**Exhibit3.1**

 

**SECONDAMENDED AND RESTATED CERTIFICATE OF INCORPORATION**

 

**OF**

 

**FTDGROUP, INC.**

 

FTD Group, Inc., formerly known asMercury Man Holdings Corporation, is a corporation organized and existing underthe laws of the State of Delaware (the “**Corporation**”).  The original Certificate of Incorporation wasfiled with the Secretary of State of the State of Delaware on September 30,2003.  An Amended and RestatedCertificate of Incorporation  (the “**First Amended and Restated Certificate ofIncorporation**”) of the Corporation was filed with the Secretary ofState of the State of Delaware on February 24, 2004, which restated,integrated and amended the Certificate of Incorporation in its entirety.  A Certificate of Amendment of Amended andRestated Certificate of Incorporation (“**Certificateof Amendment**”) of the Corporation was filed with the Secretary ofState of the State of Delaware on November 18, 2004.  The Corporation does hereby certify on this7th day of February, 2005:

 

FIRST:    That the First Amended and Restated Certificate of Incorporation, asamended by the Certificate of Amendment, of the Corporation is hereby amendedand restated to read as follows:

 

1.             Thename of the corporation is: FTD Group, Inc.

 

2.             Theaddress of its registered office in the State of Delaware is 2711 CentervilleRoad, Suite 400, in the City of Wilmington, County of New Castle.  The name of its registered agent at suchaddress is Corporation Service Company.

 

3.             Thenature of the business or purposes to be conducted or promoted is to engage inany lawful act or activity for which corporations may be organized under theGeneral Corporation Law of the State of Delaware.

 

4.             Thetotal number of shares of all classes of stock which the Corporation shall haveauthority to issue is Seventy Five Million Two Hundred Thousand (75,200,000),consisting of Seventy Five Million (75,000,000) shares of Common Stock, parvalue $0.01 per share (“**Common Stock**”),and Two Hundred Thousand (200,000) shares of Preferred Stock, par value $0.01per share (“**Preferred Stock**”).

 

Upon the effectiveness of this Second Amendedand Restated Certificate of Incorporation (the “**Effective Time**”), all outstanding shares of Common Stockimmediately prior to the Effective Time shall be reverse split on a 1-for-3basis, whereby each holder of Common Stock, without further action by thestockholder, shall hold 1 share of Common Stock for every 3 outstanding sharesof Common Stock held immediately prior to the Effective Time (the “**Reverse Stock Split**”).  No fractional shares of Common Stock shall beissued as a result of the Reverse Stock Split. In lieu of any fractional shares of Common Stock to which a stockholderwould otherwise be entitled, the Corporation shall pay cash equal to suchfraction multiplied by the initial public offering price per share of CommonStock.

 

----

 

**A.****                                  AUTHORITYOF BOARD OF DIRECTORS TO FIX DESIGNATIONS, POWERS, PREFERENCES, RIGHTS,QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF SHARES OF PREFERRED STOCK NOTFIXED HEREBY.**

 

Shares of Preferred Stock may be issued fromtime to time, in one or more series, as may from time to time be determined bythe Board of Directors, each of said series to be distinctly designated.  All shares of any one series of PreferredStock shall be alike in every particular, except that there may be differentdates from which dividends, if any, thereon shall be cumulative, if madecumulative.  The designations, powers,preferences and relative, participating, optional or other special rights ofeach such series, including voting rights, and qualifications, limitations orrestrictions of Preferred Stock, or any series thereof, if any, may differ fromthose of any and all other series at any time outstanding.  Subject to Paragraph 4.C(1) herein, thedesignations, powers, preferences and relative, participating, optional orother special rights of each such series shall be established by resolution ofthe Board of Directors pursuant to Section 151 of the General CorporationLaw of the State of Delaware, including, but without limiting the generality ofthe foregoing, the following:

 

(1)            the distinctivedesignation of, and the number of shares of Preferred Stock which shallconstitute, such series, which number may be increased (except where otherwiseprovided by the Board of Directors) or decreased (but not below the number ofshares thereof then outstanding) from time to time by like action of the Boardof Directors;

 

(2)            the rate and timesat which, and the terms and conditions on which, dividends, if any, onPreferred Stock of such series shall be paid, the extent of the preference orrelation, if any, of such dividends to the dividends payable on any other classor classes or series of the same or any other class or classes of stock of theCorporation and whether such dividends shall be cumulative or non-cumulative;

 

(3)            the right, if any,of the holders of Preferred Stock of such series to convert the same into, orexchange the same for, shares of any other class or classes or of any series ofthe same or any other class or classes of stock of the Corporation and theterms and conditions of such conversion or exchange;

 

(4)            whether or notPreferred Stock of such series shall be subject to redemption, and theredemption price or prices and the time or times at which, and the terms andconditions on which, Preferred Stock of such series may be redeemed;

 

(5)            the terms of thesinking fund or redemption or purchase account, if any, to be provided forPreferred Stock of such series;

 

(6)            the restrictions,if any, on the issuance of shares of the same or any other class or classes orof any series of the same or any other class or classes of stock of theCorporation;

 

(7)            the rights, if any,of the holders of Preferred Stock of such series upon the voluntary orinvoluntary liquidation, merger, consolidation, distribution or sale of assets,dissolution or winding-up of the Corporation; and

 

(8)            the voting powers,if any, of the holders of such series of Preferred Stock which, withoutlimiting the generality of the foregoing, may be equal to, more than or lessthan one vote per share and may include the right, voting as a series by itselfor together with other

 

2

----

 

series of Preferred Stock or all series of Preferred Stock as a class,or, together with any other class or classes or series of any other class orclasses of stock of the Corporation, to elect one or more directors of theCorporation if there shall have been a default in the payment of dividends onany one or more series of Preferred Stock or under such other circumstances andon such conditions as the Board of Directors may determine.

 

Notwithstanding the foregoing, the terms ofthe Corporation’s 14% Senior Redeemable Exchangeable Cumulative Preferred Stockand 12% Junior Redeemable Exchangeable Cumulative Preferred Stock shall be asset forth in the Certificate of Designations, Preferences and Relative,Participating, Optional and Other Special Rights of 14% Senior RedeemableExchangeable Cumulative Preferred Stock and 12% Junior Redeemable ExchangeableCumulative Preferred Stock, and Qualifications, Limitations and RestrictionsThereof of Mercury Man Holdings Corporation (the former name of theCorporation), duly approved and adopted by the Board of Directors by unanimouswritten consent dated as of February 23, 2004, which is set forth in itsentirety as **Exhibit A** hereto and isincorporated by reference herein.

 

**B.****                                  STATEMENTOF LIMITATIONS, RELATIVE RIGHTS AND POWERS IN RESPECT OF COMMON STOCK.**

 

(1)            After therequirements with respect to preferential dividends on Preferred Stock (fixedin accordance with the provisions of Paragraph 4.A herein), if any, shall havebeen met and after the Corporation shall have complied with all therequirements, if any, with respect to the setting aside of sums as sinkingfunds or redemption or purchase accounts for Preferred Stock (fixed inaccordance with the provisions of Paragraph 4.A herein), and subject further toany other conditions which may be fixed in accordance with the provisions of Paragraph4.A herein, then and not otherwise, the holders of Common Stock shall beentitled to receive such dividends as may be declared from time to time by theBoard of Directors; provided, however, that the declaration andpayment of cash dividends on Common Stock shall be subject to contractual andother restrictions with respect thereto and the legal availability of fundstherefor.

 

(2)            After distributionin full of the preferential amount, if any, to be distributed to the holders ofPreferred Stock in the event of voluntary or involuntary liquidation,dissolution or winding-up of the Corporation, the holders of Common Stock,subject to the rights, if any, of the holders of Preferred Stock to participatetherein (fixed in accordance with the provisions of Paragraph 4.A herein),shall be entitled to receive all the remaining assets of the Corporation,tangible and intangible, of whatever kind available for distribution tostockholders ratably in proportion to the number of shares of Common Stock heldby them, respectively.

 

(3)            Except as mayotherwise be required by law, or by the provisions of such resolution orresolutions as may be adopted by the Board of Directors pursuant to theprovisions of Paragraph 4.A herein, each holder of Common Stock shall have onevote in respect of each share of Common Stock held by him on all matters votedupon by the stockholders.

 

**C.****                                  OTHERPROVISIONS.**

 

(1)            The relativepowers, preferences and rights of each series of Preferred Stock in relation tothe powers, preferences and rights of each other series of Preferred Stockshall, in each case, be as may be fixed from time to time by the Board ofDirectors in such resolution or resolutions as may be adopted pursuant toauthority granted in Paragraph 4.A herein and the consent, by class or seriesvote or otherwise, of the holders of any of the series of

 

3

----

 

Preferred Stock as are from time to time outstanding shall not berequired for the issuance by the Board of Directors of any other series ofPreferred Stock whether or not the powers, preferences and rights of such otherseries shall be fixed by the Board of Directors as senior to, or on a paritywith, the powers, preferences and rights of such outstanding series, or any ofthem; provided, however, that the Board of Directors may providein the resolution or resolutions as to any series of Preferred Stock adoptedpursuant to the provisions of Paragraph 4.A herein that the consent of theholders of a majority (or such greater proportion as shall be therein fixed) ofthe outstanding shares of such series voting thereon shall be required for theissuance of any or all other series of Preferred Stock.

 

(2)            Subject to theprovisions of this Paragraph C and to the provisions of any resolution orresolutions as to any series of Preferred Stock adopted pursuant to theprovisions of Paragraph 4.A herein, shares of any series of Preferred Stock maybe issued from time to time as the Board of Directors shall determine, for suchconsideration and upon such terms as the Board of Directors may determine.

 

(3)            Shares of CommonStock may be issued from time to time as the Board of Directors shalldetermine, for such consideration and upon such terms as the Board of Directorsmay determine.

 

(4)            The authorizedamount of shares of Common Stock and of Preferred Stock may, without a class orseries vote, be increased or decreased from time to time by the affirmativevote of the holders of a majority of the stock of the Corporation entitled tovote thereon.

 

5.             Nodirector of the Corporation shall be personally liable to the Corporation orits stockholders for monetary damages for breach of fiduciary duty as adirector, except for liability (i) for any breach of the director’s dutyof loyalty to the Corporation or its stockholders, (ii) for acts oromissions not in good faith or which involve intentional misconduct or aknowing violation of the law, (iii) under Section 174 of the GeneralCorporation Law of the State of Delaware, or (iv) for any transaction fromwhich the director derived an improper personal benefit.  Any repeal or modification of this Paragraph5 shall not adversely affect any right or protection of a director of theCorporation existing immediately prior to such repeal or modification.

 

6.             Subjectto the rights of the holders of Preferred Stock, if any, the followingprovisions are inserted for the management of the business and for the conductof the affairs of the Corporation, and for further definition, limitation andregulation of the powers of the Corporation and of its directors andstockholders:

 

(1)            The number ofdirectors of the Corporation shall be such as from time to time shall be fixedby, or in the manner provided in, the bylaws of the Corporation (the “**Bylaws**”). Election of directors need not be by written ballot unless the Bylawsshall so provide.

 

(2)            In furtherance andnot in limitation of the powers conferred by statute, the Board of Directors isexpressly authorized to adopt, amend or repeal the Bylaws; to fix and vary theamount to be reserved for any proper purpose; to authorize and cause to beexecuted mortgages and liens upon all or any part of the property of theCorporation; to determine the use and disposition of any surplus or netprofits; and to fix the times for the declaration and payment of dividends.

 

4

----

 

(3)            The directors intheir discretion may submit any contract or act for approval or ratification atany annual meeting of the stockholders or at any meeting of the stockholderscalled for the purpose of considering any such contract or act, and anycontract or act that shall be approved or be ratified by the vote of theholders of a majority of the stock of the Corporation which is represented inperson or by proxy at such meeting and entitled to vote thereat (provided thata lawful quorum of stockholders be there represented in person or by proxy)shall be as valid and as binding upon the Corporation and upon all thestockholders as though it had been approved or ratified by every stockholder ofthe Corporation, whether or not the contract or act would otherwise be open tolegal attack because of directors’ interest, or for any other reason.

 

(4)            In addition to thepowers and authorities herein before or by statute expressly conferred uponthem, the directors are hereby empowered to exercise all such powers and do allsuch acts and things as may be exercised or done by the Corporation; subject,nevertheless, to the provisions of the General Corporation Law of the State ofDelaware, as amended from time to time, of this Certificate of Incorporation,and to any Bylaws from time to time made by the stockholders; provided, however,that no Bylaws so made shall invalidate any prior act of the director whichwould have been valid if such Bylaw has not been made.

 

7.             TheCorporation shall, to the full extent permitted by Section 145 of theGeneral Corporation Law of the State of Delaware, as amended from time to time,indemnify all officers and directors of the Corporation whom it may indemnifypursuant thereto.

 

8.             Specialmeetings of the stockholders, for any purpose or purposes, unless otherwiseprescribed by law or by this Second Amended and Restated Certificate ofIncorporation, shall be called by the Board of Directors, a Chairman orCo-Chairman of the Board, the President or the Chief Executive Officer, butsuch special meetings may not be called by any other person or persons. Suchrequest shall be accompanied by a written notice that shall state the purposeor purposes of the proposed meeting. Business transacted at any special meetingof stockholders shall be limited to the matters related to the purposes statedin the notice.

 

9.             TheCorporation reserves the right to amend, alter, change or repeal any provisioncontained in this Certificate of Incorporation, in the manner now or hereafterprescribed by law or this Certificate of Incorporation, and all rights at anytime conferred upon the stockholders of the Corporation by this Certificate ofIncorporation are granted subject to the provisions of this Paragraph 9.

 

SECOND:    Pursuant to Section 245 of the General Corporation Law of the Stateof Delaware, this Second Amended and Restated Certificate of Incorporationamends and restates the provisions of the Certificate of Incorporation of theCorporation.  This Second Amended andRestated Certificate of Incorporation was duly approved by the Corporation’sBoard of Directors, and was duly approved by the holders of the requisitenumber of shares of the Corporation in accordance with Sections 242 and 245 ofthe General Corporation Law of the State of Delaware and was consented to inwriting by the written consent of the stockholders of this Corporation inaccordance with Section 228 of the General Corporation Law of the State ofDelaware.  The number of shares voting infavor of such amendment and restatement exceeded the vote required, suchrequired vote being a majority of the outstanding shares of Common Stock.

 

[Signature Page Follows]

 

5

----

 

IN WITNESS WHEREOF, FTD Group, Inc. hascaused this Second Amended and Restated Certificate of Incorporation to besigned by Jon R. Burney, its Secretary, this 7th day of February, 2005.

 

 
|   | FTD GROUP, INC. |
|--------|-----------------|
|   |            |
|   |            |
|   | By:             | /s/ Jon R. Burney |   |
|   |            | Name: Jon R. Burney |
|   |            | Title: Secretary |

 

S-1

----

 

**EXHIBIT A**

 

**MERCURY MAN HOLDINGS CORPORATION**

 

**CERTIFICATE OF DESIGNATIONS, PREFERENCESAND RELATIVE, PARTICIPATING, OPTIONALAND OTHER SPECIAL RIGHTS OF14% SENIOR REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK AND12% JUNIOR REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK, ANDQUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF**

 

Pursuant to Section 151 of theGeneral Corporation Law of the State of Delaware

 

Mercury ManHoldings Corporation (the “**Company**”)*,*a corporationorganized and existing under the General Corporation Law of the State ofDelaware, does hereby certify that, pursuant to authority conferred upon theboard of directors of the Company (the “**Board of Directors**”) by its Certificate ofIncorporation (the “**Certificateof Incorporation**”)*,*and pursuantto the provisions of Section 151 of the General Corporation Law of theState of Delaware, the Board of Directors, by unanimous written consent datedas of February 23, 2004, duly approved and adopted the followingresolution (the “**Resolution**”):

 

RESOLVED, that, pursuant to the authority vested in the Board ofDirectors by its Certificate of Incorporation, the Board of Directors doeshereby create, authorize and provide for the issuance of (i) the 14%Senior Redeemable Exchangeable Cumulative Preferred Stock (the “**Senior Preferred Stock**”)*,*par value $0.01 per share, with a liquidation preferenceof $1,000.00 per share as of the date of issue, consisting of 100,000authorized shares, and (ii) the 12% Junior Redeemable ExchangeableCumulative Preferred Stock (the “**Junior Preferred Stock**”)*,*par value$0.01 per share, with a liquidation preference of $1,000.00 per share as of thedate of issue, consisting of 100,000 authorized shares, each to have thepowers, designations and preferences, the relative, participating, optional andother special rights and the qualifications, limitations and restrictionsthereof that are set forth in the Certificate of Incorporation and in thisResolution as follows:

 

**A.****          DESIGNATIONS OF THECOMPANY’S 14% SENIOR REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK**

 

Capitalizedterms used in this Part A and not expressly defined in the text shall havethe meanings set forth in Section 15 of this Part A.

 

1.                                       Designations.

 

## There is hereby created out of the authorizedand unissued shares of Preferred Stock of the Company a series of PreferredStock designated as the “**14% Senior Redeemable Exchangeable Cumulative Preferred Stock**”*.  *The number ofauthorized shares constituting such series shall be

 

1

----

 

100,000 shares of SeniorPreferred Stock.  The liquidationpreference of the Senior Preferred Stock shall be $1,000.00 per share as of thePreferred Stock Issue Date.

 

2.                                       Rank.

 

## The Senior Preferred Stock shall, withrespect to dividend distributions and distributions upon the liquidation,winding up or dissolution of the Company, rank senior to all classes of CommonStock of the Company and to each other class of Capital Stock or series ofPreferred Stock now or hereafter created by the Board of Directors, includingthe Junior Preferred Stock, the terms of which do not expressly provide that itranks senior to or on a parity with the Senior Preferred Stock as to dividenddistributions and distributions upon the liquidation, winding up or dissolutionof the Company (collectively referred to with the Common Stock of the Companyas “**JuniorSecurities**”)*. *The SeniorPreferred Stock shall, with respect to dividend distributions and distributionsupon the liquidation, winding up or dissolution of the Company, rank on aparity with any class of Capital Stock or series of Preferred Stock hereaftercreated which expressly provides that it ranks on a parity with the SeniorPreferred Stock as to dividend distributions and distributions upon theliquidation, winding up or dissolution of the Company (“**Parity Securities**”);**provided,**that any such Parity Securitiesthat were not (but were required to be) approved by the Holders of shares ofSenior Preferred Stock in accordance with Section 6(b)(i) hereofshall be deemed to be Junior Securities and not Parity Securities.  The Senior Preferred Stock shall, withrespect to dividend distributions and distributions upon the liquidation,winding up or dissolution of the Company, rank junior to each class of CapitalStock or series of Preferred Stock now or hereafter created which has beenapproved by the Holders of shares of Senior Preferred Stock in accordance with Section 6(b)(ii) hereofand which expressly provides that it ranks senior to the Senior Preferred Stockas to dividend distributions and distributions upon the liquidation, winding upor dissolution of the Company (collectivelyreferred to as “**SeniorSecurities**”).

 

3.                                       Dividends.

 

## (a)           Beginningon the Preferred Stock Issue Date, the Holders of the outstanding shares ofSenior Preferred Stock shall be entitled to receive, when, as and if declaredby the Board of Directors, out of funds legally available therefor,distributions in the form of cash dividends on each share of Senior PreferredStock, at a rate *per annum*equal to 14% of the liquidation preference as of thefirst day of the applicable Dividend Period (as such liquidation preference maybe adjusted from time to time as hereinafter provided) per share of the SeniorPreferred Stock, payable quarterly. Dividends on the Senior Preferred Stock shall accrue on a daily basisfrom the Preferred Stock Issue Date and are cumulative from such date whether ornot the Company has earnings or profits, there are funds legally available forthe payment of such dividends, the Company has sufficient cash, or dividendsare declared.  Accumulated unpaiddividends will accrue dividends, payable quarterly, at a rate *per annum* equal to 14% of the amount ofsuch accumulated unpaid dividends.  Eachdistribution shall be payable to the Holders of shares of Senior PreferredStock of record as they appear on the stock books of the Company on such recorddates, not less than 10 nor more than 45days preceding the related Dividend Payment Date, as shall be fixed bythe Board of Directors from time to time. Dividends shall cease to accumulate in respect of shares of the SeniorPreferred Stock on the date of their redemption unless the Company shall havefailed to pay the relevant redemption price on the date fixed forredemption.  Not more than 30 days aftera Dividend Payment Date, written notice of the amount of the dividend per sharepaid or accumulated shall be given by first-class mail, postage prepaid, toeach Holder of shares of Senior Preferred Stock of record, on the record datefixed by the Board of Directors for payment of such dividend or, if no recorddate was fixed, the Dividend Payment Date, at such Holder’s address as the sameappears on the stock books of the Company.

 

2

----

 

## (b)           Alldividends paid with respect to shares of the Senior Preferred Stock pursuant toSection 3(a) hereof shall be paid *pro rata*to theHolders thereof entitled thereto.

##  

## (c)           Dividendsin connection with any mandatory redemption pursuant to Section 5(a) hereofor any optional redemption pursuant to Section 5(b) hereof may bedeclared and paid at any time, without reference to any regular Dividend PaymentDate, to Holders of shares of Senior Preferred Stock of record on such date notmore than 45 days prior to the payment thereof, as may be fixed by the Board ofDirectors.

##  

## (d)           Nofull dividends shall be declared by the Board of Directors or paid or funds setapart for payment of dividends by the Company on any Parity Securities for anyperiod unless full cumulative dividends shall have been or contemporaneouslyare declared and paid in full, or declared and (in the case of dividendspayable in cash) a sum in cash is set apart sufficient for such payment, on theSenior Preferred Stock for all Dividend Periods terminating on or prior to thedate of payment of such full dividends on such Parity Securities.  If any dividends are not paid in full, asaforesaid, upon the shares of the Senior Preferred Stock and any other ParitySecurities, all dividends declared upon shares of the Senior Preferred Stockand any other Parity Securities shall be declared *pro rata*basedon the then relative liquidation preference of the Senior Preferred Stock andsuch Parity Securities.  So long as anyshares of the Senior Preferred Stock are outstanding, the Company shall notmake any payment on account of, or set apart for payment money for a sinking orother similar fund for, the purchase, redemption or other retirement of, anyParity Securities or any warrants, rights, calls or options exercisable for orconvertible into any Parity Securities, and shall not permit any corporation orother entity directly or indirectly controlled by the Company to purchase orredeem any Parity Securities or any such warrants, rights, calls or optionsunless full dividends determined in accordance herewith on the Senior PreferredStock shall have been paid or contemporaneously are declared and paid in full.

##  

## (e)           TheHolders of shares of the Senior Preferred Stock shall be entitled to receivethe dividends provided for in Section 3(a) hereof in preference toand in priority over any dividends upon any Junior Securities.

##  

## (f)            Solong as any shares of Senior Preferred Stock are outstanding, except pursuantto the Stockholders Agreement or pursuant to the Contribution Agreements (inthe case of the Contribution Agreements, solely with respect to the issuance onthe Closing Date of Common Stock of the Company), the Company shall not (1) declare,pay or set apart for payment any dividend on any Junior Securities or make anypayment on account of, or set apart for payment money for a sinking or othersimilar fund for, the purchase, redemption or other retirement of, any JuniorSecurities or any warrants, rights, calls or options exercisable for orconvertible into any Junior Securities (other than the repurchase, redemptionor other acquisition or retirement for value of Junior Securities solely inexchange for Junior Securities and other than the repurchase, redemption orother acquisition or retirement for value of Junior Securities (and anywarrants, rights, calls or options exercisable for or convertible into suchJunior Securities) held by employees of or consultants or advisors to theCompany or any of its Subsidiaries, which repurchase, redemption or otheracquisition or retirement shall have been approved by a majority of the Boardof Directors), or (2) make any distribution in respect of any Junior Securitiesor any warrants, rights, calls or options exercisable for or convertible intoany Junior Securities, either directly or indirectly, and whether in cash,obligations or shares of the Company or other property (other thandistributions or dividends in Junior Securities to the holders of JuniorSecurities and dividends on shares of the Junior Preferred Stock paid byincreasing the then liquidation preference per share of the Junior PreferredStock in lieu of dividends in accordance with the terms of the Junior PreferredStock), or (3) permit any corporation or other entity directly orindirectly controlled by the Company to purchase or redeem any JuniorSecurities or any such warrants, rights, calls or options, unless, in any suchcase, full

 

3

----

 

cumulative dividends determinedin accordance herewith have been paid in full in cash on the Senior PreferredStock (such payment to be deemed to have been made in cash for purposes of thisprovision even if dividends had theretofore been paid by increasing the thenliquidation preference of the Senior Preferred Stock if (x) there are noarrears in the payment of dividends on the Senior Preferred Stock for any pastDividend Period and (y) the aggregate liquidation preference then ineffect of all outstanding shares of Senior Preferred Stock does not exceed theinitial aggregate liquidation preference for such shares) and all otherredemption or repayment obligations in respect of the Senior Preferred Stockhave been paid in full in cash.

##  

## (g)           Dividendspayable on shares of the Senior Preferred Stock for any year shall be computedon the basis of a 360-day year of twelve 30-day months, anddividends payable on shares of the Senior Preferred Stock for any period less thana year shall be computed on the basis of a 360-day year of twelve 30-daymonths and the actual number of days elapsed in the period for whichpayable.  If any Dividend Payment Dateoccurs on a day that is not a Business Day, any accrued dividends otherwisepayable on such Dividend Payment Date shall be paid on the next succeedingBusiness Day.

##  

4.                                       LiquidationPreference.

 

## (a)           Subjectto the priority of any Senior Securities, upon any voluntary or involuntaryliquidation, dissolution or winding up of the affairs of the Company, theHolders of shares of Senior Preferred Stock then outstanding shall be entitledto be paid, out of the assets of the Company available for distribution to itsstockholders, $1,000.00 per share of Senior Preferred Stock plus (i) allaccumulated and unpaid dividends (which shall include dividends accrued onaccumulated unpaid dividends as provided in Section 3(a) hereof) and (ii) anyaccrued dividends for the current Dividend Period (including an amount equal toa prorated dividend for the period from the Dividend Payment Date immediatelyprior to the date fixed for liquidation, dissolution or winding up to the datefixed for liquidation, dissolution or winding up) (collectively, the “**liquidation preference**”), before anypayment shall be made or any assets distributed to the holders of any JuniorSecurities, including Common Stock of the Company.  In connection with any redemption of SeniorPreferred Stock or any Change of Control Offer under Sections 5 or 7,respectively, clause (ii) of the term “liquidation preference” as used insuch sections shall instead mean and include any accrued dividends for thecurrent Dividend Period (including an amount equal to a prorated dividend forthe period from the Dividend Payment Date immediately prior to the RedemptionDate or the Change of Control Payment Date, as applicable, to the RedemptionDate or the Change of Control Payment Date, as applicable).  Except as provided in the first sentence ofthis Section 4(a), the Holders of shares of Senior Preferred Stock shallnot be entitled to any distribution in the event of liquidation, dissolution orwinding up of the affairs of the Company. If the assets of the Company are not sufficient to pay in full the liquidationpayments payable to the Holders of outstanding shares of the Senior PreferredStock and the holders of all outstanding Parity Securities, then the holders ofall such shares shall share equally and ratably in such distribution of assetsof the Company in accordance with the amounts which would be payable on suchdistribution if the amount to which the Holders of outstanding shares of SeniorPreferred Stock and the holders of outstanding shares of all Parity Securitiesare entitled were paid in full.

##  

## (b)           Forthe purposes of this Section 4, neither the consolidation nor merger ofthe Company with or into one or more corporations or other entities shall bedeemed to be a liquidation, dissolution or winding up of the affairs of theCompany.

 

4

----

 

5.                                       Redemption.

 

## (a)            MandatoryRedemption.  On August 24, 2024,the Company shall (subject to contractual and other restrictions with respectthereto, including restrictions imposed by the Bank Facility, and the legalavailability of funds therefor), in the manner provided in Section 5(c) hereof,redeem all but not less than all of the shares of the Senior Preferred Stockthen outstanding, at a redemption price equal to 100% of the aggregateliquidation preference (as then in effect) per share.

##  

## (b)           OptionalRedemption.

##  

### (i)                                    The Company may (subject tocontractual and other restrictions with respect thereto, including restrictionsimposed by the Bank Facility, and the legal availability of funds therefor), atthe option of the Company, redeem at any time or from time to time on or after February 24,2009, from any source of funds legally available therefor, in whole or in part,in the manner provided in Section 5(c) hereof, any or all of theshares of the Senior Preferred Stock then outstanding, at a redemption priceequal to the following percentages of the aggregate liquidation preference (asthen in effect) per share, in each case beginning on February 24 of theyear indicated:

###  

| **Year**            | ** ** | **Redemption Price** | ** ** |
|---------------------|------------|----------------------|------------|
|                |       |                 |       |
| 2009                |       | 106                  | %          |
| 2010                |       | 104                  | %          |
| 2011                |       | 102                  | %          |
| 2012 and thereafter |       | 100                  | %          |

 

provided,however, that no optional redemption pursuant to this Section 5(b)(i) shallbe authorized or made at any time when the Company is making or required tomake within the next 30 days, or purchasing shares of Senior Preferred Stockunder, a Change of Control offer in accordance with the provisions of Section 7hereof.

 

### (ii)                                 In the event of one or more publicofferings of Common Stock of the Company in an aggregate offering amount of atleast fifty million dollars ($50,000,000) or as a result of which at leastfifteen percent (15%) of the Common Stock of the Company (after giving effectto such offerings) is publicly traded (the “**PublicOffering**”), the Company may (subject to contractual and otherrestrictions with respect thereto, including restrictions imposed by the BankFacility, and the legal availability of funds therefor), at the option of theCompany, redeem at any time or from time to time prior to February 24,2007, from the net cash proceeds of the Public Offering, in the manner providedin Section 5(c) hereof, shares of the Senior Preferred Stock equal toup to 35% of such shares then outstanding, at a redemption price equal to 114%of the aggregate liquidation preference (as then in effect) per share.

###  

### (iii)                              Notwithstanding Section 5(b)(i) above,in the event FTD, Inc. receives any amounts, payments or proceeds (includingany damages, punitive

 

5

----

 

### damages, interestsand costs) from its insurance carriers (the “**InsuranceAward**”) in connection with the settlement of the consolidatedshareholder class actions titled “In Re FTD.COM, Inc. ShareholdersLitigation” in the Court of Chancery for New Castle County in Wilmington,Delaware, or the resolution of FTD, Inc.’s litigation with such insurancecarriers arising out of such carriers’ denial of coverage for such shareholderclass actions, the Company may (subject to contractual and other restrictionswith respect thereto, including restrictions imposed by the Bank Facility, andthe legal availability of funds therefor), at the option of the Company, redeemat any time or from time to time, with funds equal to the amount of netproceeds of the Insurance Award, in the manner provided in Section 5(c) hereof,shares of the Senior Preferred Stock, at a redemption price equal to 100% ofthe aggregate liquidation preference (as then in effect) per share.

###  

### (iv)                             In the event of a redemptionpursuant to Section 5(b)(i), (ii) or (iii) hereof of only aportion of the then outstanding shares of the Senior Preferred Stock, theCompany shall effect such redemption, *pro rata*accordingto the number of shares held by each Holder of shares of Senior PreferredStock.

###  

## (c)            Proceduresfor Redemption.

##  

## (i)                                      At least 30 days and not more than60 days prior to the date fixed for any redemption of the Senior PreferredStock, written notice (the “**Redemption Notice**”)**shall be givenby first-class mail, postage prepaid, to each Holder of shares of SeniorPreferred Stock to be redeemed, at such Holder’s address as the same appears onthe stock register of the Company; provided,**that nofailure to give such notice nor any deficiency therein shall affect thevalidity of the procedure for the redemption of any shares of Senior PreferredStock to be redeemed except as to the Holder or Holders to whom the Company hasfailed to give said notice or except as to the Holder or Holders whose noticewas defective.  The Redemption Noticeshall state:  (1) the redemptionprice; (2) whether all or less than all of the outstanding shares of theSenior Preferred Stock are to be redeemed and the total number of shares of theSenior Preferred Stock being redeemed; (3) the number of shares of SeniorPreferred Stock held by the Holder that the Company intends to redeem; (4) thedate fixed for redemption; (5) that the Holder is to surrender to theCompany, at the place or places where certificates for shares of SeniorPreferred Stock are to be surrendered for redemption, in the manner and at theplace designated, such Holder’s certificate or certificates representing theshares of Senior Preferred Stock to be redeemed; (6) the Section ofthis Certificate of Designations pursuant to which the shares of SeniorPreferred Stock called for redemption are being redeemed; and (7) thatdividends on the shares of the Senior Preferred Stock to be redeemed shallcease to accrue on and after such Redemption Date unless the Company defaultsin the payment in full of the redemption price. A Redemption Notice may not beconditional.

 

6

----

 

## (ii)                                   Each Holder of shares of SeniorPreferred Stock shall surrender to the Company the certificate or certificatesrepresenting its shares of Senior Preferred Stock to be redeemed, dulyendorsed, in the manner and at the place designated in the Redemption Notice,and on the Redemption Date the full redemption price for such shares shall bepayable in cash to the Person whose name appears on such certificate orcertificates as the owner thereof, and each surrendered certificate shall becanceled and retired.  In the event thatless than all of the shares represented by any such certificate are redeemed, anew certificate shall be issued representing the unredeemed shares.

##  

## (iii)                                Unless the Company defaults in thepayment in full of the redemption price, dividends on the shares of SeniorPreferred Stock called for redemption shall cease to accumulate on theRedemption Date, and the Holders of such shares shall cease to have any furtherrights with respect thereto on the Redemption Date, other than the right toreceive the redemption price, without interest.

##  

6.                                       VotingRights.

 

## (a)           TheHolders of shares of the Senior Preferred Stock, except as otherwise requiredunder Delaware law, other applicable law or as set forth in Section 6(b) below,shall not be entitled or permitted to vote on any matter required or permittedto be voted upon by the stockholders of the Company.

##  

## (b)                                 (i)            Solong as any shares of the Senior Preferred Stock are outstanding, the Companyshall not authorize or issue any class or series of Parity Securities withoutthe affirmative vote or consent of the Holders of at least a majority of theoutstanding shares of Senior Preferred Stock, voting or consenting, as the casemay be, separately as one class, given in person or by proxy, either in writingor by resolution adopted at an annual or special meeting, except that withoutthe approval of Holders of shares of Senior Preferred Stock, the Company mayauthorize and issue shares of Parity Securities the proceeds of which are usedto redeem or repurchase, all shares of Senior Preferred Stock then outstanding.

##  

## (ii)                              So long as any shares of the SeniorPreferred Stock are outstanding, the Company shall not authorize or issue anyclass or series of Senior Securities without the affirmative vote or consent ofthe Holders of at least a majority of the outstanding shares of SeniorPreferred Stock, voting or consenting, as the case may be, separately as oneclass, given in person or by proxy, either in writing or by resolution adoptedat an annual or special meeting.

##  

## (iii)                           So long as any shares of the SeniorPreferred Stock are outstanding, the Company shall not, without the affirmativevote or consent of the Holders of at least a majority of the outstanding sharesof Senior Preferred Stock, voting or consenting, as the case may be, separatelyas one class, given in person or by proxy, either in writing or by resolutionadopted at an annual or special meeting, amend, alter or repeal (whether

 

7

----

 

## by merger,consolidation or otherwise) any of the provisions of the Certificate ofIncorporation of the Company or of any certificate amendatory thereof orsupplemental thereto so as to (1) affect adversely any of the preferences,rights, powers or privileges of the Senior Preferred Stock or of the holdersthereof as such or (2) authorize the issuance after the Closing Date ofany additional shares of Senior Preferred Stock.

##  

## (iv)                          So long as any shares of the SeniorPreferred Stock are outstanding,  priorto the issuance of any Series A Junior Subordinated Debentures, theCompany shall not, without the affirmative vote or consent of the Holders of atleast a majority of the outstanding shares of Senior Preferred Stock, voting orconsenting, as the case may be, as a single class, given in person or by proxy,either in writing or by resolution adopted at an annual or special meeting,amend or modify (whether by merger, consolidation or otherwise) any of theprovisions of the Series A Junior Subordinated Debenture or of anyamendment or supplement thereto so as to affect adversely any of thepreferences, rights, powers or privileges of the Series A JuniorSubordinated Debentures or of the holders thereof as such.

##  

## (v)                             The affirmative vote or consent ofthe Holders of at least a majority of the outstanding shares of SeniorPreferred Stock, voting or consenting, as the case may be, separately as oneclass, whether voting in person or by proxy, either in writing or by resolutionadopted at an annual or special meeting, may waive compliance with anyprovision of Part A of this Resolution.

##  

## (vi)                          Except as set forth in Sections 6(b)(i) and6(b)(ii) above or in clause (2) of Section 6(b)(iii) above,(1) the creation, authorization or issuance of any shares of any JuniorSecurities, Parity Securities or Senior Securities, or (2) the increase ordecrease in the amount of authorized capital stock of any class or series,including Senior Preferred Stock or any other series of Preferred Stock, shallnot require the consent of the Holders of Senior Preferred Stock and shall not,unless not complying with Sections 6(b)(i) or 6(b)(ii) hereof orclause (2) of Section 6(b)(iii) above, be deemed to affectadversely the rights, preferences, privileges or voting rights of the Holdersof shares of Senior Preferred Stock.

##  

## (vii)                       The Company shall not amend ormodify any of the provisions of the Certificate of Incorporation of the Companyor of any certificate amendatory thereof or supplemental thereto so as toaffect adversely any of the preferences, rights, powers or privileges of theSenior Preferred Stock, or waive compliance with any provision of Part Aof this Resolution, unless such amendment, modification or waiver appliesidentically to all shares of Senior Preferred Stock.

##  

## (c)           Inany case in which the Holders of shares of the Senior Preferred Stock shall beentitled to vote pursuant to this Section 6 or pursuant to Delaware law orother applicable law, each

 

8

----

 

Holder of shares of the SeniorPreferred Stock shall be entitled to one vote for each share of SeniorPreferred Stock held.

##  

7.                                       Changeof Control Offer.

 

## (a)           Subjectto contractual and other restrictions with respect thereto, includingrestrictions imposed by the Bank Facility, and the legal availability of fundstherefor, upon the occurrence of a Change of Control, the Company shall make anoffer (a “**Changeof Control Offer**”)**to each Holderof shares of Senior Preferred Stock to repurchase, at the Holder’s option, anyor all of such Holder’s shares of Senior Preferred Stock at a purchase price incash equal to 101% of the aggregate liquidation preference (as then in effect)per share (the “**Changeof Control Payment**”)*.*

##  

## (b)           Within30 days following any Change of Control, the Company shall mail a notice toeach Holder of shares of Senior Preferred Stock stating:  (1) that the Change of Control Offer isbeing made pursuant to this Section 7 and that all shares of SeniorPreferred Stock duly tendered will be accepted for payment; (2) thepurchase price and the purchase date, which shall be no sooner than 20 BusinessDays nor later than 60 days from the date such notice is mailed (the “**Change of Control PaymentDate**”);**(3) that any shares nottendered will continue to accumulate dividends; (4) that, unless theCompany defaults in the payment of the Change of Control Payment, all shares ofSenior Preferred Stock accepted for payment pursuant to the Change of ControlOffer shall cease to accumulate dividends on the Change of Control PaymentDate; (5) that Holderselecting to have any shares of Senior Preferred Stock repurchased pursuant to aChange of Control Offer will be required to surrender such shares, with theform entitled “Option of Holder to Elect Purchase” on the reverse side of thecertificate representing the shares of Senior Preferred Stock completed, ortransfer such shares by book-entry transfer, to the Company or its transferagent at the address specified in the notice prior to the close of business onthe third Business Day preceding the Change of Control Payment Date; (6) thatHolders will be entitled to withdraw their election if the Company or thetransfer agent, as the case may be, receives, not later than the close ofbusiness on the third Business Day preceding the Change of Control PaymentDate, a telegram, telex, facsimile transmission or letter setting forth thename of the Holder, the number of shares of Senior Preferred Stock deliveredfor repurchase, and a statement that such Holder is withdrawing its election tohave such shares repurchased; and (7) that Holders whose shares of SeniorPreferred Stock are being repurchased only in part will be issued a newcertificate representing a number of shares of Senior Preferred Stock equal tothe number of shares of Senior Preferred Stock that were not surrendered (ortransferred by book-entry transfer) by the Holder for repurchase by theCompany.

##  

## (c)            Onthe Change of Control Payment Date, the Company shall, to the extent lawful, (1) acceptfor payment all shares of Senior Preferred Stock or portions thereof properlytendered pursuant to the Change of Control Offer and (2) deposit with theCompany or its transfer agent, as the case may be, an amount equal to theChange of Control Payment in respect of all shares of Senior Preferred Stock orportions thereof so tendered.  TheCompany or its transfer agent, as the case may be, shall promptly mail to eachHolder of shares of Senior Preferred Stock so tendered the Change of ControlPayment for such shares or portions thereof. The Company shall promptly issue a new certificate representing sharesof Senior Preferred Stock and mail (or cause to be transferred by book entry)to each Holder that did not sell all of its Senior Preferred Stock in theChange of Control Offer a new certificate representing the remaining number ofshares of Senior Preferred Stock held by such Holder that were not purchased inthe Change of Control Offer.  The Companyshall announce to its stockholders the results of the Change of Control Offeron or as soon as practicable after the Change of Control Payment Date.

##  

## (d)           TheCompany shall comply with the requirements of Rule 14e-1 under theExchange Act and any other securities laws and regulationsthereunder to the extent such laws and

 

9

----

 

regulations are applicable inconnection with the repurchase of shares of Senior Preferred Stock inconnection with a Change of Control.

##  

## (e)            Notwithstandingthe foregoing, the Company shall not be required to make a Change of ControlOffer upon a Change of Control if a third party makes the Change of ControlOffer in the manner, at the times and otherwise in compliance with therequirements set forth in this Section 7 applicable to a Change of ControlOffer made by the Company, and purchases all shares of Senior Preferred Stockvalidly tendered and not withdrawn under such Change of Control Offer.

##  

8.                                       Exchange.

 

## (a)           Conditions.

##  

### (i)                                 Subject to contractual and otherrestrictions with respect thereto, including restrictions imposed by the BankFacility, the Company may, at its option on any Dividend Payment Date (hereinthe “**Exchange Date**”), exchangeall, but not less than all, of the then outstanding shares of Senior PreferredStock into the Series A Junior Subordinated Debentures. To exchange SeniorPreferred Stock into Series A Junior Subordinated Debentures, the Companyshall send a written notice (the “**ExchangeNotice**”) of exchange by first-class mail to each Holder of shares ofSenior Preferred Stock, which notice shall state: (v) that the Company haselected to exchange the Senior Preferred Stock into Series A JuniorSubordinated Debentures pursuant to this Section 8; (w) the Exchange Date,which shall be the next succeeding Dividend Payment Date and shall not be lessthan 20 days following the date on which the Exchange Notice is mailed; (x)that the Holder is to surrender to the Company, at the place or places wherecertificates for shares of Senior Preferred Stock are to be surrendered forexchange, in the manner designated in the Exchange Notice, such Holder’scertificate or certificates representing the shares of Senior Preferred Stockto be exchanged (properly endorsed or assigned for transfer); (y) thatdividends on the shares of Senior Preferred Stock to be exchanged shall ceaseto accrue, and the Holders of such shares shall cease to have any furtherrights with respect to such shares (other than the right to receive Series AJunior Subordinated Debentures), on the Exchange Date whether or notcertificates for shares of Senior Preferred Stock are surrendered for exchangeon the Exchange Date unless the Company shall default in the delivery of Series AJunior Subordinated Debentures; and (z) that interest on the Series AJunior Subordinated Debentures shall accrue from and after the Exchange Datewhether or not certificates for shares of Senior Preferred Stock aresurrendered for exchange on the Exchange Date. On the Exchange Date, if the conditions set forth in clauses (1) through(3) below are satisfied, the Company shall issue Series A JuniorSubordinated Debentures in exchange for the Senior Preferred Stock as providedin the next paragraph; provided, that on the Exchange Date:  (1) there shall be legally availablefunds sufficient therefor (including legally available funds sufficienttherefor under Sections 160 and 170 (or any successor provisions) of theDelaware General Corporation Law); (2) either (a) a registrationstatement relating to the Series A Junior

 

10

----

 

### SubordinatedDebentures shall have been declared effective under the Securities Act prior tosuch exchange and shall continue to be in effect on the Exchange Date or (b)(i) theCompany shall have obtained a written opinion of counsel that an exemption fromthe registration requirements of the Securities Act is available for suchexchange and that upon receipt of such Series A Junior SubordinatedDebentures pursuant to such exchange made in accordance with such exemption,the holders (assuming such holder is not an Affiliate of the Company) thereofwill not be subject to any restrictions imposed by the Securities Act upon theresale thereof and (ii) such exemption is relied upon by the Company forsuch exchange; and (3) immediately after giving effect to such exchange,no Default or Event of Default (each as defined in the Series A JuniorSubordinated Debentures) would exist under the Series A JuniorSubordinated Debentures.

###  

In the event that the issuance of the Series A Junior Subordinated Debentures is not permitted on the Exchange Date set forth in the Exchange Notice, or any of the conditions set forth in clauses (1) through (3) of the preceding sentence are not satisfied on the Exchange Date set forth in the Exchange Notice, the Exchange Date shall be deemed to be the first Business Day thereafter, if any, upon which all of such conditions are satisfied.

 

### (ii)                              Upon any exchange pursuant to Section 8(a)(i) hereof,each Holder of outstanding shares of Senior Preferred Stock shall be entitledto receive Series A Junior Subordinated Debentures in a principal amountequal to the sum of the aggregate liquidation preference (then in effect) ofsuch Holder’s shares of Senior Preferred Stock; provided, that theCompany may pay cash in lieu of issuing a Series A Junior SubordinatedDebenture in a principal amount of less than $1,000.00.

###  

## (b)           Procedurefor Exchange.

##  

### (i)                                         On or before the Exchange Date, eachHolder of shares of Senior Preferred Stock shall surrender the certificate orcertificates representing such shares of Senior Preferred Stock, in the mannerand at the place designated in the Exchange Notice. The Company shall cause theSeries A Junior Subordinated Debentures to be executed on the ExchangeDate and, upon surrender in accordance with the Exchange Notice of thecertificates for any shares of Senior Preferred Stock so exchanged (properlyendorsed or assigned for transfer), such shares shall be exchanged by theCompany into Series A Junior Subordinated Debentures. The Company shallpay interest on the Series A Junior Subordinated Debentures at the rateand on the dates specified therein from and after the Exchange Date.

###  

### (ii)                              Subject to the conditions set forthin Section 8(a) hereof, as of the Exchange Date the rights of theHolders of shares of the Senior Preferred Stock as stockholders of the Companyshall cease (except the right to receive Series A Junior SubordinatedDebentures), and the Person or

 

11

----

 

### Persons entitled toreceive the Series A Junior Subordinated Debentures issuable upon exchangeshall be treated for all purposes as the registered Holder or Holders of such Series AJunior Subordinated Debentures as of the date of exchange without any furtheraction of the Holders of shares of Senior Preferred Stock.

 

9.                                       RestrictedPayments.

 

## (a)           TheCompany shall not, directly or indirectly, (i) declare or pay any dividendor make any other distribution in respect of shares of the Company’s CapitalStock, or any warrants, options or other rights to acquire shares of suchCapital Stock, and (ii) make any payment (except to the extent made withQualified Capital Stock) on account of the purchase, redemption or otheracquisition or retirement for value of any of the Company’s Capital Stock, orany warrants, options or other rights to acquire shares of such Capital Stock(each of the foregoing actions set forth in clauses (i) and (ii) beingreferred to as a “**Restricted Payment**”),if at the time of such Restricted Payment or immediately after giving effect thereto,(1) a Default Event shall have occurred and be continuing or (2) theaggregate amount of Restricted Payments (including such proposed RestrictedPayment) made subsequent to the Preferred Stock Issue Date (the amount expendedfor such purposes, if other than in cash, being the fair market value of suchproperty) shall exceed the sum of (without duplication): (x) 50% of thecumulative Consolidated Net Income (taken as one accounting period) of theCompany accrued during the period commencing on the first day of the first fullfiscal quarter in which the Preferred Stock Issue Date occurs to and includingthe last day of the most recent fiscal period for which internal financialstatements are available (or if cumulative Consolidated Net Income shall be adeficit, minus 100% of such deficit); plus (y) 100% of the aggregate Net CashProceeds received by the Company from any Person (other than a Subsidiary ofthe Company) from a Capital Contribution or from the sale subsequent to thePreferred Stock Issue Date of Qualified Capital Stock of the Company.  For purposes of this Section 9, the term“**Restricted Payment**” does notinclude (A) any dividend, distribution or other payment on or with respectto any Capital Stock of the Company, or any warrants, options or rights toacquire shares of such Capital Stock, to the extent payable solely in shares ofQualified Capital Stock, (B) any dividend, distribution or other paymentto the Company, or to any Subsidiary of the Company, by the Company or any ofits Subsidiaries; (C) the payment of the Merger Consideration (as definedin the Merger Agreement); or (D) any dividend, distribution or otherpayment with respect to the settlement of the consolidated shareholder classactions titled “In Re FTD.COM, Inc. Shareholders Litigation.”

##  

## (b)           Notwithstandingthe foregoing, the provisions set forth in the immediately preceding paragraphdo not prohibit:  (1) the payment ofany dividend within 60 days after the date of declaration of such dividend ifthe dividend would have been permitted on the date of declaration; (2) ifno Default Event shall have occurred and be continuing, Restricted Paymentswhich do not exceed $15,000,000 in the aggregate from and after the PreferredStock Issue Date; (3) for the avoidance of doubt, payments pursuant to theManagement Agreement; (4) if no Default Event shall have occurred and becontinuing, repurchases (and payments of cash dividends to any Parent Entityfor repurchases) of Capital Stock from FTD-member florists or distributors (ortheir heirs or estates), or employees or directors (or their heirs or estates)of, the Company, any Parent Entity or any Subsidiary of the Company, upon thedeath, disability or termination of employment (or termination of membership ordistribution, in the case of a FTD-member florist or distributor); provided,that such repurchases are made with the proceeds of such dividends to anyParent Entity within three Business Days of the payment of such dividends, andpayments of cash, or dividends, distributions or advances to any Parent Entityto make payments of cash, in lieu of the issuance of fractional shares upon theexercise of warrants or upon the conversion or exchange of, or issuance ofCapital Stock in lieu of cash dividends on, any Capital Stock of any ParentEntity, in an aggregate amount not to exceed $7,500,000 after the PreferredStock Issue Date;

 

12

----

 

(5) if no Default Eventshall have occurred and be continuing, the declaration and payment of dividendsto holders of any class or series of Disqualified Capital Stock issued afterthe Preferred Stock Issue Date; (6) payments of amounts equal to anyinsurance proceeds received by FTD, Inc. in respect of the settlement ofthe consolidated shareholder class actions titled “In Re FTD.COM, Inc.Shareholders Litigation”; (7) any dividend, distribution or otherpayments by any of the Company’s Subsidiaries on its Capital Stock, orwarrants, options or other rights to acquire such Capital Stock, that is paid *pro rata* to all holders of such CapitalStock, warrants, options or rights, as applicable; (8) (i) any legaldefeasance, redemption, retirement, repurchase or other acquisition of CapitalStock of the Company with the Net Cash Proceeds received by the Company made within60 days of the sale of its Qualified Capital Stock (other than to aSubsidiary), or (ii) any issuance of Qualified Capital Stock of theCompany in exchange for, or the proceeds of which are used to purchase, anyCapital Stock of the Company; (9) the repurchase of Capital Stock, orwarrants, options or other rights to acquire such Capital Stock, deemed tooccur upon the exercise of stock options, warrants or other convertiblesecurities to the extent such Capital Stock, warrants, options or other rightsrepresent a portion of the exercise price thereof; (10) the payment ofdividends in cash on (or the purchase, redemption, exchange or otheracquisition or retirement of) shares of (i) the Senior Preferred Stock, or(ii) the Junior Preferred Stock to the extent not prohibited by thedesignations of the Senior Preferred Stock; and (11) payments to a ParentEntity (or a subsidiary of a Parent Entity), (i) to enable the ParentEntity to pay federal, state or local tax liabilities (any such payments to aParent Entity, a “**Tax Payment**”),not to exceed the amount of any tax liabilities that would be otherwise payableby the Company and its United States subsidiaries to the appropriate taxingauthorities to the extent that the Parent Entity has an obligation to pay suchtax liabilities relating to the operations, assets, or capital of the Companyor its United States subsidiaries; provided, that (x) notwithstandingthe foregoing, in the case of determining the amount of a Tax Payment that ispermitted to be paid by the Company and any of its United States subsidiariesin respect of their consolidated Federal income tax liability, or consolidated,combined, unitary or group, state or local income tax liability, such paymentshall be determined assuming that the Company is the parent company of anaffiliated group (the “**Company AffiliatedGroup**”) filing a consolidated federal income tax return orconsolidated, combined, unitary, or group, state or local income tax return,and that the Parent Entity and each such United States subsidiary is a memberof the Company Affiliated Group and (y) any Tax Payments shall either be usedby the Parent Entity to pay such tax liabilities within 90 days of the ParentEntity’s (or a subsidiary of a Parent Entity) receipt of such payment orrefunded to the payee, and (ii) in an aggregate amount not to exceed (A) priorto an initial public offering by any Parent Entity, $500,000 per year and (B) afteran initial public offering by any Parent Entity, $2,000,000 per year, in eachcase in order to pay legal and accounting expenses, payroll and othercompensation expenses in the ordinary course of business, filing and listingfees and other corporate overhead expenses in the ordinary course of business(for purposes of this clause (11), “tax liabilities” shall include anypenalties and interest related to a tax liability.

##  

In determining the aggregate amount of Restricted Payments madesubsequent to the Preferred Stock Issue Date in accordance with clause (2) ofSection 9(a) hereof, amounts distributed pursuant to clauses (1), (5) and (10) of this Section 9(b) hereofshall be included in such calculation, and amounts distributed pursuantto clauses (2), (3), (4), (6), (7), (8), (9) and (11) shall not beincluded in such calculation.  Forpurposes of this Section 9, the amount of any Restricted Payment made orreturned, if other than in cash, shall be the fair market value thereof, asdetermined in the good faith reasonable judgment of the Board of Directors,unless stated otherwise, at the time made or returned, as applicable.

 

10.                                 Reports.

 

So long as any shares of Senior Preferred Stock areoutstanding, the Company shall furnish to each Holder of shares of SeniorPreferred Stock (at such Holder’s address as the same appears

 

13

----

 

on the stock register of theCompany):  (a) as soon as available,but in any event within 105 days after the end of each fiscal year of theCompany, a copy of the audited consolidated balance sheet of the Company andits consolidated Subsidiaries as at the end of such year and the relatedaudited consolidated statements of income and of cash flows for such year,reported on without any qualification arising out of the scope of the audit, bythe Company’s independent certified public accountants; and (b) as soon asavailable, but in any event not later than 60 days after the end of each of thefirst three quarterly periods of each fiscal year of the Company, the unauditedconsolidated balance sheet of the Company and its consolidated Subsidiaries asat the end of such quarter and the related unaudited consolidated statements ofincome and of cash flows for such quarter and the portion of the fiscal yearthrough the end of such quarter, certified by the Chief Executive Officer, thePresident, or the Chief Financial Officer of the Company as being fairly statedin all material respects (subject to normal year-end audit adjustments).  All such financial statements shall becomplete and correct in all material respects and shall be prepared inreasonable detail and in accordance with GAAP applied (except as approved bysuch accountants or officer, as the case may be, and disclosed in reasonabledetail therein) consistently throughout the periods reflected therein and withprior periods.

 

11.                                 PreemptiveRights.

 

No shares of Senior Preferred Stock shall have any rights of preemptionwhatsoever hereunder as to any securities of the Company, or any warrants,rights or options issued or granted with respect thereto, regardless of howsuch securities or such warrants, rights or options may be designated, issuedor granted.

 

12.                                 Conversion.

 

No shares of Senior Preferred Stock shall be convertible into CommonStock of the Company or any other securities convertible or exchangeable intoCommon Stock of the Company.

 

13.                                 Reissuanceof Senior Preferred Stock.

 

Shares of Senior Preferred Stock that have been issued and reacquiredby the Company in any manner, including shares purchased, redeemed orexchanged, shall (upon compliance with any applicable provisions of the laws ofDelaware) have the status of authorized but unissued shares of Preferred Stockof the Company undesignated as to series and, subject to the provisions ofSections 6(b)(i) and 6(b)(ii) hereof and clause (2) of Section 6(b)(iii) hereof,may be designated or redesignated and issued or reissued, as the case may be,as part of any series of Preferred Stock of the Company; provided,**that such shares may not in anyevent be reissued as Senior Preferred Stock.

 

14.                                 BusinessDay.

 

If any payment, redemption or exchange shall berequired by the terms hereof to be made on a day that is not a Business Day,such payment, redemption or exchange shall be made on the immediatelysucceeding Business Day.

 

15.                                 Definitionsand Interpretation.

 

## (a)            Definitions.  As used in Part A of this Resolution,the following terms shall have the following meanings, unless the contextotherwise requires:

 

14

----

 

“**Affiliate**”**of anyspecified Person means any other Person directly or indirectly controlling orcontrolled by or under direct or indirect common control with such specifiedPerson.  For purposes of this definition,the term “control” (including, with correlative meanings, the terms “controlling,”“controlled by” and “under common control with”), as used with respect to anyPerson, shall mean the possession, directly or indirectly, of the power todirect or cause the direction of the management or policies of such Person,directly or through one or more intermediaries, whether through the ownershipof voting securities, by contract, or otherwise; provided, that*,*with respect to the Company and its Subsidiaries, aBeneficial Owner of 10% or more of the total voting power normally entitled tovote in the election of directors of the Company shall for such purposes bedeemed to constitute control.

 

“**Asset Sale**”**means, in one or a series of related transactions, theconveyance, sale, transfer, assignment or other disposal by the Company or anyof its Subsidiaries of, directly or indirectly, any of their property, businessor assets, including by merger or consolidation (in the case of one of theCompany’s Subsidiaries), and including any sale or other transfer or issuanceof any Capital Stock, or warrants, options or other rights to acquire suchCapital Stock, of any of the Company’s Subsidiaries, whether by the Company orone of the Company’s Subsidiaries or through the issuance, sale or transfer ofCapital Stock, or warrants, options or other rights to acquire such CapitalStock, by one of the Company’s Subsidiaries and including any sale andleaseback transaction, other than in any such case to the Company or anotherSubsidiary.

 

“**Bank Facility**”**shall meanthat certain Credit Agreement, dated as of the Closing Date (as modified andsupplemented from time to time), by and among FTD, Inc., a Delawarecorporation, the Lenders from time to time parties thereto, UBS Securities LLC,as Syndication Agent, Wells Fargo Bank, N.A., as Documentation Agent and CreditSuisse First Boston, acting through its Cayman Islands Branch, asAdministrative Agent.

 

“**Beneficial Owner**”**or “**beneficial owner**”**for purposes of the definition of Change of Control andAffiliate has the meaning attributed to it in Rules 13d-3 and 13d-5under the Exchange Act (as in effect on the Preferred Stock Issue Date),whether or not applicable.

 

“**Board of Directors**”**means theBoard of Directors of the Company.

 

“**Business Day**”**means any dayother than a Legal Holiday.

 

“**CapitalContribution**” meansany contribution to the equity of the Company subsequent to the Preferred StockIssuance Date for which no consideration (other than the issuance of QualifiedCapital Stock) is given.

 

“**Capital Stock**”**means (i) withrespect to any Person that is a corporation, any and all shares, interests,participations or other equivalents (however designated and whether or notvoting) of corporate stock, including each class of Common Stock and PreferredStock of such Person and (ii) with respect to any Person that is not acorporation, any and all partnership or other equity or ownership interests ofsuch Person.

 

“**Cash Equivalents**” shall have the meaning ascribed to suchterm in the Series A Junior Subordinated Debentures.

 

“**Certificate of Incorporation**”**meansthe Company’s Certificate of Incorporation.

 

15

----

 

“**Change of Control**” means:  (1) prior to consummation of the first Public Offering after thePreferred Stock Issue Date, the Permitted Holders shall cease to beneficiallyown, in the aggregate, a majority of the voting power of the Voting EquityInterests of the Company, or (2) following the consummation of the firstPublic Offering after the Preferred Stock Issue Date, (A) any merger orconsolidation of the Company with or into any Person or any sale, transfer orother conveyance, whether direct or indirect, of all or substantially all ofthe Company’s assets, on a consolidated basis, in one transaction or a seriesof related transactions, if, immediately after giving effect to such transaction(s),any “person” (including any group that is deemed to be a “person”) (other thanthe Permitted Holders) is or becomes the beneficial owner of more than 40% ofthe aggregate voting power of the Voting Equity Interests of the transferee(s)or surviving entity or entities and the Permitted Holders, in the aggregate,beneficially own, directly or indirectly, less voting power than such person, (B) any“person” (including any group that is deemed to be a “person”) (other than thePermitted Holders) is or becomes the beneficial owner of more than 40% of theaggregate voting power of the Voting Equity Interests of the Company and thePermitted Holders, in the aggregate, beneficially own, directly or indirectly,less voting power than such person, (C) the Continuing Directors cease forany reason to constitute a majority of the Company’s Board of Directors then inoffice, or (D) the Company adopts a plan of liquidation.  As used in this definition, “person”(including any group that is deemed to be a “person”) has the meaning given bySections 13(d) of the Exchange Act, whether or not applicable.  “Continuing Director” means during any periodof 12 consecutive months after the Preferred Stock Issue Date, individuals whoat the beginning of any such 12-month period constituted the Board ofDirectors (together with any new directors whose election by such Board ofDirectors or whose nomination for election by the shareholders of the Companywas approved by a vote of a majority of the directors then still in office whowere either directors at the beginning of such period or whose election ornomination for election was previously so approved, including new directorsdesignated in or provided for in an agreement regarding the merger,consolidation or sale, transfer or other conveyance, of all or substantiallyall of the assets of the Company or any Parent Entity, if such agreement wasapproved by a vote of such majority of directors).

 

“**Closing Date**”**has themeaning attributed to such term in the Merger Agreement.

 

“**Common Stock**”**means, of any Person, any and allshares, interests or other participations in, and other equivalents (howeverdesignated and whether voting or nonvoting) of such Person’s common stock, andincludes, without limitation, all series and classes of such common stock.

 

“**Company**”**means MercuryMan Holdings Corporation, a Delaware corporation.

 

“**Consolidated Net Income**”**means, with respect to any Person, for any period, theaggregate net income (or loss) of such Person and its Subsidiaries (beforepreferred stock dividends and otherwise determined on a consolidated basis inaccordance with GAAP) for such period; provided,**that there shall be excluded therefrom (only to the extentincluded in computing such net income (or loss) and without duplication):  (a) any net after-tax gain, loss, chargeor expense which is either extraordinary (as determined in accordance withGAAP) or is either unusual or nonrecurring (including any restructuring chargesand any gain, loss, charge or expense from the sale or other disposition ofassets outside the ordinary course of business or from the issuance or sale ofany securities) as determined in good faith by the Company, it being understoodand agreed that Item 10(e) of Regulation S-K under the Securities Act shallnot constitute a limitation on any such determination, (b) the net income,if positive, of any Person, other than a Subsidiary, in which such Person orany of its Subsidiaries has an interest, except to the extent of the amount ofany dividends or distributions actually paid in cash to such Person or aSubsidiary of such Person during such period, but in any case not in excess ofsuch Person’s pro rata share of such Person’s net income for such period, (c) thenet income, if positive, of any of such Person’s Subsidiaries to the extentthat the declaration or payment of dividends or similar distributions is not atthe time

 

16

----

 

permitted by operation of theterms of its charter or bylaws or any other agreement, instrument, judgment,decree, order, statute, rule or governmental regulation applicable to suchSubsidiary, (d) the cumulative effect of a change in accountingprinciples, (e) any non-cash compensation expense realized from grants ofstock appreciation or similar rights, stock options or other rights toofficers, directors and employees of the Company, (f) amounts resultingfrom currency fluctuations, and (g) any goodwill impairment chargespursuant to Financial Accounting Standards Board Statement No. 142.

 

“**ContributionAgreements**” means, collectively: (i) the Contribution and Subscription Agreements, each dated as of February 24,2004, by and between Robert L. Norton and the Company, (ii) theContribution and Subscription Agreement, dated as of February 24, 2004, byand between Jon R. Burney and the Company; (iii)  the Contributionand Subscription Agreement, dated as of February 24, 2004, by and betweenAnn M. Hofferberth and the Company; (iv)  the Contribution andSubscription Agreement, dated as of February 24, 2004, by and betweenLawrence W. Johnson and the Company; (v)  the Contribution andSubscription Agreement, dated as of February 24, 2004, by and betweenGeorge T. Kanganis and the Company; (vi)  the Contribution andSubscription Agreement, dated as of February 24, 2004, by and betweenTimothy D. Meline and the Company; (vii)  the Contribution andSubscription Agreement, dated as of February 24, 2004, by and betweenDaniel W. Smith and the Company; (viii)  the Contribution andSubscription Agreement, dated as of February 24, 2004, by and betweenWilliam J. Van Cleave and the Company; and (ix)  the Contribution andSubscription Agreement, dated as of February 24, 2004, by and betweenCarrie A. Wolfe and the Company, as each of the same may be amended from timeto time.

 

“**Default Event**”**means any ofthe following events:  (i) any timewhen the Company fails to make a mandatory redemption of the Senior PreferredStock when required (whether or not any contractual or other restrictions applyto such redemption, including restrictions imposed by the Bank Facility)pursuant to Section 5(a) hereof; or (ii) any time when theCompany fails to make an offer to repurchase all of the outstanding shares ofSenior Preferred Stock (or fails to consummate any such offer to repurchase)following a Change of Control, if such offer to repurchase is required to bemade pursuant to Section 7(a) hereof (whether or not any contractualor other restrictions apply to such repurchase, including restrictions imposedby the Bank Facility).

 

“**Disqualified Capital Stock**”**means(i) that portion of any Capital Stock which, by its terms (or by the termsof any security into which it is convertible or for which it is exchangeable),or upon the happening of any event, matures or is mandatorily redeemable,pursuant to a sinking fund obligation or otherwise, or is redeemable at thesole option of the holder thereof, in any case, on or prior to August 24,2024, (ii) any preferred stock of the Company that is issued for cash andis so designated as Disqualified Capital Stock, pursuant to an officer’scertificate on the issuance date thereof, and (iii) any Capital Stock, orwarrants, options or rights to acquire shares of Capital Stock, of anySubsidiary of such Person other than common equity with no preferences,privileges, and no redemption or repayment provisions.  Notwithstanding the foregoing, any CapitalStock that would constitute Disqualified Capital Stock solely because theholders of the Capital Stock have the right to require the Company torepurchase such Capital Stock upon the occurrence of a change of control shallnot constitute Disqualified Capital Stock if the terms of such Capital Stockprovide that the Company may not repurchase or redeem any such Capital Stockpursuant to such provisions prior to the Company’s purchase of the SeniorPreferred Stock pursuant to Section 7 hereof.

 

“**Dividend Payment Date**”**means January 1,April 1, July 1, and October 1 of each year following thePreferred Stock Issue Date.

 

17

----

 

“**Dividend Period**”**means theInitial Dividend Period and, thereafter, each Quarterly Dividend Period.

 

“**Exchange Act**”**means theSecurities Exchange Act of 1934, as amended, and the rules and regulationsthereunder.

 

“**Exchange Date**”**has the meaning set forth in Section 8(a)(i) hereof.

 

“**Exchange Notice**”**has the meaning set forth in Section 8(a)(i) hereof.

 

“**Excluded Person**”**means GEI and its Related Parties.

 

“**fair market value**”**means, withrespect to any asset or property, the price which could be negotiated in an arm’s-lengthfree market transaction, for cash, between a willing seller and a willing andable buyer, neither of whom is under undue pressure or compulsion to completethe transaction.  Fair market value shallbe determined by the Board of Directors acting reasonably and in good faith.

 

“**GAAP**”**means UnitedStates generally accepted accounting principles set forth in the opinions andpronouncements of the Accounting Principles Board of the American Institute ofCertified Public Accountants and statements and pronouncements of the FinancialAccounting Standards Board or such other statements by such other entity asapproved by a significant segment of the accounting profession in the UnitedStates.

 

“**GEI**”**means GreenEquity Investors IV, L.P., a Delaware limited partnership.

 

“**Holder**”**means a Personin whose name a share of Senior Preferred Stock is registered.

 

“**Indebtedness**” of anyPerson means, without duplication, (a) all liabilities and obligations,contingent or otherwise, of such any Person, to the extent such liabilities andobligations would appear as a liability upon the consolidated balance sheet ofsuch Person in accordance with GAAP, (i) in respect of the principalamount of borrowed money (whether or not the recourse of the lender is to thewhole of the assets of such Person or only to a portion thereof), (ii) evidencedby bonds, notes, debentures or similar instruments, (iii) representing thebalance deferred and unpaid of the purchase price of any property or services,except those incurred in the ordinary course of its business that wouldconstitute ordinarily a trade payable to trade creditors; (b) allliabilities and obligations, contingent or otherwise, of such Person (i) evidencedby bankers’ acceptances or similar instruments issued or accepted by banks, (ii) relatingto any capitalized lease obligation, or (iii) evidenced by a letter ofcredit or a reimbursement obligation of such Person with respect to any letterof credit; (c) all net obligations of such Person under Interest Swap andHedging Obligations; (d) all liabilities and obligations of others of thekind described in the preceding clauses (a), (b) or (c) that suchPerson has guaranteed or that is otherwise its legal liability or which aresecured by one or more liens on any assets or property of such Person; (e) anyand all deferrals, renewals, extensions, refinancing and refundings (whetherdirect or indirect) of, or amendments, modifications or supplements to, anyliability of the kind described in any of the preceding clauses (a), (b), (c) or(d), or this clause (e), whether or not between or among the same parties; and (f) allDisqualified Capital Stock of such Person (measured at the greater of itsvoluntary or involuntary maximum fixed repurchase price plus accrued and unpaiddividends).  For purposes hereof, the “maximumfixed repurchase price” of any Disqualified Capital Stock which does not have afixed repurchase price shall be calculated in accordance with the terms of suchDisqualified Capital Stock as if such Disqualified Capital Stock were purchasedon any date on which Indebtedness shall be required to be determined pursuantto the Indenture, and if such price is based upon, or measured by, the fairmarket

 

18

----

 

value of such DisqualifiedCapital Stock, such fair market value to be determined in good faith by theboard of directors of the issuer (or managing general partner of the issuer) ofsuch Disqualified Capital Stock.  The amountof any Indebtedness outstanding as of any date shall be (1) the accretedvalue thereof, in the case of any Indebtedness issued with original issuediscount and (2) the principal amount thereof in the case of any otherIndebtedness.

 

“**Indenture**” means that certain Indenture dated as of February 6,2004 (as modified and supplemented from time to time) by and between NectarMerger Corporation (a wholly-owned subsidiary of the Company which was mergedwith and into FTD, Inc.) and U.S. Bank National Association, as trusteegoverning the $175 million 7.75% Senior Subordinated Notes due 2014.

 

“**Initial Dividend Period**”**meansthe dividend period commencing on the Preferred Stock Issue Date and ending onthe day before the first Dividend Payment Date to occur thereafter.

 

“**Insurance Award**”has the meaning set forth in Section 5(b)(iii) hereof.

 

“**Interest Swap and Hedging Obligation**”shall have the meaning ascribed to such term in the Series A JuniorSubordinated Debentures.

 

“**Junior PreferredStock**” means the Company’s 12% Junior Redeemable ExchangeableCumulative Preferred Stock.

 

“**Junior Securities**” hasthe meaning set forth in Section 2 hereof.

 

“**Legal Holiday**”**means aSaturday, a Sunday or a day on which banking institutions in the City of NewYork are authorized by law, regulation or executive order to remain closed.

 

“**LGP**”**means LeonardGreen & Partners, L.P., a Delaware limited partnership.

 

“**liquidation preference**”has the meaning set forth in Section 4(a) hereof.

 

“**Management Agreement**”means that certain management agreement among any one or more of the Company’sSubsidiaries and Leonard Green & Partners, L.P., as such agreement maybe amended from time to time.

 

“**Merger Agreement**”**means the Agreement and Plan of Merger, dated as of October 5,2003, by and among the Company, Nectar Merger Corporation and FTD, Inc.

 

“**Net CashProceeds**” means theaggregate amount of cash or Cash Equivalents received by the Company in thecase of a sale of Qualified Capital Stock or a Capital Contribution and by theCompany and its Subsidiaries in respect of an Asset Sale plus, in the case ofan issuance of Qualified Capital Stock upon any exercise, exchange orconversion of securities (including options, warrants, rights and convertibleor exchangeable debt) of the Company that were issued for cash on or after thePreferred Stock Issue Date, the amount of cash originally received by theCompany upon the issuance of such securities (including options, warrants,rights and convertible or exchangeable debt) less, in each case, the directcosts relating to such Asset Sale or issuance of Qualified Capital Stock,including, without limitation, legal, accounting, investment banking and otherprofessional fees, and brokerage and sales commissions and any relocationexpenses incurred as a result thereof incurred in connection with such AssetSale or sale of Qualified Capital Stock, and, in the case of an Asset Sale onlyless (1) the amount (estimated reasonably and in good faith by theCompany) of income, franchise, sales and other applicable

 

19

----

 

taxes required to be paid bythe Company or any of its respective Subsidiaries in connection with such AssetSale in the taxable year that such sale is consummated or in the immediatelysucceeding taxable year, the computation of which shall take into account thereduction in tax liability resulting from any available operating losses andnet operating loss carryovers, tax credits and tax credit carry-forwards, andsimilar tax attributes, (2) cash payments attributable to Persons owningan interest (other than a lien) in the assets subject to the Asset Sale, (3) anydeduction of appropriate amounts to be provided by the Company as a reserve inaccordance with GAAP against any liability associated with the asset disposedof in such transaction and retained by the Company after such sale or otherdisposition thereof, including, without limitation, pension and otherpost-employment benefit liabilities and liabilities related to environmentalmatters or against any indemnification obligations associated with suchtransaction and (4) any holdbacks with respect to indemnificationobligations or purchase price adjustments pending receipt thereof.

 

**“Parent Entity”**means a Person that holds, directly or indirectly, Voting Equity Interests ofthe Company with voting power, in the aggregate, at least equal to the votingpower of the Voting Equity Interests of the Company held by the PermittedHolders on the Preferred Stock Issue Date.

 

“**Parity Securities**” hasthe meaning set forth in Section 2 hereof.

 

“**Permitted Holders**”****each of Leonard Green & Partners,L.P., a Delaware limited partnership, and Green Equity Investors IV, L.P., aDelaware limited partnership, and any of their Affiliates.

 

“**Person**”**means an individual, partnership, corporation, limitedliability company, unincorporated organization, trust or joint venture, or agovernmental agency or political subdivision thereof or other entity.

 

“**Preferred Stock**”**of any Personmeans any Capital Stock of such Person that has preferential rights over anyother Capital Stock of such Person with respect to dividends or redemptions orupon liquidation.

 

“**Preferred Stock Issue Date**”**meansthe first date on which shares of Senior Preferred Stock are originally issuedby the Company.

 

“**Public Offering**”has the meaning set forth in Section 5(b)(ii) hereof.

 

“**Qualified Capital Stock**” means**theSenior Preferred Stock, the Junior Preferred Stock and any other Capital Stockthat is not Disqualified Capital Stock.

 

“**Quarterly Dividend Period**”**meansthe quarterly period commencing on each January 1, April 1, July 1 and October 1 and ending on theday before the following Dividend Payment Date.

 

“**Redemption Date**”**with respectto any shares of Senior Preferred Stock, means the date on which such shares ofSenior Preferred Stock are redeemed by the Company.

 

“**Redemption Notice**”has the meaning set forth in Section 5(c)(i) hereof.

 

“**Resolution**” means thisresolution adopted and approved by the Board of Directors dated as of February 23,2004 authorizing the Senior Preferred Stock and the Junior Preferred Stock.

 

20

----

 

“**SEC**”**means theSecurities and Exchange Commission.

 

“**Securities Act**”**means theSecurities Act of 1933, as amended, and the rules and regulationsthereunder.

 

“**Senior PreferredStock**” means the Company’s 14% Senior Redeemable ExchangeableCumulative Preferred Stock.

 

“**Senior Securities**” hasthe meaning set forth in Section 2 hereof.

 

“**Series A Junior SubordinatedDebentures**” means the Company’s 14% Series A JuniorSubordinated Debentures due 2024 substantially in the form attached to theResolution as Annex I.

 

“**Stockholders Agreement**”means the Stockholders Agreement, dated as of the Closing Date, among theCompany, GEI, FTD Co-Investment LLC, a Delaware limited liability company,Robert L. Norton, Jon R. Burney, Ann M. Hofferberth, Lawrence W. Johnson, GeorgeT. Kanganis, Timothy D. Meline, Daniel W. Smith, William J. Van Cleave, CarrieA. Wolfe and the other parties thereto, as the same may be amended from time totime.

 

“**Subsidiary**” withrespect to any Person, means (i) any corporation of which the outstandingCapital Stock having at least a majority of the votes entitled to be cast inthe election of directors under ordinary circumstances shall at the time beowned, directly or indirectly, by such Person; or (ii) any other Person ofwhich at least a majority of the voting interest under ordinary circumstancesis at the time, directly or indirectly, owned by such Person.

 

“**Voting EquityInterests**” means Capital Stock, or warrants, options or other rightsto acquire such Capital Stock, which at the time are entitled to vote in theelection of, as applicable, directors, members or partners generally.

 

## (b)           Interpretation.  For the purposes of Part A of thisCertificate of Designations:  (i) wordsin the singular shall be held to include the plural and vice versa and words ofone gender shall be held to include the other gender as the context requires, (ii) theword “including” and words of similar import shall mean “including, withoutlimitation,” unless the context otherwise requires or unless otherwise specified,and (iii) the word “hereof” and words of similar import shall mean Part Aof this Certificate of Designations.

##  

**B.****          DESIGNATIONS OF THECOMPANY’S 12% JUNIOR REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK.**

 

Capitalizedterms used in this Part B and not expressly defined in the text shall havethe meanings set forth in Section 15 of this Part B.

 

1.                                       Designations.

 

## There is hereby created out of the authorizedand unissued shares of Preferred Stock of the Company a series of PreferredStock designated as the “**12% Junior Redeemable Exchangeable Cumulative Preferred Stock**”*. *The number ofauthorized shares constituting such series shall be 100,000 shares of JuniorPreferred Stock.  The liquidationpreference of the Junior Preferred Stock shall be $1,000.00 per share as of thePreferred Stock Issue Date.

 

21

----

 

2.                                       Rank.

 

## The Junior Preferred Stock shall, withrespect to dividend distributions and distributions upon the liquidation,winding up or dissolution of the Company, rank senior to all classes of CommonStock of the Company and to each other class of Capital Stock or series ofPreferred Stock now or hereafter created by the Board of Directors, the termsof which do not expressly provide that it ranks senior to or on a parity withthe Junior Preferred Stock as to dividend distributions and distributions uponthe liquidation, winding up or dissolution of the Company (collectivelyreferred to with the Common Stock of the Company as “**Junior Securities**”)*. *The Junior Preferred Stock shall,with respect to dividend distributions and distributions upon the liquidation,winding up or dissolution of the Company, rank on a parity with any class ofCapital Stock or series of Preferred Stock hereafter created which expresslyprovides that it ranks on a parity with the Junior Preferred Stock as todividend distributions and distributions upon the liquidation, winding up ordissolution of the Company (“**Parity Securities**”);**provided,**that any suchParity Securities that were not (but were required to be) approved by theHolders of shares of Junior Preferred Stock in accordance with Section 6(b)(i) hereofshall be deemed to be Junior Securities and not Parity Securities.  The Junior Preferred Stock shall, withrespect to dividend distributions and distributions upon the liquidation,winding up or dissolution of the Company, rank junior to each class of CapitalStock or series of Preferred Stock now or hereafter created, including theSenior Preferred Stock, which has been approved by the Holders of shares ofJunior Preferred Stock in accordance with Section 6(b)(ii) hereof andwhich expressly provides that it ranks senior to the Junior Preferred Stock asto dividend distributions and distributions upon the liquidation, winding up ordissolution of the Company (collectivelyreferred to as “**SeniorSecurities**”).

##  

3.                                       Dividends.

 

## (a)           Beginningon the Preferred Stock Issue Date, the Holders of the outstanding shares ofJunior Preferred Stock shall be entitled to receive, when, as and if declaredby the Board of Directors, out of funds legally available therefor,distributions in the form of cash dividends on each share of Junior PreferredStock, at a rate *per annum*equal to 12% of the liquidation preference as of thefirst day of the applicable Dividend Period (as such liquidation preference maybe adjusted from time to time as hereinafter provided) per share of the JuniorPreferred Stock, payable quarterly. Dividends on the Junior Preferred Stock shall accrue on a daily basisfrom the Preferred Stock Issue Date and are cumulative from such date whetheror not the Company has earnings or profits, there are funds legally availablefor the payment of such dividends, the Company has sufficient cash, ordividends are declared.  Accumulatedunpaid dividends will accrue dividends, payable quarterly, at a rate *per annum* equal to 12% of the amount ofsuch accumulated unpaid dividends.  Eachdistribution shall be payable to the Holders of shares of Junior PreferredStock of record as they appear on the stock books of the Company on such recorddates, not less than 10 nor more than 45days preceding the related Dividend Payment Date, as shall be fixed bythe Board of Directors from time to time. Dividends shall cease to accumulate in respect of shares of the JuniorPreferred Stock on the date of their redemption unless the Company shall havefailed to pay the relevant redemption price on the date fixed forredemption.  Not more than 30 days aftera Dividend Payment Date, written notice of the amount of the dividend per sharepaid or accumulated**shall be givenby first-class mail, postage prepaid, to each Holder of shares of JuniorPreferred Stock of record, on the record date fixed by the Board of Directorsfor payment of such dividend or, if no record date was fixed, the DividendPayment Date, at such Holder’s address as the same appears on the stock booksof the Company.

##  

## (b)           Alldividends paid with respect to shares of the Junior Preferred Stock pursuant toSection 3(a) hereof shall be paid *pro rata*to theHolders thereof entitled thereto.

 

22

----

 

## (c)           Dividendsin connection with any mandatory redemption pursuant to Section 5(a) hereofor any optional redemption pursuant to Section 5(b) hereof may be declaredand paid at any time, without reference to any regular Dividend Payment Date,to Holders of shares of Junior Preferred Stock of record on such date not morethan 45 days prior to the payment thereof, as may be fixed by the Board ofDirectors.

##  

## (d)           Nofull dividends shall be declared by the Board of Directors or paid or funds setapart for payment of dividends by the Company on any Parity Securities for anyperiod unless full cumulative dividends shall have been or contemporaneouslyare declared and paid in full, or declared and (in the case of dividendspayable in cash) a sum in cash is set apart sufficient for such payment, on theJunior Preferred Stock for all Dividend Periods terminating on or prior to thedate of payment of such full dividends on such Parity Securities.  If any dividends are not paid in full, asaforesaid, upon the shares of the Junior Preferred Stock and any other ParitySecurities, all dividends declared upon shares of the Junior Preferred Stockand any other Parity Securities shall be declared *pro rata*basedon the then relative liquidation preference of the Junior Preferred Stock andsuch Parity Securities.  So long as anyshares of the Junior Preferred Stock are outstanding, the Company shall notmake any payment on account of, or set apart for payment money for a sinking orother similar fund for, the purchase, redemption or other retirement of, anyParity Securities or any warrants, rights, calls or options exercisable for orconvertible into any Parity Securities, and shall not permit any corporation orother entity directly or indirectly controlled by the Company to purchase orredeem any Parity Securities or any such warrants, rights, calls or optionsunless full dividends determined in accordance herewith on the Junior PreferredStock shall have been paid or contemporaneously are declared and paid in full.

##  

## (e)           TheHolders of shares of the Junior Preferred Stock shall be entitled to receivethe dividends provided for in Section 3(a) hereof in preference toand in priority over any dividends upon any Junior Securities.

##  

## (f)            Solong as any shares of Junior Preferred Stock are outstanding, except pursuantto the Stockholders Agreement or pursuant to the Contribution Agreements (inthe case of the Contribution Agreements, solely with respect to the issuance onthe Closing Date of Common Stock of the Company), the Company shall not (1) declare,pay or set apart for payment any dividend on any Junior Securities or make anypayment on account of, or set apart for payment money for a sinking or othersimilar fund for, the purchase, redemption or other retirement of, any JuniorSecurities or any warrants, rights, calls or options exercisable for orconvertible into any Junior Securities (other than the repurchase, redemptionor other acquisition or retirement for value of Junior Securities solely inexchange for Junior Securities and other than the repurchase, redemption orother acquisition or retirement for value of Junior Securities (and anywarrants, rights, calls or options exercisable for or convertible into suchJunior Securities) held by employees of or consultants or advisors to theCompany or any of its Subsidiaries, which repurchase, redemption or otheracquisition or retirement shall have been approved by a majority of the Boardof Directors), or (2) make any distribution in respect of any JuniorSecurities or any warrants, rights, calls or options exercisable for orconvertible into any Junior Securities, either directly or indirectly, andwhether in cash, obligations or shares of the Company or other property (otherthan distributions or dividends in Junior Securities to the holders of JuniorSecurities), or (3) permit any corporation or other entity directly orindirectly controlled by the Company to purchase or redeem any JuniorSecurities or any such warrants, rights, calls or options, unless in any suchcase full cumulative dividends determined in accordance herewith have been paidin full in cash on the Junior Preferred Stock (such payment to be deemed tohave been made in cash for purposes of this provision even if dividends hadtheretofore been paid by increasing the then liquidation preference of theJunior Preferred Stock if (x) there are no arrears in the payment of dividendson the Junior Preferred Stock for any past Dividend Period and (y) theaggregate liquidation preference then in effect of all outstanding shares ofJunior

 

23

----

 

Preferred Stock does not exceedthe initial aggregate liquidation preference for such shares) and all otherredemption or repayment obligations in respect of the Junior Preferred Stockhave been paid in full in cash.

##  

## (g)           Dividendspayable on shares of the Junior Preferred Stock for any year shall be computedon the basis of a 360-day year of twelve 30-day months, anddividends payable on shares of the Junior Preferred Stock for any period lessthan a year shall be computed on the basis of a 360-day year of twelve 30-daymonths and the actual number of days elapsed in the period for which payable.  If any Dividend Payment Date occurs on a daythat is not a Business Day, any accrued dividends otherwise payable on suchDividend Payment Date shall be paid on the next succeeding Business Day.

##  

4.                                       LiquidationPreference.

 

## (a)           Subjectto the priority of any Senior Securities, upon any voluntary or involuntaryliquidation, dissolution or winding up of the affairs of the Company, theHolders of shares of Junior Preferred Stock then outstanding shall be entitledto be paid, out of the assets of the Company available for distribution to itsstockholders, $1,000.00 per share of Junior Preferred Stock plus (i) allaccumulated and unpaid dividends (which shall include dividends accrued onaccumulated unpaid dividends as provided in Section 3(a) hereof) and (ii) anyaccrued dividends for the current Dividend Period (including an amount equal toa prorated dividend for the period from the Dividend Payment Date immediatelyprior to the date fixed for liquidation, dissolution or winding up to the datefixed for liquidation, dissolution or winding up) (collectively, the “**liquidation preference**”), before anypayment shall be made or any assets distributed to the holders of any JuniorSecurities, including Common Stock of the Company.  In connection with any redemption of JuniorPreferred Stock or any Change of Control Offer under Sections 5 or 7,respectively, clause (ii) of the term “liquidation preference” as used insuch sections shall instead mean and include any accrued dividends for thecurrent Dividend Period (including an amount equal to a prorated dividend forthe period from the Dividend Payment Date immediately prior to the RedemptionDate or the Change of Control Payment Date, as applicable, to the RedemptionDate or the Change of Control Payment Date, as applicable).  Except as provided in the first sentence ofthis Section 4(a), the Holders of shares of Junior Preferred Stock shallnot be entitled to any distribution in the event of liquidation, dissolution orwinding up of the affairs of the Company. If the assets of the Company are not sufficient to pay in full theliquidation payments payable to the Holders of outstanding shares of the JuniorPreferred Stock and the holders of all outstanding Parity Securities, then theholders of all such shares shall share equally and ratably in such distributionof assets of the Company in accordance with the amounts which would be payableon such distribution if the amount to which the Holders of outstanding sharesof Junior Preferred Stock and the holders of outstanding shares of all ParitySecurities are entitled were paid in full.

##  

## (b)           Forthe purposes of this Section 4, neither the consolidation nor merger ofthe Company with or into one or more corporations or other entities shall bedeemed to be a liquidation, dissolution or winding up of the affairs of theCompany.

##  

5.                                       Redemption.

 

## (a)            MandatoryRedemption.  On August 24, 2024,the Company shall (subject to contractual and other restrictions with respectthereto, including restrictions imposed by the Bank Facility and the legalavailability of funds therefor), in the manner provided in Section 5(c) hereof,redeem all but not less than all of the shares of the Junior Preferred Stockthen outstanding, at a redemption price equal to 100% of the aggregateliquidation preference (as then in effect) per share.

 

24

----

 

## (b)           OptionalRedemption.

##  

### (i)                                    The Company may (subject tocontractual and other restrictions with respect thereto, including restrictionsimposed by the Bank Facility, and the legal availability of funds therefor), atthe option of the Company, redeem at any time or from time to time on or after February 24,2009, from any source of funds legally available therefor, in whole or in part,in the manner provided in Section 5(b) hereof, any or all of theshares of the Junior Preferred Stock then outstanding, at a redemption priceequal to the following percentages of the aggregate liquidation preference (asthen in effect) per share, in each case beginning on February 24 of theyear indicated:

###  

| **Year**            | ** ** | **Redemption Price** | ** ** |
|---------------------|------------|----------------------|------------|
|                |       |                 |       |
| 2009                |       | 106                  | %          |
| 2010                |       | 104                  | %          |
| 2011                |       | 102                  | %          |
| 2012 and thereafter |       | 100                  | %          |

 

provided,however, that no optional redemption pursuant to this Section 5(b)(i) shallbe authorized or made at any time when the Company is making or required tomake within the next 30 days, or purchasing shares of Junior Preferred Stockunder, a Change of Control offer in accordance with the provisions of Section 7hereof.

 

### (ii)                                 In the event of one or more publicofferings of Common Stock of the Company in an aggregate offering amount of atleast fifty million dollars ($50,000,000) or as a result of which at leastfifteen percent (15%) of the Common Stock of the Company (after giving effectto such offerings) is publicly traded (the “**PublicOffering**”), the Company may (subject to contractual and otherrestrictions with respect thereto, including restrictions imposed by the BankFacility, and the legal availability of funds therefor), at the option of theCompany, redeem at any time or from time to time prior to February 24,2007, from the net cash proceeds of the Public Offering, in the manner providedin Section 5(c) hereof, shares of the Junior Preferred Stock equal toup to 35% of such shares then outstanding, at a redemption price equal to 112%of the aggregate liquidation preference (as then in effect) per share.

###  

### (iii)                              In the event of a redemptionpursuant to Section 5(b)(i) or (ii) hereofof only a portion of the then outstanding shares of the Junior Preferred Stock,the Company shall effect such redemption, *pro rata*accordingto the number of shares held by each Holder of shares of Junior PreferredStock.

###  

## (c)            Proceduresfor Redemption.

##  

### (i)                                 At least 30 days and not more than60 days prior to the date fixed for any redemption of the Junior PreferredStock, written notice (the

 

25

----

 

### “**Redemption Notice**”)**shall be givenby first-class mail, postage prepaid, to each Holder of shares of JuniorPreferred Stock to be redeemed, at such Holder’s address as the same appears onthe stock register of the Company; provided,**that nofailure to give such notice nor any deficiency therein shall affect thevalidity of the procedure for the redemption of any shares of Junior PreferredStock to be redeemed except as to the Holder or Holders to whom the Company hasfailed to give said notice or except as to the Holder or Holders whose noticewas defective.  The Redemption Noticeshall state:  (1) the redemptionprice; (2) whether all or less than all of the outstanding shares of theJunior Preferred Stock are to be redeemed and the total number of shares of theJunior Preferred Stock being redeemed; (3) the number of shares of JuniorPreferred Stock held by the Holder that the Company intends to redeem; (4) thedate fixed for redemption; (5) that the Holder is to surrender to theCompany, at the place or places where certificates for shares of JuniorPreferred Stock are to be surrendered for redemption, in the manner and at theplace designated, such Holder’s certificate or certificates representing theshares of Junior Preferred Stock to be redeemed; (6) the Section ofthis Certificate of Designations pursuant to which the shares of JuniorPreferred Stock called for redemption are being redeemed; and (7) thatdividends on the shares of the Junior Preferred Stock to be redeemed shallcease to accrue on and after such Redemption Date unless the Company defaultsin the payment in full of the redemption price. A Redemption Notice may not be conditional.

###  

### (ii)                              Each Holder of shares of JuniorPreferred Stock shall surrender to the Company the certificate or certificatesrepresenting its shares of Junior Preferred Stock to be redeemed, dulyendorsed, in the manner and at the place designated in the Redemption Notice,and on the Redemption Date the full redemption price for such shares shall bepayable in cash to the Person whose name appears on such certificate orcertificates as the owner thereof, and each surrendered certificate shall becanceled and retired.  In the event thatless than all of the shares represented by any such certificate are redeemed, anew certificate shall be issued representing the unredeemed shares.

###  

### (iii)                           Unless the Company defaults in thepayment in full of the redemption price, dividends on the shares of JuniorPreferred Stock called for redemption shall cease to accumulate on theRedemption Date, and the Holders of such shares shall cease to have any furtherrights with respect thereto on the Redemption Date, other than the right to receivethe redemption price, without interest.

###  

6.                                       VotingRights.

 

## (a)           TheHolders of shares of the Junior Preferred Stock, except as otherwise requiredunder Delaware law, other applicable law or as set forth in Section 6(b) below,shall not be entitled or permitted to vote on any matter required or permittedto be voted upon by the stockholders of the Company.

 

26

----

 

## (b)                                 (i)            Solong as any shares of the Junior Preferred Stock are outstanding, the Companyshall not authorize or issue any class or series of Parity Securities withoutthe affirmative vote or consent of the Holders of at least a majority of theoutstanding shares of Junior Preferred Stock, voting or consenting, as the casemay be, separately as one class, given in person or by proxy, either in writingor by resolution adopted at an annual or special meeting, except that withoutthe approval of Holders of shares of Junior Preferred Stock, the Company mayauthorize and issue shares of Parity Securities the proceeds of which are usedto redeem or repurchase, all shares of Junior Preferred Stock then outstanding.

##  

### (ii)                                      So long as any shares of the JuniorPreferred Stock are outstanding, the Company shall not authorize or issue anyclass or series of Senior Securities without the affirmative vote or consent ofthe Holders of at least a majority of the outstanding shares of JuniorPreferred Stock, voting or consenting, as the case may be, separately as oneclass, given in person or by proxy, either in writing or by resolution adoptedat an annual or special meeting.

###  

### (iii)                                   So long as any shares of the JuniorPreferred Stock are outstanding, the Company shall not, without the affirmativevote or consent of the Holders of at least a majority of the outstanding sharesof Junior Preferred Stock, voting or consenting, as the case may be, separatelyas one class, given in person or by proxy, either in writing or by resolutionadopted at an annual or special meeting, amend, alter or repeal (whether bymerger, consolidation or otherwise) any of the provisions of the Certificate ofIncorporation of the Company or of any certificate amendatory thereof orsupplemental thereto so as to (1) affect adversely any of the preferences,rights, powers or privileges of the Junior Preferred Stock or of the holdersthereof as such or (2) authorize the issuance after the Closing Date ofany additional shares of Junior Preferred Stock.

###  

### (iv)                          So long as any shares of the JuniorPreferred Stock are outstanding, prior to the issuance of any Series BJunior Subordinated Debentures, the Company shall not, without the affirmativevote or consent of the Holders of at least a majority of the outstanding sharesof Junior Preferred Stock, voting or consenting, as the case may be, as asingle class, given in person or by proxy, either in writing or by resolutionadopted at an annual or special meeting, amend or modify (whether by merger,consolidation or otherwise) any of the provisions of the Series B JuniorSubordinated Debenture or of any amendment or supplement thereto so as toaffect adversely any of the preferences, rights, powers or privileges of the Series BJunior Subordinated Debentures or of the holders thereof as such.

###  

### (v)                             The affirmative vote or consent ofthe Holders of at least a majority of the outstanding shares of JuniorPreferred Stock, voting or consenting, as the case may be, separately as oneclass, whether voting in person or by proxy, either in writing or by resolutionadopted at an annual or special

 

27

----

 

### meeting, may waive compliance with anyprovision of Part B of this Resolution.

###  

### (vi)                          Except as set forth in Sections 6(b)(i) and6(b)(ii) above or in clause (2) of Section 6(b)(iii) above,(1) the creation, authorization or issuance of any shares of any JuniorSecurities, Parity Securities or Senior Securities, or (2) the increase ordecrease in the amount of authorized capital stock of any class or series,including Junior Preferred Stock or any other series of Preferred Stock, shallnot require the consent of the Holders of Junior Preferred Stock and shall not,unless not complying with Sections 6(b)(i) or 6(b)(ii) hereof orclause (2) of Section 6(b)(iii) above, be deemed to affectadversely the rights, preferences, privileges or voting rights of the Holdersof shares of Junior Preferred Stock.

###  

### (vii)                       The Company shall not amend ormodify any of the provisions of the Certificate of Incorporation of the Companyor of any certificate amendatory thereof or supplemental thereto so as toaffect adversely any of the preferences, rights, powers or privileges of theJunior Preferred Stock, or waive compliance with any provision of Part Bof this Resolution, unless such amendment, modification or waiver appliesidentically to all shares of Junior Preferred Stock.

###  

## (c)            Inany case in which the Holders of shares of the Junior Preferred Stock shall beentitled to vote pursuant to this Section 6 or pursuant to Delaware law orother applicable law, each Holder of shares of the Junior Preferred Stock shallbe entitled to one vote for each share of Junior Preferred Stock held.

##  

7.                                       Changeof Control Offer.

 

## (a)           Subjectto contractual and other restrictions with respect thereto, includingrestrictions imposed by the Bank Facility, and the legal availability of fundstherefor, upon the occurrence of a Change of Control, the Company shall make anoffer (a “**Changeof Control Offer**”)**to each Holder of shares of Junior Preferred Stock torepurchase, at the Holder’s option, any or all of such Holder’s shares ofJunior Preferred Stock at a purchase price in cash equal to 101% of theaggregate liquidation preference (as then in effect) per share (the “**Change of Control Payment**”)*.*

##  

## (b)           Within30 days following any Change of Control, the Company shall mail a notice toeach Holder of shares of Junior Preferred Stock stating:  (1) that the Change of Control Offer isbeing made pursuant to this Section 7 and that all shares of JuniorPreferred Stock duly tendered will be accepted for payment; (2) thepurchase price and the purchase date, which shall be no sooner than 20 BusinessDays nor later than 60 days from the date such notice is mailed (the “**Change of Control PaymentDate**”);**(3) that any shares not tendered will continue toaccumulate dividends; (4) that, unless the Company defaults in the paymentof the Change of Control Payment, all shares of Junior Preferred Stock acceptedfor payment pursuant to the Change of Control Offer shall cease to accumulatedividends on the Change of Control Payment Date; (5) that Holders electing to have any shares of JuniorPreferred Stock repurchased pursuant to a Change of Control Offer will berequired to surrender such shares, with the form entitled “Option of Holder toElect Purchase” on the reverse side of the certificate representing the sharesof Junior Preferred Stock completed, or transfer such shares by book-entrytransfer, to the Company or its transfer agent at the address specified in thenotice prior to the close of business on the third Business Day preceding theChange of Control Payment Date; (6) that Holders will be entitled to

 

28

----

 

withdraw their election if theCompany or the transfer agent, as the case may be, receives, not later than theclose of business on the third Business Day preceding the Change of ControlPayment Date, a telegram, telex, facsimile transmission or letter setting forththe name of the Holder, the number of shares of Junior Preferred Stockdelivered for repurchase, and a statement that such Holder is withdrawing itselection to have such shares repurchased; and (7) that Holders whoseshares of Junior Preferred Stock are being repurchased only in part will beissued a new certificate representing a number of shares of Junior PreferredStock equal to the number of shares of Junior Preferred Stock that were notsurrendered (or transferred by book-entry transfer) by the Holder forrepurchase by the Company.

##  

## (c)            Onthe Change of Control Payment Date, the Company shall, to the extent lawful, (1) acceptfor payment all shares of Junior Preferred Stock or portions thereof properlytendered pursuant to the Change of Control Offer and (2) deposit with theCompany or its transfer agent, as the case may be, an amount equal to theChange of Control Payment in respect of all shares of Junior Preferred Stock orportions thereof so tendered.  TheCompany or its transfer agent, as the case may be, shall promptly mail to eachHolder of shares of Junior Preferred Stock so tendered the Change of ControlPayment for such shares or portions thereof. The Company shall promptly issue a new certificate representing sharesof Junior Preferred Stock and mail (or cause to be transferred by book entry)to each Holder that did not sell all of its Junior Preferred Stock in the Changeof Control Offer a new certificate representing the remaining number of sharesof Junior Preferred Stock held by such Holder that were not purchased in theChange of Control Offer.  The Companyshall announce to its stockholders the results of the Change of Control Offeron or as soon as practicable after the Change of Control Payment Date.

##  

## (d)           TheCompany shall comply with the requirements of Rule 14e-1 under theExchange Act and any other securities laws and regulations thereunder to theextent such laws and regulations are applicable in connection with therepurchase of shares of Junior Preferred Stock in connection with a Change ofControl.

##  

## (e)            Notwithstandingthe foregoing, the Company shall not be required to make a Change of ControlOffer upon a Change of Control if a third party makes the Change of ControlOffer in the manner, at the times and otherwise in compliance with therequirements set forth in this Section 7 applicable to a Change of ControlOffer made by the Company, and purchases all shares of Junior Preferred Stockvalidly tendered and not withdrawn under such Change of Control Offer.

##  

8.                                       Exchange.

 

## (a)           Conditions.

##  

### (i)                                 Subject to contractual and otherrestrictions with respect thereto, including restrictions imposed by the BankFacility, the Company may, at its option on any Dividend Payment Date (hereinthe “**Exchange Date**”), exchangeall, but not less than all, of the then outstanding shares of Junior PreferredStock into the Series B Junior Subordinated Debentures.  To exchange Junior Preferred Stock into Series BJunior Subordinated Debentures, the Company shall, (A) no later than theExchange Date, exchange all of the then outstanding shares of Senior PreferredStock, if any, into the Series A Junior Subordinated Debentures in accordancewith Section 8 of Part A of this Certificate of Designations, and (B) senda written notice (the “**Exchange Notice**”)of exchange by first-class mail to each Holder of shares of Junior PreferredStock, which notice shall state: (v) that the Company has elected toexchange the

 

29

----

 

### Junior PreferredStock into Series B Junior Subordinated Debentures pursuant to this Section 8;(w) the Exchange Date, which shall be the next succeeding Dividend Payment Dateand shall not be less than 20 days following the date on which the ExchangeNotice is mailed; (x) that the Holder is to surrender to the Company, at theplace or places where certificates for shares of Junior Preferred Stock are tobe surrendered for exchange, in the manner designated in the Exchange Notice,such Holder’s certificate or certificates representing the shares of JuniorPreferred Stock to be exchanged (properly endorsed or assigned for transfer);(y) that dividends on the shares of Junior Preferred Stock to be exchangedshall cease to accrue, and the Holders of such shares shall cease to have anyfurther rights with respect to such shares (other than the right to receive Series BJunior Subordinated Debentures), on the Exchange Date whether or not certificatesfor shares of Junior Preferred Stock are surrendered for exchange on theExchange Date unless the Company shall default in the delivery of Series BJunior Subordinated Debentures; and (z) that interest on the Series BJunior Subordinated Debentures shall accrue from and after the Exchange Datewhether or not certificates for shares of Junior Preferred Stock aresurrendered for exchange on the Exchange Date. On the Exchange Date, if the conditions set forth in clauses (1) through(3) below are satisfied, the Company shall issue Series B JuniorSubordinated Debentures in exchange for the Junior Preferred Stock as providedin the next paragraph; provided, that on the Exchange Date:  (1) there shall be legally availablefunds sufficient therefor (including legally available funds sufficienttherefor under Sections 160 and 170 (or any successor provisions) of theDelaware General Corporation Law); (2) either (a) a registrationstatement relating to the Series B Junior Subordinated Debentures shall havebeen declared effective under the Securities Act prior to such exchange andshall continue to be in effect on the Exchange Date or (b)(i) the Companyshall have obtained a written opinion of counsel that an exemption from theregistration requirements of the Securities Act is available for such exchangeand that upon receipt of such Series B Junior Subordinated Debenturespursuant to such exchange made in accordance with such exemption, the holders(assuming such holder is not an Affiliate of the Company) thereof will not besubject to any restrictions imposed by the Securities Act upon the resalethereof and (ii) such exemption is relied upon by the Company for suchexchange; and (3) immediately after giving effect to such exchange, noDefault or Event of Default (each as defined in the Series B JuniorSubordinated Debentures) would exist under the Series B JuniorSubordinated Debentures.

###  

In the event that the issuance of the Series B Junior Subordinated Debentures is not permitted on the Exchange Date set forth in the Exchange Notice, or any of the conditions set forth in clauses (1) through (3) of the preceding sentence are not satisfied on the Exchange Date set forth in the Exchange Notice, the Exchange Date shall be deemed to be the first Business Day thereafter, if any, upon which all of such conditions are satisfied.

 

30

----

 

### (ii)                              Upon any exchange pursuant to Section 8(a)(i) hereof, each Holder of outstanding shares ofJunior Preferred Stock shall be entitled to receive Series B JuniorSubordinated Debentures in a principal amount equal to the sum of the aggregateliquidation preference (then in effect) of such Holder’s shares of JuniorPreferred Stock; provided, that the Company may pay cash in lieu of issuinga Series B Junior Subordinated Debenture in a principal amount of lessthan $1,000.00.

###  

## (b)           Procedurefor Exchange.

##  

### (i)                                         On or before the Exchange Date, eachHolder of shares of Junior Preferred Stock shall surrender the certificate orcertificates representing such shares of Junior Preferred Stock, in the mannerand at the place designated in the Exchange Notice. The Company shall cause theSeries B Junior Subordinated Debentures to be executed on the ExchangeDate and, upon surrender in accordance with the Exchange Notice of thecertificates for any shares of Junior Preferred Stock so exchanged (properlyendorsed or assigned for transfer), such shares shall be exchanged by theCompany into Series B Junior Subordinated Debentures. The Company shallpay interest on the Series B Junior Subordinated Debentures at the rateand on the dates specified therein from and after the Exchange Date.

###  

### (ii)                              Subject to the conditions set forthin Section 8(a) hereof, as of the Exchange Date the rights of theHolders of shares of the Junior Preferred Stock as stockholders of the Companyshall cease (except the right to receive Series B Junior SubordinatedDebentures), and the Person or Persons entitled to receive the Series BJunior Subordinated Debentures issuable upon exchange shall be treated for allpurposes as the registered Holder or Holders of such Series B JuniorSubordinated Debentures as of the date of exchange without any further actionof the Holders of shares of Junior Preferred Stock.

###  

9.                                       RestrictedPayments.

 

## (a)           TheCompany shall not, directly or indirectly, (i) declare or pay any dividendor make any other distribution in respect of shares of the Company’s CapitalStock, or any warrants, options or other rights to acquire shares of suchCapital Stock, and (ii) make any payment (except to the extent made withQualified Capital Stock) on account of the purchase, redemption or otheracquisition or retirement for value of any of the Company’s Capital Stock, orany warrants, options or other rights to acquire shares of such Capital Stock(each of the foregoing actions set forth in clauses (i) and (ii) beingreferred to as a “**Restricted Payment**”),if at the time of such Restricted Payment or immediately after giving effectthereto, (1) a Default Event shall have occurred and be continuing or (2) theaggregate amount of Restricted Payments (including such proposed RestrictedPayment) made subsequent to the Preferred Stock Issue Date (the amount expendedfor such purposes, if other than in cash, being the fair market value of suchproperty) shall exceed the sum of (without duplication):  (x) 50% of the cumulative Consolidated NetIncome (taken as one accounting period) of the Company accrued during theperiod commencing on the first day of the first full fiscal quarter in whichthe Preferred Stock Issue Date occurs to and including the last day of the mostrecent fiscal period for which internal financial statements are

 

31

----

 

available (or if cumulativeConsolidated Net Income shall be a deficit, minus 100% of such deficit); plus (v) 100%of the aggregate Net Cash Proceeds received by the Company from any Person(other than a Subsidiary of the Company) from a Capital Contribution or fromthe sale subsequent to the Preferred Stock Issue Date of Qualified CapitalStock of the Company.  For purposes ofthis Section 9, the term “Restricted Payment” does not include (A) anydividend, distribution or other payment on or with respect to any Capital Stockof the Company, or any warrants, options or rights to acquire shares of suchCapital Stock, to the extent payable solely in shares of Qualified CapitalStock, (B) any dividend, distribution or other payment to the Company, orto any Subsidiary of the Company, by the Company or any of its Subsidiaries; (C) thepayment of the Merger Consideration (as defined in the Merger Agreement); or (D) anydividend, distribution or other payment with respect to the settlement of theconsolidated shareholder class actions titled “In Re FTD.COM, Inc.Shareholders Litigation.”

##  

## (b)           Notwithstandingthe foregoing, the provisions set forth in the immediately preceding paragraphdo not prohibit:  (1) the payment ofany dividend within 60 days after the date of declaration of such dividend ifthe dividend would have been permitted on the date of declaration; (2) ifno Default Event shall have occurred and be continuing, Restricted Paymentswhich do not exceed $15,000,000 in the aggregate from and after the PreferredStock Issue Date; (3) for the avoidance of doubt, payments pursuant to theManagement Agreement; (4) if no Default Event shall have occurred and becontinuing, repurchases (and payments of cash dividends to any Parent Entityfor repurchases) of Capital Stock from FTD-member florists or distributors (ortheir heirs or estates), or employees or directors (or their heirs or estates)of, the Company, any Parent Entity or any Subsidiary of the Company, upon thedeath, disability or termination of employment (or termination of membership ordistribution, in the case of a FTD-member florist or distributor); provided,that such repurchases are made with the proceeds of such dividends to anyParent Entity within three Business Days of the payment of such dividends, andpayments of cash, or dividends, distributions or advances to any Parent Entityto make payments of cash, in lieu of the issuance of fractional shares upon theexercise of warrants or upon the conversion or exchange of, or issuance ofCapital Stock in lieu of cash dividends on, any Capital Stock of any ParentEntity, in an aggregate amount not to exceed $7,500,000 after the PreferredStock Issue Date; (5) if no Default Event shall have occurred and becontinuing, the declaration and payment of dividends to holders of any class orseries of Disqualified Capital Stock issued after the Preferred Stock IssueDate; (6) payments of amounts equal to any insurance proceeds received byFTD, Inc. in respect of the settlement of the consolidated shareholderclass actions titled “In Re FTD.COM, Inc. Shareholders Litigation”;(7) any dividend, distribution or other payments by any of the Company’sSubsidiaries on its Capital Stock, or warrants, options or other rights toacquire such Capital Stock, that is paid *prorata* to all holders of such Capital Stock, warrants, options orrights, as applicable; (8) (i) any legal defeasance, redemption,retirement, repurchase or other acquisition of Capital Stock of the Companywith the Net Cash Proceeds received by the Company made within 60 days of thesale of its Qualified Capital Stock (other than to a Subsidiary), or (ii) anyissuance of Qualified Capital Stock of the Company in exchange for, or theproceeds of which are used to purchase, any Capital Stock of the Company; (9) therepurchase of Capital Stock, or warrants, options or other rights to acquiresuch Capital Stock, deemed to occur upon the exercise of stock options,warrants or other convertible securities to the extent such Capital Stock,warrants, options or other rights represent a portion of the exercise pricethereof; (10) the payment of dividends in cash on (or the purchase,redemption, exchange or other acquisition or retirement of) shares of (i) theSenior Preferred Stock, or (ii) the Junior Preferred Stock to the extentnot prohibited by the designations of the Senior Preferred Stock; and (11)payments to a Parent Entity (or a subsidiary of a Parent Entity), (i) toenable the Parent Entity to pay federal, state or local tax liabilities (anysuch payments to a Parent Entity, a “**TaxPayment**”), not to exceed the amount of any tax liabilities thatwould be otherwise payable by the Company and its United States subsidiaries tothe appropriate taxing authorities to the extent that the Parent Entity has anobligation to pay such tax liabilities relating to the operations, assets, orcapital of the Company or its United States subsidiaries; provided, that(x)

 

32

----

 

notwithstanding the foregoing,in the case of determining the amount of a Tax Payment that is permitted to bepaid by the Company and any of its United States subsidiaries in respect oftheir consolidated Federal income tax liability, or consolidated, combined,unitary or group, state or local income tax liability, such payment shall bedetermined assuming that the Company is the parent company of an affiliatedgroup (the “**Company Affiliated Group**”)filing a consolidated federal income tax return or consolidated, combined,unitary, or group, state or local income tax return, and that the Parent Entityand each such United States subsidiary is a member of the Company AffiliatedGroup and (y) any Tax Payments shall either be used by the Parent Entity to paysuch tax liabilities within 90 days of the Parent Entity’s (or a subsidiary ofa Parent Entity) receipt of such payment or refunded to the payee, and (ii) inan aggregate amount not to exceed (A) prior to an initial public offeringby any Parent Entity, $500,000 per year and (B) after an initial publicoffering by any Parent Entity, $2,000,000 per year, in each case in order topay legal and accounting expenses, payroll and other compensation expenses inthe ordinary course of business, filing and listing fees and other corporateoverhead expenses in the ordinary course of business (for purposes of this clause(11), “tax liabilities” shall include any penalties and interest related to atax liability.

##  

In determining the aggregate amount of Restricted Payments madesubsequent to the Preferred Stock Issue Date in accordance with clause (2) ofSection 9(a) hereof, amounts distributed pursuant to clauses (1), (5) and (10) of this Section 9(b) hereofshall be included in such calculation, and amounts distributed pursuantto clauses (2), (3), (4), (6), (7), (8), (9) and (11) shall not beincluded in such calculation.  Forpurposes of this Section 9, the amount of any Restricted Payment made orreturned, if other than in cash, shall be the fair market value thereof, asdetermined in the good faith reasonable judgment of the Board of Directors,unless stated otherwise, at the time made or returned, as applicable.

 

10.                                 Reports.  

 

So long as any shares of Junior Preferred Stock areoutstanding, the Company shall furnish to each Holder of shares of JuniorPreferred Stock (at such Holder’s address as the same appears on the stockregister of the Company):  (a) assoon as available, but in any event within 105 days after the end of eachfiscal year of the Company, a copy of the audited consolidated balance sheet ofthe Company and its consolidated Subsidiaries as at the end of such year andthe related audited consolidated statements of income and of cash flows forsuch year, reported on without any qualification arising out of the scope ofthe audit, by the Company’s independent certified public accountants; and (b) assoon as available, but in any event not later than 60 days after the end ofeach of the first three quarterly periods of each fiscal year of the Company,the unaudited consolidated balance sheet of the Company and its consolidatedSubsidiaries as at the end of such quarter and the related unauditedconsolidated statements of income and of cash flows for such quarter and theportion of the fiscal year through the end of such quarter, certified by theChief Executive Officer, the President, or the Chief Financial Officer of theCompany as being fairly stated in all material respects (subject to normalyear-end audit adjustments).  All suchfinancial statements shall be complete and correct in all material respects andshall be prepared in reasonable detail and in accordance with GAAP applied(except as approved by such accountants or officer, as the case may be, anddisclosed in reasonable detail therein) consistently throughout the periodsreflected therein and with prior periods.

 

11.                                 PreemptiveRights.

 

No shares of Junior Preferred Stock shall have any rights of preemptionwhatsoever hereunder as to any securities of the Company, or any warrants,rights or options issued or granted with respect thereto, regardless of howsuch securities or such warrants, rights or options may be designated, issuedor granted.

 

33

----

 

12.                                 Conversion.

 

No shares of Junior Preferred Stock shall be convertible into CommonStock of the Company or any other securities convertible or exchangeable intoCommon Stock of the Company.

 

13.                                 Reissuanceof Junior Preferred Stock.

 

Shares of Junior Preferred Stock that have been issued and reacquiredby the Company in any manner, including shares purchased, redeemed orexchanged, shall (upon compliance with any applicable provisions of the laws ofDelaware) have the status of authorized but unissued shares of Preferred Stockof the Company undesignated as to series and, subject to the provisions ofSections 6(b)(i) and 6(b)(ii) hereof and clause (2) of Section 6(b)(iii) hereof,may be designated or redesignated and issued or reissued, as the case may be,as part of any series of Preferred Stock of the Company; provided,**that such shares may not in anyevent be reissued as Junior Preferred Stock.

 

14.                                 BusinessDay.

 

If any payment, redemption or exchange shall berequired by the terms hereof to be made on a day that is not a Business Day,such payment, redemption or exchange shall be made on the immediatelysucceeding Business Day.

 

15.                                 Definitionsand Interpretation.

 

## (a)            Definitions.  As used in Part B of this Resolution,the following terms shall have the following meanings, unless the contextotherwise requires:

##  

“**Affiliate**”**of anyspecified Person means any other Person directly or indirectly controlling orcontrolled by or under direct or indirect common control with such specifiedPerson.  For purposes of this definition,the term “control” (including, with correlative meanings, the terms “controlling,”“controlled by” and “under common control with”), as used with respect to anyPerson, shall mean the possession, directly or indirectly, of the power todirect or cause the direction of the management or policies of such Person,directly or through one or more intermediaries, whether through the ownershipof voting securities, by contract, or otherwise; provided, that*,*with respect to the Company and its Subsidiaries, aBeneficial Owner of 10% or more of the total voting power normally entitled tovote in the election of directors of the Company shall for such purposes bedeemed to constitute control.

 

“**Asset Sale**”**means, in oneor a series of related transactions, the conveyance, sale, transfer, assignmentor other disposal by the Company or any of its Subsidiaries of, directly orindirectly, any of their property, business or assets, including by merger orconsolidation (in the case of one of the Company’s Subsidiaries), and includingany sale or other transfer or issuance of any Capital Stock, or warrants,options or other rights to acquire such Capital Stock, of any of the Company’sSubsidiaries, whether by the Company or one of the Company’s Subsidiaries orthrough the issuance, sale or transfer of Capital Stock, or warrants, optionsor other rights to acquire such Capital Stock, by one of the Company’sSubsidiaries and including any sale and leaseback transaction, other than inany such case to the Company or another Subsidiary.

 

“**Bank Facility**”**shall meanthat certain Credit Agreement, dated as of the Closing Date (as modified andsupplemented from time to time), by and among FTD, Inc., a Delawarecorporation, the Lenders from time to time parties thereto, UBS Securities LLC,as Syndication Agent, Wells Fargo Bank,

 

34

----

 

N.A., asDocumentation Agent and Credit Suisse First Boston, acting through its CaymanIslands Branch, as Administrative Agent.

 

“**Beneficial Owner**”**or “**beneficial owner**”**for purposes of the definition of Change of Control andAffiliate has the meaning attributed to it in Rules 13d-3 and 13d-5under the Exchange Act (as in effect on the Preferred Stock Issue Date),whether or not applicable.

 

“**Board of Directors**”**means theBoard of Directors of the Company.

 

“**Business Day**”**means any dayother than a Legal Holiday.

 

“**CapitalContribution**” meansany contribution to the equity of the Company subsequent to the Preferred StockIssuance Date for which no consideration (other than the issuance of QualifiedCapital Stock) is given.

 

“**Capital Stock**”**means (i) withrespect to any Person that is a corporation, any and all shares, interests,participations or other equivalents (however designated and whether or notvoting) of corporate stock, including each class of Common Stock and PreferredStock of such Person and (ii) with respect to any Person that is not acorporation, any and all partnership or other equity or ownership interests ofsuch Person.

 

“**Cash Equivalents**”**shall have themeaning ascribed to such term in the Series B Junior SubordinatedDebentures.

 

“**Certificate of Incorporation**”**meansthe Company’s Certificate of Incorporation.

 

“**Change of Control**” means:  (1) prior to consummation of the first Public Offering after thePreferred Stock Issue Date, the Permitted Holders shall cease to beneficiallyown, in the aggregate, a majority of the voting power of the Voting EquityInterests of the Company, or (2) following the consummation of the firstPublic Offering after the Preferred Stock Issue Date, (A) any merger orconsolidation of the Company with or into any Person or any sale, transfer orother conveyance, whether direct or indirect, of all or substantially all ofthe Company’s assets, on a consolidated basis, in one transaction or a seriesof related transactions, if, immediately after giving effect to suchtransaction(s), any “person” (including any group that is deemed to be a “person”)(other than the Permitted Holders) is or becomes the beneficial owner of morethan 40% of the aggregate voting power of the Voting Equity Interests of thetransferee(s) or surviving entity or entities and the Permitted Holders, in theaggregate, beneficially own, directly or indirectly, less voting power thansuch person, (B) any “person” (including any group that is deemed to be a “person”)(other than the Permitted Holders) is or becomes the beneficial owner of morethan 40% of the aggregate voting power of the Voting Equity Interests of theCompany and the Permitted Holders, in the aggregate, beneficially own, directlyor indirectly, less voting power than such person, (C) the ContinuingDirectors cease for any reason to constitute a majority of the Company’s Boardof Directors then in office, or (D) the Company adopts a plan ofliquidation.  As used in this definition,“person” (including any group that is deemed to be a “person”) has the meaninggiven by Sections 13(d) of the Exchange Act, whether or notapplicable.  “Continuing Director” meansduring any period of 12 consecutive months after the Preferred Stock IssueDate, individuals who at the beginning of any such 12-month periodconstituted the Board of Directors (together with any new directors whoseelection by such Board of Directors or whose nomination for election by theshareholders of the Company was approved by a vote of a majority of thedirectors then still in office who were either directors at the beginning ofsuch period or whose election or nomination for election was previously soapproved, including new directors designated in or provided for in an agreementregarding the merger,

 

35

----

 

consolidationor sale, transfer or other conveyance, of all or substantially all of theassets of the Company or any Parent Entity, if such agreement was approved by avote of such majority of directors).

 

“**Closing Date**”**has themeaning attributed to such term in the Merger Agreement.

 

“**Common Stock**”**means, of any Person, any and allshares, interests or other participations in, and other equivalents (howeverdesignated and whether voting or nonvoting) of such Person’s common stock, andincludes, without limitation, all series and classes of such common stock.

 

“**Company**”**means MercuryMan Holdings Corporation, a Delaware corporation.

 

“**ConsolidatedNet Income**”**means, withrespect to any Person, for any period, the aggregate net income (or loss) ofsuch Person and its Subsidiaries (before preferred stock dividends andotherwise determined on a consolidated basis in accordance with GAAP) for suchperiod; provided,**that thereshall be excluded therefrom (only to the extent included in computing such netincome (or loss) and without duplication): (a) any net after-tax gain, loss, charge or expense which is eitherextraordinary (as determined in accordance with GAAP) or is either unusual ornonrecurring (including any restructuring charges and any gain, loss, charge orexpense from the sale or other disposition of assets outside the ordinarycourse of business or from the issuance or sale of any securities) asdetermined in good faith by the Company, it being understood and agreed thatItem 10(e) of Regulation S-K under the Securities Act shall not constitutea limitation on any such determination, (b) the net income, if positive,of any Person, other than a Subsidiary, in which such Person or any of itsSubsidiaries has an interest, except to the extent of the amount of anydividends or distributions actually paid in cash to such Person or a Subsidiaryof such Person during such period, but in any case not in excess of such Person’spro rata share of such Person’s net income for such period, (c) the netincome, if positive, of any of such Person’s Subsidiaries to the extent thatthe declaration or payment of dividends or similar distributions is not at thetime permitted by operation of the terms of its charter or bylaws or any otheragreement, instrument, judgment, decree, order, statute, rule orgovernmental regulation applicable to such Subsidiary, (d) the cumulativeeffect of a change in accounting principles, (e) any non-cash compensationexpense realized from grants of stock appreciation or similar rights, stockoptions or other rights to officers, directors and employees of the Company, (f) amountsresulting from currency fluctuations, and (g) any goodwill impairmentcharges pursuant to Financial Accounting Standards Board Statement No. 142.

 

“**ContributionAgreements**” means, collectively: (i) the Contribution and Subscription Agreements, each dated as of February 24,2004, by and between Robert L. Norton and the Company, (ii) theContribution and Subscription Agreement, dated as of February 24, 2004, byand between Jon R. Burney and the Company; (iii)  the Contributionand Subscription Agreement, dated as of February 24, 2004, by and betweenAnn M. Hofferberth and the Company; (iv)  the Contribution andSubscription Agreement, dated as of February 24, 2004, by and betweenLawrence W. Johnson and the Company; (v)  the Contribution andSubscription Agreement, dated as of February 24, 2004, by and betweenGeorge T. Kanganis and the Company; (vi)  the Contribution andSubscription Agreement, dated as of February 24, 2004, by and betweenTimothy D. Meline and the Company; (vii)  the Contribution andSubscription Agreement, dated as of February 24, 2004, by and betweenDaniel W. Smith and the Company; (viii)  the Contribution andSubscription Agreement, dated as of February 24, 2004, by and betweenWilliam J. Van Cleave and the Company; and (ix)  the Contribution andSubscription Agreement, dated as of February 24, 2004, by and betweenCarrie A. Wolfe and the Company, as each of the same may be amended from timeto time.

 

“**Default Event**”**means any of the followingevents:  (i) any time when theCompany fails to make a mandatory redemption of the Junior Preferred Stock whenrequired (whether or not any

 

36

----

 

contractual or other restrictionsapply to such redemption, including restrictions imposed by the Bank Facility)pursuant to Section 5(a) hereof; or (ii) any time when theCompany fails to make an offer to repurchase all of the outstanding shares ofJunior Preferred Stock (or fails to consummate any such offer to repurchase)following a Change of Control, if such offer to repurchase is required to bemade pursuant to Section 7(a) hereof (whether or not any contractualor other restrictions apply to such repurchase, including restrictions imposedby the Bank Facility).

 

“**Disqualified Capital Stock**”**means(i) that portion of any Capital Stock which, by its terms (or by the termsof any security into which it is convertible or for which it is exchangeable),or upon the happening of any event, matures or is mandatorily redeemable,pursuant to a sinking fund obligation or otherwise, or is redeemable at thesole option of the holder thereof, in any case, on or prior to August 24,2024, (ii) any preferred stock of the Company that is issued for cash andis so designated as Disqualified Capital Stock, pursuant to an officer’scertificate on the issuance date thereof, and (iii) any Capital Stock, orwarrants, options or rights to acquire shares of Capital Stock, of anySubsidiary of such Person other than common equity with no preferences,privileges, and no redemption or repayment provisions.  Notwithstanding the foregoing, any CapitalStock that would constitute Disqualified Capital Stock solely because theholders of the Capital Stock have the right to require the Company torepurchase such Capital Stock upon the occurrence of a change of control shallnot constitute Disqualified Capital Stock if the terms of such Capital Stockprovide that the Company may not repurchase or redeem any such Capital Stockpursuant to such provisions prior to the Company’s purchase of the JuniorPreferred Stock pursuant to Section 7 hereof.

 

“**Dividend Payment Date**”**means January 1,April 1, July 1, and October 1 of each year following thePreferred Stock Issue Date.

 

“**Dividend Period**”**means theInitial Dividend Period and, thereafter, each Quarterly Dividend Period.

 

“**Exchange Act**”**means theSecurities Exchange Act of 1934, as amended, and the rules and regulationsthereunder.

 

“**Exchange Date**”**has the meaning set forth in Section 8(a)(i) hereof.

 

“**Exchange Notice**”**has the meaning set forth in Section 8(a)(i) hereof.

 

“**Excluded Person**”**means GEI and its Related Parties.

 

“**fair****market value**”**means,with respect to any asset or property, the price which could be negotiated inan arm’s-length free market transaction, for cash, between a willing seller anda willing and able buyer, neither of whom is under undue pressure or compulsionto complete the transaction.  Fair marketvalue shall be determined by the Board of Directors acting reasonably and ingood faith.

 

“**GAAP**”**means UnitedStates generally accepted accounting principles set forth in the opinions andpronouncements of the Accounting Principles Board of the American Institute ofCertified Public Accountants and statements and pronouncements of the FinancialAccounting Standards Board or such other statements by such other entity asapproved by a significant segment of the accounting profession in the UnitedStates.

 

“**GEI**”**means GreenEquity Investors IV, L.P., a Delaware limited partnership.

 

37

----

 

“**Holder**”**means a Personin whose name a share of Junior Preferred Stock is registered.

 

“**Indebtedness**”of any Person means, without duplication, (a) all liabilities and obligations,contingent or otherwise, of such any Person, to the extent such liabilities andobligations would appear as a liability upon the consolidated balance sheet ofsuch Person in accordance with GAAP, (i) in respect of the principalamount of borrowed money (whether or not the recourse of the lender is to thewhole of the assets of such Person or only to a portion thereof), (ii) evidencedby bonds, notes, debentures or similar instruments, (iii) representing thebalance deferred and unpaid of the purchase price of any property or services,except those incurred in the ordinary course of its business that wouldconstitute ordinarily a trade payable to trade creditors; (b) allliabilities and obligations, contingent or otherwise, of such Person (i) evidencedby bankers’ acceptances or similar instruments issued or accepted by banks, (ii) relatingto any capitalized lease obligation, or (iii) evidenced by a letter ofcredit or a reimbursement obligation of such Person with respect to any letterof credit; (c) all net obligations of such Person under Interest Swap andHedging Obligations; (d) all liabilities and obligations of others of thekind described in the preceding clauses (a), (b) or (c) that suchPerson has guaranteed or that is otherwise its legal liability or which aresecured by one or more liens on any assets or property of such Person; (e) anyand all deferrals, renewals, extensions, refinancing and refundings (whetherdirect or indirect) of, or amendments, modifications or supplements to, anyliability of the kind described in any of the preceding clauses (a), (b), (c) or(d), or this clause (e), whether or not between or among the same parties; and (f) allDisqualified Capital Stock of such Person (measured at the greater of itsvoluntary or involuntary maximum fixed repurchase price plus accrued and unpaiddividends).  For purposes hereof, the “maximumfixed repurchase price” of any Disqualified Capital Stock which does not have afixed repurchase price shall be calculated in accordance with the terms of suchDisqualified Capital Stock as if such Disqualified Capital Stock were purchasedon any date on which Indebtedness shall be required to be determined pursuantto the Indenture, and if such price is based upon, or measured by, the fairmarket value of such Disqualified Capital Stock, such fair market value to bedetermined in good faith by the board of directors of the issuer (or managinggeneral partner of the issuer) of such Disqualified Capital Stock.  The amount of any Indebtedness outstanding asof any date shall be (1) the accreted value thereof, in the case of anyIndebtedness issued with original issue discount and (2) the principalamount thereof in the case of any other Indebtedness.

 

“**Indenture**” means that certain Indenture dated as of February 6,2004 (as modified and supplemented from time to time) by and between NectarMerger Corporation (a wholly-owned subsidiary of the Company which was mergedwith and into FTD, Inc.) and U.S. Bank National Association, as trusteegoverning the $175 million 7.75% Junior Subordinated Notes due 2014.

 

“**Initial Dividend Period**”**meansthe dividend period commencing on the Preferred Stock Issue Date and ending onthe day before the first Dividend Payment Date to occur thereafter.

 

“**Interest Swap andHedging Obligation**” shall have the meaning ascribed to such term inthe Series A Junior Subordinated Debentures.

 

“**Junior Preferred Stock**” means theCompany’s 12% Junior Redeemable Exchangeable Cumulative Preferred Stock.

 

“**Junior Securities**” hasthe meaning set forth in Section 2 hereof.

 

“**Legal Holiday**”**means aSaturday, a Sunday or a day on which banking institutions in the City of NewYork are authorized by law, regulation or executive order to remain closed.

 

38

----

 

“**LGP**”**means LeonardGreen & Partners, L.P., a Delaware limited partnership.

 

“**liquidation****preference**” has the meaning set forth in Section 4(a) hereof.

 

“**ManagementAgreement**” means that certain management agreement among any one ormore of the Company’s Subsidiaries and Leonard Green & Partners, L.P.,as such agreement may be amended from time to time.

 

“**Merger Agreement**”**means the Agreement and Plan of Merger, dated as of October 5,2003, by and among the Company, Nectar Merger Corporation and FTD, Inc.

 

“**Net CashProceeds**” means theaggregate amount of cash or Cash Equivalents received by the Company in thecase of a sale of Qualified Capital Stock or a Capital Contribution and by theCompany and its Subsidiaries in respect of an Asset Sale plus, in the case ofan issuance of Qualified Capital Stock upon any exercise, exchange orconversion of securities (including options, warrants, rights and convertibleor exchangeable debt) of the Company that were issued for cash on or after thePreferred Stock Issue Date, the amount of cash originally received by theCompany upon the issuance of such securities (including options, warrants,rights and convertible or exchangeable debt) less, in each case, the directcosts relating to such Asset Sale or issuance of Qualified Capital Stock,including, without limitation, legal, accounting, investment banking and otherprofessional fees, and brokerage and sales commissions and any relocationexpenses incurred as a result thereof incurred in connection with such Asset Saleor sale of Qualified Capital Stock, and, in the case of an Asset Sale only less(1) the amount (estimated reasonably and in good faith by the Company) ofincome, franchise, sales and other applicable taxes required to be paid by theCompany or any of its respective Subsidiaries in connection with such AssetSale in the taxable year that such sale is consummated or in the immediatelysucceeding taxable year, the computation of which shall take into account thereduction in tax liability resulting from any available operating losses andnet operating loss carryovers, tax credits and tax credit carry-forwards, andsimilar tax attributes, (2) cash payments attributable to Persons owningan interest (other than a lien) in the assets subject to the Asset Sale, (3) anydeduction of appropriate amounts to be provided by the Company as a reserve inaccordance with GAAP against any liability associated with the asset disposedof in such transaction and retained by the Company after such sale or otherdisposition thereof, including, without limitation, pension and otherpost-employment benefit liabilities and liabilities related to environmentalmatters or against any indemnification obligations associated with suchtransaction and (4) any holdbacks with respect to indemnificationobligations or purchase price adjustments pending receipt thereof.

 

“**Parent Entity**” means aPerson that holds, directly or indirectly, Voting Equity Interests of theCompany with voting power, in the aggregate, at least equal to the voting powerof the Voting Equity Interests of the Company held by the Permitted Holders onthe Preferred Stock Issue Date.

 

“**Parity Securities**” hasthe meaning set forth in Section 2 hereof.

 

“**Permitted Holders**”****each of Leonard Green & Partners,L.P., a Delaware limited partnership, and Green EquityInvestors IV, L.P., a Delaware limited partnership, and any of theirAffiliates.

 

“**Person**”**means anindividual, partnership, corporation, limited liabilitycompany, unincorporated organization, trust or joint venture, or agovernmental agency or political subdivision thereof or other entity.

 

39

----

 

“**Preferred Stock**”**of any Personmeans any Capital Stock of such Person that has preferential rights over anyother Capital Stock of such Person with respect to dividends or redemptions orupon liquidation.

 

“**Preferred Stock Issue Date**”**meansthe first date on which shares of Junior Preferred Stock are originally issuedby the Company.

 

“**Public Offering**”has the meaning set forth in Section 5(b)(ii) hereof.

 

“**Qualified Capital Stock**” means**theSenior Preferred Stock, the Junior Preferred Stock and any other Capital Stockthat is not Disqualified Capital Stock.

 

“**Quarterly Dividend Period**”**meansthe quarterly period commencing on each January 1, April 1, July 1 and October 1 and ending on theday before the following Dividend Payment Date.

 

“**Redemption Date**”**with respectto any shares of Junior Preferred Stock, means the date on which such shares ofJunior Preferred Stock are redeemed by the Company.

 

“**Redemption Notice**”has the meaning set forth in Section 5(c)(i) hereof.

 

“**Resolution**” means thisresolution adopted and approved by the Board of Directors dated as of February 23,2004 authorizing the Senior Preferred Stock and the Junior Preferred Stock.

 

“**SEC**”**means theSecurities and Exchange Commission.

 

“**Securities Act**”**means theSecurities Act of 1933, as amended, and the rules and regulationsthereunder.

 

“**Senior Preferred Stock**” means theCompany’s 14% Senior Redeemable Exchangeable Cumulative Preferred Stock.

 

“**Senior Securities**” hasthe meaning set forth in Section 2 hereof.

 

“**Series B Junior SubordinatedDebentures**” means the Company’s 12% Series B JuniorSubordinated Debentures due 2024 substantially in the form attached to the Resolutionas Annex II.

 

“**Stockholders Agreement**”means the Stockholders Agreement, dated as of the Closing Date, among theCompany, GEI, FTD Co-Investment LLC, a Delaware limited liability company,Robert L. Norton, Jon R. Burney, Ann M. Hofferberth, Lawrence W. Johnson,George T. Kanganis, Timothy D. Meline, Daniel W. Smith, William J. Van Cleave,Carrie A. Wolfe and the other parties thereto, as the same may be amended fromtime to time.

 

“**Subsidiary**” withrespect to any Person, means (i) any corporation of which theoutstanding Capital Stock having at least a majority of the votes entitled tobe cast in the election of directors under ordinary circumstances shall at thetime be owned, directly or indirectly, by such Person; or (ii) any otherPerson of which at least a majority of the voting interest under ordinarycircumstances is at the time, directly or indirectly, owned by such Person.

 

40

----

 

“**Voting EquityInterests**” means Capital Stock, or warrants, options or other rightsto acquire such Capital Stock, which at the time are entitled to vote in theelection of, as applicable, directors, members or partners generally.

 

## (b)           Interpretation.  For the purposes of Part B of thisCertificate of Designations:  (i) wordsin the singular shall be held to include the plural and vice versa and words ofone gender shall be held to include the other gender as the context requires, (ii) theword “including” and words of similar import shall mean “including, withoutlimitation,” unless the context otherwise requires or unless otherwisespecified, and (iii) the word “hereof” and words of similar import shallmean Part B of this Certificate of Designations.

 

41

----

 

**ANNEX I**

**FORM OF SERIES A JUNIOR SUBORDINATEDDEBENTURE**

 

----

 

[FORM OF SERIES A JUNIOR SUBORDINATEDDEBENTURE]

 

**THIS DEBENTURE HAS NOT BEEN REGISTERED UNDERTHE U.S. SECURITIES ACT OF 1933, AS AMENDED, AND IT MAY NOT BE OFFERED, SOLD ORTRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAIDACT.**

 

**MERCURY MAN HOLDINGS CORPORATION**

 

**14% JUNIOR SUBORDINATED DEBENTURE DUE 2024**

 
| $                 |   | [DATE] |
|---------------------------------------------------------------------------------------------------|--------|--------|

 

Mercury Man Holdings Corporation, a corporation duly organized andexisting under the laws of Delaware (herein called the “**Company**”), for value received, herebypromises to pay to                                         ,or registered assigns (the “**Holder**”),the principal sum of                              dollars, together with any accrued and unpaid interest, on August 24, 2024 (the“**Maturity Date**”), and to payinterest, calculated and payable as set forth below.

 

**ARTICLE I.**

** **

**PAYMENT OF PRINCIPAL AND INTEREST**

** **

Section 1.1             Paymentof Principal and Interest.  Intereston the principal balance of this Debenture outstanding from time to time untilpaid in full shall accrue at the rate of 14% per annum, computed on the basisof a 360-day year, commencing on the Exchange Date, payable semi-annually oneach Interest Payment Date and (to the extent that the payment of such interestshall be legally enforceable) at the rate of 16% per annum on any overdueprincipal and on any overdue installment of interest, until paid as specifiedherein.  Payment of the principal of andinterest on this Debenture will be made in such coin or currency of the UnitedStates of America as at the time of payment is legal tender for payment ofpublic and private debts and at such place in the United States as the Companymay from time to time designate in writing to the Holders.

 

Section 1.2             PaymentOnly on Business Days.  Any paymenthereunder which, but for this Section 1.2, would be payable on a day which isnot a Business Day, shall instead be due and payable on the Business Day nextfollowing such date for payment.

 

**ARTICLE II.**

** **

**REMEDIES**

** **

Section 2.1             Events of Default.  (a) Each of the following is an “**Event ofDefault**”:

 

(i)            the Companydefaults for 30 days in the payment when due of interest on this Debenturewhether or not prohibited by the subordination provisions herein;

 

(ii)           the failureby the Company to pay all or any part of the principal or premium on thisDebenture when and as the same becomes due and payable at maturity, redemption,by acceleration or otherwise, including payment of the Change of ControlPurchase Price, or otherwise;

 

1

----

 

(iii)          the failure by the Company to observeor perform any other covenant or agreement contained in this Debenture and thecontinuance of such failure for a period of 30 days after written notice isgiven to the Company by the Holder, specifying such Default;

 

(iv)          the entry by a court of competentjurisdiction of (A) a decree or order for relief in respect of the Company orany Subsidiary of the Company in an involuntary case or proceeding under anyapplicable federal or state bankruptcy, insolvency, reorganization or othersimilar law or (B) a decree or order adjudging the Company or any suchSubsidiary as bankrupt or insolvent, or approving as properly filed a petitionseeking reorganization, arrangement, adjustment or composition of or in respectof the Company or any such Subsidiary under any applicable federal or statelaw, or appointing a custodian, receiver, liquidator, assignee, trustee,sequestrator or other similar official of the Company or any such Subsidiary orof any substantial part of the property of the Company or any such Subsidiary,or ordering the winding up or liquidation of the affairs of the Company or anysuch Subsidiary, and the continuance of any such decree or order for relief orany such other decree or order unstayed and in effect for a period of 60consecutive days;

 

(v)           (A) the commencement by the Companyor any Subsidiary of the Company of a voluntary case or proceeding under anyapplicable federal or state bankruptcy, insolvency, reorganization or othersimilar law, or the consent by the Company or any such Subsidiary to the entryof a decree or order for relief in respect of the Company or any Subsidiary ofthe Company in an involuntary case or proceeding under any applicable Federalor State bankruptcy, insolvency, reorganization or other similar law, (B) theconsent by the Company or any Subsidiary of the Company to the appointment ofor taking possession by a custodian, receiver, liquidator, assignee, trustee,sequestrator or similar official of the Company or any Subsidiary of theCompany or for all or substantially all of the property and assets of theCompany or any Subsidiary of the Company, or (C) the making by the Company orany Subsidiary of the Company of any general assignment for the benefit ofcreditors;

 

(vi)          a default in any Indebtedness of theCompany or its Subsidiaries, with an aggregate principal amount in excess of$15,000,000 (a) resulting from the failure to pay principal at maturity orinterest or (b) as a result of which the maturity of such Indebtedness has beenaccelerated prior to its stated maturity; or

 

(vii)         a final unsatisfied judgment or finalunsatisfied judgments for the payment of money not covered by insurance in anaggregate amount in excess of $15,000,000, at any one time rendered against theCompany or any Subsidiary of the Company by a court or courts of competentjurisdiction, which judgments remain unstayed, undischarged or unbonded for aperiod (during which execution shall not be effectively stayed) of 60 days.

 

(b)           In the case of (1) an Event ofDefault specified in clause (i) or (ii) of Section 2.1(a) hereof, the Holderhereof may, at its option, by notice in writing to the Company, declare thisDebenture to be, and this Debenture shall thereupon be and become, due andpayable immediately without further action or notice, or (2) an Event ofDefault specified in clause (iv) or (v) of Section 2.1(a) hereof, with respectto the Company or any of its Subsidiaries, this Debenture will become due andpayable immediately without further action or notice.  If any other Event of Default occurs and iscontinuing, the Holders of at least 50% in principal amount of the then OutstandingDebentures may declare all the Debentures to be due and payableimmediately.  Upon any such declaration,the Debentures shall become due and payable immediately.  Notwithstanding the foregoing, if an Event ofDefault specified in clause (iv) or (v) of Section 2.1 hereof occurs withrespect to the Company or any of its Subsidiaries, all Outstanding Debenturesshall be due and payable immediately without further action or notice.

 

2

----

 

(c)           If payment of this Debenture isaccelerated because of an Event of Default, the Company shall promptly notifythe holders of Senior Debt of the acceleration.

 

(d)           If any Event of Default shall haveoccurred and be continuing, subject to the provisions of Article 2 and Article5 hereof, the Holder may proceed to protect and enforce its rights either bysuit in equity or by action at law, or both, whether for specific performanceof any provision of this Debenture or in aid of the exercise of any powergranted to the Holder under this Debenture.

 

Section 2.2             UnconditionalRight of Holders to Receive Principal and Interest.  Notwithstanding any other provision in thisDebenture, the Holder shall have the right, which is absolute andunconditional, to receive payment of the principal of and interest on thisDebenture on the Maturity Date (or, in the case of redemption, on theRedemption Date, or in the case of a Change of Control Offer made by theCompany, on the Change of Control Purchase Date) and to institute suit for theenforcement of any such payment, and such rights shall not be impaired withoutthe consent of such Holder.

 

Section 2.3             Restorationof Rights and Remedies.  If the Holder has instituted any proceedingto enforce any right or remedy under this Debenture and such proceeding hasbeen discontinued or abandoned for any reason, or has been determined adverselyto the Holder, then and in every such case, subject to any determination insuch proceeding, the Company and the Holder shall be restored severally andrespectively to their former positions under this Debenture and thereafter allrights and remedies of the Holder shall continue as though no such proceedinghad been instituted.

 

Section 2.4             Rights and Remedies Cumulative.  Except as otherwise provided with respect tothe replacement or payment of a mutilated, destroyed, lost or stolen Debenturein Section 7.6, no right or remedy herein conferred upon or reserved to theHolder is intended to be exclusive of any other right or remedy, and everyright and remedy shall, to the extent permitted by law, be cumulative and inaddition to every other right and remedy given hereunder or now or hereafterexisting at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder orotherwise shall not prevent the concurrent assertion or employment of any otherappropriate right or remedy.

 

Section 2.5             Delayor Omission Not Waiver.  No delay or omission of the Holder toexercise any right or remedy accruing upon any Event of Default shall impairany such right or remedy or constitute a waiver of any such Event of Default oran acquiescence therein.  Every right and remedy given by this Articleor by law to the Holder may be exercised from time to time, and as often as maybe deemed expedient by the Holder.

 

**ARTICLE III.**

** **

**COVENANTS**

** **

Section 3.1             Limitationon Merger, Sale or Consolidation.   The Company shall not, directly orindirectly, consolidate with or merge with or into another Person or sell,assign, convey or transfer all or substantially all of its assets (computed ona consolidated basis), whether in a single transaction or a series of relatedtransactions, to another Person or group of affiliated Persons or adopt a planof liquidation, unless:

 

(a)           either (i)the Company is the continuing entity or (i) the resulting, surviving or transfereeentity or, in the case of a plan of liquidation, the entity which receives thegreatest value from such plan of liquidation is a corporation organized underthe laws of the United States, any state thereof 

 

3

----

 

or the Districtof Columbia and expressly assumes in writing all of the obligations of theCompany in connection with this Debenture; and

 

(b)           no Defaultor Event of Default shall exist or shall occur immediately after suchtransaction(s).

 

In addition,the Company will not, directly or indirectly, lease all or substantially all ofits properties or assets, in one or more related transactions, to any otherPerson.

 

Section 3.2             Successor Substituted.   Upon any consolidation or merger or any transferof all or substantially all of the assets of the Company or consummation of aplan of liquidation in accordance with the foregoing, the successor corporationformed by such consolidation or into which the Company is merged or to whichsuch transfer is made or, in the case of a plan of liquidation, the entitywhich receives the greatest value from such plan of liquidation shall succeedto and be substituted for (so that from and after the date of suchconsolidation, merger, transfer or consummation of a plan of liquidation, theprovisions of this Debenture referring to the “Company” shall refer instead tothe successor corporation and not to the Company), and may exercise every rightand power of, the Company under this Debenture with the same effect as if suchsuccessor corporation had been named therein as the Company; provided, however,that the predecessor Company shall not be relieved from the obligation to paythe principal of and interest on this Debenture except in the case of a sale ofall of the Company’s assets in a transaction that is subject to, and thatcomplies with the provisions of, Section 3.1 hereof.

 

Section 3.3             Changeof Control Offer.

 

(a)           Subject to contractual and otherrestrictions with respect thereto, including restrictions imposed by the BankFacility, upon the occurrence of a Change of Control, the Company shall make anoffer (a “**Change of Control Offer**”)to repurchase, at the Holder’s option, this Debenture or any portion hereof ata cash price equal to 101% of the aggregate principal amount of this Debenturethen outstanding that is accepted for repurchase by the Holder hereof, plus,without duplication, all unpaid interest on the Debenture (including an amountequal to the prorated interest from the Interest Payment Date immediately priorto the repurchase to the date of repurchase), if any, to the date of repurchase(the “**Change of Control Payment**”).

 

(b)           Within 30 days following any Changeof Control, the Company shall mail a notice to the Holder stating:  (1) that the Change of Control Offer is beingmade pursuant to this Section 3 and that this Debenture, upon being dulytendered, will be accepted for payment; (2) the purchase price and the purchasedate, which shall be no sooner than 20 Business Days nor later than 60 daysfrom the date such notice is mailed (the “**Changeof Control Payment Date**”); (3) that if less than the full principalamount of this Debenture is tendered, the amount not so tendered will continueto accrue interest in accordance with Section 1.1; (4) that, unless the Companydefaults in the payment of the Change of Control Payment, the portion of thisDebenture accepted for payment pursuant to the Change of Control Offer shallcease to accrue interest on the Change of Control Payment Date; (5) that the Holderelecting to have this Debenture or any portion hereof repurchased pursuant to aChange of Control Offer will be required to surrender this Debenture to theCompany at the address specified in the notice prior to the close of businesson the third Business Day preceding the Change of Control Payment Date; (6)that the Holder will be entitled to withdraw its election if the Companyreceives, not later than the close of business on the third Business Daypreceding the Change of Control Payment Date, a telegram, telex, facsimiletransmission or letter setting forth the name of the Holder, the principalamount tendered for repurchase, and a statement that the Holder is withdrawingits election to have the Debenture or such portion, repurchased; and (7) that theHolder, if the Debenture is being repurchased only in part, will be 

 

4

----

 

issued a newdebenture with the same terms and conditions as this Debenture in a principalamount equal in amount to the unpurchased principal amount of the Debenture.

 

(c)           On the Change of Control PaymentDate, the Company shall accept for payment this Debenture or any portion hereofproperly tendered pursuant to the Change of Control Offer.  The Company shall promptly mail to the Holderthe Change of Control Payment for this Debenture or any portion hereof.  The Company shall promptly issue a newdebenture for any unpurchased portion of this Debenture surrendered by theHolder, if any.  The Company shallannounce to all holders of Company debentures the results of the Change ofControl Offer on or as soon as practicable after the Change of Control PaymentDate.

 

(d)           The Company shall comply with therequirements of Rule 14e-1 under the Exchange Act and any other securities lawsand regulations thereunder to the extent such laws and regulations areapplicable in connection with the repurchase of this Debenture in connectionwith a Change of Control.

 

(e)           The Company’s obligations withrespect to a Change of Control Offer shall be satisfied to the extent actuallyperformed by a third party in the manner, at the times and otherwise incompliance with the terms of this Section 3. Any portion of this Debenture purchased by such third party as contemplatedby the preceding sentence shall, notwithstanding the foregoing provisions ofthis Section 3, remain outstanding and continue to accrue interest on and afterthe Change of Control Payment Date.

 

(f)            Notwithstanding the foregoing, theCompany shall not be required to make a Change of Control Offer upon a Changeof Control if a third party makes the Change of Control Offer in the manner, atthe times and otherwise in compliance with the requirements set forth in thisDebenture applicable to a Change of Control Offer made by the Company, and purchasesall Debentures validly tendered and not withdrawn under such Change of ControlOffer.

 

Section 3.4             Restricted Payments.

 

## (a)           TheCompany shall not, directly or indirectly, (i) declare or pay any dividend ormake any other distribution in respect of shares of the Company’s CapitalStock, or any warrants, options or other rights to acquire shares of suchCapital Stock, and (ii) make any payment (except to the extent made withQualified Capital Stock) on account of the purchase, redemption or other acquisitionor retirement for value of any of the Company’s Capital Stock, or any warrants,options or other rights to acquire shares of such Capital Stock (each of theforegoing actions set forth in clauses (i) and (ii) being referred to as a “**Restricted Payment**”), if at the time ofsuch Restricted Payment or immediately after giving effect thereto, (1) aDefault Event shall have occurred and be continuing or (2) the aggregate amountof Restricted Payments (including such proposed Restricted Payment) made subsequentto the Preferred Stock Issue Date (the amount expended for such purposes, ifother than in cash, being the fair market value of such property) shall exceedthe sum of (without duplication): (x) 50% of the cumulative Consolidated NetIncome (taken as one accounting period) of the Company accrued during theperiod commencing on the first day of the first full fiscal quarter in whichthe Preferred Stock Issue Date occurs to and including the last day of the mostrecent fiscal period for which internal financial statements are available (orif cumulative Consolidated Net Income shall be a deficit, minus 100% of suchdeficit); plus (y) 100% of the aggregate Net Cash Proceeds received by theCompany from any Person (other than a Subsidiary of the Company) from a CapitalContribution or from the sale subsequent to the Preferred Stock Issue Date ofQualified Capital Stock of the Company. For purposes of this Section 3.4, the term “**Restricted Payment**” does not include (A) any dividend,distribution or other payment on or with respect to any Capital Stock of theCompany, or any warrants, options or rights to acquire shares of such 

 

5

----

 

## CapitalStock, to the extent payable solely in shares of Qualified Capital Stock, (B)any dividend, distribution or other payment to the Company, or to anySubsidiary of the Company, by the Company or any of its Subsidiaries; (C) thepayment of the Merger Consideration (as defined in the Merger Agreement); or(D) any dividend, distribution or other payment with respect to the settlementof the consolidated shareholder class actions titled “In Re FTD.COM, Inc.Shareholders Litigation.”

##  

## (b)           Notwithstanding theforegoing, the provisions set forth in the immediately preceding paragraph do notprohibit:  (1) the payment of anydividend within 60 days after the date of declaration of such dividend if thedividend would have been permitted on the date of declaration; (2) if noDefault Event shall have occurred and be continuing, Restricted Payments whichdo not exceed $15,000,000 in the aggregate from and after the Preferred StockIssue Date; (3) for the avoidance of doubt, payments pursuant to the ManagementAgreement; (4) if no Default Event shall have occurred and be continuing,repurchases (and payments of cash dividends to any Parent Entity forrepurchases) of Capital Stock from FTD-member florists or distributors (ortheir heirs or estates), or employees or directors (or their heirs or estates)of, the Company, any Parent Entity or any Subsidiary of the Company, upon thedeath, disability or termination of employment (or termination of membership ordistribution, in the case of a FTD-member florist or distributor); provided,that such repurchases are made with the proceeds of such dividends to anyParent Entity within three Business Days of the payment of such dividends, andpayments of cash, or dividends, distributions or advances to any Parent Entityto make payments of cash, in lieu of the issuance of fractional shares upon theexercise of warrants or upon the conversion or exchange of, or issuance ofCapital Stock in lieu of cash dividends on, any Capital Stock of any ParentEntity, in an aggregate amount not to exceed $7,500,000 after the PreferredStock Issue Date; (5) if no Default Event shall have occurred and becontinuing, the declaration and payment of dividends to holders of any class orseries of Disqualified Capital Stock issued after the Preferred Stock IssueDate; (6) payments of amounts equal to any insurance proceeds received by FTD,Inc. in respect of the settlement of the consolidated shareholder class actionstitled “In Re FTD.COM, Inc. Shareholders Litigation”; (7) any dividend,distribution or other payments by any of the Company’s Subsidiaries on itsCapital Stock, or warrants, options or other rights to acquire such CapitalStock, that is paid *pro rata* toall holders of such Capital Stock, warrants, options or rights, as applicable;(8) (i) any legal defeasance, redemption, retirement, repurchase or otheracquisition of Capital Stock of the Company with the Net Cash Proceeds receivedby the Company made within 60 days of the sale of its Qualified Capital Stock(other than to a Subsidiary), or (ii) any issuance of Qualified Capital Stockof the Company in exchange for, or the proceeds of which are used to purchase,any Capital Stock of the Company; (9) the repurchase of Capital Stock, orwarrants, options or other rights to acquire such Capital Stock, deemed tooccur upon the exercise of stock options, warrants or other convertiblesecurities to the extent such Capital Stock, warrants, options or other rightsrepresent a portion of the exercise price thereof; (10) the payment ofdividends in cash on (or the purchase, redemption, exchange or otheracquisition or retirement of) shares of the Junior Preferred Stock to theextent not prohibited by this Debenture; and (11) payments to a Parent Entity(or a subsidiary of a Parent Entity), (i) to enable the Parent Entity to payfederal, state or local tax liabilities (any such payments to a Parent Entity,a “**Tax Payment**”), not to exceedthe amount of any tax liabilities that would be otherwise payable by theCompany and its United States subsidiaries to the appropriate taxingauthorities to the extent that the Parent Entity has an obligation to pay suchtax liabilities relating to the operations, assets, or capital of the Companyor its United States subsidiaries; provided, that (x) notwithstandingthe foregoing, in the case of determining the amount of a Tax Payment that ispermitted to be paid by the Company and any of its United States subsidiariesin respect of their consolidated Federal income tax liability, or consolidated,combined, unitary or group, state or local income tax liability, such paymentshall be determined assuming that the Company is the parent company of anaffiliated group (the “**Company AffiliatedGroup**”) filing a consolidated federal income tax return orconsolidated, combined, unitary, or group, state or local income tax return,and that the Parent Entity and each such United States subsidiary is a memberof the Company Affiliated Group and (y) any Tax 

6

----

 

## Paymentsshall either be used by the Parent Entity to pay such tax liabilities within 90days of the Parent Entity’s (or a subsidiary of a Parent Entity) receipt ofsuch payment or refunded to the payee, and (ii) in an aggregate amount not toexceed (A) prior to an initial public offering by any Parent Entity, $500,000per year and (B) after an initial public offering by any Parent Entity,$2,000,000 per year, in each case in order to pay legal and accountingexpenses, payroll and other compensation expenses in the ordinary course ofbusiness, filing and listing fees and other corporate overhead expenses in theordinary course of business (for purposes of this clause (11), “tax liabilities”shall include any penalties and interest related to a tax liability.

##  

In determiningthe aggregate amount of Restricted Payments made subsequent to the PreferredStock Issue Date in accordance with clause (2) of Section 3.4(a) hereof,amounts distributed pursuant to clauses (1), (5)  and (10) of this Section 3.4(b) hereof shall be included in suchcalculation, and amounts distributed pursuant to clauses (2), (3), (4), (6),(7), (8), (9) and (11) shall not be included in such calculation.  For purposes of this Section 3.4, the amountof any Restricted Payment made or returned, if other than in cash, shall be thefair market value thereof, as determined in the good faith reasonable judgmentof the Board of Directors, unless stated otherwise, at the time made orreturned, as applicable.

 

Section 3.5             Reports.   The Company shall furnish to the Holder (atsuch Holder’s address as set forth below): (a) as soon as available, but in any event within 105 days after the endof each fiscal year of the Company, a copy of the audited consolidated balancesheet of the Company and its consolidated Subsidiaries as at the end of suchyear and the related audited consolidated statements of income and of cashflows for such year, reported on without any qualification arising out of thescope of the audit, by the Company’s independent certified public accountants;and (b) as soon as available, but in any event not later than 60 days after theend of each of the first three quarterly periods of each fiscal year of theCompany, the unaudited consolidated balance sheet of the Company and itsconsolidated Subsidiaries as at the end of such quarter and the relatedunaudited consolidated statements of income and of cash flows for such quarterand the portion of the fiscal year through the end of such quarter, certifiedby the Chief Executive Officer, the President, or the Chief Financial Officerof the Company as being fairly stated in all material respects (subject tonormal year-end audit adjustments).  Allsuch financial statements shall be complete and correct in all materialrespects and shall be prepared in reasonable detail and in accordance with GAAPapplied (except as approved by such accountants or officer, as the case may be,and disclosed in reasonable detail therein) consistently throughout the periodsreflected therein and with prior periods.

 

Section 3.6             InvestmentCompany. The Company will not, and will not permit any of its Subsidiaries to, berequired to register as an “investment company” (as that term is defined in theInvestment Company Act of 1940, as amended), or otherwise become subject toregistration under the Investment Company Act.

 

Section 3.7             No Senior Subordinated Debt.  The Company will not incur, create, issue,assume, guarantee or otherwise become liable for any Indebtedness that issubordinate or junior in right of payment to any Senior Debt of the Company andsenior in any respect in right of payment to this Debenture.

 

Section 3.8             Waiverof Usury, Stay or Extension Laws.  The Company covenants (to the extent that itmay lawfully do so) that it will not at any time insist upon, plead, or in anymanner whatsoever claim or take the benefit or advantage of, any usury, stay orextension law wherever enacted, now or at any time hereafter in force, whichmay affect the covenants or the performance of this Debenture, and the Company(to the extent that it may lawfully do so) hereby expressly waives all benefit 

 

7

----

 

or advantage ofany such law and covenants that it will not hinder, delay or impede theexecution of any power herein granted to the Holder, but will suffer and permitthe execution of every such power as though no such law had been enacted.

 

Section 3.9             Taxes.  The Company will pay, and will cause each ofits Subsidiaries to pay, prior to delinquency, all material taxes, assessments,and governmental levies except such as are contested in good faith and byappropriate proceedings or where the failure to effect such payment is notadverse in any material respect to the Holder.

 

Section 3.10           CorporateExistence. Subject to Section 3.1 hereof, the Company shall do or cause to be doneall things necessary to preserve and keep in full force and effect:

 

(a)           itscorporate existence, and the corporate, partnership or other existence of eachof its Subsidiaries, in accordance with the respective organizational documents(as the same may be amended from time to time) of the Company or any suchSubsidiary; and

 

(b)           the rights (charter and statutory),licenses and franchises of the Company and its Subsidiaries; provided, however,that the Company shall not be required to preserve any such right, license orfranchise, or the corporate, partnership or other existence of any of itsSubsidiaries, if the Board of Directors of the Company shall determine that thepreservation thereof is no longer desirable in the conduct of the business ofthe Company and its Subsidiaries, taken as a whole, and that the loss thereofis not adverse in any material respect to the Holder.

 

**ARTICLE IV.**

** **

**REDEMPTION OF DEBENTURES**

** **

Section 4.1             OptionalRedemption.

 
| (a) |   | (i) | The Company may (subject to contractual and other restrictions with  respect thereto, including restrictions imposed by the Bank Facility), at the  option of the Company, redeem at any time or from time to time on or after  February 24, 2009, from any source of funds legally available therefor, in  whole or in part, in the manner provided in Section 4.2 hereof, this  Debenture or any portion hereof, at a redemption price equal to the following  percentages of the aggregate principal amount proposed to be redeemed by the  Company plus, without duplication, all accrued and unpaid interest on the  Debenture, if any, to the Redemption Date, in each case beginning on February  24 of the year indicated: |
|-----|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| **Year**            | ** ** | **Redemption Price** | ** ** |
|---------------------|------------|----------------------|------------|
|                |       |                 |       |
| 2009                |       | 106                  | %          |
| 2010                |       | 104                  | %          |
| 2011                |       | 102                  | %          |
| 2012 and thereafter |       | 100                  | %          |

 
|   |   |   | provided, however, that no optional  redemption pursuant to this Section 4.1(a)(i) shall be authorized or made at  any time when the Company is making or required to make within the next 30  days, or purchasing this |
|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

8

----

 
|   |   |   | Debenture or any portion hereof, under, a Change of Control offer in  accordance with the provisions of Section 3.3 hereof.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (ii)   | In the event of one or more public offerings of Common Stock of the  Company in an aggregate offering amount of at least fifty million dollars  ($50,000,000) or as a result of which at least fifteen percent (15%) of the  Common Stock of the Company (after giving effect to such offerings) is  publicly traded (the “**Public Offering**”),  the Company may (subject to contractual and other restrictions with respect  thereto, including restrictions imposed by the Bank Facility), at the option  of the Company, redeem at any time or from time to time prior to February 24,  2007, from the net cash proceeds of the Public Offering, in the manner  provided in Section 4.2 hereof, this Debenture, at a redemption price equal  to 107.75% of the aggregate principal amount proposed to be redeemed by the  Company plus, without duplication, all accrued and unpaid interest on the  Debenture, if any, to the Redemption Date; provided, that, the Company  shall redeem only up to 35% in principal amount of the then Outstanding  Debentures.                                                                                                                                                          |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (iii)  | Notwithstanding Section 4.1(a)(i) above, in the event FTD, Inc.  receives any amounts, payments or proceeds (including any damages, punitive  damages, interests and costs) from its insurance carriers (the “**Insurance Award**”) in connection with the  settlement of the consolidated shareholder class actions titled “In Re  FTD.COM, Inc. Shareholders Litigation” in the Court of Chancery for New  Castle County in Wilmington, Delaware, or the resolution of FTD, Inc.’s  litigation with such insurance carriers arising out of such carriers’ denial  of coverage for such shareholder class actions, the Company may (subject to  contractual and other restrictions with respect thereto, including restrictions  imposed by the Bank Facility), at the option of the Company, redeem at any  time or from time to time, with funds equal to the amount of net proceeds of  the Insurance Award, in the manner provided in Section 4.2 hereof, this  Debenture, at a redemption price equal to 100% of the aggregate principal  amount proposed to be redeemed by the Company plus, without duplication, all  accrued and unpaid interest on the Debenture, if any, to the Redemption Date. |

 

(b)           In the event of a redemption pursuantto Section 4.1(a)(i), (ii) or (iii) hereof of only aportion of the total aggregate principal amount outstanding of the OutstandingDebentures, the Company shall effect such redemption as it determines *pro rata* according to the principal amountoutstanding of debentures held by each Holder of Outstanding Debentures.

 

Section 4.2             Procedures for Redemption.

 

(a)           At least 30 days and not more than 60days prior to the date fixed for any redemption of this Debenture, writtennotice (the “**Redemption Notice**”)shall be given by first-class mail, postage prepaid, to the Holder at suchHolder’s address as set forth below.  TheRedemption Notice shall state:  (1) theredemption price; (2) whether all or less than all the outstanding principalamount of this Debenture is to be redeemed and the amount being redeemed; (3)the date fixed for redemption; (4) that the Holder is to surrender theDebenture to the Company, at the place or places where the Debenture 

 

9

----

 

is to be surrendered for redemption, in the manner and at the placedesignated; (5) the Section of this Debenture pursuant to which the Debenturecalled for redemption is being redeemed; and (6) that interest on the portionof the Debenture to be redeemed shall cease to accrue on such Redemption Dateunless the Company defaults in the payment in full of the redemptionprice.  A Redemption Notice may not beconditional.

 

(b)           The Holder shall surrender to theCompany this Debenture to be redeemed, duly endorsed, in the manner and at theplace designated in the Redemption Notice, and on the Redemption Date the fullredemption price for this Debenture shall be payable in cash to the Personwhose name appears on this Debenture as the holder thereof, and this Debentureshall be canceled and retired.  In theevent that less than all of the principal amountoutstanding represented by this Debenture is redeemed, a new debenture, withthe same terms and conditions as this Debenture, shall be issued representingthe unredeemed portion.

 

(c)           Unless the Company defaults in thepayment in full of the redemption price, interest on the portion of thisDebenture called for redemption shall cease to accrue on the Redemption Date,and the Holder shall cease to have any further rights with respect thereto onthe Redemption Date, other than the right to receive the redemption price,without interest.

 

**ARTICLE V.**

** **

**SUBORDINATION**

** **

Section 5.1             Agreementto Subordinate. The Company agrees, and the Holder by accepting this Debenture agrees,that the Indebtedness evidenced by this Debenture and all Obligations inrespect of this Debenture are subordinated in right of payment, to the extentand in the manner provided in this Article 5, to the prior payment in full incash or Cash Equivalents of all Senior Debt (whether outstanding on the datehereof or hereafter created, incurred, assumed or guaranteed), and that thesubordination is for the benefit of the holders of Senior Debt.

 

Section 5.2             Liquidation;Dissolution; Bankruptcy.   Upon any distribution of assets of theCompany upon any dissolution, winding up, total or partial liquidation orreorganization of the Company, whether voluntary or involuntary, in bankruptcy,insolvency, receivership or similar proceeding or upon assignment for thebenefit of creditors or any marshaling of the Company’s assets and liabilities(1) the holders of all Senior Debt of the Company shall first be entitled toreceive payment in full in cash or Cash Equivalents of all Senior Debt(including Post-Commencement Interest and Expense Claims) before the Holder isentitled to receive any payment on account of the principal of and interest onthis Debenture or any Obligation in respect to this Debenture (other thanJunior Securities); and (2) any payment or distribution of assets of theCompany of any kind or character from any source, whether in cash, property orsecurities (other than Junior Securities), to which the Holder would beentitled (by set-off or otherwise), except for this Article 5, shall be paid bythe liquidating trustee or agent or other Person making such a payment ordistribution directly to the holders of such Senior Debt or theirrepresentatives to the extent necessary to make payment in full of all suchSenior Debt (including Post-Commencement Interest and Expense Claims) remainingunpaid, after giving effect to any concurrent payment or distribution to theholders of Senior Debt.

 

Section 5.3             Defaulton Senior Debt.

 

(a)           The Company may not make any paymentor distribution to the Holder in respect of Obligations with respect to thisDebenture and may not acquire from the Holder this Debenture for 

 

10

----

 

cash or property(other than Junior Securities) until all principal and other Obligations withrespect to the Senior Debt have been paid in full if:

 

(i)            payment default on Senior Debtoccurs and is continuing beyond any applicable grace period in the agreement,indenture or other document governing such Senior Debt; or

 

(ii)           any otherdefault occurs and is continuing on any series of Senior Debt that permitsholders of that series of Senior Debt to accelerate its maturity and theCompany receives a notice of such default (a “**PaymentBlockage Notice**”) from the holders of any Senior Debt.  If the Company receives any such PaymentBlockage Notice, no subsequent Payment Blockage Notice will be effective forpurposes of this Section unless and until (A) at least 360 days have elapsedsince the effectiveness of the immediately prior Payment Blockage Notice and(B) all scheduled payments of principal and interest on this Debenture thathave come due have been paid in full in cash.

 

No nonpaymentdefault that existed or was continuing on the date of delivery of any PaymentBlockage Notice to the Company may be, or may be made, the basis for asubsequent Payment Blockage Notice unless such default has been waived for aperiod of not less than 90 days.

 

(b)           The Company may and will resumepayments on and distributions in respect of this Debenture and may acquire thisDebenture upon the earlier of:

 

(i)            in the caseof a payment default, upon the date upon which such default is cured or waived,or

 

(ii)           in the case of a nonpayment default,upon the earlier of the date on which such nonpayment default is cured orwaived or 179 days after the date on which the applicable Payment BlockageNotice is received, unless the maturity of any Senior Debt has beenaccelerated, if this Article 5 otherwise permits the payment, distribution oracquisition at the time of such payment or acquisition.

 

Section 5.4             Acceleration.  If payment of this Debenture is acceleratedbecause of an Event of Default, the Company will promptly notify the holders ofSenior Debt of the acceleration.

 

Section 5.5             Subrogation.  After all Senior Debt is paid in full in cashor Cash Equivalents and until this Debenture is paid in full, the Holder shallbe subrogated (equally and ratably with all other Indebtedness *pari passu* with this Debenture) to therights of holders of Senior Debt to receive distributions applicable to SeniorDebt to the extent that distributions otherwise payable to the Holder has beenapplied to the payment of Senior Debt.  Adistribution made under this Article 5 to holders of Senior Debt that otherwisewould have been made to the Holder is not, as between the Company and theHolder, a payment by the Company on this Debenture.  No holder of Senior Debt shall be obligatedto create, warrant, preserve or protect any such subrogation right or shallsuffer any loss or diminution of its rights hereunder if for any reason(including the lack of enforceability or disallowance of any Post-CommencementInterest and Expense Claim) such right of subrogation is not available to anyHolder.

 

Section 5.6             Relative Rights.  This Article 5 defines the relative rights ofthe Holder and holders of Senior Debt. Nothing in this Debenture shall:

 

(a)           impair, asbetween the Company and the Holder, the obligation of the Company, which isabsolute and unconditional, to pay principal of and interest on this Debenturein accordance with its terms;

 

11

----

 

(b)           affect therelative rights of the Holder and creditors of the Company other than theirrights in relation to the holders of Senior Debt; or

 

(c)           prevent theHolder from exercising its available remedies upon a Default or Event ofDefault, subject to the rights of the holders of Senior Debt to receivedistributions and payments otherwise payable to the Holder.

 

If the Companyfails because of this Article 5 to pay principal of or interest on a Debentureon the due date, the failure is still a Default or Event of Default.

 

Section 5.7             Subordination May Not BeImpaired by Company.

 

(a)           No right of any holder of Senior Debtto enforce the subordination of the Indebtedness evidenced by this Debentureshall be impaired by any act or failure to act by the Company or any Holder orby the failure of the Company or any holder of Senior Debt to comply with thisDebenture.

 

(b)           Without in any way limiting thegenerality of the foregoing paragraph, the holders of the Senior Debt may, atany time and from time to time, without the consent of or notice to the Holder,without incurring responsibility to the Holder and without impairing orreleasing the subordination provided in this Article 5 or the Obligationshereunder of the Holder to the holders of Senior Debt, do any one or more ofthe following:  (i) change the manner,place or terms of payment or extend the time or payment of, or renew or alter,Senior Debt or any instrument evidencing the same or any agreement under whichSenior Debt is outstanding; (ii) sell, exchange, release or otherwise deal withany property pledged, mortgaged or otherwise securing Senior Debt; (iii)release any Person in any manner for the collection of Senior Debt; and (iv)exercise or refrain from exercising any rights against the Company or any otherPerson; provided, however, that in no event shall any suchactions limit the right of the Holder to take any action to accelerate thematurity of the Debentures in accordance with the provisions set forth inSection 5.2 or to pursue any rights or remedies against the Company under thisDebenture or under applicable laws if the taking of such action does nototherwise violate the terms of this Article 5.

 

**ARTICLE VI.**

** **

**DEFINITIONS**

** **

“**Affiliate**” of any specified Person meansany other Person directly or indirectly controlling or controlled by or underdirect or indirect common control with such specified Person.  For purposes of this definition, the term “control”(including, with correlative meanings, the terms “controlling,” “controlled by”and “under common control with”), as used with respect to any Person, shallmean the possession, directly or indirectly, of the power to direct or causethe direction of the management or policies of such Person, directly or throughone or more intermediaries, whether through the ownership of voting securities,by contract, or otherwise.

 

“**Asset Sale**” means, in one or a series ofrelated transactions, the conveyance, sale, transfer, assignment or otherdisposal by the Company or any of its Subsidiaries of, directly or indirectly,any of their property, business or assets, including by merger or consolidation(in the case of one of the Company’s Subsidiaries), and including any sale orother transfer or issuance of any Capital Stock, or warrants, options or otherrights to acquire such Capital Stock, of any of the Company’s Subsidiaries,whether by the Company or one of the Company’s Subsidiaries or through theissuance, sale or transfer of 

 

12

----

 

Capital Stock, or warrants, options or other rights to acquire suchCapital Stock, by one of the Company’s Subsidiaries and including any sale andleaseback transaction, other than in any such case to the Company or anotherSubsidiary.

 

“**Bank Facility**”**shall mean that certain Credit Agreement, dated as of theClosing Date (as modified and supplemented from time to time), by and amongFTD, Inc., a Delaware corporation, the Lenders from time to time parties thereto,UBS Securities LLC, as Syndication Agent, Wells Fargo Bank, N.A., asDocumentation Agent and Credit Suisse First Boston, acting through its CaymanIslands Branch, as Administrative Agent.

 

“**Beneficial Owner**” or “**beneficial owner**” for purposes of the definitionof Change of Control and Affiliate has the meaning attributed to it in Rules13d-3 and 13d-5 under the Exchange Act (as in effect on the Exchange Date),whether or not applicable.

 

“**Business Day**” means any day other than aSaturday, a Sunday or a day on which banking institutions in the City of NewYork are authorized by law, regulation or executive order to remain closed.

 

“**Capital Contribution**” means any contribution to the equityof the Company subsequent to the Preferred Stock Issuance Date from a direct orindirect parent of the Company for which no consideration (other than theissuance of Qualified Capital Stock) is given.

 

“**Capital Stock**” means (i) with respect toany Person that is a corporation, any and all shares, interests, participationsor other equivalents (however designated and whether or not voting) ofcorporate stock, including each class of Common Stock and Preferred Stock ofsuch Person and (ii) with respect to any Person that is not a corporation, anyand all partnership or other equity or ownership interests of such Person.

 

“**Cash Equivalents**” means:

 

(a)           securities issued or directly andfully guaranteed or insured by the United States of America or any agency orinstrumentality thereof (provided, that the full faith and credit of theUnited States of America is pledged in support thereof), maturing within oneyear after the date of acquisition;

 

(b)           demand deposits, time deposits andcertificates of deposit and commercial paper issued by the parent corporationof any domestic commercial bank of recognized standing having capital andsurplus in excess of $500,000,000, maturing within one year after the date ofacquisition;

 

(c)           commercialpaper issued by others rated at least A-2 or the equivalent thereof by S&Por at least P-2 or the equivalent thereof by Moody’s, maturing within one yearafter the date of acquisition;

 

(d)           repurchase obligations having termsnot more than seven days, with institutions meeting the criteria set forth inclause (b) above, for direct obligations issued by or fully guaranteed by theUnited States of America (provided, that the full faith and credit ofthe United States of America is pledged in support thereof), having, on thedate of purchase thereof, a fair market value of at least 100% of the amount ofrepurchase obligations;

 

(e)           interests inmoney market or mutual funds all of whose assets are invested in assets orsecurities of the type described in clauses (a) through (d) above;

 

13

----

 

(f)            direct investments in tax exemptobligations of any state of the United States of America, or any municipalityof any such state, in each case rated “AA” or better by S&P, “Aa2” orbetter by Moody’s or an equivalent rating by any other credit rating agency ofrecognized national standing; provided, that such obligations maturewithin six months from the date of acquisition thereof; or

 

(g)           investmentsin mutual funds, 95% of more of the assets of which are invested in obligationsof the types described in clauses (a) - (f) above.

 

“**Change of Control**” means (1) prior toconsummation of the first Public Offering after the Preferred Stock Issue Date,the Permitted Holders shall cease to beneficially own, in the aggregate, amajority of the voting power of the Voting Equity Interests of the Company, or(2) following the consummation of the first Public Offering after the PreferredStock Issue Date, (A) any merger or consolidation of the Company with or intoany Person or any sale, transfer or other conveyance, whether direct orindirect, of all or substantially all of the Company’s assets, on aconsolidated basis, in one transaction or a series of related transactions, if,immediately after giving effect to such transaction(s), any “person” (includingany group that is deemed to be a “person”) (other than the Permitted Holders)is or becomes the beneficial owner of more than 40% of the aggregate votingpower of the Voting Equity Interests of the transferee(s) or surviving entityor entities and the Permitted Holders, in the aggregate, beneficially own,directly or indirectly, less voting power than such person, (B) any “person”(including any group that is deemed to be a “person”) (other than the PermittedHolders) is or becomes the beneficial owner of more than 40% of the aggregatevoting power of the Voting Equity Interests of the Company and the PermittedHolders, in the aggregate, beneficially own, directly or indirectly, lessvoting power than such person, (C) the Continuing Directors cease for anyreason to constitute a majority of the Company’s Board of Directors then inoffice, or (D) the Company adopts a plan of liquidation.  As used in this definition, “person”(including any group that is deemed to be a “person”) has the meaning given bySections 13(d) of the Exchange Act, whether or not applicable.  “Continuing Director” means during any periodof 12 consecutive months after the Preferred Stock Issue Date, individuals whoat the beginning of any such 12-month period constituted the Board of Directors(together with any new directors whose election by such Board of Directors orwhose nomination for election by the shareholders of the Company was approvedby a vote of a majority of the directors then still in office who were eitherdirectors at the beginning of such period or whose election or nomination forelection was previously so approved, including new directors designated in orprovided for in an agreement regarding the merger, consolidation or sale,transfer or other conveyance, of all or substantially all of the assets of theCompany or any Parent Entity, if such agreement was approved by a vote of suchmajority of directors).

 

“**Change of Control Offer**” has the meaningset forth in Section 3.3(a).

 

“**Change of Control Payment**” has the meaningset forth in Section 3.3(a).

 

“**Change of Control Payment Date**” has themeaning set forth in Section 3.3(b).

 

“**Closing Date**” has the meaning attributed tosuch term in the Merger Agreement.

 

“**Common Stock**” means, of any Person, any andall shares, interests or other participations in, and other equivalents(however designated and whether voting or non-voting) of such Person’s commonstock, and includes, without limitation, all series and classes of such commonstock.

 

“**Company**” has the meaning set forth in thePreamble.

 

14

----

 

“**Consolidated Net Income**” means, withrespect to any Person, for any period, the aggregate net income (or loss) ofsuch Person and its Subsidiaries (before preferred stock dividends andotherwise determined on a consolidated basis in accordance with GAAP) for suchperiod; provided,**that thereshall be excluded therefrom (only to the extent included in computing such netincome (or loss) and without duplication): (a) any net after-tax gain, loss, charge or expense which is eitherextraordinary (as determined in accordance with GAAP) or is either unusual ornonrecurring (including any restructuring charges and any gain, loss, charge orexpense from the sale or other disposition of assets outside the ordinary courseof business or from the issuance or sale of any securities) as determined ingood faith by the Company, it being understood and agreed that Item 10(e) ofRegulation S-K under the Securities Act shall not constitute a limitation onany such determination, (b) the net income, if positive, of any Person, otherthan a Subsidiary, in which such Person or any of its Subsidiaries has aninterest, except to the extent of the amount of any dividends or distributionsactually paid in cash to such Person or a Subsidiary of such Person during suchperiod, but in any case not in excess of such Person’s pro rata share of suchPerson’s net income for such period, (c) the net income, if positive, of any ofsuch Person’s Subsidiaries to the extent that the declaration or payment ofdividends or similar distributions is not at the time permitted by operation ofthe terms of its charter or bylaws or any other agreement, instrument,judgment, decree, order, statute, rule or governmental regulation applicable tosuch Subsidiary, (d) the cumulative effect of a change in accountingprinciples, (e) any non-cash compensation expense realized from grants of stockappreciation or similar rights, stock options or other rights to officers,directors and employees of the Company, (f) amounts resulting from currencyfluctuations, and (g) any goodwill impairment charges pursuant to FinancialAccounting Standards Board Statement No. 142.

 

“**Debenture**” means this 14% Series A Junior Subordinated Debenture due 2024.

 

“**Default**” means any event which is, or afternotice or lapse of time or both would become, an Event of Default.

 

“**Disqualified Capital Stock**” means thatportion of any Capital Stock which, by its terms (or by the terms of anysecurity into which it is convertible or for which it is exchangeable), or uponthe happening of any event, matures or is mandatorily redeemable, pursuant to asinking fund obligation or otherwise, or is redeemable at the sole option ofthe holder thereof, in any case, on or prior to August 24, 2024, (ii) any preferredstock of the Company that is issued for cash and is so designated asDisqualified Capital Stock, pursuant to an officer’s certificate on theissuance date thereof, and (iii) any Capital Stock, or warrants, options orrights to acquire shares of Capital Stock, of any Subsidiary of such Personother than common equity with no preferences, privileges, and no redemption orrepayment provisions].  Notwithstandingthe foregoing, any Capital Stock that would constitute Disqualified CapitalStock solely because the holders of the Capital Stock have the right to requirethe Company to repurchase such Capital Stock upon the occurrence of a change ofcontrol shall not constitute Disqualified Capital Stock if the terms of suchCapital Stock provide that the Company may not repurchase or redeem any suchCapital Stock pursuant to such provisions prior to the Company’s purchase ofthe Debentures pursuant to Section 3.3.

 

“**Event of Default**” has the meaning set forthin Section 2.1.

 

“**Exchange Act**” means the Securities ExchangeAct of 1934, as amended, and the rules and regulations thereunder.

 

“**Exchange Date**” means the date fixed by theCompany at its option upon which the Company’s Senior Preferred Stock wasexchanged for an aggregate principal amount of Debentures equal to theliquidation value of the Senior Preferred Stock so exchanged.

 

15

----

 

“**Excluded Person**” means GEI and its RelatedParties.

 

“**fair****market value**”**means,with respect to any asset or property, the price which could be negotiated inan arm’s-length free market transaction, for cash, between a willing seller anda willing and able buyer, neither of whom is under undue pressure or compulsionto complete the transaction.  Fair marketvalue shall be determined by the Board of Directors of the Company actingreasonably and in good faith.

 

“**GAAP**” means United States generallyaccepted accounting principles set forth in the opinions and pronouncements ofthe Accounting Principles Board of the American Institute of Certified PublicAccountants and statements and pronouncements of the Financial AccountingStandards Board or such other statements by such other entity as approved by asignificant segment of the accounting profession in the United States.

 

“**GEI**” means Green Equity Investors IV, L.P.,a Delaware limited partnership.

 

“**Holder**” has the meaning set forth in thePreamble.

 

“**Indebtedness**” of any Person means, withoutduplication, (a) all liabilities and obligations, contingent or otherwise, ofsuch any Person, to the extent such liabilities and obligations would appear asa liability upon the consolidated balance sheet of such Person in accordancewith GAAP, (i) in respect of the principal amount of borrowed money (whether ornot the recourse of the lender is to the whole of the assets of such Person oronly to a portion thereof), (ii) evidenced by bonds, notes, debentures orsimilar instruments, (iii) representing the balance deferred and unpaid of thepurchase price of any property or services, except those incurred in theordinary course of its business that would constitute ordinarily a tradepayable to trade creditors; (b) all liabilities and obligations, contingent orotherwise, of such Person (i) evidenced by bankers’ acceptances or similarinstruments issued or accepted by banks, (ii) relating to any capitalized leaseobligation, or (iii) evidenced by a letter of credit or a reimbursementobligation of such Person with respect to any letter of credit; (c) all netobligations of such Person under Interest Swap and Hedging Obligations; (d) allliabilities and obligations of others of the kind described in the precedingclauses (a), (b) or (c) that such Person has guaranteed or that is otherwiseits legal liability or which are secured by one or more liens on any assets orproperty of such Person; (e) any and all deferrals, renewals, extensions,refinancing and refundings (whether direct or indirect) of, or amendments,modifications or supplements to, any liability of the kind described in any ofthe preceding clauses (a), (b), (c) or (d), or this clause (e), whether or notbetween or among the same parties; and (f) all Disqualified Capital Stock ofsuch Person (measured at the greater of its voluntary or involuntary maximumfixed repurchase price plus accrued and unpaid dividends).  For purposes hereof, the “maximum fixedrepurchase price” of any Disqualified Capital Stock which does not have a fixedrepurchase price shall be calculated in accordance with the terms of suchDisqualified Capital Stock as if such Disqualified Capital Stock were purchasedon any date on which Indebtedness shall be required to be determined pursuantto the Indenture, and if such price is based upon, or measured by, the fairmarket value of such Disqualified Capital Stock, such fair market value to bedetermined in good faith by the board of directors of the issuer (or managinggeneral partner of the issuer) of such Disqualified Capital Stock.  The amount of any Indebtedness outstanding asof any date shall be (1) the accreted value thereof, in the case of anyIndebtedness issued with original issue discount and (2) the principal amountthereof in the case of any other Indebtedness.

 

“**Indenture**” means thatcertain Indenture dated as of February 6, 2004 (as modified and supplementedfrom time to time) by and between Nectar Merger Corporation (a wholly-ownedsubsidiary 

 

16

----

 

of the Company which was merged with and intoFTD, Inc.) and U.S. Bank National Association, astrustee governing the $175 million 7.75% Senior Subordinated Notes due 2014.

 

“**Insurance Award**” has the meaning set forthin Section 4.1(a)(iii) hereof.

 

“**Interest Payment Date**” means each January 1and July 1 commencing the earlier of the first January 1 or July 1 immediatelyfollowing the Exchange Date.

 

“**Interest Swap and Hedging Obligation**” meansany obligation of any Person pursuant to any interest rate swap agreement,interest rate cap agreement, interest rate collar agreement, interest rateexchange agreement, currency exchange agreement, commodity hedging agreement orany other agreement or arrangement designed to protect against fluctuations ininterest rates, currency values or commodity prices and not for speculativepurposes, including, without limitation, any arrangement whereby, directly orindirectly, such Person is entitled to receive from time to time periodicpayments calculated by applying either a fixed or floating rate of interest ona stated notional amount in exchange for periodic payments made by such Personcalculated by applying a fixed or floating rate of interest on the samenotional amount.

 

“**Junior Preferred Stock**” means the Company’s12% Junior Redeemable Exchangeable Cumulative Preferred Stock.

 

“**Junior Securities**” means (1) the Company’sCapital Stock and all warrants, options or other rights to acquire the Company’sCapital Stock (but excluding any debt security that is convertible into, orexchangeable for, the Company’s Capital Stock) or (2) debt securities that aresubordinated to all Senior Debt (and any debt securities issued in exchange forSenior Debt) to substantially the same extent as, or to a greater extent than,this Debenture is subordinated to Senior Debt hereunder.

 

“**Management Agreement**”****means that certain management agreementamong any one or more of the Company’s Subsidiaries and Leonard Green &Partners, L.P., as such agreement may be amended from time to time.

 

“**Maturity Date**” has the meaning set forth inSection 1.2.

 

“**Merger Agreement**” means the Agreement andPlan of Merger, dated as of October 5, 2003, by and among the Company, NectarMerger Corporation and FTD, Inc.

 

“**Net CashProceeds**” means theaggregate amount of cash or Cash Equivalents received by the Company in thecase of a sale of Qualified Capital Stock or a Capital Contribution and by theCompany and its Subsidiaries in respect of an Asset Sale plus, in the case ofan issuance of Qualified Capital Stock upon any exercise, exchange orconversion of securities (including options, warrants, rights and convertibleor exchangeable debt) of the Company that were issued for cash on or after thePreferred Stock Issue Date, the amount of cash originally received by theCompany upon the issuance of such securities (including options, warrants,rights and convertible or exchangeable debt) less, in each case, the directcosts relating to such Asset Sale or issuance of Qualified Capital Stock,including, without limitation, legal, accounting, investment banking and otherprofessional fees, and brokerage and sales commissions and any relocationexpenses incurred as a result thereof incurred in connection with such AssetSale or sale of Qualified Capital Stock, and, in the case of an Asset Sale onlyless (1) the amount (estimated reasonably and in good faith by the Company) ofincome, franchise, sales and other applicable taxes required to be paid by theCompany or any of its respective Subsidiaries in connection with such AssetSale in the taxable year that such sale is consummated or in the immediatelysucceeding taxable 

 

17

----

 

year, the computation of which shall take into account the reduction intax liability resulting from any available operating losses and net operatingloss carryovers, tax credits and tax credit carry-forwards, and similar taxattributes, (2) cash payments attributable to Persons owning an interest (otherthan a lien) in the assets subject to the Asset Sale, (3) any deduction ofappropriate amounts to be provided by the Company as a reserve in accordancewith GAAP against any liability associated with the asset disposed of in suchtransaction and retained by the Company after such sale or other dispositionthereof, including, without limitation, pension and other post-employmentbenefit liabilities and liabilities related to environmental matters or againstany indemnification obligations associated with such transaction and (4) anyholdbacks with respect to indemnification obligations or purchase priceadjustments pending receipt thereof.

 

“**Parent Entity”**means aPerson that holds, directly or indirectly, Voting Equity Interests of theCompany with voting power, in the aggregate, at least equal to the voting powerof the Voting Equity Interests of the Company hold by the Permitted Holders onthe Preferred Stock Issue Date.

 

“**Obligation**” means any principal, premium orinterest payment, or monetary penalty, or damages, or purchase price due by theCompany or any Subsidiary under the terms of this Debenture.

 

“**Outstanding Debentures**” means, as of thedate of determination, all Series A JuniorSubordinated Debentures except Series A Junior Subordinated Debenturestheretofore canceled by the Company or delivered to the Company forcancellation.

 

“***pari passu***”, whenused with respect to the ranking of any Indebtedness of any Person in relationto other Indebtedness of such Person, means that each such Indebtedness (a)either (i) is not subordinated in right of payment to any other Indebtedness ofsuch Person or (ii) is subordinate in right of payment to the same Indebtednessof such Person as is the other and is so subordinate to the same extent and (b)is not subordinate in right of payment to the other or to any Indebtedness ofsuch Person as to which the other is not so subordinate.

 

“**Payment Blockage Notice**” has the meaningset forth in Section 5.3.

 

“**Permitted Holders**”****each of Leonard Green & Partners,L.P., a Delaware limited partnership, and Green EquityInvestors IV, L.P., a Delaware limited partnership, and any of theirAffiliates.

 

“**Person**” means an individual, partnership, corporation,limited liability company, unincorporatedorganization, trust or joint venture, or a governmental agency or politicalsubdivision thereof or other entity.

 

“**Preferred Stock Issue Date**” means the firstdate on which shares of Senior Preferred Stock were originally issued by theCompany.

 

“**Post Commencement Interest and Expense Claims**”means any and all claims arising after the commencement of any bankruptcy,insolvency, receivership or similar proceeding for interest on Senior Debt atthe rate (including any applicable post-default rate) set forth in theinstrument evidencing or agreement governing such Senior Debt or for expensereimbursement or indemnification on the terms set forth in such instrument oragreement, whether or not such claims are enforceable, allowable or allowed insuch bankruptcy, insolvency, receivership or similar proceeding and even ifsuch claims are not enforceable or allowed therein.

 

18

----

 

“**Public Offering**” has the meaning set forthin Section 5(b)(ii) hereof.

 

“**Qualified Capital Stock**” means any CapitalStock that is not Disqualified Capital Stock.

 

“**Redemption Date**” with respect to thisDebenture, means the date on which this Debenture is redeemed by the Company.

 

“**Redemption Notice**” has the meaning setforth in Section 4.2(a).

 

“**Restricted Payment**” has the meaning setforth in Section 3.4.

 

 “**SEC**”**means theSecurities and Exchange Commission.

 

“**Securities Act**” means the Securities Act of1933, as amended, and the rules and regulations thereunder.

 

“**Senior Debt**” of the Company meansIndebtedness (including Post-Commencement Interest and Expense Claims) of theCompany under the Bank Facility or that, by the terms of the instrumentcreating or evidencing such Indebtedness, is expressly designated Senior Debtand made senior in right of payment to the Debenture; provided, that inno event shall Senior Debt include (a) Indebtedness to any Subsidiary of theCompany or any officer, director or employee of the Company or any Subsidiaryof the Company, (b) Indebtedness incurred in violation of the terms of thisDebenture, and (c) Disqualified Capital Stock.

 

“**Senior Preferred Stock**” means the Company’s14% Senior Redeemable Exchangeable Cumulative Preferred Stock.

 

“**Series A Junior Subordinated Debentures**”means all 14% Junior Subordinated Debentures of the Company issued on theExchange Date in exchange for Senior Preferred Stock.

 

“**Stockholders Agreement**” means the Stockholders Agreement,dated as of the Closing Date, among the Company, GEI, FTD Co-Investment LLC, aDelaware limited liability company, Robert L. Norton, Jon R. Burney, Ann M.Hofferberth, Lawrence W. Johnson, George T. Kanganis, Timothy D. Meline, DanielW. Smith, William J. Van Cleave, Carrie A. Wolfe and the other parties thereto,as the same may be amended from time to time.

 

“**Subsidiary**” with respect to any Person,means (i) any corporation of which the outstanding Capital Stock having atleast a majority of the votes entitled to be cast in the election of directorsunder ordinary circumstances shall at the time be owned, directly orindirectly, by such Person; or (ii) any other Person of which at least amajority of the voting interest under ordinary circumstances is at the time,directly or indirectly, owned by such Person.

 

“**Transfer**” has the meaning set forth inSection 7.4.

 

“**Transferee**” has the meaning set forth inSection 7.4.

 

“**Voting Equity Interests**” means CapitalStock, or warrants, options or other rights to acquire such Capital Stock,which at the time are entitled to vote in the election of, as applicable,directors, members or partners generally.

 

19

----

 

**ARTICLE VII.**

** **

**MISCELLANEOUS**

** **

Section 7.1             Section Headings.  The section headings contained in thisDebenture are for reference purposes only and shall not affect the meaning orinterpretation of this Debenture.

 

Section 7.2             Amendments.  Except as otherwise provided herein, noprovision of this Debenture may be amended, modified or waived unless theCompany shall have obtained the written agreement of the Holders of at least50% in principal amount of the then Outstanding Debentures.  Notwithstanding the previous sentence, theCompany may amend or modify this Debenture, at any time, to cure any ambiguity,defect or inconsistency.  Any amendment,modification or waiver made to this Debenture or any other Debenture shall bemade to all Outstanding Debentures and shall be deemed to have been made on allOutstanding Debentures immediately upon such amendment, modification or waiverto this Debenture.

 

Section 7.3             No Personal Liability.  A director, officer, employee, incorporatoror stockholder, of the Company, as such, will not have any liability for anyobligations of the Company under the Debenture or for any claim based on, inrespect of, or by reason of, such obligations or their creation.  Each Holder by accepting a Debenture waivesand releases all such liability.  Thewaiver and release are part of the consideration for the issuance of theDebentures.

 

Section 7.4             Assignment.   The Holder may sell, assign or otherwisetransfer (collectively, a “**Transfer**”)any or all right, title or interest in or to this Debenture to any Person (a “**Transferee**”); provided, however,that if the Transferee is not a Person described in Section i(A), Section iv orSection vi of the definition of Qualified Institutional Buyer in Rule 144Apromulgated under the Securities Act, then such Transfer to such Person shallbe subject to the consent of the Company, such consent not to be unreasonablywithheld or delayed (it being understood that, prior to the Company making anydetermination to grant or withhold such consent, a proposed Transferee shall berequired to represent and warrant to the Company as to whether or not itengages, or directly or indirectly owns an equity interest in any Person thatengages, in any line of business conducted by the Company or its Subsidiariesor any reasonably related line of business). Any attempt to Transfer any or all right, title or interest in or tothis Debenture in violation of this Section 7.4 shall be null and void.

 

Section 7.5             Governing Law.  This Debenture shall be governed by, andconstrued in accordance with, the laws of the State of New York without givingeffect to any conflicts of laws principles thereof that would otherwise requirethe application of the law of any other jurisdiction.  All actions and proceedings arising out of orrelating to this Debenture shall be heard and determined in a New York State orFederal court sitting in the City of New York, and the parties hereto herebyirrevocably submit to the exclusive jurisdiction of such courts in any suchaction or proceeding and irrevocably waive the defense of an inconvenient forumto the maintenance of any such action or proceeding.

 

Section 7.6             Waiverof Jury Trial.  THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY PROCEEDINGARISING OUT OF OR RELATING TO THIS NOTE OR ANY OF THE TRANSACTIONS CONTEMPLATEDHEREIN, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT,TORT OR OTHERWISE.  THE PARTIES AGREETHAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTENEVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THEPARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY AND 

 

20

----

 

THAT ANY PROCEEDING WHATSOEVER BETWEEN THEMRELATING TO THIS NOTE OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN SHALLINSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTINGWITHOUT A JURY.

 

Section 7.7             Lost, Stolen, Destroyed orMutilated Debenture.  Upon receipt ofevidence reasonably satisfactory to the Company of the loss, theft, destructionor mutilation of this Debenture and of indemnity arrangements reasonablysatisfactory to the Company from or on behalf of the Holder, and upon surrenderor cancellation of this Debenture if mutilated, the Company shall make anddeliver a new debenture of like tenor in lieu of such lost, stolen, destroyedor mutilated Debenture, at the Holder’s expense.

 

Section 7.8             Waiverof Presentment, Etc.  Except as otherwiseprovided herein, presentment, demand, protest, notice of dishonor and all othernotices are hereby expressly waived by the Company.

 

Section 7.9             Usury.  Nothing contained in this Debenture shall bedeemed to establish or require the payment of a rate of interest in excess ofthe maximum rate legally enforceable.  Ifthe rate of interest called for under this Debenture at any time exceeds themaximum rate legally enforceable, the rate of interest required to be paidhereunder shall be automatically reduced to the maximum rate legallyenforceable.  If such interest rate is soreduced and thereafter the maximum rate legally enforceable is increased, therate of interest required to be paid hereunder shall be automatically increasedto the lesser of the maximum rate legally enforceable and the rate otherwiseprovided for in this Debenture.

 

Section 7.10           Interpretation.  For the purposes of this Debenture:  (i) words in the singular shall be held toinclude the plural and vice versa and words of one gender shall be held toinclude the other gender as the context requires and (ii) the word “including”and words of similar import shall mean “including, without limitation,” unlessthe context otherwise requires or unless otherwise specified.

 

Section 7.11           Notices.  Any notice, request, instruction or otherdocument to be given hereunder by either party to the other shall be in writingand shall be deemed given when received and shall be (i) delivered personally or(ii) mailed by certified mail, postage prepaid, return receipt requested or(iii) delivered by Federal Express or a similar overnight courier or (iv) sentvia facsimile transmission to the fax number given below, as follows:

 

If to theCompany, addressed to:

 

Mercury Man Holdings Corporation

11111 Santa Monica Boulevard

Suite 2000

Los Angeles, CA  90025

Attention:  John M. Baumer

Facsimile No.:  310-954-0404

 

21

----

 

with a copy to:

 

Latham & Watkins LLP

885 Third Avenue

New York, NY  10022

Attention:  Howard A. Sobel, Esq.

Facsimile No.:  212-751-4864

 

or at such otherplace as the Company shall have designated by notice as herein provided to theHolder.

 

If to the Holder, addressed to:

 

 

 

 

Facsimile:

 

22

----

 

IN WITNESSWHEREOF, the Company has caused this instrument to be duly executed on the datefirst written above.

 
|   | MERCURY MAN HOLDINGS  CORPORATION |
|--------|-----------------------------------|
|   |                              |
|   |                              |
|   | By:                               |   |   |
|   |                              | Name: | John M. Baumer |
|   |                              | Title: | Vice President |
|        |                                   |  |  |  |  |

 

23

----

 

**ANNEX II**

**FORM OF SERIES B JUNIOR SUBORDINATEDDEBENTURE**

 

----

 

[FORM OF SERIES B JUNIOR SUBORDINATEDDEBENTURE]

 

**THIS DEBENTURE HAS NOT BEEN REGISTERED UNDERTHE U.S. SECURITIES ACT OF 1933, AS AMENDED, AND IT MAY NOT BE OFFERED, SOLD ORTRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAIDACT.**

 

**MERCURY MAN HOLDINGS CORPORATION**

 

**12% JUNIOR SUBORDINATED DEBENTURE DUE 2024**

 
| $                 |   | [DATE] |
|---------------------------------------------------------------------------------------------------|--------|--------|

 

Mercury Man Holdings Corporation, a corporation duly organized andexisting under the laws of Delaware (herein called the “**Company**”), for value received, herebypromises to pay to                                         ,or registered assigns (the “**Holder**”),the principal sum of                              dollars, together with any accrued and unpaid interest, on August 24, 2024 (the“**Maturity Date**”), and to payinterest, calculated and payable as set forth below.

 

**ARTICLE I.**

** **

**PAYMENT OF PRINCIPAL AND INTEREST**

** **

Section 1.1             Payment of Principal andInterest.  Interest on the principalbalance of this Debenture outstanding from time to time until paid in fullshall accrue at the rate of 12% per annum, computed on the basis of a 360-dayyear, commencing on the Exchange Date, payable semi-annually on each InterestPayment Date and (to the extent that the payment of such interest shall belegally enforceable) at the rate of 16% per annum on any overdue principal andon any overdue installment of interest, until paid as specified herein.  Payment of the principal of and interest onthis Debenture will be made in such coin or currency of the United States ofAmerica as at the time of payment is legal tender for payment of public andprivate debts and at such place in the United States as the Company may fromtime to time designate in writing to the Holders.

 

Section 1.2             Payment Only on Business Days.  Any payment hereunder which, but for thisSection 1.2, would be payable on a day which is not a Business Day, shallinstead be due and payable on the Business Day next following such date forpayment.

 

**ARTICLE II.**

** **

**REMEDIES**

** **

Section 2.1             Events of Default.  (a) Each of the following is an “**Event ofDefault**”:

 

(i)            the Company defaults for 30 days inthe payment when due of interest on this Debenture whether or not prohibited bythe subordination provisions herein;

 

(ii)           the failure by the Company to pay allor any part of the principal or premium on this Debenture when and as the samebecomes due and payable at maturity, redemption, by acceleration or otherwise,including payment of the Change of Control Purchase Price, or otherwise;

 

1

----

 

(iii)          the failure by the Company to observeor perform any other covenant or agreement contained in this Debenture and thecontinuance of such failure for a period of 30 days after written notice isgiven to the Company by the Holder, specifying such Default;

 

(iv)          the entry by a court of competentjurisdiction of (A) a decree or order for relief in respect of the Company orany Subsidiary of the Company in an involuntary case or proceeding under anyapplicable federal or state bankruptcy, insolvency, reorganization or othersimilar law or (B) a decree or order adjudging the Company or any suchSubsidiary as bankrupt or insolvent, or approving as properly filed a petition seekingreorganization, arrangement, adjustment or composition of or in respect of theCompany or any such Subsidiary under any applicable federal or state law, orappointing a custodian, receiver, liquidator, assignee, trustee, sequestratoror other similar official of the Company or any such Subsidiary or of anysubstantial part of the property of the Company or any such Subsidiary, orordering the winding up or liquidation of the affairs of the Company or anysuch Subsidiary, and the continuance of any such decree or order for relief orany such other decree or order unstayed and in effect for a period of 60consecutive days;

 

(v)           (A) the commencement by the Company or any Subsidiary of the Company of avoluntary case or proceeding under any applicable federal or state bankruptcy,insolvency, reorganization or other similar law, or the consent by the Companyor any such Subsidiary to the entry of a decree or order for relief in respectof the Company or any Subsidiary of the Company in an involuntary case orproceeding under any applicable Federal or State bankruptcy, insolvency,reorganization or other similar law, (B) the consent by the Company or anySubsidiary of the Company to the appointment of or taking possession by acustodian, receiver, liquidator, assignee, trustee, sequestrator or similarofficial of the Company or any Subsidiary of the Company or for all orsubstantially all of the property and assets of the Company or any Subsidiaryof the Company, or (C) the making by the Company or any Subsidiary of theCompany of any general assignment for the benefit of creditors;

 

(vi)          a default in any Indebtedness of theCompany or its Subsidiaries, with an aggregate principal amount in excess of$15,000,000 (a) resulting from the failure to pay principal at maturity orinterest or (b) as a result of which the maturity of such Indebtedness has beenaccelerated prior to its stated maturity; or

 

(vii)         a final unsatisfied judgment or finalunsatisfied judgments for the payment of money not covered by insurance in anaggregate amount in excess of $15,000,000, at any one time rendered against theCompany or any Subsidiary of the Company by a court or courts of competentjurisdiction, which judgments remain unstayed, undischarged or unbonded for aperiod (during which execution shall not be effectively stayed) of 60 days.

 

(b)           In the case of (1) an Event ofDefault specified in clause (i) or (ii) of Section 2.1(a) hereof, the Holderhereof may, at its option, by notice in writing to the Company, declare thisDebenture to be, and this Debenture shall thereupon be and become, due andpayable immediately without further action or notice, or (2) an Event ofDefault specified in clause (iv) or (v) of Section 2.1(a) hereof, with respectto the Company or any of its Subsidiaries, this Debenture will become due andpayable immediately without further action or notice.  If any other Event of Default occurs and iscontinuing, the Holders of at least 50% in principal amount of the then OutstandingDebentures may declare all the Debentures to be due and payableimmediately.  Upon any such declaration,the Debentures shall become due and payable immediately.  Notwithstanding the foregoing, if an Event ofDefault specified in clause (iv) or (v) of Section 2.1 hereof occurs with respectto the Company or any of its Subsidiaries, all Outstanding Debentures shall bedue and payable immediately without further action or notice.

 

2

----

 

(c)           If payment of this Debenture isaccelerated because of an Event of Default, the Company shall promptly notifythe holders of Senior Debt of the acceleration.

 

(d)           If any Event of Default shall haveoccurred and be continuing, subject to the provisions of Article 2 and Article5 hereof, the Holder may proceed to protect and enforce its rights either bysuit in equity or by action at law, or both, whether for specific performanceof any provision of this Debenture or in aid of the exercise of any powergranted to the Holder under this Debenture.

 

Section 2.2             Unconditional Right of Holdersto Receive Principal and Interest. Notwithstanding any other provision in this Debenture, the Holder shallhave the right, which is absolute and unconditional, to receive payment of theprincipal of and interest on this Debenture on the Maturity Date (or, in thecase of redemption, on the Redemption Date, or in the case of a Change ofControl Offer made by the Company, on the Change of Control Purchase Date) andto institute suit for the enforcement of any such payment, and such rightsshall not be impaired without the consent of such Holder.

 

Section 2.3             Restoration of Rights andRemedies.  If the Holder hasinstituted any proceeding to enforce any right or remedy under this Debentureand such proceeding has been discontinued or abandoned for any reason, or hasbeen determined adversely to the Holder, then and in every such case, subjectto any determination in such proceeding, the Company and the Holder shall berestored severally and respectively to their former positions under thisDebenture and thereafter all rights and remedies of the Holder shall continueas though no such proceeding had been instituted.

 

Section 2.4             Rights and Remedies Cumulative.  Except as otherwise provided with respect tothe replacement or payment of a mutilated, destroyed, lost or stolen Debenturein Section 7.6, no right or remedy herein conferred upon or reserved to theHolder is intended to be exclusive of any other right or remedy, and everyright and remedy shall, to the extent permitted by law, be cumulative and inaddition to every other right and remedy given hereunder or now or hereafterexisting at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder orotherwise shall not prevent the concurrent assertion or employment of any otherappropriate right or remedy.

 

Section 2.5             Delay or Omission Not Waiver.  No delay or omission of the Holder toexercise any right or remedy accruing upon any Event of Default shall impairany such right or remedy or constitute a waiver of any such Event of Default oran acquiescence therein.  Every right andremedy given by this Article or by law to the Holder may be exercised from timeto time, and as often as may be deemed expedient by the Holder.

 

**ARTICLE III.**

** **

**COVENANTS**

** **

Section 3.1             Limitation on Merger, Sale orConsolidation.   The Company shallnot, directly or indirectly, consolidate with or merge with or into anotherPerson or sell, assign, convey or transfer all or substantially all of itsassets (computed on a consolidated basis), whether in a single transaction or aseries of related transactions, to another Person or group of affiliatedPersons or adopt a plan of liquidation, unless:

 

(a)           either (i) the Company is thecontinuing entity or (i) the resulting, surviving or transferee entity or, inthe case of a plan of liquidation, the entity which receives the greatest valuefrom such plan of liquidation is a corporation organized under the laws of theUnited States, any state thereof 

 

3

----

 

or the District of Columbia and expressly assumes in writing all of theobligations of the Company in connection with this Debenture; and

 

(b)           no Default or Event of Default shallexist or shall occur immediately after such transaction(s);

 

In addition,the Company will not, directly or indirectly, lease all or substantially all ofits properties or assets, in one or more related transactions, to any otherPerson.

 

Section 3.2             Successor Substituted.   Upon any consolidation or merger or any transferof all or substantially all of the assets of the Company or consummation of aplan of liquidation in accordance with the foregoing, the successor corporationformed by such consolidation or into which the Company is merged or to whichsuch transfer is made or, in the case of a plan of liquidation, the entitywhich receives the greatest value from such plan of liquidation shall succeedto and be substituted for (so that from and after the date of suchconsolidation, merger, transfer or consummation of a plan of liquidation, theprovisions of this Debenture referring to the “Company” shall refer instead tothe successor corporation and not to the Company), and may exercise every rightand power of, the Company under this Debenture with the same effect as if suchsuccessor corporation had been named therein as the Company; provided, however,that the predecessor Company shall not be relieved from the obligation to paythe principal of and interest on this Debenture except in the case of a sale ofall of the Company’s assets in a transaction that is subject to, and thatcomplies with the provisions of, Section 3.1 hereof.

 

Section 3.3             Change of Control Offer.

 

(a)           Subject to contractual and otherrestrictions with respect thereto, including restrictions imposed by the BankFacility, upon the occurrence of a Change of Control, the Company shall make anoffer (a “**Change of Control Offer**”)to repurchase, at the Holder’s option, this Debenture or any portion hereof ata cash price equal to 101% of the aggregate principal amount of this Debenturethen outstanding that is accepted for repurchase by the Holder hereof, plus,without duplication, all unpaid interest on the Debenture (including an amountequal to the prorated interest from the Interest Payment Date immediately priorto the repurchase to the date of repurchase), if any, to the date of repurchase(the “**Change of Control Payment**”).

 

(b)           Within 30 days following any Changeof Control, the Company shall mail a notice to the Holder stating:  (1) that the Change of Control Offer is beingmade pursuant to this Section 3 and that this Debenture, upon being dulytendered, will be accepted for payment; (2) the purchase price and the purchasedate, which shall be no sooner than 20 Business Days nor later than 60 daysfrom the date such notice is mailed (the “**Changeof Control Payment Date**”); (3) that if less than the full principalamount of this Debenture is tendered, the amount not so tendered will continueto accrue interest in accordance with Section 1.1; (4) that, unless the Companydefaults in the payment of the Change of Control Payment, the portion of thisDebenture accepted for payment pursuant to the Change of Control Offer shallcease to accrue interest on the Change of Control Payment Date; (5) that the Holderelecting to have this Debenture or any portion hereof repurchased pursuant to aChange of Control Offer will be required to surrender this Debenture to theCompany at the address specified in the notice prior to the close of businesson the third Business Day preceding the Change of Control Payment Date; (6)that the Holder will be entitled to withdraw its election if the Companyreceives, not later than the close of business on the third Business Daypreceding the Change of Control Payment Date, a telegram, telex, facsimiletransmission or letter setting forth the name of the Holder, the principalamount tendered for repurchase, and a statement that the Holder is withdrawingits election to have the Debenture or such portion, repurchased; and (7) thatthe Holder, if the Debenture is being repurchased only in part, will be 

 

4

----

 

issued a new debenture with the same terms and conditions as thisDebenture in a principal amount equal in amount to the unpurchased principalamount of the Debenture.

 

(c)           On the Change of Control PaymentDate, the Company shall accept for payment this Debenture or any portion hereofproperly tendered pursuant to the Change of Control Offer.  The Company shall promptly mail to the Holderthe Change of Control Payment for this Debenture or any portion hereof.  The Company shall promptly issue a newdebenture for any unpurchased portion of this Debenture surrendered by theHolder, if any.  The Company shallannounce to all holders of Company debentures the results of the Change ofControl Offer on or as soon as practicable after the Change of Control PaymentDate.

 

(d)           The Company shall comply with therequirements of Rule 14e-1 under the Exchange Act and any other securities lawsand regulations thereunder to the extent such laws and regulations areapplicable in connection with the repurchase of this Debenture in connectionwith a Change of Control.

 

(e)           The Company’s obligations withrespect to a Change of Control Offer shall be satisfied to the extent actuallyperformed by a third party in the manner, at the times and otherwise incompliance with the terms of this Section 3. Any portion of this Debenture purchased by such third party as contemplatedby the preceding sentence shall, notwithstanding the foregoing provisions ofthis Section 3, remain outstanding and continue to accrue interest on and afterthe Change of Control Payment Date.

 

(f)            Notwithstanding the foregoing, theCompany shall not be required to make a Change of Control Offer upon a Changeof Control if a third party makes the Change of Control Offer in the manner, atthe times and otherwise in compliance with the requirements set forth in thisDebenture applicable to a Change of Control Offer made by the Company, and purchasesall Debentures validly tendered and not withdrawn under such Change of ControlOffer.

 

Section 3.4             Restricted Payments.

 

## (a)           TheCompany shall not, directly or indirectly, (i) declare or pay any dividend ormake any other distribution in respect of shares of the Company’s CapitalStock, or any warrants, options or other rights to acquire shares of suchCapital Stock, and (ii) make any payment (except to the extent made withQualified Capital Stock) on account of the purchase, redemption or other acquisitionor retirement for value of any of the Company’s Capital Stock, or any warrants,options or other rights to acquire shares of such Capital Stock (each of theforegoing actions set forth in clauses (i) and (ii) being referred to as a “**Restricted Payment**”), if at the time ofsuch Restricted Payment or immediately after giving effect thereto, (1) aDefault Event shall have occurred and be continuing or (2) the aggregate amountof Restricted Payments (including such proposed Restricted Payment) made subsequentto the Preferred Stock Issue Date (the amount expended for such purposes, ifother than in cash, being the fair market value of such property) shall exceedthe sum of (without duplication): (x) 50% of the cumulative Consolidated NetIncome (taken as one accounting period) of the Company accrued during theperiod commencing on the first day of the first full fiscal quarter in whichthe Preferred Stock Issue Date occurs to and including the last day of the mostrecent fiscal period for which internal financial statements are available (orif cumulative Consolidated Net Income shall be a deficit, minus 100% of suchdeficit); plus (y) 100% of the aggregate Net Cash Proceeds received by theCompany from any Person (other than a Subsidiary of the Company) from a CapitalContribution or from the sale subsequent to the Preferred Stock Issue Date ofQualified Capital Stock of the Company. For purposes of this Section 3.4, the term “**Restricted Payment**” does not include (A) any dividend,distribution or other payment on or with respect to any Capital Stock of theCompany, or any warrants, options or rights to acquire shares of such 

 

5

----

 

## CapitalStock, to the extent payable solely in shares of Qualified Capital Stock, (B)any dividend, distribution or other payment to the Company, or to anySubsidiary of the Company, by the Company or any of its Subsidiaries; (C) thepayment of the Merger Consideration (as defined in the Merger Agreement); or(D) any dividend, distribution or other payment with respect to the settlementof the consolidated shareholder class actions titled “In Re FTD.COM, Inc.Shareholders Litigation.”

##  

## (b)           Notwithstandingthe foregoing, the provisions set forth in the immediately preceding paragraphdo not prohibit:  (1) the payment of anydividend within 60 days after the date of declaration of such dividend if thedividend would have been permitted on the date of declaration; (2) if noDefault Event shall have occurred and be continuing, Restricted Payments whichdo not exceed $15,000,000 in the aggregate from and after the Preferred StockIssue Date; (3) for the avoidance of doubt, payments pursuant to the ManagementAgreement; (4) if no Default Event shall have occurred and be continuing,repurchases (and payments of cash dividends to any Parent Entity forrepurchases) of Capital Stock from FTD-member florists or distributors (ortheir heirs or estates), or employees or directors (or their heirs or estates)of, the Company, any Parent Entity or any Subsidiary of the Company, upon thedeath, disability or termination of employment (or termination of membership ordistribution, in the case of a FTD-member florist or distributor); provided,that such repurchases are made with the proceeds of such dividends to anyParent Entity within three Business Days of the payment of such dividends, andpayments of cash, or dividends, distributions or advances to any Parent Entityto make payments of cash, in lieu of the issuance of fractional shares upon theexercise of warrants or upon the conversion or exchange of, or issuance ofCapital Stock in lieu of cash dividends on, any Capital Stock of any ParentEntity, in an aggregate amount not to exceed $7,500,000 after the PreferredStock Issue Date; (5) if no Default Event shall have occurred and becontinuing, the declaration and payment of dividends to holders of any class orseries of Disqualified Capital Stock issued after the Preferred Stock IssueDate; (6) payments of amounts equal to any insurance proceeds received by FTD,Inc. in respect of the settlement of the consolidated shareholder class actionstitled “In Re FTD.COM, Inc. Shareholders Litigation”; (7) any dividend,distribution or other payments by any of the Company’s Subsidiaries on itsCapital Stock, or warrants, options or other rights to acquire such CapitalStock, that is paid *pro rata* toall holders of such Capital Stock, warrants, options or rights, as applicable;(8) (i) any legal defeasance, redemption, retirement, repurchase or otheracquisition of Capital Stock of the Company with the Net Cash Proceeds receivedby the Company made within 60 days of the sale of its Qualified Capital Stock(other than to a Subsidiary), or (ii) any issuance of Qualified Capital Stockof the Company in exchange for, or the proceeds of which are used to purchase,any Capital Stock of the Company; (9) the repurchase of Capital Stock, orwarrants, options or other rights to acquire such Capital Stock, deemed tooccur upon the exercise of stock options, warrants or other convertiblesecurities to the extent such Capital Stock, warrants, options or other rightsrepresent a portion of the exercise price thereof; (10) the payment ofdividends in cash on (or the purchase, redemption, exchange or otheracquisition or retirement of) shares of the Senior Preferred Stock; and (11)payments to a Parent Entity (or a subsidiary of a Parent Entity), (i) to enablethe Parent Entity to pay federal, state or local tax liabilities (any suchpayments to a Parent Entity, a “**Tax Payment**”),not to exceed the amount of any tax liabilities that would be otherwise payableby the Company and its United States subsidiaries to the appropriate taxingauthorities to the extent that the Parent Entity has an obligation to pay suchtax liabilities relating to the operations, assets, or capital of the Companyor its United States subsidiaries; provided, that (x) notwithstandingthe foregoing, in the case of determining the amount of a Tax Payment that ispermitted to be paid by the Company and any of its United States subsidiariesin respect of their consolidated Federal income tax liability, or consolidated,combined, unitary or group, state or local income tax liability, such paymentshall be determined assuming that the Company is the parent company of an affiliatedgroup (the “**Company Affiliated Group**”)filing a consolidated federal income tax return or consolidated, combined,unitary, or group, state or local income tax return, and that the Parent Entityand each such United States subsidiary is a member of the Company AffiliatedGroup and (y) any Tax Payments shall either be used by the Parent 

 

6

----

 

## Entityto pay such tax liabilities within 90 days of the Parent Entity’s (or asubsidiary of a Parent Entity) receipt of such payment or refunded to thepayee, and (ii) in an aggregate amount not to exceed (A) prior to an initialpublic offering by any Parent Entity, $500,000 per year and (B) after aninitial public offering by any Parent Entity, $2,000,000 per year, in each casein order to pay legal and accounting expenses, payroll and other compensationexpenses in the ordinary course of business, filing and listing fees and othercorporate overhead expenses in the ordinary course of business (for purposes ofthis clause (11), “tax liabilities” shall include any penalties and interestrelated to a tax liability.

##  

In determiningthe aggregate amount of Restricted Payments made subsequent to the PreferredStock Issue Date in accordance with clause (2) of Section 3.4(a) hereof,amounts distributed pursuant to clauses (1), (5)  and (10) of this Section 3.4(b) hereof shall be included in suchcalculation, and amounts distributed pursuant to clauses (2), (3), (4), (6),(7), (8), (9) and (11) shall not be included in such calculation.  For purposes of this Section 3.4, the amountof any Restricted Payment made or returned, if other than in cash, shall be thefair market value thereof, as determined in the good faith reasonable judgmentof the Board of Directors, unless stated otherwise, at the time made orreturned, as applicable.

 

Section 3.5             Reports.   The Company shall furnish to the Holder (atsuch Holder’s address as set forth below): (a) as soon as available, but in any event within 105 days after the endof each fiscal year of the Company, a copy of the audited consolidated balancesheet of the Company and its consolidated Subsidiaries as at the end of suchyear and the related audited consolidated statements of income and of cashflows for such year, reported on without any qualification arising out of thescope of the audit, by the Company’s independent certified public accountants;and (b) as soon as available, but in any event not later than 60 days after theend of each of the first three quarterly periods of each fiscal year of theCompany, the unaudited consolidated balance sheet of the Company and itsconsolidated Subsidiaries as at the end of such quarter and the relatedunaudited consolidated statements of income and of cash flows for such quarterand the portion of the fiscal year through the end of such quarter, certifiedby the Chief Executive Officer, the President, or the Chief Financial Officerof the Company as being fairly stated in all material respects (subject tonormal year-end audit adjustments).  Allsuch financial statements shall be complete and correct in all materialrespects and shall be prepared in reasonable detail and in accordance with GAAPapplied (except as approved by such accountants or officer, as the case may be,and disclosed in reasonable detail therein) consistently throughout the periodsreflected therein and with prior periods.

 

Section 3.6             Investment Company.  The Company will not, and will not permit anyof its Subsidiaries to, be required to register as an “investment company” (asthat term is defined in the Investment Company Act of 1940, as amended), orotherwise become subject to registration under the Investment Company Act.

 

Section 3.7             No Senior Subordinated Debt.  The Company will not incur, create, issue,assume, guarantee or otherwise become liable for any Indebtedness that issubordinate or junior in right of payment to any Senior Debt of the Company andsenior in any respect in right of payment to this Debenture.

 

Section 3.8             Waiver of Usury, Stay orExtension Laws.  The Companycovenants (to the extent that it may lawfully do so) that it will not at anytime insist upon, plead, or in any manner whatsoever claim or take the benefitor advantage of, any usury, stay or extension law wherever enacted, now or atany time hereafter in force, which may affect the covenants or the performanceof this Debenture, and the Company (to the extent that it may lawfully do so)hereby expressly waives all benefit or advantage of any such law and covenantsthat it will not hinder, delay or impede the execution of any 

 

7

----

 

power herein granted to the Holder, but will suffer and permit theexecution of every such power as though no such law had been enacted.

 

Section 3.9             Taxes.  The Company will pay, and will cause each ofits Subsidiaries to pay, prior to delinquency, all material taxes, assessments,and governmental levies except such as are contested in good faith and byappropriate proceedings or where the failure to effect such payment is notadverse in any material respect to the Holder.

 

Section 3.10           Corporate Existence.  Subject to Section 3.1 hereof, the Companyshall do or cause to be done all things necessary to preserve and keep in fullforce and effect:

 

(a)           its corporate existence, and thecorporate, partnership or other existence of each of its Subsidiaries, inaccordance with the respective organizational documents (as the same may beamended from time to time) of the Company or any such Subsidiary; and

 

(b)           the rights (charter and statutory),licenses and franchises of the Company and its Subsidiaries; provided, however,that the Company shall not be required to preserve any such right, license orfranchise, or the corporate, partnership or other existence of any of itsSubsidiaries, if the Board of Directors of the Company shall determine that thepreservation thereof is no longer desirable in the conduct of the business ofthe Company and its Subsidiaries, taken as a whole, and that the loss thereofis not adverse in any material respect to the Holder.

 

**ARTICLE IV.**

** **

**REDEMPTION OF DEBENTURES**

** **

Section 4.1             Optional Redemption.

 
| (a) |   | (i) | The Company may (subject to contractual and other restrictions with  respect thereto, including restrictions imposed by the Bank Facility), at the  option of the Company, redeem at any time or from time to time on or after  February 24, 2009, from any source of funds legally available therefor, in  whole or in part, in the manner provided in Section 4.2 hereof, this  Debenture or any portion hereof, at a redemption price equal to the following  percentages of the aggregate principal amount proposed to be redeemed by the  Company plus, without duplication, all accrued and unpaid interest on the  Debenture, if any, to the Redemption Date, in each case beginning on February  24 of the year indicated: |
|-----|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| **Year**            | ** ** | **Redemption Price** | ** ** |
|---------------------|------------|----------------------|------------|
|                |       |                 |       |
| 2009                |       | 106                  | %          |
| 2010                |       | 104                  | %          |
| 2011                |       | 102                  | %          |
| 2012 and thereafter |       | 100                  | %          |

 
|   |   |   | provided, however, that no optional  redemption pursuant to this Section 4.1(a)(i) shall be authorized or made at any  time when the Company is making or required to make within the next 30 days,  or purchasing this |
|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

8

----

 
|   |   |   | Debenture or any portion hereof, under, a Change of Control offer in  accordance with the provisions of Section 3.3 hereof.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   | (ii)   | In the event of one or more public offerings of Common Stock of the  Company in an aggregate offering amount of at least fifty million dollars  ($50,000,000) or as a result of which at least fifteen percent (15%) of the Common  Stock of the Company (after giving effect to such offerings) is publicly  traded (the “**Public Offering**”),  the Company may (subject to contractual and other restrictions with respect  thereto, including restrictions imposed by the Bank Facility), at the option  of the Company, redeem at any time or from time to time prior to February 24,  2007, from the net cash proceeds of the Public Offering, in the manner  provided in Section 4.2 hereof, this Debenture, at a redemption price equal  to 112% of the aggregate principal amount proposed to be redeemed by the  Company plus, without duplication, all accrued and unpaid interest on the  Debenture, if any, to the Redemption Date; provided, that, the Company  shall redeem only up to 35% in principal amount of the then Outstanding  Debentures. |

 

(b)           In the event of a redemption pursuantto Section 4.1(a)(i) or (ii) hereof of only a portion of the total aggregateprincipal amount outstanding of the Outstanding Debentures, the Company shalleffect such redemption as it determines *prorata* according to the principal amount outstanding of debenturesheld by each Holder of Outstanding Debentures.

 

Section 4.2             Procedures for Redemption.

 

(a)           At least 30 days and not more than 60days prior to the date fixed for any redemption of this Debenture, writtennotice (the “**Redemption Notice**”)shall be given by first-class mail, postage prepaid, to the Holder at suchHolder’s address as set forth below.  TheRedemption Notice shall state:  (1) theredemption price; (2) whether all or less than all the outstanding principalamount of this Debenture is to be redeemed and the amount being redeemed; (3)the date fixed for redemption; (4) that the Holder is to surrender theDebenture to the Company, at the place or places where the Debenture is to besurrendered for redemption, in the manner and at the place designated; (5) theSection of this Debenture pursuant to which the Debenture called for redemptionis being redeemed; and (6) that interest on the portion of the Debenture to beredeemed shall cease to accrue on such Redemption Date unless the Companydefaults in the payment in full of the redemption price.  A Redemption Notice may not be conditional.

 

(b)           The Holder shall surrender to theCompany this Debenture to be redeemed, duly endorsed, in the manner and at theplace designated in the Redemption Notice, and on the Redemption Date the fullredemption price for this Debenture shall be payable in cash to the Personwhose name appears on this Debenture as the holder thereof, and this Debentureshall be canceled and retired.  In theevent that less than all of the principal amount outstanding represented bythis Debenture is redeemed, a new debenture, with the same terms and conditionsas this Debenture, shall be issued representing the unredeemed portion.

 

(c)           Unless the Company defaults in thepayment in full of the redemption price, interest on the portion of thisDebenture called for redemption shall cease to accrue on the Redemption Date,and the Holder shall cease to have any further rights with respect thereto onthe Redemption Date, other than the right to receive the redemption price,without interest.

 

9

----

 

**ARTICLE V.**

** **

**SUBORDINATION**

** **

Section 5.1             Agreement to Subordinate.  The Company agrees, and the Holder byaccepting this Debenture agrees, that the Indebtedness evidenced by thisDebenture and all Obligations in respect of this Debenture are subordinated inright of payment, to the extent and in the manner provided in this Article 5,to the prior payment in full in cash or Cash Equivalents of all Senior Debt(whether outstanding on the date hereof or hereafter created, incurred, assumedor guaranteed), and that the subordination is for the benefit of the holders ofSenior Debt.

 

Section 5.2             Liquidation; Dissolution;Bankruptcy.   Upon any distributionof assets of the Company upon any dissolution, winding up, total or partialliquidation or reorganization of the Company, whether voluntary or involuntary,in bankruptcy, insolvency, receivership or similar proceeding or uponassignment for the benefit of creditors or any marshaling of the Company’sassets and liabilities (1) the holders of all Senior Debt of the Company shallfirst be entitled to receive payment in full in cash or Cash Equivalents of allSenior Debt (including Post-Commencement Interest and Expense Claims) beforethe Holder is entitled to receive any payment on account of the principal ofand interest on this Debenture or any Obligation in respect to this Debenture(other than Junior Securities); and (2) any payment or distribution of assetsof the Company of any kind or character from any source, whether in cash,property or securities (other than Junior Securities), to which the Holderwould be entitled (by set-off or otherwise), except for this Article 5, shallbe paid by the liquidating trustee or agent or other Person making such apayment or distribution directly to the holders of such Senior Debt or theirrepresentatives to the extent necessary to make payment in full of all suchSenior Debt (including Post-Commencement Interest and Expense Claims) remainingunpaid, after giving effect to any concurrent payment or distribution to theholders of Senior Debt.

 

Section 5.3             Default on Senior Debt.

 

(a)           The Company may not make any paymentor distribution to the Holder in respect of Obligations with respect to thisDebenture and may not acquire from the Holder this Debenture for cash orproperty (other than Junior Securities) until all principal and otherObligations with respect to the Senior Debt have been paid in full if:

 

(i)            payment default on Senior Debtoccurs and is continuing beyond any applicable grace period in the agreement,indenture or other document governing such Senior Debt; or

 

(ii)           any other default occurs and is continuingon any series of Senior Debt that permits holders of that series of Senior Debtto accelerate its maturity and the Company receives a notice of such default (a“**Payment Blockage Notice**”) fromthe holders of any Senior Debt.  If theCompany receives any such Payment Blockage Notice, no subsequent PaymentBlockage Notice will be effective for purposes of this Section unless and until(A) at least 360 days have elapsed since the effectiveness of the immediatelyprior Payment Blockage Notice and (B) all scheduled payments of principal andinterest on this Debenture that have come due have been paid in full in cash.

 

No nonpaymentdefault that existed or was continuing on the date of delivery of any PaymentBlockage Notice to the Company may be, or may be made, the basis for asubsequent Payment Blockage Notice unless such default has been waived for aperiod of not less than 90 days.

 

10

----

 

(b)           The Company may and will resumepayments on and distributions in respect of this Debenture and may acquire thisDebenture upon the earlier of:

 

(i)            in the case of a payment default,upon the date upon which such default is cured or waived, or

 

(ii)           in the case of a nonpayment default,upon the earlier of the date on which such nonpayment default is cured orwaived or 179 days after the date on which the applicable Payment BlockageNotice is received, unless the maturity of any Senior Debt has beenaccelerated, if this Article 5 otherwise permits the payment, distribution oracquisition at the time of such payment or acquisition.

 

Section 5.4             Acceleration.  If payment of this Debenture is acceleratedbecause of an Event of Default, the Company will promptly notify the holders ofSenior Debt of the acceleration.

 

Section 5.5             Subrogation.  After all Senior Debt is paid in full in cashor Cash Equivalents and until this Debenture is paid in full, the Holder shallbe subrogated (equally and ratably with all other Indebtedness *pari passu* with this Debenture) to therights of holders of Senior Debt to receive distributions applicable to SeniorDebt to the extent that distributions otherwise payable to the Holder has beenapplied to the payment of Senior Debt.  Adistribution made under this Article 5 to holders of Senior Debt that otherwisewould have been made to the Holder is not, as between the Company and theHolder, a payment by the Company on this Debenture.  No holder of Senior Debt shall be obligatedto create, warrant, preserve or protect any such subrogation right or shallsuffer any loss or diminution of its rights hereunder if for any reason(including the lack of enforceability or disallowance of any Post-CommencementInterest and Expense Claim) such right of subrogation is not available to anyHolder.

 

Section 5.6             Relative Rights.  This Article 5 defines the relative rights ofthe Holder and holders of Senior Debt. Nothing in this Debenture shall:

 

(a)           impair, as between the Company andthe Holder, the obligation of the Company, which is absolute and unconditional,to pay principal of and interest on this Debenture in accordance with itsterms;

 

(b)           affect the relative rights of theHolder and creditors of the Company other than their rights in relation to theholders of Senior Debt; or

 

(c)           prevent the Holder from exercisingits available remedies upon a Default or Event of Default, subject to therights of the holders of Senior Debt to receive distributions and paymentsotherwise payable to the Holder.

 

If the Companyfails because of this Article 5 to pay principal of or interest on a Debentureon the due date, the failure is still a Default or Event of Default.

 

Section 5.7             Subordination May Not BeImpaired by Company.

 

(a)           No right of any holder of Senior Debtto enforce the subordination of the Indebtedness evidenced by this Debentureshall be impaired by any act or failure to act by the Company or any Holder orby the failure of the Company or any holder of Senior Debt to comply with thisDebenture.

 

11

----

 

(b)           Without in any way limiting thegenerality of the foregoing paragraph, the holders of the Senior Debt may, atany time and from time to time, without the consent of or notice to the Holder,without incurring responsibility to the Holder and without impairing or releasingthe subordination provided in this Article 5 or the Obligations hereunder ofthe Holder to the holders of Senior Debt, do any one or more of thefollowing:  (i) change the manner, placeor terms of payment or extend the time or payment of, or renew or alter, SeniorDebt or any instrument evidencing the same or any agreement under which SeniorDebt is outstanding; (ii) sell, exchange, release or otherwise deal with anyproperty pledged, mortgaged or otherwise securing Senior Debt; (iii) releaseany Person in any manner for the collection of Senior Debt; and (iv) exerciseor refrain from exercising any rights against the Company or any other Person; provided,however, that in no event shall any such actions limit the right of theHolder to take any action to accelerate the maturity of the Debentures inaccordance with the provisions set forth in Section 5.2 or to pursue any rightsor remedies against the Company under this Debenture or under applicable lawsif the taking of such action does not otherwise violate the terms of thisArticle 5.

 

**ARTICLE VI.**

** **

**DEFINITIONS**

** **

“**Affiliate**” of any specified Person meansany other Person directly or indirectly controlling or controlled by or underdirect or indirect common control with such specified Person.  For purposes of this definition, the term “control”(including, with correlative meanings, the terms “controlling,” “controlled by”and “under common control with”), as used with respect to any Person, shallmean the possession, directly or indirectly, of the power to direct or causethe direction of the management or policies of such Person, directly or throughone or more intermediaries, whether through the ownership of voting securities,by contract, or otherwise.

 

“**Asset Sale**” means, in one or a series ofrelated transactions, the conveyance, sale, transfer, assignment or otherdisposal by the Company or any of its Subsidiaries of, directly or indirectly,any of their property, business or assets, including by merger or consolidation(in the case of one of the Company’s Subsidiaries), and including any sale orother transfer or issuance of any Capital Stock, or warrants, options or otherrights to acquire such Capital Stock, of any of the Company’s Subsidiaries,whether by the Company or one of the Company’s Subsidiaries or through theissuance, sale or transfer of Capital Stock, or warrants, options or otherrights to acquire such Capital Stock, by one of the Company’s Subsidiaries andincluding any sale and leaseback transaction, other than in any such case to theCompany or another Subsidiary.

 

“**Bank Facility**”**shall mean that certain Credit Agreement, dated as of theClosing Date (as modified and supplemented from time to time), by and amongFTD, Inc., a Delaware corporation, the Lenders from time to time partiesthereto, UBS Securities LLC, as Syndication Agent, Wells Fargo Bank, N.A., asDocumentation Agent and Credit Suisse First Boston, acting through its CaymanIslands Branch, as Administrative Agent.

 

“**Beneficial Owner**” or “**beneficial owner**” for purposes of thedefinition of Change of Control and Affiliate has the meaning attributed to itin Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the ExchangeDate), whether or not applicable.

 

“**Business Day**” means any day other than aSaturday, a Sunday or a day on which banking institutions in the City of NewYork are authorized by law, regulation or executive order to remain closed.

 

12

----

 

“**Capital Contribution**” means any contribution to the equityof the Company subsequent to the Preferred Stock Issuance Date from a direct orindirect parent of the Company for which no consideration (other than theissuance of Qualified Capital Stock) is given.

 

“**Capital Stock**” means (i) with respect toany Person that is a corporation, any and all shares, interests, participationsor other equivalents (however designated and whether or not voting) ofcorporate stock, including each class of Common Stock and Preferred Stock ofsuch Person and (ii) with respect to any Person that is not a corporation, anyand all partnership or other equity or ownership interests of such Person.

 

“**Cash Equivalents**” means:

 

(a)           securities issued or directly andfully guaranteed or insured by the United States of America or any agency orinstrumentality thereof (provided, that the full faith and credit of theUnited States of America is pledged in support thereof), maturing within oneyear after the date of acquisition;

 

(b)           demand deposits, time deposits andcertificates of deposit and commercial paper issued by the parent corporationof any domestic commercial bank of recognized standing having capital andsurplus in excess of $500,000,000, maturing within one year after the date ofacquisition;

 

(c)           commercial paper issued by othersrated at least A-2 or the equivalent thereof by S&P or at least P-2 or theequivalent thereof by Moody’s, maturing within one year after the date ofacquisition;

 

(d)           repurchase obligations having termsnot more than seven days, with institutions meeting the criteria set forth inclause (b) above, for direct obligations issued by or fully guaranteed by theUnited States of America (provided, that the full faith and credit ofthe United States of America is pledged in support thereof), having, on thedate of purchase thereof, a fair market value of at least 100% of the amount ofrepurchase obligations;

 

(e)           interests in money market or mutualfunds all of whose assets are invested in assets or securities of the typedescribed in clauses (a) through (d) above;

 

(f)            direct investments in tax exemptobligations of any state of the United States of America, or any municipalityof any such state, in each case rated “AA” or better by S&P, “Aa2” orbetter by Moody’s or an equivalent rating by any other credit rating agency ofrecognized national standing; provided, that such obligations maturewithin six months from the date of acquisition thereof; or

 

(g)           investments in mutual funds, 95% ofmore of the assets of which are invested in obligations of the types describedin clauses (a) - (f) above.

 

“**Change of Control**” means (1) prior toconsummation of the first Public Offering after the Preferred Stock Issue Date,the Permitted Holders shall cease to beneficially own, in the aggregate, amajority of the voting power of the Voting Equity Interests of the Company, or(2) following the consummation of the first Public Offering after the PreferredStock Issue Date, (A) any merger or consolidation of the Company with or intoany Person or any sale, transfer or other conveyance, whether direct orindirect, of all or substantially all of the Company’s assets, on aconsolidated basis, in one transaction or a series of related transactions, if,immediately after giving effect to such transaction(s), any “person” (includingany group that is deemed to be a “person”) (other than the Permitted Holders)is or becomes the beneficial owner of more than 40% of the aggregate votingpower of the Voting Equity 

 

13

----

 

Interests of the transferee(s) or surviving entity or entities and thePermitted Holders, in the aggregate, beneficially own, directly or indirectly,less voting power than such person, (B) any “person” (including any group thatis deemed to be a “person”) (other than the Permitted Holders) is or becomesthe beneficial owner of more than 40% of the aggregate voting power of theVoting Equity Interests of the Company and the Permitted Holders, in theaggregate, beneficially own, directly or indirectly, less voting power thansuch person, (C) the Continuing Directors cease for any reason to constitute amajority of the Company’s Board of Directors then in office, or (D) the Companyadopts a plan of liquidation.  As used inthis definition, “person” (including any group that is deemed to be a “person”)has the meaning given by Sections 13(d) of the Exchange Act, whether or notapplicable.  “Continuing Director” meansduring any period of 12 consecutive months after the Preferred Stock IssueDate, individuals who at the beginning of any such 12-month period constitutedthe Board of Directors (together with any new directors whose election by suchBoard of Directors or whose nomination for election by the shareholders of theCompany was approved by a vote of a majority of the directors then still in officewho were either directors at the beginning of such period or whose election ornomination for election was previously so approved, including new directorsdesignated in or provided for in an agreement regarding the merger,consolidation or sale, transfer or other conveyance, of all or substantiallyall of the assets of the Company or any Parent Entity, if such agreement wasapproved by a vote of such majority of directors).

 

“**Change of Control Offer**” has the meaningset forth in Section 3.3(a).

 

“**Change of Control Payment**” has the meaningset forth in Section 3.3(a).

 

“**Change of Control Payment Date**” has themeaning set forth in Section 3.3(b).

 

“**Closing Date**” has the meaning attributed tosuch term in the Merger Agreement.

 

“**Common Stock**” means, of any Person, any andall shares, interests or other participations in, and other equivalents(however designated and whether voting or non-voting) of such Person’s commonstock, and includes, without limitation, all series and classes of such commonstock.

 

“**Company**” has the meaning set forth in thePreamble.

 

“**Consolidated Net Income**” means, withrespect to any Person, for any period, the aggregate net income (or loss) ofsuch Person and its Subsidiaries (before preferred stock dividends andotherwise determined on a consolidated basis in accordance with GAAP) for suchperiod; provided,**that thereshall be excluded therefrom (only to the extent included in computing such netincome (or loss) and without duplication): (a) any net after-tax gain, loss, charge or expense which is eitherextraordinary (as determined in accordance with GAAP) or is either unusual ornonrecurring (including any restructuring charges and any gain, loss, charge orexpense from the sale or other disposition of assets outside the ordinarycourse of business or from the issuance or sale of any securities) asdetermined in good faith by the Company, it being understood and agreed thatItem 10(e) of Regulation S-K under the Securities Act shall not constitute alimitation on any such determination, (b) the net income, if positive, of anyPerson, other than a Subsidiary, in which such Person or any of itsSubsidiaries has an interest, except to the extent of the amount of anydividends or distributions actually paid in cash to such Person or a Subsidiaryof such Person during such period, but in any case not in excess of such Person’spro rata share of such Person’s net income for such period, (c) the net income,if positive, of any of such Person’s Subsidiaries to the extent that thedeclaration or payment of dividends or similar distributions is not at the timepermitted by operation of the terms of its charter or bylaws or any otheragreement, instrument, judgment, decree, order, statute, rule or governmentalregulation applicable to such Subsidiary, (d) the cumulative effect of a changein accounting principles, (e) any non-cash compensation expense realized fromgrants 

 

14

----

 

of stock appreciation or similar rights, stock options or other rightsto officers, directors and employees of the Company, (f) amounts resulting fromcurrency fluctuations, and (g) any goodwill impairment charges pursuant toFinancial Accounting Standards Board Statement No. 142.

 

“**Debenture**” means this 12% Series B JuniorSubordinated Debenture due 2024.

 

“**Default**” means any event which is, or afternotice or lapse of time or both would become, an Event of Default.

 

“**Disqualified Capital Stock**” means thatportion of any Capital Stock which, by its terms (or by the terms of anysecurity into which it is convertible or for which it is exchangeable), or uponthe happening of any event, matures or is mandatorily redeemable, pursuant to asinking fund obligation or otherwise, or is redeemable at the sole option ofthe holder thereof, in any case, on or prior to August 24, 2024, (ii) anypreferred stock of the Company that is issued for cash and is so designated asDisqualified Capital Stock, pursuant to an officer’s certificate on theissuance date thereof, and (iii) any Capital Stock, or warrants, options orrights to acquire shares of Capital Stock, of any Subsidiary of such Personother than common equity with no preferences, privileges, and no redemption orrepayment provisions].  Notwithstandingthe foregoing, any Capital Stock that would constitute Disqualified CapitalStock solely because the holders of the Capital Stock have the right to requirethe Company to repurchase such Capital Stock upon the occurrence of a change ofcontrol shall not constitute Disqualified Capital Stock if the terms of suchCapital Stock provide that the Company may not repurchase or redeem any suchCapital Stock pursuant to such provisions prior to the Company’s purchase ofthe Debentures pursuant to Section 3.3.

 

“**Event of Default**” has the meaning set forthin Section 2.1.

 

“**Exchange Act**” means the Securities ExchangeAct of 1934, as amended, and the rules and regulations thereunder.

 

“**Exchange Date**” means the date fixed by theCompany at its option upon which the Company’s Junior Preferred Stock wasexchanged for an aggregate principal amount of Debentures equal to theliquidation value of the Junior Preferred Stock so exchanged.

 

“**Excluded Person**” means GEI and its RelatedParties.

 

“**fair market value**”**means, with respect to any asset or property, the pricewhich could be negotiated in an arm’s-length free market transaction, for cash,between a willing seller and a willing and able buyer, neither of whom is underundue pressure or compulsion to complete the transaction.  Fair market value shall be determined by theBoard of Directors of the Company acting reasonably and in good faith.

 

“**GAAP**” means United States generallyaccepted accounting principles set forth in the opinions and pronouncements ofthe Accounting Principles Board of the American Institute of Certified PublicAccountants and statements and pronouncements of the Financial AccountingStandards Board or such other statements by such other entity as approved by asignificant segment of the accounting profession in the United States.

 

“**GEI**” means Green Equity Investors IV, L.P.,a Delaware limited partnership.

 

“**Holder**” has the meaning set forth in thePreamble.

 

15

----

 

“**Indebtedness**” of any Person means, withoutduplication, (a) all liabilities and obligations, contingent or otherwise, ofsuch any Person, to the extent such liabilities and obligations would appear asa liability upon the consolidated balance sheet of such Person in accordancewith GAAP, (i) in respect of the principal amount of borrowed money (whether ornot the recourse of the lender is to the whole of the assets of such Person oronly to a portion thereof), (ii) evidenced by bonds, notes, debentures orsimilar instruments, (iii) representing the balance deferred and unpaid of thepurchase price of any property or services, except those incurred in theordinary course of its business that would constitute ordinarily a tradepayable to trade creditors; (b) all liabilities and obligations, contingent orotherwise, of such Person (i) evidenced by bankers’ acceptances or similarinstruments issued or accepted by banks, (ii) relating to any capitalized leaseobligation, or (iii) evidenced by a letter of credit or a reimbursementobligation of such Person with respect to any letter of credit; (c) all netobligations of such Person under Interest Swap and Hedging Obligations; (d) allliabilities and obligations of others of the kind described in the precedingclauses (a), (b) or (c) that such Person has guaranteed or that is otherwise itslegal liability or which are secured by one or more liens on any assets orproperty of such Person; (e) any and all deferrals, renewals, extensions,refinancing and refundings (whether direct or indirect) of, or amendments,modifications or supplements to, any liability of the kind described in any ofthe preceding clauses (a), (b), (c) or (d), or this clause (e), whether or notbetween or among the same parties; and (f) all Disqualified Capital Stock ofsuch Person (measured at the greater of its voluntary or involuntary maximumfixed repurchase price plus accrued and unpaid dividends).  For purposes hereof, the “maximum fixedrepurchase price” of any Disqualified Capital Stock which does not have a fixedrepurchase price shall be calculated in accordance with the terms of suchDisqualified Capital Stock as if such Disqualified Capital Stock were purchasedon any date on which Indebtedness shall be required to be determined pursuantto the Indenture, and if such price is based upon, or measured by, the fairmarket value of such Disqualified Capital Stock, such fair market value to bedetermined in good faith by the board of directors of the issuer (or managinggeneral partner of the issuer) of such Disqualified Capital Stock.  The amount of any Indebtedness outstanding asof any date shall be (1) the accreted value thereof, in the case of anyIndebtedness issued with original issue discount and (2) the principal amountthereof in the case of any other Indebtedness.

 

“**Indenture**” means thatcertain Indenture dated as of February 6, 2004 (as modified and supplementedfrom time to time) by and between Nectar Merger Corporation (a wholly-ownedsubsidiary of the Company which was merged with and into FTD, Inc.) and U.S.Bank National Association, as trustee governing the $175 million 7.75% JuniorSubordinated Notes due 2014.

 

“**Interest Payment Date**” means each January 1and July 1 commencing the earlier of the first January 1 or July 1 immediatelyfollowing the Exchange Date.

 

“**Interest Swap and Hedging Obligation**” meansany obligation of any Person pursuant to any interest rate swap agreement,interest rate cap agreement, interest rate collar agreement, interest rateexchange agreement, currency exchange agreement, commodity hedging agreement orany other agreement or arrangement designed to protect against fluctuations ininterest rates, currency values or commodity prices and not for speculativepurposes, including, without limitation, any arrangement whereby, directly orindirectly, such Person is entitled to receive from time to time periodicpayments calculated by applying either a fixed or floating rate of interest ona stated notional amount in exchange for periodic payments made by such Personcalculated by applying a fixed or floating rate of interest on the samenotional amount.

 

“**Junior Preferred Stock**” means the Company’s12% Junior Redeemable Exchangeable Cumulative Preferred Stock.

 

16

----

 

“**Junior Securities**” means (1) the Company’sCapital Stock and all warrants, options or other rights to acquire the Company’sCapital Stock (but excluding any debt security that is convertible into, orexchangeable for, the Company’s Capital Stock) or (2) debt securities that aresubordinated to all Senior Debt (and any debt securities issued in exchange forSenior Debt) to substantially the same extent as, or to a greater extent than,this Debenture is subordinated to Senior Debt hereunder.

 

“**Management Agreement**”****means that certain management agreementamong any one or more of the Company’s Subsidiaries and Leonard Green &Partners, L.P., as such agreement may be amended from time to time.

 

“**Maturity Date**” has the meaning set forth inSection 1.2.

 

“**Merger Agreement**” means the Agreement andPlan of Merger, dated as of October 5, 2003, by and among the Company, NectarMerger Corporation and FTD, Inc.

 

“**Net CashProceeds**” means theaggregate amount of cash or Cash Equivalents received by the Company in thecase of a sale of Qualified Capital Stock or a Capital Contribution and by theCompany and its Subsidiaries in respect of an Asset Sale plus, in the case ofan issuance of Qualified Capital Stock upon any exercise, exchange orconversion of securities (including options, warrants, rights and convertibleor exchangeable debt) of the Company that were issued for cash on or after thePreferred Stock Issue Date, the amount of cash originally received by theCompany upon the issuance of such securities (including options, warrants,rights and convertible or exchangeable debt) less, in each case, the directcosts relating to such Asset Sale or issuance of Qualified Capital Stock,including, without limitation, legal, accounting, investment banking and otherprofessional fees, and brokerage and sales commissions and any relocation expensesincurred as a result thereof incurred in connection with such Asset Sale orsale of Qualified Capital Stock, and, in the case of an Asset Sale only less(1) the amount (estimated reasonably and in good faith by the Company) ofincome, franchise, sales and other applicable taxes required to be paid by theCompany or any of its respective Subsidiaries in connection with such AssetSale in the taxable year that such sale is consummated or in the immediatelysucceeding taxable year, the computation of which shall take into account thereduction in tax liability resulting from any available operating losses andnet operating loss carryovers, tax credits and tax credit carry-forwards, andsimilar tax attributes, (2) cash payments attributable to Persons owning aninterest (other than a lien) in the assets subject to the Asset Sale, (3) anydeduction of appropriate amounts to be provided by the Company as a reserve inaccordance with GAAP against any liability associated with the asset disposedof in such transaction and retained by the Company after such sale or otherdisposition thereof, including, without limitation, pension and otherpost-employment benefit liabilities and liabilities related to environmentalmatters or against any indemnification obligations associated with suchtransaction and (4) any holdbacks with respect to indemnification obligationsor purchase price adjustments pending receipt thereof.

 

“**Parent Entity”**means a Person that holds,directly or indirectly, Voting Equity Interests of the Company with votingpower, in the aggregate, at least equal to the voting power of the VotingEquity Interests of the Company hold by the Permitted Holders on the PreferredStock Issue Date.

 

“**Obligation**” means any principal, premium orinterest payment, or monetary penalty, or damages, or purchase price due by theCompany or any Subsidiary under the terms of this Debenture.

 

“**Outstanding Debentures**” means, as of thedate of determination, all Series B Junior Subordinated Debentures exceptSeries B Junior Subordinated Debentures theretofore canceled by the Company ordelivered to the Company for cancellation.

 

17

----

 

“***pari passu***”, whenused with respect to the ranking of any Indebtedness of any Person in relationto other Indebtedness of such Person, means that each such Indebtedness (a)either (i) is not subordinated in right of payment to any other Indebtedness ofsuch Person or (ii) is subordinate in right of payment to the same Indebtednessof such Person as is the other and is so subordinate to the same extent and (b)is not subordinate in right of payment to the other or to any Indebtedness ofsuch Person as to which the other is not so subordinate.

 

“**Payment Blockage Notice**” has the meaningset forth in Section 5.3.

 

“**Permitted Holders**”****each of Leonard Green & Partners,L.P., a Delaware limited partnership, and Green Equity Investors IV, L.P., aDelaware limited partnership, and any of their Affiliates.

 

“**Person**” means an individual, partnership,corporation, limited liability company, unincorporated organization, trust orjoint venture, or a governmental agency or political subdivision thereof orother entity.

 

“**Preferred Stock Issue Date**” means the firstdate on which shares of Junior Preferred Stock were originally issued by theCompany.

 

“**Post Commencement Interest and Expense Claims**”means any and all claims arising after the commencement of any bankruptcy,insolvency, receivership or similar proceeding for interest on Senior Debt atthe rate (including any applicable post-default rate) set forth in theinstrument evidencing or agreement governing such Senior Debt or for expensereimbursement or indemnification on the terms set forth in such instrument oragreement, whether or not such claims are enforceable, allowable or allowed insuch bankruptcy, insolvency, receivership or similar proceeding and even ifsuch claims are not enforceable or allowed therein.

 

“**Public Offering**” has the meaning set forthin Section 5(b)(ii) hereof.

 

“**Qualified Capital Stock**” means any CapitalStock that is not Disqualified Capital Stock.

 

“**Redemption Date**” with respect to thisDebenture, means the date on which this Debenture is redeemed by the Company.

 

“**Redemption Notice**” has the meaning setforth in Section 4.2(a).

 

“**Restricted Payment**” has the meaning setforth in Section 3.4.

 

“**SEC**”**means the Securities and Exchange Commission.

 

“**Securities Act**” means the Securities Act of1933, as amended, and the rules and regulations thereunder.

 

“**Senior Debt**” of the Company meansIndebtedness (including Post-Commencement Interest and Expense Claims) of theCompany under the Bank Facility and the Series A Junior Subordinated Debenturesor that, by the terms of the instrument creating or evidencing suchIndebtedness, is expressly designated Senior Debt and made senior in right ofpayment to the Debenture; provided, that in no event shall Senior Debtinclude (a) Indebtedness to any Subsidiary of the Company or any officer, 

 

18

----

 

director or employee of the Company or any Subsidiary of the Company,(b) Indebtedness incurred in violation of the terms of this Debenture, and (c)Disqualified Capital Stock.

 

“**Senior Preferred Stock**” means the Company’s14% Senior Redeemable Exchangeable Cumulative Preferred Stock.

 

“**Series A Junior Subordinated Debentures**”means all 14% Junior Subordinated Debentures of the Company issued in exchangefor Senior Preferred Stock.

 

“**Series B Junior Subordinated Debentures**”means all 12% Junior Subordinated Debentures of the Company issued on theExchange Date in exchange for Junior Preferred Stock.

 

“**Stockholders Agreement**” means the Stockholders Agreement,dated as of the Closing Date, among the Company, GEI, FTD Co-Investment LLC, aDelaware limited liability company, Robert L. Norton, Jon R. Burney, Ann M.Hofferberth, Lawrence W. Johnson, George T. Kanganis, Timothy D. Meline, DanielW. Smith, William J. Van Cleave, Carrie A. Wolfe and the other parties thereto,as the same may be amended from time to time.

 

“**Subsidiary**” with respect to any Person,means (i) any corporation of which the outstanding Capital Stock having atleast a majority of the votes entitled to be cast in the election of directorsunder ordinary circumstances shall at the time be owned, directly or indirectly,by such Person; or (ii) any other Person of which at least a majority ofthe voting interest under ordinary circumstances is at the time, directly orindirectly, owned by such Person.

 

“**Transfer**” has the meaning set forth inSection 7.4.

 

“**Transferee**” has the meaning set forth inSection 7.4.

 

“**Voting Equity Interests**” means CapitalStock, or warrants, options or other rights to acquire such Capital Stock,which at the time are entitled to vote in the election of, as applicable,directors, members or partners generally.

 

**ARTICLE VII.**

** **

**MISCELLANEOUS**

** **

Section 7.1             Section Headings.  The section headings contained in thisDebenture are for reference purposes only and shall not affect the meaning orinterpretation of this Debenture.

 

Section 7.2             Amendments.  Except as otherwise provided herein, noprovision of this Debenture may be amended, modified or waived unless theCompany shall have obtained the written agreement of the Holders of at least50% in principal amount of the then Outstanding Debentures.  Notwithstanding the previous sentence, theCompany may amend or modify this Debenture, at any time, to cure any ambiguity,defect or inconsistency.  Any amendment,modification or waiver made to this Debenture or any other Debenture shall bemade to all Outstanding Debentures and shall be deemed to have been made on allOutstanding Debentures immediately upon such amendment, modification or waiverto this Debenture.

 

Section 7.3             No Personal Liability.  A director, officer, employee, incorporatoror stockholder, of the Company, as such, will not have any liability for anyobligations of the Company under the 

 

19

----

 

Debenture or for any claim based on, in respect of, or by reason of,such obligations or their creation.  EachHolder by accepting a Debenture waives and releases all such liability.  The waiver and release are part of theconsideration for the issuance of the Debentures.

 

Section 7.4             Assignment.   The Holder may sell, assign or otherwisetransfer (collectively, a “**Transfer**”)any or all right, title or interest in or to this Debenture to any Person (a “**Transferee**”); provided, however,that if the Transferee is not a Person described in Section i(A), Section iv orSection vi of the definition of Qualified Institutional Buyer in Rule 144Apromulgated under the Securities Act, then such Transfer to such Person shallbe subject to the consent of the Company, such consent not to be unreasonablywithheld or delayed (it being understood that, prior to the Company making anydetermination to grant or withhold such consent, a proposed Transferee shall berequired to represent and warrant to the Company as to whether or not itengages, or directly or indirectly owns an equity interest in any Person thatengages, in any line of business conducted by the Company or its Subsidiariesor any reasonably related line of business). Any attempt to Transfer any or all right, title or interest in or tothis Debenture in violation of this Section 7.4 shall be null and void.

 

Section 7.5             Governing Law.  This Debenture shall be governed by, andconstrued in accordance with, the laws of the State of New York without givingeffect to any conflicts of laws principles thereof that would otherwise requirethe application of the law of any other jurisdiction.  All actions and proceedings arising out of orrelating to this Debenture shall be heard and determined in a New York State orFederal court sitting in the City of New York, and the parties hereto herebyirrevocably submit to the exclusive jurisdiction of such courts in any suchaction or proceeding and irrevocably waive the defense of an inconvenient forumto the maintenance of any such action or proceeding.

 

Section 7.6             Waiver of Jury Trial.   THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIALBY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OF THETRANSACTIONS CONTEMPLATED HEREIN, WHETHER NOW EXISTING OR HEREAFTER ARISING,AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.  THE PARTIES AGREE THAT ANY OF THEM MAY FILE ACOPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING,VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVETRIAL BY JURY AND THAT ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THISNOTE OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN SHALL INSTEAD BE TRIED IN ACOURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

Section 7.7             Lost, Stolen, Destroyed orMutilated Debenture.  Upon receipt ofevidence reasonably satisfactory to the Company of the loss, theft, destructionor mutilation of this Debenture and of indemnity arrangements reasonablysatisfactory to the Company from or on behalf of the Holder, and upon surrenderor cancellation of this Debenture if mutilated, the Company shall make and delivera new debenture of like tenor in lieu of such lost, stolen, destroyed ormutilated Debenture, at the Holder’s expense.

 

Section 7.8             Waiver of Presentment, Etc.  Except as otherwise provided herein,presentment, demand, protest, notice of dishonor and all other notices arehereby expressly waived by the Company.

 

Section 7.9             Usury.  Nothing contained in this Debenture shall bedeemed to establish or require the payment of a rate of interest in excess ofthe maximum rate legally enforceable.  Ifthe rate of interest called for under this Debenture at any time exceeds themaximum rate legally enforceable, the rate of interest required to be paidhereunder shall be automatically reduced to the maximum rate legally 

 

20

----

 

enforceable.  If such interestrate is so reduced and thereafter the maximum rate legally enforceable isincreased, the rate of interest required to be paid hereunder shall beautomatically increased to the lesser of the maximum rate legally enforceableand the rate otherwise provided for in this Debenture.

 

Section 7.10           Interpretation.  For the purposes of this Debenture:  (i) words in the singular shall be held toinclude the plural and vice versa and words of one gender shall be held to includethe other gender as the context requires and (ii) the word “including” andwords of similar import shall mean “including, without limitation,” unless thecontext otherwise requires or unless otherwise specified.

 

Section 7.11           Notices.  Any notice, request, instruction or otherdocument to be given hereunder by either party to the other shall be in writingand shall be deemed given when received and shall be (i) delivered personallyor (ii) mailed by certified mail, postage prepaid, return receipt requested or(iii) delivered by Federal Express or a similar overnight courier or (iv) sentvia facsimile transmission to the fax number given below, as follows:

 

If to theCompany, addressed to:

 

Mercury Man Holdings Corporation

11111 Santa Monica Boulevard

Suite 2000

Los Angeles, CA  90025

Attention:  John M. Baumer

Facsimile No.:  310-954-0404

 

with a copy to:

 

Latham & Watkins LLP

885 Third Avenue

New York, NY  10022

Attention:  Howard A. Sobel, Esq.

Facsimile No.:  212-751-4864

 

or at such other place as the Company shall have designated by noticeas herein provided to the Holder.

 

If to the Holder, addressed to:

 

 

Facsimile:

 

21

----

 

IN WITNESSWHEREOF, the Company has caused this instrument to be duly executed on the datefirst written above.

 

 
|   | MERCURY MAN HOLDINGS  CORPORATION |
|--------|-----------------------------------|
|   |                              |
|   |                              |
|   | By:                               |   |   |
|   |                              | Name: | John M. Baumer |
|   |                              | Title: | Vice President |
|        |                                   |  |  |  |  |

 

----