stock of its intention to
effect such a registration (each a "Piggyback Notice") and, subject to
subparagraph 3(c) below, the Company will include in such registration all
Registrable Stock with respect to which the Company has received written
requests for inclusion therein within ten days after the date of sending the
Piggyback Notice (a "Piggyback Registration"), unless, if the Piggyback
Registration is not an underwritten offering, the Company in its reasonable
judgement determines that, or in the case of an underwritten Piggyback
Registration the managing underwriters advise the Company that, the inclusion of
Registrable Stock would adversely interfere with such offering, affect the
Company's securities in the public markets or otherwise adversely affect the
Company. Nothing herein shall affect the right of the Company to withdraw any
such registration in its sole discretion.
(b) If a Piggyback Registration is a primary registration on behalf
of the Company and, if the Piggyback Registration is not an underwritten
offering, the Company in its reasonable judgement determines that, or in the
case of an underwritten Piggyback Registration, the managing underwriters advise
the Company that the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner within a
price range acceptable to the Company, the Company will include in such
registration (i) first, the securities the Company proposes to sell and (ii)
second, the Registrable Stock requested to be included in such Registration and
any other securities requested to be included in such registration, pro rata
among the holders of Registrable Stock requesting such registration and the
holders of such other securities on the basis of the number of shares of such
Registrable Stock and other securities requested for inclusion in such
registration by each such holder.
(c) If a Piggyback Registration is a secondary registration on behalf
of holders of the Company's securities other than the holders of Registrable
Stock, and, if the Piggyback Registration is not an underwritten offering, the
Company determines that, or in the case of an underwritten Piggyback
Registration, the managing underwriters advise the Company that the number of
securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the holders initially requesting such registration, the Company
will include in such registration the securities requested to be included
therein by the holders requesting such registration and the Registrable Stock
requested to be included in such registration, pro rata among the holders of
securities requesting such registration on the basis of the number of shares of
such Registrable Stock and other securities requested for inclusion in such
registration by each such holder.
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<PAGE>
(d) In the case of an underwritten Piggyback Registration, the
Company will have the right to select the investment banker(s) and manager(s) to
administer the offering. If requested by the underwriters for any underwritten
offerings by Holders, under a registration requested pursuant to Section 2(a),
the Company will enter into a customary underwriting agreement with such
underwriters for such offering, to contain such representations and warranties
by the Company and such other terms which are customarily contained in
agreements of this type. The Holders shall be a party to such underwriting
agreement and may, at their option, require that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of Holders. The Holders
shall not be required to make any representations or warranties to or agreement
with the Company or the underwriters other than representations, warranties or
agreements regarding the Holders, the Holders' right and interest in the
Registrable Stock and the Holders' intended method of distribution and any other
representation or warranties required by law.
Section 4. Registration Procedures.
-----------------------
(a) The Company shall promptly notify the Holders of the occurrence
of the following events:
(i) when any registration statement relating to the Registrable
Stock or post-effective amendment thereto filed with the Commission has
become effective;
(ii) the issuance by the Commission of any stop order suspending
the effectiveness of any registration statement relating to the Registrable
Stock;
(iii) the suspension of an effective registration statement
by the Company in accordance with the last paragraph of Section 2(a)
hereof;
(iv) the Company's receipt of any notification of the suspension
of the qualification of any Registrable Stock covered by a registration
statement for sale in any jurisdiction; and
(v) the existence of any event, fact or circumstance of which
the Company has knowledge, that results in a registration statement or
prospectus relating to Registrable Stock or any document incorporated
therein by reference containing an untrue statement of material fact or
omitting to state a material fact required to be stated therein or
necessary to make the statements therein not misleading during the
distribution of securities.
The Company agrees to use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of any such registration
statement or any state qualification as promptly as possible. The Investors
agree by acquisition of the Registrable Stock that upon receipt of any notice
from the Company of the occurrence of any event of the type described in Section
4(a)(ii), (iii), (iv) or (v) to immediately discontinue their disposition of
Registrable Stock pursuant to any registration statement relating to such
securities until the Investors' receipt of written notice from the Company that
such disposition may be made.
5
<PAGE>
(b) The Company shall provide to the Holders, at no cost to the
Holders, a copy of the registration statement and any amendment thereto used to
effect the Registration of the Registrable Stock, each prospectus contained in
such registration statement or post-effective amendment and any amendment or
supplement thereto and such other documents as the requesting Holders may
reasonably request in order to facilitate the disposition of the Registrable
Stock covered by such registration statement. The Company consents to the use of
each such prospectus and any supplement thereto by the Holders in connection
with the offering and sale of the Registrable Stock covered by such registration
statement or any amendment thereto. If the Common Stock is listed on a "national
securities exchange" as defined in Rule 153 under the Securities Act at any time
during the period in which the Company is obligated to keep the registration
statement effective pursuant to Section 2(a), the Company shall also file a
sufficient number of copies of the prospectus and any post-effective amendment
or supplement thereto with such national securities exchange (or, if the Common
Stock is no longer listed thereon, with such other securities exchange or market
on which the Common Stock is then listed) so as to enable the Holders to have
the benefits of the prospectus delivery provisions of Rule 153 under the
Securities Act.
(c) The Company agrees to use its reasonable best efforts to cause
the Registrable Stock covered by a registration statement to be registered with
or approved by such state securities authorities as may be necessary to enable
the Holders to consummate the disposition of such stock pursuant to the plan of
distribution set forth in the registration statement; provided, however, that
the Company shall not be obligated to take any action to effect any such
Registration, qualification or compliance pursuant to this Section 4 in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such Registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction or qualify as a foreign corporation in any jurisdiction in
which the Company is not then qualified.
(d) Subject to the Company's Suspension Right, if any event, fact or
circumstance requiring an amendment to a registration statement relating to the
Registrable Stock or supplement to a prospectus relating to the Registrable
Stock shall exist, as promptly as practicable upon becoming aware thereof the
Company agrees to notify the Holders and prepare and furnish to the Holders a
post-effective amendment to the registration statement or supplement to the
prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Stock, the prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of
circumstances under which such statements were made.
(e) The Company agrees to use its reasonable efforts (including the
payment of any listing fees) to obtain the listing of all Registrable Stock
covered by the registration statement on each securities exchange on which
securities of the same class or series are then listed.
(f) The Company agrees to use its reasonable efforts to comply with
the Securities Act and the Exchange Act in connection with the offer and sale of
Registrable Stock pursuant to a registration statement, and, as soon as
reasonably practicable following the end of
6
<PAGE>
any fiscal year during which a registration statement effecting a Registration
of the Registrable Stock shall have been effective, to make available to its
security holders an earnings statement satisfying the provisions of Section
11(a) of the Securities Act.
(g) The Company agrees to cooperate with the selling Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Stock sold pursuant to a Registration and not bearing any Securities
Act legend and to enable certificates for such Registrable Stock to be issued
for such numbers of stock and registered in such names as the Holders may
reasonably request.
Section 5. Expenses of Registration. All reasonable expenses, other
than underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2, 3 and 4 hereof,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company and the reasonable fees and disbursements of one counsel selected by
the Holders to the extent related to the Registration and Registrable Stock
hereunder shall be borne by the Company.
Section 6. Indemnification.
---------------
(a) The Company will indemnify each Holder, each Holder's officers
and directors, and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
and liabilities (including reasonable legal expenses), arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement or prospectus relating to the
Registrable Stock, or any amendment or supplement thereto, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided, however, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with information furnished in
writing to the Company by such Holder or underwriter for inclusion therein.
(b) Each Holder will indemnify the Company, each of its directors and
each of its officers who signs the registration statement, each underwriter, if
any, of the Company's securities covered by such registration statement, and
each person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (including reasonable legal fees and expenses) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement or prospectus, or any amendment or
supplement thereto, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement or prospectus, in
reliance upon and in conformity with information furnished in writing to the
Company by such Holder for inclusion therein.
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<PAGE>
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
omission to so notify the Indemnifying Party shall not relieve it from any
liability which it may have to the Indemnified Party pursuant to the provisions
of this Section 6 except to the extent of the actual damages suffered by such
delay in notification. The Indemnifying Party shall assume the defense of such
action, including the employment of counsel to be chosen by the Indemnifying
Party to be reasonably satisfactory to the Indemnified Party, and payment of
expenses. The Indemnified Party shall have the right to employ its own counsel
in any such case, but the legal fees and expenses of such counsel shall be at
the expense of the Indemnified Party, unless the employment of such counsel
shall have been authorized in writing by the Indemnifying Party in connection
with the defense of such action, or the Indemnifying Party shall not have
employed counsel to take charge of the defense of such action or the Indemnified
Party shall have reasonably concluded that there are defenses available to it or
them which are different from or additional to those available to the
Indemnifying Party (in which case the Indemnifying Party shall not have the
right to direct the defense of such action on behalf of the Indemnified Party),
in any of which events such fees and expenses shall be borne by the Indemnifying
Party. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, which consent shall
not be unreasonably withheld, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
(d) If the indemnification provided for in this Section 6 is
unavailable to a party that would have been an Indemnified Party under this
Section 6 in respect of any expenses, claims, losses, damages and liabilities
referred to herein, then each party that would have been an Indemnifying Party
hereunder shall, in lieu of indemnifying such Indemnified Party, contribute to
the amount paid or payable by such Indemnified Party as a result of such
expenses, claims, losses, damages and liabilities in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and such Indemnified Party on the other in connection with the statement or
omission which resulted in such expenses, claims, losses, damages and
liabilities, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Indemnifying Party or such Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 6(d).
(e) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) In no event shall any Holder be liable for any expenses, claims,
losses, damages or liabilities pursuant to this Section 6 in excess of the net
proceeds to such Holder of any Registrable Stock sold by such Holder.
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Section 7. Information to be Furnished by Holders. Each Holder shall
furnish to the Company such information as the Company may reasonably request
and as shall be required in connection with the Registration and related
proceedings referred to in Section 2 or Section 3 hereof. If any Holder fails to
provide the Company with such information within 10 days of receipt of the
Company's request, the Company's obligations under Section 2 or Section 3
hereof, as applicable, with respect to such Holder or the Registrable Stock
owned by such Holder shall be suspended until such Holder provides such
information.
Section 8. Rule 144 Sales.
--------------
(a) The Company covenants that it will use its reasonable efforts to
file the reports required to be filed by the Company under the Exchange Act, so
as to enable any Holder to sell Registrable Stock pursuant to Rule 144 under the
Securities Act.
(b) In connection with any sale, transfer or other disposition by any
Holder of any Registrable Stock pursuant to Rule 144 under the Securities Act,
the Company shall cooperate with such Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Stock sold and
not bearing any Securities Act legend and to enable certificates for such
Registrable Stock to be issued for such number of shares and registered in such
names as the selling Holder may reasonably request.
Section 9. Assignment of Registration Rights. Subject to any transfer
restrictions otherwise applicable to the Preferred Stock or the Registrable
Stock, the rights of the Holders hereunder, including the right to have the
Company register Registrable Stock pursuant to this Agreement, shall be
assignable by each Holder to any transferee of all or any portion of the shares
of Preferred Stock or the Registrable Stock if: (i) the transfer to such
transferee is permitted under the Securities Act and applicable state securities
law or exemptions therefrom, (ii) the aggregate amount of Registrable Stock that
will be held by the transferee after giving effect to such transfer is not less
than 15% of the Registrable Stock outstanding on the date hereof, assuming
conversion of all of Preferred Stock, (iii) the Holder agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company after such assignment, (iv) the Company is furnished
with written notice of (a) the name and address of such transferee or assignee,
and (b) the securities with respect to which such registration rights are being
transferred or assigned, (v) following such transfer or assignment, the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act and applicable state securities laws, (vi) the transferee or
assignee agrees in writing for the benefit of the Company to be bound by all of
the provisions contained herein, and (vii) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement.
Section 10. Miscellaneous.
-------------
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
made and to be performed in the State of Delaware. The Company and Investors
agree that service of process upon the Company and Investors, respectively,
mailed by first class mail, shall be deemed in every respect effective service
of process upon the Company and Investors, respectively, in any
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such suit or proceeding. Nothing herein shall affect the right of the Company or
the right of any Investor to serve process in any other manner permitted by law.
(b) Entire Agreement. This Agreement, the Purchase Agreement and the
Certificate of Designation, Preferences and Rights of the Preferred Stock
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof.
(c) Amendment. No supplement, modification, waiver or termination of
this Agreement shall be binding unless executed in writing by the party to be
bound thereby.
(d) Notices, etc. Each notice, demand, request, request for approval,
consent, approval, disapproval, designation or other communication (each of the
foregoing being referred to herein as a notice) required or desired to be given
or made under this Agreement shall be in writing (except as otherwise provided
in this Agreement), and shall be effective and deemed to have been received (i)
when delivered in person, (ii) when sent by fax with receipt acknowledged, (iii)
five (5) days after having been mailed by certified or registered United States
mail, postage prepaid, return receipt requested, or (iv) the next business day
after having been sent by a nationally recognized overnight mail or courier
service, receipt requested. Notices shall be addressed as follows: (a) if to an
Investor, at the Investor's address or fax number set forth below its signature
hereon, or at such other address or fax number as the Investor shall have
furnished to the Company in writing, or (b) if to any assignee or transferee of
an Investor, at such address or fax number as such assignee or transferee shall
have furnished the Company in writing, or (c) if to the Company, at the address
of its principal executive offices and addressed to the attention of the
President, or at such other address or fax number as the Company shall have
furnished to the Investors or any assignee or transferee. Any notice or other
communication required to be given hereunder to a Holder in connection with a
registration may instead be given to the designated representative of such
Holder.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
to be physically delivered to the other party within five days of the execution
hereof.
(f) Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
(g) Section Titles. Section titles are for descriptive purposes only
and shall not control or alter the meaning of this Agreement as set forth in the
text.
(h) Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ftd.com inc.
By: /s/
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BUENA VISTA INTERNET GROUP
By: /s/
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
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Exhibit 10.2
INTERCOMPANY SERVICES AGREEMENT
This Intercompany Services Agreement (this "Agreement") is being entered
into as of the ___ day of June, 1999 and is entered into by and between
Florists' Transworld Delivery, Inc., a Michigan corporation ("FTDI"), and
ftd.com inc., a Delaware corporation ("ftd.com").
RECITALS
A. Historically, FTDI was engaged directly in, among other things, the
business of offering consumers the opportunity to place floral and
specialty gift orders directly with FTDI through its toll free
telephone number (1-800-SEND-FTD) and its Web site (www.ftd.com) (the
"Direct Access Business").
B. Recently, FTDI formed ftd.com as a subsidiary of FTDI and, pursuant to
the Formation Agreement, dated as of May 19, 1999, between FTDI and
ftd.com (the "Formation Agreement"), transferred substantially all of
FTDI's assets, rights and interests relating to the Direct Access
Business to ftd.com.
C. In connection with the Direct Access Business, ftd.com desires to
obtain various corporate, administrative and other services
("Services") from FTDI, and FTDI desires to provide such Services to
ftd.com.
THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
Section 1. Services.
FTDI or, at its option, its subsidiaries (other than ftd.com and its
subsidiaries) will, if requested by ftd.com, render to ftd.com the following
Services in accordance with the terms of this Agreement:
(a) Corporate Services. FTDI will provide, directly or through its
subsidiaries, the services described in Exhibit A hereto, at the cost specified
and on the other terms and conditions set forth in Exhibit A.
(b) Space Sharing. FTDI will, if requested by ftd.com, make the office
space set forth in Exhibit B available to ftd.com at the cost specified and on
the other terms and conditions set forth in Exhibit B.
(c) In the event that ftd.com requests services that exceed the scope or
extent of the Services provided for herein, and if FTDI agrees to provide such
services, FTDI and ftd.com will negotiate in good faith the terms and
conditions, including price, under which FTDI will provide such Services;
provided, however, that the terms and conditions, including price, upon which
FTDI will provide those Services to ftd.com shall be no less favorable to
ftd.com than the terms
<PAGE>
and conditions, including price, upon which FTDI provides comparable services to
unaffiliated third parties.
Section 2. Compensation.
ftd.com will pay to FTDI when due a fee for each of the Services equal to
the amount described in the appropriate Exhibit hereto relating to such Service,
provided that in the event ftd.com terminates any Service in accordance with
Section 3 hereof, the fee for such Service shall cease to accrue on and after
the effective date of such termination. Late payments shall accrue interest at a
rate equal to FTDI's average cost of borrowings at the end of FTDI's most recent
fiscal quarter plus 200 basis points.
Section 3. Term.
(a) The term of this Agreement shall begin on June 1, 1999 (the "Effective
Date") and shall continue for an indefinite period in full force and effect
until it is terminated in accordance with this Section 3.
(b) FTDI will have the right (but not the obligation) to terminate this
Agreement and the rights granted to ftd.com hereunder:
(i) if ftd.com is in material breach of any of its obligations
hereunder, which breach is not cured within 20 days of receipt of written
notice from FTDI of such breach;
(ii) if ftd.com is the subject of a voluntary petition in bankruptcy
or any voluntary proceeding relating to insolvency, receivership,
liquidation or composition for the benefit of creditors, if such petition
or proceeding is not dismissed within 90 days of filing, or becomes the
subject of any involuntary petition in bankruptcy or any involuntary
proceeding relating to insolvency, receivership, liquidation or composition
for the benefit of creditors, if such petition or proceeding is not
dismissed within 90 days of filing;
(iii) if ftd.com involuntarily dissolves or is dissolved;
(iv) if ftd.com is judicially adjudicated insolvent or generally is
unable to pay its debts as they mature or makes an assignment for the
benefit of its creditors;
(v) upon 180 days written notice to ftd.com, following the occurrence
of a distribution of the voting securities of ftd.com pursuant to a
dividend intended to be on a tax-free basis under the Internal Revenue Code
of 1986, as amended from time to time; or
(vi) upon 180 days written notice to ftd.com, in the event FTDI, FTD
Corporation, a Delaware corporation ("FTDC"), or any subsidiary or parent
of either FTDI or FTDC ceases to own any of the stock of ftd.com.
(c) ftd.com will have the right (but not the obligation) to terminate this
Agreement and the rights granted to FTDI:
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(i) if FTDI is in material breach of any of its obligations
hereunder, which breach is not cured within 20 days of receipt of written
notice from ftd.com of such breach;
(ii) if FTDI is the subject of a voluntary petition in bankruptcy or
any voluntary proceeding relating to insolvency, receivership, liquidation
or composition for the benefit of creditors, if such petition or proceeding
is not dismissed within 90 days of filing, or becomes the subject of any
involuntary petition in bankruptcy or any involuntary proceeding relating
to insolvency, receivership, liquidation or composition for the benefit of
creditors, if such petition or proceeding is not dismissed within 90 days
of filing;
(ii) if FTDI involuntarily dissolves or is dissolved;
(iv) if FTDI is judicially adjudicated insolvent or generally is
unable to pay its debts as they mature or makes an assignment for the
benefit of its creditors; or
(v) upon 180 days written notice to FTDI.
(d) FTDI will have the right (but not the obligation) to terminate this
Agreement and the rights granted to ftd.com hereunder, upon 90 days written
notice to ftd.com, following the acquisition of the beneficial ownership of at
least 20% (the "Threshold") of the voting power represented by the voting
securities of ftd.com, any successor thereto or any Permitted Assignee (as
defined in Section 10(a) of this Agreement) by any person or "group" within the
meaning of Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") or any successor provision to either of
the foregoing, including any group acting for the purpose of acquiring, holding,
voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under
the Exchange Act or any successor provision thereof (a "group") other than FTDC,
any affiliate of FTDC, FTDI or any affiliate of FTDI. For purposes of this
Agreement, (i) the term "beneficial ownership" shall have the meaning set forth
in Rule 13d-3 of the Exchange Act or any successor provisions thereof, (ii) the
term "voting securities" means the Class A Common Stock, par value $.01 per
share, and Class B Common Stock, par value $.01 per share, of ftd.com and any
other securities issued by ftd.com having the power to vote generally in the
election of directors of ftd.com and (iii) the term "affiliate" means a person
directly or indirectly controlled by, controlling or under common control with
another person. For purposes of this Section 3(d), an acquisition shall not
include (A) the acquisition by a person of voting securities of ftd.com pursuant
to an involuntary disposition by FTDI through foreclosure or similar event or
(B) the acquisition by a person of voting securities of ftd.com pursuant to a
dividend intended to be on a tax-free basis (a "Tax-Free Spin-Off") under the
Internal Revenue Code of 1986, as amended from time to time, but shall include a
subsequent acquisition of voting securities pursuant to a disposition by the
person that acquired the voting securities in such involuntary disposition or
such Tax-Free Spin-Off. In the event any person acquires beneficial ownership of
voting power in excess of the Threshold as a result of a transaction described
in the immediately preceding sentence, the Threshold with respect to such person
shall be adjusted to an amount equal to the percentage of beneficial ownership
held by such person immediately following such transaction.
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(e) A party may exercise its right to terminate pursuant to this Section 3
by sending appropriate written notice to the other party. No exercise by a party
of its rights under this Section 3 will limit its remedies by reason of the
other party's default, the party's rights to exercise any other rights under
this Section 3, or any of that party's other rights.
Section 4. Records and Accounts.
FTDI will maintain accurate books, records and accounts of all transactions
relating to the Services performed by it pursuant to this Agreement. ftd.com
may, at its own expense, examine and copy those books and records as provided in
this Section 4. Such books, records and accounts will be maintained in a manner
that allows ftd.com to separate these matters from those relating to FTDI's
other operations. Such books, records and accounts will reflect such information
as would normally be examined by an independent accountant in performing an
audit pursuant to United States generally accepted auditing standards for the
purpose of certifying financial statements, and to permit verification thereof
by governmental agencies. ftd.com may make examinations pursuant hereto during
FTDI's usual business hours, and at the place in the continental United States
where FTDI regularly keeps these books and records. ftd.com will be required to
notify FTDI at least two business days before the date of planned examination.
If ftd.com's examination is not completed within two months from commencement,
FTDI at any time may require ftd.com to terminate such examination on seven
days' notice to ftd.com, provided that FTDI has cooperated with ftd.com in the
examination of such books and records.
Section 5. No Restrictions.
Nothing in this Agreement shall limit or restrict the right of any of
FTDI's directors, officers or employees or any of ftd.com's directors, officers
or employees to engage directly or indirectly in the same or similar business
activities or lines of business as FTDI or ftd.com, respectively, or limit or
restrict the right of FTDI or ftd.com to engage in any other business or to
render or obtain, as the case may be, services of any kind to or from, as the
case may be, any corporation, firm, individual, trust or association.
Section 6. Independent Contractors.
FTDI and ftd.com are independent contractors. There is no relationship of
partnership, joint venture, employment, franchise or agency between FTDI and
ftd.com. Neither FTDI nor ftd.com shall have the power to bind the other or
incur obligations on the other's behalf without the other's prior written
consent. When FTDI's employees act under the terms of this Agreement, they
shall be deemed at all times to be under the supervision and responsibility of
FTDI; and no person employed by FTDI and acting under the terms of this
Agreement shall be deemed to be acting as agent or employee of ftd.com or any
customer of ftd.com for any purpose whatsoever.
Section 7. Other Agreements.
From time to time, ftd.com may find it necessary or desirable either to
enter into agreements covering services of the type contemplated by this
Agreement to be provided by parties other than FTDI or to enter into other
agreements covering functions to be performed by
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FTDI hereunder. Nothing in this Agreement shall be deemed to limit in any way
the right of ftd.com to acquire such services from others or to enter into such
other agreements.
Section 8. Confidentiality.
FTDI and ftd.com each agree to hold in strict confidence, and to use
reasonable efforts to cause each of their employees and representatives to hold
in strict confidence, all confidential information concerning FTDI or ftd.com,
as the case may be, furnished to or obtained by the other party in the course of
performing the obligations provided for under this Agreement except to the
extent that (a) such information has been in the public domain through no fault
of FTDI or ftd.com, as the case may be, (b) disclosure or release is compelled
by judicial or administrative process or (c) in the opinion of counsel to FTDI
or ftd.com, as the case may be, disclosure or release is necessary pursuant to
requirements of law or the requirements of any governmental entity including,
without limitation, disclosure requirements under the securities laws of the
United States or similar laws of other jurisdictions applicable to FTDI or
ftd.com, as the case may be.
Section 9. Dispute Resolution.
(a) In the event that any party to this Agreement has any claim, right or
cause of action against any other party to this Agreement, which the parties
shall be unable to settle by agreement between themselves, such claim, right or
cause of action, to the extent that the relief sought by such party is for
monetary damages or awards, shall be determined by arbitration in accordance
with the provisions of this Section 9.
(b) The party or parties requesting arbitration shall serve upon the other
or others a demand therefor, in writing, specifying the matter to be submitted
to arbitration, and nominating a competent disinterested person to act as an
arbitrator. Within 30 days after receipt of such written demand and nomination,
the other party or parties shall, in writing, nominate a competent disinterested
person, and the two (2) arbitrators so designated shall, within 15 days
thereafter, select a third arbitrator. The three (3) arbitrators shall give
immediate written notice of such selection to the parties and shall fix in said
notice a time and place of the meeting of the arbitrators which shall be as soon
as conveniently possible (but in no event later than 30 days after the
appointment of the third arbitrator), at which time and place the parties to the
controversy shall appear and be heard with respect to the right, claim or cause
of action.
(c) In case the notified party or parties shall fail to make a selection
upon notice within the time period specified, the party asserting such claim
shall appoint an arbitrator on behalf of the notified party. In the event that
the first two (2) arbitrators selected shall fail to agree upon a third
arbitrator within 15 days after their selection, then such arbitrator may, upon
application made by either of the parties to the controversy, be appointed by
any judge of any United States court of record having jurisdiction in the State
of Illinois.
(d) Each party shall present such testimony, examinations and
investigations in accordance with such procedures and regulations as may be
determined by the arbitrators and shall also recommend to the arbitrators a
monetary award to be adopted by the arbitrators as the complete disposition of
such claim, right or cause of action. After hearing the parties in regard to the
matter in dispute, the arbitrators shall adopt as their determination with
respect to such claim,
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<PAGE>
right or cause of action, within 45 days of the completion of the examination,
by majority decision signed in writing (together with a brief written statement
of the reasons for adopting such recommendation), one of the recommendations
submitted by the parties to the dispute and shall grant no other relief or
remedy. The decision of said arbitrators, absent fraud, duress or manifest
error, shall be final and binding upon the parties to such controversy and may
be enforced in any court of competent jurisdiction.
(e) The expense and cost of such arbitration shall be borne by the party
or parties whose recommendation was not adopted by the arbitrators. Each party
shall pay the fees and expenses of its own counsel.
(f) Notwithstanding any other provisions of this Section 9, in the event
that a party against whom any claim, right or cause of action is asserted
commences, or has commenced against it, bankruptcy, insolvency or similar
proceedings, the party or parties asserting such claim, right or cause of action
shall have no obligations under this Section 9 and may assert such claim, right
or cause of action in the manner and forum it deems appropriate, subject to
applicable laws. No determination or decision by the arbitrators pursuant to
this Section 9 shall limit or restrict the ability of any party hereto to obtain
or seek in any appropriate forum, any relief or remedy that is not a monetary
award or money damages.
Section 10. Miscellaneous.
(a) Neither party may assign this Agreement, or their respective rights
and obligations hereunder, in whole or in part without the other party's prior
written consent. Any attempt to assign this Agreement without such consent shall
be void and of no effect ab initio. Notwithstanding the immediately preceding
sentence, any party may assign this Agreement or all, but not less than all, of
its rights and obligations hereunder to any entity controlled by it or to any
entity that acquires it by purchase of stock or by merger or otherwise, or by
obtaining all or substantially all of its assets (a "Permitted Assignee"),
provided that any such Permitted Assignee, or any division thereof, thereafter
succeeds to all of the rights and is subject to all of the obligations of the
assignor under this Agreement; provided, however, the provisions of this Section
10(a) shall in no way modify the provisions of Section 3(d).
(b) This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Illinois applicable to agreements made and to
be performed entirely within such State, without regard to the conflicts of law
principles of such State. Each party shall comply in all respects with all laws
and regulations applicable to its activities under this Agreement.
(c) Notwithstanding the provisions of Section 9, each party hereto
irrevocably submits to the exclusive jurisdiction of (a) the courts of the State
of Illinois, DuPage County, or (b) the United States District Court for the
Northern District of Illinois, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby
or thereby. Each of FTDI and ftd.com agrees to commence any such action, suit or
proceeding either in the United States District Court for the Northern District
of Illinois or if such suit, action or other proceeding may not be brought in
such court for jurisdictional reasons, in the courts of the State of Illinois,
DuPage County. Each of FTDI and ftd.com further agrees that service of any
process, summons, notice or documents by U.S. registered mail to such party's
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<PAGE>
respective address set forth below shall be effective service of process for any
action, suit or proceeding in Illinois with respect to any matters to which it
has submitted to jurisdiction in this Section 10(c). Each of FTDI and ftd.com
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby and thereby in (i) the courts of the State of Illinois,
DuPage County, or (ii) the United States District Court for the Northern
District of Illinois, and hereby and thereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
(d) If any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to any person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof (or the remaining portion thereof)
or the application of such provision to any other persons or circumstances.
(e) All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or sent, postage
prepaid, by registered, certified or express mail or reputable overnight courier
service and shall be deemed given when so delivered by hand, or if mailed, three
days after mailing (one business day in the case of express mail or overnight
courier service), as follows:
(i) if to ftd.com,
ftd.com inc.
3113 Woodcreek Drive
Downers Grove, IL 60515
Attention: President
(ii) if to FTDI,
Florists' Transworld Delivery, Inc.
3113 Woodcreek Drive
Downers Grove, IL 60515
Attention: President
(f) The provisions of Sections 8, 9 and 10 hereof shall survive any
termination of this Agreement.
(g) No failure of either party to exercise or enforce any of its rights
under this Agreement shall act as a waiver of such right.
(h) This Agreement, along with the Exhibits hereto, contains the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. Neither party shall be liable or bound to any
other party in any manner by any representations, warranties or covenants
relating to such subject matter except as specifically set forth herein.
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(i) This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each of the parties and
delivered to each of the other parties.
(j) This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto; provided, however, that as long
as (1) FTDC beneficially owns 25% or more of the voting power represented by the
voting securities of ftd.com, and no other Person directly or beneficially owns
a greater percentage of such voting power, or (2) directors, officers or
affiliates of FTDC or its subsidiaries constitute a majority of the members of
ftd.com's board of directors, no amendment of this Agreement will be valid
unless it has been approved by at least a majority of the members of ftd.com's
board of directors, which majority must include at least one-half of the members
of ftd.com's board of directors who are "independent" directors pursuant to the
applicable rules of Nasdaq or any national stock exchange on which ftd.com's
equity securities are then traded or listed.
(k) This Agreement is for the sole benefit of the parties hereto and
nothing herein expressed or implied shall give or be construed to give to any
person, other than the parties hereto, any legal or equitable rights hereunder.
(l) The headings contained in this Agreement or in any Exhibit hereto are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All Exhibits annexed hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. Any capitalized terms used in any Exhibit but not
otherwise defined therein, shall have the meaning as defined in this Agreement.
When a reference is made in this Agreement to a Section or an Exhibit, such
reference shall be to a Section of, or an Exhibit to, this Agreement unless
otherwise indicated.
[The remainder of this page intentionally is left blank.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
ftd.com inc.
By:----------------------
Name:
Title:
Florists' Transworld Delivery, Inc.
By:----------------------
Name:
Title:
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EXHIBIT A
CORPORATE SERVICES
At the request of ftd.com, FTDI will provide, by itself or through its
subsidiaries, the services described below:
(a) Scope of Services. FTDI will provide ftd.com with all services
currently provided by FTDI and its subsidiaries to ftd.com (except to the extent
the rights and obligations related to such Services are transferred to ftd.com
pursuant to the Formation Agreement), including, without limitation, technical,
human resources, finance, accounting, administrative and legal services, as well
as services required by ftd.com by virtue of its status as a registrant under
the federal securities laws.
(b) Description of Services.
(i) Technical Services. FTDI will provide ftd.com with access to and
support for all FTDI computer and software systems required to conduct the
Direct Access Business, including, among other things, internal systems,
telecommunications and hardware and software support.
(ii) Human Resources Services. FTDI will, among other things, recruit
for and oversee ftd.com's support staff, assist ftd.com in its
implementation of employment policies and procedures, ensure the compliance
of all ftd.com personnel with all ftd.com employment policies and implement
and administer ftd.com's employee benefits programs such as ftd.com's
medical, dental and life insurance benefit programs.
FTDI also will provide each ftd.com employee with fully functional
workstations, including cubes/offices, desks, file cabinets, phones and
personal computers. FTDI will repair, maintain, support and replace these
items as needed.
(iii) Finance Services. FTDI will, among other things, (A) collect,
analyze and report all capital assets transactions and capital and expense
budget information; (B) respond to all financial information requirements
of ftd.com, (C) manage all banking activities of ftd.com, including cash
receipts and ftd.com borrowings and (D) assist in the preparing and filing
of all reports that ftd.com must file by virtue of its status as a
registrant under the federal securities laws.
(iv) Accounting Services. FTDI will, among other things, collect,
analyze and report all employee time entry, revenue-generating
transactions, disbursement and expense transactions, payroll activity,
benefits information, accounts payable and accounts receivable.
(v) Administrative Services. FTDI will, among other things, provide
general oversight of ftd.com's offices and personnel and will maintain
working relationships with all of ftd.com's benefit carriers.
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(vi) Legal Services. FTDI will, among other things, provide ftd.com
with legal advice and counsel on general corporate and employment matters.
(c) Quality of Services. FTDI will provide the above services at a quality
level that is at least equal to the quality of services being performed by FTDI
in respect of the Direct Access Business prior to the Effective Date.
(d) Price of Services. For each of the services listed above, ftd.com will
pay FTDI an amount equal to (i) the cost of such service that is attributable to
ftd.com's usage, including employee salaries and benefits, plus (ii) a general
and administrative charge of 5%. In addition, ftd.com will pay FTDI $600 per
month for each ftd.com employee for which FTDI provides benefits that include,
among other things, medical, dental and/or life insurance. All costs provided
for in this subsection (d) will be re-evaluated by FTDI quarterly based on a
rolling 12 months of actual FTDI expenses. FTDI will invoice ftd.com for such
costs within [15] days of the end of each month for services rendered in such
month and ftd.com will pay such invoice within 30 days of receipt.
(e) Access to Services. FTDI will provide ftd.com with access, as needed,
to the Mercury Network at the same prices FTDI charges the members of FTD
Association, a Michigan nonprofit corporation ("FTD Association"). FTDI also
will provide ftd.com with access to the FTD Clearinghouse for a fee that, so
long as ftd.com is receiving the ftd.com Commission (as such term is defined in
that certain Commission Agreement, dated as of June ___, 1999, between FTDI and
ftd.com), shall be equal to 7% of the sales price of the order cleared through
the FTD Clearinghouse (the "FTD Clearinghouse Fee"). Additionally, FTDI will
provide ftd.com with access to its Retrans Service and Cash-Flo Credit Card
Program at the same prices as FTDI charges the members of FTD Association;
provided, however, ftd.com will not be required to become a member of FTD
Association to receive such access. FTDI will invoice ftd.com for the costs
identified in this subsection (e) in accordance with the same procedures its
uses to invoice the members of FTD Association for such costs.
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EXHIBIT B
SPACE SHARING
(a) License to Use Space. During the term of this Agreement, if requested
by ftd.com, FTDI will permit ftd.com to use approximately 5,360 square feet of
FTDI's (or any of its subsidiaries') facility, which includes 120,000 square
feet of total usable space (the "FTDI Facility"), for general corporate
purposes, subject to the terms and conditions set forth in this Agreement. The
space to be used by ftd.com will be as mutually agreed by the parties from time
to time. ftd.com's right to use a portion of FTDI's Facility will terminate on
the earlier of (i) 90 days after ftd.com notifies FTDI that ftd.com no longer
desires to use any portion of the FTDI Facility, (ii) 90 days after FTDI
notifies ftd.com that ftd.com may no longer use any portion of the FTDI
Facility, or (iii) the termination date of this Agreement. ftd.com will vacate
the FTDI Facility on the termination of ftd.com's right to use the FTDI Facility
in either of the manners listed above.
(b) Consideration. So long as ftd.com uses any portion of the FTDI
Facility, ftd.com will pay to FTDI on the first day of each calendar month an
amount equal to $14.25 per square foot per year, which amount the parties agree
is the prevailing market rate per square foot for similar offices (taking all
relevant factors into account, including location, age of facility and facility
amenities). Payments for any partial calendar month shall be prorated on a per
diem basis.
(c) Operating Expenses. ftd.com will pay to FTDI monthly as additional
consideration ftd.com's proportionate share, based on the aggregate square
footage occupied by ftd.com during the relevant period compared to the aggregate
square footage occupied by FTDI and its subsidiaries (including ftd.com and its
subsidiaries) during the relevant period of (i) insurance premiums for the FTDI
Facility in which ftd.com occupies space and incurred by FTDI and (ii) Operating
Expenses (as defined below) and taxes for the FTDI Facility in which ftd.com
occupies space and incurred by FTDI, plus a general and administrative charge of
5%. All premiums, costs and Operating Expenses will be re-evaluated by FTDI
quarterly based on a rolling 12 months of actual FTDI premiums, costs and
Operating Expenses. The term "Operating Expenses" includes all expenses incurred
by FTDI with respect to the maintenance and operation of the FTDI Facility in
which ftd.com occupies space. These items include, but are not limited to: snow
removal, landscaping, window washing (interior and exterior), exterminating
services, rubbish removal, parking lot maintenance (periodic resealing and
restripping), electricity, water and sewer charges, managing agent fees, which
will not exceed those customarily charged in the market for similar type
properties, and other general facility repairs and maintenance charges.
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Exhibit 10.3
TRADEMARK LICENSE AGREEMENT
This Trademark License Agreement (this "Agreement") is being entered into
as of the __ day of June, 1999 and is entered into by and between Florists'
Transworld Delivery, Inc. ("FTDI" or "Licensor"), a Michigan corporation, and
ftd.com inc. ("ftd.com" or "Licensee"), a Delaware corporation.
RECITALS
A. Licensor is the owner of all right, title and interest in and to the
trademarks, service marks, trade names, copyrights, trade dress and other
intellectual property set forth in Exhibit A;
B. Licensee previously operated as part of Licensor's corporate organization
and Licensee's operations have been transferred to a separate corporate
entity;
C. Licensee has been and is engaged in the business of offering consumers the
opportunity to place floral and specialty gift orders directly with it
through its toll free telephone number (1-800-SEND-FTD) and its Web site
(www.ftd.com) and desires to continue to use the Licensed Intellectual
Property (as defined below) in furtherance of such activities; and
D. Licensor is willing to permit such continued use of the Licensed
Intellectual Property under the terms and conditions set forth in this
Agreement.
THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. DEFINITIONS
1.1 "Content" means any text, graphics, photographs, video, audio and/or
other data, files or information on Licensee's Internet Site.
1.2 "ftd.com Affiliate" means a Person directly or indirectly controlled
by, controlling or under common control with ftd.com, other than FTDI or any
FTDI Affiliate.
1.3 "ftd.com Non-Compete Period" means that period beginning on the
Effective Date and ending
(a) two years after termination of this Agreement if this Agreement is
terminated by FTDI pursuant to Section 3.2; and
(b) on termination of this Agreement if this Agreement is terminated for
any other reason, including without limitation by ftd.com pursuant to
Section 3.3.
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1.4 "ftd.com Prohibited Business" means a business or component of a
business that is engaged in any significant respect in any business currently
conducted by FTDI or an FTDI Affiliate.
1.5 "FTDI Affiliate" means a Person directly or indirectly controlled by,
controlling or under common control with FTDI, other than ftd.com or any ftd.com
Affiliate.
1.6 "FTDI Non-Compete Period" means that period beginning on the Effective
Date and ending
(a) six months after termination of this Agreement, if this Agreement
is terminated by FTDI pursuant to Section 3.4 and a Person, other than FTDI or
an FTDI Affiliate, directly or beneficially owns 35% or more of the voting power
represented by the voting securities of ftd.com and neither FTDI nor an FTDI
Affiliate directly or beneficially owns a greater percentage of such voting
power;
(b) one year after termination of this Agreement, if this Agreement is
terminated by FTDI pursuant to Section 3.4 and a Person, other than FTDI or an
FTDI Affiliate, directly or beneficially owns 20% or more of the voting power
represented by the voting securities of ftd.com;
(c) two years after termination of this Agreement, if this Agreement
is terminated by ftd.com pursuant to Section 3.3; and
(d) on termination of this Agreement if this Agreement is terminated
for any other reason, including without limitation by FTDI pursuant to Section
3.2.
1.7 "FTDI Prohibited Business" means a business, or component of a
business, that is engaged in any significant respect in the direct sale or
marketing of (a) floral and specialty gifts or (b) products that bear or
incorporate the Licensed Intellectual Property directly to consumers; provided,
however, notwithstanding any provision herein to the contrary, in the event
ftd.com elects to terminate or not to renew the Florists Online Hosting
Agreement, dated as of the date hereof, between FTDI and ftd.com (the "FOL
Agreement"), nothing in this Agreement shall be deemed to limit in any way the
right of FTDI to (x) perform the services of the type contemplated by the FOL
Agreement, (y) acquire such services from others or (z) enter into other
agreements covering functions currently performed by ftd.com under the FOL
Agreement.
1.8 "Intellectual Property Rights" means all inventions, discoveries,
patents, trademarks, service marks, trade names, copyrights, moral rights,
jingles, know-how, software, shop rights, licenses (to the extent
sublicensable), developments, research data, designs, technology, trade secrets,
test procedures, processes, route lists, computer programs, computer discs,
computer tapes, literature, reports and other confidential information,
intellectual and similar intangible property rights, whether or not registrable
(or otherwise subject to legally enforceable restrictions or protections against
unauthorized third party usage), and any and all applications for, registrations
of and extensions, divisions, renewals and reissuance of, any of the foregoing,
and rights therein, including without limitation (a) rights under any royalty or
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licensing agreements and (b) programming and programming rights, whether on
film, tape or any other medium.
1.9 "Internet Site" means the location on the Internet's World Wide Web
known as www.ftd.com.
1.10 "Licensed Intellectual Property" means the registered and
unregistered trademarks, service marks, trade names, copyrights, trade dress and
other intellectual property owned and used by Licensor as of the Effective Date
and identified in Exhibit A.
1.11 "Media" means on the World Wide Web, through Licensee's toll-free
telephone number, catalogs and direct-mail pieces and for promotional purposes
in or through any other means of communication.
1.12 "Order Revenues" means the revenues and service fees of Licensee and
its subsidiaries derived from all sales of goods and services under the Licensed
Intellectual Property, including sales from ftd.com's Web site and its toll free
telephone number that are identified by or branded with the Licensed
Intellectual Property. Order Revenues do not include any applicable discounts
or returns.
1.13 "Person" means any natural person, legal entity or other organized
group of persons or entities. (All pronouns whether personal or impersonal,
which refer to Person include natural persons and other Persons.)
1.14 "Post-Acquisition Period" means the nine-month period following the
date of the acquisition of a business that (a) is acquired by FTDI or an FTDI
Affiliate and engages in an FTDI Prohibited Business or (b) is acquired by
ftd.com or an ftd.com Affiliate and engages in an ftd.com Prohibited Business.
2. LICENSE
2.1 Except as otherwise provided in this Agreement, Licensor hereby grants
to Licensee, during the Term (as defined in Section 3.1) of this Agreement and
subject to the terms and conditions contained herein, a non-exclusive,
nontransferable, irrevocable worldwide license to use the Licensed Intellectual
Property in conjunction with Licensee's marketing or sale of products and
services in the floral and specialty gift business on its Internet Site and
through its toll-free telephone number, within the Media solely for direct sales
to consumers. Nothing in this Agreement grants Licensee ownership or other
rights in or to the Licensed Intellectual Property, except in accordance with
and to the extent of this license, and Licensee shall not sublicense the
Licensed Intellectual Property to any third party or Person without the prior
written consent of Licensor, which shall not be unreasonably withheld. Except as
provided herein, this Section 2.1 shall not be construed to prohibit the use of
any Licensed Intellectual Property by Licensor, its divisions, business units,
affiliates and subsidiaries except with respect to direct sales to consumers.
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2.2 Licensor shall have the right to demand the withdrawal of any Content
that includes images of products that compete with the specified Licensor's
products or services, from Licensee's Internet Site and from any of Licensee's
advertising or other materials that in Licensor's reasonable opinion conflicts
with, interferes with or is detrimental to Licensor's reputation or business as
currently conducted or that will subject Licensor to unfavorable regulatory
action or liability for any reason, violate any law or infringe the rights of
any Person; provided, however, Licensor must give Licensee prior written notice
of its intentions to demand such withdrawal and will allow Licensee a reasonable
time to remedy the offensive situation. Upon written notice from Licensor to
withdraw any such Content, Licensee shall, in its discretion, either (a) cease
using any such Content on its Internet Site or (b) remove the Licensed
Intellectual Property from its Internet Site, in either case as soon as
commercially and technically feasible, but in any event within five business
days after Licensor's written notice. If Licensee cannot cease using such
Content or remove such Licensed Intellectual Property, as the case may be,
within five business days after the date of Licensor's written notice, Licensee
will so notify Licensor detailing why the cessation or removal cannot be
effected within five business days and stating when the cessation or removal
will be effected, subject to the terms of the preceding sentence, and, in such
event, Licensee shall cease using such Content or remove such Licensed
Intellectual Property within 20 business days after the date of such written
notice.
2.3 Licensor agrees that it will not unreasonably withhold approval of
Licensee's reasonable requests to develop and market new products that
incorporate the Licensed Intellectual Property.
3. TERM AND TERMINATION
3.1 This Agreement shall begin on the date hereof (the "Effective Date")
and shall continue for a period of ninety-nine years in full force and effect
and thereafter shall be automatically renewed for like periods of ninety-nine
years unless and until it is terminated in accordance with this Article 3 (the
"Term").
3.2 Licensor will have the right (but not the obligation) to terminate
this Agreement and the license(s) and rights granted to Licensee hereunder if:
(a) Licensee materially breaches any of its obligations arising under
Section 2.2 or Section 4.2(a).
(b) Licensee is in material breach of any of its obligations, other
than those obligations arising under Section 2.2 or Section 4.2(a), or
representations hereunder, including all obligations arising under the non-
compete provisions of Section 9, which breach is not cured within 20 days of
receipt of written notice from Licensor of such breach; provided, however, that
Licensor will not have a right to terminate this Agreement based on a breach by
Licensee of Section 8.2(iii), Section 8.2(iv) or the last sentence of Section
13.2 unless such breach arises out of the gross negligence or willful misconduct
of Licensee and the conduct constituting the breach has not ceased within such
20-day period;
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(c) Licensee is the subject of a voluntary petition in bankruptcy or
any voluntary proceeding relating to insolvency, receivership, liquidation or
composition for the benefit of creditors, if such petition or proceeding is not
dismissed within 90 days of filing, or becomes the subject of any involuntary
petition in bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation or composition for the benefit of creditors, if such
petition or proceeding is not dismissed within 90 days of filing;
(d) Licensee involuntarily dissolves or is dissolved; or
(e) Licensee is judicially adjudicated insolvent or generally is
unable to pay its debts as they mature or makes an assignment for the benefit of
its creditors.
3.3 Licensee shall have the right (but not the obligation) to terminate
this Agreement and the rights granted to Licensor hereunder if:
(a) Licensor is in material breach of any of its obligations or
representations hereunder, including all obligations arising under the non-
compete provisions of Section 9, which breach is not cured within 20 days of
receipt of written notice from Licensee of such breach;
(b) Licensor is the subject of a voluntary petition in bankruptcy or
any voluntary proceeding relating to insolvency, receivership, liquidation or
composition for the benefit of creditors, if such petition or proceeding is not
dismissed within 90 days of filing, or becomes the subject of any involuntary
petition in bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation or composition for the benefit of creditors, if such
petition or proceeding is not dismissed within 90 days of filing;
(c) Licensor involuntarily dissolves or is dissolved; or
(d) Licensor is judicially adjudicated insolvent or generally is
unable to pay its debts as they mature or makes an assignment for the benefit of
its creditors.
3.4 Licensor shall have the right (but not the obligation) to terminate
this Agreement and the rights granted to Licensee hereunder, upon 90 days
written notice to Licensee, following the acquisition of the direct or
beneficial ownership of at least 20% (the "Threshold") of the voting power
represented by the voting securities of Licensee, any successor thereto or any
Permitted Assignee (as defined in Section 13.1 of this Agreement) by any Person
or "group" within the meaning of Sections 13(d)(3) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor provision to either of the foregoing, including any group acting for
the purpose of acquiring, holding, voting or disposing of securities within the
meaning of Rule 13d-5(b)(1) under the Exchange Act or any successor provision
thereof (a "group") other than FTD Corporation ("FTDC"), Licensor or an FTDI
Affiliate. For purposes of this Agreement, (i) the term "beneficial ownership"
shall have the meaning set forth in Rule 13d-3 of the Exchange Act or any
successor provision thereof, (ii) the term "voting securities" means the Class A
Common Stock, par value $.01 per share, and Class B Common Stock, par value $.01
per share, of Licensee and any other securities issued by Licensee having the
power to vote
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generally in the election of directors of Licensee and (iii) the
term "control" means the power, whether or not exercised, to direct the
management and policies of an entity, directly or indirectly, whether through
the ownership of voting securities, by control or otherwise. For purposes of
this Section 3.4, an acquisition shall not include (A) the acquisition by a
Person of voting securities of Licensee pursuant to an involuntary disposition
by FTDC through foreclosure or similar event or (B) the acquisition by a Person
of voting securities of Licensee pursuant to a dividend intended to be on a tax-
free basis (a "Tax-Free Spin-Off") under the Internal Revenue Code of 1986, as
amended from time to time, but shall include a subsequent acquisition of voting
securities pursuant to a disposition by the Person that acquired the voting
securities in such involuntary disposition or such Tax-Free Spin-Off. In the
event any Person acquires beneficial ownership of voting power in excess of the
Threshold as a result of a transaction described in the immediately preceding
sentence, the Threshold with respect to such Person shall be adjusted to an
amount equal to the percentage of beneficial ownership held by such Person
immediately following such transaction.
3.5 In relation to trademarks comprising the Licensed Intellectual
Property, in the event Licensee abandons its license to use any or all of the
Licensed Intellectual Property (each, an "Abandoned Mark"), Licensor shall have
the right (but not the obligation) to terminate this Agreement, or any portion
of this Agreement that applies to the Abandoned Mark, and the rights granted
hereunder to Licensee in connection with and solely to the extent related to the
license of such Abandoned Mark upon 90 days written notice to Licensee and any
license in the Abandoned Mark shall revert to Licensor.
3.6 A party may exercise its right to terminate pursuant to this Article 3
by sending appropriate written notice in accordance with Section 13.5 to the
other party. No exercise by a party of its rights under this Article 3 will
limit its remedies by reason of the other party's default, the party's rights to
exercise any other rights under this Article 3, or any of that party's other
rights.
4. INTELLECTUAL PROPERTY
4.1 The parties acknowledge that the Licensed Intellectual Property is
owned or controlled by Licensor and that all use by Licensee of the Licensed
Intellectual Property will inure to Licensor's benefit and that Licensee shall
not at any time acquire any rights in the Licensed Intellectual Property other
than such rights as are granted hereunder. Nothing contained herein shall
constitute an assignment of the Licensed Intellectual Property or grant to
Licensee any right, title or interest therein, except as specifically set forth
herein. In relation to trademarks comprising the Licensed Intellectual Property,
Licensee shall maintain Licensor's quality standards as notified by Licensor
from time to time in writing with respect to its use of the Licensed
Intellectual Property, and otherwise use the Licensed Intellectual Property
subject to any reasonable restrictions or requirements disclosed to Licensee in
writing.
4.2 (a) Licensee recognizes the validity of the Licensed Intellectual
Property and any registrations therefor, and acknowledges Licensor as the owner
of all rights, title and interest in and to the Licensed Intellectual Property
listed on Exhibit A and any registrations therefor other than such rights as are
granted hereunder. Licensee will not contest, nor assist any other party in
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contesting, Licensor's ownership of the Licensed Intellectual Property or any
registrations of Licensor for such Licensed Intellectual Property, and will not
contest the validity thereof. Except for the Licensed Intellectual Property,
Licensee agrees not to use at any time any other trademarks, names, designs,
trade dress or other intellectual property confusingly similar to the Licensed
Intellectual Property. These obligations shall survive the expiration or
earlier termination of this Agreement for any reason. Except for the Licensed
Intellectual Property, Licensee shall not file any application in any country to
register a trademark that is the same as or confusingly similar to any of the
licensed trademarks or any other trademark of Licensor that has been disclosed
to Licensee in writing. If any application for registration is filed in any
country by Licensee in contravention of this paragraph 4.2(a), Licensor shall
have the right to take appropriate action against Licensee, including seeking
injunctive relief.
(b) Licensee shall furnish Licensor in writing for review by Licensor
prior to publication proofs of all materials and products bearing any Licensed
Intellectual Property (including, without limitation, advertising and publicity
materials). Licensee will not authorize full scale production of any such
material or product until after obtaining Licensor's approval in each instance,
which approval will not be unreasonably withheld. If Licensor objects to any
portion of such materials or products, such objection will be stated and
forwarded in writing to Licensee (or by oral communication confirmed in writing
promptly thereafter) within ten (10) business days of Licensor's receipt of such
materials or products, and Licensee agrees to revise such materials or products
accordingly. If Licensor fails to respond within ten (10) business days of
receipt of such materials or products, Licensee will cease use of such materials
or products unless and until Licensor notifies Licensee that such materials or
products may be used. Any material changes in such material or product shall
also be subject to Licensor's prior approval, which approval will not be
unreasonably withheld. Approval by Licensor shall not relieve Licensee of any of
its warranties or obligations under this Agreement and all materials and
products that bear any Licensed Intellectual Property shall strictly conform
with the samples and proofs approved by Licensor. Samples, materials and
products to be approved by Licensor shall be submitted to the person designated
in writing by Licensor.
4.3 In the event that Licensee learns of any infringement, threatened
infringement or passing off of the Licensed Intellectual Property, or that any
Person claims or alleges that such Licensed Intellectual Property is liable to
cause deception or confusion to the public, then Licensee shall promptly notify
Licensor in writing of the particulars thereof. Licensor, at its option, shall
then have the sole right to determine whether or not any action shall be taken.
4.4 Upon the expiration or termination of this Agreement, Licensee shall
cease all use of the Licensed Intellectual Property, as soon as commercially and
technically practicable, and shall remove or erase the Licensed Intellectual
Property from the Internet Site, and from any advertising and promotional
materials used in connection therewith, as soon as commercially and technically
practicable, but in no event shall any such material remain on the Internet Site
more than 30 days after termination of this Agreement by Licensor or Licensee,
as the case may be, or expiration of this Agreement, as applicable, and at
Licensor's request, Licensee shall certify in writing to Licensor such removal
or erasure.
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4.5 Licensee shall cause the trademark notice "(R)" or "(TM)" and/or the
legend: "[Trademark] is a trademark of [Licensor/third party owner (as the case
may be)] and is used under license" and/or such other legend as reasonably
requested in writing by Licensor from time to time, to appear in conjunction
with promotional materials and on the Internet Site.
5. OWNERSHIP
As between Licensor and Licensee, irrespective of any termination of this
Agreement howsoever caused, Licensor is or shall be the exclusive owner of and
shall retain all right, title and interest to the Licensed Intellectual Property
set forth in Exhibit A except for such rights granted hereunder.
6. COMPENSATION
6.1 In consideration of the rights herein granted, Licensee will pay
Licensor on a quarterly basis a licensing fee equal to one percent (1%) of
Licensee's Order Revenues during the Term.
6.2 Licensee will pay Licensor for any direct third party costs incurred
by Licensor to enforce Licensee's Intellectual Property Rights for use in the
Media.
7. ACCOUNTINGS
7.1 Licensee will compute Order Revenues as of each September 30, December
31, March 31 and June 30 for the prior three (3) months. Within 90 days after
the fourth quarterly period and within 60 days after each of the first three (3)
quarterly periods concerned, Licensee will deliver to Licensor a statement
covering Order Revenues for the period due to Licensor and will pay Licensor the
licensing fee as computed in accordance with Article 6. Acceptance by Licensor
of any statement or payment shall not preclude Licensor from challenging the
accuracy thereof.
7.2 Licensee will maintain accurate books and records that report the
recognition of Order Revenues. Licensor may, at its own expenses, examine and
copy those books and records, as provided in this paragraph. Licensor may make
such an examination for a particular statement within three years after the date
when Licensee sends Licensor the statement concerned. Licensor may make such
examination only during Licensee's usual business hours, and at the place where
Licensee keeps its books and records. Licensor will be required to notify
Licensee at least ten (10) days before the date of planned examination. If an
examination has not been completed within two months from commencement, Licensee
at any time may require Licensor to terminate such examination on seven days
notice to Licensor, provided that Licensee has cooperated with Licensor in the
examination of such books and records.
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8. WARRANTIES; REPRESENTATIONS
8.1 Licensor represents and warrants that:
(i) it has full power and authority to enter into and fully perform this
Agreement;
(ii) it owns the Licensed Intellectual Property and has sufficient right
and authority to grant to Licensee all licenses and rights granted by
Licensor hereunder;
(iii) to Licensor's knowledge, the Licensed Intellectual Property and the
use thereof as permitted pursuant to this Agreement does not and will
not violate any law or infringe upon or violate any rights of any
Person;
(iv) the execution, delivery and performance by Licensor of this Agreement
will not conflict with, result in a breach or termination of, or
constitute a default under any lease, agreement, commitment or other
instrument to which Licensor is a party; and
(v) this Agreement constitutes the valid and binding obligations of
Licensor enforceable against it in accordance with its terms.
8.2 Licensee represents and warrants that:
(i) it has full power and authority to enter into and fully perform this
Agreement;
(ii) this Agreement constitutes the valid and binding obligations of
Licensee enforceable against it in accordance with its terms;
(iii) the Internet Site and any content developed or furnished by Licensee
hereunder in connection with its Internet Site and the use thereof, to
Licensee's knowledge, will not infringe upon or violate any rights of
any Person; and
(iv) Licensee will use its best efforts to ensure that its Internet Site
will be advertised, transmitted and licensed in compliance with all
applicable federal, state, local and foreign laws and in a manner that
will not reflect adversely on Licensor.
9. NON-COMPETITION OBLIGATIONS
9.1 During the FTDI Non-Compete Period, FTDI will not, and will not permit
any FTDI Affiliate to, engage in any FTDI Prohibited Business; provided,
however, in the event FTDI complies with its obligations under Section 9.4, for
a period not to exceed the Post-Acquisition Period, FTDI or an FTDI Affiliate
may engage in the acquired business related to such Post-Acquisition Period.
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9.2 During the ftd.com Non-Compete Period ftd.com shall not, and shall not
permit any ftd.com Affiliate to, engage in any ftd.com Prohibited Business;
provided, however, in the event ftd.com complies with its obligations under
Section 9.5, for a period not to exceed the Post-Acquisition Period, ftd.com or
an ftd.com Affiliate may engage in the acquired business related to such Post-
Acquisition Period.
9.3 Nothing contained herein shall be construed so as to preclude (a)
ftd.com from promoting its businesses through means other than in the Media,
including, without limitation, direct mail, online advertising and offline
advertising, or (b) FTDI from promoting its businesses in the Media or catalogs,
including, without limitation, direct mail, online advertising and offline
advertising.
9.4 First Offer/First Refusal of FTDI Prohibited Business to ftd.com.
(a) No later than the twentieth (20th) day following the acquisition
of an FTDI Prohibited Business by FTDI or an FTDI Affiliate from a third party,
FTDI and ftd.com will engage in the following procedures:
(b) FTDI will notify ftd.com in writing of its acquisition of an FTDI
Prohibited Business (an "FTDI First Offer Notice"), which notice will describe
the business in sufficient detail to permit ftd.com to make an informed decision
about whether to acquire or license that business. Upon ftd.com's written
request, FTDI will promptly provide ftd.com with such additional information as
ftd.com reasonably requests regarding the business, pursuant to the terms of an
appropriate confidentiality agreement between the parties.
(c) Within 90 days of the receipt of an FTDI First Offer Notice,
ftd.com may deliver to FTDI an offer to acquire or license the business
described in the FTDI First Offer Notice (an "ftd.com First Offer Proposal").
Such offer shall set forth all of the material terms and conditions pursuant to
which ftd.com proposes to acquire or license the business.
(d) If ftd.com does not deliver an ftd.com First Offer Proposal, then
FTDI or the FTDI Affiliate, as the case may be, prior to the conclusion of the
Post-Acquisition Period, shall cease operating or dispose of the FTDI Prohibited
Business.
(e) If ftd.com delivers an ftd.com First Offer Proposal, then, within
90 days of receipt of the ftd.com First Offer Proposal, FTDI shall notify
ftd.com of (a) its intention to accept such offer or (b) its intention to accept
a bona fide superior offer, together with a description of the material terms of
such offer, it has received from a third party to acquire or license the
business (an "FTDI Third Party Offer").
(f) Within 30 days following receipt of an FTDI Third Party Offer
(the "FTDI Matching Period"), ftd.com may notify FTDI of its offer to acquire
the business on the terms described in the FTDI Third Party Offer (a "FTDI
Matching Notice").
(g) If ftd.com delivers a FTDI Matching Notice or FTDI accepts any
other ftd.com offer to acquire or license such business, then ftd.com and FTDI
shall act in good faith to
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complete definitive documentation of the acquisition or licensing transaction
within 30 days thereafter.
(h) If ftd.com does not deliver a FTDI Matching Notice, then FTDI
may consummate the transaction described in the FTDI Third Party Offer; provided
such transaction is consummated within 60 days following the expiration of the
FTDI Matching Period.
9.5 First Offer/First Refusal of ftd.com Prohibited Business to FTDI.
(a) No later than the twentieth (20th) day following the acquisition
of an ftd.com Prohibited Business by ftd.com or any ftd.com Affiliate from a
third party, FTDI and ftd.com will engage in the following procedures:
(b) ftd.com will notify FTDI in writing of its acquisition of an
ftd.com Prohibited Business (an "ftd.com First Offer Notice"), which notice
shall describe the business in sufficient detail to permit FTDI to make an
informed decision about whether to acquire or license that business. Upon FTDI's
written request, ftd.com will promptly provide FTDI with such additional
information as FTDI reasonably requests regarding the business, pursuant to the
terms of an appropriate confidentiality agreement between the parties.
(c) Within 90 days of the ftd.com First Offer Notice, FTDI may
deliver to ftd.com an offer to acquire or license the business described in the
ftd.com First Offer Notice (an "FTDI First Offer Proposal"). Such offer shall
set forth all of the material terms and conditions pursuant to which FTDI
proposes to acquire or license the business.
(d) If FTDI does not deliver an FTDI First Offer Proposal, then
ftd.com or the ftd.com Affiliate, as the case may be, prior to the conclusion of
the Post-Acquisition Period, shall cease operating or dispose of the ftd.com
Prohibited Business.
(e) If FTDI delivers an FTDI First Offer Proposal, then, within 90
days of the FTDI First Offer Proposal, ftd.com shall notify FTDI of (a) its
intention to accept such offer or (b) its intention to accept a bona fide
superior offer, together with a description of the material terms of such offer,
it has received from a third party to acquire or license the business (an
"ftd.com Third Party Offer").
(f) Within 30 days following an ftd.com Third Party Offer (the
"ftd.com Matching Period"), FTDI may notify ftd.com of its offer to acquire the
business on the terms described in the ftd.com Third Party Offer (a "ftd.com
Matching Notice").
(g) If FTDI delivers a ftd.com Matching Notice or FTDI accepts any
other ftd.com offer to acquire or license such business, then FTDI and ftd.com
shall complete definitive documentation of the acquisition or licensing
transaction within 30 days thereafter.
(h) If FTDI does not deliver a ftd.com Matching Notice, then ftd.com
may consummate the transaction described in the ftd.com Third Party Offer;
provided such transaction is consummated within 60 days following the expiration
of the ftd.com Matching Period.
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9.6 FTDI and ftd.com agree not to disclose to any third party other than
its legal counsel and financial advisers any information delivered pursuant to
this Section 9, including, without limitation, the terms of any notice delivered
hereunder, without the prior written consent of the other party.
10. MUTUAL SUPPORT AGREEMENT
The license granted by Licensor to Licensee under this Agreement is subject
to the terms and restrictions imposed by the Mutual Support Agreement, dated as
of December 19, 1994, between Licensor and FTD Association, an Ohio nonprofit
corporation, as supplemented, to the same extent those terms and restrictions
remain in full force and effect.
11. DISPUTE RESOLUTION
11.1 In the event that any party to this Agreement has any claim, right or
cause of action against any other party to this Agreement, which the parties
shall be unable to settle by agreement between themselves, such claim, right or
cause of action, to the extent that the relief sought by such party is for
monetary damages or awards, shall be determined by arbitration in accordance
with the provisions of this Section 11.
11.2 The party or parties requesting arbitration shall serve upon the
other or others a demand therefor, in writing, specifying the matter to be
submitted to arbitration, and nominating a competent disinterested person to act
as an arbitrator. Within 30 days after receipt of such written demand and
nomination, the other party or parties shall, in writing, nominate a competent
disinterested person, and the two (2) arbitrators so designated shall, within 15
days thereafter, select a third arbitrator. The three (3) arbitrators shall give
immediate written notice of such selection to the parties and shall fix in said
notice a time and place of the meeting of the arbitrators which shall be as soon
as conveniently possible (but in no event later than 30 days after the
appointment of the third arbitrator), at which time and place the parties to the
controversy shall appear and be heard with respect to the right, claim or cause
of action.
11.3 In case the notified party or parties shall fail to make a selection
upon notice within the time period specified, the party asserting such claim
shall appoint an arbitrator on behalf of the notified party. In the event that
the first two (2) arbitrators selected shall fail to agree upon a third
arbitrator within 15 days after their selection, then such arbitrator may, upon
application made by either of the parties to the controversy, be appointed by
any judge of any United States court of record having jurisdiction in the State
of Illinois.
11.4 Each party shall present such testimony, examinations and
investigations in accordance with such procedures and regulations as may be
determined by the arbitrators and shall also recommend to the arbitrators a
monetary award to be adopted by the arbitrators as the complete disposition of
such claim, right or cause of action. After hearing the parties in regard to the
matter in dispute, the arbitrators shall adopt as their determination with
respect to such claim, right or cause of action, within 45 days of the
completion of the examination, by majority decision signed in writing (together
with a brief written statement of the reasons for adopting such recommendation),
one of the recommendations submitted by the parties to the dispute and
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shall grant no other relief or remedy. The decision of said arbitrators, absent
fraud, duress or manifest error, shall be final and binding upon the parties to
such controversy and may be enforced in any court of competent jurisdiction.
11.5 The expense and cost of such arbitration shall be borne by the party
or parties whose recommendation was not adopted by the arbitrators. Each party
shall pay the fees and expenses of its own counsel.
11.6 Notwithstanding any other provisions of this Section 11, in the event
that a party against whom any claim, right or cause of action is asserted
commences, or has commenced against it, bankruptcy, insolvency or similar
proceedings, the party or parties asserting such claim, right or cause of action
shall have no obligations under this Section 11 and may assert such claim, right
or cause of action in the manner and forum it deems appropriate, subject to
applicable laws. No determination or decision by the arbitrators pursuant to
this Section 11 shall limit or restrict the ability of any party hereto to
obtain or seek in any appropriate forum, any relief or remedy that is not a
monetary award or money damages.
12. INDEMNIFICATION
12.1 Licensee agrees to indemnify and hold harmless Licensor from any and
all third party allegations and claims directly or indirectly caused by
Licensee's use of the Licensed Intellectual Property outside of the Media or
otherwise in violation of this Agreement.
12.2 Licensor agrees to indemnify and hold harmless Licensee from any and
all third party allegations and claims directly or indirectly arising out of any
claim that Licensee's use of any of the Licensed Intellectual Property approved
in accordance with the provisions of this Agreement violates or infringes the
rights of any third party or violates or infringes any right granted by Licensor
to such third party.
13. GENERAL
13.1 Neither Licensor nor Licensee may assign this Agreement, or its
respective rights and obligations hereunder, in whole or in part without the
other party's prior written consent. Any attempt to assign this Agreement
without such consent shall be void and of no effect ab initio. Notwithstanding
the immediately preceding sentence, any party may assign this Agreement or all,
but not less than all, of its rights and obligations hereunder to any entity
controlled by it or to any entity that acquires it by purchase of stock or by
merger or otherwise, or by obtaining all or substantially all of its assets (a
"Permitted Assignee"), provided that any such Permitted Assignee, or any
division thereof, thereafter succeeds to all of the rights and is subject to all
of the obligations of the assignor under this Agreement; provided, however, the
provisions of this Section 13.1 shall in no way modify the provisions of Section
3.4.
13.2 This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Illinois applicable to agreements made and to
be performed entirely within such State, without regard to the conflicts of law
principles of such State. Each party shall
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comply in all respects with all laws and regulations applicable to its
activities under this Agreement.
13.3 Notwithstanding the provisions of Section 11, each party hereto
irrevocably submits to the exclusive jurisdiction of (a) the courts of the State
of Illinois, DuPage County, or (b) the United States District Court for the
Northern District of Illinois, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby
or thereby. Each party agrees to commence any such action, suit or proceeding
either in the United States District Court for the Northern District of Illinois
or if such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the courts of the State of Illinois, DuPage County.
Each party further agrees that service of any process, summons, notice or
documents by U.S. registered mail to such party's respective address set forth
below shall be effective service of process for any action, suit or proceeding
in Illinois with respect to any matters to which it has submitted to
jurisdiction in this Section 13.3. Each party irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby and
thereby in (i) the courts of the State of Illinois, DuPage County, or (ii) the
United States District Court for the Northern District of Illinois, and hereby
and thereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
13.4 If any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to any Person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforcability
shall not affect any other provision hereof (or the remaining portion thereof)
or the application of such provision to any other Persons or circumstances.
13.5 All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or sent, postage
prepaid, by registered, certified or express mail or reputable overnight courier
service and shall be deemed given when so delivered by hand, or if mailed, three
days after mailing (one business day in the case of express mail or overnight
courier service), as follows:
(i) if to Licensee,
ftd.com inc.
3113 Woodcreek Drive
Downers Grove, IL 60515
Attention: President
Telecopy: 630/724-6019
(ii) if to Licensor,
Florists' Transworld Delivery, Inc.
3113 Woodcreek Drive
Downers Grove, IL 60515
Attention: President
Telecopy: 630-719-6183
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13.6 The provisions of Sections 9, 11, 12 and 13 hereof shall survive any
termination of this Agreement.
13.7 The parties to this Agreement are independent contractors. There is
no relationship of partnership, joint venture, employment, franchise or agency
between the parties. No party shall have the power to bind the other or incur
obligations on the other's behalf without the other's prior written consent.
13.8 No failure of any party to exercise or enforce any of its rights
under this Agreement shall act as a waiver of such right.
13.9 This Agreement, along with the Exhibits hereto, contains the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof and, except as otherwise provided herein, supersedes all prior
agreements and understandings relating to such subject matter. No party shall be
liable or bound to any other party in any manner by any representations,
warranties or covenants relating to such subject matter except as specifically
set forth herein.
13.10 This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each of the parties and
delivered to each of the other parties.
13.11 This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto; provided, however, that as long
as (1) FTDC beneficially owns 25% or more of the voting power represented by the
voting securities of Licensee, and no other Person directly or beneficially owns
a greater percentage of such voting power, or (2) directors, officers or
affiliates of FTDC or its subsidiaries constitute a majority of the members of
Licensee's board of directors, no amendment of this Agreement will be valid
unless it has been approved by at least a majority of the members of Licensee's
board of directors, which majority must include at least one-half of the members
of Licensee's board of directors who are "independent" directors pursuant to the
applicable rules of Nasdaq or any national stock exchange on which Licensee's
equity securities are then traded or listed.
13.12 This Agreement is for the sole benefit of the parties hereto and
nothing herein expressed or implied shall give or be construed to give to any
person, other than the parties hereto any legal or equitable rights hereunder.
13.13 The headings contained in this Agreement or in any Exhibit hereto are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All Exhibits annexed hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. Any capitalized terms used in any Exhibit but not
otherwise defined therein, shall have the meaning as defined in this Agreement.
When a reference is made in this Agreement to a Section or an Exhibit, such
reference shall be to a Section of, or an Exhibit to, this Agreement unless
otherwise indicated.
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13.14 Each of the parties acknowledges that there is no adequate remedy at
law for failure of the parties to comply with the provisions of this Agreement
and that such failure would cause immediate harm that would not be adequately
compensable in damages, and therefore agree that their agreements contained
herein may be specifically enforced without the requirement of posting a bond or
other security, in addition to all other remedies available to parties hereto
under this Agreement.
[The remainder of this page intentionally is left blank.]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.
ftd.com inc.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Florists' Transworld Delivery, Inc.
By:
------------------------------
Name:
-----------------------------
Title:
----------------------------
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Exhibit 10.4
INTERCOMPANY INDEMIFICATION AGREEMENT
This Intercompany Indemnification Agreement (this "Agreement") is being
entered into as of the __ day of June, 1999 and is entered into by and among and
Florists' Transworld Delivery, Inc., a Michigan corporation ("FTDI"), FTD
Corporation, a Delaware corporation ("FTDC") and ftd.com inc., a Delaware
corporation (the "Company").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. DEFINITIONS
1.1 "Dispute Period" means the period ending 30 days following receipt by
an Indemnifying Party of a Claim Notice (as hereinafter defined).
1.2 "Indemnified Party" means any party seeking indemnity under this
Agreement.
1.3 "Indemnifying Party" means the party from whom indemnification is
sought under this Agreement.
1.4 "Loss" means any and all actual costs or expenses (including, without
limitation, counsel's fees billed at standard hourly rates and expenses as and
when incurred, in connection with any action, claim or proceeding relating
thereto), judgments, amounts paid in settlement, fines, penalties, assessments
and taxes. Notwithstanding the foregoing, Loss shall be reduced to reflect any
insurance proceeds actually recovered by the Indemnified Party relating to such
claim, provided that this reduction will not be applied if to do so would excuse
any insurer from any obligation to cover any loss. If the Indemnified Party
receives insurance proceeds after it receives indemnity hereunder, then the
Indemnified Party, within 10 days of receipt of such proceeds, will pay to the
Indemnifying Party the amount by which the Indemnifying Party's payment would
have been reduced if the insurance proceeds had been received before the
indemnity payments.
1.5 "Person" means any natural person, legal entity or other organized
group of persons or entities.
1.6 "Subsidiary" with respect to any Person means any corporation,
partnership or other entity for which more than 50% of the voting securities are
directly or indirectly owned by such Person, except that the Company and its
Subsidiaries shall not be deemed to be Subsidiaries of FTDC or FTDI, as the case
may be.
1.7 "Third Party Claim" means all claims, suits, actions, proceedings,
judgments, deficiencies, damages, settlements, liabilities, and legal and other
expenses as and when incurred asserted by a Person other than the Company, FTDC
or FTDI or any of their respective affiliates in respect of which an Indemnified
Party might seek indemnity.
<PAGE>
2. INDEMNIFICATION
2.1 Indemnification by the Company, FTDC and FTDI.
(a) The Company agrees to indemnify and hold FTDC and FTDI and their
respective officers, directors, employees, subsidiaries, affiliates and agents
harmless against and in respect of any and all Losses and Third Party Claims
arising out of or based upon (i) the negligence or willful misconduct of the
Company or any of its Subsidiaries, (ii) any breach by the Company of any
agreement between the parties hereto that is described in or filed as an exhibit
to the Company's Registration Statement on Form S-1 (No. 333-78857) as the same
may be amended (the "Form S-1"), (iii) all liabilities of the parties and their
respective Subsidiaries (whenever arising, whether prior to, at or following the
Effective Date, as hereinafter defined) arising out of or in connection with or
otherwise relating to the management or conduct before or after the Effective
Date of the business of the Company after May 19, 1999 and (iv) the failure by
the Company or any of its Subsidiaries to pay, perform or otherwise promptly
discharge any of its or its Subsidiaries' liabilities (whenever arising whether
prior to, at or following the Effective Date).
(b) FTDC agrees to indemnify and hold the Company and each of its
officers, directors, employees, subsidiaries, affiliates and agents harmless
against and in respect of any and all Losses and Third Party Claims arising out
of or based upon (A) the negligence or willful misconduct of FTDC or any of its
Subsidiaries (other than the Company), (B) any breach by FTDC of any agreement
between the parties hereto that is described in or filed as an exhibit to the
Form S-1, (C) all liabilities of the parties and their respective Subsidiaries
(whenever arising, whether prior to, at or following the Effective Date) arising
out of or in connection with or otherwise relating to the management or conduct
before or after the Effective Date of the business of FTDC, other than the
business of the Company after May 19, 1999 and (D) the failure by FTDC or any of
its Subsidiaries (other than the Company) to pay, perform or otherwise promptly
discharge any of its or its Subsidiaries' (other than the Company) liabilities
(whenever arising whether prior to, at or following the Effective Date).
(c) FTDI agrees to indemnify and hold the Company and each of its
officers, directors, employees, subsidiaries, affiliates and agents harmless
against and in respect of any and all Losses and Third Party Claims arising out
of or based upon (A) the negligence or willful misconduct of FTDI or any of its
Subsidiaries (other than the Company), (B) any breach by FTDI of any agreement
between the parties hereto that is described in or filed as an exhibit to the
Form S-1, (C) all liabilities of the parties and their respective Subsidiaries
(whenever arising, whether prior to, at or following the Effective Date) arising
out of or in connection with or otherwise relating to the management or conduct
before or after the Effective Date of the business of FTDI, other than the
business of the Company after May 19, 1999 and (D) the failure by FTDI or any of
its Subsidiaries (other than the Company) to pay, perform or otherwise promptly
discharge any of its or its Subsidiaries' (other than the Company) liabilities
(whenever arising whether prior to, at or following the Effective Date).
(d) FTDC agrees to indemnify and hold FTDI and the Company and each of
their respective officers, directors, employees, subsidiaries, affiliates and
agents harmless against and in respect of any and all Losses incurred by any of
them by reason of, or arising out of (i) any liability for income and franchise
taxes arising out of the inclusion of FTDI, the Company
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and any of their respective Subsidiaries in any consolidated federal income tax
return, or any consolidated, combined or unitary state or local tax return, of
FTDC, except for any such liability as is directly attributable to the
operations of FTDI, the Company and any of their respective Subsidiaries, as the
case may be, and (ii) any liability or obligations of any entity, whether or not
incorporated, which is or was part of a controlled group or under common control
with FTDI or the Company or otherwise treated as a "single employer" with FTDI
or the Company within the meaning of Section 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended (the "Code") or under Section 4001 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (other
than FTDI, the Company or any of their respective Subsidiaries), with respect to
any "employee benefit plan" (as defined in Section 3(3) of ERISA) established,
maintained, sponsored or contributed to by such entity, including, but not
limited to (A) liabilities for complete and partial withdrawals under any
"multiemployer plan" (as defined in Section 3(37) of ERISA) pursuant to Section
4203 or 4205 of ERISA, respectively, (B) liabilities to the Pension Benefit
Guaranty corporation (including without limitation, liabilities for premiums and
terminations), (C) liabilities under Section 4980B of the code or Part 6 of
Subtitle B of Title I of ERISA, and (D) liabilities arising under Section 412 of
the Code or Section 302(a)(2) of ERISA.
(e) FTDI agrees to indemnify and hold the Company and its officers,
directors, employees, subsidiaries, affiliates and agents harmless against and
in respect of any and all Losses incurred by any of them by reason of, or
arising out of (a) any liability for income and franchise taxes arising out of
the inclusion of the Company and any Subsidiaries in any consolidated federal
income tax return, or any consolidated, combined or unitary state or local tax
return, of FTDI, except for any such liability as is directly attributable to
the operations of the Company and any Subsidiaries, and (b) any liability or
obligations of any entity, whether or not incorporated, which is or was part of
a controlled group or under common control with the Company or otherwise treated
as a "single employer" with the Company within the meaning of Section 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the "Code") or
under Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (other than the Company or any Subsidiary), with respect to
any "employee benefit plan" (as defined in Section 3(3) of ERISA) established,
maintained, sponsored or contributed to by such entity, including, but not
limited to (i) liabilities for complete and partial withdrawals under any
"multiemployer plan" (as defined in Section 3(37) of ERISA) pursuant to Section
4203 or 4205 of ERISA, respectively; (ii) liabilities to the Pension Benefit
Guaranty corporation (including without limitation, liabilities for premiums and
terminations); (iii) liabilities under Section 4980B of the code or Part 6 of
Subtitle B of Title I of ERISA; and (iv) liabilities arising under Section 412
of the Code or Section 302(a)(2) of ERISA.
2.2 Limitations. Notwithstanding anything to the contrary contained in
this Agreement none of the Company, FTDC or FTDI will be entitled to
indemnification pursuant to Section 2 of this Agreement with respect to any
claim for indemnification unless, and only to the extent that, the aggregate of
all Losses to the Indemnified Party exceeds $100,000 whereupon the Indemnifying
Party will be obligated to pay in full the aggregate amount of the Losses
(including such first $100,000).
2.3 Indemnification Procedure. All claims for indemnification by an
Indemnified Party will be asserted and resolved as follows:
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(a) In the event any Third Party Claim in respect of which an
Indemnified Party might seek indemnity is asserted against or sought to be
collected from such Indemnified Party, the Indemnified Party shall deliver a
notice (a "Claim Notice") with reasonable promptness to the Indemnifying Party,
which Claim Notice shall include the amount of Loss claimed, to the extent
known. The Indemnifying Party shall notify the Indemnified Party as soon as
practicable within the Dispute Period whether the Indemnifying Party disputes
its liability to the Indemnified Party, and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim.
(b) If the Indemnifying Party notifies the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the Indemnified
Party with respect to the Third Party Claim pursuant to this Section, then the
Indemnifying Party will have the right to defend, with counsel reasonably
satisfactory to the Indemnified Party, at the sole cost and expense of the
Indemnifying Party, such Third Party Claim by all appropriate proceedings, which
proceedings must be vigorously and diligently prosecuted by the Indemnifying
Party to a final conclusion or may be settled at the discretion of the
Indemnifying Party; provided, however, that the Indemnifying Party shall not be
permitted to effect any settlement without the written consent of the
Indemnified Party unless (x) the sole relief provided in connection with such
settlement is monetary damages that are paid in full by the Indemnifying Party,
(y) such settlement involves no finding or admission of any wrongdoing,
violation or breach by any Indemnified Party of any right of any other Person or
any laws, contracts or governmental permits, and (z) such settlement has no
effect on any other claims that may be made against or liabilities of any
Indemnified Party. After giving the notice referred to in the first sentence of
this clause (b), the Indemnifying Party will have full control of such defense
and proceedings, including any compromise or settlement thereof (except as
provided in the preceding sentence); provided, however, that the Indemnified
Party may, at its sole cost and expense, at any time prior to the Indemnifying
Party's delivery of the notice referred to in the first sentence of this clause
(b), file any motion, answer or other pleadings or take any other action that
the Indemnified Party reasonably believes to be necessary or appropriate to
protect its interests; and provided further, that if requested by the
Indemnifying Party, the Indemnified Party shall, at the sole cost and expense of
the Indemnifying Party, provide reasonable cooperation to the Indemnifying Party
in contesting any Third Party Claim that the Indemnifying Party elects to
contest. The Indemnified Party may participate in, but not control, any defense
or settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this clause (b) and except as provided in the first sentence of this
clause (b) and the preceding sentence, the Indemnified Party will bear its own
costs and expenses with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the control of the defense or
settlement of a Third Party Claim at any time if it irrevocably waives its right
to indemnity with respect to such Third Party Claim.
(c) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend the
Third Party Claim pursuant to this Section or if the Indemnifying Party gives
such notice but fails to prosecute vigorously and diligently or settle the Third
Party Claim (in each case in accordance with clause (b) above), or if the
Indemnifying Party fails to give any notice whatsoever within the Dispute
Period, then the Indemnified Party will have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings will be prosecuted by the Indemnified
Party in a reasonable manner and in good faith or will be settled at the
discretion of the Indemnified Party (with the consent of the Indemnifying Party,
which
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consent will not be unreasonably withheld). Subject to the immediately
preceding sentence, the Indemnified Party will have full control of such defense
and proceedings, including any compromise or settlement thereof, provided,
however, that if requested by the Indemnified Party, the Indemnifying Party
will, at the sole cost and expense of the Indemnifying Party, provide reasonable
cooperation to the Indemnified Party and its counsel in contesting any Third
Party Claim which the Indemnified Party is contesting. The Indemnifying Party
may participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this clause (c), and the Indemnifying Party will
bear its own costs and expenses with respect to such participation.
3. TERM
The term of this Agreement shall begin on May 19, 1999 (the "Effective
Date") and shall continue for an indefinite period in full force and effect.
4. DISPUTE RESOLUTION
4.1 In the event that any party to this Agreement has any claim, right or
cause of action against any other party to this Agreement, which the parties
shall be unable to settle by agreement between themselves, such claim, right or
cause of action, to the extent that the relief sought by such party is for
monetary damages or awards, shall be determined by arbitration in accordance
with the provisions of this Section 4.
4.2 The party or parties requesting arbitration shall serve upon the other
or others a demand therefor, in writing, specifying the matter to be submitted
to arbitration, and nominating a competent disinterested person to act as an
arbitrator. Within 30 days after receipt of such written demand and nomination,
the other party or parties shall, in writing, nominate a competent disinterested
person, and the two (2) arbitrators so designated shall, within 15 days
thereafter, select a third arbitrator. The three (3) arbitrators shall give
immediate written notice of such selection to the parties and shall fix in said
notice a time and place of the meeting of the arbitrators which shall be as soon
as conveniently possible (but in no event later than 30 days after the
appointment of the third arbitrator), at which time and place the parties to the
controversy shall appear and be heard with respect to the right, claim or cause
of action.
4.3 In case the notified party or parties shall fail to make a selection
upon notice within the time period specified, the party asserting such claim
shall appoint an arbitrator on behalf of the notified party. In the event that
the first two (2) arbitrators selected shall fail to agree upon a third
arbitrator within 15 days after their selection, then such arbitrator may, upon
application made by either of the parties to the controversy, be appointed by
any judge of any United States court of record having jurisdiction in the State
of Illinois.
4.4 Each party shall present such testimony, examinations and
investigations in accordance with such procedures and regulations as may be
determined by the arbitrators and shall also recommend to the arbitrators a
monetary award to be adopted by the arbitrators as the complete disposition of
such claim, right or cause of action. After hearing the parties in regard to
the matter in dispute, the arbitrators shall adopt as their determination with
respect to such claim, right or cause of action, within 45 days of the
completion of the examination, by majority decision signed in writing (together
with a brief written statement of the reasons for adopting
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such recommendation), one of the recommendations submitted by the parties to the
dispute and shall grant no other relief or remedy. The decision of said
arbitrators, absent fraud, duress or manifest error, shall be final and binding
upon the parties to such controversy and may be enforced in any court of
competent jurisdiction.
4.5 The expense and cost of such arbitration shall be borne by the party
or parties whose recommendation was not adopted by the arbitrators. Each party
shall pay the fees and expenses of its own counsel.
4.6 Notwithstanding any other provisions of this Section 4, in the event
that a party against whom any claim, right or cause of action is asserted
commences, or has commenced against it, bankruptcy, insolvency or similar
proceedings, the party or parties asserting such claim, right or cause of action
shall have no obligations under this Section 4 and may assert such claim, right
or cause of action in the manner and forum it deems appropriate, subject to
applicable laws. No determination or decision by the arbitrators pursuant to
this Section 9 shall limit or restrict the ability of any party hereto to obtain
or seek in any appropriate forum, any relief or remedy that is not a monetary
award or money damages.
5. GENERAL
5.1 No party may assign this Agreement, or its respective rights and
obligations hereunder, in whole or in part without the other party's prior
written consent. Any attempt to assign this Agreement without such consent shall
be void and of no effect ab initio. Notwithstanding the immediately preceding
sentence, any party may assign this Agreement or all, but not less than all, of
its rights and obligations hereunder to any entity controlled by it or to any
entity that acquires it by purchase of stock or by merger or otherwise, or by
obtaining all or substantially all of its assets (a "Permitted Assignee"),
provided that any such Permitted Assignee, or any division thereof, thereafter
succeeds to all of the rights and is subject to all of the obligations of the
assignor under this Agreement.
5.2 This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Illinois applicable to agreements made and to
be performed entirely within such State, without regard to the conflicts of law
principles of such State. Each party shall comply in all respects with all laws
and regulations applicable to its activities under this Agreement.
5.3 Notwithstanding the provisions of Section 4, each party hereto
irrevocably submits to the exclusive jurisdiction of (a) the courts of the State
of Illinois, DuPage County, or (b) the United States District Court for the
Northern District of Illinois, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby
or thereby. Each party agrees to commence any such action, suit or proceeding
either in the United States District Court for the Northern District of Illinois
or if such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the courts of the State of Illinois, DuPage County.
Each party further agrees that service of any process, summons, notice or
documents by U.S. registered mail to such party's respective address set forth
below shall be effective service of process for any action, suit or proceeding
in Illinois with respect to any matters to which it has submitted to
jurisdiction in this Section 5.3. Each party irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
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arising out of this Agreement or the transactions contemplated hereby and
thereby in (i) the courts of the State of Illinois, DuPage County, or (ii) the
United States District Court for the Northern District of Illinois, and hereby
and thereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
5.4 If any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to any Person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof (or the remaining portion thereof)
or the application of such provision to any other Persons or circumstances.
5.5 All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or sent, postage
prepaid, by registered, certified or express mail or reputable overnight courier
service and shall be deemed given when so delivered by hand, or if mailed, three
days after mailing (one business day in the case of express mail or overnight
courier service), as follows:
(1) if to the Company,
ftd.com inc.
3113 Woodcreek Drive
Downers Grove, IL 60515
Attention: President
(2) if to FTDI,
Florists' Transworld Delivery, Inc.
3113 Woodcreek Drive
Downers Grove, IL 60515
Attention: President
(3) if to FTDC,
FTD Corporation
3113 Woodcreek Drive
Downers Grove, IL 60515
Attention: President
5.6 The provisions of Sections 4 and 5 shall survive any termination of
this Agreement.
5.7 The parties to this Agreement are independent contractors. There is no
relationship of partnership, joint venture, employment, franchise or agency
among the parties. No party shall have the power to bind any other or incur
obligations on any other's behalf without the other's prior written consent.
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5.8 No failure of any party to exercise or enforce any of its rights under
this Agreement shall act as a waiver of such right.
5.9 This Agreement, along with the Exhibits hereto, contains the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter. No party shall be liable or bound to any other party in any
manner by any representations, warranties or covenants relating to such subject
matter except as specifically set forth herein.
5.10 This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each of the parties and
delivered to each of the other parties.
5.11 This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto; provided, however, that as long
as (1) FTDC beneficially owns 25% or more of the voting power represented by the
voting securities of the Company, and no other Person directly or beneficially
owns a greater percentage of such voting power, or (2) directors, officers or
affiliates of FTDC or its subsidiaries constitute a majority of the members of
the Company's board of directors, no amendment of this Agreement will be valid
unless it has been approved by at least a majority of the members of the
Company's board of directors, which majority must include at least one-half of
the members of the Company's board of directors who are "independent" directors
pursuant to the applicable rules of Nasdaq or any national stock exchange on
which the Company's equity securities are then traded or listed.
5.12 This Agreement is for the sole benefit of the parties hereto and
nothing herein expressed or implied shall give or be construed to give to any
person, other than the parties hereto any legal or equitable rights hereunder.
5.13 The headings contained in this Agreement or in any Exhibit hereto are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All Exhibits annexed hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. Any capitalized terms used in any Exhibit but not
otherwise defined therein, shall have the meaning as defined in this Agreement.
When a reference is made in this Agreement to a Section or an Exhibit, such
reference shall be to a Section of, or an Exhibit to, this Agreement unless
otherwise indicated.
5.14 The parties hereto agree that if any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached, irreparable damage would occur, no adequate remedy at law
would exist and damages would be difficult to determine, and that the parties
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or equity.
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IN WITNESS WHEREOF, the parties have signed or caused this Agreement
to be signed and delivered as of the date first written above.
ftd.com inc.
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
Florists' Transworld Delivery, Inc.
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
FTD Corporation
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
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Exhibit 10.6
FIRST AMENDMENT TO TAX SHARING AGREEMENT
This First Amendment (the "Amendment") is being entered into as of the ____
day of June, 1999 and is entered into by and among FTD Corporation, a Delaware
corporation ("Parent"), Florists' Transworld Delivery, Inc., a Michigan
corporation ("Subsidiary No. 1"), and ftd.com inc., a Delaware corporation
("Subsidiary No. 2").
RECITALS
1. Parent and Subsidiary No. 1 are parties to a Tax Sharing Agreement,
dated as of December 19, 1994 (the "Agreement").
2. Subsidiary No. 1 has, as of the date hereof, formed Subsidiary No. 2
as a wholly owned subsidiary of Subsidiary No. 1, and pursuant to a Formation
Agreement, dated as of the date hereof, between Subsidiary No. 1 and Subsidiary
No. 2 transferred certain of Subsidiary No. 1's assets to Subsidiary No. 2 in
exchange for an equity interest in Subsidiary No. 2.
3. The parties wish to amend the Agreement to make Subsidiary No. 2 a
member of the Group (as such term is defined in the Agreement), with the intent
that it have the same rights, privileges, obligations and responsibilities as
Subsidiary No. 1 and the other members of the Group, to the same extent as if
Subsidiary No. 2 had been named as a member of the Group therein.
THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
AGREEMENT
1. Definitions. Capitalized terms used herein but not defined herein
shall have the respective meanings set forth in the Agreement, as amended
hereby.
2. Additional Group Member. Parent hereby agrees that Subsidiary No. 2
will be entitled to exercise, jointly and severally with Subsidiary No. 1, all
of the rights and privileges Subsidiary under the Agreement, and Subsidiary No.
2 hereby acknowledges and agrees that it will be liable, jointly and severally,
for the obligations of Subsidiary under the Agreement. Subsidiary No. 2 hereby
agrees to be bound by all of the terms and conditions of the Agreement
applicable to Subsidiary thereunder.
3. Miscellaneous. Except as expressly provided in this Amendment, the
Agreement is hereby ratified and confirmed by the parties. This Amendment may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all of which counterparts together will constitute
but one and the same instrument. This Amendment will be shall be construed in
accordance with and governed by the laws of the jurisdiction set forth in
Section 10 of the Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date set forth above.
FTD Corporation
By:
------------------------------
Name:
Title:
Florists' Transworld Delivery, Inc.
By:
-------------------------------
Name:
Title:
ftd.com inc.
By:
-------------------------------
Name:
Title:
<PAGE>
Exhibit 10.7
FLORISTS ONLINE HOSTING AGREEMENT
This Florists Online Hosting Agreement (this "Agreement") is being entered
into as of the ___ day of June, 1999 and is entered into by and between
Florists' Transworld Delivery, Inc., a Michigan corporation ("FTDI"), and
ftd.com inc., a Delaware corporation ("ftd.com").
RECITALS
A. Historically, FTDI was engaged directly in, among other things, the
business of offering consumers the opportunity to place floral and
specialty gift orders directly with FTDI through its toll free
telephone number (1-800-SEND-FTD) and its Web site (www.ftd.com) (the
"Direct Access Business").
B. Historically, using its Web site, FTDI offered various online hosting
services for its Internet program, FTD Florists Online, located at
www.ftd.com.
C. Recently, FTDI formed ftd.com as a subsidiary of FTDI and, pursuant to
the Formation Agreement, dated as of May 19, 1999, between FTDI and
ftd.com (the "Formation Agreement"), transferred substantially all of
FTDI's assets, rights and interests relating to the Direct Access
Business to ftd.com, including FTDI's Web site.
D. In connection with FTDI's operation of FTD Florists Online, FTDI
desires to obtain various online hosting services ("Services") from
ftd.com, and ftd.com desires to provide such Services to FTDI.
THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
Section 1. Services.
(a) ftd.com shall provide, directly, through its subsidiaries or through a
third party vendor reasonably satisfactory to FTDI, the services described on
Exhibit A hereto, at the cost specified and on the other terms and conditions
set forth on Exhibit A.
(b) In the event that FTDI requests services that exceed the scope or
extent of the Services provided for herein, and if ftd.com agrees to provide
such services, ftd.com and FTDI will negotiate in good faith the terms and
conditions, including price, under which ftd.com will provide such Services;
provided, however, that the terms and conditions, including price, upon which
ftd.com will provide those Services to FTDI shall be no less favorable to FTDI
than the terms and conditions, including price, upon which ftd.com provides
comparable services to unaffiliated third parties.
<PAGE>
Section 2. Compensation.
FTDI will pay to ftd.com when due a fee for each of the Services equal to
the amount described in Exhibit A hereto relating to such Service, provided that
in the event FTDI terminates any Service in accordance with Section 3 hereof,
the fee for such Service shall cease to accrue on and after the effective date
of such termination. Late payments shall accrue interest at a rate equal to
ftd.com's average cost of borrowings at the end of ftd.com's most recent fiscal
quarter plus 200 basis points.
Section 3. Term.
(a) The term of this Agreement shall begin on the date hereof (the
"Effective Date") and shall continue for a period of 12 months in full force and
effect until it is terminated in accordance with this Section 3 and shall be
automatically renewed for like periods of 12 months unless notice of election
not to renew is given by either party at least 90 days prior to the commencement
of any renewal period.
(b) ftd.com shall have the right (but not the obligation) to terminate
this Agreement and the rights granted to FTDI hereunder if:
(i) FTDI is in material breach of any of its obligations hereunder,
which breach is not cured within 20 days of receipt of written notice from
ftd.com of such breach;
(ii) FTDI is the subject of a voluntary petition in bankruptcy or any
voluntary proceeding relating to insolvency, receivership, liquidation or
composition for the benefit of creditors, if such petition or proceeding is
not dismissed within 90 days of filing, or becomes the subject of any
involuntary petition in bankruptcy or any involuntary proceeding relating
to insolvency, receivership, liquidation or composition for the benefit of
creditors, if such petition or proceeding is not dismissed within 90 days
of filing;
(iii) FTDI involuntarily dissolves or is dissolved; or
(iv) FTDI is judicially adjudicated insolvent or generally is unable
to pay its debts as they mature or makes an assignment for the benefit of
its creditors.
(c) FTDI shall have the right (but not the obligation) to terminate this
Agreement and the rights granted to ftd.com hereunder if:
(i) ftd.com is in material breach of any of its obligations
hereunder, which breach is not cured within 20 days of receipt of written
notice from FTDI of such breach;
(iii) ftd.com is the subject of a voluntary petition in bankruptcy or
any voluntary proceeding relating to insolvency, receivership, liquidation
or composition for the benefit of creditors, if such petition or proceeding
is not dismissed within 90 days of filing, or becomes the subject of any
involuntary petition in bankruptcy or any involuntary proceeding relating
to insolvency, receivership, liquidation or composition
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for the benefit of creditors, if such petition or proceeding is not dismissed
within 90 days of filing;
(iii) ftd.com involuntarily dissolves or is dissolved; or
(iv) ftd.com is judicially adjudicated insolvent or generally is
unable to pay its debts as they mature or makes an assignment for the
benefit of its creditors.
(d) FTDI will have the right (but not the obligation) to terminate this
Agreement and the rights granted to ftd.com hereunder, upon 90 days written
notice to ftd.com, following the acquisition of the beneficial ownership of at
least 20% (the "Threshold") of the voting power represented by the voting
securities of ftd.com, any successor thereto or any Permitted Assignee (as
defined in Section 9(a) of this Agreement) by any person or "group" within the
meaning of Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") or any successor provision to either of
the foregoing, including any group acting for the purpose of acquiring, holding
or disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act or any successor provision thereof (a "group") other than FTD
Corporation, a Delaware corporation ("FTDC"), any affiliate of FTDC, FTDI or any
affiliate of FTDI. For purposes of this Agreement, (i) the term "beneficial
ownership" shall have the meaning set forth in Rule 13d-3 of the Exchange Act or
any successor provisions thereof, (ii) the term "voting securities" means the
Class A Common Stock, par value $.01 per share, and Class B Common Stock, par
value $.01 per share, of ftd.com and any other securities issued by ftd.com
having the power to vote generally in the election of directors of ftd.com and
(iii) the term "affiliate" means a person or entity directly or indirectly
controlled by, controlling or under common control with another person. For
purposes of this Section 3, an acquisition shall not include (A) the acquisition
by a person of voting securities of ftd.com pursuant to an involuntary
disposition by FTDI through foreclosure or similar event or (B) the acquisition
by a person of voting securities of ftd.com pursuant to a dividend intended to
be on a tax-free basis (a "Tax-Free Spin-Off") under the Internal Revenue Code
of 1986, as amended from time to time, but shall include a subsequent
acquisition of voting securities pursuant to a disposition by the person that
acquired the voting securities in such involuntary disposition or such Tax-Free
Spin-Off. In the event any person acquires beneficial ownership of voting power
in excess of the Threshold as a result of a transaction described in the
immediately preceding sentence, the Threshold with respect to such person shall
be adjusted to an amount equal to the percentage of beneficial ownership held by
such person immediately following such transaction.
(e) A party may exercise its right to terminate pursuant to this Section 3
by sending appropriate written notice to the other party. No exercise by a party
of its rights under this Section 3 will limit its remedies by reason of the
other party's default, the party's rights to exercise any other rights under
this Section 3, or any of that party's other rights.
Section 4. Records and Accounts.
ftd.com will maintain accurate books, records and accounts of all
transactions relating to the Services performed by it pursuant to this
Agreement. FTDI may, at its own expense, examine and copy those books and
records as provided in this Section 4. Such books, records and accounts will be
maintained in a manner that allows FTDI to separate these matters from those
relating to ftd.com's other operations. Such books, records and accounts will
reflect such
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information as would normally be examined by an independent accountant in
performing an audit pursuant to United States generally accepted auditing
standards for the purpose of certifying financial statements, and to permit
verification thereof by governmental agencies. FTDI may make examinations
pursuant hereto during ftd.com's usual business hours, and at the place in the
continental United States where ftd.com regularly keeps these books and records.
FTDI will be required to notify ftd.com at least two business days before the
date of planned examination. If FTDI's examination is not completed within two
months from commencement, ftd.com at any time may require FTDI to terminate such
examination on seven days' notice to FTDI, provided that ftd.com has cooperated
with FTDI in the examination of such books and records.
Section 5. No Restrictions.
Nothing in this Agreement shall limit or restrict the right of any of
FTDI's directors, officers or employees or any of ftd.com's directors, officers
or employees to engage directly or indirectly in the same or similar business
activities or lines of business as FTDI or ftd.com, respectively, or limit or
restrict the right of FTDI or ftd.com, as the case may be, to engage in any
other business or to render or obtain, as the case may be, services of any kind
to or from, as the case may be, any corporation, firm, individual, trust or
association.
Section 6. Independent Contractors.
ftd.com and FTDI are independent contractors. There is no relationship of
partnership, joint venture, employment, franchise or agency between ftd.com and
FTDI. Neither ftd.com nor FTDI shall have the power to bind the other or incur
obligations on the other's behalf without the other's prior written consent.
When ftd.com's employees act under the terms of this Agreement, they shall be
deemed at all times to be under the supervision and responsibility of ftd.com;
and no person employed by ftd.com and acting under the terms of this Agreement
shall be deemed to be acting as agent or employee of FTDI or any customer of
FTDI for any purpose whatsoever.
Section 7. Confidentiality.
ftd.com and FTDI each agree to hold in strict confidence, and to use
reasonable efforts to cause each of their employees and representatives to hold
in strict confidence, all confidential information concerning ftd.com or FTDI,
as the case may be, furnished to or obtained by the other party, in the course
of performing the obligations provided for under this Agreement except to the
extent that (a) such information has been in the public domain through no fault
of ftd.com or FTDI, as the case may be, (b) disclosure or release is compelled
by judicial or administrative process or (c) in the opinion of counsel to
ftd.com or FTDI, as the case may be, disclosure or release is necessary pursuant
to requirements of law or the requirements of any governmental entity including,
without limitation, disclosure requirements under the securities laws of the
United States or similar laws of other jurisdictions applicable to ftd.com or
FTDI, as the case may be.
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Section 8. Dispute Resolution.
(a) In the event that any party to this Agreement has any claim, right or
cause of action against any other party to this Agreement, which the parties
shall be unable to settle by agreement between themselves, such claim, right or
cause of action, to the extent that the relief sought by such party is for
monetary damages or awards, shall be determined by arbitration in accordance
with the provisions of this Section 8.
(b) The party or parties requesting arbitration shall serve upon the other
or others a demand therefor, in writing, specifying the matter to be submitted
to arbitration, and nominating a competent disinterested person to act as an
arbitrator. Within 30 days after receipt of such written demand and nomination,
the other party or parties shall, in writing, nominate a competent disinterested
person, and the two (2) arbitrators so designated shall, within 15 days
thereafter, select a third arbitrator. The three (3) arbitrators shall give
immediate written notice of such selection to the parties and shall fix in said
notice a time and place of the meeting of the arbitrators which shall be as soon
as conveniently possible (but in no event later than 30 days after the
appointment of the third arbitrator), at which time and place the parties to the
controversy shall appear and be heard with respect to the right, claim or cause
of action.
(c) In case the notified party or parties shall fail to make a selection
upon notice within the time period specified, the party asserting such claim
shall appoint an arbitrator on behalf of the notified party. In the event that
the first two (2) arbitrators selected shall fail to agree upon a third
arbitrator within 15 days after their selection, then such arbitrator may, upon
application made by either of the parties to the controversy, be appointed by
any judge of any United States court of record having jurisdiction in the State
of Illinois.
(d) Each party shall present such testimony, examinations and
investigations in accordance with such procedures and regulations as may be
determined by the arbitrators and shall also recommend to the arbitrators a
monetary award to be adopted by the arbitrators as the complete disposition of
such claim, right or cause of action. After hearing the parties in regard to
the matter in dispute, the arbitrators shall adopt as their determination with
respect to such claim, right or cause of action, within 45 days of the
completion of the examination, by majority decision signed in writing (together
with a brief written statement of the reasons for adopting such recommendation),
one of the recommendations submitted by the parties to the dispute and shall
grant no other relief or remedy. The decision of said arbitrators, absent
fraud, duress or manifest error, shall be final and binding upon the parties to
such controversy and may be enforced in any court of competent jurisdiction.
(e) The expense and cost of such arbitration shall be borne by the party or
parties whose recommendation was not adopted by the arbitrators. Each party
shall pay the fees and expenses of its own counsel.
(f) Notwithstanding any other provisions of this Section 8, in the event
that a party against whom any claim, right or cause of action is asserted
commences, or has commenced against it, bankruptcy, insolvency or similar
proceedings, the party or parties asserting such claim, right or cause of action
shall have no obligations under this Section 8 and may assert such
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claim, right or cause of action in the manner and forum it deems appropriate,
subject to applicable laws. No determination or decision by the arbitrators
pursuant to this Section 8 shall limit or restrict the ability of any party
hereto to obtain or seek in any appropriate forum, any relief or remedy that is
not a monetary award or money damages.
Section 9. Miscellaneous.
(a) Neither party may assign this Agreement, or their respective rights and
obligations hereunder, in whole or in part without the other party's prior
written consent. Any attempt to assign this Agreement without such consent shall
be void and of no effect ab initio. Notwithstanding the immediately preceding
sentence, either party may assign this Agreement or all, but not less than all,
of its rights and obligations hereunder to any entity controlled by it or to any
entity that acquires it by purchase of stock or by merger or otherwise, or by
obtaining all or substantially all of its assets (a "Permitted Assignee"),
provided that any such Permitted Assignee, or any division thereof, thereafter
succeeds to all of the rights and is subject to all of the obligations of the
assignor under this Agreement; provided, however, the provisions of this Section
9(a) shall in no way modify the provisions of Section 3(d).
(b) This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Illinois applicable to agreements made and to
be performed entirely within such State, without regard to the conflicts of law
principles of such State. Each party shall comply in all respects with all laws
and regulations applicable to its activities under this Agreement.
(c) Notwithstanding the provisions of Section 8, each party hereto
irrevocably submits to the exclusive jurisdiction of (a) the courts of the State
of Illinois, DuPage County, or (b) the United States District Court for the
Northern District of Illinois, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby
or thereby. Each of FTDI and ftd.com agrees to commence any such action, suit or
proceeding either in the United States District Court for the Northern District
of Illinois or if such suit, action or other proceeding may not be brought in
such court for jurisdictional reasons, in the courts of the State of Illinois,
DuPage County. Each of FTDI and ftd.com further agrees that service of any
process, summons, notice or documents by U.S. registered mail to such party's
respective address set forth below shall be effective service of process for any
action, suit or proceeding in Illinois with respect to any matters to which it
has submitted to jurisdiction in this Section 9(c). Each of FTDI and ftd.com
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby and thereby in (i) the courts of the State of Illinois,
DuPage County, or (ii) the United States District Court for the Northern
District of Illinois, and hereby and thereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
(d) If any provision of this Agreement (or any portion thereof) or the
application of any such provision (or any portion thereof) to any person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof (or the remaining portion thereof)
or the application of such provision to any other persons or circumstances.
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(e) All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered by hand or sent, postage
prepaid, by registered, certified or express mail or reputable overnight courier
service and shall be deemed given when so delivered by hand, or if mailed, three
days after mailing (one business day in the case of express mail or overnight
courier service), as follows:
(i) if to ftd.com,
ftd.com inc.
3113 Woodcreek Drive
Downers Grove, IL 60515
Attention: President
(ii) if to FTDI,
Florists' Transworld Delivery, Inc.
3113 Woodcreek Drive
Downers Grove, IL 60515
Attention: President
(f) The provisions of Sections 7, 8 and 9 hereof shall survive any
termination of this Agreement.
(g) No failure of either party to exercise or enforce any of its rights
under this Agreement shall act as a waiver of such right.
(h) This Agreement, along with the Exhibits hereto, contains the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. Neither party shall be liable or bound to any
other party in any manner by any representations, warranties or covenants
relating to such subject matter except as specifically set forth herein.
(i) This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more such counterparts have been signed by each of the parties and
delivered to each of the other parties.
(j) This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto; provided, however, that as long
as (1) FTDC beneficially owns 25% or more of the voting power represented by the
voting securities of ftd.com, and no other Person directly or beneficially owns
a greater percentage of such voting power, or (2) directors, officers or
affiliates of FTDC or its subsidiaries constitute a majority of the members of
ftd.com's board of directors, no amendment of this Agreement will be valid
unless it has been approved by at least a majority of the members of ftd.com's
board of directors, which majority must include at least one-half of members of
ftd.com's board of directors who are "independent" directors pursuant to the
applicable rules of Nasdaq or any national stock exchange on which ftd.com's
equity securities are then traded or listed.
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<PAGE>
(k) This Agreement is for the sole benefit of the parties hereto and
nothing herein expressed or implied shall give or be construed to give to any
person, other than the parties hereto any legal or equitable rights hereunder.
(l) The headings contained in this Agreement or in any Exhibit hereto are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All Exhibits annexed hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. Any capitalized terms used in any Exhibit but not
otherwise defined therein, shall have the meaning as defined in this Agreement.
When a reference is made in this Agreement to a Section or an Exhibit, such
reference shall be to a Section of, or an Exhibit to, this Agreement unless
otherwise indicated.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
ftd.com inc.
By:
----------------------------
Name:
Title:
Florists' Transworld Delivery, Inc.
By:
----------------------------
Name:
Title:
<PAGE>
EXHIBIT A
ONLINE HOSTING SERVICES
If requested by FTDI, ftd.com will provide, by itself or through its
subsidiaries, the services described below:
(a) Scope and Description of Services. ftd.com will provide FTDI with all
online hosting services currently provided to FTDI directly by ftd.com or by
ftd.com through third party contracts, including, without limitation, the
development and maintenance for FTD florists of Commerce Web Subsites (as
defined below) within the www.ftd.com web site on the Internet based on each
member florist's completed FTD Florists Online Enrollment and Information Forms
submitted by the florist in conformance with FTDI's instructions.
Notwithstanding anything herein to the contrary, ftd.com and FTDI will mutually
agree, from time to time, with respect to the placement of the link to this
information and the manner in which this link appears on its web site. If a
consumer places an order directly on a florist's Commerce Web Subsite, ftd.com
agrees to transmit such order to FTDI's Mercury Network and FTDI will convert
that order to a Mercury message and direct the order to that florist for
fulfillment, with FTDI receiving 100% of the order's value subject to any
processing charges. For the purposes of this Agreement, the term "Commerce Web
Subsite" means a Web site through which a consumer can place an order for floral
or specialty gift products.
(b) Price. For the services described above, FTDI will pay ftd.com a
monthly fee of $50 for each florist Commerce Web Subsite hosted on ftd.com.
(c) Payment and Accounting. ftd.com will invoice FTDI within 15 days of
the end of each month for services rendered in such month. FTDI will pay such
invoice within 30 days of receipt.
A-1
<PAGE>
Exhibit 10.8
COMMISSION AGREEMENT
This Commission Agreement (this "Agreement") is being entered into as of
the ___ day of June, 1999 and is entered into by and between Florists'
Transworld Delivery, Inc., a Michigan corporation ("FTDI"), and ftd.com inc., a
Delaware corporation ("ftd.com").
RECITALS
A. Historically, FTDI was engaged directly in, among other things, the
business of offering consumers the opportunity to place FTD floral and
specialty gift orders directly with FTDI through its toll free
telephone number (1-800-SEND-FTD) and its Web site (www.ftd.com) (the
"Direct Access Business"), and used the FTD Clearinghouse to process
all floral orders and some specialty gift orders received by the
Direct Access Business;
B. Recently, FTDI formed ftd.com as a wholly owned subsidiary of FTDI
and, pursuant to the Formation Agreement, dated as of May 19, 1999,
between FTDI and ftd.com (the "Formation Agreement"), transferred
substantially all of FTDI's assets, rights and interests relating to
the Direct Access Business to ftd.com.
C. In connection with the Direct Access Business and as of the Effective
Date (as defined below), ftd.com desires to use the FTD Clearinghouse
to process floral orders and specialty gift orders (the "Services")
received by the Direct Access Business and FTDI desires to provide
such Services to ftd.com.
THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
Section 1. Clearinghouse Commission.
As consideration for ftd.com using FTDI's clearinghouse (the "FTD
Clearinghouse") to process ftd.com orders, FTDI agrees to pay ftd.com each month
a $5.00 commission fee (the "ftd.com Per Order Commission") for every order that
ftd.com clears through the FTD Clearinghouse during the applicable monthly
period; provided, that, in the event FTDI agrees to pay an unaffiliated third
party that (i) does not own a flower shop and who clears its orders through the
FTD Clearinghouse or (ii) clears in excess of 500,000 orders annually through
the FTD Clearinghouse a fee or commission with economic terms that are more
beneficial to the recipient of such fee or commission (a "More Favorable Third
Party Commission") than the economic terms of the ftd.com Per Order Commission,
FTDI agrees to adjust the economic terms of the ftd.com Per Order Commission, so
that it is no less favorable than the More Favorable Third Party Per Order
Commission. Such adjustment shall become effective as of the date such More
Favorable Third Party Commission becomes effective.
<PAGE>
Section 2. Term.
----
The term of this Agreement will begin on July 1, 1999 (the "Effective
Date") and will continue in full force and effect until June 30, 2002 and shall
be automatically renewed for like periods of three years, unless notice of
election not to renew is given by either party at least one hundred and eighty
(180) days prior to the commencement of any renewal period.
Section 3. Dispute Resolution.
------------------
(a) In the event that any party to this Agreement has any claim, right or
cause of action against any other party to this Agreement, which the parties
shall be unable to settle by agreement between themselves, such claim, right or
cause of action, to the extent that the relief sought by such party is for
monetary damages or awards, shall be determined by arbitration in accordance
with the provisions of this Section 3.
(b) The party or parties requesting arbitration shall serve upon the other
or others a demand therefor, in writing, specifying the matter to be submitted
to arbitration, and nominating a competent disinterested person to act as an
arbitrator. Within 30 days after receipt of such written demand and nomination,
the other party or parties shall, in writing, nominate a competent disinterested
person, and the two (2) arbitrators so designated shall, within 15 days
thereafter, select a third arbitrator. The three (3) arbitrators shall give
immediate written notice of such selection to the parties and shall fix in said
notice a time and place of the meeting of the arbitrators which shall be as soon
as conveniently possible (but in no event later than 30 days after the
appointment of the third arbitrator), at which time and place the parties to the
controversy shall appear and be heard with respect to the right, claim or cause
of action.
(c) In case the notified party or parties shall fail to make a selection
upon notice within the time period specified, the party asserting such claim
shall appoint an arbitrator on behalf of the notified party. In the event that
the first two (2) arbitrators selected shall fail to agree upon a third
arbitrator within 15 days after their selection, then such arbitrator may, upon
application made by either of the parties to the controversy, be appointed by
any judge of any United States court of record having jurisdiction in the State
of Illinois.
(d) Each party shall present such testimony, examinations and
investigations in accordance with such procedures and regulations as may be
determined by the arbitrators and shall also recommend to the arbitrators a
monetary award to be adopted by the arbitrators as the complete disposition of
such claim, right or cause of action. After hearing the parties in regard to the
matter in dispute, the arbitrators shall adopt as their determination with
respect to such claim, right or cause of action, within 45 days of the
completion of the examination, by majority decision signed in writing (together
with a brief written statement of the reasons for adopting such recommendation),
one of the recommendations submitted by the parties to the dispute and shall
grant no other relief or remedy. The decision of said arbitrators, absent fraud,
duress or manifest error, shall be final and binding upon the parties to such
controversy and may be enforced in any court of competent jurisdiction.
(e) The expense and cost of such arbitration shall be borne by the party
or parties whose recommendation was not adopted by the arbitrators. Each party
shall pay the fees and
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<PAGE>
expenses of its own counsel.
(f) Notwithstanding any other provisions of this Section 3, in the event
that a party against whom any claim, right or cause of action is asserted
commences, or has commenced against it, bankruptcy, insolvency or similar
proceedings, the party or parties asserting such claim, right or cause of action
shall have no obligations under this Section 3 and may assert such claim, right
or cause of action in the manner and forum it deems appropriate, subject to
applicable laws. No determination or decision by the arbitrators pursuant to
this Section 9 shall limit or restrict the ability of any party hereto to obtain
or seek in any appropriate forum, any relief or remedy that is not a monetary
award or money damages.
Section 4. Miscellaneous.
-------------
(a) Neither party may assign this Agreement, or their respective rights
and obligations hereunder, in whole or in part without the other party's prior
written consent. Any attempt to assign this Agreement without such consent shall
be void and of no effect ab initio. Notwithstanding the immediately preceding
sentence, either party may assign this Agreement or all, but not less than all,
of its rights and obligations hereunder to any entity controlled by it or to any
entity that acquires it by purchase of stock or by merger or otherwise, or by
obtaining all or substantially all of its assets (a "Permitted Assignee"),
provided that any such Permitted Assignee, or any division thereof, thereafter
succeeds to all of the rights and is subject to all of the obligations of the
assignor under this Agreement.
(b) This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Illinois applicable to agreements made and to
be performed entirely within such State, without regard to the conflicts of law
principles of such State. Each party shall comply in all respects with all laws
and regulations applicable to its activities under this Agreement.
(c) Notwithstanding the provisions of Section 3, each party hereto
irrevocably submits to the exclusive jurisdiction of (a) the courts of the State
of Illinois, DuPage County, or (b) the United States District Court for the
Northern District of Illinois, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby
or thereby. Each party agrees to commence any such action, suit or proceeding
either in the United States District Court for the Northern District of Illinois
or if such suit, action or other proceeding may not be brought in such court for
jurisdictional reasons, in the courts of the State of Illinois, DuPage County.
Each party further agrees that service of any process, summons, notice or
documents by U.S. registered mail to such party's respective address set forth
below shall be effective service of process for any action, suit or proceeding
in Illinois with respect to any maters to which it has submitted to jurisdiction
in this Section 4(c). Each party irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby and thereby in (i) the
courts of the State of Illinois, DuPage County, or (ii) the United States
District Court for the Northern District of Illinois, and hereby and thereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
(d) This Agreement may be executed in one or more counterparts, all of
which shall
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<PAGE>
be considered one and the same agreement, and shall become effective when one or
more such counterparts have been signed by each of the parties and delivered to
each of the other parties.
(e) This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto; provided, however, that as long
as (1) FTD Corporation ("FTDC") beneficially owns 25% or more of the voting
power represented by the voting securities of ftd.com, and no other Person
directly or beneficially owns a greater percentage of such voting power, or (2)
directors, officers or affiliates of FTDC or its subsidiaries constitute a
majority of the members of ftd.com's board of directors, no amendment of this
Agreement will be valid unless it has been approved by at least a majority of
the members of ftd.com's board of directors, which majority must include at
least one-half of the members of ftd.com's board of directors who are
"independent" directors pursuant to the applicable rules of Nasdaq or any other
exchange on which ftd.com's equity securities are then traded or listed.
(f) This Agreement is for the sole benefit of the parties hereto and
nothing herein expressed or implied shall give or be construed to give to any
person, other than the parties hereto any legal or equitable rights hereunder.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
ftd.com inc.
By:
--------------------------
Name:
Title:
Florists' Transworld Delivery, Inc.
By:
--------------------------
Name:
Title:
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<PAGE>
Exhibit 10.14
ftd.com inc.
1999 Equity Incentive Plan
1. Purpose. The purpose of this 1999 Equity Incentive Plan (this "Plan")
is to attract and retain directors, consultants, officers and other key
employees for (a) ftd.com inc., a Delaware corporation (the "Company"), and its
Subsidiaries, (b) Florists' Transworld Delivery, Inc., a Michigan corporation
("FTDI"), and (c) FTD Corporation, a Delaware corporation ("FTDC"), and to
provide to such persons incentives and rewards for superior performance.
2. Definitions. As used in this Plan,
"Appreciation Right" means a right granted pursuant to Section 5 of
this Plan, and shall include both Tandem Appreciation Rights and Free-Standing
Appreciation Rights.
"Base Price" means the price to be used as the basis for determining
the Spread upon the exercise of a Free-Standing Appreciation Right and a Tandem
Appreciation Right.
"Board" means the Board of Directors of the Company and, to the extent
of any delegation by the Board to a committee (or subcommittee thereof) pursuant
to Section 16 of this Plan, such committee (or subcommittee).
"Change in Control" has the meaning provided in Section 12 of this
Plan.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Common Shares" means the common stock par value $.01 per share, of
the Company or any security into which such Common Shares may be changed by
reason of any transaction or event of the type referred to in Section 11 of this
Plan.
"Company" has the meaning provided in Section 1 of this Plan.
"Covered Employee" means a Participant who is, or is determined by the
Board to be likely to become, a "covered employee" within the meaning of Section
162(m) of the Code (or any successor provision).
"Date of Grant" means the date specified by the Board on which a grant
of Option Rights, Appreciation Rights, Performance Shares or Performance Units
or a grant or sale of Restricted Shares or Deferred Shares shall become
effective (which date shall not be earlier than the date on which the Board
takes action with respect thereto).
"Deferral Period" means the period of time during which Deferred
Shares are subject to deferral limitations under Section 7 of this Plan.
<PAGE>
"Deferred Shares" means an award made pursuant to Section 7 of this
Plan of the right to receive Common Shares at the end of a specified Deferral
Period.
"Director" means a member of the Board of Directors of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, as such law, rules and regulations may
be amended from time to time.
"FTDC" has the meaning provided in Section 1 of this Plan.
"FTDI" has the meaning provided in Section 1 of this Plan.
"Free-Standing Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is not granted in tandem with an Option
Right.
"Immediate Family" has the meaning ascribed thereto in Rule 16a-1(e)
under the Exchange Act (or any successor rule to the same effect) as in effect
from time to time.
"Incentive Stock Options" means Option Rights that are intended to
qualify as "incentive stock options" under Section 422 of the Code or any
successor provision.
"Management Objectives" means the measurable performance objective or
objectives established pursuant to this Plan for Participants who have received
grants of Performance Shares or Performance Units or, when so determined by the
Board, Option Rights, Appreciation Rights, Restricted Shares and dividend
credits pursuant to this Plan. Management Objectives may be described in terms
of Company-wide or FTDI-wide objectives or objectives that are related to the
performance of the individual Participant or of the Subsidiary, division,
department, region or function within FTDI, the Company or the Subsidiary in
which the Participant is employed. The Management Objectives may be made
relative to the performance of other corporations. The Management Objectives
applicable to any award to a Covered Employee shall be based on specified levels
of or growth in one or more of the following criteria:
1. cash flow/net assets ratio;
2. debt/capital ratio;
3. return on total capital;
4. return on equity;
5. earnings per share growth;
6. revenue growth;
7. total return to stockholders; and
8. EBITDA growth.
If the Committee determines that a change in the business, operations,
corporate structure or capital structure of FTDI or the Company, or the manner
in which FTDI or the Company conducts its business, or other events or
circumstances render the Management Objectives unsuitable, the Committee may in
its discretion modify such Management Objectives or the related minimum
acceptable level of achievement, in whole or in part, as the Committee deems
appropriate and equitable, except in the case of a Covered Employee where such
action
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<PAGE>
would result in the loss of the otherwise available exemption of the award under
Section 162(m) of the Code. In such case, the Committee shall not make any
modification of the Management Objectives or minimum acceptable level of
achievement.
"Market Value per Share" means, as of any particular date, (i) the
closing sale price per Common Share as reported on the principal exchange on
which Common Shares are then trading, if any, or, if applicable, the NASDAQ
National Market or other principal automated quotation system on which Common
Shares are quoted, on the Date of Grant, or if there are no sales on such day,
on the next preceding trading day during which a sale occurred, or (ii) if
clause (i) does not apply, the fair market value of the Common Shares as
determined by the Board.
"Non-Employee Director" means a Director who is not an employee of the
Company or FTDI or any other subsidiary of FTDI.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable on exercise of an
Option Right.
"Option Right" means the right to purchase Common Shares upon exercise
of an option granted pursuant to Section 4 or Section 9 of this Plan.
"Participant" means a person who is selected by the Board to receive
benefits under this Plan and who is at the time a consultant, an officer, or
other key employee of the Company, FTDI or FTDC, or who has agreed to commence
serving in any of such capacities within 90 days of the Date of Grant, and shall
also include each Non-Employee Director who receives an award of Option Rights
or Restricted Shares.
"Performance Period" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 8 of this
Plan within which the Management Objectives relating to such Performance Share
or Performance Unit are to be achieved.
"Performance Share" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 8 of this Plan.
"Performance Unit" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 8 of this Plan.
"Plan" has the meaning provided in Section 1 of this Plan.
"Reload Option Rights" means additional Option Rights granted
automatically to an Optionee upon the exercise of Option Rights pursuant to
Section 4(g) of this Plan.
"Restricted Shares" means Common Shares granted or sold pursuant to
Section 6 or Section 9 of this Plan as to which neither the substantial risk of
forfeiture nor the prohibition on transfers referred to in such Section 6 has
expired.
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"Rule 16b-3" means Rule 16b-3 under the Exchange Act (or any successor
rule to the same effect) as in effect from time to time.
"Spread" means the excess of the Market Value per Share on the date
when an Appreciation Right is exercised, or on the date when Option Rights are
surrendered in payment of the Option Price of other Option Rights, over the
Option Price or Base Price provided for in the related Option Right or Free-
Standing Appreciation Right, respectively.
"Subsidiary" means a corporation, company or other entity (i) more
than 50 percent of whose outstanding shares or securities (representing the
right to vote for the election of directors or other managing authority) are, or
(ii) that does not have outstanding shares or securities (as may be the case in
a partnership, joint venture or unincorporated association), but more than 50
percent of whose ownership interest representing the right generally to make
decisions for such other entity is, now or hereafter, owned or controlled,
directly or indirectly, by the Company except that for purposes of determining
whether any person may be a Participant for purposes of any grant of Incentive
Stock Options, "Subsidiary" means any corporation in which at the time the
Company owns or controls, directly or indirectly, more than 50 percent of the
total combined voting power represented by all classes of stock issued by such
corporation.
"Tandem Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is granted in tandem with an Option
Right.
"Voting Power" means at any time, the total votes relating to the
then-outstanding securities entitled to vote generally in the election of
Directors.
3. Shares Available Under the Plan. (a) Subject to adjustment as provided
in Section 3(b) and Section 11 of this Plan, the number of Common Shares that
may be issued or transferred (i) upon the exercise of Option Rights or
Appreciation Rights, (ii) as Restricted Shares and released from substantial
risks of forfeiture thereof, (iii) as Deferred Shares, (iv) in payment of
Performance Shares or Performance Units that have been earned, (v) as awards to
Non-Employee Directors or (vi) in payment of dividend equivalents paid with
respect to awards made under the Plan shall not exceed in the aggregate
____________ Common Shares, plus any shares described in Section 3(b). Such
shares may be shares of original issuance or treasury shares or a combination of
the foregoing.
(b) The number of shares available in Section 3(a) above shall be
adjusted to account for shares relating to awards that expire, are forfeited or
are transferred, surrendered or relinquished upon the payment of any Option
Price by the transfer to the Company of Common Shares or upon satisfaction of
any withholding amount. Upon payment in cash of the benefit provided by any
award granted under this Plan, any shares that were covered by that award shall
again be available for issue or transfer hereunder.
(c) Notwithstanding anything in this Section 3, or elsewhere in this
Plan, to the contrary and subject to adjustment as provided in Section 11 of
this Plan, (i) the aggregate number of Common Shares actually issued or
transferred by the Company upon the exercise of Incentive Stock Options shall
not exceed ___________ Common Shares; (ii) no Participant shall be granted
Option Rights and Appreciation Rights, in the aggregate, for more than ________
Common Shares during any period of __ years; (iii) the number of shares issued
as Restricted
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Shares shall not in the aggregate exceed ____________ Common Shares; and (iv) no
Non-Employee Director shall be granted Option Rights, Appreciation Rights and
Restricted Shares, in the aggregate, for more than __________ Common Shares
during any fiscal year of the Company.
(d) Notwithstanding any other provision of this Plan to the contrary,
in no event shall any Participant in any calendar year receive an award of
Performance Shares or Performance Units having an aggregate maximum value as of
their respective Dates of Grant in excess of $_________________.
4. Option Rights. The Board may, from time to time and upon such terms
and conditions as it may determine, authorize the granting to Participants of
options to purchase Common Shares. Each such grant may utilize any or all of the
authorizations, and shall be subject to all of the requirements contained in the
following provisions:
(a) Each grant shall specify the number of Common Shares to which it
pertains subject to the limitations set forth in Section 3 of this plan.
(b) Each grant shall specify an Option Price per share, which may not
be less than the Market Value per Share on the Date of Grant.
(c) Each grant shall specify whether the Option Price shall be
payable (i) in cash or by check acceptable to the Company, (ii) by the actual or
constructive transfer to the Company of Common Shares owned by the Optionee for
at least 6 months (or other consideration authorized pursuant to Section 4(d))
having a value at the time of exercise equal to the total Option Price, or (iii)
by a combination of such methods of payment.
(d) The Board may determine, at or after the Date of Grant, that
payment of the Option Price of any Option Right (other than an Incentive Stock
Option) may also be made in whole or in part in the form of Restricted Shares or
other Common Shares that are forfeitable or subject to restrictions on transfer,
Deferred Shares, Performance Shares (based, in each case, on the Market Value
per Share on the date of exercise), other Option Rights (based on the Spread on
the date of exercise) or Performance Units. Unless otherwise determined by the
Board at or after the Date of Grant, whenever any Option Price is paid in whole
or in part by means of any of the forms of consideration specified in this
Section 4(d), the Common Shares received upon the exercise of the Option Rights
shall be subject to such risks of forfeiture or restrictions on transfer as may
correspond to any that apply to the consideration surrendered, but only to the
extent, determined with respect to the consideration surrendered, of (i) the
number of shares or Performance Shares, (ii) the Spread of any unexercisable
portion of Option Rights, or (iii) the stated value of Performance Units.
(e) Any grant may provide for deferred payment of the Option Price
from the proceeds of sale through a bank or broker on a date satisfactory to the
Company of some or all of the shares to which such exercise relates.
(f) Any grant may provide for payment of the Option Price, at the
election of the Optionee, in installments, with or without interest, upon terms
determined by the Board.
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(g) Any grant may, at or after the Date of Grant, provide for the
automatic grant of Reload Option Rights to an Optionee upon the exercise of
Option Rights (including Reload Option Rights) using Common Shares or other
consideration specified in Section 4(d). Reload Option Rights shall cover up to
the number of Common Shares, Deferred Shares, Option Rights or Performance
Shares (or the number of Common Shares having a value equal to the value of any
Performance Units) surrendered to the Company upon any such exercise in payment
of the Option Price or to meet any withholding obligations. Reload Options may
not have an Option Price that is less than the applicable Market Value per Share
at the time of exercise and shall be on such other terms as may be specified by
the Directors, which may be the same as or different from those of the original
Option Rights.
(h) Successive grants may be made to the same Participant whether or
not any Option Rights previously granted to such Participant remain unexercised.
(i) Each grant shall specify the period or periods of continuous
service by the Optionee with the Company or any Subsidiary that is necessary
before the Option Rights or installments thereof will become exercisable and may
provide for the earlier exercise of such Option Rights in the event of a Change
in Control.
(j) Any grant of Option Rights may specify Management Objectives that
must be achieved as a condition to the exercise of such rights.
(k) Option Rights granted under this Plan may be (i) options,
including, without limitation, Incentive Stock Options, that are intended to
qualify under particular provisions of the Code, (ii) options that are not
intended so to qualify, or (iii) combinations of the foregoing.
(l) The Board may, at or after the Date of Grant of any Option Rights
(other than Incentive Stock Options), provide for the payment of dividend
equivalents to the Optionee on either a current or deferred or contingent basis
or may provide that such equivalents shall be credited against the Option Price.
(m) The exercise of an Option Right shall result in the cancellation
on a share-for-share basis of any Tandem Appreciation Right authorized under
Section 5 of this Plan.
(n) No Option Right shall be exercisable more than 10 years from the
Date of Grant.
(o) Each grant of Option Rights shall be evidenced by an agreement
executed on behalf of the Company by an officer and delivered to the Optionee
and containing such terms and provisions, consistent with this Plan, as the
Board may approve.
5. Appreciation Rights. (a) The Board may authorize the granting (i) to
any Optionee, of Tandem Appreciation Rights in respect of Option Rights granted
hereunder, and (ii) to any Participant, of Free-Standing Appreciation Rights. A
Tandem Appreciation Right shall be a right of the Optionee, exercisable by
surrender of the related Option Right, to receive from the Company an amount
determined by the Board, which shall be expressed as a percentage of the Spread
(not exceeding 100 percent) at the time of exercise. Tandem Appreciation Rights
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<PAGE>
may be granted at any time prior to the exercise or termination of the related
Option Rights; provided, however, that a Tandem Appreciation Right awarded in
relation to an Incentive Stock Option must be granted concurrently with such
Incentive Stock Option. A Free-Standing Appreciation Right shall be a right of
the Participant to receive from the Company an amount determined by the Board,
which shall be expressed as a percentage of the Spread (not exceeding 100
percent) at the time of exercise.
(b) Each grant of Appreciation Rights may utilize any or all of the
authorizations, and shall be subject to all of the requirements, contained in
the following provisions:
(i) Any grant may specify that the amount payable on exercise
of an Appreciation Right may be paid by the Company in cash, in Common
Shares or in any combination thereof and may either grant to the
Participant or retain in the Board the right to elect among those
alternatives.
(ii) Any grant may specify that the amount payable on exercise
of an Appreciation Right may not exceed a maximum specified by the Board at
the Date of Grant.
(iii) Any grant may specify waiting periods before exercise and
permissible exercise dates or periods.
(iv) Any grant may specify that such Appreciation Right may be
exercised only in the event of, or earlier in the event of, a Change in
Control.
(v) Any grant may provide for the payment to the Participant of
dividend equivalents thereon in cash or Common Shares on a current,
deferred or contingent basis.
(vi) Any grant of Appreciation Rights may specify Management
Objectives that must be achieved as a condition of the exercise of such
Rights.
(vii) Each grant of Appreciation Rights shall be evidenced by an
agreement executed on behalf of the Company by an officer and delivered to
and accepted by the Participant, which agreement shall describe such
Appreciation Rights, identify the related Option Rights (if applicable),
state that such Appreciation Rights are subject to all the terms and
conditions of this Plan, and contain such other terms and provisions,
consistent with this Plan, as the Board may approve.
(c) Any grant of Tandem Appreciation Rights shall provide that such
Rights may be exercised only at a time when the related Option Right is also
exercisable and at a time when the Spread is positive, and by surrender of the
related Option Right for cancellation.
(d) Regarding Free-standing Appreciation Rights only:
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(i) Each grant shall specify in respect of each Free-standing
Appreciation Right a Base Price, which shall be equal to or greater or
less than the Market Value per Share on the Date of Grant;
(ii) Successive grants may be made to the same Participant
regardless of whether any Free-standing Appreciation Rights previously
granted to the Participant remain unexercised; and
(iii) No Free-standing Appreciation Right granted under this Plan
may be exercised more than 10 years from the Date of Grant.
6. Restricted Shares. The Board may also authorize the grant or sale of
Restricted Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale shall constitute an immediate transfer of
the ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to voting, dividend and
other ownership rights, but subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall provide that the Restricted Shares
covered by such grant or sale shall be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period of not
less than 3 years to be determined by the Board at the Date of Grant and may
provide for the earlier lapse of such substantial risk of forfeiture in the
event of a Change in Control.
(d) Each such grant or sale shall provide that during the period for
which such substantial risk of forfeiture is to continue, the transferability of
the Restricted Shares shall be prohibited or restricted in the manner and to the
extent prescribed by the Board at the Date of Grant (which restrictions may
include, without limitation, rights of repurchase or first refusal in the
Company or provisions subjecting the Restricted Shares to a continuing
substantial risk of forfeiture in the hands of any transferee).
(e) Any grant of Restricted Shares may specify Management Objectives
that, if achieved, will result in termination or early termination of the
restrictions applicable to such shares. Each grant may specify in respect of
such Management Objectives a minimum acceptable level of achievement and may set
forth a formula for determining the number of Restricted Shares on which
restrictions will terminate if performance is at or above the minimum level, but
falls short of full achievement of the specified Management Objectives.
(f) Any such grant or sale of Restricted Shares may require that any
or all dividends or other distributions paid thereon during the period of such
restrictions be automatically deferred and reinvested in additional Restricted
Shares, which may be Subject to the same restrictions as the underlying award.
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(g) Each grant or sale of Restricted Shares shall be evidenced by an
agreement executed on behalf of the Company by any officer and delivered to and
accepted by the Participant and shall contain such terms and provisions,
consistent with this Plan, as the Board may approve. Unless otherwise directed
by the Board, all certificates representing Restricted Shares shall be held in
custody by the Company until all restrictions thereon shall have lapsed,
together with a stock power or powers executed by the Participant in whose name
such certificates are registered, endorsed in blank and covering such Shares.
7. Deferred Shares. The Board may also authorize the granting or sale of
Deferred Shares to Participants. Each such grant or sale may utilize any or all
of the authorizations, and shall be subject to all of the requirements contained
in the following provisions:
(a) Each such grant or sale shall constitute the agreement by the
Company to deliver Common Shares to the Participant in the future in
consideration of the performance of services, but subject to the fulfillment of
such conditions during the Deferral Period as the Board may specify.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than the Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall be subject to a Deferral Period of
not less than 1 year, as determined by the Board at the Date of Grant, and may
provide for the earlier lapse or other modification of such Deferral Period in
the event of a Change in Control.
(d) During the Deferral Period, the Participant shall have no right
to transfer any rights under his or her award and shall have no rights of
ownership in the Deferred Shares and shall have no right to vote them, but the
Board may, at or after the Date of Grant, authorize the payment of dividend
equivalents on such Shares on either a current or deferred or contingent basis,
either in cash or in additional Common Shares.
(e) Each grant or sale of Deferred Shares shall be evidenced by an
agreement executed on behalf of the Company by any officer and delivered to and
accepted by the Participant and shall contain such terms and provisions,
consistent with this Plan, as the Board may approve.
8. Performance Shares and Performance Units. The Board may also
authorize the granting of Performance Shares and Performance Units that will
become payable to a Participant upon achievement of specified Management
Objectives. Each such grant may utilize any or all of the authorizations, and
shall be subject to all of the requirements, contained in the following
provisions:
(a) Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, which number may be subject to
adjustment to reflect changes in compensation or other factors; provided,
however, that no such adjustment shall be made in the case of a Covered Employee
where such action would result in the loss of the otherwise available exemption
of the award under Section 162(m) of the Code.
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<PAGE>
(b) The Performance Period with respect to each Performance Share or
Performance Unit shall be such period of time (not less than 3 years),
commencing with the Date of Grant as shall be determined by the Board at the
time of grant which may be subject to earlier lapse or other modification in the
event of a Change in Control as set forth in the agreement specified in Section
8(g).
(c) Any grant of Performance Shares or Performance Units shall
specify Management Objectives which, if achieved, will result in payment or
early payment of the award, and each grant may specify in respect of such
specified Management Objectives a minimum acceptable level of achievement and
shall set forth a formula for determining the number of Performance Shares or
Performance Units that will be earned if performance is at or above the minimum
level, but falls short of full achievement of the specified Management
Objectives. The grant of Performance Shares or Performance Units shall specify
that, before the Performance Shares or Performance Units shall be earned and
paid, the Board must certify that the Management Objectives have been satisfied.
(d) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that have been earned. Any grant may
specify that the amount payable with respect thereto may be paid by the Company
in cash, in Common Shares or in any combination thereof and may either grant to
the Participant or retain in the Board the right to elect among those
alternatives.
(e) Any grant of Performance Shares may specify that the amount
payable with respect thereto may not exceed a maximum specified by the Board at
the Date of Grant. Any grant of Performance Units may specify that the amount
payable or the number of Common Shares issued with respect thereto may not
exceed maximums specified by the Board at the Date of Grant.
(f) The Board may, at or after the Date of Grant of Performance
Shares, provide for the payment of dividend equivalents to the holder thereof on
either a current or deferred or contingent basis, either in cash or in
additional Common Shares.
(g) Each grant of Performance Shares or Performance Units shall be
evidenced by an agreement executed on behalf of the Company by any officer and
delivered to and accepted by the Participant, which agreement shall state that
such Performance Shares or Performance Units are subject to all the terms and
conditions of this Plan, and contain such other terms and provisions, consistent
with this Plan, as the Board may approve.
9. Awards to Non-Employee Directors. The Board may, from time to time
and upon such terms and conditions as it may determine, authorize the granting
to Non-Employee Directors of Option Rights and may also authorize the grant or
sale of Restricted Shares to Non-Employee Directors.
(a) Each grant of Option Rights awarded pursuant to this Section 9
shall be upon terms and conditions consistent with Section 4 of this Plan and
shall be evidenced by an agreement in such form as shall be approved by the
Board. Each grant shall specify an Option Price per share, which shall not be
less than the Market Value per Share on the Date of Grant. Each such Option
Right granted under the Plan shall expire not more than 10 years from the Date
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<PAGE>
of Grant and shall be subject to earlier termination as hereinafter provided.
Unless otherwise determined by the Board, such Option Rights shall be subject to
the following additional terms and conditions:
(i) Each grant shall specify the number of Common Shares to
which it pertains subject to the limitations set forth in Section 3 of this
plan.
(ii) Each such Option Right shall become exercisable to the
extent of one-______ of the number of shares covered thereby one year after
the Date of Grant and to the extent of an additional one-______ of such
shares after each of the next ___ successive years thereafter. Such Option
Rights shall become exercisable in full immediately in the event of a
Change in Control.
(iii) In the event of the termination of service on the Board by
the holder of any such Option Rights, other than by reason of disability or
death, the then outstanding Option Rights of such holder may be exercised
to the extent that they would be exercisable on the date that is six months
after the date of such termination and shall expire six months after such
termination, or on their stated expiration date, whichever occurs first.
(iv) In the event of the death or disability of the holder of
any such Option Rights, each of the then outstanding Option Rights of such
holder may be exercised at any time within one year after such death or
disability, but in no event after the expiration date of the term of such
Option Rights.
(v) If a Non-Employee Director subsequently becomes an employee
of the Company or a Subsidiary while remaining a member of the Board, any
Option Rights held under the Plan by such individual at the time of such
commencement of employment shall not be affected thereby.
(vi) Option Rights may be exercised by a Non-Employee Director
only upon payment to the Company in full of the Option Price of the Common
Shares to be delivered. Such payment shall be made in cash or in Common
Shares then owned by the optionee for at least six months, or in a
combination of cash and such Common Shares.
(b) Each grant or sale of Restricted Shares pursuant to this Section
9 shall be upon terms and conditions consistent with Section 6 of this Plan.
10. Transferability. (a) Except as otherwise determined by the Board, no
Option Right, Appreciation Right or other derivative security granted under the
Plan shall be transferable by a Participant other than by will or the laws of
descent and distribution. Except as otherwise determined by the Board, Option
Rights and Appreciation Rights shall be exercisable during the Optionee's
lifetime only by him or her or by his or her guardian or legal representative.
(b) The Board may specify at the Date of Grant that part or all of
the Common Shares that are (i) to be issued or transferred by the Company upon
the exercise of Option Rights or Appreciation Rights, upon the termination of
the Deferral Period applicable to Deferred Shares or upon payment under any
grant of Performance Shares or Performance Units or (ii) no
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<PAGE>
longer subject to the substantial risk of forfeiture and restrictions on
transfer referred to in Section 6 of this Plan, shall be subject to further
restrictions on transfer.
(c) Notwithstanding the provisions of Section 10(a), Option Rights
(other than Incentive Stock Options), Appreciation Rights, Restricted Shares,
Deferred Shares, Performance Shares and Performance Units shall be transferable
by a Participant, without payment of consideration therefor by the transferee,
to any one or more members of the Participant's Immediate Family (or to one or
more trusts established solely for the benefit of one or more members of the
Participant's Immediate Family or to one or more partnerships in which the only
partners are members of the Participant's Immediate Family); provided, however,
that (i) no such transfer shall be effective unless reasonable prior notice
thereof is delivered to the Company and such transfer is thereafter effected in
accordance with any terms and conditions that shall have been made applicable
thereto by the Company or the Board and (ii) any such transferee shall be
subject to the same terms and conditions hereunder as the Participant.
11. Adjustments. The Board may make or provide for such adjustments in
the numbers of Common Shares covered by outstanding Option Rights, Appreciation
Rights, Deferred Shares, and Performance Shares granted hereunder, in the Option
Price and Base Price provided in outstanding Appreciation Rights, and in the
kind of shares covered thereby, as the Board, in its sole discretion, exercised
in good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of Participants or Optionees that otherwise would
result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, or (b)
any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event, the Board, in its
discretion, may provide in substitution for any or all outstanding awards under
this Plan such alternative consideration as it, in good faith, may determine to
be equitable in the circumstances and may require in connection therewith the
surrender of all awards so replaced. The Board may also make or provide for such
adjustments in the numbers of shares specified in Section 3 of this Plan as the
Board in its sole discretion, exercised in good faith, may determine is
appropriate to reflect any transaction or event described in this Section 11;
provided, however, that any such adjustment to the number specified in Section
3(c)(i) shall be made only if and to the extent that such adjustment would not
cause any Option intended to qualify as an Incentive Stock Option to fail so to
qualify.
12. Change in Control. For purposes of this Plan, except as may be
otherwise prescribed by the Board in an agreement evidencing a grant or award
made under the Plan, a "Change in Control" shall mean if at any time the
following event shall have occurred: the Company is merged or consolidated or
reorganized into or with another corporation or other legal person, and as a
result of such merger, consolidation or reorganization less than a majority of
the combined voting power of the then-outstanding securities of such corporation
or person immediately after such transaction are held in the aggregate by the
holders of securities entitled to vote generally in the election of Directors
immediately prior to such transaction; provided, however, that the Board may
determine in its sole discretion that such transaction does not constitute a
"Change in Control" at any time prior to the consummation of such transaction
unless (a) holders of securities entitled to vote generally in the election of
Directors immediately prior to the consummation of such transaction receive
consideration for their securities that
12
<PAGE>
consists solely of cash in connection with such transaction; (b) after giving
effect to the consummation of such transaction, (i) Perry Acquisition Partners,
L.P. and its affiliates, (ii) Bain Capital, Inc. and its affiliates and (iii)
Fleet Private Equity Co. Inc. and its affiliates in the aggregate own less than
25% of the shares of common stock of FTD Corporation owned by such entities as
of the date hereof or, if a tax-free spin off has occurred, less than 25% of the
Common Shares that would have been received by such entities if the spin off had
occurred on the date hereof; or (c) individuals who constitute the Directors
immediately prior to the consummation of such transaction cease for any reason
to constitute at least one-third of the board of directors of the surviving or
resulting entity.
13. Fractional Shares. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Board may provide for the
elimination of fractions or for the settlement of fractions in cash.
14. Withholding Taxes. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld,
which arrangements (in the discretion of the Board) may include relinquishment
of a portion of such benefit. The Company and a Participant or such other person
may also make similar arrangements with respect to the payment of any taxes with
respect to which withholding is not required.
15. Foreign Employees. In order to facilitate the making of any grant or
combination of grants under this Plan, the Board may provide for such special
terms for awards to Participants who are foreign nationals or who are employed
by the Company or any Subsidiary outside of the United States of America as the
Board may consider necessary or appropriate to accommodate differences in local
law, tax policy or custom. Moreover, the Board may approve such supplements to
or amendments, restatements or alternative versions of this Plan as it may
consider necessary or appropriate for such purposes, without thereby affecting
the terms of this Plan as in effect for any other purpose, and the Secretary or
other appropriate officer of the Company may certify any such document as having
been approved and adopted in the same manner as this Plan. No such special
terms, supplements, amendments or restatements, however, shall include any
provisions that are inconsistent with the terms of this Plan as then in effect
unless this Plan could have been amended to eliminate such inconsistency without
further approval by the stockholders of the Company.
16. Administration of the Plan. (a) This Plan shall be administered by
the Board, which may from time to time delegate all or any part of its authority
under this Plan to a committee of the Board (or subcommittee thereof) consisting
of not less than [two] Non-Employee Directors appointed by the Board. A majority
of the committee (or subcommittee) shall constitute a quorum, and the action of
the members of the committee (or subcommittee) present at any meeting at which a
quorum is present, or acts unanimously approved in writing, shall be the acts of
the committee (or subcommittee). To the extent of any such delegation,
references in this Plan to the Board shall be deemed to be references to any
such committee or subcommittee.
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(b) The interpretation and construction by the Board of any provision
of this Plan or of any agreement, notification or document evidencing the grant
of Option Rights, Appreciation Rights, Restricted Shares, Deferred Shares,
Performance Shares or Performance Units and any determination by the Board
pursuant to any provision of this Plan or of any such agreement, notification or
document shall be final and conclusive. No member of the Board shall be liable
for any such action or determination made in good faith.
17. Amendments, Etc. (a) The Board may at any time and from time to time
amend the Plan in whole or in part; provided, however, that any amendment which
must be approved by the stockholders of the Company in order to comply with
applicable law or the rules of The Nasdaq Stock Market or, if the Common Shares
are not traded on the Nasdaq National Market, the principal national securities
exchange or automated quotation system upon which the Common Shares are traded
or quoted, shall not be effective unless and until such approval has been
obtained. Presentation of this Plan or any amendment hereof for stockholder
approval shall not be construed to limit the Company's authority to offer
similar or dissimilar benefits under other plans without stockholder approval.
(b) The Board shall not, without the further approval of the
stockholders of the Company, authorize the amendment of any outstanding Option
Right to reduce the Option Price. Furthermore, no Option Right shall be
cancelled and replaced with awards having a lower Option Price without further
approval of the stockholders of the Company. This Section 17(b) is intended to
prohibit the repricing of "underwater" Option Rights and shall not be construed
to prohibit the adjustments provided for in Section 11 of this Plan.
(c) The Board also may permit Participants to elect to defer the
issuance of Common Shares or the settlement of awards in cash under the Plan
pursuant to such rules, procedures or programs as it may establish for purposes
of this Plan. The Board also may provide that deferred issuances and settlements
include the payment or crediting of dividend equivalents or interest on the
deferral amounts.
(d) The Board may condition the grant of any award or combination of
awards authorized under this Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other compensation
otherwise payable by the Company or a Subsidiary to the Participant.
(e) In case of termination of employment by reason of death,
disability or normal or early retirement, or in the case of hardship or other
special circumstances, of a Participant who holds an Option Right or
Appreciation Right not immediately exercisable in full, or any Restricted Shares
as to which the substantial risk of forfeiture or the prohibition or restriction
on transfer has not lapsed, or any Deferred Shares as to which the Deferral
Period has not been completed, or any Performance Shares or Performance Units
which have not been fully earned, or who holds Common Shares subject to any
transfer restriction imposed pursuant to Section 10(b) of this Plan, the Board
may, in its sole discretion, accelerate the time at which such Option Right or
Appreciation Right may be exercised or the time at which such substantial risk
of forfeiture or prohibition or restriction on transfer will lapse or the time
when such Deferral Period will end or the time at which such Performance Shares
or Performance Units will be deemed to have been fully earned or the time when
such transfer restriction will terminate or may waive any other limitation or
requirement under any such award.
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(f) This Plan shall not confer upon any Participant any right with
respect to continuance of employment or other service with the Company or any
Subsidiary or FTDI or FTDC, nor shall it interfere in any way with any right the
Company or any Subsidiary or FTDI or FTDC would otherwise have to terminate such
Participant's employment or other service at any time.
(g) To the extent that any provision of this Plan would prevent any
Option Right that was intended to qualify as an Incentive Stock Option from
qualifying as such, that provision shall be null and void with respect to such
Option Right. Such provision, however, shall remain in effect for other Option
Rights and there shall be no further effect on any provision of this Plan.
18. Termination. No grant shall be made under this Plan more than 10
years after the date on which this Plan is first approved by the stockholders of
the Company, but all grants made on or prior to such date shall continue in
effect thereafter subject to the terms thereof and of this Plan.
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Exhibit 10.15
FORM OF NONQUALIFIED STOCK OPTION AGREEMENT
-------------------------------------------
This AGREEMENT (the "Agreement") is made as of ____________ (the "Date of
Grant") by and between ftd.com inc., a Delaware corporation (the "Company"), and
__________________ (the "Optionee").
1. Grant of Stock Option. Subject to and upon the terms, conditions, and
restrictions set forth in this Agreement and in the Company's 1999 Equity
Incentive Plan (the "Plan"), the Company hereby grants to the Optionee as of the
Date of Grant a stock option (the "Option") to purchase _____________ Common
Shares (the "Optioned Shares"). The Option may be exercised from time to time in
accordance with the terms of this Agreement. The price at which the Optioned
Shares may be purchased pursuant to this Option shall be _____________ per share
subject to adjustment as hereinafter provided (the "Option Price"). The Option
is intended to be a nonqualified stock option and shall not be treated as an
"incentive stock option" within the meaning of that term under Section 422 of
the Code.
2. Term of Option. The term of the Option shall commence on the Date of
Grant and, unless earlier terminated in accordance with Section 6 hereof, shall
expire ten (10) years from the Date of Grant.
3. Right to Exercise. Subject to the expiration or earlier termination of
the Option, on each anniversary of the Date of Grant the number of Optioned
Shares equal to __________ percent (___%) multiplied by the initial number of
Optioned Shares specified in this Agreement shall become exercisable on a
cumulative basis until the Option is fully exercisable. To the extent the Option
is exercisable, it may be exercised in whole or in part. In no event shall the
Optionee be entitled to acquire a fraction of one Optioned Share pursuant to
this Option. The Optionee shall be entitled to the privileges of ownership with
respect to Optioned Shares purchased and delivered to the Optionee upon the
exercise of all or part of this Option.
4. Option Nontransferable. (a) The Option granted hereby shall be neither
transferable nor assignable by the Optionee other than by will or by the laws of
descent and distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee, or in the event of his or her legal incapacity,
by his or her guardian or legal representative acting on behalf of the Optionee
in a fiduciary capacity under state law and court supervision.
(b) Notwithstanding the provisions of Section 4(a), the Option granted
hereby shall be transferable by the Optionee, without payment of consideration
therefor by the transferee, to any one or more members of the Optionee's
Immediate Family (or to one or more trusts established solely for the benefit of
one or more members of the Optionee's Immediately Family or to one or more
partnerships in which the only partners are members of the Optionee's Immediate
Family); provided, however, that (i) no such transfer shall be effective unless
reasonable prior notice thereof is delivered to the Company and such transfer is
thereafter effected in accordance with any terms and conditions that shall have
been made applicable to the Company or the Board and (ii) any such transferee
shall be subject to the same terms and conditions hereunder as the Optionee.
<PAGE>
5. Notice of Exercise; Payment. To the extent then exercisable, the Option
may be exercised by written notice to the Company stating the number of Optioned
Shares for which the Option is being exercised and the intended manner of
payment. Payment equal to the aggregate Option Price of the Optioned Shares for
which the Option is being exercised shall be tendered in full with the notice of
exercise to the Company in cash in the form of currency or check or other cash
equivalent acceptable to the Company. The Optionee may also tender the Option
Price by (a) the actual or constructive transfer to the Company of
nonforfeitable, nonrestricted Common Shares that have been owned by the Optionee
for (i) more than one year prior to the date of exercise and for more than two
years from the date on which the option was granted, if they were originally
acquired by the Optionee pursuant to the exercise of an incentive stock option,
within the meaning of Section 422 of the Code or (ii) more than six months prior
to the date of exercise, if they were originally acquired by the Optionee other
than pursuant to the exercise of an incentive stock option, or (b) by any
combination of the foregoing methods of payment, including a partial tender in
cash and a partial tender in nonforfeitable, nonrestricted Common Shares. Within
ten days thereafter, the Company shall direct the due issuance of the Optioned
Shares so purchased. Nonforfeitable, nonrestricted Common Shares that are
transferred by the Optionee in payment of all or any part of the Option Price
shall be valued on the basis of their Fair Market Value per Common Share. The
requirement of payment in cash shall be deemed satisfied if the Optionee makes
arrangements that are satisfactory to the Company with a bank or broker that is
a member of the National Association of Securities Dealers, Inc. to sell on the
exercise date a sufficient number of Optioned Shares that are being purchased
pursuant to the exercise, so that the net proceeds of the sale transaction will
at least equal the amount of the aggregate Option Price plus payment of any
applicable withholding taxes, and pursuant to which the bank or broker
undertakes to deliver to the Company the amount of the aggregate Option Price
plus payment of any applicable withholding taxes on a date satisfactory to the
Company, but not later than the date on which the sale transaction will settle
in the ordinary course of business. As a further condition precedent to the
exercise of this Option, the Optionee shall comply with all regulations and
requirements of any regulatory authority having control of, or supervision over,
the issuance of Common Shares and in connection therewith shall execute any
documents that the Board shall in its sole discretion deem necessary or
advisable. The date of the Optionee's written notice shall be the exercise date.
6. Termination of Agreement. This Agreement and the Option granted hereby
shall terminate automatically and without further notice on the earliest of the
following dates:
(a) 90 days after the Optionee's death or permanent and total
disability, if the Optionee dies or becomes permanently and totally disabled
while in the employ of the Company or during the 30-day period specified in
Section 6(c);
(b) 90 days after the Optionee's retirement under a retirement plan of
the Company or one of its Subsidiaries at or after the earliest voluntary
retirement age provided for in such retirement plan or retirement at any earlier
age with the consent of the Board;
(c) Except as provided on a case-by-case basis, 30 calendar days after
the Optionee ceases to be an employee of the Company and its Subsidiaries for
any reason other than as described in Section 6(a) or 6(b) hereof; or
(d) Ten years from the Date of Grant.
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<PAGE>
In the event that the Optionee's employment is terminated for cause, the
Agreement shall terminate at the time of such termination notwithstanding any
other provision of this Agreement. For purposes of this provision, "cause" shall
mean the Optionee shall have committed prior to termination of employment any of
the following acts:
(i) fraud, misappropriation, embezzlement, dishonesty or other
similar act of misconduct by the Optionee against the Company or any of its
subsidiaries or affiliates, the Optionee's willful misconduct with respect
to the business and affairs of the Company or any of its subsidiaries or
affiliates;
(ii) intentional wrongful damage to material assets of the
Company;
(iii) intentional wrongful disclosure of material confidential
information of the Company;
(iv) intentional wrongful engagement in any competitive activity
that would constitute a material breach of the duty of loyalty;
(v) intentional breach of any stated material policy of the
Company;
(vi) the Optionee's conviction of or plea of guilty or nolo
contendre to a felony or crime involving moral turpitude.
This Agreement shall not be exercisable for any number of Optioned Shares in
excess of the number of Optioned Shares for which this Agreement is then
exercisable, pursuant to Sections 3 and 7 hereof, on the date of termination of
employment. For the purposes of this Agreement, the continuous employment of the
Optionee with the Company shall not be deemed to have been interrupted, and the
Optionee shall not be deemed to have ceased to be an employee of the Company, by
reason of the transfer of his or her employment among the Company and its
Subsidiaries or a leave of absence of not more than _____ (__) days approved by
the Board. For the purposes of this Agreement, "permanent and total disability"
shall be defined by Section 22(e)(3) of the Code.
7. Acceleration of Option. The Option granted hereby shall become
immediately exercisable in full in the event of (a) a Change in Control, (b) the
Optionee's permanent and total disability if the Optionee becomes permanently
and totally disabled while an employee of the Company or one of its
Subsidiaries, or (c) the death of the Optionee if such death occurs while the
Optionee is employed by the Company or one of its Subsidiaries.
8. No Employment Contract. Nothing contained in this Agreement shall confer
upon the Optionee any right with respect to continuance of employment by the
Company, nor limit or affect in any manner the right of the Company to terminate
the employment or adjust the compensation of the Optionee.
9. Taxes and Withholding. To the extent that the Company shall be required
to withhold any federal, state, local or foreign taxes in connection with the
exercise of the Option, and the amounts available to the Company for such
withholding are insufficient, it shall be a condition to the exercise of the
Option that the Optionee shall pay such taxes or make provisions
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<PAGE>
that are satisfactory to the Company for the payment thereof. The Optionee may
elect to satisfy all or any part of any such withholding obligation by (a)
surrendering to the Company a portion of the Optioned Shares that are issued or
transferred to the Optionee upon the exercise of the Option, and the Optioned
Shares so surrendered by the Optionee shall be credited against any such
withholding obligation at the Fair Market Value per Common Share of such shares
on the date of such surrender or (b) utilizing the bank or broker assistance
arrangement provided in Section 5. The Company will pay any and all issue and
other taxes in the nature thereof which may be payable by the Company in respect
of any issue or delivery upon a purchase pursuant to this Option.
10. Compliance with Law. The Company shall make reasonable efforts to
comply with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, the Option shall not be
exercisable if the exercise thereof would result in a violation of any such law.
11. Adjustments. The Board may make or provide for such adjustments in
the number of Optioned Shares covered by this Option, in the Option Price
applicable to such Option, and in the kind of shares covered thereby, as the
Board, in its sole discretion, exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the Optionee's rights
that otherwise would result from (a) any stock dividend, stock split,
combination of shares, recapitalization, or other change in the capital
structure of the Company, (b) any merger, consolidation, spin-off, split-off,
spin-out, split-up, reorganization, partial or complete liquidation, or other
distribution of assets or issuance of rights or warrants to purchase securities,
or (c) any other corporate transaction or event having an effect similar to any
of the foregoing. In the event of any such transaction or event, the Board, in
its discretion, may provide in substitution for this Option such alternative
consideration as it may determine to be equitable in the circumstances and may
require in connection therewith the surrender of this Option.
12. Availability of Common Shares. The Company shall at all times until
the expiration of the Option reserve and keep available, either in its treasury
or out of its authorized but unissued Common Shares, the full number of Optioned
Shares deliverable upon the exercise of this Option.
13. Amendments. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of the Optionee under this Agreement without the Optionee's consent.
14. Severability. In the event that one or more of the provisions of this
Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
15. Relation to Plan; Interpretation. This Agreement is subject to the
terms and conditions of the Plan. In the event of any inconsistency between the
provisions of this Agreement and the Plan, the Plan shall govern. Capitalized
terms used herein without definition shall have the meanings assigned to them in
the Plan. The Board acting pursuant to the Plan, as constituted from time to
time, shall, except as expressly provided otherwise herein, have the right
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<PAGE>
to determine any questions which arise in connection with this Option or its
exercise. Any reference herein to a provision of a statute, rule or regulation
shall also include any successor provision thereto.
16. Successors and Assigns. Without limiting Section 4 hereof, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, administrators, heirs, legal representatives and assigns of the
Optionee, and the successors and assigns of the Company.
17. Governing Law. The interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
18. Notices. Any notice to the Company provided for herein shall be in
writing to the Company, marked Attention: ___________________________________,
and any notice to the Optionee shall be addressed to the Optionee at his or her
address on file with the Company. Except as otherwise provided herein, any
written notice shall be deemed to be duly given if and when delivered personally
or deposited in the United States mail, first class certified or registered
mail, postage and fees prepaid, return receipt requested, and addressed as
aforesaid. Any party may change the address to which notices are to be given
hereunder by written notice to the other party as herein specified (provided
that for this purpose any mailed notice shall be deemed given on the third
business day following deposit of the same in the United States mail).
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by its duly authorized officer and Optionee has also executed this
Agreement in duplicate, as of the day and year first above written.
ftd.com inc.
By:____________________________________
_______________________________________
Optionee
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<PAGE>
Exhibit 10.16
June 8, 1999
Mr. Brian Chapman
1323 W. Barry
Chicago, Illinois 60657
Dear Brian:
It is with great pleasure that I offer to you the position of Vice President -
Strategy & Development. In the event you accept our offer and the conditions
associated to the offer, your compensation and benefits will include:
. Your gross base salary will be $150,000 per year, paid at the bi-weekly
rate of $5,769.23.
. You will receive 3 weeks of paid vacation in 1999.
. At the discretion of the Board of Directors, you will receive options to
purchase shares of Class A common stock of ftd.com inc. in an amount equal
to 0.5% of the common stock of ftd.com inc. outstanding immediately prior
to the Company's proposed initial public offering (the "IPO"). It is
expected that those options will be granted contemporaneously with the
closing of the IPO at an exercise price equal to the IPO price. In the
event the IPO is not consummated by December 31, 1999, these stock options
would be granted on December 31, 1999 at the fair market value of the Class
A common stock as determined by the Board of Directors of the Company.
Vesting of these options would begin on your start date and would vest in
equal amounts on each of the first four anniversaries of your start date.
The other terms of these options will be governed by the Company's stock
option plan which is expected to be adopted at any upcoming board meeting.
As noted above, the option grants and terms are subject to Board approval.
Also, contingent upon your acceptance of this offer, you will be entitled
to participate in the Company's Key Management Incentive Plan ("KMIP"),
which would entitle you to a bonus of up to 50% of your base salary,
payable after the end of each fiscal year. You will also be eligible to
receive one years' severance with mitigation.
. You will be eligible to participate in a wide variety of benefits offered
to all ftd.com employees. Most benefits commence on the first day of the
month following 90 days of employment. We will reimburse you for reasonable
COBRA payments made by you from the date of the acceptance until you begin
participation in our benefit programs. On your first day, a representative
from ftd.com will assist you in filling out the necessary employment forms.
Please bring forms of identification. This offer is made contingent upon
producing these documents and executing various documents governing the
terms of your employment, severance arrangements, maintenance of the
confidentiality of certain information and related agreements.
<PAGE>
Mr. Brian Chapman
June 8, 1999
Page 2
Brian, I look forward to you joining ftd.com team and know that you will make a
valuable contribution. If you have any questions, please contact me at (630)
719-2504. Please indicate your acceptance of this offer no later than June 15,
1999.
Sincerely,
/s/Michael Soenen
Michael Soenen
President & CEO
Agreed and Accepted:
/s/ Brian Chapman
Brian Chapman
<PAGE>
EXHIBIT 23.1
The Board of Directors
ftd.com inc.:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/S/ KPMG LLP
Chicago, Illinois
June 23, 1999
