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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM 10-K
------------------------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1997
COMMISSION FILE NUMBER 33-91582
FTD CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<C> <C>
DELAWARE 13-3711271
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
3113 WOODCREEK DRIVE
DOWNERS GROVE, IL 60515-5420
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code (630) 719-7800
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON STOCK, $.01 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Because no established public trading market exists for shares of the
Registrant's voting stock, the aggregate market value of voting stock held by
non-affiliates of the Registrant cannot be determined.
As of September 25 , 1997, there were 6,035,470 shares of the Registrant's
Class A Common Stock, par value $.01 per share, and 1,566,686 shares of the
Registrant's Class B Common Stock, par value $.0005 per share outstanding.
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the Registrant's definitive information statement (to be filed
pursuant to Regulation 14(C) for the 1997 Annual Meeting of Stockholders (the
"Information Statement") are incorporated by reference in Items 10, 11, 12 and
13 of Part III hereof.
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PART I
ITEM 1. BUSINESS
OVERVIEW
FTD Corporation ("FTD Corporation" or the "Registrant") was incorporated as
a Delaware corporation on March 8, 1993. As used in this Report, the terms
"Company" or "FTD" refer to FTD Corporation and its wholly owned subsidiary,
Florists' Transworld Delivery, Inc., a Michigan corporation (the "Operating
Company"). All of the operations of FTD are conducted through the Operating
Company.
FTD is the world's largest floral services organization based on the number
of members of FTD Association (as defined below) and affiliated organizations.
FTD Association has a membership of approximately 21,000 retail florist shops
primarily in the U.S. and Canada and, through affiliated or related
organizations, approximately 32,000 additional retail florist shops in
approximately 140 other countries. Through these members FTD offers consumers
expedited delivery of high-quality FTD-branded products in the U.S. and Canada
and non-branded floral products throughout most of the world.
FTD promotes a worldwide brand based on the FTD Mercury Man logo, one of
the most recognized corporate logos in the world according to consumer
recognition studies. See "-- Marketing and Advertising." A significant portion
of FTD's revenues, operating income and competitive advantage is derived from
FTD's technology-based transaction processing businesses, which include the
Mercury Network, Clearinghouse, Advantage Software and Direct Access
(1-800-SEND-FTD). In addition to the foregoing, FTD's operations include
Marketplace and other businesses which support and enhance the retail floral
industry. See "-- Operations."
THE ACQUISITION AND RELATIONSHIP WITH FTD ASSOCIATION
The Operating Company is the successor to a non-profit cooperative
association founded by a group of retail florists in the United States in 1910.
The Operating Company was the surviving corporation after the acquisition (the
"Acquisition") on December 19, 1994 by FTD Corporation, of all of the
outstanding equity of Florists' Transworld Delivery Association, a Michigan
non-profit cooperative association (the "Old Association"), pursuant to an
Agreement and Plan of Merger, dated August 2, 1994 (the "Merger Agreement"),
among FTD Corporation, FTD Acquisition Corporation, a Delaware corporation, and
the Old Association. Upon consummation of the Acquisition, the Operating Company
became a wholly-owned subsidiary of FTD Corporation. Immediately following the
Acquisition, the Old Association was converted from a non-profit corporation to
a for-profit corporation and renamed "Florists' Transworld Delivery, Inc."
FTD Corporation, through the Operating Company, operates all of the
businesses conducted by the Old Association prior to the Acquisition except for
certain trade association activities which are being conducted by FTD
Association, an Ohio non-profit corporation organized in connection with the
Acquisition and structured as a member-owned trade association ("FTD
Association"). Neither FTD nor the Operating Company has any ownership interest
in FTD Association; however, as provided in the Merger Agreement, the Operating
Company and FTD Association have entered into the Mutual Support Agreement,
dated December 18, 1994 (the "Mutual Support Agreement"), which governs the
relationship between the Operating Company and FTD Association. Pursuant to the
Mutual Support Agreement, among other things: (i) existing and future members
have the exclusive right, subject to execution of a Trademark Membership License
Agreement with the Operating Company, to use the FTD logo and other FTD
trademarks in connection with the operation of a retail florist shop; (ii) all
members in good standing are provided access to FTD's Clearinghouse, Mercury
Network and certain other FTD services and products; (iii) the Operating
Company's prices to members for specified services will not be increased above
those charged on July 1, 1994 prior to December 19, 1997 (except for adjustments
for inflation); (iv) payments by the Operating Company equal to a percentage of
the value of every floral order cleared through FTD's Clearinghouse are made to
FTD Association; and (v) the Operating Company and FTD Association may designate
up to 20% but not fewer than two individuals to be elected to the other's board
of directors. All references herein to "members" refer to the members of FTD
Association.
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MARKETING AND ADVERTISING
FTD conducts extensive marketing and advertising programs on both a
national and local basis. FTD's national advertising (via television, radio,
magazines and Sunday newspaper supplements) generally promotes FTD florists,
FTD-branded products, 1-800-SEND-FTD and FTD Florists' Online Internet site
(www.ftd.com). FTD coordinates cooperative advertising on a local basis with
participating florists. FTD also provides FTD florists with advertising tools
such as billboard paper, slicks for print advertising and television and radio
tapes to be tagged with individual shop information. In addition, FTD provides
FTD florists with customized direct mail pieces, in-shop merchandising materials
and FTD Floral Selections, a counter display catalog featuring FTD products for
all occasions.
FTD's marketing and advertising programs are designed to: (i) increase
consumer demand for FTD-branded floral arrangements which FTD florists clear
through Clearinghouse and components of which are Marketplace's FTD-branded
hardgoods; (ii) feature the FTD Mercury Man logo; and (iii) support the FTD
retail florists generally by encouraging consumers to associate FTD professional
florists with high-quality floral goods and outstanding customer service.
OPERATIONS
For each transaction cleared by FTD, FTD's Clearinghouse operations
collects the billing information from either the Mercury Network or the florist
that fills the order locally (the "Receiving Florist") if the Mercury Network
has not been used, and allocates funds among FTD, the florist with whom a
customer places the delivery order (the "Sending Florist") and the Receiving
Florist. Generally, orders received by the Receiving Florist by 2:00 p.m. will
be delivered to the recipient in the same postal zip code on the same day.
Floral orders between FTD florists are transmitted primarily by FTD's Mercury
Network.
FTD was initially formed to encourage flowers-by-wire transactions between
member florists, but over time FTD has developed a number of additional services
and products that support and enhance the retail floral operations of FTD
professional florists. Currently, FTD's primary operations are Marketplace,
Clearinghouse, Mercury Network and Other (including Direct Access).
The following table illustrates the percentage of total revenue generated
by the Operating Company's major businesses as a percentage of total revenue for
the three fiscal years ended June 30, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUE:
Marketplace................................................. 30.6% 34.8% 37.3%
Clearinghouse............................................... 21.1 22.3 23.8
Mercury Network............................................. 23.1 20.5 18.3
Other (including Direct Access)............................. 25.2 22.4 20.6
----- ----- -----
Total Revenue............................................... 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
Marketplace. FTD's Marketplace is one of the largest wholesale suppliers of
hardgoods to retail florists in the U.S. based on total sales. Marketplace
products include both FTD-branded and non-branded holiday and everyday floral
arrangement containers and products, as well as packaging, promotional products
and a wide variety of other floral-related supplies. By capitalizing on FTD's
sourcing expertise and volume purchases, Marketplace is able to provide FTD
florists with a broad selection of products at attractive prices.
Marketplace also enters into promotional partnerships to design, promote
and sell FTD-branded products. To date, FTD has participated in partnerships
with companies such as Gerber Products Company, Mars, Inc. and Disney
Enterprises, Inc. For example, collectible containers featuring Winnie the Pooh
and his friends have been developed for friendship, new baby, Christmas,
Valentine's Day and Easter floral arrangements. M&M's have been included in the
Sweet Surprise floral arrangement since 1993. The
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Company believes that FTD's large retail network and brand recognition make it a
valuable corporate partner for such ventures.
Clearinghouse. FTD's Clearinghouse provides billing and collection services
to both the Sending Florist and the Receiving Florist in flowers-by-wire
transactions. In fiscal 1997, FTD cleared floral orders aggregating in excess of
$492 million in retail sales. Revenue from FTD's Clearinghouse is generated by
FTD retaining a percentage of the sales price of orders sent through
Clearinghouse.
FTD is a joint venture participant in Interflora, Inc., a floral services
organization with non-FTD member florists, which enables florists to transmit
and receive orders outside the Americas.
Mercury Network. FTD's Mercury Network is one of the largest proprietary
telecommunications networks in the world, based on the total number of
participating retail outlets, linking together FTD and approximately 16,400 of
the 21,000 FTD florists. FTD's on-line florists may use the Mercury Network to
transmit orders cleared through FTD or through competing clearinghouses and to
send messages. In fiscal 1997, the Mercury Network transmitted approximately
14.5 million orders among U.S. and Canadian members.
Direct Access. FTD's Direct Access business offers retail customers the
opportunity to place orders directly with FTD by dialing a toll free number
(1-800-SEND-FTD), through online services such as Compuserve or through FTD
Florists' Online Internet site (www.ftd.com). Revenue from the Direct Access
business is generated by FTD's receipt of a percentage of the sales price as the
Sending Florist and a service charge from the consumer.
OTHER BUSINESSES
FTD has developed several other businesses to support and enhance FTD
florists' retail floral operations, including greeting cards, Advantage Software
for florists' operations, publications, and credit card authorization and
processing services.
Renaissance Greeting Cards. Through Renaissance Greeting Cards, Inc.
("Renaissance"), a subsidiary of the Operating Company acquired in 1992, FTD
produces greeting cards for special occasions and holidays which are sold in
over 7,900 retail outlets nationwide. Renaissance cards are made using only
recycled paper.
Advantage Software. FTD offers FTD florists computer software, which
operates on the Mercury computer system, that is customized to the needs of
retail florists. The Advantage Plus software package provides a comprehensive
range of payroll and accounting functions for the retail florist. In addition,
the package was expanded in 1997 with modules which streamline the delivery
process. These modules automatically calculate delivery rates, confirm accuracy
of addresses, build efficient delivery routes, print delivery maps and capture
recipient data for future marketing.
FTD Directory & Toll Free Listings. FTD produces the FTD Directory & Toll
Free Listings ("FTD Directory"), a directory of all current FTD florists, their
locations, product ordering information and minimum order amounts. In a typical
transaction, the Sending Florist is responsible for selecting the Receiving
Florist within the desired locale. Unless the Sending Florist has already
established a relationship with a particular florist in that locale, the Sending
Florist typically consults FTD Directory to identify a Receiving Florist. FTD
Directory is published periodically and is supplied to FTD florists in printed
form. FTD Directory is also available on CD-ROM.
Credit Card Authorization and Processing. FTD offers processing of credit
card transactions to participating FTD florists. By pooling the credit card
transactions of such florists, FTD is able to secure more favorable terms on
credit card transactions than they could secure individually. Credit card
authorizations can be obtained by telephone, with a dedicated authorization
terminal, or by using the accounting software offered to retail florists by FTD.
FTD also provides an address verification system to minimize fraud, as well as
statement and adjustment services. Revenue from FTD's credit card program is
generated by a monthly subscriber fee and discounts charged for transactions.
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SEASONALITY
FTD generated 22.8%, 25.6%, 29.2% and 22.4% of total revenue in the
quarters ended September 30, December 31, March 31 and June 30 of fiscal 1997,
respectively. FTD's revenue typically exhibits a modest degree of seasonality as
demonstrated in fiscal 1997. FTD's operating income also fluctuates over the
course of the fiscal year, with FTD generating slightly more of its operating
income in the fiscal quarters ending September 30 and March 31. This fluctuation
is primarily attributable to (i) increased advertising and promotional
expenditures during the holiday seasons in the fiscal quarters ending December
31 and June 30 and (ii) a Clearinghouse volume incentive program, which
experiences higher expenses as a result of increased volume during these
quarters. FTD's working capital, cash and short-term borrowings also fluctuate
during the year as a result of the factors set forth above.
TRADEMARKS
The FTD Mercury Man logo is a registered U.S. trademark which distinguishes
FTD's services and products from those offered by others and appears on the shop
window or door of each member. FTD also owns the rights to a number of other
trademarks, including "FTD," "FTDA" and "Florists' Transworld Delivery" and
trademarks for certain floral products, including the "Chicken Soup Bouquet,"
"Thanks a Bunch Bouquet," "Stay in Touch Bouquet," "Pick-Me-Up Bouquet,"
"Birthday Party Bouquet," "Anniversary Bouquet," "Puzzle Fun Bouquet" and "Sweet
Dreams Bouquet." FTD has licensed certain of its trademarks, including the FTD
Mercury Man logo, to FTD Association for use with its trade association
activities and to the FTD florists who have executed a Trademark Membership
License Agreement with the Operating Company.
COMPETITION
FTD's Clearinghouse operation has two primary competitors: American Floral
Services, Inc. and Teleflora LLC ("Teleflora"). Both these competing services
offers some products and services which are comparable to those offered by FTD
and most FTD florists subscribe to at least one of these competing services.
FTD's Clearinghouse processes more orders than any competing service.
FTD's Marketplace operation competes in an extremely fragmented industry
against a large number of wholesalers. The Company believes that it has a
competitive advantage in this segment due to its multi-faceted relationship with
retail florists, its depth of product line and its ability to offer discounted
pricing because of FTD's substantial volume purchases.
The primary competitor for the Direct Access (1-800-SEND-FTD) business is
1-800-FLOWERS, Inc. Several other less significant companies operate in the toll
free and online services markets.
The Operating Company is subject to certain operating restrictions pursuant
to the Modified Final Judgment, dated November 13, 1990, of the United States
District Court for the Eastern District of Michigan in United States of America
v. Florists' Telegraph Delivery Association, Civ. No. 56-15748, and United
States of America v. Florists' Transworld Delivery Association, Civ. No.
66-28784 (collectively referred to as the "Consent Order"). Among its terms, the
Consent Order prohibits restricting FTD Association membership to florists who
are not subscribers to a competing clearinghouse. The Consent Order expires on
August 1, 2005.
EMPLOYEES
As of June 30, 1997, FTD employed approximately 380 full-time employees.
FTD considers its relations with its employees to be good. FTD employees are not
currently covered by any collective bargaining agreement.
ITEM 2. PROPERTIES
FTD's principal executive offices, consisting of approximately 120,000
square feet of office space, are owned by FTD and are located in Downers Grove,
Illinois. FTD leases office space through a subsidiary in
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Sanford, Maine. FTD uses independent warehouse and distribution facilities in
California, Ohio and Ontario, Canada for product distribution.
ITEM 3. LEGAL PROCEEDINGS
On July 16, 1997, Teleflora instituted an arbitration proceeding against
FTD in Southfield, Michigan. The arbitration was filed under the Commercial
Arbitration Rules of the American Arbitration Association alleging that FTD
breached a 1991 Agreement by which FTD provides certain Mercury Network services
to Teleflora (the "1991 Agreement"). The specific claim is that FTD has failed
to negotiate in good faith a new contract on expiration of the 1991 Agreement as
required by its terms. Unspecified damages are alleged. FTD has filed an
answering statement that denies the allegations made by Teleflora. FTD
management believes that it has meritorious defenses to this action and intends
to contest Teleflora's allegations vigorously. An adverse decision could have a
material adverse effect on the Company's financial position and results of
operations.
On July 21, 1997, Teleflora filed a complaint against FTD in United States
District Court for the Central District of California. On August 7, 1997,
Teleflora filed a first amended and supplemental complaint in that action. The
first amended and supplemental complaint contains six counts alleging
monopolization and attempted monopolization in violation of Section 2 of the
Sherman Act, discriminatory pricing in violation of Section 2 of the Clayton
Act, unfair competition in violation of California Business and Professions Code
Sections 17200 et seq., and a claim for breach of contract. The allegations
pertain to the 1991 Agreement. Teleflora seeks compensatory and treble damages
and declaratory relief, and has moved for a preliminary injunction. FTD
management believes that it has meritorious defenses to this action, and intends
to contest Teleflora's allegations vigorously. An adverse decision could have a
material adverse effect on the Company's financial position and results of
operations.
FTD is involved in various other lawsuits and matters arising in the normal
course of business. In the opinion of the management of FTD, although the
outcomes of these claims and suits are uncertain, they should not have a
material adverse effect on FTD's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted to a vote of the Company's security-holders
during the fourth quarter of fiscal 1997.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The information below is included in this report pursuant to instruction 3
to Item 401(b) of Regulation S-K:
<TABLE>
<CAPTION>
NAME AGE EXECUTIVE OFFICERS
---- --- ------------------
<S> <C> <C>
Robert L. Norton............................................ 50 President
Francis C. Piccirillo....................................... 47 Treasurer
Scott D. Levin.............................................. 35 Secretary
Fred Johnson................................................ 49 Executive Vice President
Technology of the
Operating Company
Rock A. Davis............................................... 42 Vice President
Marketplace of the
Operating Company
</TABLE>
Mr. Norton has been the President of FTD Corporation since January, 1997.
Mr. Norton is currently the Chief Executive Officer, President and Director of
the Operating Company. Mr. Norton joined the Operating Company in October 1996
as General Manager and became President and Chief Operating Officer in January
1997. From March 1993 until May 1996, Mr. Norton was Vice Chairman and Chief
Financial Officer of
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Fabri-Centers of America, Inc., a retail chain of fabric and craft stores. Mr.
Norton received a B.S. from Cleveland State University in 1973.
Mr. Piccirillo joined FTD Corporation as Treasurer in August 1997. Mr.
Piccirillo is also Vice President and Chief Financial Officer of the Operating
Company. Prior to that time, Mr. Piccirillo was Vice President/Treasurer of
Fabri-Centers of America, Inc. Mr. Piccirillo received a B.S. in Industrial
Management in 1971 and an M.B.A. in 1973 from Gannon University. In addition,
Mr. Piccirillo received a J.D. from Cleveland State University in 1976, and is a
Certified Public Accountant.
Mr. Levin joined FTD Corporation as Secretary in May 1996. Mr. Levin also
served as Vice President of FTD Corporation from May 1996 to September 1997. Mr.
Levin also serves as Vice President Administration, General Counsel and
Secretary of the Operating Company. Prior to joining the Company, Mr. Levin
practiced law with Schulte Roth & Zabel LLP specializing in corporate and
securities transactions from April 1989 to April 1996. Mr. Levin received a B.A.
in Political Science and Philosophy from Boston College in 1984 and a J.D. from
The National Law Center of George Washington University in 1987.
Mr. Johnson joined the Operating Company 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. Mr. Johnson received a B.S. in
engineering from Case Institute of Technology in 1969 and an M.B.A. from Case
Western Reserve University in 1977.
Mr. Davis is Vice President Marketplace of the Operating Company. Mr. Davis
joined the Operating Company as Vice President Direct Access in April 1995.
Previously, Mr. Davis was Senior Vice President of The Signature Group from June
1982 to July 1994. Prior to joining The Signature Group, Mr. Davis was in the
Audit Division of Arthur Andersen & Company. Mr. Davis received a B.S. in
General Management from Purdue University in 1977 and a Masters of Management
from Northwestern University in 1986. Mr. Davis is a Certified Public
Accountant.
Executive Officers are selected by and serve at the discretion of the Board
of Directors.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
No established public trading market exists for FTD Corporation's common
equity. As of September 25, 1997, there were approximately 1,800 holders of
Class A Common Stock, par value $.01 per share, of FTD Corporation, and
approximately five holders of Class B Common Stock, par value $.0005 per share,
of FTD Corporation.
FTD has not paid any dividends on its common equity since its inception,
and it has no present intention of paying any such dividends. Any future
determination as to the payment of dividends will be at the discretion of the
Board of Directors of FTD, and will depend on the Company's financial condition,
results of operations, capital requirements, compliance with charter and
contractual restrictions, and such other factors as the Board of Directors deems
relevant. In addition, under the terms of its borrowings, the Company may not
declare or pay any dividend or make any distribution (other than dividends or
distributions payable solely in capital stock of the Company) on shares of its
common stock to holders of such common stock if at the time of such proposed
dividend, or immediately after giving effect thereto, certain financial
conditions are not satisfied. Notwithstanding the foregoing, the following,
among other things, are permitted: (1) payments by the Operating Company to or
on behalf of FTD to fund certain operating expenses of FTD; (2) payments by the
Operating Company to FTD pursuant to a tax sharing agreement between such
parties as in effect on December 19, 1994 or any amendment thereto or
replacement agreement thereof; (3) payments by the Operating Company to FTD to
fund certain payments by FTD for management services provided to the Operating
Company; (4) payments by the Operating Company to FTD to pay reasonable expenses
incurred in connection with a public equity offering to members pursuant to the
Mutual Support Agreement; and (5) payments by the Operating Company to FTD to
repurchase shares of its Common Stock or options to purchase Common Stock held
by former employees of FTD or its subsidiaries (subject to restrictions).
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected historical data of the Old
Association for the fiscal years ended June 30, 1993 and 1994 and the period
from July 1, 1994 to December 18, 1994, and of FTD for the period December 19,
1994 to June 30, 1995 and the fiscal years ended June 30, 1996 and 1997. The
selected historical balance sheet and statement of operations data as of and for
the fiscal years ended June 30, 1993 and 1994 were derived from the audited
consolidated financial statements of the Old Association. The Acquisition was
consummated on December 19, 1994. The selected historical statement of
operations data for the period from July 1, 1994 to December 18, 1994 were
derived from the audited consolidated financial statements of the Old
Association. The selected historical statement of operating data for the period
from December 19, 1994 to June 30, 1995, and for the years ended June 30, 1996
and 1997, and the balance sheet data as of June 30, 1995, 1996 and 1997 were
derived from the audited consolidated financial statements of FTD. The
information contained in this table should be read in conjunction with Item 7 --
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements for the years ended June
30, 1995, 1996 and 1997, of FTD, including the notes thereto, appearing
elsewhere in this Form 10-K.
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<TABLE>
<CAPTION>
CONSOLIDATED FTD CORPORATION OLD ASSOCIATION
---------------------------------- ----------------------------------
DECEMBER 19,
1994 JULY 1
YEAR ENDED JUNE 30, THROUGH THROUGH YEAR ENDED JUNE 30,
------------------- JUNE 30, DECEMBER 18, -------------------
1997 1996 1995 1994 1994 1993
---- ---- ------------ ------------ ---- ----
(DOLLARS IN THOUSANDS, EXCEPT FOR EARNINGS PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue..................... $162,583 $166,255 $ 96,518 $75,333 $166,560 $169,195
Cost of goods sold and services
provided....................... 96,306 104,386 58,567 49,109 102,260 103,622
Selling, general and
administrative................. 55,769 58,376 30,669 28,684 57,625 61,073
-------- -------- -------- ------- -------- --------
Income (loss) from operations..... 10,508 3,493 7,282 (2,460) 6,675 4,500
Other expense, net(1)............. 11,839 12,067 5,827 77 795 1,178
Income taxes (benefit)(2)......... 416 (1,813) 1,021 35 92 42
Minority interest(3).............. (14) (33) 8
Cumulative effect of accounting
change(4)...................... 6,277
-------- -------- -------- ------- -------- --------
Net income (loss)................. $ (1,733) $ (6,728) $ 426 $(2,572) $ (489) $ 3,280
======== ======== ======== ======= ======== ========
Earnings (loss) per share(5)
Primary........................ $ (.23) $ (1.01) $ 0.06
Fully Diluted.................. $ (.23) $ (1.01) $ 0.06
OTHER DATA:
Depreciation and amortization..... $ 15,606 $ 14,231 $ 6,525 $ 4,911 $ 10,144 $ 9,043
Capital expenditures.............. 2,614 4,950 3,082 1,413 8,134 18,200
Ratio of earnings to fixed
charges(6)..................... -- -- 1.2x -- 2.9x 2.0x
BALANCE SHEET DATA:
(at end of period)
Working capital................... $ 5,339 $ 2,718 $ 6,546 $ 16,918 $ 12,581
Total assets...................... 181,724 196,082 203,864 135,506 125,816
Long-term debt, including current
portion........................ 82,400 96,277 100,757 33,463 33,746
Total equity...................... $ 27,172 $ 29,140 $ 35,080 $ 36,216 $ 40,521
</TABLE>
- -------------------------
(1) Interest expense in fiscal 1993 is net of $185 of interest capitalized as
construction in progress.
(2) Taxes on income for the fiscal years ended June 30, 1993 and 1994 and the
period July 1 through December 18, 1994 are generally applicable to the Old
Association's Canadian operations. During these periods, the Old Association
conducted substantially all of its business activities as a member-owned
non-profit cooperative association and, accordingly, no provision for U.S.
income taxes was required. Taxes on income for the period December 19, 1994
through June 30, 1995 and for the fiscal years ended June 30, 1996 and 1997
represent operations after conversion from a cooperative association to a
for-profit corporation, which resulted in a provision for U.S. income tax
liabilities to be recorded.
(3) Represents FTD's interest in Renaissance.
(4) Effective July 1, 1993, the Old Association and its consolidated
subsidiaries adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Post-Retirement Benefits Other Than Pensions,"
for its unfunded post-retirement health care program. See note 8 to the
consolidated financial statements of the Company.
(5) The Old Association was a member-owned non-profit cooperative association
and accordingly, no stock was issued.
(6) In calculating the ratio of earnings to fixed charges, earnings consists of
net income prior to income taxes, minority interest and cumulative effect of
accounting change, plus fixed charges. Fixed charges consist of interest
expense and the component of rental expense believed by management to be
representative of the interest factor thereon. Earnings for the period July
1 through December 18, 1994 were insufficient to cover fixed charges by
$2,537. Earnings for the year ended June 30, 1996 and 1997 were insufficient
to cover fixed charges by $8,574 and $1,331, respectively.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the historical information contained in this report, certain
statements made herein are forward-looking statements that involve risks and
uncertainties and are subject to important factors that could cause FTD's actual
results to differ significantly from the results discussed in the
forward-looking statements, including without limitation, the effect of economic
and market conditions and the impact of competitive activities. The following
discussion should be read in conjunction with the Consolidated Financial
Statements including the notes thereto included elsewhere in this report.
EFFECT OF ACQUISITION ON RESULTS OF OPERATIONS
The Acquisition was consummated on December 19, 1994. Accordingly, the
results of operations from December 19, 1994 through June 30, 1995 and for the
years ended June 30, 1996 and 1997 represent those of FTD Corporation and its
consolidated subsidiaries. Results of operations prior to December 19, 1994 are
those of the Old Association. The Acquisition generally affected FTD's results
of operations as follows: (i) certain trade association activities previously
conducted by FTD are now being conducted by FTD Association; (ii) immediately
following the consummation of the Acquisition, the Operating Company was
converted from a non-profit cooperative association owned by its members to a
for-profit corporation; (iii) in connection with the Acquisition, FTD recorded a
$7.0 million liability subsequently adjusted to $3.9 million for the costs of
termination benefits and other expenses associated with FTD's employee headcount
reduction and the planned consolidation of FTD's data processing facilities;
(iv) as a result of the Acquisition, FTD's balance sheet carries significant
goodwill; (v) certain provisions of the Mutual Support Agreement may impact,
among other things, product pricing in transactions with members; and (vi) the
Company has implemented or plans to implement several cost reduction strategies,
including a reduction in costs related to the Company's Board of Directors, the
elimination of costs associated with trade activities of the Old Association and
a reduction in various general and administrative expenses of the Old
Association (offset by additional costs related to the new management team and
out-sourcing certain functions).
RESULTS OF OPERATIONS
The following table illustrates the total revenue generated by FTD's major
businesses and summarizes FTD's historical results of operations for the three
fiscal years ended June 30, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUE:
Marketplace................................................. $ 49,738 $ 57,924 $ 64,016
Clearinghouse............................................... 34,383 37,070 40,831
Mercury Network............................................. 37,558 34,138 31,483
Other....................................................... 40,904 37,123 35,521
-------- -------- --------
Total revenue.......................................... 162,583 166,255 171,851
Cost of goods sold and services provided.................... 96,306 104,386 107,676
Selling, general and administrative......................... 55,769 58,376 59,353
-------- -------- --------
Income from operations...................................... $ 10,508 $ 3,493 $ 4,822
======== ======== ========
</TABLE>
YEAR ENDED JUNE 30, 1997 COMPARED TO YEAR ENDED JUNE 30, 1996
The following is a discussion of changes in the Company's financial
condition and results of operations for the year ended June 30, 1997 compared
with the year ended June 30, 1996.
Revenue decreased by $3.7 million, or 2.2%, to $162.6 million for the year
ended June 30, 1997 compared to $166.3 million for the year ended June 30, 1996.
The decline in revenue was the net result of decreases in Marketplace and
Clearinghouse revenue, partially offset by increases in Mercury Network and
Other revenue.
10
<PAGE> 11
Marketplace revenue decreased by $8.2 million, or 14.2%, to $49.7 million
for the year ended June 30, 1997 compared to $57.9 million for the year ended
June 30, 1996. The decrease from the prior year was the result of lower sales
volume of holiday products. Marketplace revenue was 30.6% and 34.8% of total
revenue for the years ended June 30, 1997 and 1996, respectively.
Clearinghouse revenue decreased by $2.7 million, or 7.3%, to $34.4 million
for the year ended June 30, 1997 from $37.1 million for the year ended June 30,
1996. This was the net result of a decline in the volume of floral orders
cleared through FTD and a 3.5% increase in the average revenue per order in
accordance with overall industry trends. The Company believes the decline in the
volume of orders cleared by FTD is due to competition from other clearinghouse
services, and the general decline in industry clearings which has resulted from
the general decline in the market share of retail florists. Clearinghouse
revenue was 21.1% and 22.3% of total revenue for the years ended June 30, 1997
and 1996, respectively.
Mercury Network revenue increased by $3.5 million, or 10.3%, to $37.6
million for the year ended June 30, 1997 from $34.1 million for the year ended
June 30, 1996. An increase in terminal leasing revenue, order transmission
income and sales of Advantage floral business systems were the major factors in
the revenue increase. Mercury Network revenue was 23.1% and 20.5% of total
revenue for the years ended June 30, 1997 and 1996, respectively.
Other revenue experienced a net increase of $3.8 million, or 10.2%, to
$40.9 million for the year ended June 30, 1997 from $37.1 million for the year
ended June 30, 1996. This increase was primarily due to growth in the order
volume of Direct Access (1-800-SEND-FTD) and publications revenue. Other revenue
was 25.2% and 22.4% of total revenue for the year ended June 30, 1997 and 1996,
respectively.
The cost of goods sold and services provided decreased by $8.1 million, or
7.8%, to $96.3 million for the year ended June 30, 1997 from $104.4 million for
the year ended June 30, 1996. This is primarily the result of lower cost of
goods sold related to lower Marketplace sales discussed above. In addition, FTD
realized cost reductions resulting from improvements in customer service
operations. As a percentage of revenue, cost of goods sold and services provided
decreased slightly to 59.2% for the year ended June 30, 1997 from 62.8% for the
year ended June 30, 1996.
Selling, general and administrative expenses decreased by $2.6 million, to
$55.8 million for the year ended June 30, 1997 from $58.4 million for the year
ended June 30, 1996. This decrease is primarily due to FTD's decreased
advertising and promotional expenditures in fiscal 1997. In addition, a pension
curtailment gain of $2.7 million, a $0.8 million postretirement curtailment gain
and a $0.5 million pension settlement gain were partially offset by costs of
$4.5 million due to FTD's facility consolidation efforts including the writeoff
of the trained workforce intangible asset.
Interest income for the years ended June 30, 1997 and 1996 was $1.5 million
and $1.4 million, respectively. The increase is attributable to higher average
invested cash. Interest expense for the year ended June 30, 1997 was $12.8
million as compared to $13.5 million in the prior year. The decrease of $0.7
million resulted from a reduction in debt during the year ended June 30, 1997.
See "-- Liquidity and Capital Resources."
Income taxes for the year ended June 30, 1997 reflect an expense of $ 0.4
million compared to a benefit of $1.8 million in the prior year. The tax
expenses for the year ended June 30, 1997 represents the current year reduction
to the Company's deferred tax assets. The tax benefit for the year ended June
30, 1996 represents the amount of deferred tax benefit recognized as a result of
the pretax loss incurred for the year.
As a result of the factors described above, a net loss of $1.7 million
resulted for the year ended June 30, 1997, an improvement of $5.0 million from a
net loss of $6.7 million for the year ended June 30, 1996.
YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995
The following is a discussion of changes in the Company's financial
condition and results of operations for the year ended June 30, 1996 compared
with the year ended June 30, 1995. For purposes of presenting a meaningful
comparison, as stated above, the year ended June 30, 1995 includes both: (i)
results of the
11
<PAGE> 12
Operating Company's predecessor (Florists' Transworld Delivery Association) for
the period prior to the acquisition on December 19, 1994; and (ii) the results
of the Company from December 19, 1994 through June 30, 1995.
Revenue decreased by $5.6 million, or 3.3%, to $166.3 million for the year
ended June 30, 1996, compared to $171.9 million for the year ended June 30,
1995. The decline in revenue was partly due to the elimination of $2.7 million
in revenue from trade association activities in the prior comparable period
which, since the Acquisition, have no longer been conducted by the Company. The
balance of the decline in revenue was the net result of decreases in Marketplace
and Clearinghouse, partially offset by Mercury Network and Other revenue.
Marketplace revenue decreased by $6.1 million, or 9.5%, to $57.9 million
for the year ended June 30, 1996 compared to $64.0 million for the year ended
June 30, 1995. The decrease from the prior year was the result of lower sales of
holiday, seasonal and non-branded everyday containers. This was partially offset
by increased sales of the expanded perishables product line and FTD branded
everyday products. Marketplace revenue was 34.8% and 37.3% of total revenue for
the years ended June 30, 1996 and 1995, respectively.
Clearinghouse revenue decreased by $3.7 million, or 9.2%, to $37.1 million
for the year ended June 30, 1996 from $40.8 million for the year ended June 30,
1995. This was the net result of a decline in the volume of floral orders
cleared through FTD and a 3.1% increase in the average revenue per order in
accordance with overall industry trends. The Company believes the decline in the
volume of orders cleared by FTD is due to competition from other clearinghouse
services, and the general decline in industry clearings which has resulted from
the general decline in the market share of retail florists. Clearinghouse
revenue was 22.3% and 23.8% of total revenue for the years ended June 30, 1996
and 1995, respectively.
Mercury Network revenue increased by $2.6 million, or 8.4%, to $34.1
million for the year ended June 30, 1996 from $31.5 million for the year ended
June 30, 1995. An increase in terminal leasing revenue, order transmission
income and equipment sales were the major factors in the revenue increase.
Mercury Network revenue was 20.5% and 18.3% of total revenue for the years ended
June 30, 1996 and 1995, respectively.
Excluding the trade association related revenues from the prior year
discussed above, Other revenue experienced a net increase of $4.3 million, or
13.1%, to $37.1 million for the year ended June 30, 1996 from $32.8 million for
the year ended June 30, 1995. This increase was primarily due to growth in the
order volume of the Direct Access business and in the volume of listings in the
FTD Directory. Other revenue was 22.4% and 20.6% of total revenue for the year
ended June 30, 1996 and 1995, respectively.
The cost of goods sold and services provided decreased by $3.3 million, or
3.1%, to $104.4 million for the year ended June 30, 1996 from $107.7 million for
the year ended June 30, 1995. The decrease in cost of goods sold and services
provided is primarily due to a $6.2 million reduction in costs for products and
distribution related to the lower Marketplace sales volume and a $1.8 million
decrease due to lower costs of member programs which have not been conducted by
the Company since the Acquisition. Offsetting these decreases was a depreciation
expense increase of $1.1 million from the prior year primarily due to computer
hardware and software acquisitions. Other offsetting cost increases resulted
from the increase in Direct Access order volume, additional FTD Directory costs,
field service costs and Mercury Network product and other costs. As a percentage
of revenue, cost of goods sold and services provided remained relatively
constant, with an increase to 62.8% for the year ended June 30, 1996 from 62.7%
for the year ended June 30, 1995.
Selling, general and administrative expenses decreased by $0.9 million, or
1.5%, to $58.4 million for the year ended June 30, 1996 from $59.3 million for
the year ended June 30, 1995. Several factors contributed to the net decrease:
(i) non-recurring Acquisition related costs of $4.1 million were incurred by the
Company during the year ended June 30, 1995; (ii) the elimination of
approximately $1.3 million in costs of certain trade association activities in
fiscal 1995 which, since the Acquisition, have not been conducted by the
Company; (iii) various overhead reductions of $0.8 million affecting promotional
costs; (iv) advertising activities related to the Company's member incentive
program which was implemented during the year ended June 30, 1996 which amounted
to $4.7 million; and (v) amortization of goodwill and other intangibles
increased by $1.8 million for the year ended June 30, 1996 from the prior
comparable period which included a
12
<PAGE> 13
partial year of amortization. Selling, general and administrative expenses
increased, as a percent of revenue, to 35.1% from 34.5% for the year ended June
30, 1996 compared to the comparable period in 1995.
Interest income for the years ended June 30, 1996 and 1995 was $1.4 million
and $2.8 million, respectively. The decrease is attributable to lower average
invested cash due to cash utilized to effect the Acquisition. Interest expense
for the year ended June 30, 1996 was $13.5 million as compared to $8.7 million
in the prior year. The increase of $4.8 million resulted from a full year of
interest on the debt in fiscal 1996 versus a partial year of interest on the
debt in fiscal 1995. See "-- Liquidity and Capital Resources."
Income taxes for the year ended June 30, 1996 reflect a benefit of $1.8
million compared to an expense of $1.0 million for the prior year. The expense
in the prior year was due to the Operating Company's conversion from a
cooperative association to a for-profit corporation on December 19, 1994, the
date of the Acquisition, resulting in recognition of primarily deferred tax
expense for the period from December 19, 1994 through June 30, 1995. Income tax
expense prior to December 19, 1994 was entirely related to the Old Association's
Canadian operations. The tax benefit for the year ended June 30, 1996 represents
the amount of deferred tax benefit recognized as a result of the pretax loss
incurred for the year.
As a result of the factors described above, a net loss of $6.7 million
resulted for the year ended June 30, 1996, an increase of $4.6 million from a
net loss of $2.1 million for the year ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Interest payments on the Operating Company's $60.0 million aggregate
principal amount of $14% Senior Subordinated Notes due 2001 (the "Notes"),
registered under the Securities Act of 1933, as amended (the "Securities Act")
and interest and principal payments on obligations under a credit agreement
dated December 19, 1994, as amended (the "Bank Credit Agreement") represent
significant liquidity requirements for FTD. Borrowings under the Bank Credit
Agreement bear interest at floating rates and require interest payments on
varying dates depending on the interest rate option selected by FTD. Borrowings
available under the Bank Credit Agreement consist of a $45.0 million term loan
facility and a $25.0 million revolving credit facility to finance working
capital and letter of credit needs. FTD has repaid $20.4 million of the term
loans through June 30, 1997 and is required to repay principal amounts of $9.3
million in fiscal 1998, $10.1 million in fiscal 1999 and $5.3 million in fiscal
2000. Any loans outstanding under the revolving credit facility will mature on
December 19, 1999. Under the terms of the Bank Credit Agreement, borrowings
under the revolving credit facility are required to be reduced to zero for 30
consecutive days in each annual period. None of the $25.0 million revolving
credit facility available under the Bank Credit Agreement was borrowed from the
date of Acquisition through June 30, 1997. The Company believes, based on
current circumstances, that its cash flow, together with borrowings under the
revolving credit facility, will be sufficient to fund operations, including
planned capital expenditures, and to repay the term loans and make interest
payments as they become due through the term of the Notes and the Bank Credit
Agreement.
In addition to its debt service obligations, FTD's remaining liquidity
demands will be primarily for capital expenditures and working capital needs. In
the fiscal years ended June 30, 1997 and 1996, FTD's capital expenditures were
$2.6 million and $5.0 million, respectively, related primarily in 1997 to the
purchase of additional office equipment and in 1996 to the upgrade of its
Mercury Network communications facilities through the purchase of its new
Mercury 3000 terminals that are leased to FTD florists. FTD's expected capital
expenditures for fiscal 1998 are estimated to be approximately $5.0 million and
will primarily be used for improvements of internal customer service and
information systems and the Mercury Network. The Company believes that cash flow
from operations, together with borrowings available under the revolving credit
facility, will be sufficient to fund anticipated capital expenditures and
working capital needs.
The Bank Credit Agreement contains certain restrictive covenants with
respect to the Company that, among other things, create limitations (subject to
certain exceptions) on the declaration or payment of any dividend or making of
any distribution by the Company on shares of its common stock.
Cash provided by operating activities was $12.5 million for the year ended
June 30, 1997 compared to cash provided of $11.1 million for the year ended June
30, 1996. Factors contributing to this change in cash
13
<PAGE> 14
flow were: pension benefits of $2.9 million and an inventory build of $3.5
million, offset by certain program obligations to members.
Cash provided by investing activities was $3.6 million for the year ended
June 30, 1997 compared to cash used of $5.0 million for the year ended June 30,
1996. In fiscal 1997, the cash provided by investing activities primarily
consisted of the sale of the Company's previous headquarters in Southfield,
Michigan, which was offset by capital expenditures.
Cash used in financing activities was $14.4 million for the year ended June
30, 1997 compared to cash used of $4.0 million for the year ended June 30, 1996.
The net cash used in the year ended June 30, 1997, reflects primarily payment of
principal on the term loans.
Effective January 1, 1997, amendments to FTD's defined benefit pension plan
were adopted, including the elimination of the accrual of future benefits under
the plan. As a result of these amendments, and the corresponding remeasurement
of the accumulated and projected benefit of obligations under the plan, a pre-
tax pension curtailment gain of $2.7 million as well as a pre-tax settlement
gain of $0.5 million were recognized in income as a reduction in selling,
general and administrative costs during fiscal 1997. FTD has established a new
401(k) savings plan for all of its eligible employees.
On January 3, 1997, FTD's Board of Directors approved a plan to consolidate
corporate staff and operations into its Downers Grove, Illinois facility, which
has enabled FTD to improve program execution and is helping FTD to better serve
its customers. Leased office space in Boston, Massachusetts was subleased, and
land and buildings in Southfield, Michigan were sold. FTD's bank credit
agreement required FTD to use the net proceeds from the sale of assets to reduce
the outstanding term loan and as a result, future interest costs will be
reduced. In accordance with EITF Consensus no. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Cost to Exit an Activity,"
non-recurring charges in connection with the consolidation including severance,
asset impairment losses, and other costs aggregating $2.3 million were
recognized as Selling, General and Administrative costs during fiscal 1997.
Additional non-recurring expenses of $0.7 million were also incurred in
connection with the consolidation resulting in a total of $3.0 million in
non-recurring costs being recorded in fiscal 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Registrant required by this
item are set forth on pages F-1 through F-20 and the related schedule is set
forth on page F-22.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not applicable.
14
<PAGE> 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the directors of the Company is hereby
incorporated herein by reference to the section. "Election of Directors"
contained in the Information Statement. See also Item 4A, "Executive Officers of
the Registrant" in Part I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is hereby incorporated
herein by reference to the sections, "Management-Executive Compensation,"
"Summary Compensation Table," "Option Grants in Last Fiscal Year," "Fiscal
Year-End Option Values" and "Director Compensation for the Last Fiscal Year" in
the Company's Information Statement. The sections, "Board of Directors Report on
Executive Compensation" and "Stockholder Return Comparison," in the Company's
Information Statement are not incorporated by reference herein. Such sections
are furnished solely for information and shall not be deemed to be soliciting
material or to be "filed" as part of this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial owners
and management is hereby incorporated by reference to the sections, "Security
Ownership of Certain Beneficial Owners and Management" and "Principal
Stockholders," in the Company's Information Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related transactions
is hereby incorporated by reference to the section, "Relationship with
Affiliates," in the Company's Information Statement.
15
<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
(1) & (2) The consolidated financial statements and schedule which are
filed with this Form 10-K are set forth in the Index to Consolidated Financial
Statements and Schedule at Page F-1 which immediately precedes such documents.
(3) See accompanying Index to Exhibits. The Company will furnish to any
stockholder upon written request, any exhibit listed in the accompanying Index
to Exhibits upon payment by such stockholders of the Company's reasonable
expenses in furnishing any such exhibits. Such exhibits are, as indicated in the
index, either filed herewith or have heretofore been filed with the Securities
and Exchange Commission under the Securities Act and are referred to and
incorporated herein by reference to such filings.
(B) REPORTS ON FORM 8-K
No forms 8-K were filed by the Company during the fourth quarter of fiscal
1997.
(C) EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
See accompanying Index to Exhibits.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FTD CORPORATION
By: /s/ ROBERT L. NORTON
------------------------------------
Name: Robert L. Norton
Title: President
Date: September 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ RICHARD C. PERRY Chairman of the Board and Director September 25, 1997
- ------------------------------------------
Richard C. Perry
/s/ ROBERT L. NORTON President (Principal Executive September 25, 1997
- ------------------------------------------ Officer)
Robert L. Norton
/s/ FRANCIS C. PICCIRILLO Treasurer (Principal Accounting and September 25, 1997
- ------------------------------------------ Financial Officer)
Francis C. Piccirillo
/s/ VERONICA K. HO Director September 25, 1997
- ------------------------------------------
Veronica K. Ho
/s/ GARY K. SILBERBERG Director September 25, 1997
- ------------------------------------------
Gary K. Silberberg
/s/ GEOFFREY REHNERT Director September 25, 1997
- ------------------------------------------
Geoffrey Rehnert
/s/ HABIB GORGI Director September 25, 1997
- ------------------------------------------
Habib Gorgi
</TABLE>
17
<PAGE> 18
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of June 30, 1997 and 1996.... F-3
Consolidated Statements of Operations for the years ended
June 30, 1997, 1996 and 1995.............................. F-4
Consolidated Statements of Stockholders' Equity for the
years ended June 30, 1997, 1996 and 1995.................. F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 1997, 1996 and 1995.............................. F-6
Notes to Consolidated Financial Statements as of June 30,
1997 and 1996............................................. F-7
Independent Auditors' Report on Financial Statement
Schedule.................................................. F-21
Schedule II -- Valuation and Qualifying Accounts............ F-22
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable and therefore have
been omitted.
F-1
<PAGE> 19
[KPMG LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors
FTD Corporation
To the Board of Directors:
We have audited the accompanying consolidated balance sheets of FTD
Corporation and subsidiary as of June 30, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three year period ended June 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
FTD Corporation and subsidiary as of June 30, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in the three year
period ended June 30, 1997, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Detroit, Michigan
August 14, 1997
F-2
<PAGE> 20
FTD CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $ 28,294 $ 26,650
Accounts receivable, less allowance for doubtful accounts
($2,211 in 1997, and $1,412 in 1996)...................... 24,979 24,080
Inventories, principally finished goods, net................ 14,992 12,468
Deferred income taxes....................................... 7,242 5,569
Other current assets........................................ 2,034 1,718
-------- --------
Total current assets.................................... 77,541 70,485
PROPERTY AND EQUIPMENT:
Land and improvements....................................... 1,600 2,500
Building and improvements................................... 7,601 13,169
Mercury consoles............................................ 22,472 23,187
Furniture and equipment..................................... 12,832 11,630
-------- --------
Total................................................... 44,505 50,486
Less accumulated depreciation............................... 23,925 15,158
-------- --------
Property and equipment, net............................. 20,580 35,328
OTHER ASSETS:
Deferred financing costs, less accumulated amortization
($2,724 in 1997 and $1,648 in 1996)....................... 3,394 4,470
Deferred income taxes....................................... -- 194
Other noncurrent assets..................................... 1,979 2,191
Goodwill and other intangibles, less accumulated
amortization
($7,528 in 1997 and $4,874 in 1996)....................... 78,230 83,414
-------- --------
Total other assets...................................... 83,603 90,269
-------- --------
Total assets............................................ $181,724 $196,082
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt........................ $ 9,297 $ 8,496
Accounts payable............................................ 29,237 28,360
Accrued member incentive programs........................... 13,816 12,949
Accrued severance costs..................................... 1,245 1,319
Other accrued liabilities................................... 5,765 6,059
Members' deposits........................................... 9,991 8,876
Unearned income............................................. 2,724 1,708
-------- --------
Total current liabilities............................... 72,075 67,767
Long-term debt, less current maturities..................... 73,103 87,781
Post-retirement benefits, less current portion.............. 6,577 7,163
Accrued pension obligations................................. 876 4,061
Deferred income taxes....................................... 1,765 --
Minority interest in subsidiary............................. 156 170
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, no shares issued.............................. -- --
Common stock:
Class A, $0.01 par value, 30,000,000 shares authorized;
6,164,514 shares issued and 6,073,839 outstanding at
June 30, 1997; 6,160,181 issued and 6,134,549
outstanding at June 30, 1996............................ 62 62
Class B, $0.0005 par value, 3,000,000 shares authorized;
1,566,686 shares issued and outstanding at June 30, 1997
and 1996................................................ 1 1
Paid-in capital............................................. 35,639 35,607
Accumulated deficit......................................... (8,013) (6,275)
Notes receivable............................................ (32) (128)
Treasury stock, at cost, 90,675 shares Class A Common Stock
at June 30, 1997 25,632 shares Class A Common Stock at
June 30, 1996............................................. (485) (127)
-------- --------
Total stockholders' equity.............................. 27,172 29,140
-------- --------
Total liabilities and stockholders' equity.............. $181,724 $196,082
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 21
FTD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUES:
Marketplace................................................. $ 49,738 $ 57,924 $35,460
Clearinghouse............................................... 34,383 37,070 24,738
Mercury Network............................................. 37,558 34,138 17,618
Other....................................................... 40,904 37,123 18,702
-------- -------- -------
Total revenues......................................... 162,583 166,255 96,518
COSTS:
Products and distribution................................... 35,897 41,209 25,736
Floral order transmissions and processing services.......... 29,803 30,562 14,923
Member programs............................................. 30,606 32,615 17,908
-------- -------- -------
Total cost of goods sold and services provided......... 96,306 104,386 58,567
Selling, general and administrative expense................. 55,769 58,376 30,669
-------- -------- -------
Income from operations................................. 10,508 3,493 7,282
OTHER INCOME AND EXPENSES:
Interest income............................................. (1,480) (1,431) (1,719)
Interest expense............................................ 12,789 13,498 7,546
Loss on sale of Southfield Michigan facility................ 530 -- --
-------- -------- -------
Total other income and expenses........................ 11,839 12,067 5,827
Income (loss) before income tax expense (benefit) and
minority interest.................................... (1,331) (8,574) 1,455
Income tax expense (benefit)................................ 416 (1,813) 1,021
Minority interest in earnings (loss) of subsidiary.......... (14) (33) 8
-------- -------- -------
Net income (loss)...................................... $ (1,733) $ (6,728) $ 426
======== ======== =======
EARNINGS (LOSS) PER SHARE:
Primary..................................................... $(0.23) $(1.01) $0.06
Fully Diluted............................................... $(0.23) $(1.01) $0.06
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 22
FTD CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Class A, shares outstanding
Balance at beginning of year.............................. 6,135 6,029 0
Common stock issued to effect merger.................... 5,986
Additional common stock issued.......................... 149
Purchase of common stock from initial investors......... (552)
Sales of common stock in public offering................ 659
Repurchase of common stock.............................. (66) (33) (106)
Sale of common stock to officers........................ 4 32
------- ------- -------
Balance at end of year.................................... 6,073 6,135 6,029
------- ------- -------
Class B, shares outstanding
Balance at beginning of year.............................. 1,567 442
Common Stock issued to effect merger.................... 442
Exercise of common stock warrants....................... 1,125
------- ------- -------
Balance at end of year.................................... 1,567 1,567 442
------- ------- -------
Common stock Class A and Class B at par value
Balance at beginning of year.............................. $ 63 $ 66 $ 0
Repurchase of initial investment........................ (5)
Common stock issued to effect merger.................... 64
Additional common stock issued.......................... 2
Sale of treasury stock.................................. (1)
Sale of common stock in public offering................. 6
Change in par value of class B shares................... (4)
Exercise of common stock warrants....................... 1
------- ------- -------
Balance at end of year.................................... $ 63 $ 63 $ 66
======= ======= =======
Paid-in Capital
Balance at beginning of year.............................. $35,607 $35,385 $ 0
Repurchase of initial investment........................ (2,949)
Common stock issued to effect merger.................... 29,936
Additional common stock issued.......................... 949
Net income (loss)....................................... 4,500
Sale of treasury stock.................................. (499)
Sale of common stock in public offering................. 3,516
Repurchase of common stock.............................. 80
Sale of common stock to officers........................ 32 135
Change in par value of class B shares................... 4
Cancellation of shareholder receivable related to
repurchase of common stock............................. (65)
------- ------- -------
Balance at end of year.................................... $35,639 $35,607 $35,385
======= ======= =======
Retained Earnings (Accumulated Deficit)
Balance at beginning of year.............................. $(6,275) $ 449 $ 0
Net income (loss)....................................... (1,733) (6,728) 426
Foreign currency translation adjustment................. (5) 4 23
------- ------- -------
Balance at end of year.................................... $(8,013) $(6,275) $ 449
======= ======= =======
Stock Subscription and Notes Receivable
Balance at beginning of year.............................. $ (128) $ (319) $ 0
Repurchase of initial investment........................ 68
Additional common stock issued.......................... (319)
Sale of common stock to officers........................ (32) (12)
Amortization of shareholder notes receivable............ 70
Cancellation of shareholder receivable related to
repurchase of common stock............................. 65
Forgiveness of officers loan............................ 128
------- ------- -------
Balance at end of year.................................... $ (32) $ (128) $ (319)
======= ======= =======
Treasury Stock
Balance at beginning of year.............................. $ (127) $ (500) $ 0
Repurchase of common stock.............................. (358) (162) (500)
Sale of treasury stock.................................. 500
Sale of common stock to officers........................ 35
------- ------- -------
Balance at end of year.................................... $ (485) $ (127) $ (500)
======= ======= =======
Total Stockholders Equity................................... $27,172 $29,140 $35,081
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 23
FTD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ (1,733) $(6,728) $ 426
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 15,606 14,231 6,525
Amortization of deferred financing costs and original
issue discount.......................................... 1,404 1,359 708
Post-retirement benefits.................................. (586) 401 361
Pension................................................... (2,756) (120)
Minority interest in earnings (loss) of subsidiary........ (14) (33) 8
Undistributed loss of unconsolidated affiliate............ (30) (66) (54)
Loss on sale or disposal of assets........................ 530 663
Increase (decrease) in cash due to change in:
Accounts receivable..................................... (899) (3,219) 12,842
Inventories............................................. (2,524) 1,027 1,524
Deferred income taxes................................... 286 (2,035) 507
Other current assets.................................... (316) (159) 2,336
Accounts payable........................................ 877 1,491 (28,694)
Accrued member incentive programs....................... 867 6,194 (2,819)
Accrued severance costs................................. (74) (1,504) (1,075)
Other accrued liabilities, unearned income, and members'
deposits............................................... 1,837 (417) 1,907
-------- ------- --------
Net cash provided by (used in) operating activities... 12,475 11,085 (5,498)
CASH FLOWS FROM INVESTING ACTIVITIES:
Release of restricted cash related to credit deposit fund
investments............................................... 2,173
Proceeds from acquisition................................... 46,577
Payment to effect merger.................................... (109,028)
Capital expenditures, net................................... (2,614) (4,950) (3,082)
Proceeds from sale of Southfield Michigan facility.......... 6,224
-------- ------- --------
Net cash provided by (used in) investing activities... 3,610 (4,950) (63,360)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to deferred financing costs....................... (126)
Proceeds from long-term debt................................ 95,436
Repayments of long-term debt................................ (14,206) (4,762) (35,101)
Issuance of common stock.................................... 3,681 30,631
Repurchase of common stock.................................. (358) (3,037) (500)
Issuance of common stock warrants........................... 1 3,000
Decrease in notes receivable from stockholders.............. 128 138
-------- ------- --------
Net cash provided by (used in) financing activities... (14,436) (3,979) 93,340
Effect of foreign exchange rate changes on cash............. (5) 12
-------- ------- --------
Net increase in cash and cash equivalents................... 1,644 2,168 24,482
Cash and cash equivalents at beginning of period............ 26,650 24,482
-------- ------- --------
Cash and cash equivalents at end of period.................. $ 28,294 $26,650 $ 24,482
======== ======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid............................................... $ 11,458 $12,113 $ 6,704
======== ======= ========
Income taxes paid........................................... $ 237 $ 201 $ 260
======== ======= ========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Florists' Transworld Delivery Association (the "Acquired Company") was
acquired by FTD Corporation (the "Company") on December 19, 1994 (see note 2).
The acquisition was effected through a merger of the Acquired Company with a
subsidiary of the Company, with the Acquired Company surviving the merger as a
wholly owned subsidiary of the Company, as follows:
<TABLE>
<S> <C>
Cash utilized to effect merger.............................. $109,028
NONCASH ITEMS:
Reduction of proceeds from long-term debt for financing
costs..................................................... 5,992
Value ascribed to common stock warrants issued.............. 1,500
Reduction in accrued severance costs subsequent to initial
purchase price allocation................................. 3,138
Other purchase accounting adjustments for assets acquired
and liabilities assumed................................... (809)
--------
Total purchase price...................................... $118,849
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 24
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS
FTD Corporation (the "Company"), is a supplier of non-perishable hardgoods,
order clearing services, marketing support and other services, including
greeting cards, publications and credit card authorization and processing to the
retail floral industry and operates a toll free number that offers consumers the
opportunity to place orders directly with the Company.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company at June 30, 1997 and
1996, include the accounts of FTD Corporation and its wholly owned subsidiary,
Florists' Transworld Delivery, Inc. (the "Operating Company"). All significant
intercompany accounts and transactions have been eliminated in consolidation.
Prior to the acquisition, the Company was inactive. The accompanying
consolidated statements of operations and cash flows for the year ended June 30,
1995 includes only the Operating Company's revenues, operating expenses and cash
flows for the period December 19, 1994 through June 30, 1995.
Certain amounts in the 1996 and 1995 consolidated financial statements have
been reclassified to conform to the 1997 presentation.
CASH AND CASH EQUIVALENTS
The Company's policy is to invest cash in excess of operating requirements
in income-producing investments. The Company considers all investments purchased
with maturities of three months or less at the date of purchase to be cash
equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments consist primarily of cash and cash equivalents,
accounts receivable, accounts payable, accrued member incentive programs,
accrued severance costs, other accrued liabilities, unearned income, member
deposits and long-term debt. At June 30, 1997, because of the short maturity of
those instruments other than Long-term debt, the fair value of these financial
instruments approximates the carrying amount. Long-term debt is discussed in
Note 4.
INVENTORIES
Inventories consist principally of finished goods and are stated at the
lower of cost, principally on a first in, first out basis, or market (net
realizable sales value).
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated over their
estimated useful lives using the straight-line method. The useful lives are ten
to 31.5 years for building and improvements, five years for Mercury consoles,
and five to ten years for furniture and equipment. Assets acquired on December
19, 1994 (see Note 2), have been recorded at fair value.
Upon sale or retirement of property and equipment, the cost and related
accumulated depreciation are eliminated from the respective accounts, and any
gain or loss incurred in the ordinary course of business is included as selling,
general and administrative expenses in the accompanying consolidated statements
of operations. Maintenance and repairs are charged to expense as incurred.
Expenditures which improve or extend the life of existing property and equipment
are capitalized.
F-7
<PAGE> 25
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
SYSTEMS SOFTWARE
Systems software, included in other noncurrent assets, is recorded at
purchase cost and is being amortized over its expected economic life of five
years using the straight-line method. Assets acquired on December 19, 1994 (see
Note 2), have been recorded at fair value.
INTANGIBLES
Deferred financing costs are being amortized over the life of the related
financing using the straight-line method. Goodwill is being amortized using the
straight line method over 30 years. Other intangibles consist of trademarks,
trained workforce, and software, and are being amortized over 40, 7, and 5
years, respectively, using the straight-line method.
The Company periodically evaluates whether events and circumstances that
have occurred indicate that the remaining balance of goodwill and other
intangibles may not be recoverable or that the remaining estimated useful lives
may warrant revision. When such factors indicate that goodwill and other
intangibles should be evaluated for possible impairment, the Company uses an
estimate of undiscounted future cash flows to measure whether the goodwill and
other intangibles is recoverable, and over what period (see Notes 2 and 3).
INCOME TAXES
The Company follows Statement of Financial Accounting Standards ("SFAS")
No. 109, Accounting for Income Taxes. SFAS No. 109 requires the asset and
liability method of accounting for income taxes in which deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under SFAS No.
109, the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date (see Note
7).
FOREIGN CURRENCY TRANSLATION
In accordance with SFAS No. 52, balance sheet accounts of the Company's
foreign operations are translated from Canadian currency into U.S. dollars at
year-end or historical rates, while income and expenses are translated at the
weighted average exchange rates for the year. Translation gains or losses
related to net assets located outside the United States are included in retained
earnings. Gains and losses resulting from foreign currency transactions are
included in net income.
EARNINGS PER SHARE
Earnings (loss) per share is calculated by dividing net income (loss) by
the weighted average common shares and common share equivalents outstanding
during the period. Where dilutive, unexercised stock options of the Company are
included as common stock equivalents using the treasury stock method.
REVENUES
Revenues earned by the Company for processing floral orders are recorded in
the month the orders are reported to the Company as filled. Revenues for other
services related to the processing of floral orders (including equipment rentals
and transmission charges) are recorded in the period the service is provided.
Sales of products are recorded when the products are shipped. Revenues relating
to publications are recognized in the periods in which the publications are
issued.
F-8
<PAGE> 26
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
STOCK-BASED COMPENSATION
Prior to July 1, 1996, the Company accounted for its stock options in
accordance with provisions of Accounting Principles Board ("APB") Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations. As
such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price.
On July 1, 1996, the Company adopted SFAS No. 123 Accounting for
Stock-Based Compensation, which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair value-based method defined in SFAS No. 123 has been
applied. The Company has elected to continue apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosure provisions of SFAS No. 123 (see Note
11).
USE OF ESTIMATES
Management of the Company has made estimates and assumptions relating to
the reporting of assets and liabilities and related disclosures to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results may differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued SFAS No. 128,
"Earnings Per Share" in Fiscal 1997. This Statement establishes standards for
computing and presenting earnings per share and applies to entities with
publicly held Common Stock or potential Common Stock. This statement supersedes
Accounting Principles Board (APB) Opinion No. 15 and is effective for periods
ending after December 15, 1997. The Company will adopt this statement in the
second quarter of Fiscal 1998. Currently, the Company is evaluating the effect
of this statement.
The FASB also has recently issued two new accounting standards, SFAS No.
130, Reporting Comprehensive Income and SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. These statements will affect the
disclosure requirements for the Fiscal 1999 annual financial statements. The
Company does not know at this time the effect of these new statements.
(2) ACQUISITION
On December 19, 1994 (the "Merger Date"), FTD Corporation, a Delaware
corporation, completed an acquisition of all of the outstanding equity of
Florists' Transworld Delivery Association, a Michigan nonprofit cooperative
association (the "Acquired Company"), pursuant to the terms of an Agreement and
Plan of Merger (the "Merger Agreement") dated August 2, 1994. The acquisition
was effected through the merger (the "Merger") of FTD Acquisition Corp., a
wholly owned subsidiary of FTD Corporation, with and into the Acquired Company,
with the Acquired Company surviving the Merger as a wholly owned subsidiary of
FTD Corporation. Concurrent with the Merger, the Acquired Company was converted
from a nonprofit cooperative association to a for-profit corporation and renamed
"Florists' Transworld Delivery, Inc." (from and after the Merger Date, the
"Operating Company").
The Company has accounted for the Merger under the purchase method of
accounting, and accordingly, the Company's consolidated financial statements,
reflect the allocation of the total purchase price to the tangible and
intangible assets acquired and liabilities assumed of the Acquired Company as of
December 19, 1994, based on their respective estimated fair values.
F-9
<PAGE> 27
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(2) ACQUISITION -- CONTINUED
Upon consummation of the acquisition of the Operating Company by FTD
Corporation, management began to assess, formulate, and implement a plan to
involuntarily terminate and/or relocate employees of the Operating Company as
part of its relocation and/or consolidation efforts. The allocation of the total
purchase price referred to above included a reserve for the estimated cost of
planned termination, severance and relocation.
On January 3, 1997, the Operating Company's Board of Directors approved a
plan to consolidate corporate staff and operations into its Downers Grove,
Illinois facility. Leased office space in Boston, Massachusetts was sub-leased,
and land and buildings, in Southfield, Michigan were sold. The Company's bank
credit agreement required it to use the net proceeds from the sale of assets to
reduce the outstanding term loan. In accordance with EITF Consensus No. 94-3
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity," non-recurring charges in connection with this
consolidation including severance, asset impairment losses, and other costs
aggregating $3.0 million were recognized as selling, general and administrative
costs in the accompanying Consolidated Statement of Operations for the year
ended June 30, 1997. The severance costs results from the planned termination of
approximately 183 employees, who performed corporate and operating functions at
the Southfield and Boston locations. In addition, based on the consolidation of
the Company's facilities and the termination of a majority of the workforce as a
result of the closed facilities, the balance of $2.1 million, net of $0.6
million of amortization, for the intangible asset of trained workforce was
written off during the year ended June 30, 1997. The activity in such reserves
during the period December 19, 1994 through June 30, 1995 and the years ended
June 30, 1996 and 1997, can be summarized as follows (in thousands):
<TABLE>
<CAPTION>
SEVERANCE RELOCATION
BENEFITS COSTS OTHER TOTAL
--------- ---------- ----- -----
<S> <C> <C> <C> <C>
Initial estimate as of December 19, 1994................. $5,573 $600 $ 863 $7,036
Costs paid during the period December 19, 1994
through June 30, 1995.................................. 843 -- 232 1,075
------ ---- ------ ------
Remaining liability as of June 30, 1995.................. 4,730 600 631 5,961
------ ---- ------ ------
Costs paid during the year ending June 30, 1996.......... 1,310 41 153 1,504
Change in estimate....................................... 2,370 480 288 3,138
------ ---- ------ ------
Remaining liability as of June 30, 1996.................. 1,050 79 190 1,319
------ ---- ------ ------
Additional liability recognized due to consolidation..... 1,292 93 1,575 2,960
Cost paid during the year ending June 30, 1997........... 1,550 53 1,431 3,034
------ ---- ------ ------
Remaining liability as of June 30, 1997.................. $ 792 $119 $ 334 $1,245
====== ==== ====== ======
</TABLE>
(3) INTANGIBLES
At June 30, 1997 and 1996 goodwill and other intangible assets consisted of
the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Goodwill.................................................... $68,758 $69,188
Trademarks.................................................. 15,000 15,000
Trained Workforce........................................... -- 2,100
Software.................................................... 2,000 2,000
------- -------
Total....................................................... 85,758 88,288
Less accumulated amortization............................... 7,528 4,874
------- -------
Total....................................................... $78,230 $83,414
======= =======
</TABLE>
F-10
<PAGE> 28
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(3) INTANGIBLES -- CONTINUED
The Company had no intangibles prior to the Merger Date. The changes in
goodwill resulted from adjustments to the reserve for estimated costs of planned
termination, severance and relocation (see Note 2), as well as pension and
postretirement obligations (see Notes 8 and 9). The reduction in trained
workforce related from the consolidation of the Company's offices in Fiscal 1997
and the related impairment of this asset at that time (see Note 2).
(4) FINANCING ARRANGEMENTS
LONG-TERM DEBT (IN THOUSANDS)
At June 30, 1997 and 1996 long-term debt consisted of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Series B senior subordinated notes, interest payable
semiannnually at 14% due December 15, 2001, net of
unamortized discount of $2,252 and $2,580 at June 30, 1997
and 1996 respectively..................................... $57,748 $57,420
Term loan, payable quarterly at various amounts, plus
interest at a weighted average floating Eurodollar rate of
8.8%, and 8.5% at June 30, 1997 and 1996 respectively, due
December 15, 1999......................................... 24,619 38,781
Other....................................................... 33 76
------- -------
Total long-term debt................................. 82,400 96,277
Less current maturities..................................... 9,297 8,496
------- -------
Long-term debt, less current maturities.............. $73,103 $87,781
======= =======
</TABLE>
The principal payments required for each of the following five Fiscal years
are as follows (in thousands):
<TABLE>
<S> <C>
1998....................................................... $ 9,297
1999....................................................... 10,094
2000....................................................... 5,252
2001....................................................... 6
2002....................................................... 60,003
-------
Total................................................. $84,652
=======
</TABLE>
The Company's debt agreements include covenants which, among other things,
require that the Company maintain certain financial ratios and a minimum level
of consolidated net worth. The Company is in compliance with all debt covenants
at June 30, 1997. The Company's debt agreements also include restrictions on the
declaration and payment of dividends. The term loan agreement requires the
Company to repay principal of the loans to the extent cash flow generated in the
Fiscal year exceeds certain calculated amounts. As of June 30, 1997 the
estimated fair value of long-term debt, discounted at current rates, was
$87,652,000.
LINE OF CREDIT
The Company has a $25 million revolving line of credit, obtained at the
acquisition date, with a group of banks at an interest rate varying with prime
or other indices. There were no borrowings on this line during 1997 or 1996
however the Company has trade letters of credit of approximately $3.0 million
outstanding under this revolving line of credit agreement at June 30, 1997. The
agreement provides a maximum commitment for letters of credit of $5.0 million
and requires an annual commitment fee of 0.5% on the unused portion of the
commitment.
F-11
<PAGE> 29
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(5) LEASES
AS LESSOR
The Company leases Mercury consoles to members through leases classified as
operating leases for accounting purposes. The net investment in equipment leased
to members under operating leases, including equipment used for maintenance
purposes, was as follows at June 30, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Mercury consoles............................................ $22,472 $23,187
Less: Accumulated Depreciation.............................. 17,710 10,946
------- -------
Net Investment $ 4,762 $12,241
======= =======
</TABLE>
AS LESSEE
Rental expense with respect to operating leases related to facilities and
equipment was $1,005,000, $802,000 and $459,000 for the years ended June 30,
1997, 1996 and 1995, respectively. The minimum aggregate annual operating lease
obligations are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $1,160
1999........................................................ 637
2000........................................................ 333
2001........................................................ 333
Thereafter.................................................. 106
------
Total.................................................. $2,569
======
</TABLE>
(6) ADVERTISING AND SALES PROMOTION COSTS
The Company expenses advertising time and space costs and related residual
rights and contracts at the time the advertising is first broadcast or
displayed. Production and promotion costs are charged to expense when incurred.
Advertising credits earned by FTD members under the Company's sales incentive
program are charged to expense when earned.
In the years ended 1997, 1996 and 1995, advertising and sales promotion
expense was $28 million, $31 million and $16 million, respectively.
F-12
<PAGE> 30
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(7) INCOME TAXES
At June 30, 1997 and 1996, the Company's deferred tax assets and
liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current deferred tax assets:
Accrued Value Plus incentive obligations.................. $ 2,824 $ 3,058
Accrued severance costs................................... 399 499
Allowance for doubtful accounts........................... 814 518
Unearned income........................................... 970 617
Inventory................................................. 1,075 497
Accrued vacation.......................................... 132 246
Other..................................................... 1,028 134
------- -------
Current deferred tax assets................................. 7,242 5,569
------- -------
Noncurrent deferred tax assets:
Net operating loss carryforwards.......................... 3,131 4,844
Postretirement benefit obligations........................ 2,433 2,650
Accrued pension........................................... 324 1,503
Other..................................................... 254 197
------- -------
Noncurrent deferred tax assets.............................. 6,142 9,194
Noncurrent deferred tax liabilities -- tax over book
depreciation and difference in basis...................... 6,407 7,500
------- -------
Net noncurrent deferred tax assets (liabilities)............ (265) 1,694
------- -------
Deferred tax assets -- valuation allowance.................. (1,500) (1,500)
------- -------
Net deferred tax assets..................................... $ 5,477 $ 5,763
======= =======
</TABLE>
The deferred tax assets are subject to certain asset realization tests.
Company management believes that, under the principles of SFAS No. 109, based on
their evaluation of taxable income in future years and the uncertainty of fully
realizing the noncurrent deferred tax assets with very long lives, a valuation
allowance of $1.5 million is appropriate at June 30, 1997 and 1996.
The Company's net operating loss carryforwards at June 30, 1997 and 1996,
of approximately $8.5 million, and $10.8 million, respectively, the tax benefits
of which are included above as noncurrent deferred tax assets, will expire if
unused, as follows: $0.2 million in 2007; $2.3 million in 2008; $0.8 million in
2009; and $5.2 million in 2010. In addition, as a result of the Merger (see Note
2), the Company's pre-Merger net operating loss carryforwards of $3.3 million
available to be utilized in the future are limited to approximately $1.8 million
per year.
The provision for income taxes consists of the following components (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current..................................................... $130 $ 189 $ 144
Deferred.................................................... 286 (2,002) 877
---- ------- ------
Income Tax expense (benefit)................................ $416 $(1,813) $1,021
==== ======= ======
</TABLE>
F-13
<PAGE> 31
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(7) INCOME TAXES -- CONTINUED
The provision for income taxes for the years ended June 30, 1997, 1996 and
1995, differs from the amount computed by applying the U.S. federal income tax
rate (35%) to pretax income because of the effect of the following items (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Tax expense (benefit) at U.S. federal income tax rate...... $(466) $(3,001) $ 509
State income taxes (benefit), net of federal income tax
benefit.................................................. (27) (172) 29
Amortization of purchased goodwill......................... 893 842 464
Valuation allowance........................................ -- 500 --
Other items, net........................................... 16 18 19
----- ------- ------
Reported income tax expense (benefit)................. $ 416 $(1,813) $1,021
===== ======= ======
</TABLE>
(8) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Operating Company provides certain postretirement health care benefits
to substantially all employees who retired with a minimum of 10 years of service
and have attained 60 years of age. The plan retirees are required to share in
the cost of the benefit. During 1997, the consolidation of corporate staff and
operations into one facility (see Note 2), together with other factors, resulted
in the termination of numerous employees which significantly reduced the
expected years of future service of those employees and the Operating Company's
corresponding liability for certain postretirement benefits. These terminations
caused a decrease in the Operating Company's postretirement obligation and
generated a pretax gain of $0.8 million which was recorded as a reduction in
selling, general and administrative expenses. In addition, the Operating Company
amended its postretirement benefit plan effective January 1, 1997, and will no
longer provide such benefits to employees hired after January 1, 1997.
At June 30, 1997 and 1996 the status of the plan consisted of the following
(in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Retirees.................................................... $4,448 $4,198
Fully eligible active participants.......................... -- 62
Other active participants................................... 860 1,921
------ ------
Accumulated postretirement benefit obligation............... 5,308 6,181
Unrecognized net gain....................................... 1,526 1,238
------ ------
Accrued postretirement benefit liability.................... $6,834 $7,419
====== ======
</TABLE>
At June 30, 1995, the accrued postretirement benefit liability included
employees who were subsequently voluntarily or involuntarily terminated as part
of the Company's relocation and/or consolidation plan to relocate and/or
consolidate employees. Upon the completion of the Company's relocation and/or
consolidation plan, a reduction to the accrued postretirement benefit liability
of $590,000 was recorded to reflect the impact of this plan.
Net periodic postretirement benefit costs for the years ended June 30,
1997, 1996 and 1995 included the following components (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost................................................ $190 $194 $168
Interest cost............................................... 434 438 294
Unrecognized prior period gain.............................. (45) (54) --
---- ---- ----
Total....................................................... $579 $578 $462
==== ==== ====
</TABLE>
F-14
<PAGE> 32
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(8) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS -- CONTINUED
The discount rates used in determining the accumulated postretirement
benefit obligation ("APBO") were 7.75% at and for the year ended June 30, 1997,
7.5% at and for the year ended June 30, 1996, 8.5% for the year ended June 30,
1995 and 7.75% at June 30, 1995. The assumed health care cost trend rate used in
measuring the APBO was 9.8% and graded down to 5.75% over 11 years at June 30,
1997, 10.0% and graded down to 5.5% over 12 years at June 30, 1996 and 13.2% and
graded down to 6.4% over 13 years at June 30, 1995. If the current health care
cost trend rate assumption was increased by one percent, the APBO as of June 30,
1997, would increase approximately $558,000, or 10.5%, while the periodic cost
for the Fiscal year ended June 30, 1997, would have increased approximately
$64,800, or 11.2%.
(9) PENSION PLANS
During the quarter ended December 31, 1996, the level of lump sum
distributions made to participants in the Company's defined benefit pension plan
caused a partial pension plan settlement, resulting in the recognition of a
pre-tax pension settlement gain of $429,000. As virtually all of these
distributions were accrued as part of a purchase price allocation in connection
with the Merger, the settlement gain was accounted for as a reduction of
goodwill which arose as part of the Merger.
Prior to January 1, 1997, the Operating Company had both a defined benefit
and a defined contribution plan which covered substantially all domestic
employees. The Operating Company's funding policy was to contribute annually to
the defined benefit plan the amount deductible for income tax purposes. No
contributions were made in 1997, 1996, or 1995. The Operating Company's matching
contributions to the defined contribution plan are determined at the discretion
of its Board of Directors. No matching contributions were made in the year ended
June 30, 1997, 1996 or 1995 to the defined contribution plan.
Effective January 1, 1997, amendments to the Operating Company's defined
benefit pension plan were adopted, including the elimination of the accrual of
future benefits under the plan. As a result of these amendments, and the
corresponding remeasurement of the accumulated and projected benefit obligations
under the plan, a pre-tax pension curtailment gain of $2.7 million as well as a
pre-tax settlement gain of $0.5 million were recognized in income as a reduction
in selling, general and administrative costs. The Operating Company has
established a new 401(k) savings plan for all of its eligible employees to
replace the defined benefit pension plan.
Benefits under the defined benefit plan are based on the employee's age,
years of service, and the highest consecutive five-year average compensation.
Pension expense, including administrative costs, charged to the operations
for the above-mentioned plans amounted to $370,000, $903,000 and $491,000 in the
year ended June 30, 1997, 1996 and 1995, respectively.
Plan assets for the defined benefit plan consist of investments in common
stock, real estate properties, fixed income securities, and short-term
investments. Pension expense for the defined benefit plan in 1997, 1996 and 1995
was computed as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost.............................................. $ 299 $ 616 $ 360
Interest cost............................................. 546 820 387
Actual gain on plan assets................................ (495) (1,434) (566)
Net amortization and deferral............................. 20 901 310
------- ------- -----
Net Periodic Pension expense.............................. 370 903 491
Settlement gain........................................... (936) -- --
Curtailment gain.......................................... (2,665) -- --
------- ------- -----
Total Pension Cost / (Gain)............................... $(3,231) $ 903 $ 491
======= ======= =====
</TABLE>
F-15
<PAGE> 33
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(9) PENSION PLANS -- CONTINUED
At June 30, 1997 and 1996 the funded status of the defined benefit plan was
as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Actuarial present value of:
Vested benefit obligations................................ $ 2,457 $ 6,136
Nonvested benefit obligations............................. 573 840
------- -------
Accumulated benefit obligations........................... 3,030 6,976
======= =======
Projected benefit obligations............................... 3,144 10,653
Plan assets at fair value................................... (2,562) (5,780)
------- -------
Projected benefit obligations in excess of plan assets...... 582 4,873
Unrecognized net gain....................................... 1,272 212
------- -------
Total accrued pension obligations........................... $ 1,854 $ 5,085
======= =======
</TABLE>
For the period July 1, 1995 through March 1, 1996, the weighted average
discount rate was 7.75% preretirement and 6% postretirement for those
participating in the defined benefit plan on November 1, 1976, and 7.75% for all
others. For any benefits accrued after March 1, 1996, the weighted average
discount rate was 7.75% for both preretirement and postretirement for all plan
participants. For the year ended June 30, 1995, the weighted average discount
rate was 8.5% preretirement and 6% postretirement for those participating in the
defined benefit plan on November 1, 1976, and 8.5% for all others. The discount
rate used to calculate the projected benefit obligation at June 30, 1996 was
decreased to 7.5%. The discount rate used to calculate the projected benefit
obligation at June 30, 1997 was decreased to 7.0% for the period January 1, 1997
through June 30, 1997. The rate of increase in future compensation levels was
5.0% and the expected long-term rate of return on assets was 9.0%.
At June 30, 1995 the calculated projected benefit obligation assumed that
certain employees of FTD Association, who were formerly employees of the
Operating Company, were active plan participants continuing to earn benefits.
Subsequent to June 30, 1995, the status of FTD Association employees was changed
to vested terminated participants who were due a lump sum under the plan
agreement and, accordingly, the calculated projected benefit obligation was
increased by $734,000.
(10) NOTE RECEIVABLE AND OTHER RELATED PARTY TRANSACTIONS
Operating expenses for the years ended June 30, 1997, 1996 and 1995 include
$1,000,000 payable each period to certain investors of the Company for
management consulting services.
An agreement with a former officer of the Company ("Agreement") provided,
among other things, for the sale of 127,500 shares of Common Stock of the
Company at the assumed fair market value on the agreement date of $4.71 per
share. A portion of such purchase was financed through (i) a $100,000 one-year,
interest-free loan from the Company, and (ii) a $150,000 interest-bearing
recourse loan from the Company due June 30, 1996. The interest-free loan was
forgiven in its entirety by June 30, 1996 and was recorded as compensation
expense by the Operating Company in the amount of $97,000 for the year ended
June 30, 1996. The outstanding principal balance of the interest-bearing
recourse loan accrued interest at 9%. At June 30, 1996, $128,419 was outstanding
from these notes.
In November 1996, options for 255,000 shares of Class A Common Stock issued
to such former officer pursuant to the FTD Corporation 1994 Stock Award and
Incentive Plan were canceled. Also in November 1996, $128,419 and owing under
the $150,000 recourse loan was forgiven by the Operating Company. The Company
during the third quarter repurchased 45,689 shares of Class A Common Stock for
$241,898 from such former officer.
F-16
<PAGE> 34
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(10) NOTE RECEIVABLE AND OTHER RELATED PARTY TRANSACTIONS -- CONTINUED
The Company loaned an officer of the Company $150,000 pursuant to a five
year interest bearing note dated June 30, 1997, with accrued interest at 7% per
annum with principal due at maturity.
The Company and the Operating Company, pursuant to an employment
arrangement the current president was granted Non-Qualified Stock Options to
purchase (i) 60,000 shares of Class A Common Stock at an exercise price of $7.50
per share and (ii) 50,000 shares of Class A Common Stock at an exercise price of
$25.00 per share.
(11) 1994 STOCK AWARD AND INCENTIVE PLAN
The Company's 1994 Stock Award and Incentive Plan (the "Plan") was adopted
by the Board of Directors of the Company and approved by the Company's
stockholders on December 19, 1994, and amended on June 12, 1995. The maximum
number of shares of Common Stock authorized for issuance under the Plan is equal
to 15% of the initial equity capital of the Company upon the consummation of the
Merger.
The Plan provides for the granting of incentive stock options ("ISOs");
options which do not qualify as ISOs, known as nonqualified stock options
("NSOs"); or a combination of both ISOs and NSOs ("Options"), provided, however,
that ISOs may only be granted to employees of the Company and its subsidiaries.
Options granted under the Plan may be accompanied by stock appreciation rights
("SARs") or limited stock appreciation rights ("LSARs"), or both ("Rights"). The
Plan also provides for the granting of restricted stock, deferred stock, and
performance shares (together, referred to as "Restricted Awards"). The Plan is
not subject to any provisions of the Employee Retirement Income Security Act of
1974, as amended, nor is the Plan a qualified plan within the meaning of section
401(a) of the Internal Revenue Code of 1986, as amended.
Under the Agreement (see Note 10), a former officer was issued options in
Fiscal 1995 to purchase: (i) at an exercise price of $4.71 per share, 127,500
shares of the Company's Common Stock; and (ii) at an exercise price of $18.84
per share, 127,500 shares of the Company's Common Stock. During the year ended
June 30, 1995, another senior officer of the Company was granted options to
purchase: (i) at an exercise price of $4.71 per share, 40,000 shares of the
Company's Common Stock; and (ii) at an exercise price of $18.84 per share,
40,000 shares of the Company's Common Stock. As of June 30, 1995, options
covering 335,000 shares of the Class A Common Stock were outstanding, of which
none were exercisable.
During the year ended June 30, 1996, other senior officers were granted
options to purchase: (i) at an exercise price of $5.35 per share, 75,000 shares
of the Company's Common Stock; and (ii) at an exercise price of $21.40 per
share, 100,000 shares of the Company's Common Stock. During the year ended June
30, 1997, other employees have been granted options to purchase: (i) at an
exercise price of $7.50 per share, 163,500 shares of the Company's Common Stock;
and (ii) at an excercise price of $25.00 per share, 91,500 shares of the
Company's Common Stock. These options vest and become exercisable in four or
five equal installments. As of June 30, 1997 and 1996, options covering 217,000
and 430,000 shares respectively of Class A Common Stock were outstanding of
which 7,500 and 51,000 shares were vested, respectively and none were exercised.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for the Plan and accordingly, no compensation cost has been
recognized for the Plan. Had compensation cost for the Plan been determined
based on the fair value at the grant dates for options under the Plan consistent
with SFAS
F-17
<PAGE> 35
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(11) 1994 STOCK AWARD AND INCENTIVE PLAN -- CONTINUED
No. 123, the Company's net income and earnings per share would have been reduced
to the Pro Forma amounts shown in the table below:
PRO FORMA RESULTS
<TABLE>
<CAPTION>
1997 1997 1996 1996
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net Loss (in thousands)................... $(1,733) $(2,051) $(6,728) $(7,121)
Earnings per share:
Primary................................. $ (0.23) $ (0.27) $ (1.01) $ (1.07)
Fully Diluted........................... $ (0.23) $ (0.27) $ (1.01) $ (1.07)
</TABLE>
The pro forma disclosures shown are not representative of the future
effects on net earnings and earnings per share because the retroactive
application of SFAS No. 123 is prohibited.
The fair values of the options granted under the Plan during Fiscal 1997
and 1996 were determined at the grant date using the Black-Scholes option
pricing model. The significant assumptions used to calculate the fair value of
option grants were: risk-free interest rates ranging from 6.19% to 6.37%,
expected volatility of 50%, expected lives of 3.07 to 5.05 years and no expected
dividends for the shares.
SUMMARY STOCK OPTION ACTIVITY
<TABLE>
<CAPTION>
CLASS A WEIGHTED AVERAGE
# OF OPTIONS EXERCISE $
------------ ----------------
<S> <C> <C>
Outstanding @ December 19, 1994............................ -- --
Granted.................................................. 335,000 $11.78
------- -------
Outstanding @ June 30, 1995................................ 335,000 11.78
Granted.................................................. 175,000 14.52
Canceled................................................. 80,000 11.78
------- -------
Outstanding @ June 30, 1996................................ 430,000 12.89
Granted.................................................. 255,000 13.78
Canceled................................................. 468,000 2.88
------- -------
Outstanding @ June 30, 1997................................ 217,000 13.96
======= =======
Exercisable @ June 30, 1997................................ 7,500 $ 5.35
Weighted Average of Fair Value of options granted in Fiscal
1997..................................................... $ 2.29
Weighted Average of Fair Value of options granted in Fiscal
1996..................................................... $ 3.26
</TABLE>
STOCK OPTIONS OUTSTANDING
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
CLASS A OPTIONS EXERCISE WEIGHTED AVERAGE REMAINING
OUTSTANDING PRICE (RANGE) EXERCISE $ CONTRACTUAL LIFE
- --------------- ------------- ---------------- ----------------
<C> <C> <C> <C>
132,000 $ 5.35 - 7.50 $ 7.26 9.57 years
85,000 21.40 - 25.00 24.36 9.45 years
------- -------------- ------- ----------
217,000 $ 5.35 - 25.00 $13.96 9.52 years
======= ============== ======= ==========
</TABLE>
F-18
<PAGE> 36
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(12) COMMITMENTS AND CONTINGENCIES
On July 16, 1997, Teleflora LLC ("Teleflora") instituted an arbitration
against FTD in Southfield, Michigan. The arbitration was filed under the
Commercial Arbitration Rules of the American Arbitration Association alleging
that FTD breached a 1991 Agreement by which FTD provides certain Mercury Network
services to Teleflora (the "1991 Agreement"). The specific claim is that FTD has
failed to negotiate in good faith a new contract on expiration of the 1991
Agreement as required by its terms. Unspecified damages are alleged. FTD has
filed an answering statement that denies the allegations. FTD management
believes that it has meritorious defenses to this action and intends to contest
Teleflora's allegations vigorously. An adverse decision could have a material
adverse effect on the Company's financial position and results of operations.
On July 21, 1997, Teleflora filed a complaint against FTD in United States
District Court for the Central District of California. On August 7, 1997,
Teleflora filed a first amended and supplemental complaint in that action. The
first amended and supplemental complaint contains six counts alleging
monopolization and attempted monopolization in violation of Section 2 of the
Sherman Act, discriminatory pricing violation of Section 2 of the Clayton Act,
unfair competition in violation of California Business and Professions Code
Sections 17200 et seq., and a claim for breach of contract. The allegations
pertain to the 1991 Agreement. Teleflora seeks compensatory and treble damages,
and declaratory relief and have moved for a preliminary injunction. FTD
management believes that it also has meritorious defenses to this action and
intends to contest Teleflora's allegations vigorously. An adverse decision could
have a material adverse effect on the Company's financial position and results
of operations.
The Company is involved in various lawsuits and other matters arising in
the normal course of business. In the opinion of the management of the Company,
although the outcomes of these claims and suits are uncertain, they should not
have a material adverse effect on the Company's financial condition, liquidity,
or results of operations.
(13) CAPITAL STOCK
Class A and non-voting class B Common Stock rank equally and, except with
respect to voting power, are substantially identical in all material respects.
Class B Common Stock is convertible into Class A Common Stock on a one-to-one
basis.
The Company is authorized to establish and designate one or more series of
preferred stock.
Pursuant to the Merger Agreement, on July 5, 1995, the Company sold 658,483
shares of Class A Common Stock at a price of $5.35 to certain members of FTD
Association. The Company concurrently repurchased 552,239 shares of Class A
Common Stock and two shares of Class B Common Stock from existing stockholders
on a pro rata basis and recouped the costs associated with a previous purchase
of treasury stock.
Effective September 21, 1995, the stockholders of the Company, in an
unanimous Action by Written Consent, authorized a change in the par value of the
Class B Common Stock from $0.01 to $0.0005 per share.
Ninety thousand warrants were exercised in May, 1996 to purchase 1,125,000
shares of Class B Common Stock at a price of $0.01 per warrant, each of which
bought 12.5 shares of Class B Common Stock.
During Fiscal 1997 the Company repurchased into treasury 65,043 shares of
Class A Common Stock at a cost of approximately $358,000.
F-19
<PAGE> 37
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(14) QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (IN THOUSANDS, EXCEPT FOR PER
SHARE DATA):
<TABLE>
<CAPTION>
FISCAL 1997 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
----------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net Revenue....................... $37,068 $41,640 $47,841 $36,034
Income from Operations............ 2,403 1,417 6,742 (54)
Net Income (Loss)................. (548) (1,162) 2,270 (2,293)
Net Income (Loss) Per Common
Share:
Primary......................... $ (.07) $ (.15) $ .30 $ (.30)
Fully Diluted................... $ (.07) $ (.15) $ .30 $ (.30)
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1996 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
----------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net Revenue....................... $36,536 $45,865 $44,794 $39,060
Income from Operations............ 3,657 (1,463) 2,343 (1,044)
Net Income (Loss)................. 107 (3,067) (627) (3,141)
Net Income (Loss) Per Common
Share:
Primary......................... $ .01 $ (.43) $ (.09) $ (.47)
Fully Diluted................... $ .01 $ (.43) $ (.09) $ (.47)
</TABLE>
F-20
<PAGE> 38
KPMG LETTERHEAD
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
The Board of Directors
FTD Corporation:
We have audited and reported separately herein on the financial statements
of FTD Corporation as of and for the years ended June 30, 1997 and 1996.
Our audits were made for the purpose of forming an opinion on the basic
financial statements of the Company taken as a whole. The supplementary
information included in Schedule II is presented for purposes of additional
analysis and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ KPMG PEAT MARWICK LLP
August 14, 1997
Detroit, Michigan
F-21
<PAGE> 39
FTD CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
--------------------------
BALANCE CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COST AND OTHER END OF
PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
------------ ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR 1996
Allowance for doubtful accounts (shown as
deduction from Accounts Receivable in
balance sheet)......................... $1,589 $ 895 $80(a) $1,152(b) $1,412
Inventory valuation reserve (included in
Inventories, net in balance sheet)..... $ 345 $1,325 -- $1,276(c) $ 394
YEAR 1997
Allowance for doubtful accounts (shown as
deduction from Accounts Receivable in
balance sheet)......................... $1,412 $1,105 $75(a) $ 381(b) $2,211
Inventory valuation reserve (included in
Inventories, net in balance sheet)..... $ 394 $1,363 -- $ 52(c) $1,705
</TABLE>
- -------------------------
(a) Collection of accounts previously written off
(b) Uncollectible accounts written off
(c) Valuation writedown
F-22
<PAGE> 40
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- ------- ----------------------- ------
<S> <C> <C>
</TABLE>
3.1 Restated Certificate of Incorporation of the Registrant.
3.2 Bylaws of the Registrant.
4.1 Indenture, dated as of December 1, 1994 (the "Indenture"),
by and between Florists' Transworld Delivery, Inc. and First
Trust of New York, National Association, as Trustee.
(Incorporated by reference to Exhibit 4.1 of the Florists'
Transworld Delivery, Inc. Registration Statement on Form S-1
(File No. 33-88628) (the "FTDI S-1").)
4.2 Supplemental Indenture, dated as of December 19, 1994, to
the Indenture. (Incorporated by reference to Exhibit 4.3 of
the FTDI S-1.)
4.3 Form of Subscription Agreement among FTD and certain
stockholders of FTD. (Incorporated by reference to Exhibit
4.3 of Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form S-1 (File No. 33-91582) (the
"FTD S-1").
10.1 Credit Agreement, dated as of December 19, 1994, among the
Registrant, Florists' Transworld Delivery, Inc., the various
lending institutions party thereto and Bankers Trust
Company, as Agent. (Incorporated by reference to Exhibit
10.1 of the FTDI S-1.)
10.2 First Amendment to Credit Agreement, dated as of August 30,
1995, among the Registrant, Florists' Transworld Delivery,
Inc., the lending institutions party to the Credit Agreement
and Bankers Trust Company, as Agent. (Incorporated by
reference to Exhibit 10.1(b) of the Florists' Transworld
Delivery, Inc. Annual Report on Form 10-K for fiscal year
ended June 30, 1995.)
10.3 Second Amendment to Credit Agreement, dated as of June 11,
1996, among the Registrant, Florists' Transworld Delivery,
Inc., the lending institutions party to the Credit Agreement
and Bankers Trust Company, as Agent. (Incorporated by
reference to Exhibit I(d) of the Registrant's Registration
Statement on Form 8-A, filed August 28, 1996.)
10.4 Third Amendment to Credit Agreement, dated as of November
21, 1996, among the Registrant, Florists' Transworld
Delivery, Inc., the lending institutions party to the Credit
Agreement and Bankers Trust Company, as Agent. (Incorporated
by reference to Exhibit 10(b) of the Registrant's Form 10-Q,
filed December 31, 1996.)
10.5 Pledge Agreement, dated December 19, 1994, by and among the
Registrant, Florists' Transworld Delivery, Inc., FTD
Holdings, Incorporated, FTD Direct Access, Inc., Directory
Advertising, Inc. and Bankers Trust Company, as Agent.
(Incorporated by reference to Exhibit 10.2 of the FTDI S-1.)
10.6 Security Agreement, dated December 19, 1994, by and among
the Registrant, Florists' Transworld Delivery, Inc., certain
subsidiaries of the Registrant and Bankers Trust Company, as
Agent. (Incorporated by reference to Exhibit 10.3 of the
FTDI S-1.)
10.7* Consultation Agreement and Covenant Not to Compete, dated as
of August 2, 1994, by and between Florists' Transworld
Delivery, Inc. and John A. Borden. (Incorporated by
reference to Exhibit 10.8 of the FTDI S-1.)
10.8 Mutual Support Agreement, dated as of December 18, 1994, by
and between Florists' Transworld Delivery, Inc. and FTD
Association. (Incorporated by reference to Exhibit 10.9 of
the FTDI S-1.)
10.9 Supplement to Mutual Support Agreement, dated as of January
11, 1996, by and between Florists' Transworld Delivery, Inc.
and FTD Association.
i
<PAGE> 41
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- --------- ----------------------------------------------------------------------------------------------- ---------
<S> <C> <C>
10.10 Trademark License Agreement, dated as of December 18, 1994, by and between Florists' Transworld
Delivery, Inc. and FTD Association. (Incorporated by reference to Exhibit 10.10 of the FTDI
S-1.)
10.11 Securityholders' and Registration Rights Agreement, dated as of December 19, 1994, among the
Registrant, Florists' Transworld Delivery, Inc., BT Securities Corporation and Montgomery
Securities. (Incorporated by reference to Exhibit 10.11 of FTD S-1.)
10.12 Tax Sharing Agreement, dated as of December 19, 1994, between the Registrant and Florists'
Transworld Delivery, Inc. (Incorporated by reference to Exhibit 10.12 of the FTDI S-1.)
10.13 Stockholders' Agreement, dated as of December 19, 1994, among the Registrant and certain
stockholders of the Registrant. (Incorporated by reference to Exhibit 10.13 of the FTD S-1.)
10.14* FTD Corporation 1994 Stock Award and Incentive Plan (Incorporated by reference to Exhibit 10.14
of the FTD S-1).
10.15* Letter dated October 17, 1996 regarding Norton employment arrangements.
10.16* Letter dated June 6, 1997, amending Norton employment arrangements.
10.17* Description of Key Management Incentive Plan (Incorporated by reference to Exhibit 10.b of the
Operating Company's Form 10-Q, filed March 31, 1997.)
10.18* Promissory Note, dated June 30, 1997, made by Scott D. Levin.
11.1 Computation of Earnings Per Share.
21.1 Subsidiaries of the Registrant. (Incorporated by reference to Exhibit 21.1 of the FTD S-1.)
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* Management contract or compensatory plan arrangement required to be filed as
an Exhibit to the Form 10-K pursuant to Item 14(a)3.
ii
<PAGE> 1
EXHIBIT 3.1
<PAGE> 2
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
FTD CORPORATION
------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
------------------------------------
FTD CORPORATION, a Delaware corporation (hereinafter called the
"Corporation"), does hereby certify as follows:
FIRST: The first paragraph of Article FOURTH of the Corporation's
Restated Certificate of Incorporation is hereby amended to read in its entirety
as set forth below:
FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 34,000,000
shares, consisting of (i) 30,000,000 shares of Class A Common Stock,
par value $.01 per share ("Class A Common Stock"), (ii) 3,000,000
shares of Class B Common Stock, par value $.01 per share ("Class B
Common Stock"), and (iii) 1,000,000 shares of Preferred Stock, par
value $.01 per share ("Preferred Stock"). The Class A Common Stock
and Class B Common Stock are collectively referred to herein as
"Common Stock."
SECOND: The foregoing amendment was duly adopted in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be duly
executed in its corporate name this 31st day of May, 1995.
FTD CORPORATION
By: -------------------------
Name: Veronica K. Ho
Title: Vice President
PAGE 1 of 13
<PAGE> 3
State of Delaware
Office of the Secretary of State
----------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "PERRY CAPITAL CORP.", CHANGING ITS NAME FROM "PERRY CAPITAL CORP." TO "FTD
CORPORATION", FILED IN THIS OFFICE ON THE SEVENTEENTH DAY OF MAY, A.D. 1995, AT
12:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7508774
DATE: 05-17-95
PAGE 2 of 13
<PAGE> 4
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
PERRY CAPITAL CORP.
------------------------------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
------------------------------------
Perry Capital Corp., a Delaware corporation (hereinafter called the
"Corporation"), does hereby certify as follows:
FIRST: Article FIRST of the Corporation's Certificate of Incorporation is
hereby amended to read in its entirety as set forth below:
FIRST: The name of the corporation is FTD Corporation
(hereinafter the "Corporation").
SECOND: The foregoing amendment was duly adopted in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly
executed in its corporate name this 10th day of May, 1995.
Perry Capital Corp.
By: -------------------------
Name: Gary K. Silberberg
Title: Vice President
PAGE 3 of 13
<PAGE> 5
State of Delaware
Office of the Secretary of State
----------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"PERRY CAPITAL CORP.", FILED IN THIS OFFICE ON THE NINETEENTH DAY OF DECEMBER,
A.D. 1994, AT 8:30 O'CLOCK A.M.
------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7496487
DATE: 05-05-95
PAGE 4 of 13
<PAGE> 6
RESTATED CERTIFICATE OF INCORPORATION
OF
PERRY CAPITAL CORP.
Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware (the "DGCL"), Perry Capital Corp., a Delaware corporation
(the "Corporation"), does hereby certify that the Corporation was organized in
the State of Delaware on March 8, 1993 under that same name and that the
Certificate of Incorporation is hereby amended and restated to read in its
entirety as follows:
FIRST: The name of the Corporation is Perry Capital Corp.
SECOND: The address of the registered office of the Corporation
in the State of Delaware is 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which a corporation may be organized under the DGCL as set
forth in Title 8 of the Delaware Code.
FOURTH: The total number of shares of all classes of stock which
the Corporation shall have the authority to issue is 5,000,000 shares,
consisting of (i) 3,000,000 shares of Class A Common Stock, par value $.01 per
share ("Class A Common Stock"), (ii) 1,000,000 shares of Class B Common Stock,
par value $.01 per share ("Class B Common Stock"), and (iii) 1,000,000 shares
of Preferred Stock, par value $.01 per share ("Preferred Stock"). The Class A
Common Stock and Class B Common Stock are collectively referred to herein as
"Common Stock."
The designations, powers, preferences and relative participating, optional
or other special rights and the qualifications, limitations and restrictions
thereof in respect of each class of capital stock of the Corporation are as
follows:
A. COMMON STOCK
Except as otherwise provided in this Article FOURTH, the Class A Common
Stock and the Class B Common Stock shall have the same rights and privileges
and shall rank equally, share ratably and be identical in all respects as to
all matters and shall be treated as one class of stock.
1. Dividends.
PAGE 5 of 13
<PAGE> 7
Subject to the provisions of law and the rights of the holders of
Preferred Stock and any other class or series of stock at the time outstanding
having prior rights as to dividends or upon the distribution of any assets, the
holders of shares of Common Stock shall be entitled to receive, when and as
declared by the Board of Directors of the Corporation (the "Board of
Directors"), out of the assets of the Corporation legally available therefore,
such dividends as may be declared from time to time by the Board of Directors;
provided, however, that (i) if dividends are declared which are payable in
shares of Class A Common Stock or Class B Common Stock, dividends shall be
declared which are payable at the same rate on both classes of stock and the
dividends payable in shares of Class A Common Stock shall be payable to holders
of Class A Common Stock and the dividends payable in shares of Class B Common
Stock shall be payable to holders of Class B Common Stock and (ii) if the
dividends consist of other voting securities of the Corporation, the
Corporation shall make available to each holder of Class B Common Stock, at
such holder's request, dividends consisting of non-voting securities of the
Corporation which are otherwise identical to the voting securities and which
are convertible into or exchangeable for such voting securities on the same
terms as the Class B Common Stock is convertible into Class A Common Stock.
2. Voting Rights.
Except as otherwise required by law or as set forth in Article FOURTH,
Section A.7, with respect to all matters upon which stockholders are entitled
to vote or to which stockholders are entitled to give consent, (i) the holders
of the outstanding shares of the Class A Common Stock shall be entitled to cast
thereon one (1) vote in person or by proxy for each share of the Class A Common
Stock standing in such holder's name and (ii) the holders of the outstanding
shares of the Class B Common Stock shall not be entitled to cast any vote,
either by class or in common with the Class A Common Stock, in respect of the
outstanding shares of the Class B Common Stock standing in such holder's name.
3. Conversion.
3A. Conversion of Class B Common Stock.
(i) Each holder of Class B Common Stock shall be entitled to convert
into the same number of shares of Class A Common Stock any and all of the
shares of such holder's Class B Common Stock at any time, except that no such
shares of Class B Common Stock originally issued by the Corporation to a bank
holding company or an affiliate of a bank holding company shall be converted
into shares of Class A Common Stock by the original holder or any direct or
indirect transferee thereof, unless such shares are being distributed, disposed
of or sold in any one of the following transactions (each a "Conversion
Event"):
(a) such shares of Class B Common Stock are being sold in any
public offering of such shares registered under the Securities Act of
PAGE 6 of 13
<PAGE> 8
1933 or a public sale pursuant to Rule 144 of the Securities and
Exchange Commission or any similar rule then in force;
(b) such shares of Class B Common Stock are being sold
(including by virtue of a merger, consolidation or similar transaction
involving the Corporation) to a person or group of persons (within the
meaning of the Securities Exchange Act of 1934, as amended (the "1934
Act")) if, after such sale, such person or group of persons in the
aggregate would own or control securities of the Corporation which
possess in the aggregate the ordinary voting power to elect a majority
of the Corporation's directors (provided that such sale has been
approved by the Corporation's Board of Directors or a committee
thereof);
(c) such shares of Class B Common Stock are being sold
(including by virtue of a merger, consolidation or similar transaction
involving the Corporation) to a person or group of persons (within the
meaning of the 1934 Act) if, after such sale, such person or group of
persons in the aggregate would own or control securities of the
Corporation (excluding any Class B Common Stock converted and disposed
of in connection with such Conversion Event) which possess in the
aggregate the ordinary voting power to elect a majority of the
Corporation's directors; and
(d) such shares of Class B Common Stock are being sold to a
person or group of persons (within the meaning of the 1934 Act) if,
after such sale, such person or group of persons in the aggregate would
not own, control or have the right to acquire more than two percent of
the outstanding securities of any class of voting securities of the
Corporation.
For purposes of this paragraph 3A, "person" shall include any natural person
and any corporation, partnership, joint venture, trust, unincorporated
organization and any other entity or organization.
(ii) Each holder of Class B Common Stock shall be entitled to
convert shares of Class B Common Stock in connection with any Conversion Event
if such holder reasonably believes that such Conversion Event will be
consummated, and a written request for conversion from any holder of Class B
Common Stock to the Corporation stating such holder's reasonable belief that a
Conversion Event will occur shall be conclusive and shall obligate the
Corporation to effect such conversion in a timely manner so as to enable each
such holder to participate in such Conversion Event. The Corporation will not
cancel the shares of Class B Common Stock so converted before the tenth day
following such Conversion Event and will reserve such shares until such tenth
day for reissuance in compliance with the next sentence. If any shares of
Class B Common Stock are converted into shares of Class A Common Stock in
connection with a Conversion Event and such shares of Class A Common Stock are
not actually distributed, disposed of or sold pursuant to such Conversion Event,
such shares of Class A Common Stock shall be promptly converted back into the
same number of shares of Class B Common Stock.
PAGE 7 of 13
<PAGE> 9
3B. Conversion Procedure.
(i) Unless otherwise provided in connection with a Conversion
Event, each conversion of shares shall be effected by the surrender of the
certificates or certificates representing the shares to be converted at the
principal office of the Corporation at any time during normal business hours,
together with a written notice by the holder of Class B Common Stock stating
that such holder desires to convert the shares, or a stated number of the
shares, of such Class B Common Stock represented by such certificate or
certificates into shares of Class A Common Stock. Unless otherwise provided in
connection with a Conversion Event, each conversion shall be deemed to have
been effected as of the close of business on the date on which such certificate
or certificates have been surrendered and such notice has been received, and at
such time the rights of the holder of the converted Class B Common Stock as
such holder shall cease and the person or persons in whose name or names the
certificate or certificates for shares of Class A Common Stock are to be issued
upon such conversion shall be deemed to have become the holder or holders of
record of the shares of Class A Common Stock represented thereby. In
connection with any such conversion of shares of Class B Common Stock, the
holder proposing to effect the conversion shall provide to the Corporation a
certificate confirming that the conversion satisfies the requirements set forth
in paragraph 3A.
(ii) Promptly after the surrender of certificates and the receipt
of written notice, the Corporation shall issue and deliver in accordance with
the surrendering holder's instructions (a) the certificate or certificates for
the Class A Common Stock issuable upon such conversion and (b) a certificate
representing any Class B Common Stock which was represented by the certificate
or certificates delivered to the Corporation in connection with such conversion
but which was not converted.
(iii) The issuance of certificates for Class A Common Stock upon
conversion of Class B Common Stock will be made without charge to the holders
of such shares for any issuance tax in respect thereof or other cost incurred
by the Corporation in connection with such conversion and the related issuance
of Class A Common Stock; provided, however, that if any such certificate is to
be issued in a name other than that of the holder of the share or shares of
Class B Common Stock converted, the person or persons requesting the issuance
thereof shall pay to the Corporation the amount of any tax that may be payable
in respect of any transfer involved in such issuance or shall establish to the
satisfaction of the Corporation that such tax has been paid.
(iv) 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 issuance upon the conversion of the Class B Common Stock, such
number of shares of Class A Common Stock issuable upon the conversion of all
outstanding shares of Class B Common Stock. All shares of Class A Common Stock
which arc so issuable shall, when issued, be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens and charges. The
Corporation shall take all such actions as may be necessary to assure that all
such shares of Class A Common Stock may be issued without
PAGE 8 of 13
<PAGE> 10
violation of any applicable law or governmental regulation or any requirements
of any domestic securities exchange upon which shares of Common Stock may be
listed (except for official notice of issuance, which will be immediately
transmitted by the Corporation upon issuance).
(v) The Corporation shall not close its books against the transfer
of shares of Class A Common Stock in any manner which would interfere with the
timely conversion of any shares of Class B Common Stock.
3C. Stock Splits. If the Corporation in any manner subdivides
or combines the outstanding shares of one class of Common Stock, the
outstanding shares of the other class of Common Stock shall be proportionately
subdivided or combined in a similar manner.
4. Registration of Transfer. The Corporation shall keep at its
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of shares of Common Stock. Upon the surrender
of any certificate representing shares of any class of Common Stock at such
place, the Corporation shall, at the request of the registered holder of such
certificate, execute and deliver a new certificate or certificates in exchange
therefor representing in the aggregate the number of shares of such class
represented by the surrendered certificate, and the Corporation forthwith shall
cancel such surrendered certificate. Each such new certificate will be
registered in such name and will represent such number of shares of such class
as is requested by the holder of the surrendered certificate and will be
substantially identical in form to the surrendered certificate. The issuance of
new certificates shall be made without charge to the holders of the surrendered
certificates for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such issuance; provided, however, that if
any such certificate is to be issued in a name other than that of the holder of
the share or shares of Common Stock surrendered, the person or persons
requesting the issuance thereof shall pay to the Corporation the amount of any
tax that may be payable in respect of any transfer involved in such issuance or
shall establish to the satisfaction of the Corporation that such tax has been
paid.
5. Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder will be
satisfactory) of the ownership and the loss, theft, destruction or mutilation
of any certificate evidencing one or more shares of any class of Common Stock,
and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (provided that if the
holder is a financial institution or other institutional investor its own
agreement will be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
PAGE 9 of 13
<PAGE> 11
6. Notices. All notices referred to herein shall be in writing,
shall be delivered personally or by first class mail, postage prepaid, and
shall be deemed to have been given when so delivered or mailed to the
Corporation at its principal executive offices and to any stockholder at such
holder's address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder).
7. Amendment and Waiver. No amendment or waiver of any
provision of Section A. of this Article FOURTH shall be effective without the
prior approval of the holders of a majority of the then outstanding Class B
Stock voting as a separate class.
B. PREFERRED STOCK
The Board of Directors is expressly authorized to provide for the issuance
of all or any shares of the Preferred Stock in one or more classes or series,
and to fix for each such class or series such voting powers, full or limited,
or no voting powers, and such distinctive designations, preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such class or series and as may be permitted by
the DGCL, including, without limitation, the authority to provide that any such
class or series may be (i) subject to redemption at such time or times and at
such price or prices; (ii) entitled to receive dividends (which may be
cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation, or (iv) convertible into, or exchangeable for, shares of any
other class or classes of stock, or of any other series of the same or any
other class or classes of stock, of the Corporation at such price or prices or
at such rates of exchange and with such adjustments; all as may be stated in
such resolution or resolutions.
FIFTH: The following provisions are inserted for the management
of the business and the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the Corporation
and of its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors.
(2) The number of directors of the Corporation shall be as from
time to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless
the By-Laws so provide. A director shall hold office until the annual
meeting for the year in which his term expires and until his successor
PAGE 10 of 13
<PAGE> 12
shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office.
(3) No director shall be personally liable to the Corporation or
any of its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174
of the DGCL or (iv) for any transaction from which the director derived
an improper personal benefit. Any repeal or modification of this
Article FIFTH by the stockholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation existing
at the time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.
(4) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things as
may be exercised or done by the Corporation, subject, nevertheless, to
the provisions of the DGCL, this Restated Certificate of Incorporation,
and any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any prior
act of the directors which would have been valid if such By-Laws had not
been adopted.
(5) In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make,
alter or repeal the By-laws of the Corporation, subject to the right of
amendment or repeal by the affirmative vote of the holders of a majority
of the combined voting power of the then outstanding shares of capital
stock of the Corporation entitled to vote at any annual meeting or at
any special meeting called for such purpose.
SIXTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor of receivers appointed for this
Corporation under the provisions of Section 291 of the DGCL or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of the DGCL,
order a meeting of the creditors or class of creditors, and/or of the
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths ( 3/4) in value of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the Corporation, as the case may
be, agree to any compromise or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
PAGE 11 of 13
<PAGE> 13
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
SEVENTH: Meetings of stockholders may be held within or without
the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the DGCL)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
NINTH: Any director or the entire board of directors may be
removed, with or without cause, at any time by the holders of a majority of
the shares then entitled to vote at an election of directors, and the vacancy
in the board of directors caused by such removal may be filled by the
stockholders at the time of such removal.
PAGE 12 of 13
<PAGE> 14
IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate
to be executed on its behalf this 19th day of December, 1994.
PERRY CAPITAL CORP.
By:
-------------------------
Name: Richard Perry
Title: President
Attest:
- ------------------------------
Name: Ervin Shindell
Title: Secretary, Perry Capital
PAGE 13 of 13
<PAGE> 1
EXHIBIT 3.2
<PAGE> 2
BY-LAWS
OF
FTD CORPORATION
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Commencing in the year 1996, Annual
Meetings of stockholders shall, unless otherwise provided by the Board of
Directors, be held on the second Tuesday in November in each year if not a
legal holiday, and if a legal holiday, then on the next full business day
<PAGE> 3
following, at 10:00 A.M., at which the stockholders shall elect by a plurality
vote a Board of Directors and transact such other business as may properly be
brought before the meeting. Written notice of the Annual Meeting stating the
place, date and hour of the meeting shall be given to each stockholder entitled
to vote at such meeting not less than ten nor more than sixty days before the
date of the meeting.
No business may be transacted at an Annual Meeting of stockholders, other
than business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors (or
any duly authorized committee thereof), (b) otherwise properly brought before
the Annual Meeting by or at the direction of the Board of Directors (or any
duly authorized committee thereof) or (c) otherwise properly brought before the
Annual Meeting by any stockholder of the Corporation (i) who is a stockholder
of record on the date of the giving of the notice provided for in this Section
2 and on the record date for the determination of stockholders entitled to vote
at such Annual Meeting and (ii) who complies with the notice procedures set
forth in this Section 2.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary
of the Corporation.
<PAGE> 4
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation
not less than sixty days nor more than ninety days prior to the date of the
Annual Meeting: provided, however, that in the event that less than seventy
days' notice or prior public disclosure of the date of the Annual Meeting is
given or made to stockholders, notice by the stockholder in order to be timely
must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the Annual Meeting was
mailed or such public disclosure of the date of the Annual Meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth as to each matter such stockholder proposes to bring before the
Annual Meeting (i) a brief description of the business desired to be brought
before the Annual Meeting and the reasons for conducting such business at the
Annual Meeting, (ii) the name and record address of such stockholder, (iii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such stockholder, (iv) a description of
all arrangements or understandings between such stockholder and any other
person or persons (including their names) in connection with the proposal of
such business by such stockholder and any material interest of such stockholder
in such business and (v) a representation that such stockholder intends to
appear in person or by proxy at the Annual Meeting to bring such business
before the meeting.
<PAGE> 5
No business shall be conducted at the Annual Meeting of stockholders
except business brought before the Annual Meeting in accordance with the
procedures set forth in this Section 2, provided, however, that, once business
has been properly brought before the Annual Meeting in accordance with such
procedures, nothing in this Section 2 shall be deemed to preclude discussion by
any stockholder of any such business. If the Chairman of an Annual Meeting
determines that business was not properly brought before the Annual Meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
Section 3. Special Meetings. Unless otherwise prescribed by law or by
the Restated Certificate of Incorporation, Special Meetings of Stockholders,
for any purpose or purposes, may be called by either the Chairman, if there be
one, or the President and shall be called by any such officer at the request in
writing of a majority of the Board of Directors or at the request in writing of
stockholders owning at least ten percent (10%) of the capital stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting. Written notice of a
Special Meeting stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called shall be given not less than ten
nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
<PAGE> 6
Restated Certificate of Incorporation, the holders of a majority of the capital
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder entitled to vote at the meeting.
Section 5. Voting. Unless otherwise required by law, the Restated
Certificate of Incorporation or these By-Laws, any question brought before any
meeting of stockholders shall be decided by the vote of the holders of a
majority of the voting power of the stock represented and entitled to vote
thereat. Such votes may be cast in person or by proxy but no proxy shall be
voted on or after three years from its date, unless such proxy provides for a
longer period. The Board of Directors, in its discretion, or the officer of
<PAGE> 7
the Corporation presiding at a meeting of stockholders, in his discretion, may
require that any votes cast at such meeting shall be cast by written ballot.
Section 6. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 7. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 6 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of
<PAGE> 8
Directors shall consist of not less than one nor more than fifteen members, the
exact number of which shall initially be fixed by the Incorporator and
thereafter, subject to the terms of the Stockholders' Agreement (as hereinafter
defined), from time to time by the Board of Directors. Except as provided in
Section 2 of this Article, directors shall be elected by a plurality of the
votes cast at Annual Meetings of Stockholders, and each director so elected
shall hold office until the next Annual Meeting and until his successor is duly
elected and qualified, or until his earlier resignation or removal. Any
director may resign at any time upon notice to the Corporation. Directors need
not be stockholders.
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors of the Corporation, except as may
be otherwise provided in the Restated Certificate of Incorporation or a
Certificate of Designation with respect to the right of holders of preferred
stock of the Corporation to nominate and elect a specified number of directors
in certain circumstances. Nominations of persons for election to the Board of
Directors may be made at any Annual Meeting of stockholders (a) by or at the
direction of the Board of Directors (or any duly authorized committee thereof)
or (b) by any stockholder of the Corporation (i) who is a stockholder of record
on the date of the giving of the notice provided for in this Section 1 and on
the record date for the determination of stockholders entitled to vote at such
Annual Meeting and (ii) who complies with the notice procedures set forth in
this Section 1.
<PAGE> 9
In addition to any other applicable requirements, for a nomination to be
made by a stockholder, such stockholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation
not less than sixty days nor more than ninety days prior to the date of the
Annual Meeting; provided, however, that in the event that less than seventy
days' notice or prior public disclosure of the date of the Annual Meeting is
given or made to stockholders, notice by the stockholder in order to be timely
must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the Annual Meeting was
mailed or such public disclosure of the date of the Annual Meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth (a) as to each person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by the person and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
<PAGE> 10
Act"), and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be made by
such stockholder, (iv) a representation that such stockholder intends to appear
in person or by proxy at the Annual Meeting to nominate the persons named in
its notice and (v) any other information relating to such stockholder that
would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to be named as a nominee and to serve
as a director if elected.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Section 1.
If the Chairman of the Annual Meeting determines that a nomination was not
made in accordance with the foregoing procedures, the
Chairman shall declare to the meeting that the nomination was defective and
such defective nomination shall be disregarded.
Section 2. Vacancies. Subject to the terms of the Stockholders'
<PAGE> 11
Agreement, vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and qualified, or until
their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as
are not by statute or by the Restated Certificate of Incorporation or by these
By-Laws directed or required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as may from time to time be determined by
the Board of Directors. Special meetings of the Board of Directors may be
called by the Chairman, if there be one, the President, or any director. Notice
thereof stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before the date of
the meeting, by telephone or telegram on twenty-four (24) hours' notice, or on
such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances.
<PAGE> 12
Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Restated Certificate of Incorporation, these By-Laws or the
Stockholders' Agreement, at all meetings of the Board of Directors, a majority
of the entire Board of Directors shall constitute a quorum for the transaction
of business and the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by the Restated
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if all the members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Restated Certificate of Incorporation or these By-Laws, members
of the Board of Directors of the Corporation, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors
or such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating
<PAGE> 13
in the meeting can hear each other, and participation in a meeting pursuant to
this Section 7 shall constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any absent or disqualified member. Any
committee, to the extent allowed by law and provided in the resolution
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any
<PAGE> 14
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
Section 10. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (ii) the material facts
as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof or the
<PAGE> 15
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
Section 11. Stockholders Agreement. The provisions of Section 2.2(a) and
2.2(b) of the Stockholders' Agreement (the "Stockholders' Agreement"), dated
December 19, 1994, among the Corporation, Perry Acquisition Partners, L.P.,
Bain Capital Fund IV, L.P., Bain Capital Fund IV-B, L.P., Information Partners
Capital Fund, L.P., BCIP Associates, BCIP Trust Associates, L.P., Fleet Growth
Resources, Inc., Chisholm Partners II L.P., Turnberry Partners, L.P. and
Randolph Street Partners (together with the definition's of any and all defined
terms used in such Sections), as the same may be from time to time amended but
only so long as such provisions remain in force, are hereby incorporated into
these By-Laws as if fully set forth herein.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors, in its discretion, may also choose a Chairman of the
Board of Directors (who must be a director) and one or more Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other officers. Any number of
offices may be held by the same person, unless otherwise prohibited by law, the
Restated Certificate of Incorporation or
<PAGE> 16
these By-Laws. The officers of the Corporation need not be stockholders of the
Corporation nor, except in the case of the Chairman of the Board of Directors,
need such officers be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting
held after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation
or removal. Any officer elected by the Board of Directors may be removed at
any time by the affirmative vote of a majority of the Board of Directors,
subject to Section 2.2(b)(ii) of the Stockholders' Agreement. Any vacancy
occurring in any office of the Corporation shall be filled by the Board of
Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the Chairman of the Board, President or any
Vice President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may
<PAGE> 17
deem advisable to vote in person or by proxy at any meeting of security holders
of any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and power incident to
the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the Board
of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. He shall be the Chief Executive
Officer of the Corporation, and except where by law the signature of the
President is required, the Chairman of the Board of Directors shall possess the
same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman of
the Board of Directors shall exercise all the powers and discharge all the
duties of the President. The Chairman of the Board of Directors shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him by these By-Laws or by the Board of Directors.
Section 5. President. The President shall, subject to the control of the
Board of Directors and, if there be one, the Chairman of the Board of
Directors, have general supervision of the business of the Corporation and
shall see that all orders and resolutions of the Board of
<PAGE> 18
Directors are carried into effect. He shall execute all bonds, mortgages,
contracts and other instruments of the Corporation requiring a seal, under the
seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except that the other officers of the
Corporation may sign and execute documents when so authorized by these By-Laws,
the Board of Directors or the President. In the absence or disability of the
Chairman of the Board of Directors, or if there be none, the President shall
preside at all meetings of the stockholders and the Board of Directors. If
there be no Chairman of the Board of Directors, the President shall be the
Chief Executive Officer of the Corporation. The President shall also perform
such other duties and may exercise such other powers as from time to time may
be assigned to him by these By-Laws or by the Board of Directors.
Section 6. Vice Presidents. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice President or the Vice Presidents
if there is more than one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. Each
Vice President shall perform such other duties and have such other powers as
the Board of Directors from time to time may prescribe. If there be no
Chairman of the Board of Directors and no Vice President, the Board of
Directors shall designate the officer of the Corporation who, in the absence of
the President or in the event of the
<PAGE> 19
inability or refusal of the President to act, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. If the Secretary
shall be unable or shall refuse to cause to be given notice of all meetings of
the stockholders and special meetings of the Board of Directors, and if there
be no Assistant Secretary, then either the Board of Directors or the President
may choose another officer to cause such notice to be given. The Secretary
shall have custody of the seal of the Corporation and the Secretary or any
Assistant Secretary, if there be one, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant Secretary.
The Board of Directors may give general authority to any other officer to
affix the seal of the Corporation and to attest the affixing by his signature.
The Secretary shall see that all books, reports, statements, certificates and
other documents and records required by law to be kept or
<PAGE> 20
filed are properly kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall
perform such duties and have such powers as from time to time may be assigned
to them by the Board of Directors, the President, any Vice President, if there
be one, or the Secretary, and in the absence of the Secretary or in the event
<PAGE> 21
of his disability or refusal to act, shall perform the duties of the Secretary,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in
the event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the Corporation.
Section 11. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
<PAGE> 22
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number
of shares owned by him in the Corporation.
Section 2. Signatures. Any or all of the signatures on a certificate may
be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in
<PAGE> 23
such manner as the Board of Directors shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these By-Laws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be canceled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
<PAGE> 24
Section 6. Beneficial Owners. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Restated Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be given
personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law,
the Restated Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto.
<PAGE> 25
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Restated Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting, and may be paid in cash, in property, or in shares of the
capital stock. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
<PAGE> 26
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings other Than
Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall 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, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director or officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
<PAGE> 27
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the Corporation to procure a judgment in its favor by reason of
the fact that he is or was a director or officer of the Corporation, or is or
was a director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification
<PAGE> 28
under this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section 1 or
Section 2 of this Article VIII, as the case may be. Such determination shall
be made (i) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding, or (ii)
if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders. To the extent, however, that a director
or officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was
unlawful, if his action is based on the records or books of account of the
<PAGE> 29
Corporation or another enterprise, or on information supplied to him by the
officers of the Corporation or another enterprise in the course of their
duties, or on the advice of legal counsel for the Corporation or another
enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used in
this Section 4 shall mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise of which such person
is or was serving at the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section 4 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Sections 1
or 2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VIII. The basis of such indemnification by a court
shall be a determination by such court that indemnification of the director or
officer is proper in the circumstances because he has met the applicable
standards of conduct set forth in Sections 1
<PAGE> 30
or 2 of this Article VIII, as the case may be. Neither a contrary
determination in the specific case under Section 3 of this Article VIII nor the
absence of any determination thereunder shall be a defense to such application
or create a presumption that the director or officer seeking indemnification
has not met any applicable standard of conduct. Notice of any application for
indemnification pursuant to this Section 5 shall be given to the Corporation
promptly upon the filing of such application. If successful, in whole or in
part, the director or officer seeking indemnification shall also be entitled to
be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a director
or officer in defending or investigating a threatened or pending action, suit
or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of
any court of competent jurisdiction or otherwise, both as to action in his
<PAGE> 31
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article VIII shall not
be deemed to preclude the indemnification of any person who is not specified in
Sections 1 or 2 of this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether or not
the Corporation would have the power or the obligation to indemnify him against
such liability under the provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer
<PAGE> 32
of such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued. For purposes
of this Article VIII, references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references
to "serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties
on, or involves services by, such director or officer with respect to an
employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
<PAGE> 33
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify any director or
officer in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation. Section 12. Indemnification of
Employees and Agents. The Corporation may, to the extent authorized from time
to time by the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation similar to
those conferred in this Article VIII to directors and officers of the
Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Subject to Article III, Section 1, these By-Laws may be
altered, amended or repealed, in whole or in part, or new By-Laws may be
adopted by the stockholders or by the Board of Directors, provided, however,
that notice of such alteration, amendment, repeal or adoption of new By-Laws be
contained in the notice of such meeting of stockholders or Board of Directors
as the case may be. Subject to the Stockholders' Agreement, all such
amendments must be approved by either the holders of a majority of the voting
power of the outstanding capital stock entitled to vote thereon or by a
majority of the entire Board of Directors then in office.
<PAGE> 34
Section 2. Entire Board of Directors. As used in this Article IX and in
these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no
vacancies.
<PAGE> 1
EXHIBIT 10.9
<PAGE> 2
SUPPLEMENTAL MUTUAL SUPPORT AGREEMENT
-------------------------------------
This Supplemental Agreement made as of this 11th day of January, 1996, by
and between Florists' Transworld Delivery, Inc., a Michigan corporation and the
survivor by merger with Florists' Transworld Delivery Association, a Michigan
non-profit corporation ("FTDI"), and FTD Association, an Ohio non-profit
corporation organized on a membership basis ("FTDA").
This Supplemental Agreement is made for the purpose of modifying the
original Mutual Support Agreement executed between the parties hereto as of
December 18, 1994. The original Mutual Support Agreement is modified as
follows:
1. Section 2.3(a) is amended to read in its entirety as follows:
"(a) FTDA Directors. FTDI may designate up to twenty
percent (20%), but not fewer than two (2), of the members of the Board of
Directors of FTDA. The balance of the members of the Board of Directors of FTDA
shall be elected by the Active Members voting on the basis of one vote for each
such membership interest, provided that regional representation by, and
election of, such directors may be established in accordance with applicable
law."
2. Section 2.4 is amended to read in its entirety as follows:
"2.4 Representation on FTDI Board of Directors. FTDA may
designate up to twenty percent (20%), but no fewer than two (2), of the members
of FTDI's Board of Directors and the boards of directors of any controlled
Affiliates (other than RGC) of FTDI which may operate any portion of the
Businesses."
3. A new Section 2.4.1 (inserted between Sections 2.4 and 2.5) is added
to the Mutual Support Agreement which provides the following:
PAGE 1 0f 7
<PAGE> 3
"2.4.1 No Overlap of Officers
(a) No officer of FTDA shall be an officer of FTDI.
(b) No officer of FTDI shall be an officer of FTDA."
4. Section 3.1(d)(1) is amended to read in its entirety as follows:
"(1) Under FTDA Standards. FTDA agrees that it shall
enforce the FTDA Standards and the other rules and regulations contained in the
FTDA Handbook, to the full extent necessary to maintain and protect the
goodwill associated with the Member Used Intellectual Property, and FTDI hereby
acknowledges that the extent to which FTD enforced its standards prior to the
Merger was sufficient for this purpose. Notwithstanding the foregoing, in the
event a Member's violation pertains to the FTDA Standards (other than with
respect to a FTDA Standard which pertains specifically to a Member's
participation in another wire association), and FTDA fails in the reasonable
opinion of FTDI to discipline said Member as required, FTDI shall have the
right to take whatever action FTDI deems necessary to enforce the FTDA
Standards against said Member, up to and including the imposition of
limitations upon or termination of a Member's access to FTDI's clearinghouse,
communications system and other business operations and/or suspension or
termination of such Member's Trademark Membership License Agreement, it being
understood that such discipline would not extend to that Member's status in
FTDA or access to or other benefits or attributes of FTDA membership (other
than with respect to such Member's access to FTDI's business operations as
referred to above or the use of the Member Used Intellectual Property and the
Trademark Membership License Agreement), provided that in the event a Member's
access to FTDI's clearinghouse, communications system, and other business
operations has been terminated by FTDI and/or the Trademark Membership License
Agreement has been terminated by FTDI, FTDA, at the request of the Member (if
FTDA agrees and reasonably determines that such termination was unreasonable),
may submit such matter to a neutral arbitrator selected by FTDI and FTDA who
shall apply the procedures in Section 7.8 of this Agreement. In the event the
arbitrator determines upon such appeal that a
PAGE 2 0f 7
<PAGE> 4
Member's right to use the clearinghouse, communications system, other business
operations, the Member Used Intellectual Property and the Trademark Membership
License Agreement should be reinstated, and in the event that the Member has
met its financial obligations to FTDI, FTDI shall reinstate the Member. The
decision of the arbitrator shall be deemed to constitute action by FTDI to
maintain the goodwill associated with the Member Used Intellectual Property."
5. Section 3.1 (d)(2) is amended to read in its entirety as follows:
"(2) Under FTDI Standards. FTDA agrees that FTDI shall
have the right to discipline Members for violating the FTDI Standards that
shall be adopted by FTDI for the use of its clearinghouse, communications
system, and other business operations to the extent necessary to ensure proper
usage thereof and payment therefor by Members associated with the Member Used
Intellectual Property, and such discipline may include the imposition of
limitations upon or termination of a Member's access to FTDI's clearinghouse,
communications system, and other business operations and/or suspension or
termination of such Member's Trademark Membership License Agreement, it being
understood that such discipline would not extend to that Member's status in
FTDA or access to or other benefits or attributes of FTDA membership (other
than with respect to such Member's access to FTDI's business operations as
referred to above or the use of the Member Used Intellectual Property and the
Trademark Membership License Agreement), provided that a Member disciplined by
FTDI for violating the FTDI Standards, which discipline results in termination
of a Member's access to FTDI's clearinghouse, communications system, and other
business operations and/or termination of such Member's Trademark Membership
License Agreement, shall have a right of appeal to a neutral arbitrator
selected by FTDI and the Member who shall apply the arbitration procedures
referred to in Section 7.8; provided further, however, that a Member's right of
appeal to an arbitrator under this Section 3.1(d)(2) shall exist only if (i)
FTDA shall determine, in its good faith judgment, that such termination was
unreasonable, and (ii) such termination was not based, in whole or in part,
upon (x) the failure of such Member
PAGE 3 0f 7
<PAGE> 5
to meet its financial obligations to FTDI for a period of 60 consecutive days,
(y) the occurrence of three or more bonafide customer complaints and/or test
order failures within any consecutive 12 month period or (z) the use of FTDI's
clearinghouse, communications system or other business operations or the Member
Used Intellectual Property in a manner determined by FTDI in its good faith
judgment to be inconsistent with FTDI's Standards or the Trademark Membership
License Agreement after delivery of notice thereof to such Member not less than
thirty (30) days prior to such termination and the failure by such Member to
cure such use in such thirty (30) day period. In the event the arbitrator
determines upon such appeal that a Member's right to use the clearinghouse,
communications system, other business operations, the Member Used Intellectual
Property and the Trademark Membership License Agreement should be reinstated,
and in the event that the Member has met its financial obligations to FTDI,
FTDI shall reinstate the Member. The decision of the arbitrator shall be deemed
to constitute action by FTDI to maintain the goodwill associated with the
Member Used Intellectual Property. FTDA agrees that it shall not invoke the
procedures referred to in Section 7.8 hereof to commence an arbitration
proceeding against FTDI with respect to any dispute, controversy or claim
arising out of or relating to this Section 3.1(d)(2) except to the extent that
FTDA determines that the FTDI Standards adopted by FTDI for the use of FTDI's
clearinghouse, communications system, and other business operations are not
necessary to ensure proper usage thereof and payment therefor by Members
associated with the Member Used Intellectual Property."
6. Section 3.1 (m) is amended to read in its entirety as follows:
"(m) FTDA Standards. FTDI shall at all times control the
nature and quality of the Licensees' products and services identified by the
Member Used Intellectual Property. For this purpose FTD hereby appoints FTDA as
FTDI's exclusive agent after the Merger for purposes of establishing and
enforcing the FTDA Standards which shall govern the activities of the Members
and their use of the Member Used Intellectual Property under their respective
Trademark Membership License Agreements with FTDI.
PAGE 4 0f 7
<PAGE> 6
FTDA agrees to establish and enforce quality control standards for Licensees
consistent with the quality control standards enforced by FTD prior to the
Merger and FTD finds on behalf of FTDI that such standards and the quality to
be enforced by FTDA are sufficient to adequately protect the goodwill
associated with the Member Used Intellectual Property and the Members' products
and services. FTDA agrees that the FTDA Standards shall at all times be
sufficient to protect the goodwill associated with the Member Used Intellectual
Property. FTDA wilt notify FTDI of any proposed modification (whether written
or oral, through amendment, addition, deletion or otherwise) of the FTDA
Standards or any of the FTDA Standards not less than sixty (60) days in advance
of the earlier of the proposed notice, announcement or implementation of such
modification, provided that in the event such modification involves a proposed
amendment to FTDA's Code of Regulations pursuant to Section 2(c) or Section
2(d) of Regulation XI thereof, such notice shall be given within three (3) days
after such amendment has been proposed. In the event that FTDI determines in
its good faith judgment that any such proposed modification of the FTDA
Standards could violate FTDA's obligations as set forth in this Section 3.1(m),
FTDI shall be entitled to submit such matter to arbitration as contemplated by
Section 7.8 hereof, and implementation of any such modification shall be
delayed pending the resolution of such controversy pursuant to such Section
7.8."
7. Section 3.1 (o)(i) is amended to read in its entirety as follows:
"(o) Non-Competition. (i)(A) During the term of the
Trademark License Agreement, FTDA agrees it will not carry on, directly or
indirectly, whether alone or in conjunction with any Person, as a holder of an
equity interest exceeding five percent (5%) of the combined equity interest of
any corporation or partnership, or as a principal, agent, or otherwise, or have
a material interest in, advise, lend money (other than in connection with the
purchase of public debt securities or commercial paper) to, guarantee debts or
obligations of or otherwise provide material support or material assistant to
any Person that, directly or indirectly, carries on, any business
PAGE 5 0f 7
<PAGE> 7
activity which is in competition with the Businesses in the United States of
America, in Canada and Mexico, in the countries of the European Union or any
other place in the world where the Businesses are currently conducted, in the
event that such business activity utilizes or proposes to utilize in any way
any portion of the Licensed Intellectual Property.
(B) For a period of fifteen (15) years from the date of this Agreement,
FTDA agrees it will not carry on, directly or indirectly, whether alone or in
conjunction with any Person, as a holder of any equity interest exceeding five
percent (5%) of the combined equity interest of any corporation or partnership,
or as a principal, an agent, or otherwise, or have a material interest in,
advise, lend money (other than in connection with the purchase of public debt
securities or commercial paper) to, guarantee debts or obligations of or
otherwise provide material support or material assistance to any Person that,
directly or indirectly, carries on, any business activity which is in
competition with the Businesses in the United States of America, in Canada and
Mexico, in the countries of the European Union or any other place in the world
where the Businesses are currently conducted.
(C) In the event that FTDA engages in any of the activities contemplated
by clause (B) of this Section 3.1(o)(i) subsequent to the 15-year period, (I)
(x) FTDI shall be entitled in its sole discretion to renegotiate with FTDA the
bases upon which FTDI continues to provide administrative and similar services
to FTDA pursuant to the terms of this Agreement and (y) the obligations of FTDI
under Section 3.1 (i) of this Agreement will terminate immediately and (II) in
the event such activities are carried on within the floral industry, the
obligations of FTDI under Section 3.1 (c)(ii) and (iii) will terminate
immediately."
8. Section 3.1(g) is amended to read in its entirety as follows:
"(g) Direct Orders. After the Merger, FTDI and its
Affiliates will fill all Direct Orders only through FTDI Licensees and will
distribute all Direct Orders through
PAGE 6 0f 7
<PAGE> 8
procedures reasonably established by FTDI from time to time, such procedures in
existence on the date hereof being set forth in Schedule 3.1(g) hereto. Any
changes to the procedures set forth in such schedule shall be made on a
reasonable basis and shall provide for an allocation to FTDI Licensees of
Direct Orders generated by FTDI and its Affiliates on a reasonable and
equitable basis so as to provide an opportunity for all FTDI Licensees which
are qualified under FTDI's Direct Order eligibility qualifications to
participate in filling such Direct Orders. FTDI shall notify FTDA of changes in
the schedule. In the event FTDA believes that such changes are not reasonable
and equitable, it may submit such dispute to arbitration in accordance with the
procedures provided in Section 7.8. In the event the arbitrator determines that
the changes are not reasonable and equitable, the changes shall be discontinued
by FTDI. In the event that FTDI reasonably should conclude that the procedures
in effect are in violation of any third-party patent rights, then: (i) FTDI
shall have no obligation under this or any other agreement to employ or
implement such procedures, and (ii) FTDI shall establish and implement
replacement procedures in accordance with this Section and with the provisions
of Section (p) below to the extent applicable."
IN WITNESS WHEREOF, FTDI and FTDA have caused this Agreement to be duly
executed as of the day and year first above written.
FLORISTS' TRANSWORLD DELIVERY, INC.
By:
-------------------------
Its: President/CEO
-------------
FTD ASSOCIATION
By:
-------------------------
Its: President Elect
---------------
PAGE 7 0f 7
<PAGE> 1
EXHIBIT 10.15
<PAGE> 2
Exhibit 10.15
October 17, 1996
Mr. Robert Norton
220 Foxhollow Drive
Mayfield, Ohio 44124
Dear Bob:
We are thrilled to offer you the position of General Manager of Florists'
Transworld Delivery, Inc. ("FTD"). This letter sets forth the terms of your
employment with FTD.
Duties: Effective October 28, 1996, you will be employed as General Manager of
FTD. You shall have such executive and managerial powers and duties with
respect to FTD as from time to time may be assigned to you by the Board of
Directors of FTD. FTD shall have the right to terminate your employment at any
time, with or without cause, by giving you written notice of the effective date
of termination. FTD shall have no further obligation hereunder from and after
the effective date of termination other than as set forth below under
"Severance."
Base Salary: You will receive a minimum salary at the rate of $275,000 per
year for the period commencing on the effective date of your employment and
ending September 30, 1997. Such salary will be increased to (i) 300,000 for
the one year period ending September 30, 1998 and (ii) $325,000 for the one
year period ending September 30, 1999, in the event that the Level A EBITDA
targets set forth below are met for the fiscal years ending 1997 and 1998,
respectively.
<PAGE> 3
Performance Bonus: You will be entitled to receive from FTD an annual
performance bonus. Any bonus for FTD's fiscal years ending June 30, 1997, 1998
and 1999 will be based upon the EBITDA targets set forth below:
<TABLE>
<CAPTION>
FY END
June 30 Level A Level B Level C
- ------- ------- ------- -------
<S> <C> <C> <C>
1997 $24,500,000 $26,000,000 $28,000,000
1998 $29,600,000 $32,000,000 $34,000,000
1999 $35,600,000 $38,000,000 $40,000,000
</TABLE>
Any bonus will be payable on September 30 of the following fiscal year
(e.g. any bonus based upon the EBITDA target for the fiscal year ending June
30, 1997, will be paid September 30, 1997), provided that you are actively
employed by FTD at the time of payment.
The amount of the bonus to be paid will be as follows:
(i) 35% of your base salary at time of payment, based upon achieving
an EBITDA target level at least equal to Level A but less than Level B;
(ii) 70% of your base salary at the time of payment, based upon
achieving an EBITDA target level at least equal to Level B but less than Level
C; and
(iii) 100% of your base salary at the time of payment, based upon
achieving an EBITDA target level at least equal to Level C.
For FY 1997, $25,000 of the bonus will be guaranteed, provided you are
actively employed by FTD on September 30, 1997.
Benefits: You will be eligible for four weeks vacation and the full menu of
benefits available from FTD.
Stock: At any time within 60 days of the effective date of your employment,
you may purchase up to 30,000 shares of the Class A Common Stock of FTD
Corporation, for a purchase price of $7.50 per share.
Restricted Stock: FTD Corporation will also issue to you 20,000 shares of its
Class A Common Stock for a purchase price equal to the par value thereof. Such
stock shall vest as follows: (i) 6,667 shares on September 30, 1999; (ii)
6,666 shares on September 30, 2000; and (iii) 6,666 shares on September 30,
2001.
Options: You will be granted for Class A Common Stock of FTD Corporation as
follows: (i) 50,000 shares with an exercise price of $7.50 per share; and (ii)
50,000 shares with an exercise price of $25.00 per share. These options will
vest 25% annually over four years beginning September 30, 1998.
The issuance of the stock, restricted stock and options referred to above
is subject to approval of the Board of Directors of FTD Corporation. Such
stock, restricted stock and stock issued upon exercise of options are subject
<PAGE> 4
to certain transfer and repurchase restrictions on the same terms as other
senior executive employees of FTD.
Moving Expenses: FTD will reimburse you for reasonable moving expenses
incurred in relocating to the metropolitan area in which FTD's principal
executive offices are then located (not including costs and expenses incurred
in connection with the sale or purchase of a residence).
Severance: If you employment is terminated (other than for cause) by FTD
within 12 months of your start date you will be eligible for 6 months of base
salary with mitigation. In your second year of employment severance will
increase to 12 months with mitigation.
Confidentiality; Non-Competition: You agree to enter into a separate agreement
with FTD which provides for (i) nondisclosure of confidential information, (ii)
non-competition and (iii) non-solicitation of customers, suppliers and
employees. Such agreement will be effective commencing the date your
employment starts with FTD and will end three years from the date your
employment with FTD is terminated.
We are very excited about having you join our team.
Sincerely,
/s/ Richard Perry
Richard Perry
Chairman of the Board
Accepted as of this
22nd day of October, 1996:
/s/ Robert L. Norton
- --------------------
Robert L. Norton
<PAGE> 1
EXHIBIT 10.16
June 6, 1997
Mr. Robert L. Norton
President
Florists' Transworld Delivery, Inc.
3113 Woodcreek Drive
Downers Grove, IL 60515
Dear Bob:
This letter confirms our prior agreement that the EBITDA targets for
FTD's 1997 fiscal year specified in the Key Management Incentive Plan shall
replace the EBITDA targets for FTD's 1997 fiscal year set forth in your
October 17, 1997 letter.
Sincerely,
/s/ Richard Perry
Richard Perry
Chairman of the Board
Accepted as of this
6th day of June, 1997:
/s/ Robert L. Norton
- --------------------
Robert L. Norton
<PAGE> 1
EXHIBIT 10.18
PROMISSORY NOTE
$150,000 June 30, 1997
FOR VALUE RECEIVED, Scott D. Levin ("Payor"), promises to pay to the
order of Florists' Transworld Delivery, Inc., a Michigan corporation (together
with its successors and assigns, "Payee"), at its principal place of business,
3113 Woodcreek Drive, Downers Grove, Illinois 60515, or at such other place as
Payee may designate, the principal sum of One Hundred Fifty Thousand Dollars
($150,000), payable at final maturity on June 30, 2002, in accordance with the
terms of this Promissory Note (this "Note").
The outstanding principal amount of this Note shall bear simple
interest at seven percent (7%) per annum. Accrued interest shall be payable at
final maturity of this Note.
All payments of principal of and interest on this Note shall be payable
in lawful currency of the United States of America at the office of the Payee
described above, in immediately available funds.
Payor shall have the right to pay all or any part of the unpaid
principal hereunder without premium or penalty at any time.
In addition to, and not in limitation of the foregoing, Payor agrees to
pay all expenses, including, without limitation, attorney's fees and legal
expenses, incurred by the holder of this Note in connection with endeavoring to
collect any amounts payable hereunder which are not paid when due.
All parties hereto waive presentment for payment, demand, protest and
notice of dishonor.
No delay on the part of Payee in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Payee
of any right or remedy shall preclude any other or further exercise thereof or
the exercise of any other right or remedy.
Payee shall have the right at any time to sell, assign, transfer,
negotiate or pledge all or part of its interest in this Note. Payor may not
assign any of his obligations hereunder without the prior written consent of
Payee. This Note shall be binding on Payor and his legal representatives.
No amendment, modification, or waiver of, or consent with respect to any
provision of this Note shall in any event be effective unless the same shall be
in writing and signed and delivered by Payee or any other holder hereof.
After maturity of this Note, the outstanding principal amount of this
Note shall be unconditionally payable upon demand.
For the avoidance of doubt, Payee shall have full recourse against
Payor.
<PAGE> 2
THIS NOTE IS MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE
OF NEW YORK. Wherever possible each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Note shall be prohibited or invalid under such
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Note and shall be interpreted so as to be
effective and valid.
SIGNED AND DELIVERED as of the date first written above.
Scott D. Levin
--------------------------
Scott D. Levin
<PAGE> 1
EXHIBIT 11.1
FTD CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<Cable>
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
1997 1996
--------- ---------
<S> <C> <C>
PRIMARY AND FULLY DILUTED EARNINGS PER SHARE:
- --------------------------------------------
Net loss applicable to common stock $ (1,733) $ (6,728)
========= =========
Average number of common shares outstanding 7,685 6,669
Common stock equivalents due to dilutive affect
of stock options and warrants 0 15
--------- ---------
Total average number of common shares outstanding 7,685 6,684
Primary loss per share $ (0.23) $ (1.01)
========= =========
</TABLE>
<PAGE> 1
EXHIBIT 21.1
FTD CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
JUNE 30, JUNE 30,
1997 1996
-------- --------
<S> <C> <C>
PRIMARY AND FULLY DILUTED EARNINGS PER SHARE:
- ---------------------------------------------
Net earnings (loss) aplicable to common stock $ (1,733) $ (6,728)
========== =========
Average number of common shares outstanding 7,685 6,669
Common stock equivalents due to dilutive affect
of stock options and warrants 0 15
---------- ---------
Total average number of common shares outstanding 7,685 6,684
Primary earnings (loss) per share $ 0.23 $ 1.01
========== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FTD
CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 28,294
<SECURITIES> 0
<RECEIVABLES> 24,979
<ALLOWANCES> 2,211
<INVENTORY> 14,992
<CURRENT-ASSETS> 77,541
<PP&E> 44,505
<DEPRECIATION> 23,925
<TOTAL-ASSETS> 181,724
<CURRENT-LIABILITIES> 72,075
<BONDS> 73,103
0
0
<COMMON> 62
<OTHER-SE> 27,172
<TOTAL-LIABILITY-AND-EQUITY> 181,724
<SALES> 49,738
<TOTAL-REVENUES> 162,583
<CGS> 35,897
<TOTAL-COSTS> 96,306
<OTHER-EXPENSES> 55,769
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,789
<INCOME-PRETAX> (1,331)
<INCOME-TAX> 416
<INCOME-CONTINUING> (1,733)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,733)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
