FTD CORP, 424B1, 1998-02-20

FTD CORP
424B1, 1998-02-20
BUSINESS SERVICES, NEC

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<PAGE> 1
Rule 424(b)(1)
Registration Statement No. 333-37303

PROSPECTUS

FTD LOGO

1,146,078 SHARES

FTD CORPORATION
CLASS A COMMON STOCK
------------------------

FTD Corporation ("FTD" or the "Company") hereby offers (the "Offering") in
the United States up to 1,146,078 shares (the "Shares") of Class A Common Stock,
par value $.01 per share (the "Class A Common Stock"), at a price of $10.50 per
Share (the "Offering Price"), for sale solely to certain members of FTD
Association (as defined). The Shares are being offered hereunder to satisfy
certain obligations of FTD contained in the Mutual Support Agreement (as
defined). The Shares offered hereby will be subject to certain restrictions on
transfer. See "THE OFFERING -- Restrictions on Transfer of Shares; Optional
Redemption." The subscription period for the Offering will terminate at 5:00
P.M., New York City time, on March 31, 1998, unless extended at FTD's discretion
for up to an additional 60-day period (the "Offering Termination Date").

All subscriptions are irrevocable. No minimum aggregate number of Shares
must be subscribed for in order for the Offering to close. If at the Offering
Termination Date less than all of the Shares offered shall have been subscribed
for, subscriptions that have been accepted by FTD shall remain effective, and
the Offering shall terminate with respect to the unsubscribed Shares (the
"Unsubscribed Shares") to the extent such shares are not re-allocated among
participating members as provided herein. See "THE OFFERING -- Members'
Allocations."

Participating Members (as defined) will be required to execute an
acknowledgment as part of the subscription materials that states, among other
things, that the Participating Member has carefully reviewed the Subscription
Agreement (as defined) and this Prospectus, including the information set forth
under "RISK FACTORS", and that the Participating Member understands that the
Shares may not be transferred except in accordance with the Subscription
Agreement and applicable laws.

SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS PRIOR TO MAKING A DECISION TO PURCHASE
SHARES.

THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE

------------------------

<TABLE>
<CAPTION>
==============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) FTD(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................. $10.50 None $10.50
- --------------------------------------------------------------------------------------------------------------
Total................................. $12,033,819 None $12,033,819
==============================================================================================================
</TABLE>

(1) There will be no underwriters. The Shares will be offered for sale solely to
certain FTD Association members directly by FTD.

(2) There is no firm commitment for the sale of the Shares offered hereunder.
However, assuming the sale of all of the Shares for cash, the total proceeds
will be as shown above. FTD will also pay estimated expenses of
approximately $250,000.

------------------------

The date of this Prospectus is February 20, 1998.
<PAGE> 2

AVAILABLE INFORMATION

FTD has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Shares being offered by this Prospectus. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto, certain portions of which have been
omitted pursuant to the rules and regulations of the Commission. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document are not necessarily complete. With respect to each such contract,
agreement or other document filed or incorporated by reference as an exhibit to
the Registration Statement, reference is made to such exhibit for a more
complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.

FTD is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and in accordance therewith files
reports and other information with the Commission. Such reports and other
information filed by FTD with the Commission may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and will also be available
for inspection and copying at the regional offices of the Commission located at
7 World Trade Center, New York, New York 10048 and at 500 West Madison Street
(Suite 1400), Chicago, Illinois 60661. Copies of such material may also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission
maintains a Website that contains reports, proxy and information statements and
other information regarding registrants such as FTD that file electronically
with the Commission. The address of the Commission's Website is
http://www.sec.gov.

FTD will continue to be subject to the informational requirements of the
Exchange Act for so long as the Class A Common Stock continues to be held by at
least 300 holders of record. For so long as FTD is subject to the Exchange Act,
it will provide an annual report to stockholders and such other reports as may
be required by the Exchange Act to be provided to stockholders. If the Company
ceases to be subject to the Exchange Act, the Company will no longer be required
to file with the Commission annual reports containing consolidated financial
statements audited by its independent certified public accountants or quarterly
reports containing unaudited consolidated financial statements for each of the
first three quarters of each fiscal year, and the Company does not intend to
distribute such reports to its stockholders.

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements of FTD, including the
notes thereto, appearing elsewhere in this Prospectus. Unless otherwise stated
in this Prospectus, references to the "Company" or "FTD" include FTD Corporation
and its wholly-owned subsidiary, Florists' Transworld Delivery, Inc., a Michigan
corporation (the "Operating Company"). This Offering is being made solely to
certain members of FTD Association, an Ohio non-profit corporation, pursuant to
the Mutual Support Agreement, dated December 18, 1994, between the Operating
Company (as successor to Florists' Transworld Delivery Association, a Michigan
non-profit cooperative association (the "Old Association")) and FTD Association,
as amended (the "Mutual Support Agreement"). All references in this Prospectus
to "members" refer to the members of FTD Association. See "BUSINESS -- The
Acquisition and Relationship with FTD Association." Except where specifically
stated otherwise, all information contained in this Prospectus relating to the
Common Stock, including the Summary Consolidated Financial Data, Dilution,
Selected Historical Financial Data, and Executive Compensation, has been
adjusted to reflect a 2 for 1 stock split effected in the form of a stock
dividend (the "Stock Split"), which was declared on February 2, 1998 and paid to
holders of record as of February 9, 1998 and assumes that (i) all of the Shares
offered hereby are sold and (ii) no shares of Class B Common Stock are
converted. See "USE OF PROCEEDS." References in this Prospectus to fiscal years
are to FTD's fiscal years ending on June 30. Certain capitalized terms used and
not defined in this summary shall have the meanings given to them elsewhere in
this Prospectus.

FTD

FTD is the world's largest floral services organization based on number of
members and affiliated organizations. All of the operations of FTD are conducted
through the Operating Company, the successor to a non-profit cooperative
organization founded by a group of retail florists in the United States in 1910.
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's principal executive offices are located at 3113 Woodcreek Drive,
Downers Grove, Illinois 60515, and its telephone number is (630) 719-7800.

Except for certain trade association activities which are being conducted
by FTD Association, FTD, through the Operating Company, operates all of the
businesses conducted by the Old Association prior to the acquisition (the
"Acquisition") by FTD on December 19, 1994, of all of the outstanding equity of
the Old Association pursuant to an Agreement and Plan of Merger, dated August 2,
1994 (the "Merger Agreement"), among FTD, FTD Association and the Old
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,
which governs the relationship between the Operating Company and FTD
Association.

FTD promotes a worldwide brand based on the FTD Mercury Man logo. See
"BUSINESS -- 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 FTD florists' retail floral operations. See
"BUSINESS -- Operations." The main businesses of FTD are the following:

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

3
<PAGE> 4

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 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 florist with whom the customer places a delivery order (the "Sending
Florist") and the florist that fills the order locally in flowers-by-wire
transactions (the "Receiving Florist"). 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 7% of the sales price of orders sent
through Clearinghouse. The remaining 93% is allocated as follows: 20% to the
Sending Florist and 73% to the Receiving Florist.

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 florists.

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.

4
<PAGE> 5

THE OFFERING

COMMON STOCK OFFERED.......... Up to 1,146,078 shares of Class A Common Stock,
par value $.01 per share, of FTD are being
offered in the United States solely to Active
Members of FTD Association (defined in the
Articles of Incorporation of FTD Association as
an FTD Association member that is an
individual, partnership, firm or corporation of
good reputation engaged in the retail floral
business) ("Active Members"). Completion of the
Offering is not conditioned upon the sale of
any minimum number of Shares and consequently
the Company is unable to estimate the proceeds,
if any, to be received from the Offering.
Assuming all of the Shares are sold, the
proceeds to the Company will be approximately
$12.0 million. The Company will pay expenses of
approximately $250,000 in connection with the
Offering. The Offering is being made to satisfy
certain obligations of the Company under the
Mutual Support Agreement. See "BUSINESS -- The
Acquisition and Relationship with FTD
Association."

COMMON STOCK OUTSTANDING
AFTER THE OFFERING.......... 13,461,670 shares of Class A Common Stock
3,000,000 shares of Class B Common Stock

TOTAL SHARES OUTSTANDING...... 16,461,670 total shares of Common Stock*

COMMON STOCK.................. Except with respect to voting rights, the Class
A Common Stock and Class B Common Stock, par
value $.0005 per share (the "Class B Common
Stock" and collectively with the Class A Common
Stock, the "Common Stock") are substantially
identical. Each share of Class A Common Stock
is entitled to one vote, while, except as may
be required by law, shares of Class B Common
Stock are non-voting. The Class A Common Stock
and Class B Common Stock will be entitled to
share ratably, as a single class, in any
dividends declared by the Company on the Common
Stock. The Class B Common Stock was issued in
connection with the Acquisition to the Fleet
Funds to satisfy certain restrictions on stock
ownership applicable to bank holding companies
and also was issued upon exercise of the
Warrants (as defined). See "DESCRIPTION OF
CAPITAL STOCK."

OFFERING TERMINATION.......... The Offering will terminate at 5:00 P.M., New
York City time, on March 31, 1998, unless
extended, at FTD's discretion, for up to an
additional 60-day period (the "Offering
Termination Date").

NO MINIMUM NUMBER OF
SHARES REQUIRED TO BE
SOLD........................ The Shares are being offered by FTD pursuant to
the Mutual Support Agreement. Completion of the
sale of the Shares pursuant to the Offering is
not conditioned upon the sale of any minimum
number of Shares. Therefore, if at the Offering
Termination Date less than all of the Shares
offered shall have been subscribed for pursuant
to subscription agreements ("Subscription
Agreements") accepted by FTD, subscriptions
that have been accepted by FTD

- ---------------

* Assumes all Shares are sold and excludes 434,000 shares of Class A Common
Stock issuable upon exercise of options outstanding under the Company's 1994
Stock Award and Incentive Plan. See "DESCRIPTION OF CAPITAL STOCK."
5
<PAGE> 6

shall remain effective, and the Offering shall
terminate with respect to the unsubscribed
Shares to the extent such Unsubscribed Shares
are not re-allocated among Participating
Members as provided herein. See "RISK FACTORS"
and "THE OFFERING." ALL SUBSCRIPTIONS WILL BE
IRREVOCABLE BY THE PURCHASER WHEN A COMPLETED
SUBSCRIPTION AGREEMENT IS RECEIVED BY FTD.

NOTICE OF COMMENCEMENT OF THE
OFFERING; PARTICIPATING
MEMBERS..................... Each Active Member in the United States
received a notice of the Offering (the
"Notice") including a copy of this Prospectus
and the subscription materials. By receiving a
copy of this Prospectus and the subscription
materials, Active Members became eligible to
subscribe for Shares.

PARTICIPATING MEMBERS'
ALLOCATIONS................... Active Members who wish to purchase Shares
(each a "Participating Member") must subscribe
to purchase at least 50 Shares. To the extent
that a Participating Member does not subscribe
for such minimum amount, such member will no
longer have any right to participate in the
Offering. FTD may, in its sole discretion,
allocate the Shares among Participating Members
(the "Initial Allocation") and may elect to
reoffer any or all Unsubscribed Shares to
Participating Members using the same factors as
were used for the Initial Allocation.

PROCEDURES FOR SUBSCRIBING
FOR SHARES.................. Each Participating Member received a copy of
this Prospectus and subscription materials from
FTD which provides instructions for purchasing
Shares. Participating Members who elect to
purchase Shares must complete, sign and deliver
the Subscription Information included in the
subscription materials to FTD before 5:00 P.M.,
New York City time, on the Offering Termination
Date.

Anyone with questions or needing assistance
concerning the procedures for purchasing Shares
should call FTD at (630) 719-7905 and ask to
speak to a representative about the FTD Member
Offering.

PAYMENT OF PURCHASE PRICE..... Participating Members that elect to purchase
Shares will be billed for the aggregate
purchase price of the Shares (the "Purchase
Price") through FTD's Clearinghouse system. Any
Participating Member who fails to pay any
portion of its bill for the Purchase Price by
June 25, 1998, unless extended at FTD's
discretion for up to an additional 60-day
period (the "Final Payment Date"), will not be
entitled to purchase Shares, and the Company in
its sole discretion, may terminate the
Subscription Agreement executed by such
Participating Member, in which case the billing
for the purchase price of the Shares will be
reversed.

USE OF PROCEEDS............... The cash proceeds from the Offering will be
used to defray expenses of the Offering,
estimated to be approximately $250,000, and for
working capital needs and general corporate
purposes of the Operating Company. See "USE OF
PROCEEDS."

RESTRICTIONS ON TRANSFER...... Prior to the earlier of (i) three years from
the closing of the Offering or (ii) 180 days
after the consummation of an Initial

6
<PAGE> 7

Public Offering (as defined) (the "Restriction
Period"), the Shares will be subject to certain
restrictions on transfer. During this period,
Shares may not be transferred by Participating
Members, other than to (1) family members or
affiliates (as such term is defined in Rule
12b-2 promulgated under the Exchange Act) of
such Participating Member (collectively,
"Permitted Transferees") or (2) subject to the
Company's right of first refusal to purchase
such Shares, other Active Members of FTD
Association in good standing. Such Permitted
Transferees are not permitted to make any
further transfer of the Shares, except to such
Participating Member or the Company. See "THE
OFFERING -- Restrictions on Transfer of Shares;
Optional Redemption."

OPTIONAL REDEMPTION........... If any Participating Member ceases to be an
Active Member of FTD Association, FTD will have
the irrevocable option during the Restriction
Period of redeeming any Shares held by such
Participating Member or any family member or
affiliate of such Participating Member to whom
such Participating Member transferred Shares at
the greater of (i) the Fair Market Value (as
defined) of the Shares and (ii) the Offering
Price. See "THE OFFERING -- Restrictions on
Transfer of Shares; Optional Redemption."

RISK FACTORS.................. See "RISK FACTORS" for a discussion of certain
factors that should be considered by
prospective investors prior to making a
decision to purchase Shares in the Offering.

RECENT DEVELOPMENTS

On February 4, 1998, the Company announced a net loss for the fiscal second
quarter of $2.1 million, or ($0.14) per share, compared to a net loss of $1.2
million, or ($0.08) per share, for the second quarter of fiscal 1997. The net
loss for the fiscal second quarter of fiscal 1998 includes $0.8 million
attributable to the extinguishment of debt. In November 1997, the Company used
the funds provided under the Bank Credit Agreement (as defined) to extinguish
existing debt. As a result, the Company recognized $1.3 million of un-amortized
deferred financing costs associated with the existing debt. The related income
tax benefit attributable to the extinguishment of the existing debt was $0.5
million. Net sales for the second quarter increased to $42.6 million from $41.6
million in the prior year second quarter. Operating income for the second
quarter decreased to $0.9 million from $1.4 million in the second quarter in
fiscal 1997. This is primarily the result of proportionately higher cost of
goods sold relating to increases in Marketplace holiday-product sales and
increases in the related distribution costs due to the timing of shipments of
holiday products. The increased distribution costs during the second fiscal
quarter of 1998 resulted from both the earlier receipt of holiday product and
the shipment of such products to customers.

7
<PAGE> 8

SUMMARY CONSOLIDATED 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 and the
three month periods ended September 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 December 19, 1994 to June 30, 1995, 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
selected historical statement of operations data for each of the three month
periods ended September 30, 1996 and 1997 and the balance sheet data as of
September 30, 1996 and 1997 were derived from unaudited consolidated financial
statements of FTD and have been prepared on the same basis as the audited
financial statements included herein. In the opinion of management, such
unaudited financial statements include all adjustments necessary to present
fairly the information set forth therein, which consists solely of normal
recurring adjustments. The results of operations for the three month period
ended September 30, 1997 are not necessarily indicative of results of operations
for the full year. (See "-- Recent Developments") The information contained in
this table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements for the years ended June 30, 1995, 1996 and 1997 and the
three month periods ended September 30, 1996 and 1997, of FTD, including the
notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
CONSOLIDATED FTD CORPORATION
--------------------------------------------------------------------------
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------------- DECEMBER 19,
YEAR ENDED YEAR ENDED 1994 THROUGH
ACTUAL AS ADJUSTED JUNE 30, JUNE 30, JUNE 30,
1997 1997(7) 1996 1997 1996 1995
------ ----------- ---- ---------- ---------- ------------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue.......... $ 35,487 $ 35,487 $ 37,068 $162,583 $166,255 $ 96,518
Cost of goods sold and
services provided.... 22,038 22,038 23,353 96,306 104,386 58,567
Selling, general and
administrative....... 10,136 10,136 11,312 55,769 58,376 30,669
-------- -------- -------- -------- -------- --------
Income (loss) from
operations........... 3,313 3,313 2,403 10,508 3,493 7,282
Other expense,
net(1)............... 2,676 2,676 2,938 11,839 12,067 5,827
Income taxes
(benefit)(2)......... 458 458 24 416 (1,813) 1,021
Minority interest(3)... (1) (1) (11) (14) (33) 8
Cumulative effect of
accounting
change(4)............ -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss)...... $ 180 $ 180 $ (548) $ (1,733) $ (6,728) $ 426
======== ======== ======== ======== ======== ========
Earnings(loss) per
share(5)
Primary.............. $ .01 $ .01 $ (.04) $ (.12) $ (.51) $ .03
Fully Diluted........ $ .01 $ .01 $ (.04) $ (.12) $ (.51) $ .03
OTHER DATA:
Depreciation and
amortization....... $ 3,333 $ 3,333 $ 3,575 $ 15,606 $ 14,231 $ 6,525
Capital
expenditures....... 402 402 1,386 2,614 4,950 3,082
Ratio of earnings to
fixed charges(6)... 1.2x 1.2x -- -- -- 1.2x
BALANCE SHEET DATA:
(at end of period)
Working capital...... $ 7,073 $ 18,857
Total assets......... 177,116 188,900
Long-term debt,
including current
portion............ 80,260 80,260
Total equity......... $ 27,267 $ 39,051

<CAPTION>
OLD ASSOCIATION
----------------------------------

JULY 1 YEAR ENDED
THROUGH JUNE 30,
DECEMBER 18, -------------------
1994 1994 1993
------------ ---- ----
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
Total revenue.......... $75,333 $166,560 $169,195
Cost of goods sold and
services provided.... 49,109 102,260 103,622
Selling, general and
administrative....... 28,684 57,625 61,073
------- -------- --------
Income (loss) from
operations........... (2,460) 6,675 4,500
Other expense,
net(1)............... 77 795 1,178
Income taxes
(benefit)(2)......... 35 92 42
Minority interest(3)... -- -- --
Cumulative effect of
accounting
change(4)............ -- 6,277 --
------- -------- --------
Net income (loss)...... $(2,572) $ (489) $ 3,280
======= ======== ========
Earnings(loss) per
share(5)
Primary..............
Fully Diluted........
OTHER DATA:
Depreciation and
amortization....... $ 4,911 $ 10,144 $ 9,043
Capital
expenditures....... 1,413 8,134 18,200
Ratio of earnings to
fixed charges(6)... -- 2.9x 2.0x
BALANCE SHEET DATA:
(at end of period)
Working capital......
Total assets.........
Long-term debt,
including current
portion............
Total equity.........
</TABLE>

8
<PAGE> 9

- -------------------------
(1) Interest expense in fiscal 1993 is also 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
and for the three month periods ended September 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 Greeting Cards, Inc.
("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 FTD.

(5) Earnings (loss) per share has been calculated after giving effect to the
Stock Split. 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 consist 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 years ended June 30, 1996 and 1997 and the three
month period ended September 30, 1996, were insufficient to cover fixed
charges by $8,574, $1,331 and $535, respectively.

(7) Adjusted to give effect to this Offering, assuming all Shares are sold for
cash.

9
<PAGE> 10

RISK FACTORS

Prospective investors should consider carefully the following factors as
well as the other information set forth in this Prospectus prior to making a
decision to purchase Shares in the Offering.

ABSENCE OF MARKET VALUE IN DETERMINING OFFERING PRICE

No established public trading market exists for the Class A Common Stock,
and accordingly, the Offering Price for the Shares has not been set based on any
market price of the Class A Common Stock or pursuant to arms' length negotiation
with any third party. Rather, the Offering Price has been determined by the
Board of Directors of FTD after giving consideration to many complex factors,
including the historical operations and prospects of the Company, competitive
conditions in the floral industry and general economic conditions. No assurance
can be given that the Offering Price is equal to or exceeds the fair value of
the Shares. See "THE OFFERING -- Determination of Offering Price."

RESTRICTIONS ON TRANSFER; REDEMPTION; ABSENCE OF PUBLIC MARKET

The transfer of the Shares will be restricted until the earlier of (i)
three years from the closing of the Offering or (ii) 180 days after the
consummation of an Initial Public Offering. Until such time, the Shares can be
transferred only to Permitted Transferees of the Participating Member (who are
not permitted to further transfer the Shares except to such Participating Member
or the Company) or, subject to FTD's right of first refusal, to another Active
Member of FTD Association in good standing. In addition, if any Participating
Member ceases to be an Active Member of FTD Association, FTD will have the
option of redeeming any Shares held by such Participating Member or any
Permitted Transferee of such Participating Member to whom such Participating
Members transferred such Shares at the greater of (i) the Fair Market Value (as
defined) of the Shares as determined in the good faith discretion of an officer
of the Company and (ii) the Offering Price. See "THE OFFERING -- Restrictions on
Transfer of Shares; Optional Redemption." The Class A Common Stock is not
currently listed for trading on any securities exchange, and there can be no
assurance that a trading market for the Class A Common Stock will ever exist.

NO MINIMUM NUMBER OF SHARES REQUIRED TO BE SOLD

The Shares are being offered by FTD to satisfy its obligations pursuant to
the Mutual Support Agreement. Completion of the sale of the Shares pursuant to
the Offering is not conditioned upon the sale of any minimum number of Shares.
All subscriptions will be irrevocable by subscribers when received by FTD. Those
Shares subscribed for under subscriptions accepted by FTD as of the Offering
Termination Date will constitute the Shares sold in the Offering.

RECENT NET OPERATING LOSSES

The Company's revenue decreased approximately 2.2% for fiscal 1997 and
decreased approximately 3.3% for fiscal 1996 compared to the prior fiscal years.
The Company reported net losses of approximately $1.7 million and $6.7 million
in fiscal 1997 and 1996, respectively. The net loss in fiscal 1997 was partially
attributable to certain non-recurring expenses of $4.5 million related to FTD's
facility consolidation efforts including the writeoff of the trained workforce
intangible asset. Due to seasonal variations in the Company's business, as well
as the timing of expenditures, the net income for the three months ended
September 30, 1997 of $0.2 million versus a net loss of $0.5 million reported
for the same period in fiscal 1997 is not necessarily indicative of the results
of operations for the full year. See "Prospectus Summary -- Recent
Developments." Operating results for 1996 were negatively impacted by increases
in interest expense and the amortization of goodwill and other intangible assets
which were related to the Acquisition. There can be no assurance that the
Company will have net earnings in the future.

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SUBSTANTIAL LEVERAGE; NEGATIVE TANGIBLE STOCKHOLDERS' EQUITY

FTD has consolidated indebtedness that is substantial in relation to its
stockholders' equity. As of September 30, 1997, FTD had $80.3 million principal
amount of long-term debt (including current portion of $9.3 million), $27.3
million of equity and a tangible net deficit (equity reduced by the amount of
goodwill and other intangible assets) of approximately $53.3 million. As of
September 30, 1997, assuming the sale of all Shares in the Offering, the equity
will be $39.1 ($2.38 per Share) and the tangible net deficit will be $41.6
($(2.54) per Share).

The significant indebtedness has several important consequences for
purchasers of Shares including but not limited to the following: (i) a
substantial portion of FTD's cash flow from operations must be dedicated to debt
service and will not be available for other purposes; (ii) FTD's flexibility to
obtain additional financing in the future for working capital, capital
expenditures or acquisitions or to refinance indebtedness may be significantly
impaired; and (iii) FTD's substantial leverage may make it more vulnerable to
economic downturns and limit its ability to withstand competitive pressures or
take advantage of business opportunities.

FTD's ability to satisfy its debt service obligations depends on its future
operating performance, which will be affected by prevailing economic conditions
and financial, business and other factors, certain of which are beyond FTD's
control. If FTD is unable to service its indebtedness, it will be forced to
adopt an alternative strategy that may include actions such as reducing or
delaying capital expenditures, selling assets, restructuring or refinancing its
indebtedness or seeking additional equity capital. There can be no assurance
that any of these strategies could be effected on satisfactory terms, if at all.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Liquidity and Capital Resources."

CONTINUED APPLICABILITY OF CONSENT ORDER

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.

COMPETITION; CONTINUED DECLINE IN SHARE OF U.S. CLEARING BUSINESS

Management estimates, based on data provided by the American Floral
Endowment, an industry research organization, that FTD's share of the U.S.
clearing business (as measured by the percentage of total transactions cleared)
has declined from 54.0% in 1994 to approximately 40.0% in 1996. Management
believes that the decline in FTD's share has been due to competition from other
clearinghouses. FTD expects a continuing decrease in the number of floral orders
cleared by FTD, which it expects, based on historical trends, to be partially
offset by a continued increase in the average dollar amount per floral order
cleared. If the decline in the number of floral orders cleared is more severe
than the Company expects and/or the increase in the average dollar value per
transaction cleared is not realized, such decline could have a material adverse
effect on FTD's financial condition, results of operations and liquidity. See
"BUSINESS -- Competition."

FTD faces significant competition in its businesses. In particular, based
on FTD's Dual Member Study for 1996, over 80% of FTD's members subscribe to
competing clearinghouses, and competition to provide clearinghouse services is
intense. In addition, FTD's members may use the Mercury Network to transmit
orders to be cleared through competing clearinghouses.

RELIANCE ON THE RETAIL FLORIST INDUSTRY; DECLINE IN RETAIL FLORIST SALES

The operating and financial success of FTD's business has been and is
expected to continue to be dependent on the financial performance of the retail
florist industry. Management estimates, based on data

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<PAGE> 12

provided by various industry publications, that retail floriculture industry
revenues (excluding floral hardgoods) increased from $5.9 billion to $15.0
billion from 1983 through 1996. Retail florists are now second to mass merchants
as a distribution channel in the floral industry in the United States. This is
primarily due to the growth of non-traditional channels of distribution such as
the mass merchandisers, supermarkets, 1-800 numbers, on-line computer sales,
mail order catalogs, home shopping networks and audiotex telephone shopping.
From 1983 to 1996 the share of floral sales attributable to retail florists
declined from 63% to approximately 35%. There can be no assurance that the
retail florist industry will not continue to lose market share to other floral
distribution channels, nor that retail florist revenues and flowers-by-wire
transactions will not decline in absolute terms. A sustained decline in the
sales volume of the retail florist industry could have a material adverse effect
on FTD.

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 holiday
seasons. FTD's working capital, cash and short-term borrowings also fluctuate
during the year as a result of the factors set forth above.

CONTROLLING STOCKHOLDERS

The principal stockholders of FTD Corporation are Perry Acquisition
Partners L.P. ("Perry Partners"), a group of five investment funds (the "Bain
Funds") controlled by Bain Capital, Inc. ("Bain"), and three investment funds
(the "Fleet Funds"), two of which are controlled by Fleet Financial Group, Inc.
("FFG"), and one of which is controlled by an affiliate of an FFG subsidiary
(referred to collectively herein as the "Principal Stockholders").

Perry Partners owns approximately 49.06% of the Common Stock, representing
approximately 61.12% of the total voting power. Following the consummation of
the Offering, Perry Partners will own approximately 45.62% of the Common Stock,
representing approximately 55.87% of the total voting power (assuming all of the
Shares are sold and no shares of Class B Common Stock are converted). By virtue
of such stock ownership and the terms of the Stockholders' Agreement (as
defined), Perry Partners has the power to control, subject to certain
exceptions, matters submitted to stockholders and to elect a majority of the
directors of FTD. The Bain Funds own in the aggregate approximately 17.62% of
the Common Stock, representing approximately 21.96% of the total voting power.
Following the consummation of the Offering, the Bain Funds will own, in the
aggregate, approximately 16.39%, of the Common Stock, representing approximately
20.07% of the total voting power (assuming all of the Shares are sold and no
shares of Class B Common Stock are converted). By virtue of the Stockholders'
Agreement, the consent of the Bain Funds is needed with respect to certain
actions submitted to the Board of Directors or stockholders of FTD, and the Bain
Funds have the right to have three of their designees nominated as directors of
FTD Corporation. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT" and "DESCRIPTION OF CAPITAL STOCK -- Stockholders' Agreement."

FTD Corporation currently has 3,000,000 shares of Class B Common Stock
outstanding, all of which are non-voting. The Fleet Funds own 23.29% of the
outstanding Class B Common Stock. Under certain circumstances the Class B Common
Stock may be converted to Class A Common Stock at a rate of one share of Class A
Common Stock for each share of Class B Common Stock tendered and such conversion
could decrease the proportionate voting power of the other stockholders.
Additionally, the Board of Directors of the Company is authorized to issue one
or more series of preferred stock. The issuance of such preferred stock could
adversely effect the voting power of the Class A Common Stock and could, under
certain circumstances,

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<PAGE> 13

have the effect of preventing a change in control of the Company. See
"DESCRIPTION OF CAPITAL STOCK."

The Company has entered into a Management Consulting Services Agreement
with certain parties related to each of the Principal Stockholders to provide
financial advisory services to the Company. Pursuant to the Management
Consulting Services Agreement, the Principal Stockholders received $1.0 million
for each of the years ended June 30, 1997 and 1996, and for the period December
19, 1994 through June 1995. See "RELATIONSHIP WITH AFFILIATES."

THE ACQUISITION AND RELATIONSHIP WITH FTD ASSOCIATION

Pursuant to the terms of the Mutual Support Agreement between the Operating
Company and FTD Association, FTD's ability to change its operations is
restricted in certain ways. See "BUSINESS -- The Acquisition and Relationship
with FTD Association."

RESTRICTIONS ON FTD'S OPERATIONS IMPOSED BY TERMS OF INDEBTEDNESS

The Operating Company's credit agreement with its principal lenders (the
"Bank Credit Agreement") restricts the ability of FTD and its subsidiaries,
including the Operating Company, to, among other things, incur additional
indebtedness, consummate certain asset sales, incur liens, pay dividends or make
certain other restricted payments or investments, enter into certain
transactions with affiliates, merge or consolidate with any other person or
convey, lease, sell, transfer or otherwise dispose of all or substantially all
of its business or property, modify the material terms of its constituent
documents and engage in unrelated businesses. The Bank Credit Agreement also
imposes limitations on FTD's ability to restrict the ability of its subsidiaries
to pay dividends or make certain payments to FTD or any of its other
subsidiaries. In addition, the Indenture with respect to the Operating Company's
$60,000,000 principal amount 14% Series B Senior Subordinated Notes due 2001
(the "Notes") imposes similar restrictions on the Operating Company.

The Bank Credit Agreement also requires FTD and its consolidated
subsidiaries to maintain specified financial ratios and satisfy certain
financial tests. FTD's ability to meet such financial ratios and tests may be
affected by events beyond its control, and there can be no assurance that FTD
will meet such tests. A breach of any of these covenants could result in an
event of default under the Bank Credit Agreement. If an event of default under
the Bank Credit Agreement occurs, the lenders could elect to declare all amounts
borrowed under the Bank Credit Agreement, together with accrued interest, to be
immediately due and payable and to terminate all commitments under the revolving
credit facility under the Bank Credit Agreement. If the Operating Company (or
FTD pursuant to its guaranty of such payments) were unable to repay all amounts
declared due and payable, the lenders could proceed against the collateral
granted to them to satisfy the indebtedness and other obligations due and
payable. Substantially all of the assets of FTD and its subsidiaries are pledged
as security under the Bank Credit Agreement. If the Bank Credit Agreement
indebtedness were to be accelerated, there can be no assurance that the assets
of the Operating Company would be sufficient to repay in full such indebtedness
and the other indebtedness of FTD and the Operating Company, which, upon a
liquidation of the Company, are required to be paid in full before any
distribution on the Common Stock could be made. See "DESCRIPTION OF BANK CREDIT
AGREEMENT."

RESTRICTIONS ON DIVIDENDS

The Company is currently prohibited from paying cash dividends on its
Common Stock, including the Class A Common Stock, by covenants contained in
certain of the Company's financing arrangements. See "DIVIDEND POLICY."

DILUTION OF INVESTMENT

If all Shares offered hereby are sold, there will be a net tangible deficit
per share of $(2.54). This a difference of $13.04 from the Offering Price of
$10.50 per share. See "DILUTION."

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<PAGE> 14

THE OFFERING

GENERAL

The Company completed its initial offering to FTD Association members in
1995 (the "1995 Members' Offering") at a offering price of $2.68 per Share (as
adjusted to reflect the Stock Split). FTD is hereby offering in the United
States to Active Members (defined in the Articles of Incorporation of FTD
Association as an FTD Association member that is an individual, partnership,
firm or corporation of good reputation engaged in the retail floral business) of
FTD Association, who may legally purchase Shares in the respective state in
which they reside, up to 1,146,078 Shares at a price of $10.50 per Share.

Active Members may legally purchase Shares if all required action has been
taken to register or qualify the Shares under the blue sky or state securities
laws of the state in which such member resides. The Company has made application
in all states to have the Shares registered or qualified for sale in such
states; however, there can be no assurance that such registration or
qualification will be obtained in each state. In order to purchase Shares in the
Offering, an Active Member must subscribe for Shares in accordance with the
procedures described below and the instructions contained in the subscription
materials accompanying this Prospectus. In certain states the Offering is being
facilitated through a registered broker in order to comply with applicable state
securities laws.

The Offering is being conducted by FTD pursuant to the Mutual Support
Agreement. Completion of the sale of the Shares pursuant to the Offering is not
conditioned upon the sale of any minimum number of Shares. If at the Offering
Termination Date less than all of the Shares have been subscribed for,
subscriptions that have been accepted by FTD will remain effective, and the
Offering shall terminate with respect to the unsubscribed Shares to the extent
such unsubscribed shares are not re-allocated among Participating Members as
provided herein.

DETERMINATION OF OFFERING PRICE

The Offering Price has been determined by the Board of Directors of FTD
after giving consideration to many complex factors, including the historical
operations and prospects of the Company, competitive conditions in the floral
industry and general economic conditions. Although many factors have been
considered, the specific Offering Price of the Shares does not have any direct
relationship to the assets, earnings, book value or other measurable criteria of
the Company. No assurance can be given that the Offering Price is equal to or
exceeds the fair value of the Shares.

PLAN OF DISTRIBUTION

The Company is offering and selling the Shares without the assistance of
any underwriter. Instead, in order to satisfy the broker/dealer or agent
registration requirements of the federal and state securities laws for an issuer
or an employee of the issuer, except as otherwise noted hereafter, the Offering
will be made through Bear Stearns & Co., a registered broker/dealer in all
jurisdictions. In certain jurisdictions, officers of FTD will be used to offer
shares. In such cases, such persons will comply with the provisions of Exchange
Act Rule 3a4-1.

NOTICE OF COMMENCEMENT OF THE OFFERING

Each Active Member in the United States received a Notice including a copy
of this Prospectus and the subscription materials. By receiving a copy of this
Prospectus and the subscription materials, Active Members became eligible to
subscribe for Shares.

MEMBERS' ALLOCATIONS

FTD may allocate the Shares among Participating Members on a fair and
equitable basis as determined in the discretion of the Board of Directors of the
Company and such allocation may be based in part upon the quantity of products
purchased from FTD and the number of orders cleared through FTD. Additionally,
the

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<PAGE> 15

Company may, in its sole discretion, reoffer any or all Unsubscribed Shares to
Participating Members using the same factors as were used for the Initial
Allocation.

SUBSCRIPTION PROCEDURES

The Offering will terminate at 5:00 P.M., New York City time, on March 31,
1998, unless extended at FTD's discretion for up to an additional 60-day period.
Participating Members may subscribe for Shares by properly completing and
signing a Subscription Agreement and delivering the Subscription Agreement to
the address set forth below prior to 5:00 P.M., New York City time, on the
Offering Termination Date. The instructions accompanying the Subscription
Agreement should be read carefully and followed in detail. COMPLETED
SUBSCRIPTION AGREEMENTS SHOULD BE SENT BY MAIL, OVERNIGHT DELIVERY OR HAND
DELIVERY:

FTD CORPORATION
3113 WOODCREEK DRIVE
DOWNERS GROVE, ILLINOIS 60515
ATTN: 1998 FTD MEMBER OFFERING

Each Participating Member who wishes to purchase Shares must subscribe for
and purchase at least 50 Shares, or they will not be entitled to purchase any
Shares. To the extent that any Participating Member does not return a properly
completed Subscription Agreement and comply with the procedures set forth
therein, such member will no longer have any right to participate in the
Offering. FTD may elect, in its sole discretion, to reoffer any or all
Unsubscribed Shares to Participating Members using the same factors as were used
for the Initial Allocation. FTD will notify each Participating Member of the
total number of Unsubscribed Shares allotted to them and the aggregate Purchase
Price following the Offering Termination Date.

THE METHOD OF DELIVERY OF THE SUBSCRIPTION AGREEMENT TO THE COMPANY WILL BE
AT THE ELECTION AND RISK OF EACH PARTICIPATING MEMBER. IF SENT BY MAIL, FTD
RECOMMENDS THAT COMPLETED SUBSCRIPTION AGREEMENTS BE SENT BY REGISTERED MAIL,
WITH RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE PROVIDED
FOR TO ENSURE DELIVERY OF THE SUBSCRIPTION AGREEMENT TO THE COMPANY PRIOR TO THE
OFFERING TERMINATION DATE.

SUBSCRIPTION AGREEMENTS RECEIVED BY THE COMPANY FROM PARTICIPATING MEMBERS
MAY NOT BE REVOKED.

SUBSCRIPTION AGREEMENT -- ACKNOWLEDGMENT

In order to subscribe for Shares in the Offering, each Participating Member
must execute an Acknowledgment, which is part of the Subscription Information.
By executing the Acknowledgment each Participating Member will represent and
agree that:

(i) the Participating Member has received a copy of this Prospectus and
carefully reviewed it, including the information set forth under the heading
"RISK FACTORS." This acknowledgment is intended to assure that only
Participating Members who have reviewed the disclosures regarding the offering
and its attendant risks will subscribe for Shares. The Company could seek to
rely on this acknowledgment in response to a claim by a Participating Member
that the Participating Member was not aware of a disclosure, including a risk
set forth in this Prospectus.

(ii) the Participating Member has not received any information or
representations from the Company's representatives or anyone else other than the
information and representations contained in this Prospectus. This
representation is intended to assure the Company that each Participating Member
relies only on the information contained in this Prospectus and not information
which may not be complete or accurate and has not been subjected to review by
the Company. This representation also is intended to assure that all investors
rely only upon the same information. The Company could seek to rely on this
representation to limit any claim against the Company based on information and
representations not contained in this Prospectus.

(iii) the Participating Member may not sell, transfer or assign the
Subscription Agreement, or any interest therein, and that the Participating
Member may not sell, transfer or assign the Shares except in accordance with the
Subscription Agreement and applicable laws. This acknowledgment requires each
Participating Member to represent to the Company that the Participating Member
is subscribing for Shares

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<PAGE> 16

for his, her or its own benefit and not for any other person who is not
specifically invited to participate in this Offering. Furthermore, each
Participating Member acknowledges an understanding that the Shares are not
freely transferable and are subject to restrictions in accordance with the
subscription and applicable laws. The Company might assert these acknowledgments
to void purchases proven to be made by or for the benefit of non-Members or
others not intended or invited to participate in this Offering. The Company
could also assert these acknowledgments to void a purported sale of Shares
acquired pursuant to this Offering and later sold in violation of the transfer
restrictions contained in the Subscription Agreement or in violation of
securities or other applicable laws.

(iv) the Participating Member has reviewed the Subscription Agreement and
understands and accepts the obligations imposed by the Subscription Agreement.
This representation seeks to assure the Company that the Participating Member
understands the terms and conditions of the subscription for Shares. The Company
could, for example, reject a subscription which was received after the
Expiration Date as set forth therein or that attempted to subscribe for less
than the minimum number of Shares.

(v) the Participating Member is bound by the Subscription Agreement and
cannot revoke it and that it is binding on the Participating Member's heirs,
estate, legal representatives, assigns and successors and will survive the
death, disability or dissolution of the Participating Member. This
acknowledgment seeks to assure that the Participating Member understands that
he, she or it must purchase the Shares subscribed for and cannot later decide
not to purchase the Shares at his, her or its election or because of his, her or
its death, disability or dissolution. The Company could enforce the subscription
against any Participating Member who later attempted to avoid payment for Shares
subscribed for in the Subscription Agreement.

By executing the Subscription Agreement, a Participating Member is not
waiving any rights which the Participating Member may have under the securities
laws, including any rights under Section 14 of the Securities Act.

RESTRICTIONS ON TRANSFER OF SHARES; OPTIONAL REDEMPTION

Shares sold to Participating Members in the Offering will be subject to
certain restrictions on transfer during the Restriction Period, which terminates
on the earlier of (i) three years from the closing of the Offering or (ii) 180
days after the consummation of an Initial Public Offering (as defined below).
During the Restriction Period, Shares may not be transferred by Participating
Members, other than to (1) Permitted Transferees, which include family members
or affiliates (as such term is defined in Rule 12b-2 promulgated under the
Exchange Act, summarized below) of such Participating Member or (2) subject to
the Company's right of first refusal, other Active Members of FTD Association in
good standing. Such Permitted Transferees are not permitted to make any further
transfer of the Shares, except to such Participating Member or the Company.
FTD's right of first refusal gives FTD an irrevocable option for 30 days after
it receives written notice from a Participating Member that such Participating
Member wishes to transfer his Shares, to purchase the Shares at the price
proposed to be paid by the purchaser. If FTD elects not to purchase the Shares,
the sale of the Shares must be consummated at the price proposed by the
purchaser within 20 days after FTD's option lapses.

Rule 12b-2 defines an affiliate of a person to mean a person that directly
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the person specified. For purposes of the
transfer restrictions on the Shares, "Initial Public Offering" means the sale of
Class A Common Stock to the public in an offering pursuant to an effective
registration statement filed with the Commission under the Securities Act that
results in an active trading market in the Class A Common Stock (such an active
trading market shall be deemed to exist if, among other things, the Class A
Common Stock is listed on a national securities exchange or on the Nasdaq Stock
Market-National Market System); provided that an Initial Public Offering does
not include an offering made in connection with a business acquisition or
combination or an employee benefit plan or an offering of securities by FTD
solely to members of FTD Association made pursuant to the Mutual Support
Agreement.

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The certificates representing the Shares will contain a legend in
substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SUBSCRIPTION AGREEMENT BETWEEN FTD CORPORATION (THE "COMPANY") AND THE ORIGINAL
HOLDER OF THIS SECURITY, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT
IN ACCORDANCE WITH THE PROVISIONS OF SUCH SUBSCRIPTION AGREEMENT. THE HOLDER OF
THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL
OF THE PROVISIONS OF SUCH SUBSCRIPTION AGREEMENT, INCLUDING RESTRICTIONS
RELATING TO THE TRANSFER OF SECURITIES REPRESENTED HEREBY.

If any Participating Member ceases to be an Active Member of FTD
Association, FTD will have the irrevocable option during the Restriction Period
to redeem any Shares held by such Participating Member or any Permitted
Transferees of such Participating Member to whom such Shares have been
transferred at the greater of (i) the value of the Shares, determined in good
faith by an officer of the Company, in his sole discretion, based on the
earnings, book value and prospects of the Company in light of market conditions
generally ("Fair Market Value") or (ii) the Offering Price.

PAYMENT OF PURCHASE PRICE

Participating Members will be billed for the Purchase Price through FTD's
Clearinghouse system. Any Participating Member who fails to pay any portion of
its bill for the Purchase Price by the Final Payment Date will not be entitled
to purchase Shares, and the Company in its sole discretion may terminate the
Subscription Agreement executed by such Participating Member, in which case the
billing for the Purchase Price of the Shares will be reversed.

DETERMINATIONS AS TO VALIDITY; INQUIRIES

All questions concerning the timeliness, validity, form and eligibility of
Subscription Agreements and payments received will be determined by FTD, in its
sole discretion, and such determinations will be final and binding. FTD, in its
sole discretion, may waive any defect or irregularity, or permit a defect or
irregularity to be corrected within such time as it may determine, or reject the
purported subscription for Shares. Subscription Agreements will not be deemed to
have been received or accepted until all irregularities have been waived or
cured within such time as FTD determines in its sole discretion. FTD will not be
under any duty to give notification of any defect or irregularity in connection
with the submission of Subscription Agreements or incur any liability for
failure to give such notification.

ANYONE WITH QUESTIONS OR REQUIRING ASSISTANCE CONCERNING THE PROCEDURES FOR
PURCHASING SHARES SHOULD CALL FTD AT (630) 719-7905 AND ASK TO SPEAK TO A
REPRESENTATIVE ABOUT THE FTD MEMBER OFFERING.

ISSUANCE OF CERTIFICATES REPRESENTING SHARES

Certificates representing Shares purchased pursuant to the Offering will be
delivered to purchasers as soon as practicable following the Final Payment Date.

RIGHT TO AMEND OR TERMINATE THE OFFERING

FTD expressly reserves the right to amend the terms and conditions of the
Offering, whether the amended terms and conditions are more or less favorable to
Active Members or Participating Members. In the event of a material change in
the terms of the Offering, FTD will file a post-effective amendment to the
Registration Statement, of which this Prospectus is a part, and resolicit
subscribers to the extent required by the Commission. FTD expressly reserves the
right, at any time prior to delivery of Shares offered hereby, to terminate or
suspend the Offering, if the Offering is prohibited by law or regulation or the
Board of Directors concludes, in its sole judgment, that it is not in the best
interests of FTD to complete the Offering under the

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circumstances. If the Offering is so terminated, all amounts debited from
Participating Members' accounts will be promptly credited to such accounts
without interest.

USE OF PROCEEDS

The Offering is being made pursuant to the Mutual Support Agreement. See
"THE OFFERING." The estimated proceeds of approximately $12.0 million (assuming
all of the Shares are sold for cash) from the consummation of the Offering will
be used by the Company to defray the expenses of the Offering, estimated to be
approximately $250,000, and for working capital needs and general corporate
purposes of the Operating Company, including acquisitions. However, there is
currently no definitive agreement in effect nor is there any existing plan,
commitment or other understanding with respect to FTD's acquisition of any
company, and there is no probable acquisition pending of any company whose
acquisition would have a material effect on the consolidated financial
statements of FTD.

DIVIDEND POLICY

The Company has not paid dividends on its Common Stock since its inception
in March 1993. The Company is currently prohibited from paying cash dividends on
its Common Stock, including the Class A Common Stock, by covenants contained in
certain of the Company's financing arrangements. In the event the payment of
dividends is not prohibited in the future by such covenants, the decision
whether to pay dividends on the Common Stock will be determined by the Board of
Directors in light of the Company's earnings, cash flows, financial condition,
business prospects and other relevant factors. Holders of Class A and Class B
Common Stock will be entitled to share ratably, as a single class, in any
dividends paid on the Common Stock.

18
<PAGE> 19

DILUTION

The net tangible deficit of the Company at September 30, 1997 was $(3.50)
per share of Common Stock. Pro forma tangible deficit per share after giving
effect to the Offering represents the amount of total tangible assets of the
Company less the amount of total liabilities, divided by the number of shares of
Common Stock outstanding, after giving effect to the Stock Split and sale by the
Company of 1,146,078 shares of Class A Common Stock in the Offering at the
Offering price of $10.50 per share. Since the company will retain all of the net
proceeds of the offering, the pro forma net tangible deficit per share of Common
Stock at September 30, 1997, after giving effect to the aforementioned changes,
would be $(2.54) per share.

The following table illustrates the calculation of the per share dilution
described above:

<TABLE>
<CAPTION>
PRO FORMA AFTER
GIVING EFFECT
TO THE OFFERING
FEBRUARY 20, 1998
-----------------
<S> <C>
Offering Price per share.................................... $10.50
Pro forma net tangible deficit per share at September 30,
1997...................................................... $(2.54)
Net tangible deficit dilution per share to new Investors.... $13.04
</TABLE>

The following table sets forth on a pro forma basis as of September 30,
1997 the distribution between existing stockholders and new investors with
respect to the number of shares of Common Stock purchased from the Company, the
total effective cash cost and the average price per share paid to the Company.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATIONS
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 15,244 93.0% $35,392 74.6% $ 2.32
New investors....................... 1,146 7.0 12,034 25.4 $10.50
------ ------ ------- ------
Total.......................... 16,390 100.00% $47,426 100.00%
====== ====== ======= ======
</TABLE>

19
<PAGE> 20

SELECTED HISTORICAL FINANCIAL DATA

<TABLE>
<CAPTION>
CONSOLIDATED FTD CORPORATION OLD ASSOCIATION
-------------------------------------------------------- ----------------------------------
THREE MONTHS ENDED DECEMBER 19, JULY 1
SEPTEMBER 30, YEAR ENDED JUNE 30, 1994 THROUGH THROUGH YEAR ENDED JUNE 30,
------------------- ------------------- JUNE 30, DECEMBER 18, -------------------
1997 1996 1997 1996 1995 1994 1994 1993
---- ---- ---- ---- ------------ ------------ ---- ----
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Marketplace............. $ 12,529 $ 13,639 $ 49,738 $ 57,924 $ 35,460 $ 28,556 $ 58,987 $ 63,606
Clearinghouse........... 6,777 6,627 34,383 37,070 24,738 16,093 42,386 44,717
Mercury Network......... 8,021 8,497 37,558 34,138 17,618 13,865 30,113 27,596
Other................... 8,160 8,305 40,904 37,123 18,702 16,818 35,074 33,276
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue........... 35,487 37,068 162,583 166,255 96,518 75,333 166,560 169,195
Cost of goods sold and
services provided..... 22,038 23,353 96,306 104,386 58,567 49,109 102,260 103,622
Selling, general, and
administrative........ 10,136 11,312 55,769 58,376 30,669 28,684 57,625 61,073
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations............ 3,313 2,403 10,508 3,493 7,282 (2,460) 6,675 4,500
Other expense, net(1)... 2,676 2,938 11,839 12,067 5,827 77 795 1,178
Income taxes
(benefit)(2).......... 458 24 416 (1,813) 1,021 35 92 42
Minority interest(3).... (1) (11) (14) (33) 8 -- -- --
Cumulative effect of
accounting
change(4)............. -- -- -- -- -- -- 6,277 --
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $ 180 $ (548) $ (1,733) $ (6,728) $ 426 $ (2,572) $ (489) $ 3,280
======== ======== ======== ======== ======== ======== ======== ========
Earnings (loss) per
share(5)
Primary................. $ .01 $ (.04) $ (.12) $ (.51) $ .03
Fully Diluted........... $ .01 $ (.04) $ (.12) $ (.51) $ .03
OTHER DATA:
Depreciation and
amortization.......... $ 3,333 $ 3,575 $ 15,606 $ 14,231 $ 6,525 $ 4,911 $ 10,144 $ 9,043
Capital expenditures.... 402 1,386 2,614 4,950 3,082 1,413 8,134 18,200
Ratio of earnings to
fixed charges(6)...... 1.2x -- -- -- 1.2x -- 2.9x 2.0x
BALANCE SHEET DATA:
(at end of period)
Working capital......... $ 7,073 $ 2,388 $ 5,466 $ 2,718 $ 6,546 $ 16,918 $ 12,581
Total assets............ 177,116 198,109 181,724 196,082 203,864 135,506 125,816
Long-term debt,
including current
portion............... 80,260 94,852 82,400 96,277 100,757 33,463 33,746
Total equity............ $ 27,267 $ 28,570 $ 27,172 $ 29,140 $ 35,080 $ 36,216 $ 40,521
</TABLE>

20
<PAGE> 21

- -------------------------
(1) Interest expense in fiscal 1993 is also net of $185 of interest capitalized
as construction in progress.

(3) Represents FTD's interest in Renaissance.

(6) In calculating the ratio of earnings to fixed charges, earnings consist 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 years ended June 30, 1996 and 1997, and the three
month period ended September 30, 1996, were insufficient to cover fixed
charges by $8,574, $1,331 and $535, respectively.

21
<PAGE> 22

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

Except for the historical information contained in this Prospectus, 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 Prospectus.
See "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS."

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 and for the three month periods ended
September 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 FTD Association
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, 1997, 1996 and 1995 and the three month periods
ended September 30, 1997 and 1996:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED JUNE 30,
------------------- ------------------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUE:
Marketplace................................ $12,529 $13,639 $ 49,738 $ 57,924 $ 64,016
Clearinghouse.............................. 6,777 6,627 34,383 37,070 40,831
Mercury Network............................ 8,021 8,497 37,558 34,138 31,483
Other...................................... 8,160 8,305 40,904 37,123 35,521
------- ------- -------- -------- --------
Total revenue................................ 35,487 37,068 162,583 166,255 171,851
Cost of goods sold and services provided..... 22,038 23,353 96,306 104,386 107,676
Selling, general and administrative.......... 10,136 11,312 55,769 58,376 59,353
------- ------- -------- -------- --------
Income from operations....................... $ 3,313 $ 2,403 $ 10,508 $ 3,493 $ 4,822
======= ======= ======== ======== ========
</TABLE>

THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996

The following is a discussion of changes in the Company's financial
condition and results of operations for the three month period ended September
30, 1997, compared with the three month period ended September 30, 1996.

22
<PAGE> 23

Revenue decreased by $1.6 million, or 4.3%, to $35.5 million for the three
month period ended September 30, 1997, compared to $37.1 million for the three
month period ended September 30, 1996. This decline in revenue was primarily the
net result of decreases in Marketplace and Mercury Network revenue.

Marketplace revenue decreased by $1.1 million, or 8.1%, to $12.5 million
for the three month period ended September 30, 1997 compared to $13.6 million
for the three month period ended September 30, 1996. The decrease from the prior
year was the result of the timing of several shipments which resulted in lower
sales volume of holiday products. Marketplace revenue was 35.2% and 36.7% of
total revenue for the three months ended September 30, 1997 and 1996,
respectively.

Mercury Network revenue decreased by $0.5 million, or 5.9%, to $8.0 million
for the three months ended September 30, 1997 from $8.5 million for the three
month period ended September 30, 1996. This decrease is primarily due to a
decrease in sales of Advantage Business Systems.

The cost of goods sold and services provided decreased by $1.4 million, or
6.0%, to $22.0 million for the three month period ended September 30, 1997 from
$23.4 million for the three month period ended September 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
improvement in customer service operations. As a percent of revenue, cost of
goods sold and services provided decreased slightly to 62.0% for the three month
period ended September 30, 1997, from 63.1% for the three month period ended
September 30, 1996.

Selling, general and administrative expenses decreased $1.2 million, or
10.6%, to $10.1 million for the three month period ended September 30, 1997,
from $11.3 million for the three month period ended September 30, 1996. The
decrease is primarily due to FTD's lower advertising and promotional
expenditures in the first quarter of fiscal 1998 as compared to the same period
in fiscal 1997, as well as lower administrative expenses due to the Company's
facility consolidation in fiscal 1997.

Interest expense for the three month period ended September 30, 1997 was
$3.0 million as compared to $3.3 million for the three month period ended
September 30, 1996. The decrease of $0.3 million resulted from a reduction in
debt during the three month period ended September 30, 1997.

Income tax expense for the three month period ended September 30, 1997 was
$0.5 million compared to minimal tax expense for the comparable three month
period ended September 30, 1996. The change resulted from the increase in
taxable income.

Net income was $0.2 million for the three month period ended September 30,
1997, an improvement of $0.7 million, from a loss of $0.5 million for the three
month period ended September 30, 1996. The change is attributable to the factors
previously discussed.

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.

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

23
<PAGE> 24

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 years 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 the 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 post-retirement 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 for the comparable period 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 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

24
<PAGE> 25

net result of decreases in Marketplace and Clearinghouse revenue, 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 years
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 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 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."

25
<PAGE> 26

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 Notes and interest and principal payments on
obligations under 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 $50.0 million term loan facility (the "Term Loan
Facility") and a $50.0 million revolving credit facility (the "Revolving Credit
Facility") to finance working capital, acquisitions, certain expenses and letter
of credit needs. FTD has repaid $20.4 million of term loans outstanding under
its prior credit facility through June 30, 1997 and has repaid $2.2 million of
the term loans thereunder in the three month period ended September 30, 1997. In
October the Company refinanced under the Revolving Credit Facility the remaining
balance of the term loan which approximated $22.3 million. Any loan outstanding
under the Revolving Credit Facility will mature on December 31, 2003. The
Company believes, based on current circumstances, that its cash flow, together
with borrowings under the Revolving Credit Facility, will be sufficient to fund
its working capital needs, obligations to the Operating Company and potential
acquisitions, 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
purchase 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.

For the three month period ended September 30, 1997, FTD used cash in the
amount of $6.9 million, as compared to a $51,000 increase in cash for the three
month period ended September 30, 1996.

Cash used by operating activities was $4.5 million for the three month
period ended September 30, 1997, compared to cash provided by operating
activities of $3.0 million for the three month period ended September 30, 1996.
Depreciation and amortization was $3.3 million for the three month period ended
September 30, 1997, and $3.6 million for the three month period ended September
30, 1996. The decrease in cash is primarily due to an increase in accounts
receivable and a decrease in accounts payable for the period ended September 30,
1997.

Cash used in investing activities, consisting of capital expenditures net
of disposal of assets, was $62,000 for the three month period ended September
30, 1997 compared to $1.4 million for the three month period ended September 30,
1996.

26
<PAGE> 27

Cash used in financing activities, primarily reflecting the payment of
principal on the term loans outstanding under FTD's prior credit facility, was
$2.3 million for the three month period ended September 30, 1997 compared to
$1.5 million for the three month period ended September 30, 1996. During the
first quarter of fiscal 1998, the Company repurchased from a former officer
30,930 shares of Class A Common Stock for approximately $75,000.

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 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 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.

The Company has conducted a review of its computer systems to identify the
systems that could be affected by the "Year 2000" issue and is developing an
implementation plan to resolve the issue. The Year 2000 problem is the result of
computer programs being written using two digits rather than four to define the
applicable year. Any of the Company's programs that have time-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a major system failure or miscalculations.

The Company expects its Year 2000 date conversion project to be completed
on a timely basis. During the execution of this project the Company will incur
internal staff costs as well as consulting and other expenses related to
enhancements necessary to prepare the systems for the Year 2000. The expenses of
the Year 2000 project as well as the related potential effect on the Company's
earnings is not expected to have a material effect on its financial position or
results of operations.

27
<PAGE> 28

BUSINESS

OVERVIEW

FTD is the world's largest floral services organization based on number of
members 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. 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 FTD Florists' retail floral operations. See
"-- Operations."

THE ACQUISITION AND RELATIONSHIP WITH FTD ASSOCIATION

The Operating Company is the successor to a non-profit cooperative
organization founded by a group of retail florists in the United States in 1910.
The Operating Company was the surviving corporation after the acquisition on
December 19, 1994 by FTD Corporation of all of the outstanding equity of the Old
Association pursuant to the Merger Agreement. 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,
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.

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

28
<PAGE> 29

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
Receiving Florist if the Mercury Network has not been used, and allocates funds
among FTD, 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
FTD 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, 1997, 1996 and 1995 and for the three
months ended September 30, 1997 and 1996:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
SEPTEMBER 30, FISCAL YEAR ENDED JUNE 30,
---------------- ---------------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUE:
Marketplace......................................... 35.3 36.8 30.6% 34.8% 37.3%
Clearinghouse....................................... 19.1 17.9 21.1 22.3 23.8
Mercury Network..................................... 22.6 22.9 23.1 20.5 18.3
Other............................................... 23.0 22.4 25.2 22.4 20.6
----- ----- ----- ----- -----
Total Revenue....................................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>

Marketplace. The Company believes that 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.

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 7% of the sales price of orders sent through Clearinghouse. The
remaining 93% is allocated as follows: 20% to the

29
<PAGE> 30

Sending Florist and 73% to the Receiving Florist. In addition, pursuant to the
Mutual Support Agreement, payments by FTD equal to one-eighth of one percent
(.125%) of the value of every floral order cleared through FTD's Clearinghouse
are required to be made to FTD Association monthly within ten (10) days after
the end of the prior month in which floral orders are reported to, and collected
by, 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.

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, 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.

30
<PAGE> 31

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.

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 Sanford, Maine. FTD
uses independent warehouse and distribution facilities in California, Ohio and
Ontario, Canada for product distribution.

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. Both of 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 services.

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
800-FLOWERS, Inc. Several other less significant companies operate in the toll
free and online services markets.

The Operating Company currently is subject to certain operating
restrictions pursuant to 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 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.

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<PAGE> 32

LEGAL PROCEEDINGS

FTD is involved in various lawsuits and other 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.

YEAR 2000 ISSUES

The Company has conducted a review of its computer systems to identify the
systems that could be affected by the "Year 2000" issue, which could result in a
major system failure or miscalculations, and is developing a plan to resolve the
issue. The Company expects its Year 2000 date conversion project to be completed
on a timely basis. During the execution of this project the Company will incur
internal staff costs as well as consulting and other expenses related to
enhancements necessary to prepare the systems for the Year 2000. The expenses of
the Year 2000 project as well as the related potential effect on the Company's
earnings is not expected to have a material effect on its financial position or
results of operations.

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<PAGE> 33

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following individuals are the current directors and executive officers
of FTD. All directors are elected annually to serve until the next annual
meeting of stockholders and until their successors have been elected and
qualified. All executive officers of FTD serve at the pleasure of the Board of
Directors of FTD.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard C. Perry.................. 42 Chairman of the Board of Directors of FTD Corporation
and the Operating Company
Robert L. Norton.................. 51 President of FTD Corporation and Chief Executive
Officer, President and Director of the Operating Company
Veronica K. Ho.................... 37 Director of FTD Corporation and the Operating Company
Gary K. Silberberg................ 37 Director of FTD Corporation and the Operating Company
Geoffrey Rehnert.................. 40 Director of FTD Corporation
Habib Y. Gorgi.................... 41 Director of FTD Corporation and the Operating Company
Scott D. Levin.................... 35 Secretary of FTD Corporation and Vice President
Administration, General Counsel and Secretary of the
Operating Company
Francis C. Piccirillo............. 48 Treasurer of FTD Corporation and Vice President and
Chief Financial Officer of the Operating Company
William P. Phelan................. 41 Director of the Operating Company
Catherine A. Hickman.............. 46 Director of the Operating Company
Anthony P. Thonnerieux............ 50 Director of the Operating Company
Fred Johnson...................... 51 Executive Vice President Technology of the Operating
Company
</TABLE>

The Principal Stockholders of FTD Corporation are Perry Partners, the Bain
Funds and the Fleet Funds. FTD Corporation and the Principal Stockholders have
entered into a stockholders' agreement, dated December 19, 1994 (the
"Stockholders' Agreement"), which provides, among other things, for the
composition of the Board of Directors of FTD. The Board of Directors of FTD
Corporation consists of nine directors, of which Perry Partners is entitled to
nominate six and the Bain Funds are entitled to nominate three. Each of the
Principal Stockholders has agreed to take all actions necessary, including
voting all of the securities owned by it, to cause such nominees to be elected
to the Board of Directors of FTD. See "DESCRIPTION OF CAPITAL STOCK --
Stockholders' Agreement."

Mr. Perry, Ms. Ho and Mr. Silberberg were elected to the Board of Directors
of FTD Corporation as designees of Perry Partners. Mr. Rehnert and Mr. Gorgi
were elected to the Board of Directors of FTD Corporation as designees of the
Bain Funds.

Directors' Fees. Directors of FTD Corporation do not receive any fees in
connection with their service as members of the Board of Directors. All
directors are reimbursed for the reasonable expenses incurred in connection with
each meeting attended.

Set forth below is certain biographical information about each of the
Company's directors and executive officers:

RICHARD C. PERRY

Chairman of the Board of Directors of FTD Corporation and the Operating Company

Mr. Perry has been Chairman of the Board of Directors of FTD Corporation
since December 1994. Mr. Perry is also Chairman of the Board of Directors of the
Operating Company. Mr. Perry is the President

33
<PAGE> 34

and founder of Perry Corp., a private money management firm. Prior to forming
Perry Corp. in 1988, Mr. Perry was with Goldman, Sachs & Co. Mr. Perry is an
Adjunct Associate Professor at the New York University Stern School of Business
Administration. He is also a director of Radio & Records, Inc. and a trustee of
the Allen Stevenson School and the Board of Facing History and Ourselves. Mr.
Perry received a B.S. from the Wharton School of the University of Pennsylvania
in 1977 and an M.B.A. from New York University Graduate School of Business
Administration in 1980.

ROBERT L. NORTON

President of FTD Corporation and Chief Executive Officer, President and
Director of the Operating Company

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 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.

VERONICA K. HO

Director of FTD Corporation and the Operating Company

Ms. Ho has been a member of the Board of Directors of FTD Corporation since
December 1994. Ms. Ho served as Vice President of FTD Corporation from December
1994 to September 1997. Ms. Ho is a member of the Board of Directors of the
Operating Company and a Managing Director of Perry Corp. Before joining Perry
Corp. in April 1993, Ms. Ho was Chief Financial Officer of Whitehall
Corporation, a producer of defense, electronics, and technology systems, from
April 1991 to March 1993. From 1986 to 1991, she was with several private
merchant banking firms specializing in management buyouts. Ms. Ho is also a
member of the Board of Directors of Radio & Records, Inc. and the New York
Advisory Board of Facing History and Ourselves. She received a B.A. from Brown
University in Economics and Applied Mathematics in 1982 and an M.B.A. from the
Harvard Graduate School of Business Administration in 1986. Ms. Ho is married to
Mr. Silberberg.

GARY K. SILBERBERG

Director of FTD Corporation and the Operating Company

Mr. Silberberg has been a member of the Board of Directors of FTD
Corporation since December 1994. Mr. Silberberg is also a member of the Board of
Directors of the Operating Company. Mr. Silberberg is a Managing Director of
Perry Corp. Prior to joining Perry Corp. in April 1994, Mr. Silberberg was a
principal of Baker Nye Investments, where he managed an investment portfolio for
seven years. Before that time, Mr. Silberberg practiced corporate law with
Skadden, Arps, Slate, Meagher & Flom, where he worked on a variety of
transactions, including strategic mergers and restructurings. Mr. Silberberg
received an Sc.B. in Economics and Applied Mathematics from Brown University in
1982 and a J.D. from Yale Law School in 1985. Mr. Silberberg is married to Ms.
Ho.

GEOFFREY REHNERT

Director of FTD Corporation

Mr. Rehnert has been a member of the Board of Directors of FTD Corporation
since December 1994. Mr. Rehnert has been a General Partner and Managing
Director of Bain since 1986. He is a director of ICON Health & Fitness, Inc., GT
Bicycles, Inc., and Kollmorgen Corporation. Mr. Rehnert received a B.A. from
Duke University and a J.D. from Stanford Law School.

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<PAGE> 35

HABIB Y. GORGI

Director of FTD Corporation and the Operating Company

Mr. Gorgi has been a member of the Board of Directors of FTD Corporation
since January 1997. Mr. Gorgi is also a member of the Board of Directors of the
Operating Company. Mr. Gorgi was the Executive Vice President of various
investment funds controlled by FFG from January 1986 to December 1995, when he
became President of Fleet Growth Resources, Inc. ("FGR"). Mr. Gorgi serves on
the Board of Directors of several non-public companies. Mr. Gorgi earned a B.A.
from Brown University in 1978, and an M.B.A. from Columbia University in 1983.

SCOTT D. LEVIN

Secretary of FTD Corporation and Vice President Administration, General
Counsel and Secretary of the Operating Company

Mr. Levin joined FTD Corporation as Secretary in May 1996. Mr. Levin 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.

FRANCIS C. PICCIRILLO

Treasurer of FTD Corporation and Vice President and Chief Financial Officer
the Operating Company

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.

WILLIAM P. PHELAN

Director of the Operating Company

Mr. Phelan is a member of the Board of Directors of the Operating Company.
Mr. Phelan has been President of Chatham Capital Management, Inc., a private
equity capital firm, since January 1995. From January 1992 through March 1995,
Mr. Phelan was a partner in Fleet Private Equity Co., Inc. From 1988 through
December 1991, Mr. Phelan was a Senior Vice President at Cowen & Company, an
investment banking firm specializing in healthcare and technology-related
investment banking. Mr. Phelan received a B.B.A. in Accounting from Siena
College in 1978 and his M.S. in Taxation from City College of New York in 1983.

CATHERINE A. HICKMAN

Director of the Operating Company

Ms. Hickman is a member of the Board of Directors of the Operating Company.
Ms. Hickman was President of FTD Association from August 1996 to August 1997.
Ms. Hickman has owned and operated a retail florist business in Long Beach,
California for the past 25 years. Ms. Hickman received a teaching degree from
California State University at Long Beach in 1993.

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<PAGE> 36

ANTHONY P. THONNERIEUX

Director of the Operating Company

Mr. Thonnerieux is a member of the Board of Directors of the Operating
Company. Mr. Thonnerieux currently serves as the President and is a member of
the Board of Trustees of FTD Association. Mr. Thonnerieux has been an active
partner in a retail florist business in Newton, New Jersey, for the past 25
years. He received a B.S. degree from Rider University in 1969.

FRED JOHNSON

Executive Vice President Technology of the Operating Company

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.

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<PAGE> 37

EXECUTIVE COMPENSATION

The following table sets forth, for the Company's last three fiscal years,
the compensation of those persons who were, at June 30, 1997, the chief
executive officer and the other four most highly compensated executive officers
of the Company and the Company's former chief executive officer and two persons
who would have been one of the four most highly compensated executive officers
during fiscal 1997 but were not serving on June 30, 1997 (the "Named Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-----------------------------
ANNUAL COMPENSATION(1) SECURITIES
---------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION($)
--------------------------- ---- ------ ----- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Robert L. Norton(2)...................... 1997 $185,096 $ -- 220,000 2,147(3)
President -- FTD Corporation
Chief Executive Officer and
President -- Operating Company
Margaret C. Whitman(4)................... 1997 160,115 99,500 -- 130,421(5)
Former President and 1996 258,038 -- -- 100,517(6)
Chief Executive Officer 1995 85,600 100,000 510,000 7,018(7)
Rock A. Davis(8)......................... 1997 152,788 6,000 10,000 2,800(3)
Former Vice President Marketplace -- 1996 125,288 11,000 60,000 2,693(3)
Operating Company 1995 2,404 -- -- 52(3)
Scott D. Levin........................... 1997 137,885 25,000 60,000 18,127(9)
Secretary -- FTD Corporation 1996 17,788 -- -- 11,271(10)
Vice President Administration,
General Counsel and Secretary --
Operating Company
Douglas L. Hagemann(11).................. 1997 149,730 -- -- 11,808(12)
Former Vice President of Finance 1996 149,730 -- -- 2,859(3)
and Stockholder Relations --
Operating Company 1995 144,422 16,500 -- 17,136(13)
Louis E. Nagy, Jr.(14)................... 1997 153,004 -- -- 100,054(15)
Former Vice President Marketing and 1996 125,192 -- 60,000 14,516(16)
Product Development --
Operating Company 1995 40,866 17,500 -- 777(3)
</TABLE>

- -------------------------
(1) Includes cash bonuses paid in the referenced fiscal year with respect to
services rendered in the prior fiscal year. Excludes cash bonuses paid in
the following fiscal year with respect to services rendered in the
referenced fiscal year, which cash bonuses paid in fiscal 1998 with respect
to services rendered in fiscal 1997 are as follows: Rock A. Davis
($80,000), Scott D. Levin ($75,000) and Douglas L. Hagemann ($10,000). The
bonuses for Mr. Davis and Mr. Levin were paid pursuant to the Company's Key
Management Incentive Plan. See "-- Key Management Incentive Plan."

(2) Excludes a cash bonus paid to Mr. Norton in the first quarter of fiscal
1998 with respect to services rendered by Mr. Norton from the commencement
of his employment with the Company through September 30, 1997, pursuant to
the Norton Employment Arrangements. The amount of such bonus is $275,000.
See "-- Norton Employment Arrangements."

(3) Represents flexible dollars for use in connection with FTD's benefit plans.

(4) Ms. Whitman was President and Chief Executive Officer from March 1995 until
the termination of her employment agreement on January 3, 1997.

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<PAGE> 38

(5) Reflects $128,419 for the forgiveness of debt issued in connection with Ms.
Whitman's initial employment with the Operating Company and used for the
purchase of FTD shares of Common Stock, and $2,002 for flexible dollars for
use in connection with FTD's benefits plans.

(6) Reflects $3,461 for flexible dollars for use in connection with FTD's
benefit plans and $97,056 for the forgiveness of debt used to purchase
shares of Common Stock.

(7) Reflects $1,370 for flexible dollars for use in connection with FTD's
benefit plans and $5,648 for the forgiveness of debt used to purchase
shares of Common Stock.

(8) Mr. Davis was a Vice President of the Operating Company from April 1995
until January 1998.

(9) Reflects $2,424 for flexible dollars for use in connection with FTD's
benefit plans and $15,703 for moving expenses.

(10) Reflects $275 for flexible dollars for use in connection with FTD's benefit
plans and $10,996 for moving expenses.

(11) Mr. Hagemann was Vice President Finance and Stockholder Relations from July
1996 until September 1997.

(12) Reflects $8,874 for Universal Life Insurance and $2,934 for flexible
dollars for use in connection with FTD's benefit plans.

(13) Reflects $14,327 for Universal Life Insurance and $2,809 for flexible
dollars for use in connection with FTD's benefit plans.

(14) Mr. Nagy was Vice President Marketing and Product Development of the
Operating Company from March 1995 until April 1997.

(15) Reflects $8,062 as part of severance arrangement with the Company, $89,552
for moving and related expenses and $2,440 for flexible dollars for use in
connection with FTD's benefit plans.

(16) Reflects $2,963 for flexible dollars for use in connection with FTD's
benefit plans and $11,553 for moving expenses.

The following table sets forth individual grants of stock options made to
the Named Officers during the fiscal year ended June 30, 1997. Options are
exercisable for Class A Common Stock.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------ ANNUAL RATES OF STOCK
PERCENT OF TOTAL PRICE APPRECIATION FOR
NUMBER OF SECURITIES OPTIONS GRANTED TO EXERCISE OR OPTION TERM
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- -------------------- ------------------ ----------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Norton..... 120,000(2) 23.5% 3.75 6/6/2007 $248,078 $611,076
100,000(2) 19.6 12.50 6/6/2007
Rock A. Davis........ 10,000(3) 2.0 3.75 -- -- --
Scott D. Levin....... 20,000(4) 3.9 3.75 10/1/2006 41,350 101,846
30,000(4) 5.9 12.50 10/1/2006
10,000(5) 2.0 3.75 3/20/2007 20,675 50,923
</TABLE>

- -------------------------
(1) Options granted under the FTD Corporation 1994 Stock Award and Incentive
Plan.

(2) Such options vest and become exercisable in four equal, cumulative
installments, with the first vesting date being September 30, 1998.

(3) All of the options granted to Mr. Davis were forfeited upon the effective
date of Mr. Davis' termination of employment as Vice President Marketplace
on January 26, 1998.

(4) Such options vest and become exercisable in four equal, cumulative
installments, with the first vesting date being April 18, 1998.

38
<PAGE> 39

(5) Such options vest and become exercisable in four equal, cumulative
installments, with the first vesting date being February 1, 1999.

The following table sets forth the June 30, 1997 aggregate value of
unexercised options held by each of the Named Officers.

FISCAL YEAR-END OPTION VALUES(1)

<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT FISCAL YEAR-END VALUE OF UNEXERCISED
---------------------------------------------------- IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END
ACQUIRED ON VALUE ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Norton............ -- -- 0 220,000 $ -- $480,000
Rock A. Davis(2)............ -- -- 15,000 55,000 38,063 154,188
Scott D. Levin.............. -- -- 0 60,000 -- 120,000
</TABLE>

- -------------------------
(1) Because no established public trading market exists for the underlying
securities, fiscal year-end option values were based on an assumed stock
price of $7.75 per share, which price is currently used by FTD for purposes
of granting additional options under the FTD Corporation 1994 Stock Award
and Incentive Plan. There can be no assurance that such price per share
represents the actual fair market value of a Share.
(2) All of the unexercisable options granted to Mr. Davis were forfeited upon
the effective date of Mr. Davis' termination of employment as Vice President
Marketplace on January 26, 1998. The exercisable options will be forfeited
unless exercised in accordance with the terms of the related stock option
agreement.

No options were exercised during the fiscal year ended June 30, 1997.

1994 Stock Award and Incentive Plan. The FTD Corporation 1994 Stock Award
and Incentive Plan (referred to herein as the "Option Plan") was adopted by the
Board of Directors of the Company and approved by the Company's stockholders on
December 9, 1994 and amended on June 12, 1995. The maximum number of shares of
Common Stock authorized for issuance under the Option Plan is equal to 15% of
the initial equity capital of the Company upon the consummation of the
Acquisition. The Option Plan is not subject to any provisions of the Employee
Retirement Income Security Act of 1974, as amended, nor is the Option Plan a
qualified plan within meaning of Section 401(a) of the Code.

The Option Plan is designed to enable the Company to attract and retain
highly qualified personnel who will contribute to the Company's success by their
ability, ingenuity and industry and to provide incentives to the participating
officers, other key employees, directors, consultants and advisors that are
linked directly to increases in stockholder value and will therefore inure to
the benefit of all stockholders of the Company.

Options may be granted to officers, other key employees of the Company
(collectively, the officers and key employees are referred to as "Eligible
Employees"), directors of the Company (other than members of the Compensation
Committee of the Board of Directors), and consultants and advisors to the
Company who are responsible for or contribute to the management, growth and/or
profitability of the business of the Company (each, a "Participant"). As of June
30, 1997, stock options to purchase an aggregate of 434,000 shares of Class A
Common Stock were outstanding (419,000 of which have not yet vested).

The Option Plan is administered by the Board of Directors or, if appointed
by the Board, the Compensation Committee (as applicable, the "Administrator").
The Company currently does not have a Compensation Committee. The Option Plan
permits the Administrator to determine which Participants shall receive awards,
the times when awards are to be granted and the number of shares, terms and
conditions on which the awards will be granted (not inconsistent with the terms
of the Option Plan). The Administrator is entitled to determine whether and to
what extent stock options, Stock Appreciation Rights ("SARs"), Limited Stock
Appreciation Rights ("LSARs"), Restricted Stock, Deferred Stock, Performance
Shares or a combination of the foregoing, are to be granted thereunder.

39
<PAGE> 40

The Option Plan provides for grants of "Incentive Stock Options," meeting
the requirements of Section 422 of the Code and "Non-qualified Stock Options,"
which do not qualify as ISOs. Eligible Employees may be granted Incentive Stock
Options, Non-qualified Stock Options, or both, while all other Participants may
only be granted Non-qualified Stock Options, although all awards may be with or
without Stock Appreciation Rights or Limited Stock Appreciation Rights. The
option price per share under each Incentive Stock Option or Non-qualified Stock
Option is to be determined by the Administrator in its sole discretion at the
time of grant but shall not, in the case of Incentive Stock Options, be less
than 100% of the Fair Market Value (as defined therein) of the stock on such
date. If an employee owns or is deemed to own (by reason of the attribution
rules applicable under Section 425(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company and an Incentive Stock
Option is granted to such employee, the option price of such Incentive Stock
Option (to the extent required by the Code at the time of grant) shall be no
less than 110% of the Fair Market Value of the Stock on the date such Incentive
Stock Option is granted. The Company is authorized to make loans available to
Participants in connection with the exercise of outstanding options granted
under the Option Plan as the Administrator, in its sole discretion, may
determine appropriate.

Unless otherwise determined by the Administrator, the options shall not be
transferable and shall only be exercisable during the optionee's lifetime by the
optionee. In the event that an employee is terminated for any reason, the Stock
Option may thereafter be exercised to the extent provided in the applicable
subscription or award agreement.

SARs and LSARs may be granted either alone ("Free Standing") or in
conjunction with all or part of any option granted under the Option Plan
("Related Rights"). LSARs may only be exercised within the 30-day period
following a Change of Control (as defined by the Administrator in the agreement
evidencing such LSAR), and, with respect to LSARs that are Related Rights, only
to the extent that the stock options to which they relate shall be exercisable
in accordance with the provisions of the Option Plan.

SARs that are Related Rights are exercisable only at such time or times and
to the extent that the stock options to which they relate shall be exercisable.
Upon the exercise of a SAR that is a Related Right, an optionee shall be
entitled to receive up to, but not more than, an amount in cash or that number
of shares of Common Stock (or in some combination of cash and shares of Common
Stock) equal in value to the excess of the Fair Market Value of one share of
Common Stock as of the date of exercise over the option price per share
specified in the related stock option multiplied by the number of shares of
Common Stock in respect of which such Related Right SAR is being exercised. The
Administrator has the right to determine the form of payment.

SARs that are Free Standing are exercisable at such time or times and
subject to such terms and conditions as are determined by the Administrator at
or after the grant thereof. Upon the exercise of a SAR that is Free Standing, a
recipient shall be entitled to receive up to, but not more than, an amount in
cash or that number of shares of Common Stock (or any combination of cash or
shares of Common Stock) equal in value to the excess of the Fair Market Value of
one share of Common Stock as of the date of exercise over the price per share
specified in the grant thereof (which price shall be no less than 100% of the
Fair Market Value of the Common Stock on the date of grant) multiplied by the
number of shares of Common Stock in respect to which the right is being
exercised. The Administrator has the right to determine the form of payment.

Restricted Stock, Deferred Stock or Performance Share awards may be issued
either alone or in addition to other awards granted under the Option Plan. Such
awards are generally subject to restrictions on transfer and termination
determined in the discretion of the Administrator. Such restrictions may be
accelerated or waived in whole or in part based on such factors and such
circumstances as the Administrator may determine, in its sole discretion,
including, but not limited to, the attainment of certain performance related
goals, the Participant's termination of employment or service, death or
disability or the occurrence of a Change of Control (as defined in the agreement
evidencing such award).

Upon the award of any restricted stock or performance shares, the
participant will have the rights of a stockholder with respect to the shares,
including dividend rights, subject to the conditions and restrictions generally
applicable to restricted stock specifically set forth in the award agreement for
the participant's
40
<PAGE> 41

restricted stock or performance shares. Upon an award of deferred stock, the
participant will not have any rights of a stockholder, other than the right to
receive dividends, during the specified deferral period.

The Administrator may amend, alter or discontinue the Option Plan, provided
that any amendment which would (i) increase the total number of shares of stock
reserved for the purpose of the Option Plan, (ii) change the class of employees,
directors, consultants and advisors eligible to participate in the Option Plan
or (iii) extend the maximum option period must be approved by the stockholders
to the extent such amendment would affect the qualified status of the Option
Plan under Rule 16b-3 of the Act.

Exercise Price of Non-qualified Option Grants. The Company will not grant
non-qualified options with an exercise price of less than 85% of the fair market
value of the Common Stock on the date of grant.

Pension Plan. Prior to January 1, 1997, the Company provided a qualified
defined benefit pension plan (the "Pension Plan") which covered all employees
who received a regular stated salary and who did not work a varied schedule for
purposes of meeting the peak demand requirements of the Company's business
(provisional employees). Effective January 1, 1997, amendments to the Pension
Plan were adopted, including the elimination of the accrual of future benefits
under the Pension Plan.

The following table shows the estimated annual pension benefits payable to
a covered participant upon normal retirement at age 65 under the Pension Plan,
based on the remuneration that is covered under the Pension Plan and years of
service with the Company and its subsidiaries:

<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30
------------ - -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$ 50,000............. $ 4,150 8,300 12,450 16,600 20,750 24,900
60,000............. 5,025 10,050 15,075 20,100 25,125 30,150
70,000............. 5,900 11,800 17,700 23,600 29,500 35,400
80,000............. 6,775 13,550 20,325 27,100 33,875 40,650
90,000............. 7,650 15,300 22,950 30,600 38,250 45,900
100,000............. 8,625 17,050 25,575 34,100 42,625 51,150
110,000............. 9,400 18,800 28,200 37,600 47,000 56,400
120,000............. 10,275 20,550 30,825 41,100 51,375 61,650
130,000............. 11,150 22,300 33,450 44,600 55,750 66,900
140,000............. 12,025 24,050 36,075 48,100 60,125 72,150
150,000............. 12,900 25,600 38,700 51,600 64,500 77,400
to
270,000
</TABLE>

Pension Plan benefits, as shown above, are calculated based upon total
years of services to a maximum of 30 years and the average of the five highest
consecutive calendar years' salary, bonus and certain elements of other
compensation and assume that participants have contributed all years to the Tax
Deferred Account-Mandatory under the Company's 401(k) Retirement Savings Plan
(as amended, the "401(k) Plan"). The annual pension benefits shown are computed
as a straight life annuity with ten years certain period beginning at age 65,
and assume that participants will transfer the balance of the Tax Deferred
Account-Mandatory from the 401(k) Plan to the Pension Plan. The amounts paid
under the Pension Plan are not offset by any social security payments. Mr.
Hagemann is the only Named Officer eligible to receive benefits under the
Pension Plan. Mr. Hagemann's covered compensation and the estimated years of
service as of June 30, 1997 is $158,604 and 15.75 years.

401(k) Plan. FTD has amended, effective January 1, 1997, its 401(k) Plan
for all of its eligible employees to replace certain benefits eliminated under
the Pension Plan. Generally, any employee who has completed 12 months of service
and is over 21 years of age is eligible to participate in the 401(k) Plan. Each
eligible employee may elect to contribute to the 401(k) Plan, through payroll
deductions, up to 15% of his or her compensation for services rendered in any
year, not to exceed a statutorily prescribed annual limit.

41
<PAGE> 42

Participants in the 401(k) Plan are always fully vested in their own
contributions. The 401(k) Plan provides that the Company may make matching
contributions to the 401(k) Plan based on the Company's net income and at the
discretion of the Board of Directors. Each participant becomes fully vested in
the Company's contributions allocated to his or her account upon completion of
five years of service. The Company's contributions are tax-deductible to the
Company. Company contributions to the 401(k) Plan for fiscal 1997 were not
significant, and no contributions were made by the Company to the accounts of
any of the Named Executive Officers.

Norton Employment Arrangements. FTD Corporation and the Operating Company
have entered into employment arrangements with Mr. Norton to serve as President
of FTD Corporation and President and Chief Executive Officer of the Operating
Company. Although Mr. Norton does not have an employment agreement with FTD,
pursuant to the terms of letters from the Operating Company to Mr. Norton dated
October 17, 1996 and June 6, 1997 (collectively, the "Norton Employment
Arrangements"), effective October 1, 1997 Mr. Norton's annual base salary was
increased to $300,000 plus an annual bonus and salary increase based on
performance criteria established by the Board of Directors. Mr. Norton's annual
bonus is paid at the end of the first quarter of the fiscal year based upon
performance criteria met as of the end of the immediately preceding fiscal year.

Pursuant to the Norton Employment Arrangements, Mr. Norton was granted
Non-Qualified Stock Options to purchase (i) 120,000 shares of Class A Common
Stock at an exercise price of $3.75 per share and (ii) 100,000 shares of Class A
Common Stock at an exercise price of $12.50 per share. Also, pursuant thereto,
on June 30, 1997, Mr. Norton purchased 60,000 shares of Class A Common Stock at
a price of $3.75 per share. The Company issued Mr. Norton 40,000 additional
shares of Class A Common Stock during the first quarter of fiscal 1998, which
are subject to restrictions on transfer and forfeiture in the event of
termination of employment prior to the expiration of a specified period of time.
Such 40,000 additional shares of Class A Common Stock were issued as restricted
stock and no purchase price was paid thereon. The Company has determined the
fair market value of such 40,000 additional shares of Class A Common Stock to be
$7.75. The Company's Board of Directors determined this fair market value price
in its sole discretion utilizing a multiple of EBITDA (earnings before interest,
taxes, depreciation and amortization) net of outstanding debt at fiscal year end
June 30, 1997.

The Norton Employment Arrangements provide that Mr. Norton shall be paid an
amount equal to twelve month's salary if his employment is terminated (other
than for cause) by the Operating Company at any time after October 28, 1997.

Levin Note. The Company loaned $150,000 to Mr. Levin pursuant to a
five-year, interest bearing recourse note dated June 30, 1997 (the "Levin
Note"), with accrued interest and principal due and payable at maturity. The
Levin Note bears interest at 7% per annum. The proceeds of the Levin Note were
used to purchase a primary residence and to assist Mr. Levin with other
relocation expenses. At October 31, 1997, $153,530 in principal and interest was
outstanding under the Levin Note.

Severance Arrangements. The Company has agreed with Mr. Hagemann that he
will be entitled to receive, among other things, salary continuation until the
age of 62 (November 8, 1998) if his employment with the Company or an affiliate
of the Company were terminated by the Company for any reason other than cause
(as defined in the Merger Agreement) prior to such time. Mr. Hagemann's
severance benefit currently would equal approximately $199,640. The Company has
agreed to provide Mr. Nagy with up to 12 months salary continuation unless Mr.
Nagy obtains employment prior to the end of such 12-month period.

Key Management Incentive Plan. Mr. Levin is a participant in the Company's
Key Management Incentive Plan which covers approximately 30 key employees of FTD
and provides bonuses in the event that (i) the Company achieves one or more
targets based on FTD's EBITDA (earnings before interest, taxes, depreciation and
amortization), and (ii) the individual achieves specified goals.

Compensation Committee Interlocks and Insider Participation. The Company
currently does not have a Compensation Committee. All matters which would
otherwise be determined by the Compensation Committee are considered by the
entire Board of Directors.

42
<PAGE> 43

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information concerning the ownership
of FTD Corporation Common Stock as of September 25, 1997, as adjusted to reflect
the Stock Split, by: (i) each person who is known to the Company to own
beneficially more than 5% of the outstanding shares of Class A Common Stock;
(ii) each director and each of the Named Officers owning equity securities of
FTD Corporation; and (iii) all executive officers and directors of the Company
as a group. To the knowledge of the Company, each of such stockholders has sole
voting and dispositive power as to the shares beneficially owned unless
otherwise noted.

<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
(VOTING) (NONVOTING)
------------------------ -----------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF
SHARES CLASS SHARES CLASS
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Perry Partners..................................... 7,458,862 61.12 -- --
599 Lexington Avenue
New York, NY 10022
Bain Funds......................................... 2,679,616 21.96 -- --
Two Copley Place
Boston, MA 02116
Richard C. Perry(1)................................ 7,458,862 61.12 -- --
Habib Y. Gorgi(2).................................. 430,904 3.53 698,750 23.29
Geoffrey Rehnert(3)................................ 2,679,616 21.96 -- --
Robert L. Norton(4)................................ 100,000 * -- --
William P. Phelan(5)............................... 26,494 * 51,250 1.71
Rock A. Davis(6)................................... 25,000 * -- --
Scott D. Levin(7).................................. 6,666 * -- --
All executive officers and directors of FTD as a
group (10 people)(8)............................. 10,727,542 87.90 750,000 25.00
</TABLE>

- -------------------------
* Represents less than 1%

(1) The address of Mr. Perry is c/o the Company, 3113 Woodcreek Drive, Downers
Grove, Illinois 60515. All of the shares shown are held by Perry Partners.
Mr. Perry has a controlling interest in Perry Investors, L.L.C., the general
partner of Perry Partners. Accordingly, Mr. Perry may be deemed to have
voting and dispositive power with respect to the Shares held by Perry
Partners. Mr. Perry disclaims beneficial ownership of such Shares.

(2) The address of Mr. Gorgi is c/o Fleet Equity Partners, 50 Kennedy Plaza,
Providence, Rhode Island 02903. Includes shares owned by FGR, Fleet Equity
Partners VII, L.P. ("FEP"), and Chisholm Partners II, L.P. ("CPII"). Mr.
Gorgi is the President of FGR, Silverado V Corp. ("SVC"), and Silverado II
Corp. ("SIIC"). FGR and SVC are general partners of FEP, and SIIC is the
general partner of Silverado II L.P. ("SIILP"), which is the general partner
of CPII. Mr. Gorgi is also a limited partner of FEP and SIILP. As President
of FGR, SVC and SIIC, Mr. Gorgi may be deemed to share voting and
dispositive power with Robert M. Van Degna, Chairman & CEO of those
entities. Mr. Gorgi disclaims beneficial ownership of all shares which are
directly owned by FGR and those shares which are directly owned by FEP and
CPII, except for his pecuniary interest therein.

(3) The address of Mr. Rehnert is c/o Bain Capital, Inc., Two Copley Place,
Boston, Massachusetts 02116. All of the Shares shown are owned by the Bain
Funds. Mr. Rehnert is a Managing Director of Bain, which is a general
partner of the Bain Funds. Accordingly, Mr. Rehnert may be deemed to share
voting and dispositive power as to the shares held by the Bain Funds. Mr.
Rehnert disclaims beneficial ownership of such Shares. In addition, the
other Managing Directors of Bain, Joshua Bekenstein, Edward Conrad, David
Dominik, Paul Edgerley, Robert Gay, Adam Kirsch, Mark Nunnelly, Mitt Romney,
Stephan Pagliuca, Mark B. Wolpow and Robert White, may also be deemed to
share voting and dispositive power as to, and also disclaim beneficial
ownership of, such Shares.

43
<PAGE> 44

(4) The address of Mr. Norton is c/o the Company, 3113 Woodcreek Drive, Downers
Grove, Illinois 60515. The Shares owned by Mr. Norton are subject to certain
restrictions on transfer. Includes 40,000 restricted shares which will vest
in three equal annual installments commencing September 30, 1999.

(5) The address of Mr. Phelan is c/o the Company, 3113 Woodcreek Drive, Downers
Grove, Illinois 60515. All of the shares shown are owned by Turnberry
Partners, L.P. ("Turnberry"). Mr. Phelan is the President and sole
stockholder of Chatham Capital Management, Inc., the general partner of
Turnberry and is deemed to have voting and dispositive power as to the
shares held by Turnberry.

(6) The address of Mr. Davis is c/o the Company, 3113 Woodcreek Drive, Downers
Grove, Illinois 60515. Includes 15,000 Shares issuable upon exercise of
outstanding options which are currently exercisable. The Shares owned by Mr.
Davis are subject to certain restrictions on transfer.

(7) The address of Mr. Levin is c/o the Company, 3113 Woodcreek Drive, Downers
Grove, Illinois 60515. The Shares owned by Mr. Levin are subject to certain
restrictions on transfer.

(8) Includes 40,000 restricted shares which will vest in three equal annual
installments commencing September 30, 1999, and includes 15,000 Shares
issuable upon exercise of outstanding options which are currently
exercisable.

Except as described above, no directors or executive officers of FTD
Corporation beneficially own any shares of Common Stock.

See "DESCRIPTION OF CAPITAL STOCK" for a description of certain voting
arrangements with respect to the Common Stock owned by the Principal
Stockholders and certain other rights and obligations with respect to such
Common Stock.

RELATIONSHIP WITH AFFILIATES

Transactions with Affiliates. All future transactions with officers,
directors or 5% shareholders will be on terms no less favorable to the Company
than could be obtained from third parties. Any future loans to officers and
directors will be for a bona fide business purpose and will be approved by a
majority of the directors who have no interest in the matter to be voted upon.
Any future forgiveness of loans to officers and directors will be approved by a
majority of the directors who have no interest in the matter to be voted upon.

Management Consulting Services Agreement. Parties related to each of the
Principal Stockholders have entered into an agreement for management consulting
services (the "Management Consulting Services Agreement") with FTD pursuant to
which they will make available to the Operating Company's management financial
and other corporate advisory services. Subject to certain limitations contained
in the Bank Credit Agreement and the Indenture with respect to the Notes, for
each fiscal year of the Company, the Operating Company will pay dividends to FTD
sufficient to allow FTD to pay such affiliates $400,000 per year plus up to an
additional $1.6 million per year conditioned upon the achievement of certain
levels of operating income, and reimbursement of reasonable out-of-pocket
expenses. Subject to certain conditions, such fee will be shared by the parties
thereto in proportion to their relative ownership interests in FTD. Pursuant to
the Management Consulting Services Agreement, the Principal Stockholders
received $1.0 million for each of the years ended June 30, 1997 and 1996, and
for the period December 19, 1994 through June 30, 1995.

Certain directors of FTD Corporation will receive indirectly a portion of
the management fee as a result of their ownership interest in or other
relationship with the entities providing services to the Operating Company. Mr.
Rehnert, a director of FTD Corporation designated by the Bain Funds, is a
Managing Director of Bain Capital, Inc. Mr. Gorgi, a director of FTD Corporation
designated by the Bain Funds, is the President of certain entities which own
Shares, directly or indirectly through general partnership interests. Mr.
Phelan, a director of the Operating Company, designated by the Bain Funds, is
entitled to receive a portion of the fees to be paid by the Operating Company
under the Management Consulting Services Agreement to Fleet Growth Resources,
Inc. pursuant to an agreement with such entity, so long as Mr. Phelan remains a
director of the Operating Company. Mr. Perry, Ms. Ho and Mr. Silberberg,
directors of FTD Corporation designated by Perry Partners, have an interest in
Perry Investors, L.L.C. Assuming the relative ownership interest among the
Principal Stockholders remains unchanged, Bain Capital, Inc., Fleet Growth
Resources, Inc. and Perry
44
<PAGE> 45

Investors, L.L.C. will be entitled to 23.33%, 11.67% and 65%, respectively, of
the fees to be paid by the Company under the Management Consulting Services
Agreement. The portion of such fee each of such directors will receive, if any,
is discretionary.

Stockholders' Agreement. Pursuant to the Stockholders' Agreement, each of
the Principal Stockholders has agreed, among other things, (i) to vote its
shares of common stock in order to elect and maintain a board of directors of
FTD and each of its subsidiaries (including the Operating Company), which
consists of six nominees of Perry Partners and three nominees of the Bain Funds
and, in the case of the Operating Company, FTD Association nominees as well,
(ii) that certain actions taken by the Company including (A) amending the
certificate of incorporation or by-laws of the Company, (B) entering into
acquisitions of assets or stock exceeding $4 million or (C) effectuating any
merger, consolidation or sale of the Company, require the approval of two of the
directors nominated by Perry Partners and two of the directors nominated by the
Bain Funds and (iii) to certain restrictions on transferring its shares of Class
A Common Stock, including grants to the other Principal Stockholders of certain
rights with respect to the sale of its Class A Common Stock. See "DESCRIPTION OF
CAPITAL STOCK -- Stockholders' Agreement."

DESCRIPTION OF CAPITAL STOCK

The following summary description of the material terms of the capital
stock of FTD Corporation does not purport to be complete and is qualified in its
entirety by reference to the Restated Certificate of Incorporation and Bylaws of
the Company. For a description of certain restrictions on transfer with respect
to the Shares offered hereby, see "THE OFFERING."

Upon the consummation of the Offering, the authorized capital stock of the
Company will consist of 30,000,000 shares of Class A Common Stock, par value
$.01 per share, 3,000,000 shares of Class B Common Stock, par value $.0005 per
share and 1,000,000 shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock"). Following the Offering, the Company will have 13,427,128
shares of Class A Common Stock and 3,000,000 shares of Class B Common Stock
outstanding (assuming all of the Shares are sold and no shares of Class B Common
Stock are converted). No shares of Preferred Stock are issued and outstanding.

No established public trading market exists for FTD's common equity. As of
September 25, 1997, there were approximately 1,800 holders of Class A Common
Stock and approximately five holders of Class B Common Stock.

American Stock Transfer & Trust Company has been appointed the transfer
agent and registrar for the Class A Common Stock and Class B Common Stock.

COMMON STOCK

The Class A Common Stock and the Class B Common Stock rank equally and,
except with respect to voting power, are substantially identical in all material
respects. The Class B Common Stock was issued in connection with the Acquisition
to the Fleet Funds to satisfy certain restrictions on stock ownership applicable
to bank holding companies and was also issued upon exercise of the Warrants.

Dividends. The holders of Common Stock are entitled to receive dividends
when and as dividends are declared by the Board of Directors of FTD Corporation
out of funds legally available therefor, provided that if any shares of
Preferred Stock are at the time outstanding, the payment of dividends on the
Common Stock or other distributions may be subject to the declaration and
payment of full dividends on outstanding shares of Preferred Stock. 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
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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 this Offering; and (5) payments by the Operating
Company to FTD to fund repurchases by FTD of shares of its Common Stock or
options to purchase Common Stock held by former employees of FTD or its
subsidiaries (subject to restrictions).

Holders of Class A Common Stock and Class B Common Stock will be entitled
to share ratably, as a single class, in any dividends paid on the Common Stock.
No dividend may be declared or paid in cash, property, Common Stock or Preferred
Stock convertible into Common Stock on either the Class A Common Stock or Class
B Common Stock unless a corresponding dividend is paid simultaneously on the
other Class of Common Stock. If stock dividends are declared, holders of Class A
Common Stock will receive shares of Class A Common Stock and holders of Class B
Common Stock will receive shares of Class B Common Stock; provided, however,
that if the dividends consist of other voting securities, then the Company shall
make available to each holder of Class B Common Stock, at such holder's request,
dividends consisting of non-voting securities 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. See "DIVIDEND POLICY."

Voting Rights. Each holder of Class A Common Stock is entitled to one vote
for each share of Class A Common Stock held on all matters submitted to a vote
of the Company's stockholders. Holders of Class B Common Stock are not entitled
to vote on any matters, except as otherwise required by law.

Conversion Rights. Shares of Class B Common Stock are convertible into
Class A Common Stock on a one-to-one basis at any time at the option of the
holders thereof, except that no shares of Class B Common Stock originally issued
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:

(a) a public offering of such shares registered under the Securities
Act or a public sale pursuant to Rule 144 of the Securities Act, or any
similar rule then in effect;

(b) a sale of such shares to a person or group of persons if, after
such sale, such person or group of persons in the aggregate would own or
control securities of FTD which possess in the aggregate the ordinary
voting power to elect a majority of FTD's directors (provided that such
sale has been approved by the Board of Directors or a committee thereof);

(c) a sale of such shares to a person or group of persons if, after
such sale, such person or group of persons in the aggregate would own or
control securities of FTD (excluding any Class B Common Stock converted and
disposed of in connection with such sale) which possess in the aggregate
the ordinary voting power to elect a majority of FTD's directors; and

(d) a sale of such shares to a person or group of persons 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 FTD.

Liquidation Rights. Upon any liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, any assets remaining
after the satisfaction in full of the prior rights of creditors, and the
aggregate liquidation preference of any Preferred Stock then outstanding will be
distributed to the holders of Class A Common Stock and Class B Common Stock,
ratably as a single Class in proportion to the number of shares held by them.

Reorganization, Consolidation or Merger. In the event of a reorganization,
consolidation or merger of the Company, each holder of a share of Class A Common
Stock shall be entitled to receive the same kind and

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amount of property receivable by a holder of a share of Class B Common Stock and
each holder of a share of Class B Common Stock shall be entitled to receive the
same kind and amount of property receivable by a holder of Class A Common Stock.

No Preemptive Rights. The holders of Class A Common Stock and Class B
Common Stock are not entitled to preemptive or subscription rights.

PREFERRED STOCK

Pursuant to the Restated Certificate of Incorporation, the Board of
Directors of FTD Corporation is authorized to establish and designate one or
more series of Preferred Stock, without further authorization of the Company's
stockholders, subject to the approval required pursuant to the Stockholders'
Agreement as described below. The Board of Directors is authorized to fix the
number of shares, the voting powers and such distinctive designations,
preferences and relative rights and limitations of any such series. Thus, any
series may, if so determined by the Board of Directors of the Company, have full
voting rights with the Class A Common Stock or superior or limited voting
rights, be convertible into Common Stock or another security of the Company, and
have such other relative preferences, rights and limitations as the Board of
Directors shall determine. As a result, any series of Preferred Stock could have
rights which would adversely affect the voting power of the Class A Common
Stock. The issuance of shares of Preferred Stock under certain circumstances may
have the effect of delaying, deterring or preventing a change in control of the
Company. The shares of any series or Class of Preferred Stock need not be
identical.

STOCKHOLDERS' AGREEMENT

The shares of Common Stock owned by the Principal Stockholders are subject
to the Stockholders' Agreement. The following is a summary of certain provisions
of the Stockholders' Agreement.

Board of Directors; Voting Matters. Under the Stockholders' Agreement, the
Principal Stockholders have agreed to vote their shares of Common Stock in order
to elect (i) a Board of Directors of the Company which consists of six designees
of Perry Partners and three designees of the Bain Funds and (ii) Boards of
Directors of the Operating Company and each of its subsidiaries which consist of
six designees of Perry Partners, two designees of the Bain Funds and two
designees of FTD Association. For biographical information regarding the Board
of Directors of FTD Corporation and the Operating Company, see "MANAGEMENT."

The affirmative vote of at least a majority of the members of the Board of
Directors of the Company or any of its subsidiaries, as the case may be, which
majority shall include at least two directors designated by Perry Partners and
two directors designated by the Bain Funds, is required with respect to certain
actions by the Company and the Operating Company, including, among others, the
following: (1) with certain exceptions, the issuance or sale by the Company or
any of its significant subsidiaries of any of its debt or equity securities
(other than the offerings, including this Offering, to FTD members required
under the Mutual Support Agreement (each, a "FTD Member Offering")) or any
incurrence of any material long-term indebtedness by the Company or any of its
significant subsidiaries; (2) with certain exceptions, the registration by the
Company or any of its subsidiaries of any of its securities; (3) certain
material acquisitions of assets or stock of another entity; (4) certain business
combinations and asset dispositions; (5) the declaration of dividends or the
payment of other distributions to stockholders of the Company; (6) with certain
exceptions, the repurchase or redemption by the Company or any of its
subsidiaries of any of its securities; (7) transactions with affiliates of the
Company (other than in the ordinary course); and (8) any material refinancing or
restructuring of the Bank Credit Agreement which is reasonably likely to have an
adverse effect on the Company.

Each annual operating budget for the Company and each of its significant
subsidiaries and the appointment of the Chairman, and the Chief Executive
Officer of the Company and the Operating Company require the approval of Perry
Partners and the Bain Funds.

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Tag-Along Rights; Right of First Refusal. With respect to any proposed
transfer (other than with respect to offers and sales of Common Stock (i) in a
Public Offering (as defined in the Stockholders' Agreement), (ii) following a
Public Offering, pursuant to Rule 144 or Rule 144A under the Securities Act or
(iii) in an FTD Member Offering) by Perry Partners and its affiliates of Common
Stock which, when taken together with all prior transfers, represents more than
5% of the Common Stock initially held by Perry Partners upon consummation of the
Acquisition, each other stockholder of the Company who is a party to the
Stockholders' Agreement has the right to require the proposed transferee to
purchase a proportionate number of shares of Common Stock held by such
stockholder at the same price and upon the same terms and conditions as to be
paid and given to Perry Partners.

If any stockholder of the Company who is a party to the Stockholders'
Agreement at any time intends to transfer any Common Stock to a third party in a
bona-fide arms'-length transaction, the Company has an irrevocable option to
purchase all (but not less than all) of such Common Stock at the price offered
by the third party. If such option is not exercised by the Company, the other
stockholders party to the Stockholders' Agreement (excluding affiliates of the
selling stockholder) have an irrevocable option to purchase all (but not less
than all) of such securities at the applicable offer price.

Registration Rights. Subject to certain limitations, at any time and from
time to time after the earlier of (i) the Company's first Public Offering and
(ii) December 19, 1998, upon the written request (a "Registration Request") of
the holders of a majority of the Common Stock held by Perry Partners, its
affiliates and their transferees permitted under the Stockholders' Agreement
("Permitted Transferees"), on the one hand, or holders of a majority of the
Common Stock held by the Bain Funds, the Fleet Funds, their respective
affiliates and their Permitted Transferees, on the other hand (in each case, a
"Requesting Stockholder"), that the Company effect the registration under the
Securities Act of all or part of the Common Stock owned by such Requesting
Stockholder, the Company is obligated to use its best efforts to effect the
registration under the Securities Act of such Common Stock. Except with respect
to applicable underwriting discounts and commissions, such registration will
generally be at the expense of the Company.

Notwithstanding the foregoing, except in certain circumstances: (i) the
Company will not be required to effect more than one such registration within
any 360-day period; (ii) Perry Partners, its affiliates and their Permitted
Transferees are entitled to no more than five Registration Requests; and (iii)
the Bain Funds, the Fleet Funds, their respective affiliates and their Permitted
Transferees are entitled to no more than three Registration Requests; provided
that the limitations on the number of Registration Requests contained in clauses
(ii) and (iii) above do not apply to registrations where the Requesting
Stockholder agrees to pay all of the costs and expenses of each such
registration.

If the Company at any time after the first Public Offering proposes to
register any shares of Common Stock under the Securities Act (except solely in
connection with any employee benefit plan or dividend reinvestment plan or a
merger or consolidation), including registrations pursuant to a Registration
Request, then upon the written request of any stockholder a party to the
Stockholders' Agreement, the Company, subject to certain limitations, is
obligated to use its best efforts to also register such stockholder's shares.

In connection with the registrations described above, to the extent
permitted by applicable law, the Company will indemnify each selling stockholder
and each selling stockholder will indemnify the Company and the other selling
stockholders against certain liabilities under the Securities Act and the
Exchange Act.

Termination. The Stockholders' Agreement (other than the tag-along
provisions, the registration rights provisions and certain provisions with
respect to the Bain Funds' and the Fleet Funds' obligations to pay Perry
Partners a portion of the profits they receive on certain sales of their Common
Stock) terminates on the earliest of (i) the date on which Perry Partners, the
Bain Funds and the Fleet Funds and their respective affiliates do not own in the
aggregate at least 35% of the Common Stock outstanding on a fully diluted basis,
(ii) the date on which either Perry Partners and its affiliates, on the one
hand, or the Bain Funds and the Fleet Funds and their respective affiliates, on
the other hand, do not own in the aggregate at least 10% of the Common Stock on
a fully-diluted basis or (iii) December 19, 2003.

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SECURITYHOLDERS' AND REGISTRATION RIGHTS AGREEMENT

The Company, the Principal Stockholders and BT Securities Corporation and
Montgomery Securities (collectively, the "Initial Purchasers") have entered into
a Securityholders' and Registration Rights Agreement (the "Securityholders'
Agreement") with respect to the shares of Class B Common Stock issued upon
exercise of warrants (the "Warrants") issued to the Initial Purchasers in
connection with the Acquisition (the "Warrant Shares"). The Securityholders'
Agreement provides that the Initial Purchasers and persons to whom Registrable
Securities (as defined in the Securityholders' Agreement) are transferred
(collectively, "Holders") have the registration rights and other rights and
obligations with respect to the Registrable Securities described below.

Demand Registration Rights. At any time and from time to time, Holders
owning, individually or in the aggregate, not less than 25% of the Registrable
Securities may make a written request for registration under the Act of their
Registrable Securities (a "Demand Registration"). Subject to certain conditions,
within 120 days of the receipt of such written request for a Demand
Registration, the Company shall file with the Commission and use its best
efforts to cause to become effective under the Securities Act a registration
statement with respect to such Registrable Securities. Subject to the
satisfaction of certain conditions set forth in the Securityholders' Agreement,
the Company shall be required to register Registrable Securities pursuant to the
foregoing provisions on a maximum of two separate occasions.

If at any time the Company proposes to file a registration statement under
the Securities Act with respect to an offering by the Company for its own
account or for the account of any of its securityholders of any class of its
common equity securities (other than, among others, a registration statement
filed pursuant to the offering of securities of the Company in an FTD Members
Offering), then the Company is required to offer Holders of Registrable
Securities the opportunity to include such Registrable Securities.

Take-Along Rights. If at any time prior to the occurrence of a Triggering
Event (as defined below) any existing stockholder prior to the consummation of
the 1995 Members' Offering (the "Initial Equity Holders") or any of its
Permitted Transferees (as defined in the Securityholders' Agreement) (a
"Take-Along Seller"), directly or indirectly, transfers (other than in a bona
fide public distribution pursuant to an effective registration statement under
the Securities Act) in a single transaction or a series of related transactions
a number of shares of Common Stock greater than or equal to 15% of the shares of
Common Stock collectively owned by the Initial Equity Holders on December 19,
1994 to a Non-Qualified Transferee (as defined in the Securityholders'
Agreement) (other than any sale effected pursuant to the Mutual Support
Agreement), the Holders of Warrant Shares have the irrevocable exclusive option,
but not obligation, to sell to the Non-Qualified Transferee Warrant Shares in an
amount equal to up to such number of Shares proposed to be sold by such
Take-Along Seller (the "Take-Along Included Securities") determined in
accordance with the Securityholders' Agreement, at a price per Take-Along
Included Security comprising such Take-Along Included Securities identical to
the price per share of Common Stock to be paid by the Non-Qualified Transferee
to the Take-Along Seller and on other terms identical to the terms applicable to
the Take-Along Seller.

A "Triggering Event" means the earlier of (i) the date on which the Company
or the Operating Company or any of their respective successors or assigns
consummates an underwritten primary public offering of equity securities
pursuant to a registration statement under the Act after which at least 30% of
the total issued and outstanding common equity of the Company or of the
Operating Company has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 promulgated
under the Securities Act or (ii) the date on which any class of equity
securities of the Company or the Operating Company is listed on a national
securities exchange or authorized for quotation on the National Association of
Securities Dealers, Inc. Automated Quotations System (other than as a result of
any FTD Member Offering).

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DESCRIPTION OF BANK CREDIT AGREEMENT

Effective November 20, 1997, the Operating Company has entered into the
Bank Credit Agreement with The First National Bank of Chicago ("FNBC"), as agent
(the "Agent") and other institutions from time to time party thereto as lenders
(the "Banks"), which provides loans of up to $100.0 million (the "Bank Credit
Agreement"). The Bank Credit Agreement provides a facility of up to $50.0
million in aggregate principal amount of term loans (the "Term Loans") and the
Revolving Credit Facility, pursuant to which the Operating Company borrowed
approximately $25.0 million to refinance the Company's then existing
indebtedness under its prior credit facility and which permits the Operating
Company to borrow up to an additional $25.0 million for working capital,
acquisitions and the payment of certain expenses. As part of the $50.0 million
Revolving Credit Facility, the Operating Company may borrow up to $5.0 million
in aggregate principal amount of swing line loans (the "Swing Line Loans") and
may have letters of credit issued on its behalf. This information relating to
the Bank Credit Agreement is qualified in its entirety by reference to the
complete text of the documents entered into in connection therewith. The
following is a description of the general terms of the Bank Credit Agreement.

Indebtedness of the Operating Company under the Bank Credit Agreement is
guaranteed by the Company and certain of its subsidiaries and is secured by (i)
a first priority perfected pledge of all capital stock of each direct and
indirect subsidiary of the Company (including the Operating Company), provided
that only 65% of the capital stock of foreign subsidiaries are so pledged and
(ii) a first priority security interest in all of the receivables and the
proceeds thereof, inventory, equipment (other than certain equipment secured by
purchase money security interests), general intangibles, contract rights,
chattel paper, instruments and documents, interest and currency contracts, and
all investment property owned by FTD and its direct and indirect subsidiaries,
other than Florists' Transworld Delivery Association of Canada Limited.

Indebtedness under the Bank Credit Agreement bears interest at a floating
rate based (at FTD's option) upon (i) the Alternate Base Rate (defined as the
higher of (x) the corporate base rate of FNBC and (y) the Federal Reserve
reported rate on overnight Federal funds transactions (as adjusted pursuant to
the Bank Credit Agreement) plus 1/2 of 1%) plus up to 0.50% as a floating rate
margin or (ii) the Eurodollar Base Rate (as defined in the Bank Credit
Agreement) for 14 days or one, two, three or six months, plus an additional 1%
to 2% as a Eurodollar margin; provided that the Swing Line Loans shall be at a
floating rate (as described above).

The Term Loans and the Revolving Credit Facility will mature on December
31, 2003. The Company is required to repay the Term Loans beginning March 31,
1999, in 20 consecutive quarterly installments, which are based on the total
amount of Term Loans outstanding as of February 1, 1999 (the last date the
Operating Company may make a borrowing thereunder). In addition, the Bank Credit
Agreement provides for mandatory repayments, subject to certain exceptions, of
the Term Loans (i) from the net proceeds of, among other things, asset sales
outside the ordinary course of business of the Operating Company and its
subsidiaries, and (ii) in an amount equal to 50% of Excess Cash Flow (as defined
therein) per annum.

The loans under the Revolving Credit Facility (the "Revolving Loans") may
be borrowed, repaid and reborrowed, and shall be repaid in full on the
Termination Date (as defined in the Bank Credit Agreement). The Operating
Company is required to pay to the lenders under the Bank Credit Agreement a
commitment fee ranging from 1/4 of 1% to 1/2 of 1% per annum, payable on a
quarterly basis, on the unused portion of the Revolving Credit Facility (and,
prior to February 1, 1999, the unused portion of the Term Loan Commitment)
during such quarter, and certain additional fees payable to the Agent and First
Chicago Capital Markets, Inc., as arranger. The Operating Company is required to
pay to the lenders participating in the Revolving Credit Facility (i) a standby
letter of credit fee equal to the applicable Eurodollar Margin multiplied by the
average daily outstanding face amount available for drawing under all letters of
credit and (ii) a performance letter of credit fee equal to 50% of the
applicable Eurodollar Margin multiplied by the average daily outstanding face
amount available for drawing under all letters of credit. The Operating Company
is also required to pay fronting fees to each letter of credit issuer equal to a
percentage rate agreed upon by the Operating Company and such issuer, payable on
a quarterly basis, on the average daily outstanding face amount available for
drawing under all letters of credit of such issuer. Each such letter of

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credit and fronting fee shall be payable quarterly in arrears. The Agent and the
Banks will receive such other fees as have been separately agreed upon with the
Agent.

The Bank Credit Agreement requires FTD and its subsidiaries to meet certain
financial tests, including minimum fixed charge coverage, maximum leverage,
minimum consolidated net worth and maximum amounts of capital expenditures. The
Bank Credit Agreement also contains covenants which, among other things, limit
the incurrence of additional indebtedness, consummation of certain asset sales,
incurrence of liens, declaration or payment of dividends, making certain other
restricted payments or investments, transactions with affiliates, mergers and
consolidations, conveying, leasing, selling, transferring or otherwise disposing
of all or substantially all of its business or property, modifying the material
terms of its constituent documents, or engaging in unrelated businesses. The
Operating Company is in full compliance with all restrictive covenants set forth
in the Bank Credit Agreement.

The Bank Credit Agreement contains customary events of default, including
payment defaults, breach of representations and warranties, covenant defaults,
cross-default to certain other indebtedness, certain events of bankruptcy and
insolvency, judgment defaults, failure of any guaranty or security agreement
supporting the Bank Credit Agreement to be in full force and effect and change
of control of the Company or the Operating Company.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS

The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Class A
Common Stock by non-United States holders. As used herein, "non-United States
holder" means (i) a corporation, individual or partnership that is, for United
States federal income tax purposes, a foreign corporation, a non-resident alien
individual or a foreign partnership, (ii) an estate that is not subject to
United States taxation on income from sources without the United States that is
not effectively connected with the conduct of a trade or business within the
United States and (iii) a trust if either (A) a court in the United States is
not able to exercise primary supervision over the administration of such trust
or (B) one or more United States fiduciaries do not have the authority to
control all substantial decisions of such trust.

This discussion is based on current law which is subject to change
(possibly with retroactive effect) or different interpretations. This discussion
does not purport to deal with all aspects of federal income and estate taxation
that may be relevant to a particular non-United States holder's decision to
purchase Class A Common Stock.

ALL PROSPECTIVE NON-UNITED STATES HOLDERS OF CLASS A COMMON STOCK ARE
ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE UNITED STATES FEDERAL,
STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF CLASS A COMMON STOCK.

DIVIDENDS

Dividends, if any, paid to a non-United States holder of Class A Common
Stock will be subject to withholding of United States federal income tax at a
30% rate or such lower rate as may be specified by an applicable income tax
treaty. However, a non-United States holder will be taxed at ordinary federal
income tax rates (on a net income basis) on dividends that are effectively
connected with the conduct of a trade or business of such non-United States
holder within the United States (but only if, in cases in which a tax treaty
applies, such dividends are attributable to a permanent establishment of the
holder in the United States) and will not be subject to the withholding tax
described above. If such non-United States holder is a foreign corporation, it
also may be subject to a United States branch profits tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty.

Under current law, dividends paid to an address located in a country other
than the United States are presumed to be paid to a resident of such country
(unless the payer has knowledge to the contrary) for
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purposes of the withholding discussed above and, under the current
interpretation of United States Treasury regulations, for purposes of
determining the applicability of a tax treaty rate. Under proposed United States
Treasury regulations not currently in effect, however, a Non-United States
holder of Class A Common Stock who wishes to claim the benefit of an applicable
treaty rate (and avoid backup withholding, as discussed below) would be required
to satisfy applicable certification and other requirements. Currently, certain
certification and disclosure requirements must be complied with in order to be
exempt from withholding under the effectively connected income exemption
discussed above. A non-United States holder that is eligible for a reduced rate
of United States withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts withheld by filing an appropriate claim for refund
with the Internal Revenue Service ("IRS").

DISPOSITION OF STOCK

Non-United States holders generally will not be subject to United States
federal income tax in respect of gain recognized on a disposition of Class A
Common Stock unless (i) the gain is effectively connected with a trade or
business conducted by the non-United States holder within the United States and,
if a tax treaty applies, is attributable to a permanent establishment of the
Non-United States holder that is located in the United States (in which case the
branch profits tax described under "Dividends" above may also apply if the
holder is a foreign corporation), (ii) in the case of a non-United States holder
who is a non-resident alien individual and holds Class A Common Stock as a
capital asset, such holder is present in the United States for 183 or more days
in the taxable year of the disposition, and either the income from the
disposition is attributable to an office or other fixed place of business
maintained by the holder in the United States or the holder has a "tax home" in
the United States (within the meaning of the Internal Revenue Code of 1986, as
amended (the "Code")), or (iii) the Non-United States holder is subject to tax
pursuant to certain Code provisions applicable to expatriates. (The foregoing is
based on the assumption that the Company is not and has not been a "United
States real property holding corporation" for federal income tax purposes. The
Company does not believe it has been or is currently, and does not anticipate
becoming, such a corporation.)

FEDERAL ESTATE TAXES

Class A Common Stock that is owned or treated as being owned by a
non-United States holder at the time of death will be included in such holder's
gross estate for United States federal estate tax purposes, unless an applicable
estate tax treaty provides otherwise. Such individual's estate may be subject to
U.S. federal estate tax on the property includable in the estate for U.S.
federal estate tax purposes.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

The Company must report annually to the IRS and to each Non-United States
holder the amount of dividends paid to such holder and the tax withheld with
respect to such dividends, regardless of whether withholding was required.
Copies of the information returns reporting such dividends and withholding may
also be made available to the tax authorities in the country in which the
Non-United States holder resides under the provisions of an applicable income
tax treaty.

Under current law, backup withholding at the rate of 31% generally will not
apply to dividends paid to a Non-United States holder at an address outside the
United States (unless the payer has knowledge that the payee is a U.S. person).
Under proposed United States Treasury regulations not currently in effect,
however, a Non-United States holder will be subject to backup withholding unless
applicable certification requirements are met.

Payment of the proceeds of a sale of Class A Common Stock by or through a
U.S. office of a broker is subject to both backup withholding and information
reporting unless the beneficial owner provides the payer with its name and
address and certifies under penalties of perjury that it is a Non-United States
holder, or otherwise establishes an exemption. In general, backup withholding
and information reporting will not apply to a payment of the proceeds of a sale
of Class A Common Stock by or through a foreign office of a foreign broker. If,
however, such broker is, for U.S. federal income tax purposes a U.S. person, a
controlled foreign corporation, or a foreign person that derives 50% or more of
its gross income for a certain period from the

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conduct of a trade or business in the United States, such payments will be
subject to information reporting, but not backup withholding, unless (1) such
broker has documentary evidence in its records that the beneficial owner is a
Non-United States holder and certain other conditions are met, or (2) the
beneficial owner otherwise establishes an exemption.

Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against such holder's U.S. federal income tax
liability provided the required information is furnished in a timely manner to
the IRS.

The backup withholding and information reporting rules are under review by
the Treasury Department and their application to the Class A Common Stock could
be changed by future regulations. Non-United States holders should consult their
tax advisors regarding the application of these rules to their particular
situations, the availability of an exemption therefrom, the procedure for
obtaining such an exemption, if available, and the possible application of the
proposed United States Treasury regulations addressing the withholding and the
information reporting rules.

LEGAL MATTERS

The validity of the Shares will be passed upon for the Company by Schulte
Roth & Zabel LLP.

EXPERTS

The consolidated financial statements and schedule of FTD Corporation as of
June 30, 1997 and 1996, and for each of the years in the three-year period ended
June 30, 1997, have been included herein in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.

53
<PAGE> 54

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 and
September 30, 1997........................................ F-3
Consolidated Statements of Operations for the years ended
June 30, 1997, 1996 and 1995 and the three month periods
ended September 30, 1997 and 1996......................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended June 30, 1997, 1996 and 1995 and the three
month period ended September 30, 1997..................... F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 1997, 1996 and 1995 and the three month periods
ended September 30, 1997 and 1996......................... F-6
Notes to Consolidated Financial Statements as of June 30,
1997, 1996 and 1995 and the three month period ended
September 30, 1997........................................ F-7
Independent Auditors' Report on Supplementary Information... F-22
Schedule II -- Valuation and Qualifying Accounts............ F-23
</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> 55

[KPMG Peat Marwick LLP LETTERHEAD}

INDEPENDENT AUDITORS' REPORT

Board of Directors
FTD Corporation:

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> 56

FTD CORPORATION

CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997 AND 1996 AND SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
AS OF AS OF JUNE 30,
SEPTEMBER 30, -------------------
1997 1997 1996
------------- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $ 21,398 $ 28,294 $ 26,650
Accounts receivable, less allowance for doubtful accounts
($2,247 at September 30, 1997 and $2,211 and $1,412 at
June 30, 1997 and 1996, respectively)..................... 31,342 24,979 24,080
Inventories, principally finished goods, net................ 14,520 14,992 12,468
Deferred income taxes....................................... 7,242 7,242 5,569
Other current assets........................................ 1,958 2,034 1,718
-------- -------- --------
Total current assets.................................... 76,460 77,541 70,485
PROPERTY AND EQUIPMENT:
Land and improvements....................................... 1,600 1,600 2,500
Building and improvements................................... 7,607 7,601 13,169
Mercury consoles............................................ 22,287 22,472 23,187
Furniture and equipment..................................... 13,079 12,832 11,630
-------- -------- --------
Total................................................... 44,573 44,505 50,486
Less accumulated depreciation............................... 26,381 23,925 15,158
-------- -------- --------
Property and equipment, net............................. 18,192 20,580 35,328
OTHER ASSETS:
Deferred financing costs, less accumulated amortization
($2,993 at September 30, 1997 and $2,724 and $1,648 at
June 30, 1997 and 1996, respectively)..................... 3,125 3,394 4,470
Deferred income taxes....................................... -- -- 194
Other noncurrent assets..................................... 1,857 1,979 2,191
Goodwill and other intangibles, less accumulated
amortization ($8,276 at September 30, 1997 and $7,528 and
$4,874 at June 30, 1997 and 1996, respectively)........... 77,482 78,230 83,414
-------- -------- --------
Total other assets...................................... 82,464 83,603 90,269
-------- -------- --------
Total assets............................................ $177,116 $181,724 $196,082
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt........................ $ 9,287 $ 9,297 $ 8,496
Accounts payable............................................ 25,595 29,237 28,360
Accrued member incentive programs........................... 12,930 13,816 12,949
Accrued severance costs..................................... 920 1,245 1,319
Other accrued liabilities................................... 7,616 5,765 6,059
Members' deposits........................................... 10,022 9,991 8,876
Unearned income............................................. 3,017 2,724 1,708
-------- -------- --------
Total current liabilities............................... 69,387 72,075 67,767
Long-term debt, less current maturities..................... 70,973 73,103 87,781
Post-retirement benefits, less current portion.............. 6,577 6,577 7,163
Accrued pension obligations................................. 576 876 4,061
Deferred income taxes....................................... 2,181 1,765 --
Minority interest in subsidiary............................. 155 156 170
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;
6,185,014 shares issued and 6,055,470 shares outstanding
at September 30, 1997; 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 62
Class B, $0.0005 par value, 3,000,000 shares authorized;
1,566,686 shares issued and outstanding at September 30,
1997 and at June 30, 1997 and 1996...................... 1 1 1
Paid-in capital............................................. 35,949 35,639 35,607
Accumulated deficit......................................... (7,830) (8,013) (6,275)
Notes receivable............................................ (295) (32) (128)
Treasury stock, at cost, 129,544 shares Class A Common Stock
at September 30, 1997; 90,675 shares Class A Common Stock
at June 30, 1997; 25,632 shares Class A Common Stock at
June 30, 1996............................................. (620) (485) (127)
-------- -------- --------
Total stockholders' equity.............................. 27,267 27,172 29,140
-------- -------- --------
Total liabilities and stockholders' equity.............. $177,116 $181,724 $196,082
======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 57

FTD CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
AND THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996

<TABLE>
<CAPTION>
THREE MONTH PERIOD
ENDED SEPTEMBER 30, FISCAL YEAR ENDED JUNE 30,
-------------------- -------------------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Marketplace.................................. $12,529 $13,639 $ 49,738 $ 57,924 $35,460
Clearinghouse................................ 6,777 6,627 34,383 37,070 24,738
Mercury Network.............................. 8,021 8,497 37,558 34,138 17,618
Other........................................ 8,160 8,305 40,904 37,123 18,702
------- ------- -------- -------- -------
Total revenues.......................... 35,487 37,068 162,583 166,255 96,518
COSTS:
Products and distribution.................... 8,746 9,461 35,897 41,209 25,736
Floral order transmissions and processing
services................................... 6,716 7,081 29,803 30,562 14,923
Member programs.............................. 6,576 6,811 30,606 32,615 17,908
------- ------- -------- -------- -------
Total cost of goods sold and services
provided.............................. 22,038 23,353 96,306 104,386 58,567
Selling, general and administrative
expense.................................... 10,136 11,312 55,769 58,376 30,669
------- ------- -------- -------- -------
Income from operations.................. 3,313 2,403 10,508 3,493 7,282
OTHER INCOME AND EXPENSES:
Interest income.............................. (327) (345) (1,480) (1,431) (1,719)
Interest expense............................. 3,003 3,283 12,789 13,498 7,546
Loss on sale of Southfield Michigan
facility................................... -- -- 530 -- --
------- ------- -------- -------- -------
Total other income and expenses......... 2,676 2,938 11,839 12,067 5,827
Income (loss) before income tax expense
(benefit) and minority interest....... 637 (535) (1,331) (8,574) 1,455
Income tax expense (benefit)................. 458 24 416 (1,813) 1,021
Minority interest in earnings (loss) of
subsidiary................................. (1) (11) (14) (33) 8
------- ------- -------- -------- -------
Net income (loss)....................... $ 180 $ (548) $ (1,733) $ (6,728) $ 426
======= ======= ======== ======== =======
EARNINGS (LOSS) PER SHARE:*
Primary...................................... $0.01 $(0.04) $(0.12) $(0.51) $0.03
Fully Diluted................................ $0.01 $(0.04) $(0.12) $(0.51) $0.03
</TABLE>

- -------------------------
* Adjusted to reflect 100% stock dividend declared on February 2, 1998 to
stockholders of record as of February 9, 1998.

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 58

FTD CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
AND THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE
------------- ---------------------------
1997 1997 1996 1995
---- ---- ---- ----
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Class A, shares outstanding
Balance at beginning of period............................ 6,073 6,135 6,029 0
Common stock issued to effect merger.................... 5,986
Additional common stock issued.......................... 20 149
Purchase of common stock from initial investors......... (552)
Sales of common stock in public offering................ 659
Repurchase of common stock.............................. (39) (66) (33) (106)
Sale of common stock to officers........................ 4 32
------- ------- ------- -------
Balance at end of period.................................. 6,054 6,073 6,135 6,029
------- ------- ------- -------
Class B, shares outstanding
Balance at beginning of period............................ 1,567 1,567 442
Common Stock issued to effect merger.................... 442
Exercise of common stock warrants....................... 1,125
------- ------- ------- -------
Balance at end of period.................................. 1,567 1,567 1,567 442
------- ------- ------- -------
Common stock Class A and Class B at par value
Balance at beginning of period............................ $ 63 $ 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 period.................................. $ 63 $ 63 $ 63 $ 66
======= ======= ======= =======
Paid-in Capital
Balance at beginning of period............................ $35,639 $35,607 $35,385 $ 0
Repurchase of initial investment........................ (2,949)
Common stock issued to effect merger.................... 29,936
Additional common stock issued.......................... 310 949
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 period.................................. $35,949 $35,639 $35,607 $35,385
======= ======= ======= =======
Retained Earnings (Accumulated Deficit)
Balance at beginning of period............................ $(8,013) $(6,275) $ 449 $ 0
Net income (loss)....................................... 180 (1,733) (6,728) 426
Foreign currency translation adjustment................. 3 (5) 4 23
------- ------- ------- -------
Balance at end of period.................................. $(7,830) $(8,013) $(6,275) $ 449
======= ======= ======= =======
Stock Subscription and Notes Receivable
Balance at beginning of period............................ $ (32) $ (128) $ (319) $ 0
Repurchase of initial investment........................ $ 32 68
Additional common stock issued.......................... (319)
Sale of common stock to officers........................ $ (295) (32) (12)
Amortization of shareholder notes....................... 70
Cancellation of shareholder receivable related to
repurchase of common stock............................ 65
Forgiveness of officers loan............................ 128
------- ------- ------- -------
Balance at end of period.................................. $ (295) $ (32) $ (128) $ (319)
======= ======= ======= =======
Treasury Stock
Balance at beginning of period............................ $ (485) $ (127) $ (500) $ 0
Repurchase of common stock.............................. (135) (358) (162) (500)
Sale of treasury stock.................................. 500
Sale of common stock to officers........................ 35
------- ------- ------- -------
Balance at end of period.................................. $ (620) $ (485) $ (127) $ (500)
======= ======= ======= =======
Total Stockholders Equity................................... $27,267 $27,172 $29,140 $35,081
======= ======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.
F-5
<PAGE> 59

FTD CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
AND THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996

<TABLE>
<CAPTION>
THREE MONTH
PERIOD ENDED
SEPTEMBER 30, FISCAL YEAR ENDED JUNE 30,
------------------ --------------------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ 180 $ (548) $ (1,733) $(6,728) $ 426
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 3,333 3,575 15,606 14,231 6,525
Amortization of deferred financing costs and original
issue discount.......................................... 359 346 1,404 1,359 708
Post-retirement benefits.................................. -- 149 (586) 401 361
Pension................................................... (300) 247 (2,756) (120) --
Minority interest in earnings (loss) of subsidiary........ (1) (11) (14) (33) 8
Undistributed loss of unconsolidated affiliate............ (13) (10) (30) (66) (54)
Loss on sale or disposal of assets........................ -- 107 530 663
Increase (decrease) in cash due to change in:
Accounts receivable..................................... (6,363) (1,076) (899) (3,219) 12,842
Inventories............................................. 472 (1,435) (2,524) 1,027 1,524
Deferred income taxes................................... 416 (33) 286 (2,035) 507
Other current assets.................................... 76 (1,989) (316) (159) 2,336
Accounts payable........................................ (3,642) (203) 877 1,491 (28,694)
Accrued member incentive programs....................... (886) (2) 867 6,194 (2,819)
Accrued severance costs................................. (325) (312) (74) (1,504) (1,075)
Other accrued liabilities, unearned income, and members'
deposits.............................................. 2,175 4,159 1,837 (417) 1,907
------- ------- -------- ------- ---------
Net cash provided by (used in) operating activities..... (4,519) 2,964 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................................... (402) (1,386) (2,614) (4,950) (3,082)
Proceeds from sale of Southfield Michigan facility.......... 340 -- 6,224
------- ------- -------- ------- ---------
Net cash provided by (used in) investing activities... (62) (1,386) 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................................ (2,230) (1,503) (14,206) (4,762) (35,101)
Issuance of common stock.................................... 310 (39) 3,681 30,631
Repurchase of common stock.................................. (135) -- (358) (3,037) (500)
Issuance of common stock warrants........................... 1 3,000
Decrease on notes receivable from stockholders.............. (263) 12 128 138
------- ------- -------- ------- ---------
Net cash provided by (used in) financing activities... (2,318) (1,530) (14,436) (3,979) 93,340
Effect of foreign exchange rate changes on cash............. 3 3 (5) 12
------- ------- -------- ------- ---------
Net increase in cash and cash equivalents................... (6,896) 51 1,644 2,168 24,482
Cash and cash equivalents at beginning of period............ 28,294 26,650 26,650 24,482
------- ------- -------- ------- ---------
Cash and cash equivalents at end of period.................. $21,398 $26,701 $ 28,294 $26,650 $ 24,482
======= ======= ======== ======= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid............................................... $ 554 $ 931 $ 11,458 $12,113 $ 6,704
======= ======= ======== ======= =========
Income taxes paid........................................... $ 44 $ 100 $ 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> 60

FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1996 AND 1995 AND THE THREE MONTH
PERIOD ENDED SEPTEMBER 30, 1997

(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.

The unaudited consolidated financial statements at September 30, 1997, have
been prepared in accordance with generally accepted accounting principles for
interim financial information pursuant to the rules and regulations of the
Securities and Exchange Commission and do not contain all information included
in the audited consolidated financial statements and notes for the year ended
June 30, 1997. In the opinion of FTD management, all adjustments necessary for a
fair presentation of the financial position and results of operations have been
included (and any such adjustments are of a normal, recurring nature, except as
disclosed herein). Due to seasonal variations in FTD's business, operating
results for the three month period ended September 30, 1997 are not necessarily
indicative of the results that might be expected for the year ended June 30,
1998.

Certain amounts in the September 30, 1996 unaudited consolidated financial
statements have been reclassified to conform to the current 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).
F-7
<PAGE> 61

FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
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.

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.

F-8
<PAGE> 62

FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
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. The number of common shares and common share equivalents
outstanding have been adjusted to reflect a 100% stock dividend declared on
February 2, 1998 to stockholders of record as of February 9, 1998. 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.

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.

F-9
<PAGE> 63

FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(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.

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.

F-10
<PAGE> 64

FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(2) ACQUISITION -- CONTINUED

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>

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).

F-11
<PAGE> 65

FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(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-12
<PAGE> 66

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-13
<PAGE> 67

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-14
<PAGE> 68

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 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.......................... 5,308 6,181
Unrecognized net gain....................................... 1,526 1,238
------ ------
Accrued postretirement benefit.............................. $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................................... (45) (54) --
---- ---- ----
Total....................................................... $579 $578 $462
==== ==== ====
</TABLE>

F-15
<PAGE> 69

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.

F-16
<PAGE> 70

FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(9) PENSION PLANS -- CONTINUED

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>

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.

F-17
<PAGE> 71

FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(10) NOTE RECEIVABLE AND OTHER RELATED PARTY TRANSACTIONS -- CONTINUED
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.

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
F-18
<PAGE> 72

FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(11) 1994 STOCK AWARD AND INCENTIVE PLAN -- CONTINUED
shares of the Company's Common Stock; and (ii) at an exercise 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 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................................. $ (0.12) $ (.14) $ (.51) $ (.54)
Fully Diluted........................... $ (0.12) $ (.14) $ (.51) $ (.54)
</TABLE>

- -------------------------
* Adjusted to reflect the 100% stock dividend declared on February 2, 1998 to
stockholders of record as of February 9, 1998.

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>

F-19
<PAGE> 73

FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(11) 1994 STOCK AWARD AND INCENTIVE PLAN -- CONTINUED

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>

(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.

F-20
<PAGE> 74
FTD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

(13) CAPITAL STOCK -- CONTINUED
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.

(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................................. $ (.04) $ (.08) $ .15 $ (.15)
Fully Diluted........................... $ (.04) $ (.08) $ .15 $ (.15)
</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 $ (.22) $ (.05) $ (.24)
Fully Diluted........................... $ .01 $ (.22) $ (.05) $ (.24)
</TABLE>

- -------------------------
* As adjusted to reflect the 100% stock dividend declared on February 2, 1998 to
stockholders of record as of February 9, 1998.

F-21
<PAGE> 75

[KPMG LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

Board of Directors
FTD Corporation:

Under date of August 14, 1997, we reported on the consolidated balance
sheets of FTD Corporation and subsidiary as of June 30, 1997 and 1996 and the
related consolidated statements of operations, stockholder's equity, and cash
flows for each of the years in the three-year period ended June 30, 1997, which
are included in the prospectus. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule in the registration statement. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.

In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.

KPMG PEAT MARWICK LLP

Detroit, Michigan
August 14, 1997

F-22
<PAGE> 76

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

F-23
<PAGE> 77

======================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT
RELATES NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, TO ANY PERSON MANY JURISDICTION IN, WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF FTD SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

-------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Risk Factors.......................... 10
The Offering.......................... 14
Use of Proceeds....................... 18
Dividend Policy....................... 18
Dilution.............................. 19
Selected Historical Financial Data.... 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 28
Management............................ 33
Security Ownership of Certain
Beneficial Owners and Management.... 43
Relationship with Affiliates.......... 44
Description of Capital Stock.......... 45
Description of Bank Credit
Agreement........................... 50
Certain United States Federal Income
Tax Consequences to Non-United
States Holders...................... 51
Legal Matters......................... 53
Experts............................... 53
Index to Consolidated Financial
Statements and Schedule............. F-1
</TABLE>

======================================================
======================================================
1,146,078 SHARES

FTD CORPORATION
CLASS A COMMON STOCK
--------------------

PROSPECTUS
--------------------
FEBRUARY 20, 1998
======================================================