AGREEMENT AND PLAN OF MERGER

EXHIBIT 2.1

 

EXECUTION COPY

 

 

AGREEMENT AND PLAN OF MERGER

 

 

among

 

MERCURY MAN HOLDINGS CORPORATION,

 

NECTAR MERGER CORPORATION

 

 

and

 

FTD, INC.

 

Dated as of October 5, 2003

 

 

i

 

ii

 

iii

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER, dated as of October 5, 2003 (this “ Agreement ”), is made and entered into among Mercury Man Holdings Corporation, a Delaware corporation (“ Purchaser ”), Nectar Merger Corporation, a Delaware corporation and a wholly owned Subsidiary of Purchaser (“ Merger Sub ”), and FTD, Inc., a Delaware corporation (the “ Company ”).

 

RECITALS

 

WHEREAS, the respective boards of directors of Purchaser, Merger Sub and the Company each have determined by unanimous vote of all of the directors voting on the matter that it would be advisable and is in the best interests of their respective companies and stockholders (other than Purchaser, holders who are parties to the Exchange Agreements (as hereinafter defined) and each of their respective affiliates) for Purchaser to acquire the Company by means of the Merger (as hereinafter defined) on the terms and subject to the conditions set forth herein; and

 

WHEREAS, it is the intention of the parties that Merger Sub merge with and into the Company, with the Company being the surviving corporation and a wholly owned Subsidiary of Purchaser; and

 

WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition to the willingness of Purchaser and Merger Sub to enter into this Agreement, Purchaser and certain holders of the Common Stock (as hereinafter defined) are entering into voting agreements with Parent, pursuant to which, among other things, such stockholders have agreed to vote all of their shares of Class A Common Stock in the Company in favor of adopting this Agreement; and

 

WHEREAS, following the execution and delivery of this Agreement and as a condition to the willingness of Purchaser and Merger Sub to enter into this Agreement, Purchaser and certain of the Company’s employees will enter into exchange agreements (the “ Exchange Agreements ”), pursuant to which such employees will exchange a portion of their equity interests in the Company for equity interests in Purchaser immediately prior to the Effective Time; and

 

WHEREAS, the board of directors of the Company (the “ Board ”) has unanimously (i) determined that the Merger is fair to, and in the best interests of, the Company and the holders of the outstanding shares of Class A common stock, par value $0.01 per share (the “ Class A Common Stock ”), and Class B common stock, par value $0.0005 per share (the “ Class B Common Stock ” and, together with the Class A Common Stock, the “ Common Stock ”), and has declared that the Merger is advisable, (ii) approved and declared advisable this Agreement and (iii) resolved to recommend (subject to the limitations contained herein) that the holders of Class A Common Stock adopt this Agreement; and

 

WHEREAS, the parties hereto desire to make certain representations, warranties, covenants and agreements in connection herewith;

NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained herein, the parties hereto hereby agree as follows:

 

ARTICLE I

 

THE MERGER

 

1.1 The Merger . On and subject to the terms and conditions of this Agreement, at the Effective Time, Merger Sub shall be merged with and into the Company in accordance with this Agreement and the applicable provisions of the Delaware General Corporation Law (“ DGCL ”), and the separate corporate existence of Merger Sub shall thereupon cease (the “ Merger ”). The Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the “ Surviving Corporation ”).

 

1.2 The Closing . Subject to the terms and conditions of this Agreement, the closing of the Merger (the “ Closing ”) shall take place at the offices of Jones Day, 77 West Wacker, Suite 3500, Chicago, Illinois 60601, at 10:00 a.m., local time, as soon as practicable following the satisfaction (or waiver if permissible) of the conditions set forth in Article VIII . The date on which the Closing occurs is hereinafter referred to as the “ Closing Date .”

 

1.3 Effective Time . If all the conditions to the Merger set forth in Article VIII shall have been fulfilled or waived in accordance herewith and this Agreement shall not have been terminated as provided in Article IX , the parties hereto shall cause a certificate of merger meeting the requirements of Section 251 of the DGCL and any other appropriate documents to be properly executed and filed in accordance with Section 251 of the DGCL on the Closing Date (or on such other date as Purchaser and the Company may agree). The Merger shall become effective at the time of filing of the certificate of merger with the Secretary of State of the State of Delaware in accordance with the DGCL or at such later time that the parties hereto shall have agreed upon and designated in such filing as the effective time of the Merger (the “ Effective Time ”).

 

1.4 Effects of the Merger . The Merger shall have the effects set forth in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all property of the Company and Merger Sub shall vest in the Surviving Corporation, and all liabilities and obligations of the Company and Merger Sub shall become liabilities and obligations of the Surviving Corporation.

 

ARTICLE II

 

CERTIFICATE OF INCORPORATION AND BYLAWS

OF THE SURVIVING CORPORATION

 

2.1 Certificate of Incorporation . At the Effective Time, the certificate of incorporation of the Company as in effect immediately prior to the Effective Time shall be amended so as to read in its entirety as set forth in Exhibit A hereto, and so amended shall be the certificate of incorporation of the Surviving Corporation, until duly amended in accordance with applicable Law and the terms thereof.

 

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2.2 Bylaws . At the Effective Time, the bylaws of the Company as in effect immediately prior to the Effective Time shall be amended so as to read in its entirety as set forth in Exhibit B hereto, and so amended shall be the bylaws of the Surviving Corporation, until duly amended in accordance with applicable Law, the terms thereof and the Surviving Corporation’s certificate of incorporation.

 

ARTICLE III

 

DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION

 

3.1 Directors . The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable Law and the Surviving Corporation’s certificate of incorporation and bylaws.

 

3.2 Officers . The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable Law and the Surviving Corporation’s certificate of incorporation and bylaws.

 

ARTICLE IV

 

EFFECT OF THE MERGER ON SECURITIES

OF MERGER SUB AND THE COMPANY

 

4.1 Effect of the Merger on Merger Sub Stock . As of the Effective Time, by virtue of the Merger and without any action on the part of any holder of common stock of Merger Sub, each share of common stock, par value $0.01 per share, of Merger Sub outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation.

 

4.2 Effect of the Merger on Company Securities .

 

(a) As of the Effective Time, by virtue of the Merger and without any action on the part of any holder of Common Stock, each share of Common Stock issued and outstanding immediately prior to the Effective Time that is owned by the Company or any Subsidiary of the Company or by Purchaser, Merger Sub or any other Subsidiary of Purchaser shall automatically be canceled and retired and shall cease to exist, and no cash or other consideration shall be delivered or deliverable in exchange therefor.

 

(b) As of the Effective Time, by virtue of the Merger and without any action on the part of any holder of Common Stock, each share of Common Stock issued and outstanding immediately prior to the Effective Time other than any shares of Common Stock to be canceled pursuant to Section 4.2(a) and shares of Dissenting Common Stock (as hereinafter defined), shall

 

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be canceled, retired and shall cease to exist and shall be converted automatically into the right to receive an amount equal to $24.85 in cash, without interest (the “ Merger Consideration ”), payable to the holder thereof upon surrender of the certificate formerly representing such share of Common Stock in the manner provided in Section 4.3 , and no other consideration shall be delivered or deliverable on or in exchange therefor.

 

(c) Notwithstanding any provision of this Agreement to the contrary, if required by the DGCL but only to the extent required thereby, shares of Common Stock that are issued and outstanding immediately prior to the Effective Time and that are held by holders of such shares of Common Stock who have not voted in favor of the adoption of this Agreement or consented thereto in writing and who have properly exercised appraisal rights with respect thereto in accordance with, and who have complied with, Section 262 of the DGCL (the “ Dissenting Common Stock ”) will not be exchangeable for the right to receive the Merger Consideration, and holders of such shares of Dissenting Common Stock will be entitled to receive payment of the appraised value of such shares of Common Stock in accordance with the provisions of such Section 262 unless and until such holders fail to perfect or effectively withdraw or lose their rights to appraisal and payment under the DGCL. If, after the Effective Time, any such holder fails to perfect or effectively withdraws or loses such right, such shares of Common Stock will thereupon be treated as if they had been converted into and have become exchangeable for, at the Effective Time, the right to receive the Merger Consideration, without any interest thereon. At the Effective Time, any holder of Dissenting Shares shall cease to have any rights with respect thereto, except the rights provided in Section 262 of the DGCL and as provided in the previous sentence. The Company will give Purchaser (i) notice of any demands received by the Company for appraisals of shares of Common Stock and (ii) the opportunity to participate in and direct all negotiations and proceedings with respect to such notices and demands. The Company shall not, except with the prior written consent of Purchaser, make any payment with respect to any demands for appraisal or settle any such demands.

 

(d) At or immediately prior to the Effective Time, all options to purchase shares of Common Stock under any plan, program or arrangement of the Company (collectively, the “ Stock Option Plans ”) (true and correct copies of which have been made available by the Company to Purchaser), whether or not then exercisable (individually, an “ Option ” and collectively, the “ Options ”), shall be cancelled and in consideration of such cancellation the holder of a cancelled Option shall be entitled to receive for each share of Common Stock subject to such Option an amount in cash equal to the difference between the Merger Consideration and the per share exercise price of such Option to the extent such difference is a positive number (such amount being hereinafter referred to as the “ Option Consideration ”). Each outstanding Option, whether or not then vested, that has an exercise price equal to or greater than the Merger Consideration shall be cancelled immediately prior to the Effective Time and in consideration of such cancellation the holder of such cancelled Option shall be entitled to receive $0.05 per share of Class A Common Stock issuable upon exercise of such Option.

 

All amounts payable pursuant to this Section 4.2(d) shall be reduced by any required withholding of taxes and shall be paid without interest.

 

(e) All vested or unvested restricted shares of Common Stock shall, by virtue of this Agreement and, without further action of the Company, Purchaser, Merger Sub or the holder of

 

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such restricted shares, vest and become free of all restrictions immediately prior to the Effective Time and shall be canceled, retired and shall cease to exist and shall be converted into the right to receive the Merger Consideration.

 

(f) Except as otherwise may be agreed to by the parties, each of the Stock Option Plans shall terminate as of the Effective Time and any other plan, program or arrangement providing for the issuance or grant of any interest in respect of the capital stock (or any interest convertible into or exchangeable for such capital stock) of the Company or any Subsidiary thereof shall be canceled as of the Effective Time.

 

4.3 Exchange of Certificates Representing Shares of Common Stock .

 

(a) Prior to the Effective Time, Purchaser shall appoint a commercial bank or trust company having net capital of not less than $200 million, which shall be reasonably satisfactory to the Company, to act as paying agent hereunder (the “ Paying Agent ”) for the purpose of exchanging certificates representing Company Stock (each, a “ Certificate ”) for the Merger Consideration in accordance with this Article IV . Prior to the Effective Time, Purchaser shall cause the Surviving Corporation to provide the Paying Agent with cash in amounts necessary to pay for all the shares of Common Stock pursuant to Section 4.2(b) (other than shares of Dissenting Common Stock, if any) and to pay the aggregate Option Consideration pursuant to Section 4.2(d) . Such amounts shall hereinafter be referred to as the “ Exchange Fund .”

 

(b) Promptly after the Effective Time, the Surviving Corporation shall cause the Paying Agent to mail to each holder of record (other than the Company, any Subsidiary of the Company, Purchaser, Merger Sub or any other Subsidiary of Purchaser) of shares of Common Stock (i) a letter of transmittal that shall specify that delivery shall be effected, and risk of loss and title to such Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and which letter shall be in such form and have such other provisions as are reasonable and customary in transactions such as the Merger and (ii) instructions for effecting the surrender of such Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate to the Paying Agent together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall promptly receive in exchange therefor the amount of cash into which shares of Common Stock theretofore represented by such Certificate shall have been converted pursuant to Section 4.2 , and the shares represented by the Certificate so surrendered shall forthwith be canceled. No interest will be paid or will accrue on the cash payable upon surrender of any Certificate. In the event of a transfer of ownership of Common Stock that is not registered in the transfer records of the Company, payment may be made with respect to such Common Stock to such a transferee if the Certificate representing such shares of Common Stock is presented to the Paying Agent, accompanied by all documents reasonably required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid.

 

(c) As of the Effective Time, all shares of Common Stock (other than shares of Common Stock to be canceled and retired in accordance with Section 4.2(a) and any shares of Dissenting Common Stock) issued and outstanding immediately prior to the Effective Time shall cease to be outstanding and shall automatically be canceled and retired and shall cease to exist,

 

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and each holder of any such shares shall cease to have any rights with respect thereto or arising therefrom (including, without limitation, the right to vote), except the right to receive the Merger Consideration, without interest, upon surrender of the Certificate representing such shares in accordance with Section 4.3(b) , and until so surrendered, each the Certificate representing such shares shall represent for all purposes only the right to receive the Merger Consideration, without interest. The Merger Consideration paid upon the surrender for exchange of Certificates in accordance with the terms of this Section 4.3 shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Common Stock theretofore represented by such Certificates.

 

(d) At or after the Effective Time, there shall be no transfers on the stock transfer books of the Company of the shares of Common Stock other than transfers that occurred prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be canceled and exchanged as provided in this Article IV .

 

(e) The Paying Agent shall invest the Exchange Fund, as directed by Purchaser, in (i) direct obligations of the United States of America, (ii) obligations for which the full faith and credit of the United States of America is pledged to provide for the payment of principal and interest, (iii) commercial paper rated the highest quality by either Moody’s Investors Services, Inc. or Standard & Poor’s Rating Group, a division of The McGraw Hill Companies, Inc., or (iv) certificates of deposit, bank repurchase agreements or bankers’ acceptances of commercial banks with capital exceeding $500 million. Any net earnings with respect to the Exchange Fund shall be the property of and paid over to Purchaser as and when requested by Purchaser; provided , however , that any such investment or any such payment of earnings may not delay the receipt by holders of Certificates of any Merger Consideration.

 

(f) Any portion of the Exchange Fund (including the proceeds of any interest and other income received by the Paying Agent in respect of all such funds) that remains unclaimed by the former stockholders of the Company one year after the Effective Time shall be delivered to the Surviving Corporation. Any former stockholders of the Company who have not theretofore complied with this Article IV shall thereafter look only to the Surviving Corporation for payment of any Merger Consideration that may be payable in respect of each share of Common Stock such stockholder holds as determined pursuant to this Agreement, without any interest thereon.

 

(g) None of Purchaser, the Company, the Surviving Corporation, the Paying Agent or any other Person shall be liable to any former holder of shares of Common Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws.

 

(h) If any Certificate is lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in respect thereof pursuant to this Agreement.

 

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(i) Except as otherwise provided herein, Purchaser shall pay all charges and expenses, including those of the Paying Agent, in connection with the exchange of the Merger Consideration for Certificates.

 

(j) The Surviving Corporation and, to the extent permitted by applicable Law the Merger Sub, shall be entitled to deduct and withhold, or cause to be deducted or withheld, from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Common Stock or Options such amounts as are required to be deducted and withheld with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “ Code ”), or any provision of applicable state, local or foreign tax Law. To the extent that amounts are so deducted and withheld, such deducted and withheld amounts shall be treated for all purposes of this Agreement as having been paid to such holders in respect of which such deduction and withholding was made.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the disclosure letter, dated the date hereof, delivered by the Company to Purchaser prior to the execution of this Agreement (the “ Company Disclosure Letter ”) with specific reference to the particular Section or subsection of this Agreement to which the limitation set forth in such Company Disclosure Letter relates (it being understood that any information set forth in a particular section of the Company Disclosure Letter shall be deemed to apply to each other section or subsection thereof or hereof to which its relevance is reasonably apparent from such particular section), the Company hereby represents and warrants to Purchaser and Merger Sub as follows:

 

5.1 Existence; Good Standing; Corporate Authority . Each of the Company and its Subsidiaries (a) is a corporation duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization and (b) is duly licensed or qualified to do business as a foreign corporation and is in good standing under the laws of each other state of the United States or the laws of any foreign jurisdiction, if applicable, in which the character of the properties owned, licensed or leased by it or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified or to be in good standing has not and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, liabilities, consolidated results of operations or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or prevent or delay the ability of the Company to consummate the transactions contemplated by this Agreement or any of the Ancillary Documents to which it is or will become a party (any such change, effect, event, occurrence, state of facts or development, a “ Company Material Adverse Effect ”). Each of the Company and its Subsidiaries has all requisite corporate power and authority to own, operate, license and lease its properties and carry on its business as now conducted and consummate the transactions contemplated by this Agreement and the Ancillary Documents, except where the failure to have such power and authority would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company has heretofore made available to Purchaser true and correct copies of the certificate of incorporation and bylaws or other governing instruments of the Company and each of its Subsidiaries as currently in effect.

 

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The corporate records and minute books of the Company and each of its Subsidiaries reflect all material actions taken and authorizations made at meetings of such companies’ board of directors or any committees thereof and at any stockholders’ meetings thereof.

 

5.2 Authorization, Validity and Effect of Agreements . (a) The Company has the requisite corporate power and authority to execute and deliver this Agreement and all agreements and documents executed by it in connection herewith (the “ Ancillary Documents ”) and subject to the adoption of this Agreement by the holders of a majority of the outstanding shares of the Class A Common Stock (the “ Stockholder Approval ”), to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby have been duly and validly authorized by the Board, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement and the Ancillary Documents or to consummate the transactions contemplated hereby and thereby (other than the adoption of this Agreement by the holders of the Common Stock if required by applicable Law). This Agreement has been, and any Ancillary Document at the time of execution will have been, duly and validly executed and delivered by the Company, and (assuming this Agreement and such Ancillary Documents each constitute a valid and binding obligation of Purchaser and Merger Sub) constitutes and will constitute the valid and binding obligations of the Company, enforceable in accordance with their respective terms.

 

(b) On or prior to the date hereof, the Board has (i) determined that as of the date hereof this Agreement, the Ancillary Documents and the transactions contemplated hereby and thereby are fair to and in the best interests of the Company and its stockholders, (ii) adopted resolutions approving this Agreement, the Ancillary Documents and the transactions contemplated hereby and thereby and (iii) adopted resolutions declaring this Agreement and the Merger advisable. No “fair price,” “moratorium,” “control share acquisition” or other similar anti-takeover statute or regulation (including Section 203 of the DGCL) (each, a “ Takeover Statute ”) or any anti-takeover provision in the Company’s certificate of incorporation or bylaws is, or at the Effective Time will be, applicable to the Company, the Class A Common Stock, the Class B Common Stock, the Merger or the other transactions contemplated by this Agreement. To the knowledge of the Company, no other anti-takeover laws or regulations apply or purport to apply to this Agreement, the Ancillary Documents or any of the transactions contemplated hereby or thereby. No provision of the certificate of incorporation or the bylaws of the Company or similar governing instruments of any of its Subsidiaries would, directly or indirectly, restrict or impair the ability of Purchaser to vote, or otherwise to exercise the rights of a stockholder with respect to, any shares of the Company and any of its Subsidiaries that may be acquired or controlled by Purchaser.

 

(c) Prior to the date hereof, the Board or an appropriate committee of the Board administering the Stock Option Plans has adopted such resolutions or taken such other actions as are required to permit any Options that are not exercisable as of the date hereof to become exercisable at the Effective Time.

 

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(d) Prior to the date hereof, the Board has adopted such resolutions or taken such other actions as are required to cause all unvested restricted shares of Common Stock to become vested immediately prior to the Effective Time.

 

5.3 Compliance with Laws . (a) Neither the Company nor any of its Subsidiaries is in material violation of any foreign, federal, state or local law, statute, ordinance, rule, regulation, code, injunction, ordinance, convention, directive, order, judgment, ruling or decree or other legal requirement (including any arbitral award or decision) (the “ Laws ”) of any foreign, federal, state or local judicial, legislative, executive, administrative or regulatory body or authority or any court, arbitration, board or tribunal (“ Governmental Entity ”) applicable to the Company or any of its Subsidiaries or any of their respective properties or assets. The Company is not being investigated with respect to, or, to the knowledge of the Company, threatened to be charged with or given notice of any violation of, any applicable Law, except for such of the foregoing as would not reasonably be expected to have a material adverse effect on the value of Purchaser’s investment in the Company or the Company’s ability to operate its business (a “ Material Adverse Restriction ”).

 

(b) Neither the Company nor any of its Subsidiaries has intentionally and, to the Company’s knowledge, none of the directors, officers, agents or employees of the Company or any of its Subsidiaries has, (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity or (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended. Neither the Company nor any of its Subsidiaries has participated in any boycotts.

 

5.4 Capitalization . (a) The authorized capital stock of the Company consists solely of 300,000,000 shares of Class A Common Stock, 20,000,000 shares of Class B Common Stock and 5,000,000 shares of preferred stock, par value $0.01 per share (the “ Preferred Stock ”). As of the close of business on October 2, 2003 (the “ Measurement Date ”), (i) 15,080,964 shares of Class A Common Stock were issued and outstanding (excluding shares held by the Company in its treasury), (ii) 1,311,252 shares of Class B Common Stock were issued and outstanding (excluding shares held by the Company in its treasury), (iii) no shares of Preferred Stock were outstanding, (iv) Options to purchase an aggregate of 983,650 shares of Class A Common Stock were outstanding, (v) 435,836 shares of Class A Common Stock and 801,250 shares of Class B Common Stock were held by the Company in its treasury, and (vi) no shares of capital stock of the Company were held by the Company’s Subsidiaries. The Company has no outstanding bonds, debentures, notes or other obligations entitling the holders thereof to vote (or that are convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter. Since June 30, 2003, the Company has not (A) issued any shares of Common Stock other than upon the exercise of Options, (B) granted any Options, or (C) split, combined, converted or reclassified any of its shares of capital stock. All issued and outstanding shares of Common Stock are, and all shares of Common Stock that may be issued prior to the Effective Time will be when issued, duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. There are no other shares of capital stock or voting securities of the Company, and no existing options, warrants, calls, subscriptions, convertible securities or other rights, agreements or commitments that obligate the Company or any of its Subsidiaries to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock of, or equity interests in or any security convertible into or exercisable or exchangeable for any capital stock or equity interest in, the Company or any of its Subsidiaries.

 

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(b) There are no (i) outstanding agreements or other obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire (or cause to be repurchased, redeemed or otherwise acquired) any shares of capital stock of the Company and there are no performance awards outstanding under the Stock Option Plans or any other outstanding stock-related awards or (ii) voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries or, to the knowledge of the Company, any of the Company’s directors or executive officers is a party with respect to the voting of capital stock of the Company or any of its Subsidiaries. Section 5.4(b) of the Company Disclosure Letter sets forth a complete and accurate list of all outstanding Options to purchase shares of Common Stock granted pursuant to any Stock Option Plan as of the date hereof, which list sets forth the name of the holders thereof and, to the extent applicable, the exercise price or purchase price thereof, the number of shares of Class A Common Stock or Class B Common Stock subject thereto, the governing Stock Option Plan with respect thereto and the expiration date thereof.

 

5.5 Subsidiaries .

 

(a) Section 5.5(a) of the Company Disclosure Letter lists each Subsidiary of the Company together with the jurisdiction of incorporation of each such Subsidiary. Except for the shares of capital stock in each Subsidiary of the Company, and as set forth in Section 5.5(a) of the Company Disclosure Letter, the Company does not own, directly or indirectly, any capital stock or other ownership interest in any other Person.

 

(b) The Company owns, directly or indirectly through a Subsidiary, all the outstanding shares of capital stock (or other ownership interests having by their terms ordinary voting power to elect directors or others performing similar functions with respect to such Subsidiary) of each of the Company’s Subsidiaries.

 

(c) Each of the outstanding shares of capital stock (or other ownership interests having by their terms ordinary voting power to elect directors or others performing similar functions with respect to such Subsidiary) of each of the Company’s Subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and free of preemptive or similar rights, and is owned, directly or indirectly, by the Company or one of its Subsidiaries free and clear of all liens, pledges, security interests, claims or other encumbrances (“ Encumbrances ”) and all other limitations or restrictions, including on the right to vote, sell or otherwise dispose of the stock or other ownership interest.

 

5.6 No Violation . Neither the execution and delivery by the Company of this Agreement or any of the Ancillary Documents nor the consummation by the Company of the transactions contemplated hereby or thereby does or will: (a) violate, conflict with or result in a breach of any provisions of the certificate of incorporation or bylaws of the Company or any of its Subsidiaries; (b) violate, conflict with, result in a breach of any provision of, constitute a default (or an event that, with notice or lapse of time or both, would constitute a default) under, result in the termination, cancellation or amendment or in a right of termination, cancellation or amendment of, accelerate the performance required by or benefit obtainable under, result in the

 

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triggering of any payment, penalty or other obligations pursuant to any Contract (as hereinafter defined); (c) result in the creation or imposition of any Encumbrance (other than Permitted Encumbrances) upon any of the properties of the Company or its Subsidiaries, except for any such matters referenced in clauses (b) and (c) with respect to which requisite waivers or consents have been, or prior to the Effective Time will be, obtained or with respect to any matters that would not reasonably be expected to have a Company Material Adverse Effect; (d) result in there being declared void, voidable or without further binding effect, any of the terms, conditions or provisions of any Material Contract; (e) require any consent, approval, action, order, notification or authorization of, license, permit or waiver by or declaration, filing or registration (collectively, “ Consents ”) with any Governmental Entity, including any such Consent under the Laws of any foreign jurisdiction, other than (i) the filings required under the Securities Exchange Act of 1934 (the “ Exchange Act ”) or the Securities Act of 1933 (the “ Securities Act ”), (ii) the filing required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), and any other applicable Law governing antitrust or competition matters, and any Consents required or permitted to be obtained pursuant to the Laws of any foreign jurisdiction relating to antitrust matters or competition (“ Foreign Antitrust Laws ”) (collectively, “ Other Antitrust Filings and Consents ,” and, together with the other filings described in clauses (i) and (ii) above, “ Regulatory Filings ”), and (iii) those Consents the failure of which to obtain or make would not reasonably be expected to result in a Material Adverse Restriction; or (f) violate any Laws applicable to the Company or any of its Subsidiaries or any of their respective assets or properties, except for violations that would not reasonably be expected to have a Material Adverse Restriction or adversely affect the ability of the Company to consummate the transactions contemplated hereby. Neither the execution and delivery by the Company of this Agreement or any of the Ancillary Documents nor the consummation by the Company of the transactions contemplated hereby or thereby will require any Consent of any Third Parties or other Person except (i) under those Contracts set forth in Section 5.6 of the Company Disclosure Letter, (ii) for the Stockholder Approval, and (iii) under those Contracts that are not Material Contracts, the failure of which would not be reasonably expected to result in a Material Adverse Restriction.

 

5.7 Company Reports . The Company has filed or furnished all reports, schedules, forms, statements, prospectuses and other documents required to be filed with, or furnished to, the Securities and Exchange Commission (the “ SEC ”) by the Company since June 30, 2002, and has previously made available to Purchaser and Merger Sub true and complete copies of (i) the Annual Reports on Form 10-K for the fiscal years ended June 30, 2002 and 2003 filed by the Company with the SEC, (ii) information or proxy statements relating to all of the Company’s meetings of stockholders held or scheduled to be held since June 30, 2002, and (iii) each other registration statement, proxy or information statement, Quarterly Report on Form 10-Q or Current Report on Form 8-K filed since June 30, 2002 by the Company with the SEC (all such documents, as amended or supplemented, are referred to collectively as, the “ Company Reports ”). No Subsidiary currently is, and no Subsidiary since June 28, 2002 has been, required to file or otherwise furnish any reports, schedules, forms, statements, prospectus or other documents with or to the SEC. Since June 30, 2002, the Company has complied in all material respects with its SEC filing obligations under the Exchange Act and the Securities Act. Since June 30, 2002, except as disclosed in a subsequent Company Report, there has not occurred an event or circumstance that, but for the passage of time, would be required to be disclosed in a Company Report. Each of the audited financial statements and related schedules and notes

 

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thereto and unaudited interim financial statements of the Company contained in the Company Reports (or incorporated therein by reference) were prepared in accordance with United States generally accepted accounting principles applied on a consistent basis (“ GAAP ”) (except in the case of interim unaudited financial statements) except as noted therein, and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended, subject (in the case of interim unaudited financial statements) to normal year-end audit adjustments and, such financial statements complied as to form as of their respective dates in all material respects with applicable rules and regulations of the SEC. As of their respective dates, each Company Report was prepared in accordance with and complied with the requirements of the Securities Act or the Exchange Act, as applicable, and the Company Reports (including all financial statements included therein and all exhibits and schedules thereto and all documents incorporated by reference therein) did not, as of the date of effectiveness in the case of a registration statement, the date of mailing in the case of a proxy or information statement and the date of filing in the case of other Company Reports, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

5.8 Absence of Certain Changes . From June 30, 2003 through the date hereof, the Company and its Subsidiaries have conducted their business in the ordinary course of such business consistent with past practices, except as contemplated by this Agreement in connection with the Merger and the transactions contemplated thereby. From June 30, 2003 through the date hereof, neither the Company nor any of its Subsidiaries has engaged in any transaction or series of transactions material to the Company and its Subsidiaries in the aggregate, other than in the ordinary course of business consistent with past practice, and there have not been (a) any events, changes, effects, developments or states of fact that would reasonably be expected to have or constitute a Company Material Adverse Effect; (b) any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock of the Company; (c) any issuance by the Company, or agreement or commitment of the Company to issue, any shares of Common Stock or securities convertible into or exchangeable for shares of Common Stock; (d) any repurchase, redemption or any other acquisition by the Company or its Subsidiaries of any outstanding shares of capital stock or other securities of, or other ownership interests in, the Company or its Subsidiaries; (e) any material change in accounting principles, practices or methods; (f) any entry into any employment agreement with, or any material increase in the rate or terms (including, without limitation, any acceleration of the right to receive payment) of compensation payable or to become payable by the Company or any of its Subsidiaries to, their respective directors or officers, except for increases occurring in the ordinary course of business in accordance with their customary practices and employment agreements entered into in the ordinary course of business; (g) any material increase in the rate or terms (including, without limitation, any acceleration of the right to receive payment) of any bonus, insurance, pension or other employee benefit plan or arrangement covering any such directors, officers or employees, except increases occurring in the ordinary course of business in accordance with the Company’s customary practices; (h) any revaluation by the Company or any of its Subsidiaries of any material amount of their assets, taken as a whole, including, without limitation, write-downs of inventory or write-offs of accounts receivable other than in the ordinary course of business consistent with past practices; and (i) any action of the type described in Section 7.1(a) or Section 7.1(b) that had such action been taken after the date of this Agreement would be in violation of such Section.

 

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5.9 Taxes . Except as set forth in Section 5.9 of the Company Disclosure Letter, (a) all U.S. Federal income and all other material Tax returns, statements, reports and forms (collectively, the “ Company Returns ”) required to be filed with any taxing authority by the Company and each of its Subsidiaries have been timely filed in accordance in all material respects with all applicable Laws; (b) the Company and each of its Subsidiaries have timely paid all material Taxes due and payable and the Company Returns are true, correct and complete in all material respects; (c) the Company and each of its Subsidiaries have withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other Third Party (as hereinafter defined); (d) there is no action, suit, proceeding, audit or claim pending against the Company or any of its Subsidiaries in respect of any Taxes, nor has any such action, suit, proceeding, audit or claim been threatened in writing; (e) neither the Company nor any of its Subsidiaries is a party to or bound by any Tax sharing or allocation agreement or similar contract or assignment or any agreement that obligates either of them to make any payment computed by references to the Taxes, taxable income or taxable losses of any other Person; (f) there are no liens with respect to Taxes (other than Taxes not yet due and payable) on any of the assets or properties of the Company or any of its Subsidiaries; (g) neither the Company nor any of its Subsidiaries (1) is, or has been, a member of an affiliated, consolidated, combined or unitary group, other than one of which the Company was the common parent and (2) has any liability for the Taxes of any Person (other than the Company and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law), or as a transferee or successor, by contract or otherwise; (h) neither the Company nor any of its Subsidiaries has agreed to make or is required to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise; (i) no waivers of statutes of limitation with respect to any Company Returns have been given by the Company or any of its Subsidiaries; (j) all deficiencies asserted or assessments made as a result of any examinations of the Company or any of its Subsidiaries have been fully paid, or are fully reflected as a liability in the Company’s 2003 Balance Sheet (as hereinafter defined), or are being contested and an adequate reserve therefor has been established and is fully reflected in the 2003 Balance Sheet; (k) none of the Company or any of its Subsidiaries has received written notice from any Governmental Entity in a jurisdiction in which such entity does not file a Tax return stating that such entity is or may be subject to taxation by that jurisdiction; (l) none of the assets of the Company or any of its Subsidiaries is property required to be treated as being owned by any other Person pursuant to the “safe harbor lease” provisions of former Section 168(f)(8) of the Code; and (m) neither the Company nor any predecessors of the Company by merger or consolidation has within the past three years been a party to a transaction intended to qualify under Section 355 of the Code or under so much of Section 356 of the Code as relates to Section 355 of the Code. The term “ Tax ” or “ Taxes ” means all United States federal, state, local or foreign income, profits, estimated gross receipts, windfall profits, environmental (including taxes under Section 59A of the Code), severance, property, intangible property, occupation, production, sales, use, license, excise, emergency excise, franchise, escheat, capital gains, capital stock, employment, withholding, social security (or similar), disability, transfer, registration, stamp, payroll, goods and services, value added, alternative or add-on minimum tax, estimated, or any other tax, custom, duty or governmental fee, or other like assessment or charge of any

 

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kind whatsoever, together with any interest, penalties, fines, related liabilities or additions to taxes that may become payable in respect therefor imposed by any Governmental Entity, whether disputed or not.

 

5.10 Employee Benefits .

 

(a) Except as set forth in Section 5.10(a) of the Company Disclosure Letter, none of the Company or any ERISA Affiliate (as defined below) maintains, administers, sponsors or otherwise has any liability with respect to (i) any “employee benefit plan,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), (ii) any material employment, severance or similar contract, plan, arrangement or policy or (iii) any other material plan or arrangement (written or oral) whether or not subject to ERISA (including any funding mechanism therefore now in effect or required) providing for compensation, bonuses, profit-sharing, stock option or other stock related rights or other forms of incentive or deferred compensation, vacation benefits, insurance coverage (including any self-insured arrangements), health or medical benefits, disability benefits, workers’ compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical or life insurance benefits), which, without limiting any other limitation hereof, in each case specified in subsection (i), (ii) or (iii), covers any employee or former employee or director of the Company or any of its Subsidiaries. Other than with respect to any multiemployer plan as defined in Section 4001 of ERISA, the Company has delivered or made available to Purchaser (i) current, accurate and complete copies (or to the extent no such copy exists, an accurate description of the material features) of each Stock Option Plan (as defined below) and, if applicable, related trust agreements, (ii) all amendments thereto, and (iii) if applicable, the two most recently prepared (A) Forms 5500 and attached schedules, (B) audited financial statements and (C) actuarial valuation reports. The plans required to be listed on Section 5.10(a) of the Company Disclosure Letter are referred to collectively herein as the “ Company Employee Plans .” An “ ERISA Affiliate ” means any Person which would be treated as a single employer with the Company or any of its Subsidiaries under Section 414 of the Code.

 

(b) None of the Company, any of its Subsidiaries, or any ERISA Affiliate has incurred any liability under Title IV of ERISA which has not been satisfied (other than for premiums to the Pension Benefit Guaranty Corporation (“ PBGC ”) not yet due) with respect to any employee pension benefit plan (as defined in Section 3(2) of ERISA) or any multiemployer plan (as defined in Section 3(37) of ERISA), and no events have occurred and no circumstances exist that could reasonably be expected to result in any such liability to the Company, any of its Subsidiaries or any ERISA Affiliate.

 

(c) Each Company Employee Plan which is intended to be qualified under Section 401(a) of the Code is so qualified and each trust forming a part thereof is exempt from Tax pursuant to Section 501(a) of the Code and, to the knowledge of the Company, nothing has occurred, whether by action or failure to act, that could reasonably be expected to cause the loss of such qualification. The Company has furnished to Merger Sub a copy of the most recent Internal Revenue Service determination letter, if any, with respect to each Company Employee Plan. Each Company Employee Plan has been maintained in compliance in all material respects with its terms and with the requirements prescribed by any and all statutes, orders, rules and

 

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regulations, including ERISA and the Code, which are applicable to such Company Employee Plan. To the knowledge of the Company, nothing has been done or omitted to be done and no transaction or holding of any asset under or in connection with any Company Employee Plan has occurred that will make the Company or any of its Subsidiaries, or any officer or director of the Company or any Subsidiaries, subject to any material liability under Part 4 of Title I of ERISA or liable for any Tax pursuant to Section 4975 of the Code (assuming the taxable period of any such transaction expired as of the date hereof).

 

With respect to each Company Employee Plan (other than a multiemployer plan (as defined in Section 4001 of ERISA)) that is subject to Title IV of ERISA (a “ Pension Plan ”), the fair market value of the assets of such Pension Plan equals or exceeds the actuarial present value of the accumulated benefit obligations (as of the date of the most recent actuarial report prepared for such Pension Plan) under such Pension Plan (whether or not vested), based on the actuarial assumptions set forth in the most recent actuarial report prepared for such Pension Plan. No “accumulated funding deficiency” (for which an excise tax is due or would be due in the absence of a waiver) as defined in Section 412 of the Code or as defined in Section 302(a)(2) of ERISA, whichever may apply, has been incurred with respect to any Pension Plan with respect to any plan year, whether or not waived. Neither the Company nor any ERISA Affiliate has failed to pay when due any “required installment,” within the meaning of Section 412(m) of the Code and Section 302(e) of ERISA, whichever may apply, with respect to any Pension Plan. Neither the Company nor any ERISA Affiliate is subject to any lien imposed under Section 412(n) of the Code or Section 302(f) of ERISA, whichever may apply, with respect to any Pension Plan. Except for such of the following as would not reasonably be expected to result in a Material Adverse Restriction, (i) neither the Company nor any ERISA Affiliate has any liability for unpaid contributions with respect to any Pension Plan, (ii) neither the Company nor any ERISA Affiliate is required to provide security to any Pension Plan under Section 401(a)(29) of the Code, (iii) neither the Company nor any ERISA Affiliate has engaged in, or is a successor or parent corporation to an entity that has engaged in, any transaction described in Section 4069 of ERISA, (iv) no filing has been made by the Company or any ERISA Affiliate with the PBGC, and no proceeding has been commenced by the PBGC, to terminate any Pension Plan, that in either case is pending, and (v) no condition exists and no event has occurred that could reasonably be expected to constitute grounds for the termination of any Pension Plan by the PBGC. There has been no “reportable event” (as defined in Section 4043(b) of ERISA and the PBGC regulations under such Section) with respect to any Pension Plan.

 

(d) There has been no amendment to or change in employee participation or coverage under, any Company Employee Plan which would materially increase the expense of maintaining such Company Employee Plan above the level of the expense incurred in respect thereof for the fiscal year ended June 30, 2003.

 

(e) Neither the Company nor any of its Subsidiaries has any obligations to provide retiree health and life insurance or other retiree death benefits under any Company Employee Plan which is a welfare plan as defined in Section 3(1) of ERISA, other than benefits mandated by Section 4980B of the Code or under applicable Law.

 

(f) (i) To the knowledge of the Company, no Company Employee Plan is under audit or is the subject of an audit or investigation by the Internal Revenue Service, the Department of

 

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Labor or any other Governmental Entity, nor is any such audit or investigation pending and (ii) with respect to any Company Employee Plan and except as would not result in a Material Adverse Restriction, (A) no actions, suits, termination proceedings or claims (other than routine claims for benefits in the ordinary course) are pending or, to the knowledge of the Company, threatened and (B) no facts or circumstances exist that could reasonably be expected to give rise to any such actions, suits or claims.

 

(g) The Board has adopted resolutions that have the effect of (i) terminating the FTD Corporation 1994 Stock Award and Incentive Plan immediately prior to the Effective Time and, where the Merger Consideration is greater than the exercise price of an Option thereunder, providing for the payment of consideration in an amount equal to the Option Consideration in substitution for the number of shares of Common Stock subject to outstanding Options to purchase shares of Common Stock and the cancellation of such Option in consideration of such payments; (ii) terminating the FTD.COM Inc. 1999 Equity Incentive Plan immediately prior to the Effective Time and, where the Merger Consideration is greater than the exercise price of an Option thereunder, providing for the payment of alternative consideration in an amount equal to the Option Consideration, which the Board in its discretion as provided in such plan determined to be equitable in the circumstances, and the cancellation of such Option in consideration of such payments; and (iii) terminating the FTD, Inc. 2002 Long-Term Equity Incentive Plan immediately prior to the Effective Time and, where the Merger Consideration is greater than the exercise price of an Option thereunder, canceling all of the Company’s obligations under such Options in exchange for the Option Consideration; provided , however , with respect to all Options referred to in clause (ii) for which the exercise price is greater than the Merger Consideration, the holder of such Options shall be entitled to receive a payment of $0.05 per share of Common Stock issuable upon exercise of such Option, which the Board in its discretion and as provided in the FTD.COM Inc. 1999 Equity Incentive Plan determined to be equitable in the circumstances. Except for the Options referenced in the immediately preceding clause, there are no Options outstanding providing for a per share exercise price in excess of the Merger Consideration.

 

(h) Neither the execution and delivery of this Agreement or any Ancillary Documents by the Company nor the consummation of the transactions contemplated hereby or thereby will result in the acceleration or creation of any rights of any officer, director or employee of the Company under any Company Employee Plan or under any agreement (including, without limitation, the acceleration of the vesting or exercisability of any Options, the acceleration of the vesting of any restricted stock, the acceleration of the accrual or vesting of any benefits under any plan or the acceleration or creation of any rights under any bonus, severance, parachute or change in control agreement). The Company is not a party to or bound by any agreement, plan or arrangement pursuant to which the Company has any obligation to “gross up,” indemnify or otherwise compensate or hold harmless any Person with respect to any portion of any excise tax (or interest or penalties with respect thereto) which such Person may become subject to under Section 4999 of the Code or any similar state tax Law.

 

5.11 Brokers . The Company has not retained, authorized to act on behalf of the Company or any of its Subsidiaries or entered into any contract, arrangement or understanding with any Person or firm that may result in the obligation of Purchaser, Merger Sub or the Company or any of their respective affiliates to pay any finder’s fees, brokerage or agent’s

 

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commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby, except that the Company has retained the Financial Advisor, the arrangements with which have been disclosed in writing to Purchaser prior to the date hereof, and all of which fees and expenses will be borne by the Company.

 

5.12 Licenses and Permits . The Company and its Subsidiaries maintain in full force and effect and are in compliance with all licenses, permits, certificates, approvals, consents, easements, variances, exemptions and authorizations (collectively, “ Permits ”) with and under all Laws and all Environmental Laws, and from all Governmental Entities, required to conduct their respective businesses as presently conducted, except for such of the foregoing the lack of which or failure to comply with which would not reasonably be expected to have a Company Material Adverse Effect, and no Permit is subject to any outstanding order, decree, judgment or stipulation that would be likely to affect such Permit, where the effect of the foregoing would have a Company Material Adverse Effect.

 

5.13 Environmental Compliance and Disclosure . Except for any matters that would not reasonably be expected to have a Company Material Adverse Effect, (a) the respective business of the Company and each of its Subsidiaries are, and have been, conducted in compliance with all applicable Environmental Laws (as defined below), (b) each of the Company and its Subsidiaries has obtained, and is in full compliance with, all material Permits required by applicable Laws for the use, storage, treatment, transportation, release, emission and disposal of raw materials, by-products, wastes and other substances used or produced by or otherwise relating to the operations of any of them, (c) none of the real property contains any asbestos containing material or mold that may be in a condition, location or form that requires any abatement, containment or remediation to address a tangible risk to human health, and (d) except as set forth in Section 5.13(b) of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries has: (i) created or assumed any liabilities, guaranties, obligations or indemnifications under any Environmental Law, consent decree or contract with any Third Party, including any Governmental Entity, related to any property currently or formerly owned, operated or leased by the Company or any of its Subsidiaries; (ii) received, or been subject to, any complaint, summons, citation, notice, order, claim, litigation, investigation, judicial or administrative proceedings, or judgment from any Person, including any Governmental Entity, regarding any actual or alleged violations of, or actual or potential liability under, any Environmental Laws; or (iii) any responsibility or liability under Environmental Law for any cleanup or remediation related to any hazardous materials or waste. There are no underground storage tanks located on any real property owned by the Company or, to the Company’s knowledge, any real property leased by the Company. As used in this Agreement, the term “ Environmental Laws ” means Laws relating to pollution or protection of the environment or human safety or health, including matters relating to emissions, discharges or releases of pollutants, contaminants, chemicals or toxic or hazardous substances into ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of such hazardous substances.

 

5.14 Title to Assets . The Company and each of its Subsidiaries have good and marketable title to all of their real and personal properties and assets reflected on the Company’s audited balance sheet (including in any related notes thereto) as of June 30, 2003 included in the

 

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Company’s Annual Report on Form 10-K for the fiscal year then ended (the “ 2003 Balance Sheet ”) or acquired after June 30, 2003 (other than assets disposed of since June 30, 2003 in the ordinary course of business consistent with past practice), in each case free and clear of all title defects and Encumbrances, except for (a) Encumbrances that secure indebtedness that is properly reflected in the 2003 Balance Sheet; (b) liens for Taxes accrued but not yet payable; (c) liens arising as a matter of law in the ordinary course of business with respect to obligations incurred after June 30, 2003, provided that the obligations secured by such liens are not delinquent or material; and (d) such title defects or Encumbrances, if any, as would not reasonably be expected to have a Company Material Adverse Effect (collectively, “ Permitted Encumbrances ”). The Company and each of its Subsidiaries either own, or have valid leasehold interests in, all material properties and assets currently used by them in the conduct of their business.

 

5.15 Labor and Employment Matters . (a) Neither the Company nor any of its Subsidiaries is a party to, or bound by, any collective bargaining agreement or other Contract or understanding with a labor union or labor organization or written work rules or written practices agreed to with any labor organization or employee association applicable to employees of the Company or any of its Subsidiaries. Except for such of the following as would not reasonably be expected to result in a Material Adverse Restriction, there is no (i) unfair labor practice, labor dispute (other than routine individual grievances) or labor arbitration proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries relating to their respective businesses, (ii) to the knowledge of the Company, activity or proceeding by a labor union or representative thereof to organize any employees of the Company or any of its Subsidiaries or (iii) lockout, strike, slowdown, work stoppage or, to the knowledge of the Company, threat thereof by or with respect to any such employees.

 

(b) Section 5.15 of the Company Disclosure Letter contains a true and complete list of each of the Company’s material written personnel policies or rules applicable to employees of the Company or any of its Subsidiaries as of the date hereof, true, correct and complete copies of which have heretofore been made available to Purchaser. To the knowledge of the Company, (i) the Company and its Subsidiaries are, and have at all times been, in material compliance with all applicable Laws respecting employment and employment practices, terms and conditions of employment, wages, hours of work and occupational safety and health, (ii) no charges with respect to or relating to the Company or its Subsidiaries are pending before the Equal Employment Opportunity Commission or any other corresponding state agency, except for such charges as would not reasonably be expected to result in a Material Adverse Restriction, and the Company and its Subsidiaries have at all times been in material compliance with all federal and state Laws and regulations prohibiting discrimination in the workplace including, without limitation, Laws and regulations that prohibit discrimination and/or harassment on account of race, national origin, religion, gender, disability, age, workers compensation status or otherwise, except where the failure to be in such compliance would not reasonably be expected to result in a Material Adverse Restriction, (iii) no federal, state, local or foreign agency responsible for the enforcement of labor or employment Laws has notified the Company that it intends to conduct an investigation with respect to or relating to the Company and its Subsidiaries and no such investigation is in progress, except where such investigations would not reasonably be expected to result in a Material Adverse Restriction, and (iv) except as would not reasonably be expected to result in a Material Adverse Restriction, there are no lawsuits, complaints, controversies or other proceedings pending or, to the knowledge of the Company, any applicant for employment

 

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or classes of the foregoing alleging breach of any expense or implied contract or employment, any Law or regulation governing employment or the termination thereof or other discriminatory, wrongful or tortious conduct in connection with the employment relationship.

 

(c) As of the date hereof, within the last three years, the Company and its Subsidiaries have not effectuated (i) a “plant closing” (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company or any of its Subsidiaries, or (ii) a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of the Company or any of its Subsidiaries; nor has the Company or any of its Subsidiaries been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state or local Law.

 

5.16 Intellectual Property .

 

(a) Section 5.16 of the Company Disclosure Letter lists all of the trademarks (whether registered or unregistered), service marks, trade names, service names, brand names, likenesses, logos (collectively, “ Trademarks ”) that are material to the conduct of the business of the Company or any of its Subsidiaries, and all registered copyrights, patents, URLs and domain names currently used by, or necessary to the conduct of the business of, the Company or its Subsidiaries (collectively with the Trademarks, the “ Proprietary Rights ”). Section 5.16 of the Company Disclosure Letter also sets forth: (i) for each patent, the number, normal expiration date and subject matter for each country in which such patent has been issued, or, if applicable, the application number, date of filing and subject matter for each country, (ii) for each registered trademark, the application serial number or registration number, the class of goods covered and the expiration date for each country in which a trademark has been reg