Document:

Exhibit 10.2

 

EMPLOYEE MATTERS AGREEMENT

 

by and between

 

UNITED ONLINE, INC.

 

and

 

FTD COMPANIES, INC.

 

dated as of

 

October 31, 2013

 

 

TABLE OF CONTENTS

 

	
 
    	
ARTICLE I
    	
 
    
	
 
    	
DEFINITIONS AND INTERPRETATION
    	
 
    
	
Section 1.1
    	
Definitions
    	
1
    
	
 
    	
ARTICLE II
    	
 
    
	
 
    	
GENERAL PRINCIPLES
    	
 
    
	
Section 2.1
    	
Assumption   and Retention of Liabilities; Related Assets
    	
4
    
	
Section 2.2
    	
Participation   in Benefit Plans
    	
5
    
	
Section 2.3
    	
Assumption   of Certain Benefit Plans
    	
5
    
	
Section 2.4
    	
Service   Recognition
    	
5
    
	
Section 2.5
    	
Approval   by United Online As Sole Stockholder
    	
5
    
	
Section 2.6
    	
Transfer   of Assets
    	
5
    
	
 
    	
ARTICLE III
    	
 
    
	
 
    	
U.S. QUALIFIED DEFINED CONTRIBUTION PLANS
    	
 
    
	
Section 3.1
    	
UOL   401(k) Plan; FTD 401(k) Plan
    	
6
    
	
Section 3.2
    	
Contributions   as of the Distribution Date
    	
6
    
	
 
    	
ARTICLE IV
    	
 
    
	
 
    	
U.S. HEALTH AND WELFARE PLANS
    	
 
    
	
Section 4.1
    	
Health   And Welfare Plans Maintained By United Online Prior To The Distribution Date
    	
6
    
	
Section 4.2
    	
Time-Off   Benefits
    	
7
    
	
 
    	
ARTICLE V
    	
 
    
	
 
    	
EMPLOYEE STOCK PURCHASE PLAN
    	
 
    
	
Section 5.1
    	
Effect   of Distribution on UOL ESPP
    	
7
    
	
Section 5.2
    	
Establishment   of FTD Employee Stock Purchase Plan
    	
 
    
	
 
    	
ARTICLE VI
    	
 
    
	
 
    	
EFFECT ON UOL EQUITY AWARDS
    	
 
    
	
Section 6.1
    	
Stock   Options
    	
8
    
	
Section 6.2
    	
Time-Based   Restricted Stock Units
    	
9
    
	
 
    	
ARTICLE VII
    	
 
    
	
 
    	
ADDITIONAL COMPENSATION MATTERS; SEVERANCE
    	
 
    
	
Section 7.1
    	
Annual   Incentive Awards
    	
10
    
	
Section 7.2
    	
Individual   Arrangements
    	
10
    
	
Section 7.3
    	
Severance   Plans
    	
10
    
	
Section 7.4
    	
Sections 162(m)/409A
    	
11
    
	
Section 7.5
    	
Certain   Director Fees
    	
11
    
	
 
    	
ARTICLE VIII
    	
 
    
	
 
    	
GENERAL AND ADMINISTRATIVE
    	
 
    
	
Section 8.1
    	
Employer   Rights
    	
11
    
	
Section 8.2
    	
No   Rights to Employment
    	
11
    
	
Section 8.3
    	
Continuation   of Elections/Release Of Information/Right To Reimbursement
    	
11
    
	
 
    	
ARTICLE IX
    	
 
    
	
 
    	
INDEMNIFICATION
    	
 
    
	
Section 9.1
    	
General   Indemnification
    	
11
    
	
 
    	
ARTICLE X
    	
 
    
	
 
    	
MISCELLANEOUS
    	
 
    
	
Section 10.1
    	
Further   Assurances
    	
12
    
	
Section 10.2
    	
Amendments   and Waivers
    	
12
    
	
Section 10.3
    	
Entire   Agreement
    	
12
    
	
Section 10.4
    	
Third   Party Beneficiaries
    	
12
    
	
Section 10.5
    	
Notices
    	
12
    
	
Section 10.6
    	
Counterparts;   Electronic Delivery
    	
12
    
	
Section 10.7
    	
Titles   and Headings
    	
12
    
	
Section 10.8
    	
Severability
    	
12
    
	
Section 10.9
    	
Assignability;   Binding Effect
    	
13
    
	
Section 10.10
    	
Governing   Law
    	
13
    
	
Section 10.11
    	
Construction
    	
13
    
	
Section 10.12
    	
Performance
    	
13
    
	
Section 10.13
    	
Title   and Headings
    	
 
    
	
Section 10.14
    	
Schedules
    	
13
    

 

 

EMPLOYEE MATTERS AGREEMENT

 

THIS EMPLOYEE MATTERS AGREEMENT (as the same may be amended or supplemented from time to time, this “Agreement”) is entered into as of October 31, 2013, by and between United Online, Inc., a Delaware corporation (“United Online”), and FTD Companies, Inc., a Delaware corporation (“FTD”). United Online and FTD are sometimes referred to herein individually as a “Party,” and collectively as the “Parties.”

 

RECITALS

 

WHEREAS, United Online and FTD have entered into a Separation and Distribution Agreement, dated as of the date hereof (the “Separation Agreement”), pursuant to which United Online will be separated into two independent publicly-traded companies: (a) FTD, which, following consummation of the transactions contemplated by the Separation Agreement, will own and conduct the FTD Business, and (b) United Online, which, following the consummation of the transactions contemplated by the Separation Agreement, will own and conduct the UOL Businesses;

 

WHEREAS, as set forth in the Separation Agreement, and subject to the terms and conditions thereof, the Parties currently intend to effect the distribution by United Online to the holders of outstanding shares of common stock, par value $0.0001 per share, of United Online, on a pro rata basis, of all of the outstanding shares of common stock, par value $0.0001 per share, of FTD, owned by United Online as of the Distribution Date (which shall represent 100% of the issued and outstanding shares of FTD common stock) (the “Distribution”); and

 

WHEREAS, pursuant to the Separation Agreement, United Online and FTD have agreed to enter into this Agreement for the purpose of allocating Assets, Liabilities and responsibilities with respect to employee compensation and benefit plans and programs between them.

 

NOW, THEREFORE, in consideration of the foregoing and the terms, conditions, covenants and provisions of this Agreement, the Parties mutually covenant and agree as follows:

 

ARTICLE I

 

DEFINITIONS AND INTERPRETATION

 

Section 1.1  Definitions.  Capitalized terms used, but not defined herein, shall have the meanings assigned to such terms in the Separation Agreement and the following terms shall have the following meanings:

 

“Affiliate” has the meaning set forth in the Separation Agreement.

 

“Agreement” has the meaning set forth in the preamble to this Agreement.

 

“Ancillary Agreements” has the meaning set forth in the Separation Agreement.

 

“Assets” has the meaning set forth in the Separation Agreement.

 

“Benefit Plan” means, with respect to an entity, each plan, program, arrangement, agreement or commitment that is an employment, change in control, consulting, non-competition or deferred compensation plan, program, arrangement, agreement or commitment or an executive compensation, incentive bonus or other bonus, employee pension, profit-sharing, savings, retirement, supplemental retirement, stock option, stock purchase, stock appreciation rights, restricted stock unit, other equity-based compensation, severance pay, salary continuation, life, health, hospitalization, sick leave, vacation pay, disability or accident insurance plan, corporate-owned or key-man life insurance or other employee benefit plan, program, arrangement, agreement or commitment, including any “employee benefit plan” (as defined in Section 3(3) of ERISA), in each case, that is sponsored or maintained by such entity or to which such entity contributes or is required to contribute.

 

“COBRA” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, as codified in Code Section 4980B and Sections 601 through 608 of ERISA.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

 

“Distribution” has the meaning set forth in the preamble to this Agreement.

 

“DOL” means the U.S. Department of Labor.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” means, with respect to any Person, each business or entity which is a member of a “controlled group of corporations,” under “common control” or a member of an “affiliated service group” with such Person within the meaning of Sections 414(b), (c) or (m) of the Code, or required to be aggregated with such Person under Section 414(o) of the Code, or under “common control” with such Person within the meaning of Section 4001(a)(14) of ERISA.

 

“Former Employee” means any individual who is a Former UOL Employee or a Former FTD Employee.

 

“Former FTD Employee” means any individual whose employment with United Online and its Subsidiaries terminated for any reason prior to the Distribution Date and who primarily provided services for an FTD Business at the time of his or her termination of employment.

 

“Former UOL Employee” means any individual whose employment with United Online and its Subsidiaries terminated for any reason prior to the Distribution Date, other than a Former FTD Employee.

 

“FTD” has the meaning set forth in the preamble to this Agreement.

 

“FTD 401(k) Plan” has the meaning set forth in Section 3.1(a).

 

“FTD Benefit Plan” means any Benefit Plan sponsored, maintained, contributed to or required to be contributed to by any member of the FTD Entities or any ERISA Affiliate thereof following the Distribution Date, including the Benefit Plans assumed pursuant to Section 2.3(a).

 

“FTD Board of Directors” means the board of directors of FTD.

 

“FTD Business” has the meaning set forth in the Separation Agreement.

 

“FTD Employee” means any individual who, on or immediately prior to the Distribution Date, is employed by any member of the FTD Entities, including active employees and employees on vacation or approved leave of absence (including maternity, paternity, family, sick leave, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, and leave under the Family Medical Leave Act and other approved leaves).

 

“FTD Entities” has the meaning set forth in the Separation Agreement.

 

“FTD Flexible Benefits Program” has the meaning set forth in Section 4.1(c).

 

“FTD Option” has the meaning set forth in Section 6.1(b).

 

“FTD Participant” means any individual who is a FTD Employee, a Former FTD Employee, a member of the FTD Board of Directors (including any member of the FTD Board of Directors who also continues as a member of the UOL Board of Directors on and following the Distribution Date) or a beneficiary, dependent or alternate payee of any of the foregoing.

 

“FTD Post-Separation Stock Price” means the volume weighted average price of a share of FTD Common Stock trading on NASDAQ over the first three trading days following the Distribution Date.

 

“FTD Ratio” has the meaning set forth in Section 6.1(b)(i).

 

“FTD Stock Plan” has the meaning set forth in Section 2.5.

 

“FTD Stock Unit Award” has the meaning set forth in Section 7.2(b).

 

“FTD Subsidiaries” has the meaning set forth in the Separation Agreement.

 

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“FTD Welfare Plans” has the meaning set forth in Section 4.1(a).

 

“Group” has the meaning set forth in the Separation Agreement.

 

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended.

 

“IRS” means the U.S. Internal Revenue Service.

 

“Liabilities” has the meaning set forth in the Separation Agreement.

 

“Participating Company” means United Online and any entity the employees of which are eligible to participate in a UOL Benefit Plan.

 

“Parties” has the meaning set forth in the preamble to this Agreement.

 

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

 

“Post-Distribution UOL Holder” has the meaning set forth in Section 6.1(a).

 

“Post-Distribution UOL Option” has the meaning set forth in Section 6.1(a).

 

“Post-Distribution UOL Stock Unit Award” has the meaning set forth in Section 6.2(a).

 

“Separation Agreement” has the meaning set forth in the recitals to this Agreement.

 

“United Online” has the meaning set forth in the preamble to this Agreement.

 

“UOL 401(k) Plan” means the United Online, Inc. 401k Plan.

 

“UOL Benefit Plan” means any Benefit Plan sponsored, maintained or contributed to by any member of the UOL Entities or any ERISA Affiliate thereof (or to which any such entity contributes or is required to contribute), whether prior to or following the Distribution Date, other than a FTD Benefit Plan.

 

“UOL Board of Directors” means the board of directors of United Online.

 

“UOL Businesses” has the meaning set forth in the Separation Agreement.

 

“UOL Employee” means any individual who, immediately prior to the Distribution Date, is employed by any member of the UOL Entities, including active employees and employees on vacation or approved leave of absence (including maternity, paternity, family, sick leave, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, and leave under the Family Medical Leave Act and other approved leaves).

 

“UOL Entities” has the meaning set forth in the Separation Agreement.

 

“UOL ESPP” means the United Online, Inc. 2010 Employee Stock Purchase Plan.

 

“UOL Flexible Benefits Program” means the United Online, Inc. Flexible Benefit Plan.

 

“UOL Option” has the meaning set forth in Section 6.1(a).

 

“UOL Participant” means any individual who is a UOL Employee, a Former UOL Employee, a member of the UOL Board of Directors (whether or not any such Board member continues as a member of the FTD Board of Directors on and following the Distribution Date) or a beneficiary, dependent or alternate payee of any of the foregoing.

 

“UOL Post-Separation Stock Price” means the volume weighted average price of a share of UOL Common Stock trading on NASDAQ over the first three trading days following the Distribution Date.

 

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“UOL Pre-Separation Stock Price’ means the volume weighted average price of a share of UOL Common Stock trading on NASDAQ over the three trading days immediately preceding the Distribution Date.

 

“UOL Ratio” has the meaning set forth in Section 6.1(a)(i).

 

“UOL Severance Plan” means the United Online, Inc. Severance Benefit Plan.

 

“UOL Stock Plans” means the United Online, Inc. 2001 Stock Incentive Plan, the United Online, Inc. 2010 Incentive Compensation Plan, the United Online 2001 Supplemental Stock Incentive Plan, the FTD Group, Inc. 2005 Equity Incentive Award Plan, and any other stock option or stock incentive compensation plan or arrangement maintained before the Distribution Date for employees, officers, non-employee directors or other independent contractors of any of the UOL Entities, as amended.

 

“UOL Stock Unit Award” has the meaning set forth in Section 6.2(a).

 

“UOL Subsidiaries” has the meaning set forth in the Separation Agreement.

 

“UOL Welfare Plans” means the health and welfare plans set forth on Schedule C hereto.

 

“U.S.” means the United States of America.

 

ARTICLE II

 

GENERAL PRINCIPLES

 

Section 2.1  Assumption and Retention of Liabilities; Related Assets.

 

(a)                                 As of the Distribution Date, except as otherwise expressly provided for in this Agreement, United Online shall, or shall cause one or more members of the UOL Entities to, assume or retain and United Online hereby agrees to pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all UOL Benefit Plans, (ii) all Liabilities with respect to the employment, service, workers compensation, termination of employment or termination of service of all UOL Employees and Former UOL Employees and their dependents and beneficiaries (and any alternate payees in respect thereof) and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker of any member of the UOL Entities or in any other employment, non-employment, or retainer arrangement, or relationship with any member of the UOL Entities or whose employment or service is or was otherwise primarily associated with the UOL Businesses), in each case to the extent arising in connection with or as a result of employment with or the performance of services for any member of the UOL Entities or FTD Entities, and (iii) any other Liabilities or obligations expressly assigned to any of the UOL Entities under this Agreement. The Liabilities assumed or retained by the UOL Entities as provided for in this Section 2.1(a) shall be UOL Liabilities for all purposes of the Separation Agreement.

 

(b)                                 As of the Distribution Date, except as otherwise expressly provided for in this Agreement, FTD shall, or shall cause one or more members of the FTD Entities to, assume or retain, as applicable, and FTD hereby agrees to pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all FTD Benefit Plans, (ii) all Liabilities with respect to the employment, service, workers compensation, termination of employment or termination of service of all FTD Employees and Former FTD Employees and their dependents and beneficiaries (and any alternate payees in respect thereof) and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker of any member of the FTD Entities or in any other employment, non-employment, or retainer arrangement, or relationship with any member of the FTD Entities or whose employment or service is or was otherwise primarily associated with the FTD Businesses), in each case to the extent arising in connection with or as a result of employment with or the performance of services for any member of the UOL Entities or FTD Entities, including but not limited to any corrective contributions to the UOL 401(k) Plan or other payments, in either case which may be due or relate to FTD Employees and Former FTD Employees based on the resolution of any IRS Voluntary Correction Program submission with respect to the UOL 401(k) Plan and (iii) any other Liabilities or obligations expressly assigned to any of the FTD Entities under this Agreement. The Liabilities assumed or retained by the FTD Entities as provided for in this Section 2.1(b) shall be FTD Liabilities for all purposes of the Separation Agreement.

 

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Section 2.2  Participation in Benefit Plans.  Except as otherwise expressly provided for in this Agreement or as otherwise expressly agreed to in writing between the Parties, effective as of the Distribution Date, (i) each member of the FTD Entities shall cease to be a Participating Company in any UOL Benefit Plan, (ii) each member of the UOL Entities shall cease to be a Participating Company in any FTD Benefit Plan, (iii) each FTD Participant shall cease to participate in, be covered by, accrue benefits under, be eligible to contribute to or have any rights under any UOL Benefit Plan, with the exception of rights relating to COBRA, and United Online and FTD shall take all necessary action to effectuate each such cessation and (iv) each UOL Participant shall cease to participate in, be covered by, accrue benefits under, be eligible to contribute to or have any rights under any FTD Benefit Plan, and FTD and United Online shall take all necessary action to effectuate each such cessation.

 

Section 2.3  Assumption of Certain Benefit Plans.

 

(a)                                 Prior to and effective as of the Distribution Date, United Online shall take all steps necessary to assign to a member of the FTD Entities, and such member of the FTD Entities shall take all steps necessary to assume, all Liabilities in respect of each Benefit Plan in which only FTD Participants participate, including, but not limited to, the FTD Retirement Plans.

 

(b)                                 Prior to and effective as of the Distribution Date, FTD shall take all steps necessary to assign to a member of the UOL Entities, and such member of the UOL Entities shall take all steps necessary to assume, all Liabilities in respect of each Benefit Plan in which only UOL Participants participate.

 

Section 2.4  Service Recognition.

 

(a)  Pre-Distribution Service Credit.  FTD shall give each FTD Participant full credit for purposes of eligibility, vesting, determination of level of benefits, and, to the extent applicable, benefit accruals under any FTD Benefit Plan for such FTD Participant’s service with United Online or any of its Subsidiaries prior to the Distribution Date to the same extent such service was recognized by the applicable Benefit Plans immediately prior to the Distribution Date and United Online shall give each UOL Participant full credit for purposes of eligibility, vesting, determination of level of benefits, and, to the extent applicable, benefit accruals under any UOL Benefit Plan for such UOL Participant’s service with United Online or any of its Subsidiaries prior to the Distribution Date to the same extent such service was recognized by the applicable Benefit Plans immediately prior to the Distribution Date; provided that such service shall not be recognized to the extent that such recognition would result in the duplication of benefits.

 

(b)                                 Nothing herein shall limit the UOL Entities or FTD Entities from recognizing service in addition to the service required to be recognized hereunder.

 

Section 2.5  Approval of FTD Stock Plan by United Online As Sole Stockholder.  Prior to the Distribution Date, FTD shall adopt the FTD Companies, Inc. 2013 Incentive Compensation Plan (the “FTD Stock Plan”). Prior to the Distribution, United Online, as FTD’s sole shareholder, shall approve the FTD Stock Plan.

 

Section 2.6  Transfer of Assets.  Assets, if any, attributable to the Liabilities referenced in the preceding provisions of this Article II shall be allocated (if applicable) as provided in the remaining provisions of this Agreement.

 

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ARTICLE III

 

U.S. QUALIFIED DEFINED CONTRIBUTION PLANS

 

Section 3.1  UOL 401(k) Plan; FTD 401(k) Plan.

 

(a)  Establishment of the FTD 401(k) Plan.  Prior to and effective as of the Distribution Date, FTD shall, or shall cause one or more members of the FTD Entities to, establish a defined contribution plans and trusts for the benefit of FTD Participants (the “FTD 401(k) Plan”). FTD shall take all necessary, reasonable and appropriate action to establish, maintain and administer the FTD 401(k) Plan so that it is qualified under Section 401(a) of the Code and that the related trust(s) is/are exempt under Section 501(a) of the Code. The members of the FTD Entities shall be responsible for any and all Liabilities and other obligations with respect to the FTD 401(k) Plan, and the members of the UOL Entities shall be responsible for any and all Liabilities and other obligations with respect to the UOL 401(k) Plan, except as expressly provided in Section 3.1(b).

 

(b)  Transfer of UOL 401(k) Plan Assets and Accrued Benefit Liabilities.  As soon as practicable but no later than sixty (60) days following the Distribution Date, United Online shall cause the accrued benefits (reflected in the accounts, including any outstanding loan balances) under the UOL 401(k) Plan attributable to FTD Participants and all of the Assets in the UOL 401(k) Plan related thereto to be transferred in-kind to the FTD 401(k) Plan, and FTD shall cause the FTD 401(k) Plan to accept such transfer of accrued benefits and Assets and, effective as of the date of such transfer, to assume and to fully perform, pay and discharge in due course in full, all obligations of the UOL 401(k) Plan relating to the accrued benefits of FTD Participants as of the Distribution Date. The transfer of Assets and Liabilities specified in this paragraph shall be conducted in accordance with Section 414(l) of the Code and Section 208 of ERISA.

 

Section 3.2  Contributions as of the Distribution Date.  All contributions payable to the UOL 401(k) Plan with respect to employee deferrals and contributions, matching contributions and other contributions for FTD Participants through the Distribution Date, determined in accordance with the terms and provisions of the UOL 401(k) Plan, ERISA and the Code, shall be paid by United Online to the UOL 401(k) Plan prior to the date of the Asset transfer described in Section 3.1(b).

 

Section 3.3  Alternative Date.  Notwithstanding any other provision of this Article III, references to the Distribution Date in this Article III may, in the discretion of United Online and FTD, be deemed to be references to such later date as may be mutually determined by United Online and FTD.

 

ARTICLE IV

 

U.S. HEALTH AND WELFARE PLANS

 

Section 4.1  Health And Welfare Plans Maintained By United Online Prior To The Distribution Date.

 

(a)  Establishment of the FTD Welfare Plans.  One or more members of the UOL Entities maintain the UOL Welfare Plans for the benefit of eligible UOL Participants and FTD Participants. Prior to and effective as of the Distribution Date, FTD shall, or shall cause a member of the FTD Entities to, adopt, for the benefit of eligible FTD Participants, health and welfare plans, the terms of which are substantially comparable, in the aggregate, to the terms of the UOL Welfare Plans as in effect immediately prior to the Distribution Date (collectively, the “FTD Welfare Plans”).

 

(b)  Terms of Participation in FTD Welfare Plans.  FTD shall cause the FTD Welfare Plans to (i) waive all preexisting conditions limitations, exclusions, and service conditions with respect to participation and coverage requirements applicable to FTD Participants, other than limitations that were in effect with respect to FTD Participants as of the Distribution Date under the UOL Welfare Plans, and (ii) waive any waiting period limitation or evidence of insurability requirement that would otherwise be applicable to a FTD Participant following the Distribution Date to the extent such FTD Participant had satisfied any similar limitation under the analogous UOL Welfare Plan. FTD Participants shall initially be eligible for participation in and benefits under FTD retiree welfare plans on the same basis under which they were eligible for participation in and benefits under the United Online retiree welfare plans immediately before the Distribution.

 

(c)  Reimbursement Account Plan.  Prior to and effective as of the Distribution Date, one or more members of the FTD Entities shall establish flexible spending reimbursement accounts under a cafeteria plan qualifying under Section 125 of the Code (the “FTD Flexible Benefits Program”) and each FTD Employee shall be eligible as of the Distribution Date to participate in the FTD Flexible Benefits Program pursuant to the terms of such plan. As of the Distribution Date, FTD shall cause the FTD Flexible Benefits Program to accept a transfer of the health care flexible spending reimbursement accounts of 

 

6

 

each FTD Employee who participates in the UOL Flexible Benefits Program immediately prior to the Distribution Date, and to honor and continue through October 31, 2013 the elections made by each FTD Employee under the UOL Flexible Benefits Program in respect of the health care flexible spending reimbursement accounts that are in effect immediately prior to the Distribution Date. As soon as practicable following the Distribution Date, United Online shall cause to be transferred from the UOL Flexible Benefits Program to the FTD Flexible Benefits Program the excess, if any, of the aggregate accumulated contributions to the health care flexible spending reimbursement accounts made by FTD Employees prior to the Distribution Date during 2013 over the aggregate reimbursement payouts paid to the FTD Employees for such year from such accounts. FTD shall cause the FTD Flexible Benefits Program to accept a transfer of the dependent care flexible spending reimbursement accounts of each FTD Employee who participates in the UOL Flexible Benefits Program immediately prior to the Distribution Date, and to honor and continue through October 31, 2013 the elections made by each FTD Employee under the UOL Flexible Benefits Program in respect of the dependent care flexible spending reimbursement accounts that are in effect immediately prior to the Distribution Date. As soon as practicable following the Distribution Date, United Online shall cause to be transferred from the UOL Flexible Benefits Program to the FTD Flexible Benefits Program the excess, if any, of the aggregate accumulated contributions to the dependent care flexible spending reimbursement accounts made by FTD Employees prior to the Distribution Date during 2013 over the aggregate reimbursement payouts paid to the FTD Employees for such year from such accounts. From and after the Distribution Date, FTD shall assume and be solely responsible for all claims by FTD Employees under the FTD Flexible Benefits Program incurred at any time during 2013, whether incurred prior to, on or after the Distribution Date, that have not been paid in full as of the Distribution Date.

 

(d)  Liabilities.

 

(i)  Insured Benefits.  With respect to employee welfare and fringe benefits that are provided through the purchase of insurance, United Online shall cause the UOL Welfare Plans to fully perform, pay and discharge in due course in full all claims of FTD Participants that are incurred prior to the Distribution Date and FTD shall cause the FTD Welfare Plans to fully perform, pay and discharge in due course in full all claims of FTD Participants that are incurred on or after the Distribution Date.

 

(ii)  Self-Insured Benefits.  With respect to employee welfare and fringe benefits that are provided on a self-insured basis, (A) United Online shall or shall cause a member of the UOL Entities to fully perform, pay and discharge in due course in full, all claims of FTD Participants that are incurred prior to the Distribution Date, and (B) FTD shall or shall cause a member of the FTD Entities to fully perform, pay and discharge in due course in full all claims of FTD Participants that are incurred on or after the Distribution Date.

 

(iii)  Incurred Claim Definition.  For purposes of this Section 4.1(e), a claim or Liability is deemed to be incurred (A) with respect to medical, dental, vision and/or prescription drug benefits, upon the rendering of health services giving rise to such claim or Liability; (B) with respect to life insurance, accidental death and dismemberment and business travel accident insurance, upon the occurrence of the event giving rise to such claim or Liability; (C) with respect to disability benefits, upon the date of an individual’s disability, as determined by the disability benefit insurance carrier or claim administrator, giving rise to such claim or Liability; and (D) with respect to a period of continuous hospitalization, upon the date of admission to the hospital.

 

(iv)  Claim Experience.  Notwithstanding the foregoing, the Parties shall take any action necessary to ensure that any claims experience under the UOL Welfare Plans attributable to FTD Participants shall be allocated to the FTD Welfare Plans.

 

Section 4.2  Time-Off Benefits.  FTD shall credit each FTD Participant with the amount of accrued but unused vacation time, sick time and other time-off benefits that such FTD Participant had earned as of the Distribution Date.

 

ARTICLE V

 

EMPLOYEE STOCK PURCHASE PLAN

 

Section 5.1  Effect of Distribution on UOL ESPP.  Pursuant to the terms of the UOL ESPP, each outstanding purchase right shall automatically be exercised on October 31, 2013 by applying the payroll deductions or other permitted contributions of each participant thereunder to the purchase of shares of UOL Common Stock at the purchase price per share in effect for that purchase interval. However, the applicable limitation on the number of shares of UOL Common Stock purchasable per participant shall continue to apply to any such purchase, but not the limitation applicable to the maximum number of shares of UOL Common Stock purchasable in total by all participants thereunder. The purchase rights under the UOL ESPP will be subject to the adjustments set forth in Section 6.1(a) below.

 

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ARTICLE VI

 

EFFECT ON UOL EQUITY AWARDS

 

Section 6.1  Stock Options.

 

(a)                                 Each option to purchase UOL Common Stock granted under the UOL Stock Plans (a “UOL Option”) that is outstanding immediately prior to the Distribution Date and that is held by a UOL Employee or a Former Employee, (a “Post-Distribution UOL Holder”) shall be adjusted effective as of immediately prior to the opening of market on the Distribution Date (and shall thereafter be referred to as a “Post-Distribution UOL Option”) as follows:

 

(i)                                     The number of shares of UOL Common Stock subject to each Post-Distribution UOL Option shall be equal to the product (rounded down to the nearest whole share) of (A) the number of shares of UOL Common Stock subject to the corresponding UOL Option immediately prior to the Distribution Date and (B) a fraction, the numerator of which is the UOL Pre-Separation Stock Price and the denominator of which is the UOL Post-Separation Stock Price (such fraction, the “UOL Ratio”).

 

(ii)                                  The exercise price per share for each Post-Distribution UOL Option shall be equal to (A) the exercise price of the corresponding UOL Option immediately prior to the Distribution Date divided by (B) the UOL Ratio (rounded up to the nearest whole cent).

 

(iii)                               Each Post-Distribution UOL Option shall otherwise be subject to the same terms, vesting conditions, exercise procedures, expiration dates and termination provisions and other terms and conditions as were in effect immediately prior to the Distribution Date for the corresponding UOL Option.

 

(b)                                 Each UOL Option that is outstanding immediately prior to the Distribution Date and that is held by a FTD Employee shall, effective as of immediately prior to the opening of market on the Distribution Date, be assumed and converted into an option to purchase FTD Common Stock (a “FTD Option”) as follows:

 

(i)                                     The number of shares of FTD Common Stock subject to each FTD Option shall be equal to the product (rounded down to the nearest whole share) of (A) the number of shares of UOL Common Stock subject to the corresponding UOL Option immediately prior to the Distribution Date and (B) a fraction, the numerator of which is the UOL Pre-Separation Stock Price and the denominator of which is the FTD Post-Separation Stock Price (such fraction, the “FTD Ratio”).

 

(ii)                                  The exercise price per share for each FTD Option shall be equal to the product of (A) the exercise price of the corresponding UOL Option immediately prior to the Distribution Date and (B) a fraction, the numerator of which is the FTD Post-Separation Stock Price and the denominator of which is the UOL Pre-Separation Stock Price.

 

(iii)                               Each FTD Option shall otherwise be subject to the same terms, vesting conditions, exercise procedures, expiration dates and termination provisions and other terms and conditions as were in effect immediately prior to the Distribution Date for the corresponding UOL Option. With respect to each FTD Option, FTD shall give each FTD Participant full vesting service credit for such FTD Participant’s service with United Online or any of its Subsidiaries prior to the Distribution Date to the same extent such service was recognized with respect to the corresponding UOL Option immediately prior to the Distribution Date.

 

(c)                                  Each option to purchase UOL Common Stock granted under the UOL Stock Plans that is outstanding immediately prior to the Distribution Date and that is held by Mark R. Goldston or by a Participant who is a non-employee member of the UOL Board of Directors shall, effective as of immediately prior to the opening of market on the Distribution Date, be assumed and converted into (i) in the case of one-half of such options, Post-Distribution UOL Options; and (ii) in the case of the remaining one-half of such options, FTD Options, in each case utilizing the adjustment mechanisms set forth in Section 6.1(a) and Section 6.1(b) above so that the total aggregate spread value of the UOL Options, on the one hand, and the sum of the total aggregate spread value of the Post-Distribution UOL Options and the FTD Options, on the other, is equivalent. The division of the UOL Options as set forth above in this subsection (c) shall be done on a grant-by-grant basis based on the number of shares underlying each grant of UOL Options. Upon the exercise of (or FTD’s receipt of notice of the intent to exercise) an FTD Option by Mark R. Goldston, FTD shall promptly notify United Online and shall promptly provide documentation and other information necessary to permit United Online to duly and timely prepare and file all Tax Returns (including IRS and other information returns) and duly and timely remit to each Tax Authority any payroll, withholding or

 

8

 

other payments due in connection with such exercise. In addition, FTD shall timely pay United Online an amount equal to the applicable income and employment tax withholding due in connection with such exercise. Upon the exercise of (or FTD’s receipt of notice of the intent to exercise) an FTD Option by a member of the UOL Board of Directors, FTD shall promptly notify United Online and shall promptly provide documentation and other information necessary to permit United Online to prepare and file all Tax Returns (including IRS and other information returns) in connection with such exercise. Any terms used in this Section 6.1(c) and not defined herein shall have the meaning set forth in the Tax Sharing Agreement between the parties hereto, dated as of October 31, 2013.

 

Section 6.2  Time-Based Restricted Stock Units.

 

(a)                                 Each United Online time-based restricted stock unit award granted under the UOL Stock Plans (including each deferred unit attributable to the deemed investment in UOL Common Stock under a non-qualified deferred compensation plan) (a “UOL Stock Unit Award”) that is outstanding immediately prior to the Distribution Date and that is held by a UOL Employee or a Former Employee shall be adjusted effective as of immediately prior to the opening of market on the Distribution Date (and shall thereafter be referred to as a “Post-Distribution UOL Stock Unit Award”) as follows:

 

(i)                                     The number of shares of UOL Common Stock subject to each Post-Distribution UOL Stock Unit Award shall be equal to the product (rounded up to the nearest whole share) of (A) the number of shares of UOL Common Stock subject to the corresponding UOL Stock Unit Award immediately prior to the Distribution Date and (B) the UOL Ratio.

 

(ii)                                  To the extent that a dividend equivalent relating to the Distribution is credited to the account of a holder of a United Online restricted stock unit, (A) the adjustments described in Section 6.2(a)(i) shall be made in a manner which does not result in double crediting; and (B) the ultimate payout of such dividend equivalent shall be made in the form of shares of UOL Common Stock with a value equal to the shares of FTD Common Stock which would otherwise have been released.

 

(iii)                               Each Post-Distribution UOL Stock Unit Award shall be subject to the same terms, vesting conditions, issuance dates and method of distribution and other terms and conditions as were in effect immediately prior to the Distribution Date for the corresponding UOL Stock Unit Award.

 

(b)                                 Each UOL Stock Unit Award that is outstanding immediately prior to the Distribution Date and that is held by a FTD Employee shall, effective as of immediately prior to the opening of market on the Distribution Date, be assumed and converted into a time-based restricted stock unit award with respect to FTD Common Stock (a “FTD Stock Unit Award”) as follows:

 

(i)                                     The number of shares of FTD Common Stock subject to each FTD Stock Unit Award shall be equal to the product (rounded up to the nearest whole share) of (A) the number of shares of UOL Common Stock subject to the corresponding UOL Stock Unit Award immediately prior to the Distribution Date and (B) the FTD Ratio.

 

(ii)                                  To the extent that a dividend equivalent relating to the Distribution is credited to the account of a holder of a United Online restricted stock unit, (A) the adjustments described in Section 6.2(b)(i) shall be made in a manner which does not result in double crediting; and (B) the ultimate payout of such dividend equivalent shall be made in the form of shares of FTD Common Stock.

 

(iii)                               Each FTD Stock Unit Award shall be subject to the same terms, vesting conditions, issuance dates and method of distribution and other terms and conditions that were in effect immediately prior to the Distribution Date for the corresponding UOL Stock Unit Award. With respect to each FTD Stock Unit Award, FTD shall give each FTD Participant full vesting service credit for such FTD Participant’s service with United Online or any of its Subsidiaries prior to the Distribution Date to the same extent such service was recognized with respect to the corresponding UOL Stock Unit Award immediately prior to the Distribution Date.

 

(c)                                  Each United Online restricted stock unit award granted under the UOL Stock Plans that is outstanding immediately prior to the Distribution Date and that is held by Mark R. Goldston or by a Participant who is a non-employee member of the UOL Board of Directors shall, effective as of immediately prior to the opening of market on the Distribution Date, immediately vest and be settled (i) in the case of one-half of such restricted stock unit awards, UOL Common Stock; and (ii) in the case of the remaining one-half of such restricted stock unit awards, FTD Common Stock, in each case utilizing the adjustment mechanisms set forth in Section 6.2(a)(i) and Section 6.2(b)(i) above so that the total aggregate value of the

 

9

 

United Online restricted stock unit awards, on the one hand, and the aggregate value of the shares of UOL Common Stock and FTD Common Stock, on the other, is equivalent. The division of the United Online restricted stock unit awards as set forth above in this subsection (c) shall be done on a grant-by-grant basis based on the number of shares underlying each grant of United Online restricted stock units.

 

(d)                                 All of the foregoing adjustments shall be effected in accordance with Sections 424 and 409A of the Code. In no event shall the adjustments set forth in this Section 6.2 serve to provide additional benefits to a holder of restricted stock unit awards beyond what such holder would have received had he or she been the holder of the number of shares of UOL Common Stock equal to the number of such holder’s restricted stock units.

 

(e)                                  The Parties shall use reasonable best efforts to maintain effective registration statements with the SEC with respect to the awards described in this Article VI, to the extent any such registration statement is required by applicable Law.

 

ARTICLE VII

 

ADDITIONAL COMPENSATION MATTERS; SEVERANCE

 

Section 7.1  Annual Incentive Awards.

 

(a)  FTD Assumption of Annual Incentive Liability.  Prior to and effective as of the Distribution Date, FTD shall assume or retain, as applicable, responsibility for all Liabilities and fully perform, pay and discharge in due course in full, all obligations relating to any annual incentive awards that any FTD Participant is eligible to receive with respect to calendar year 2013 and, effective as of the Distribution Date, United Online shall have no obligation with respect to any such annual incentive award.

 

(b)  United Online Assumption of Annual Incentive Liability.  Prior to and effective as of the Distribution Date, United Online shall assume or retain, as applicable, responsibility for all Liabilities and fully perform, pay and discharge in due course in full, all obligations relating to any annual incentive awards that any UOL Participant is eligible to receive with respect to calendar year 2013 and, effective as of the Distribution Date, FTD shall have no obligation with respect thereto.

 

(c)  Establishment of FTD Annual Incentive Plans.  Prior to and effective as of the Distribution Date, FTD shall adopt annual incentive plans which shall permit the issuance of annual incentive awards on terms and conditions established in the discretion of the FTD Board of Directors and/or the Compensation Committee thereof.

 

Section 7.2  Individual Arrangements.

 

(a)  United Online Individual Arrangements.  Except as otherwise provided herein, United Online shall assume or retain, as applicable, and shall have full responsibility with respect to any Liabilities and the payment or performance of any obligations arising out of or relating to, any employment, change in control, consulting, non-competition, retention or other compensatory arrangement previously entered into or provided by any member of the UOL Entities or FTD Entities to any UOL Participant (the “UOL Participant Agreements”). Effective as of the Distribution Date, FTD shall take all steps necessary to assign to United Online, and United Online shall take all steps necessary to assume, all Liabilities in respect of the UOL Participant Agreements.

 

(b)  FTD Individual Arrangements.  Except as otherwise provided herein, FTD shall assume or retain, as applicable, and shall have full responsibility with respect to any Liabilities and the payment or performance of any obligations arising out of or relating to, any employment, change in control, consulting, non-competition, retention or other compensatory arrangement previously entered into or provided by any member of the UOL Entities or FTD Entities to any FTD Participant (the “FTD Participant Agreements”). Effective as of the Distribution Date, United Online shall take all steps necessary to assign to FTD, and FTD shall take all steps necessary to assume, all Liabilities in respect of the FTD Participant Agreements.

 

Section 7.3  Severance Plans.

 

(a)  Assumption of Severance Liabilities.  Prior to and effective as of the Distribution Date (i) FTD shall assume or retain, as applicable, responsibility for all Liabilities and fully perform, pay and discharge in due course in full, all obligations relating to any benefit to which a FTD Participant is entitled under the UOL Severance Plan and (ii) United Online shall assume or retain, as applicable, responsibility for all Liabilities and fully perform, pay and discharge in due course in full all obligations relating to any benefit to which the UOL Participant is entitled under a UOL Severance Plan.

 

10

 

(b)  Effect of the Separation on Severance.  United Online and FTD acknowledge and agree that the transactions contemplated by the Separation Agreement will not constitute a termination of employment of any FTD Participant for purposes of any policy, plan, program or agreement of any member of the UOL Entities or FTD Entities that provides for the payment of severance, separation pay, salary continuation or similar benefits in the event of a termination of employment.

 

Section 7.4  Sections 162(m)/409A.  Notwithstanding anything in this Agreement to the contrary (including the treatment of supplemental and deferred compensation plans, outstanding long-term incentive awards and annual incentive awards provided for herein), the Parties agree to cooperate in good faith regarding the need to provide treatment different from that otherwise provided herein to ensure that (i) a federal income tax deduction for the payment of such supplemental or deferred compensation or long-term incentive award, annual incentive award or other compensation is not limited by reason of Section 162(m) of the Code, to the extent such award or compensation is intended to qualify as performance-based compensation for purposes of Section 162(m) of the Code, and (ii) the treatment of such supplemental or deferred compensation or long-term incentive award, annual incentive award or other compensation does not cause the imposition of a tax under Section 409A of the Code.

 

Section 7.5  Certain Director Fees.  United Online shall retain responsibility for the payment of any fees payable in respect of service on the UOL Board of Directors that are payable but not yet paid as of the Distribution Date, and FTD shall have no responsibility for any such payments (whether owed to an individual who is a member of the FTD Board of Directors as of the Distribution Date or otherwise). FTD shall retain responsibility for the payment of any fees payable in respect of service on the FTD Board of Directors, and United Online shall have no responsibility for any such payments (whether owed to an individual who is a member of the UOL Board of Directors as of the Distribution Date or otherwise).

 

ARTICLE VIII

 

GENERAL AND ADMINISTRATIVE

 

Section 8.1  Employer Rights.  Nothing in this Agreement shall (i) prohibit any FTD Entities from amending, modifying or terminating any FTD Benefit Plan at any time in its sole discretion or (ii) prohibit any UOL Entities from amending, modifying or terminating any UOL Benefit Plan at any time in its sole discretion.

 

Section 8.2  No Rights to Employment.  Nothing in this Agreement is intended to confer upon any employee or former employee of any of the UOL Entities or FTD Entities any right to continued employment, or any recall or similar rights to an individual on layoff or any type of approved leave.

 

Section 8.3  Continuation of Elections/Release Of Information/Right To Reimbursement.  Effective as of the Distribution Date, FTD and United Online shall cause each FTD Benefit Plan and each UOL Benefit Plan, respectively, to recognize and maintain all existing elections and designations (including all beneficiary designations) to the extent applicable. To the extent permitted by applicable Law, all authorizations for the release of information and rights to reimbursement made by or relating to FTD Participants under UOL Benefit Plans or by UOL Participants under FTD Benefit Plans shall be transferred to and be in full force and effect under the corresponding FTD Benefit Plans or UOL Benefit Plans, respectively, until such authorizations or rights are replaced or revoked by, or no longer apply to, the relevant FTD Participant or UOL Participant, as the case may be.

 

ARTICLE IX

 

INDEMNIFICATION

 

Section 9.1  General Indemnification.  Any claim for indemnification under this Agreement shall be governed by, and be subject to, the provisions of Article IX of the Separation Agreement, which provisions are hereby incorporated by reference into this Agreement and any references to “Agreement” in such Article IX as incorporated herein shall be deemed to be references to this Agreement.

 

11

 

ARTICLE X

 

MISCELLANEOUS

 

Section 10.1  Further Assurances.  Subject to the limitations or other provisions of this Agreement, (a) each Party shall, and shall cause the other members of its Group to, use commercially reasonable efforts (subject to, and in accordance with applicable Law) to take promptly, or cause to be taken promptly, all actions, and to do promptly, or cause to be done promptly, and to assist and cooperate with the other Party in doing, all things reasonably necessary, proper or advisable to carry out the intent and purposes of this Agreement, including using commercially reasonable efforts to perform all covenants and agreements herein applicable to such Party or any member of its Group and (b) neither Party will, nor will either Party allow any other member of its Group to, without the prior written consent of the other Party, take any action which would reasonably be expected to prevent or materially impede, interfere with or delay the matters contemplated by this Agreement. Without limiting the generality of the foregoing, where the cooperation of third parties would be necessary in order for a Party to completely fulfill its obligations under this Agreement, such Party shall use commercially reasonable efforts to cause such third parties to provide such cooperation.

 

Section 10.2  Amendments and Waivers.

 

(a)                                 Subject to Section 11.1 of the Separation Agreement, this Agreement may not be amended except by an agreement in writing signed by both Parties.

 

(b)                                 Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the Party entitled to the benefit thereof and any such waiver shall be validly and sufficiently given for the purposes of this Agreement if it is in writing signed by an authorized representative of such Party. No delay or failure in exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any other right, power or remedy. The rights and remedies hereunder are cumulative and not exclusive of any rights or remedies that either Party would otherwise have.

 

Section 10.3  Entire Agreement.  This Agreement, the Separation Agreement, the other Ancillary Agreements and the Exhibits and Schedules attached hereto and thereto, constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof.

 

Section 10.4  Third Party Beneficiaries.  This Agreement is solely for the benefit of the Parties and shall not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.

 

Section 10.5  Notices.  All notices, requests, permissions, waivers and other communications hereunder shall be provided in accordance with the provisions of Section 12.10 of the Separation Agreement.

 

Section 10.6  Counterparts; Electronic Delivery.  This Agreement may be executed in multiple counterparts, each of which when executed shall be deemed to be an original, but all of which together shall constitute one and the same agreement. Execution and delivery of this Agreement or any other documents pursuant to this Agreement by facsimile or other electronic means shall be deemed to be, and shall have the same legal effect as, execution by an original signature and delivery in person.

 

Section 10.7  Titles and Headings.  Titles and headings to Sections and Articles herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

 

Section 10.8  Severability.  If any term or other provision of this Agreement or Schedules attached hereto is determined by a nonappealable decision by a court, administrative agency or arbitrator to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the court, administrative agency or arbitrator shall interpret this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions

 

12

 

contemplated hereby are fulfilled to the fullest extent possible. If any provision in this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only as broad as is enforceable.

 

Section 10.9  Assignability; Binding Effect.  Except as otherwise expressly provided in this Agreement, neither Party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other Party, and any attempt to assign this Agreement without such consent shall be void and of no effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.

 

Section 10.10  Governing Law.  This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the State of Delaware, without regard to any conflicts of law provisions thereof that would result in the application of the laws of any other jurisdiction.

 

Section 10.11  Construction.  This Agreement shall be construed as if jointly drafted by the Parties, and no rule of construction or strict interpretation shall be applied against either Party. The Parties represent that this Agreement is entered into with full consideration of any and all rights which the Parties may have. The Parties have relied upon their own knowledge and judgment and upon the advice of the attorneys of their choosing. The Parties have had access to independent legal advice, have conducted such investigations they and their counsel thought appropriate, and have consulted with such other independent advisors as they and their counsel deemed appropriate regarding this Agreement and their rights and asserted rights in connection therewith. The Parties are not relying upon any representations or statements made by the other Party, or such other Party’s employees, agents, representatives or attorneys, regarding this Agreement, except to the extent such representations are expressly set forth or incorporated in this Agreement. The Parties are not relying upon a legal duty, if one exists, on the part of the other Party (or such other Party’s employees, agents, representatives or attorneys) to disclose any information in connection with the execution of this Agreement or its preparation, it being expressly understood that neither Party shall ever assert any failure to disclose information on the part of the other Party as a ground for challenging this Agreement.

 

Section 10.12  Performance.  Each Party shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any Subsidiary or Affiliate of such Party.

 

Section 10.13  Schedules.  The Schedules attached hereto are incorporated herein by reference and shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein.

 

[Signature Page Follows]

 

13

 

IN WITNESS WHEREOF, the Parties have caused this Employee Matters Agreement to be duly executed as of the day and year first above written.

 

	
 
    	
UNITED ONLINE, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Neil P. Edwards
    
	
 
    	
 
    	
Name:
    	
Neil   P. Edwards
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
FTD COMPANIES, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Becky Sheehan
    
	
 
    	
 
    	
Name:
    	
Becky   Sheehan
    
	
 
    	
 
    	
Title:
    	
Executive   Vice President and Chief Financial Officer
    

 

[Signature Page to Employee Matters Agreement]

 

 

SCHEDULE A

UOL WELFARE PLANS

 

MEDICAL

 

Aetna Select EPO

Aetna Choice POS II Basic

Aetna Choice POS II Plus

Exec—U—Care Plan

 

DENTAL

 

Aetna DMO

Aetna PPO Basic

Aetna PPO Plus

Aetna Employee Assistance Program

 

VISION

 

VSP

 

LIFE & AD&D INSURANCE

 

MetLife Life Insurance

MetLife AD&D Insurance

MetLife Supplemental Life Insurance

 

SHORT- & LONG TERM DISABILITY

 

MetLife Short-Term Disability

MetLife Long-Term Disability

 

FLEXIBLE SPENDING ACCOUNTS

 

Medical Flexible Spending Account

Dependent Flexible Spending Account

 

VOLUNTARY BENEFITS

 

Long Term Care Insurance

Accident Insurance

Whole Life Insurance

Critical Illness InsuranceExhibit 10.3

 

TAX SHARING AGREEMENT

 

by and between

 

UNITED ONLINE, INC.

 

and

 

FTD COMPANIES, INC.

 

dated as of

 

October 31, 2013

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
Article I DEFINITIONS
    	
1
    
	
Article II PREPARATION AND FILING OF TAX   RETURNS
    	
5
    
	
Section 2.1
    	
United   Online’s Responsibility
    	
5
    
	
Section 2.2
    	
FTD’s   Responsibility
    	
5
    
	
Section 2.3
    	
Agent
    	
5
    
	
Section 2.4
    	
Manner   of Tax Return Preparation
    	
5
    
	
Section 2.5
    	
Tax   Services
    	
5
    
	
Article III LIABILITY FOR TAXES
    	
6
    
	
Section 3.1
    	
United   Online’s Liability
    	
6
    
	
Section 3.2
    	
FTD’s   Liability
    	
6
    
	
Section 3.3
    	
Subsequent   Adjustments
    	
6
    
	
Section 3.4
    	
Determination   of Taxes Attributable to the FTD Business
    	
6
    
	
Article IV DISTRIBUTION TAXES AND ALLOCATION
    	
7
    
	
Section 4.1
    	
Distribution   Taxes
    	
7
    
	
Section 4.2
    	
Private   Letter Rulings; Tax Opinion
    	
8
    
	
Section 4.3
    	
Carrybacks
    	
8
    
	
Section 4.4
    	
Allocation   of Tax Assets
    	
9
    
	
Section 4.5
    	
Allocation   of Certain Tax Items
    	
9
    
	
Section 4.6
    	
Tax   Treatment of Equity-Related Compensation
    	
9
    
	
Article V INDEMNIFICATION
    	
10
    
	
Section 5.1
    	
Generally
    	
10
    
	
Section 5.2
    	
Inaccurate, Incomplete   or Untimely Information
    	
10
    
	
Section 5.3
    	
Adjustments   to Payments
    	
10
    
	
Section 5.4
    	
Reporting   of Indemnifiable Loss
    	
10
    
	
Section 5.5
    	
No   Indemnification for Tax Items
    	
11
    
	
Section 5.6
    	
Double   Recovery
    	
11
    
	
Article VI PAYMENTS
    	
11
    
	
Section 6.1
    	
In   General
    	
11
    
	
Section 6.2
    	
Treatment   of Payments
    	
11
    
	
Section 6.3
    	
Prompt   Performance
    	
11
    
	
Section 6.4
    	
After   Tax Amounts
    	
11
    
	
Section 6.5
    	
Interest
    	
11
    
	
Article VII TAX PROCEEDINGS
    	
12
    
	
Section 7.1
    	
Audits
    	
12
    
	
Section 7.2
    	
Notice
    	
12
    
	
Section 7.3
    	
Remedies
    	
12
    
	
Section 7.4
    	
Control   of Distribution Tax Proceedings
    	
12
    
	
Article VIII MISCELLANEOUS PROVISIONS
    	
13
    
	
Section 8.1
    	
Effectiveness
    	
13
    
	
Section 8.2
    	
Cooperation   and Exchange of Information
    	
13
    
	
Section 8.3
    	
Dispute   Resolution
    	
13
    
	
Section 8.4
    	
Changes   in Law
    	
14
    
	
Section 8.5
    	
Confidentiality
    	
14
    
	
Section 8.6
    	
Affiliates
    	
14
    
	
Section 8.7
    	
Authority
    	
15
    
	
Section 8.8
    	
Setoff
    	
15
    
	
Section 8.9
    	
Amendments   and Waivers
    	
15
    
	
Section 8.10
    	
Entire   Agreement
    	
15
    
	
Section 8.11
    	
Third-Party   Beneficiaries
    	
15
    
	
Section 8.12
    	
Notices
    	
15
    
	
Section 8.13
    	
Counterparts;   Electronic Delivery
    	
15
    
	
Section 8.14
    	
Severability
    	
15
    
	
Section 8.15
    	
Assignability;   Binding Effect
    	
15
    
	
Section 8.16
    	
Governing   Law
    	
16
    
	
Section 8.17
    	
Construction
    	
16
    
	
Section 8.18
    	
Titles   and Headings
    	
16
    
	
Section 8.19
    	
Coordination   with Employee Matters Agreement
    	
16
    
	
Section 8.20
    	
Conflict   or Inconsistency Between Agreements
    	
16
    

 

i

 

TAX SHARING AGREEMENT

 

THIS TAX SHARING AGREEMENT (as the same may be amended or supplemented from time to time, this “Agreement”) is entered into as of October 31, 2013, by and between United Online, Inc., a Delaware corporation (“United Online”), and FTD Companies, Inc., a Delaware corporation (“FTD”). United Online and FTD are sometimes referred to herein individually as a “Party,” and collectively as the “Parties.” Capitalized terms used herein and not otherwise defined have the respective meanings set forth in Article I.

 

RECITALS

 

WHEREAS, United Online and FTD have entered into a Separation and Distribution Agreement, dated as of the date hereof (the “Separation Agreement”), pursuant to which United Online will be separated into two independent publicly-traded companies: (a) FTD, which, following consummation of the transactions contemplated by the Separation Agreement, will own and conduct the FTD Business, and (b) United Online, which, following the consummation of the transactions contemplated by the Separation Agreement, will own and conduct the UOL Businesses;

 

WHEREAS, UNOL Intermediate, Inc., a Delaware corporation, which wholly owns all of the FTD Affiliates, was renamed FTD Companies, Inc. on April 25, 2013;

 

WHEREAS, United Online is the common parent of an affiliated group of corporations that files a consolidated United States federal income tax return;

 

WHEREAS, as set forth in the Separation Agreement, and subject to the terms and conditions thereof, the Parties currently intend to effect the distribution by United Online to the holders of outstanding shares of common stock, par value $0.0001 per share, of United Online, on a pro rata basis, of all of the outstanding shares of common stock, par value $0.0001 per share, of FTD, owned by United Online as of the Distribution Date (which shall represent 100% of the issued and outstanding shares of FTD common stock) (the “Distribution”);

 

WHEREAS, following the Distribution, (a) FTD will be the common parent of an affiliated group of corporations that files a consolidated United States federal income tax return and (b) the currently existing affiliated group of which United Online is the common parent will remain in existence with all of its previous members other than FTD and those FTD Affiliates which were previously members;

 

WHEREAS, United Online has received a private letter ruling from the IRS (the “IRS Ruling”) to the effect that, among other things, for United States federal income tax purposes, the Distribution will qualify as a tax-free distribution under section 355 of the Code; and

 

WHEREAS, the Parties desire to set forth their agreement on the rights and obligations, following the Distribution, of the members of the UOL Tax Group, on the one hand, and the members of the FTD Tax Group, on the other hand, with respect to (a) handling and allocating United States federal, state and local and foreign Taxes in periods beginning before the Distribution Date, (b) Taxes resulting from transactions effectuated in connection with the Distribution and (c) various other Tax matters.

 

NOW, THEREFORE, in consideration of the foregoing and the terms, conditions, covenants and provisions of this Agreement, the Parties mutually covenant and agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

“Affiliate” means with respect to any Person, any other Person of which all or a portion of the stock or other equity interests are owned, directly or indirectly, by such first Person.

 

“Agreement” means this Tax Sharing Agreement.

 

“After Tax Amount” means any additional amount necessary to reflect (through a gross-up mechanism) the hypothetical Tax consequences of the receipt or accrual of any payment required to be made under this Agreement (including payment of an additional amount or amounts hereunder and the effect of the deductions available for interest paid or accrued

 

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and for Taxes such as state and local Income Taxes), determined by using the highest marginal corporate Tax rate (or rates, in the case of an item that affects more than one Tax) for the relevant Taxable Period (or portion thereof).

 

“Ancillary Agreements” has the meaning set forth in the Separation Agreement.

 

“Audit” means any audit, assessment of Taxes, or other examination by any Taxing Authority, proceeding, or appeal of such a proceeding relating to Taxes, whether administrative or judicial, including proceedings relating to competent authority determinations.

 

“Carryback” has the meaning set forth in Section 4.3(c).

 

“Code” means the Internal Revenue Code of 1986, as amended, and any successor thereto.

 

“Consolidated Return” means any Tax Return reflecting or reporting United States federal, state, local or foreign Taxes filed on a consolidated, combined, unitary or similar basis which includes both (i) FTD or one or more FTD Affiliates and (ii) United Online or one or more UOL Affiliates.

 

“Controlling Party” has the meaning set forth in Section 7.4(c).

 

“Dispute Resolution Commencement Date” has the meaning set forth in Section 8.3.

 

“Dispute” has the meaning set forth in Section 8.3.

 

“Distribution” has the meaning set forth in the recitals to this Agreement.

 

“Distribution Date” means the date on which the Distribution occurs, such date to be determined by, or under the authority of, the Board of Directors of United Online, in its sole and absolute discretion.

 

“Distribution Taxes” means any Taxes imposed on United Online or any UOL Affiliate resulting from, or arising in connection with, the failure of the Distribution to be tax-free to United Online or such UOL Affiliate under section 355 of the Code (including, without limitation, any Tax resulting from the application of section 355(d) or 355(e) of the Code to the Distribution) or corresponding provisions of the laws of any other jurisdictions. Each Tax referred to in the immediately preceding sentence shall be determined using the highest marginal federal and state corporate Income Tax rate for the relevant Taxable Period (or portion thereof).

 

“Employee Matters Agreement” has the meaning set forth in the Separation Agreement.

 

“Filing Party” has the meaning set forth in Section 7.1.

 

“Final Determination” means the final resolution of liability for any Tax for any Taxable Period, by or as a result of: (i) a final and unappealable decision, judgment, decree or other order by any court of competent jurisdiction; (ii) a final settlement with the IRS, a closing agreement or accepted offer in compromise under Code section 7121 or 7122, or a comparable agreement under the laws of other jurisdictions, which resolves the entire liability for such Tax for any Taxable Period; (iii) any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered by the jurisdiction imposing the Tax; or (iv) any other final disposition, including by reason of the expiration of the applicable statute of limitations.

 

“FTD” has the meaning set forth in the first sentence of this Agreement.

 

“FTD Affiliate” means any previous, current or future Affiliate of FTD and/or one or more of its Affiliates.

 

“FTD Business” means (a) the consumer business and the floral network business conducted by the FTD Group and (b) any other business directly conducted by any member of the FTD Group as of or prior to the date of this Agreement.

 

“FTD Group” means FTD and each FTD Affiliate.

 

“FTD Group Member” means FTD, each Person that is or was an FTD Affiliate and each Person that becomes an FTD Affiliate after the Distribution.

 

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“FTD Tax Group” means the Tax Group of which FTD is the common parent.

 

“Income Tax” means any federal, state, local or foreign Tax based upon, measured by or calculated by reference to net income or profits, net receipts or gross receipts (regardless of whether denominated as an “income tax,” a “franchise tax” or otherwise).

 

“Indemnifiable Loss Deduction” has the meaning set forth in Section 5.3.

 

“Indemnified Loss” has the meaning set forth in Section 5.3.

 

“Indemnifying Party” has the meaning set forth in Section 5.3.

 

“Indemnitee” has the meaning set forth in Section 5.3.

 

“IRS” means the United States Internal Revenue Service or any successor thereto, including, but not limited to its agents, representatives, and attorneys.

 

“IRS Ruling” has the meaning set forth in the recitals to this Agreement.

 

“IRS Ruling Documents” means (1) the request for a private letter ruling under section 355 and various other sections of the Code, filed by United Online with the IRS in connection with the Distribution, together with any supplemental filings or ruling requests or other materials subsequently submitted in connection with such request on behalf of United Online, its Affiliates and shareholders to the IRS, the appendices and exhibits thereto, and any rulings issued by the IRS to United Online in response to such request or (2) any similar filings submitted to, or rulings issued by, any other Taxing Authority in connection with the Distribution.

 

“Non-Controlling Party” has the meaning set forth in Section 7.4(c).

 

“Owed Party” has the meaning set forth in Section 6.1.

 

“Owing Party” has the meaning set forth in Section 6.1.

 

“Payment Period” has the meaning set forth in Section 6.5.

 

“Party” has the meaning set forth in the second sentence of this Agreement.

 

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

 

“Post-Distribution Period” means a Taxable Period (or portion thereof) beginning after the Distribution Date.

 

“Pre-Distribution Period” means a Taxable Period (or portion thereof) ending on or before the Distribution Date.

 

“Prohibited Act” has the meaning set forth in Section 4.4.

 

“Representation Letter” means an officer’s certificate in which certain representations, warranties and covenants are made on behalf of United Online and FTD in connection with the issuance of the Tax Opinion.

 

“Restated Tax Saving Amount” has the meaning set forth in Section 5.4.

 

“Separation Agreement” has the meaning set forth in the recitals to this Agreement.

 

“Refund” means any refund (or credit in lieu thereof) of Taxes (including any overpayment of Taxes that can be refunded or, alternatively, applied to other Taxes payable), including any interest paid on or with respect to such refund of Taxes; provided that for purposes of this Agreement, the amount of any Refund required to be paid to another Party shall be reduced by the net amount of any Income Taxes imposed on, related to, or attributable to, the receipt or accrual of such Refund.

 

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“Straddle Period” means a Taxable Period that begins on or before and ends after the Distribution Date.

 

“Supplemental IRS Ruling Documents” means (1) any request for a Supplemental IRS Ruling and any materials, appendices and exhibits submitted or filed therewith and any Supplemental IRS Rulings issued by the IRS to United Online in response to any such request and (2) any similar filings submitted to, or rulings issued by, any other Taxing Authority in connection with the Distribution.

 

“Supplemental IRS Ruling” means (1) any ruling issued by the IRS in connection with the Distribution, other than a ruling in response to United Online’s initial request for the IRS Ruling, and (2) any similar ruling issued by any other Taxing Authority addressing the application of a provision of the laws of another jurisdiction to the Distribution.

 

“Tax” and “Taxes” include all taxes, charges, fees, duties, levies, imposts or other assessments imposed by any federal, state, local or foreign Taxing Authority, including, but not limited to, income, gross receipts, excise, property, sales, use, license, capital stock, transfer, franchise, payroll, withholding, social security, value added and other taxes, and any interest, penalties or additions attributable thereto.

 

“Tax Asset” means any Tax Item that has accrued for Tax purposes, but has not been used during a Taxable Period, and that could reduce a Tax in another Taxable Period, including, but not limited to, a net operating loss, net capital loss, investment tax credit, foreign tax credit, charitable deduction, credit related to alternative minimum tax and any other Tax credit.

 

“Tax Benefit” means a reduction in the Tax liability of a taxpayer for any Taxable Period. A Tax Benefit shall be deemed to have been realized or received from a Tax Item in a Taxable Period only if and to the extent that the Tax liability of the taxpayer for such period, after taking into account the effect of the Tax Item on the Tax liability of such taxpayer in the current period and all prior periods, is less than it would have been if such Tax liability were determined without regard to such Tax Item.

 

“Tax Detriment” means an increase in the Tax liability of a taxpayer for any Taxable Period. A Tax Detriment shall be deemed to have been realized or received from a Tax Item in a Taxable Period only if and to the extent that the Tax liability of the taxpayer for such period, after taking into account the effect of the Tax Item on the Tax liability of such taxpayer in the current period and all prior periods, is more than it would have been if such Tax liability were determined without regard to such Tax Item.

 

“Tax Group” means any United States federal, state, local or foreign affiliated, consolidated, combined, unitary or similar group or fiscal unity that joins in the filing of a single Tax Return.

 

“Tax Item” means any item of income, gain, loss, deduction, credit, recapture of credit or any other attribute or item (including the adjusted basis of property) that may have the effect of increasing or decreasing any Tax.

 

“Tax Opinion” means an opinion issued to United Online by Skadden, Arps, Slate, Meagher & Flom LLP (which opinion will rely upon the effectiveness of the IRS Ruling), in form and substance acceptable to the Parties substantially to the effect that, among other things, the Distribution will qualify as a tax-free distribution under section 355 of the Code.

 

“Tax Return” means any return, report, certificate, form or similar statement or document (including any related or supporting information or schedule attached thereto and any information return, amended tax return, claim for refund or declaration of estimated tax) supplied or required to be supplied to, or filed or required to be filed with, a Taxing Authority in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax.

 

“Tax Saving Amount” has the meaning set forth in Section 5.3.

 

“Tax Services” has the meaning set forth in Section 2.5(a).

 

“Taxable Period” means any period for which a liability for Tax is determined.

 

“Taxing Authority” means any governmental authority or any subdivision, agency, commission or authority thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (including the IRS).

 

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“Transition Services Agreement” has the meaning set forth in the Separation Agreement.

 

“Treasury Regulations” means the final and temporary (but not proposed) income tax regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

 

“United Online” has the meaning set forth in the first sentence of this Agreement.

 

“UOL Affiliate” means any previous, current or future Affiliate of United Online and/or one or more of its Affiliates, but excluding FTD and any FTD Affiliate.

 

“UOL Businesses” means (a) the communications and content and media businesses conducted by the UOL Group (including, without limitation, NetZero, Juno, Classmates.com and MyPoints.com) and (b) any other business (other than the FTD Business) directly conducted by any member of the UOL Group as of or prior to the date of this Agreement.

 

“UOL Group” means United Online and each UOL Affiliate, but excluding any FTD Group Member.

 

“UOL Group Member” means United Online, each Person that is or was a UOL Affiliate, and each Person that becomes a UOL Affiliate after the Distribution, but excluding any FTD Group Member.

 

“UOL Tax Group” means the Tax Group of which United Online is the common parent.

 

ARTICLE II

 

PREPARATION AND FILING OF TAX RETURNS

 

Section 2.1  United Online’s Responsibility.  United Online shall have sole and exclusive responsibility for the preparation and filing of:

 

(a)                                 all Consolidated Returns;

 

(b)                                 all Tax Returns that include only United Online and/or any UOL Affiliate; and

 

(c)                                  any Tax Returns required to be filed for a Taxable Period ending on or before, or that includes, the Distribution Date that are not otherwise described in Section 2.1 or Section 2.2.

 

Section 2.2  FTD’s Responsibility.  FTD shall have sole and exclusive responsibility for the preparation and filing of all Tax Returns that include only FTD and/or any FTD Affiliate.

 

Section 2.3  Agent.  Subject to the other applicable provisions of this Agreement, FTD hereby irrevocably designates, and agrees to cause each FTD Affiliate to so designate, United Online as its sole and exclusive agent and attorney-in-fact to take such actions (including execution of documents) as are appropriate in any and all matters (including Audits) relating to any Tax Return described in Section 2.1(a) or Section 2.1(c).

 

Section 2.4  Manner of Tax Return Preparation.  Unless otherwise required by a Taxing Authority or by applicable law, the Parties shall prepare and file all Tax Returns, and take all other actions, in a manner consistent with this Agreement, the Separation Agreement, the IRS Ruling Documents, any Supplemental IRS Ruling Documents and past practice. All Tax Returns shall be filed on a timely basis (taking into account applicable extensions) by the Party responsible for filing such Tax Returns under this Agreement.

 

Section 2.5  Tax Services.

 

(a)  In General.  It is the intention of the Parties that except as specifically provided herein, the Transition Services Agreement shall govern the provision of tax services by United Online to FTD and the other members of the FTD Group (the “Tax Services”).

 

(b)  Right to Review.  United Online shall provide or cause to be provided any Tax Return (or portion or excerpt thereof relating exclusively to FTD or FTD Affiliates) to be filed by United Online on behalf of FTD

 

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pursuant to this Agreement at least ten (10) business days prior to the due date of such Tax Return, including extensions. FTD shall have the right to comment on any such Tax Return (or portion or excerpt thereof, as applicable), and United Online shall reasonably consider FTD’s comments.

 

(c)  Information.  United Online shall provide or cause to be provided to FTD copies of all Tax Returns (or portions or excerpts thereof relating exclusively to FTD or FTD Affiliates) filed on behalf of FTD, in each case within fifteen (15) days of filing pursuant to this Agreement, and shall promptly provide any notices or communications from any Taxing Authority relating to any Tax or Tax Return of FTD or an FTD Affiliate covered by the Tax Services.

 

(d)  List of Tax Returns.  As soon as practicable after the Distribution Date, United Online shall provide to FTD a list of all Tax Returns to be filed by United Online on behalf of FTD or FTD Affiliates pursuant to Section 2.1(a) or Section 2.1(c).

 

ARTICLE III

 

LIABILITY FOR TAXES

 

Section 3.1  United Online’s Liability.

 

(a)                                 United Online shall be liable for all Taxes due with respect to all Tax Returns described in (a) Section 2.1(a) or Section 2.1(c), except to the extent described in Section 3.2 hereof, and (b) Section 2.1(b). United Online shall be liable for any Tax deficiency assessed with respect to the portion of such Tax Returns for which it is responsible. United Online shall be entitled to receive and retain all Refunds of Taxes previously paid by United Online or any UOL Affiliates with respect to Taxes described in this Section 3.1.

 

Section 3.2  FTD’s Liability.  FTD shall be liable for all Taxes due with respect to Tax Returns described in (a) Section 2.1(a) or Section 2.1(c), but only to the extent that such Taxes are attributable to the FTD Business, and with respect to Income Taxes, as determined pursuant to Section 3.4, and (b) Section 2.2. FTD shall be liable for any Tax deficiency assessed with respect to the portion of such Tax Returns for which it is responsible. FTD shall be entitled to receive and retain all Refunds of Taxes previously paid by FTD or any FTD Affiliates with respect to Taxes described in this Section 3.2.

 

Section 3.3  Subsequent Adjustments.  If, as a result of any payment by United Online of a Tax in connection with an Audit, adjustment, or amended Tax Return described in Section 2.1, FTD receives a reciprocal (i.e., arising directly from such adjustment) net Tax Benefit, FTD shall pay the amount of such Tax Benefit to United Online. If, as a result of any payment by FTD of a Tax in connection with an Audit, adjustment, or amended Tax Return described in Section 2.1 or Section 2.2, United Online receives a reciprocal net Tax Benefit, United Online shall pay the amount of such Tax Benefit to FTD.

 

Section 3.4  Determination of Taxes Attributable to the FTD Business.

 

(a)  United States Federal Income Tax.  For purposes of Section 3.2, the amount of U.S. federal Income Tax attributable to the FTD Business shall be the amount of such U.S. federal Income Taxes that the FTD Tax Group would have been required to pay on a consolidated basis if the FTD Tax Group had paid tax on behalf of an affiliated group consisting only of the FTD Group, as determined in a manner consistent with the following principles:

 

(i)                                     including only Tax Items of members of the FTD Tax Group that were included in the relevant UOL Tax Group consolidated Tax Return;

 

(ii)                                  using all elections, accounting methods and conventions used on the UOL Tax Group consolidated Tax Return for such period; and

 

(iii)                               applying the highest statutory marginal corporate Income Tax rate in effect for such taxable period.

 

(b)  State Income Tax.  For purposes of Section 3.2, the amount of state or local Income Taxes attributable to the FTD Business shall be as determined by United Online in a manner consistent with the principles set forth in

 

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Section 3.4(a) (for the avoidance of doubt, using the highest statutory marginal state or local corporate Income Tax rate for such applicable state or local jurisdiction, as the case may be).

 

(c)  Foreign Income Tax.  For purposes of Section 3.2, the amount of foreign Income Taxes attributable to the FTD Business shall be as determined by United Online in a manner consistent with the principles set forth in Section 3.4(a).

 

ARTICLE IV

 

DISTRIBUTION TAXES AND ALLOCATION

 

Section 4.1  Distribution Taxes.

 

(a)  United Online’s Liability for Distribution Taxes.  Notwithstanding Article III, United Online shall be liable for one hundred percent (100%) of any Distribution Taxes that are attributable to, or result from, one or more of the following:

 

(i)                                     any action or omission by any UOL Group Member that is inconsistent with any material or information, or that constitutes a breach of any covenant or representation, pertaining to any UOL Group Member in the IRS Ruling Documents, the IRS Ruling, any Supplemental IRS Ruling Documents, any Supplemental IRS Ruling or the Representation Letter;

 

(ii)                                  any action or omission by any UOL Group Member after the Distribution Date, including, without limitation, a cessation, transfer to affiliates, or disposition of its active trades or businesses, or an issuance of stock, stock buyback or payment of an extraordinary dividend by any UOL Group Member following the Distribution;

 

(iii)                               any acquisition of any stock or assets of any UOL Group Member by one or more other Persons occurring prior to or following the Distribution; or

 

(iv)                              any issuance of stock by any UOL Group Member, or change in ownership of stock in any UOL Group Member, that causes section 355(d) or section 355(e) of the Code to apply to the Distribution.

 

(b)  FTD’s Liability for Distribution Taxes.  Notwithstanding Article III, FTD shall be liable for one hundred percent (100%) of any Distribution Taxes that are attributable to, or result from, one or more of the following:

 

(i)                                     any action or omission by any FTD Group Member that is inconsistent with any material or information, or that constitutes a breach of any covenant or representation, pertaining to any FTD Group Member in the IRS Ruling Documents, the IRS Ruling, any Supplemental IRS Ruling Documents, any Supplemental IRS Ruling or the Representation Letter;

 

(ii)                                  any action or omission by any member of the FTD Group after the Distribution Date, including without limitation, a cessation, transfer to affiliates or disposition of its active trades or businesses, or an issuance of stock, stock buyback or payment of an extraordinary dividend by any member of the FTD Group following the Distribution;

 

(iii)                               any acquisition of any stock or assets of any member of the FTD Group by one or more other Persons following the Distribution; or

 

(iv)                              any issuance of stock by any member of the FTD Group, or change in ownership of stock in any member of the FTD Group, that causes section 355(d) or section 355(e) of the Code to apply to the Distribution.

 

(c)  First Party Responsible.  The first party to act or fail to act in a manner that results in the imposition of Distribution Taxes shall be liable for one hundred percent (100%) of such Distribution Taxes pursuant to Section 4.1(a) or 4.1(b), as applicable; provided that if such first party is able to act, and does act, in a manner that

 

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results in Distribution Taxes not being imposed, then such first party shall not be liable for any Distribution Taxes imposed as a result of any act or omission by the other party subsequent to the first party’s action or omission.

 

(d)  No Party Responsible.  If Distribution Taxes are imposed and no Party bears responsibility for the imposition of such taxes under Section 4.1(c), or if both Parties shall bear simultaneous responsibility for the imposition of such taxes under Section 4.1(c), then FTD shall be liable for fifty percent (50%) of such Distribution Taxes pursuant to Section 4.1(a) or 4.1(b), and United Online shall be liable for fifty percent (50%), of such Distribution Taxes pursuant to Section 4.1(a) or 4.1(b).

 

Section 4.2  Private Letter Rulings; Tax Opinion.

 

(a)  Information.  United Online has provided FTD with copies of the IRS Ruling Documents submitted on or prior to the date of this Agreement, and shall provide FTD with copies of any IRS Ruling Documents or Supplemental IRS Ruling Documents prepared after such date prior to the submission of such IRS Ruling Documents or Supplemental IRS Ruling Documents, as applicable, to a Taxing Authority. United Online shall provide FTD with a copy of the IRS Ruling, a copy of the Representation Letter and a copy of the Tax Opinion.

 

(b)  Cooperation by FTD.  FTD shall cooperate with United Online, and shall take any and all actions reasonably requested by United Online, in connection with (i) United Online’ submission of any IRS Ruling Documents prepared after the date specified in the preamble to this Agreement and (ii) United Online’s request for the Tax Opinion (including, without limitation, by making any representation or covenant or providing any materials or information requested by Skadden, Arps, Slate, Meagher & Flom LLP).

 

(c)  Supplemental IRS Rulings.

 

(i)                                     In General.  At the reasonable request of FTD, United Online shall cooperate with FTD and use its reasonable best efforts to seek to obtain, as expeditiously as possible, a Supplemental IRS Ruling or other guidance from the IRS or any other Taxing Authority for the purpose of confirming the continuing validity of any ruling issued by any Taxing Authority addressing the application of the law to the Distribution; provided that United Online shall not be obligated to seek a Supplemental IRS Ruling if it reasonably believes that seeking such Supplemental IRS Ruling would adversely affect United Online, its shareholders or any other UOL Group Member. In no event shall United Online be required to file any Supplemental IRS Ruling Documents unless FTD represents that (A) it has read the Supplemental IRS Ruling Documents and (B) all information and representations, if any, relating to FTD and the other members of the FTD Group contained in the Supplemental IRS Ruling Documents are true, correct and complete in all material respects. FTD shall reimburse United Online for all reasonable costs and expenses incurred by United Online and any other UOL Group Member in obtaining a Supplemental IRS Ruling requested by FTD. FTD shall not seek any guidance (whether written or oral) from the IRS or any other Taxing Authority concerning the Distribution except as set forth in this Section 4.2(c).

 

(ii)                                  Participation Rights.  If United Online requests a Supplemental IRS Ruling or other guidance after the date specified in the preamble to this Agreement: (A) United Online shall keep FTD informed in a timely manner of all material actions taken or proposed to be taken by United Online in connection therewith; (B) United Online shall (1) reasonably in advance of the submission of any such Supplemental IRS Ruling Documents provide FTD with a draft thereof, (2) reasonably consider FTD’s comments to such draft, (3) provide FTD with a final copy of the Supplemental IRS Ruling Documents, (4) provide FTD with notice reasonably in advance of, and FTD shall have the right to attend, any meetings with the Taxing Authority (subject to the approval of the Taxing Authority) that relate to such Supplemental IRS Ruling and (5) provide FTD with a copy of such Supplemental IRS Ruling.

 

Section 4.3  Carrybacks.

 

(a)                                 The carryback of any loss, credit or other Tax Asset from any Post-Distribution Period shall be in accordance with the provisions of the Code and Treasury Regulations (and any applicable state, local or foreign laws).

 

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(b)                                 Except to the extent otherwise consented to by United Online (such consent not to be unreasonably withheld, conditioned or delayed) or prohibited by applicable law, FTD shall elect to relinquish, waive or otherwise forgo the carryback of any loss, credit or other Tax Asset from any Post-Distribution Period to any Pre-Distribution Period or Straddle Period (a “Carryback”). In the event that FTD (or the appropriate member of the FTD Group) is prohibited by applicable law to relinquish, waive or otherwise forgo a Carryback (or United Online consents to a Carryback), United Online shall cooperate with FTD, at FTD’s expense, in seeking from the appropriate Taxing Authority such Refund as reasonably would result from such Carryback, to the extent that such Refund is directly attributable to such Carryback, and shall pay over to FTD the amount of such Refund within ten (10) days after such Refund is received; provided that FTD shall indemnify and hold the members of the UOL Group harmless from and against any and all collateral Tax consequences resulting from or caused by any such Carryback, including, without limitation, the loss or postponement of any benefit from the use of Tax Assets generated by a UOL Group Member if (i) such Tax Assets expire unutilized, but would have been utilized but for such Carryback, or (ii) the use of such Tax Assets is postponed to a later taxable period than the taxable period in which such Tax Assets would have been utilized but for such Carryback.

 

Section 4.4  Allocation of Tax Assets.

 

(a)                                 United Online and FTD shall cooperate, each at its own expense, in determining the allocation of any Tax Assets or Tax liabilities among the Parties in accordance with the Code and Treasury Regulations (and any applicable state, local and foreign laws). In the absence of controlling legal authority or unless otherwise provided under this Agreement, Tax Assets or Tax liabilities shall be allocated to the legal entity that incurred the cost or burden associated with the creation of such Tax Assets or Tax liabilities. United Online and FTD hereby agree to compute all Taxes for Post-Distribution Periods and Straddle Periods consistently with the determinations made pursuant to this Section 4.4 unless otherwise required by a Final Determination.

 

(b)                                 To the extent that the amount of any Tax Asset is later reduced or increased by a Taxing Authority, or as a result of an Audit or carrybacks of Tax Assets from Post-Distribution Periods of either the UOL Tax Group or the FTD Tax Group, such reduction or increase shall be allocated to the Party to which such Tax Attribute was allocated pursuant to Section 4.4(a)

 

Section 4.5  Allocation of Certain Tax Items.

 

(a)  Allocation Between Taxable Periods.  If applicable law requires the Taxable Period of any FTD Group Member that was a member of the UOL Tax Group prior to the Distribution Date to end as of the close of the Distribution Date, then Tax Items shall be included in each Taxable Period in accordance with Treasury Regulation § 1.1502-76(b)(2)(i) with no election under Treasury Regulation § 1.1502-76(b)(2)(ii).

 

(b)  Allocation Within a Straddle Period.  If applicable law does not require the Taxable Period of FTD and each FTD Group Member that was a member of the UOL Tax Group prior to the Distribution Date to end as of the close of the Distribution Date, then the amount of Tax Items attributable to each portion of the Straddle Period shall be determined by means of a closing of the books and records of such FTD Group Member as of the close of the Distribution Date; provided that exemptions, allowances or deductions that are calculated on an annual or periodic basis shall be allocated between such portions in proportion to the number of days in each such portion.

 

(c)  Extraordinary Transactions.  Notwithstanding anything to the contrary in this Agreement, for all Tax purposes, the Parties shall report any transaction that is outside the ordinary course of the normal day-to-day operations of the FTD Business that is undertaken, caused or permitted by any FTD Group Member that occurs on the Distribution Date but after the Distribution as occurring on the date after the Distribution Date pursuant to Treasury Regulation § 1.1502-76(b)(1)(ii)(B) or any similar or analogous provision of state, local or foreign law. United Online shall not make a ratable allocation election pursuant to Treasury Regulation § 1.1502-76(b)(2)(ii)(D) or any similar or analogous provision of state, local or foreign law for the tax year in which the Distribution occurs.

 

Section 4.6  Tax Treatment of Equity-Related Compensation.

 

(a)                                 United Online or a UOL Affiliate shall be entitled to claim any Tax deduction relating to (A) (i) the exercise of an option award to purchase United Online stock and (ii) the vesting of a restricted stock unit with respect to United Online stock, in each case, held by an employee or former employee of United Online or a UOL Affiliate at the time of such exercise, vesting or payment; (B) with respect to Mark R. Goldston (i) the exercise of an option award to purchase United Online stock or FTD stock and (ii) the vesting of a restricted stock unit with respect to United Online stock or FTD

 

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stock; and (C) with respect to a member of the Board of Directors of United Online prior to the Distribution (i) the exercise of an option award to purchase United Online stock or FTD stock and (ii) the vesting of a restricted stock unit with respect to United Online stock or FTD stock.

 

(b)                                 Subject to Section 4.6(a)(B) and (C), FTD or an FTD Affiliate shall be entitled to claim any Tax deduction relating to (i) the exercise of an option award to purchase FTD stock and (ii) the vesting of a restricted stock unit with respect to FTD stock, in each case, held by an employee or former employee of United Online or a UOL Affiliate at the time of such exercise, vesting or payment.

 

(c)                                  Upon the exercise of (or FTD’s receipt of notice of the intent to exercise) an option award to purchase FTD stock by Mark R. Goldston, FTD shall promptly notify United Online and shall promptly provide documentation and other information necessary to permit United Online to duly and timely prepare and file all Tax Returns (including IRS and other information returns) and duly and timely remit to each Tax Authority any payroll, withholding or other payments due in connection with such exercise. In addition, FTD shall timely pay United Online an amount equal to the applicable income and employment tax withholding due in connection with such exercise. Upon the exercise of (or FTD’s receipt of notice of the intent to exercise) an option award to purchase FTD stock by a member of the Board of Directors of United Online prior to the Distribution, FTD shall promptly notify United Online and shall promptly provide documentation and other information necessary to permit United Online to prepare and file all Tax Returns (including IRS and other information returns) in connection with such exercise.

 

ARTICLE V

 

INDEMNIFICATION

 

Section 5.1  Generally.  The UOL Tax Group shall jointly and severally indemnify FTD, each FTD Affiliate, and their respective directors, officers and employees, and hold them harmless from and against any and all Taxes or Tax deficiencies for which United Online or any UOL Affiliate is liable under this Agreement and any loss, cost, damage or expense, including reasonable attorneys’ fees and costs, that are attributable to, or result from the failure of United Online or any director, officer or employee to make any payment required to be made under this Agreement. The FTD Tax Group shall jointly and severally indemnify United Online, each UOL Affiliate, and their respective directors, officers and employees, and hold them harmless from and against any and all Taxes or Tax deficiencies for which FTD or any FTD Affiliate is liable under this Agreement and any loss, cost, damage or expense, including reasonable attorneys’ fees and costs, that is attributable to, or results from, the failure of FTD, any FTD Affiliate or any director, officer or employee to make any payment required to be made under this Agreement.

 

Section 5.2  Inaccurate, Incomplete or Untimely Information.  The UOL Tax Group shall jointly and severally indemnify FTD, each FTD Affiliate, and their respective directors, officers and employees, and hold them harmless from and against any loss, cost, damage, fine, penalty, or other expense of any kind attributable to the negligence of United Online or any UOL Affiliate in supplying FTD or any FTD Affiliate with inaccurate, incomplete or untimely information, in connection with the preparation of any Tax Return. The FTD Tax Group shall jointly and severally indemnify United Online, each UOL Affiliate, and their respective directors, officers and employees, and hold them harmless from and against any loss, cost, damage, fine, penalty, or other expense of any kind attributable to the negligence of FTD or any FTD Affiliate in supplying United Online or any UOL Affiliate with inaccurate, incomplete or untimely information, in connection with the preparation of any Tax Return.

 

Section 5.3  Adjustments to Payments.  Any Party that is entitled to receive a payment (the “Indemnitee”) under this Agreement from another Party (the “Indemnifying Party”) with respect to any Taxes, losses, costs, damages or expenses suffered or incurred by the Indemnitee (an “Indemnified Loss”) shall pay to such Indemnifying Party, or the Indemnifying Party shall pay to the Indemnitee, as applicable, an amount equal to the difference between any “Tax Saving Amount” actually realized by the Indemnitee in the year of the payment and the amount of the Indemnified Loss. For purposes of this Section 5.3, the “Tax Saving Amount” shall equal the amount by which the Income Taxes of the Indemnitee or any of its affiliates are reduced (including, without limitation, through the receipt of a refund, credit or otherwise), plus any related interest received by the Indemnitee (net of Tax) from a Taxing Authority, as a result of claiming as a deduction or offset on any relevant Tax Return amounts attributable to an Indemnified Loss (the “Indemnifiable Loss Deduction”).

 

Section 5.4  Reporting of Indemnifiable Loss.  In the event that an Indemnitee incurs an Indemnified Loss, such Indemnitee shall claim as a deduction or offset on any relevant Tax Return (including, without limitation, any claim for refund) such Indemnified Loss to the extent such position is more likely than not (within the meaning of Section 1.6662-4(d) of the Treasury Regulations) to be sustained with respect to United States federal, state and local Tax Returns or has similar

 

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appropriate authoritative support with respect to any Tax Return other than a United States federal, state or local Tax Return. Except as otherwise provided in this Agreement, the Indemnitee shall have primary responsibility for the preparation of its Tax Returns and reporting thereon such Indemnifiable Loss Deduction; provided that the Indemnitee shall consult with, and provide the Indemnifying Party with a reasonable opportunity to review and comment on the portion of the Indemnitee’s Tax Return relating to the Indemnified Loss. If a Dispute arises between the Indemnitee and the Indemnifying Party as to whether a deduction or tax position with respect to an Indemnified Loss is “more likely than not” (with respect to United States federal, state and local Tax Returns) to be sustained or similar appropriate authoritative support (with respect to any Tax Return other than a United States federal, state or local Tax Return) for the claiming of an Indemnifiable Loss Deduction, such Dispute shall be resolved in accordance with the principles and procedures set forth in Section 8.3. United Online and FTD shall act in good faith to coordinate their Tax Return filing positions with respect to the Taxable Periods that include an Indemnifiable Loss Deduction. Any Tax Saving Amount calculated under Section 5.3 hereof shall be adjusted in the event of an Audit which results in a Final Determination that increases or decreases the amount of the Indemnifiable Loss Deduction reported on any relevant Tax Return of the Indemnitee. The Indemnitee shall promptly inform the Indemnifying Party of any such Audit and shall attempt in good faith to sustain the Indemnifiable Loss Deduction at issue in the Audit. Upon receiving a written notice of a Final Determination in respect of an Indemnifiable Loss Deduction, the Indemnitee shall redetermine the Tax Saving Amount attributable to the Indemnifiable Loss Deduction under Section 5.3 hereof, taking into account the Final Determination (the “Restated Tax Saving Amount”). If the Restated Tax Saving Amount is greater than the Tax Saving Amount, the Indemnitee shall promptly pay the Indemnifying Party an amount equal to the difference between such amounts. If the Restated Tax Saving Amount is less than the Tax Saving Amount, then the Indemnifying Party shall pay to the Indemnitee an amount equal to the difference between such amounts promptly after receipt of written notice setting forth the amount due and the computation thereof.

 

Section 5.5  No Indemnification for Tax Items.  Nothing in this Agreement or any other ancillary document shall be construed as a guarantee of the existence or amount of any loss, credit, carryforward, basis or other Tax Item, whether past, present or future, of any Party.

 

Section 5.6  Double Recovery.  Notwithstanding anything herein to the contrary, no Party shall be entitled to indemnification hereunder for any amount to the extent such Party has otherwise been reimbursed for such amount.

 

ARTICLE VI

 

PAYMENTS

 

Section 6.1  In General.  In the event that one party (the “Owing Party”) is required to make a payment to another party (the “Owed Party”) pursuant to this Agreement, then such payments shall be made according to this Article VI. All payments shall be made to the Owed Party or to the appropriate Taxing Authority as specified by the Owed Party within the time prescribed for payment in this Agreement, or if no period is prescribed, within twenty (20) days after delivery of written notice of payment owing together with a computation of the amounts due.

 

Section 6.2  Treatment of Payments.  Unless otherwise required by any Final Determination, the Parties agree that any payments made by one Party to the other Party (other than payments of interest pursuant to Section 6.5 and payments of After Tax Amounts pursuant to Section 6.4) pursuant to this Agreement shall be treated for all Tax purposes as nontaxable payments made immediately prior to the Distribution and, accordingly not includible in the taxable income of the recipient.

 

Section 6.3  Prompt Performance.  All actions required to be taken by any Party under this Agreement shall be performed within the time prescribed for performance in this Agreement, or if no period is prescribed, such actions shall be performed promptly.

 

Section 6.4  After Tax Amounts.  If pursuant to a Final Determination it is determined that the receipt or accrual of any payment made under this Agreement (other than payments of interest pursuant to Section 6.5) is subject to any Tax, the Party making such payment shall be liable for (a) the After Tax Amount with respect to such payment and (b) interest at the rate described in Section 6.5 on the amount of such Tax from the date such Tax accrues through the date of payment of such After Tax Amount. A Party making a demand for a payment pursuant to this Agreement and for a payment of an After Tax Amount with respect to such payment shall separately specify and compute such After Tax Amount. However, a Party may choose not to specify an After Tax Amount in a demand for payment pursuant to this Agreement without thereby being deemed to have waived its right subsequently to demand an After Tax Amount with respect to such payment.

 

Section 6.5  Interest.  If an Owing Party fails to make any payment pursuant to this Agreement within the period prescribed for such payment in this Agreement, such Owing Party shall be obligated to pay, in addition to the amount

 

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otherwise due, interest on such amount at a rate per annum equal to five percent (5%). Such interest shall be payable at the same time as the payment to which it relates.

 

ARTICLE VII

 

TAX PROCEEDINGS

 

Section 7.1  Audits.  Except as otherwise provided in Section 7.4, the Party responsible for preparing and filing a Tax Return pursuant to Article II (the “Filing Party”) shall have the right to control, contest, and represent the interests of itself and any of its Affiliates in any Audit relating to such Tax Return; provided that if the other Party (the “Non-Filing Party”) paid Taxes or would be required to pay Taxes with respect to such Tax Return pursuant to Section 3.1 or Section 3.2, as applicable, the Non-Filing Party shall be entitled to participate in such Audit, at its own cost and expense and with counsel of its own choosing (such counsel to be reasonably acceptable to the Filing Party), and the Filing Party shall not settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Audit without the prior written consent of the Non-Filing Party (such consent not to be unreasonably withheld, delayed or conditioned) to the extent that the proposed settlement or agreement to any deficiency, claim or adjustment results in a material adjustment to Taxes paid or to be paid by the Non-Filing Party pursuant to Section 3.1 or Section 3.2, as applicable. The Filing Party’s rights shall extend to any matter pertaining to the management and control of an Audit, including execution of waivers, choice of forum, scheduling of conferences and the resolution or determination of any Tax Item. Each of the Filing Party and the Non-Filing Party shall bear its respective costs incurred in handling, settling, or contesting an Audit, and any costs incurred by both Parties shall be shared equally. The Filing Party shall advise the Non-Filing Party of all significant Tax issues subject to an Audit by any Taxing Authority with respect to which the Non-Filing Party paid Taxes or would be required to pay Taxes pursuant to Section 3.1 or Section 3.2, as applicable, and shall keep the Non-Filing Party fully informed on a timely basis with respect to any proposed contest, compromise or settlement thereof. For purposes of this Section 7.1, an adjustment to Taxes paid or to be paid by the Non-Filing Party shall be deemed to be material if and only if such adjustment is reasonably expected to exceed $100,000.

 

Section 7.2  Notice.  Within twenty (20) business days after a Party receives a written notice or other information from a Taxing Authority of the existence of a Tax issue that may give rise to an indemnification obligation under this Agreement, such Party shall notify the other Party of such issue, and thereafter shall promptly forward to the other Party copies of notices and material communications with any Taxing Authority relating to such issue. The failure of one Party to notify the other Party of any matter relating to a particular Tax for a Taxable Period or to take any action specified in this Agreement shall not relieve such other Party of any liability and/or obligation which it may have under this Agreement with respect to such Tax for such Taxable Period, except to the extent that such other Party’s rights under this Agreement are materially prejudiced by such failure.

 

Section 7.3  Remedies.  Subject to Section 5.2, FTD agrees that no claim against United Online and no defense to FTD’s liabilities or obligations to United Online under this Agreement shall arise from the resolution by United Online of any deficiency, claim or adjustment relating to the redetermination of any Tax Item of United Online or any UOL Affiliate.

 

Section 7.4  Control of Distribution Tax Proceedings.

 

(a)                                 United Online shall have the right to control, contest, and represent the interests of itself and any UOL Affiliate in any Audits relating to Distribution Taxes for which United Online bears liability pursuant to Section 4.1(a) or Section 4.1(c), and to resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Audit. United Online’ rights shall extend to any matter pertaining to the management and control of such Audit, including execution of waivers, choice of forum, scheduling of conferences and the resolution of any Tax Item. FTD shall be entitled through counsel of its choosing and reasonably acceptable to United Online to monitor the conduct or settlement of any such Audit by United Online, and United Online shall keep FTD and such counsel fully informed on a timely basis with respect thereto. United Online shall provide FTD and such counsel with such information as either of them may reasonably request (which request may be general or specific), but all costs and expenses incurred in such monitoring shall be borne by FTD.

 

(b)                                 FTD shall have the right to control, contest, and represent the interests of itself and any FTD Affiliate in any Audits relating to Distribution Taxes for which FTD bears liability pursuant to Section 4.1(b) or Section 4.1(c), and to resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Audit. FTD’s rights shall extend to any matter pertaining to the management and control of such Audit, including execution of waivers, choice of forum, scheduling of conferences and the resolution of any Tax Item. United Online shall be entitled through counsel of its choosing and reasonably acceptable to FTD to monitor the conduct or settlement of any such

 

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Audit by FTD, and FTD shall keep United Online and such counsel fully informed on a timely basis with respect thereto. FTD shall provide United Online and such counsel with such information as either of them may reasonably request (which request may be general or specific), but all costs and expenses incurred in such monitoring shall be borne by United Online.

 

(c)                                  United Online shall have the right to control and contest any Audits relating to Distribution Taxes for which they both bear liability pursuant to Section 4.1(d) and to resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Audit; provided that FTD may assume sole control of any such Audit if such Party acknowledges in writing that it has sole liability for any Distribution Taxes that are reasonably expected to arise in such Audit (the Party controlling such Audit, the “Controlling Party” and the other Party, the “Non-Controlling Party”). The control rights shall extend to any matter pertaining to the management and control of such Audit, including execution of waivers, choice of forum, scheduling of conferences and the resolution of any Tax Item. The Non-Controlling Party shall be entitled through counsel of its choosing and reasonably acceptable to the Controlling Party to monitor the conduct or settlement of any such Audit by the Controlling Party, and the Controlling Party shall keep the Non-Controlling Party and such counsel fully informed on a timely basis with respect thereto. The Controlling Party shall provide the Non-Controlling Party and such counsel with such information as either of them may reasonably request (which request may be general or specific), but all costs and expenses incurred in such monitoring shall be borne by the Non-Controlling Party.

 

ARTICLE VIII

 

MISCELLANEOUS PROVISIONS

 

Section 8.1  Effectiveness.  This Agreement shall become effective on October 31, 2013.

 

Section 8.2  Cooperation and Exchange of Information.

 

(a)  Cooperation.  United Online and FTD shall each cooperate fully (and each shall cause its respective Affiliates to cooperate fully) with all reasonable requests from another Party hereto, or from an agent, representative or advisor to such Party, in connection with the preparation and filing of Tax Returns, claims for refund, and Audits concerning issues or other matters covered by this Agreement. Such cooperation shall include, without limitation:

 

(i)                                     the retention until the expiration of the applicable statute of limitations, and the provision upon request, of Tax Returns, books, records (including information regarding earnings and profits and the ownership and Tax basis of property), documentation and other information relating to the Tax Returns, including accompanying schedules, related work papers, and documents relating to rulings, closing agreements or other determinations by Taxing Authorities;

 

(ii)                                  providing FTD access to United Online’s tax software in order to input relevant data and otherwise prepare and file all Tax Returns for which FTD is responsible pursuant to Section 2.2;

 

(iii)                               the execution of any document that may be necessary or reasonably helpful in connection with any Audit, or the filing of a Tax Return or refund claim by a member of the FTD Tax Group or the UOL Tax Group, including certification, to the best of a Party’s knowledge, of the accuracy and completeness of the information it has supplied or any power of attorney required by the applicable Taxing Authority to be provided by one Party to another Party for the performance by such other Party of acts required or permitted under this Agreement; and

 

(iv)                              the use of the Party’s reasonable best efforts to obtain any documentation that may be necessary or reasonably helpful in connection with any of the foregoing.

 

Each Party shall use reasonable best efforts to comply in connection with the foregoing matters within ten (10) business days or such shorter period as may be required by the applicable Taxing Authority or otherwise in connection with any Audit. Each Party shall make its employees and facilities available on a reasonable and mutually convenient basis in connection with the foregoing matters.

 

(b)  Failure to Perform.  If a Party materially fails to comply with any of its obligations set forth in Section 8.2(a) upon reasonable request and notice by the other Party, and such failure results in the imposition of

 

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additional Taxes, the non-performing Party shall be liable in full for such additional Taxes notwithstanding anything to the contrary in this Agreement.

 

Section 8.3  Dispute Resolution.  Unless otherwise agreed by the Parties, any dispute, controversy or claim arising out of or relating to this Agreement or the breach, termination or validity hereof (“Dispute”) which arises between United Online and FTD shall be resolved pursuant to this Section 8.3. The Dispute shall first be negotiated between the appropriate senior executives of United Online and FTD who shall have the authority to resolve the matter. Such executives shall meet to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies, within ten (10) days of receipt by United Online or FTD, as applicable, of notice of a Dispute, which date of receipt shall be referred to herein as the “Dispute Resolution Commencement Date.” If the senior executives are unable to resolve the Dispute within thirty (30) days from the Dispute Resolution Commencement Date, then United Online and FTD shall jointly retain a nationally recognized accounting firm reasonably acceptable to both Parties to resolve the Dispute. The accounting firm selected by the Parties shall act as an arbitrator to resolve all points of disagreement, and its decision shall be final and binding upon all parties involved. Following the decision of such accounting firm, United Online and FTD shall each take or cause to be taken any action necessary to implement the decision of such accounting firm. United Online and FTD shall share equally the administrative costs of the arbitration and such accounting firm’s fees, disbursements and expenses, and shall each bear their respective other costs and expenses related to the arbitration.

 

Section 8.4  Changes in Law.

 

(a)                                 Any reference to a provision of the Code, Treasury Regulations, or a law of another jurisdiction shall include a reference to any applicable successor provision or law.

 

(b)                                 If, due to any change in applicable law or regulations or their interpretation by any court of law or other governing body having jurisdiction subsequent to the date specified in the preamble to this Agreement, performance of any provision of this Agreement or any transaction contemplated hereby shall become impracticable or impossible, the Parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such provision.

 

Section 8.5  Confidentiality.  Each of the Parties hereto shall hold and cause its directors, officers, employees, advisors and consultants to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all information (other than any such information relating solely to the business or affairs of such Party) concerning the other Party hereto furnished it by such other Party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (1) in the public domain through no fault of such Party or (2) later lawfully acquired from other sources not under a duty of confidentiality by the Party to which it was furnished), and no Party shall release or disclose such information to any other Person, except its Affiliates and its and their directors, officers, employees, auditors, attorneys, financial advisors, bankers or other consultants who shall be advised of and agree to be bound by the provisions of this Section 8.5. Each of the Parties hereto shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by the other Party if it exercises the same care as it takes to preserve confidentiality for its own similar information.

 

Section 8.6  Affiliates.

 

(a)                                 United Online shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any other UOL Group Member; provided that if it is contemplated that a UOL Group Member may cease to be controlled, directly or indirectly, by United Online as a result of a transfer of its stock or other ownership interests to a third party in exchange for consideration in an amount approximately equal to the fair market value of the stock or other ownership interests transferred and such consideration is not expected to be distributed outside of the UOL Group to the shareholders of United Online, then United Online may request in writing no later than thirty (30) days prior to such cessation that FTD execute a release of such UOL Group Member from its obligations under this Agreement effective as of such transfer, provided that United Online shall succeed to the rights of such UOL Group Member under this Agreement and shall have confirmed in writing the obligations of United Online and the remaining UOL Group Members with respect to their own obligations and the obligations of the departing UOL Group Member, and that such departing UOL Group Member shall have executed a release of any rights it may have against FTD by reason of this Agreement.

 

(b)                                 FTD shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any other member of the FTD Group; provided that if it is contemplated that member of the FTD Group may cease to be controlled, directly or indirectly, by FTD as a result of a transfer of its stock or other ownership interests to a third party in exchange for consideration in an amount approximately equal to the fair market value of the stock or other ownership interests transferred and such consideration is not expected to be distributed outside of

 

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the FTD Group to the shareholders of FTD, then FTD may request in writing no later than thirty (30) days prior to such cessation that United Online execute a release of such member of the FTD Group from its obligations under this Agreement effective as of such transfer, provided that FTD shall succeed to the rights of such member of the FTD Group under this Agreement and shall have confirmed in writing the obligations of FTD and the remaining members of the FTD Group with respect to their own obligations and the obligations of the departing member of the FTD Group, and that such departing member of the FTD Group shall have executed a release of any rights it may have against United Online by reason of this Agreement

 

Section 8.7  Authority.  Each of the Parties hereto represents, on behalf of itself and its affiliates, to the other that (a) it has the corporate power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or other action, (c) it has duly and validly executed and delivered this Agreement and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles.

 

Section 8.8  Setoff.  All payments to be made by any Party under this Agreement may be netted against payments due to such Party under this Agreement, but otherwise shall be made without setoff, counterclaim or withholding, all of which are hereby expressly waived.

 

Section 8.9  Amendments and Waivers.

 

(a)                                 Subject to Section 11.1 of the Separation Agreement, this Agreement may not be amended except by an agreement in writing signed by both Parties.

 

(b)                                 Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the Party entitled to the benefit thereof and any such waiver shall be validly and sufficiently given for the purposes of this Agreement if it is in writing signed by an authorized representative of such Party. No delay or failure in exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any other right, power or remedy. The rights and remedies hereunder are cumulative and not exclusive of any rights or remedies that either Party would otherwise have.

 

Section 8.10  Entire Agreement.  This Agreement, the Separation Agreement, the other Ancillary Agreements and the Exhibits and Schedules attached thereto, constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof.

 

Section 8.11  Third-Party Beneficiaries.  Except as provided in Article V relating to Indemnitees, this Agreement is solely for the benefit of United Online, the UOL Affiliates, FTD and the FTD Affiliates, and shall not be deemed to confer upon any other third parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.

 

Section 8.12  Notices.  All notices, requests, permissions, waivers and other communications hereunder shall be provided in accordance with the provisions of Section of the Separation Agreement.

 

Section 8.13  Counterparts; Electronic Delivery.  This Agreement may be executed in multiple counterparts, each of which when executed shall be deemed to be an original, but all of which together shall constitute one and the same agreement. Execution and delivery of this Agreement or any other documents pursuant to this Agreement by facsimile or other electronic means shall be deemed to be, and shall have the same legal effect as, execution by an original signature and delivery in person.

 

Section 8.14  Severability.  If any term or other provision of this Agreement is determined by a nonappealable decision by a court, administrative agency or arbitrator to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the court, administrative agency or arbitrator shall interpret this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the

 

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fullest extent possible. If any provision in this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only as broad as is enforceable.

 

Section 8.15  Assignability; Binding Effect.  Except as otherwise expressly provided in this Agreement, neither Party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other Party, and any attempt to assign this Agreement without such consent shall be void and of no effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. This Agreement may be enforced separately by each member of the UOL Tax Group and each member of the FTD Tax Group.

 

Section 8.16  Governing Law  This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the State of Delaware, without regard to any conflicts of law provisions thereof that would result in the application of the laws of any other jurisdiction.

 

Section 8.17  Construction.  This Agreement shall be construed as if jointly drafted by the Parties, and no rule of construction or strict interpretation shall be applied against either Party. The Parties represent that this Agreement is entered into with full consideration of any and all rights which the Parties may have. The Parties have relied upon their own knowledge and judgment and upon the advice of the attorneys of their choosing. The Parties have had access to independent legal advice, have conducted such investigations they and their counsel thought appropriate, and have consulted with such other independent advisors as they and their counsel deemed appropriate regarding this Agreement and their rights and asserted rights in connection therewith. The Parties are not relying upon any representations or statements made by the other Party, or such other Party’s employees, agents, representatives or attorneys, regarding this Agreement, except to the extent such representations are expressly set forth or incorporated in this Agreement. The Parties are not relying upon a legal duty, if one exists, on the part of the other Party (or such other Party’s employees, agents, representatives or attorneys) to disclose any information in connection with the execution of this Agreement or its preparation, it being expressly understood that neither Party shall ever assert any failure to disclose information on the part of the other Party as a ground for challenging this Agreement.

 

Section 8.18  Titles and Headings.  Titles and headings to Sections and Articles herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

 

Section 8.19  Coordination with Employee Matters Agreement.  To the extent any covenants or agreements between the Parties with respect to employment Taxes are set forth in the Employee Matters Agreement, such matters shall be governed exclusively by the Employee Matters Agreement and not by this Agreement.

 

Section 8.20  Conflict or Inconsistency Between Agreements.  Except as provided in Section 8.19, in the event of any conflict or inconsistency between any provision of this Agreement and any provision of either the Separation Agreement or any of the other Ancillary Agreements, the applicable provisions of this Agreement shall prevail.

 

[Signature Page Follows]

 

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WHEREFORE, the Parties have signed this Tax Sharing Agreement effective as of the date first set forth above.

 

	
 
    	
UNITED   ONLINE, INC., on behalf of itself and the UOL Affiliates
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Neil P. Edwards
    
	
 
    	
 
    	
Name:   
    	
Neil   P. Edwards
    
	
 
    	
 
    	
Title:   
    	
Executive   Vice President and Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
FTD   COMPANIES, INC., on behalf of itself and the FTD Affiliates
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Becky Sheehan
    
	
 
    	
 
    	
Name:   
    	
Becky   Sheehan
    
	
 
    	
 
    	
Title:   
    	
Executive   Vice President and Chief Financial Officer
    

 

[Signature Page to Tax Sharing Agreement]

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