FORM OF
GOVERNANCE AGREEMENT
THIS GOVERNANCE AGREEMENT (this "AGREEMENT") is made as of
[____________, 2002], by and among (i) FTD, Inc., a Delaware corporation
formerly known as IOS Brands Corporation (the "COMPANY"), (ii) Perry Acquisition
Partners, L.P., a Delaware limited partnership, Perry Partners, L.P., a Delaware
limited partnership, Perry Partners International, Inc., a Cayman Islands
corporation, and Perry Principals Holdings, LLC, a Delaware limited liability
company (collectively, the "PERRY ENTITIES"), (iii) Xxxx Capital Fund IV, L.P.,
a Delaware limited partnership, Xxxx Capital Fund IV-B, L.P., a Delaware limited
partnership, Information Partners Capital Fund, L.P., a Delaware limited
partnership, BCIP Associates, a Delaware general partnership, and BCIP Trust
Associates, L.P., a Delaware limited partnership (collectively, the "BAIN
ENTITIES", (iv) Xxxxxxxx Street Partners, an Illinois general partnership
("XXXXXXXX"), and (v) Xxxxxxxx Partners II L.P., a Delaware limited partnership,
Fleet Equity Partners VII, L.P., a Delaware limited partnership, and Fleet
Growth Resources III, Inc., a Delaware corporation (collectively, the "FLEET
ENTITIES"). Each of the parties to this Agreement other than the Company is
referred to herein as an "INVESTOR" and collectively, the "INVESTORS". Each of
the Investors other than the Perry Entities is referred to herein as an "OTHER
INVESTOR" and collectively, the "OTHER Investors."
WHEREAS, as of the date hereof, the Perry Entities Beneficially Own
(as defined below) shares of Common Stock (the "PERRY SHARES"), that represent
approximately ___% of the Common Stock (as defined in SECTION 1) of the Company;
WHEREAS, as of the date hereof, the Bain Entities, Fleet Entities and
Xxxxxxxx Beneficially Own (as defined below) shares of Common Stock (the "OTHER
INVESTOR SHARES"), that represent approximately ___% of the Common Stock of the
Company;
WHEREAS, pursuant to that certain Stockholders' Agreement dated as of
December 19, 1994, among the Company and the Investors (the "OLD STOCKHOLDERS
AGREEMENT"), the Investors had the right to designate members of the Board of
Directors of the Company and the Company's direct and indirect subsidiaries;
WHEREAS, the Company has requested the Investors consent to the
termination of the Old Stockholders Agreement; and
WHEREAS, a condition to the Investors' obligation to consent to the
termination of the Old Stockholders Agreement is that the Company enter into
this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, each of the parties hereby agrees
as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
"AFFILIATE" means, with respect to a Person, any other Person that
directly or indirectly, through one or more intermediaries, Controls, is
Controlled by or is under common Control with such Person.
"BAIN NOMINEES" means such Persons as are so designated by the Bain
Entities from time to time to serve as members of the Board pursuant to this
Agreement.
"BENEFICIALLY OWN" has the meaning specified in Rule 13d-3 under the
Exchange Act as in effect on the date hereof.
"BOARD" means the Board of Directors of the Company.
"COMMON STOCK" means, collectively, (i) the Class A Common Stock of
the Company, par value $.01 per share, (ii) the Class B Common Stock of the
Company, par value $.0005 per share, and (iii) any other class or series of
common stock issued by the Company subsequent to the date of this Agreement.
"CONTROL" has the meaning specified in Rule 12b-2 under the Exchange
Act as in effect on the date hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"NOMINEES" means Perry Nominees and Bain Nominees.
"PERRY NOMINEES" means such Persons as are so designated by the Perry
Entities from time to time to serve as members of the Board pursuant to this
Agreement.
"PERSON" means any individual, corporation, association, limited
liability company, partnership, trust or estate, an unincorporated organization,
a joint venture, a government or any agency or political subdivision thereof, or
any other entity of whatever nature.
2. NOMINATION. Until the termination of this Agreement:
(a) The Perry Entities shall vote their Perry Shares and the
Other Investors shall vote their Other Investor Shares, and shall take all other
necessary or desirable actions within its control (whether in its capacity as a
stockholder, director or otherwise), to cause the board of directors to consist
of nine members. The Perry Entities shall have the right to designate four Perry
Nominees and the Bain Entities shall have the right to designate two Bain
Nominees; PROVIDED, HOWEVER, that:
(i) if at any time the number of Perry Shares falls below (for
a period of at least 30 consecutive days) the number of
shares equal to 20% of the then outstanding shares of
Common Stock, the Perry Entities shall only be entitled to
designate two Perry Nominees;
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(ii) notwithstanding the other provisions of this SECTION 2(a),
if at any time the number of Perry Shares falls below (for
a period of at least 30 consecutive days) 30% of the number
of Perry Shares as of the date of this Agreement, the Perry
Entities shall no longer be entitled to designate any Perry
Nominees (and the number of Perry Nominees shall be zero);
(iii) if at any time the number of Other Investor Shares falls
below (for a period of at least 30 consecutive days) the
number of shares equal to 10% of the then outstanding
shares of Common Stock, the Bain Entities shall only be
entitled to designate one Bain Nominee;
(iv) notwithstanding the other provisions of this SECTION 2(a),
if at any time the number of Other Investor Shares falls
below (for a period of at least 30 consecutive days) 30% of
the number of Other Investor Shares as of the date of this
Agreement, beginning at the next designation of a Bain
Nominee, the Other Investors shall no longer be entitled to
designate any Bain Nominees (and the number of Bain
Nominees shall be zero) and the number of Perry Nominees
shall be increased to five if, at such time, the Perry
Entities would be entitled to designate at least three
Perry Nominees without giving effect to this clause (iv);
and
(v) if at any time the number of Perry Shares is less than or
equal to the number of Other Investor Shares and the Perry
Entities would, but for this clause (v), be entitled to
designate pursuant to this Agreement four Perry Nominees,
then notwithstanding the other provisions of this SECTION
2(a), beginning at the next designation of a Perry Nominee
(whether to fill a vacancy or at an election of directors
to the board), the Bain Entities shall be entitled to
designate three Bain Nominees and the Perry Entities shall
be entitled to designate three (rather than four) Perry
Nominees.
For purposes of these calculations, the number of shares shall be calculated
after giving effect to any stock dividend, stock split, recapitalization or
other reorganization. Any waiver or failure by the Perry Entities or the Bain
Entities to designate the maximum number of nominees to which they are entitled
hereunder shall not be deemed a waiver of such Person's rights hereunder in
connection with any future elections of directors to the Board.
(b) The Company shall take (and cause to be taken) all
commercially reasonable actions and agrees to exercise all authority under
applicable law to cause any slate of directors presented to stockholders of the
Company for election to the Board to include the Nominees. In this regard, the
Company shall, subject to applicable law and the listing requirements of any
stock exchange or interdealer quotation system, if and to the extent the Company
is subject thereto (the "LISTING RULES"), duly nominate the Nominees for
election to the
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Board and shall solicit proxies in favor of the election of the Nominees from
the stockholders of the Company entitled to vote for the election of directors.
In connection therewith and in furtherance thereof, the Company shall include in
any proxy solicitation materials related to the election of members of the Board
such information regarding the Nominees and recommendations of the Board as are
appropriate in proxy solicitation materials or as may be required under the
rules and regulations promulgated by the Securities and Exchange Commission.
(c) So long as the Perry Entities or the Bain Entities are
entitled to designate Nominees, if at any time no Nominee is serving as a
director on the Board, then, at the request of the Perry Entities or the Bain
Entities, as the case may be, the Company shall promptly invite (or cause to be
invited) at least one Perry Nominee and/or Bain Nominee, as the case may be, to
attend all meetings of (i) the Board, and, unless otherwise prohibited by
applicable law or the Listing Rules, any meetings of any committees of the Board
and (ii) the board of directors (and any committees thereof) of all of the
Company's subsidiaries, in each case in a nonvoting observer capacity (an
"OBSERVER") and, in this respect, shall give (or cause to be given) to the
Observer copies of all notices, minutes, consents, and other material that the
Company provides to its directors (and, in the case of meetings of the board of
directors (and any committees thereof) of the Company's subsidiaries, that such
subsidiary provides to its directors), PROVIDED, HOWEVER, that the Company and
its subsidiaries shall have the right to exclude the Observer from access to any
material or meeting or portion thereof if the Board (or, in the case of a
meeting of the board of directors (or a committee thereof) of a subsidiary of
the Company, such board of directors), based on the advice of its attorneys,
believes that such exclusion is reasonably necessary to preserve the
attorney-client privilege, to protect confidential proprietary information or to
avoid a conflict of interest or potential conflict of interest. An Observer's
rights hereunder shall terminate at such time as a Perry Nominee or Bain
Nominee, as the case may be, is elected to the Board.
3. REMOVAL AND REPLACEMENT. Following the election of a Nominee to the
Board, such Nominee shall not be removed from the Board except for cause under
applicable law. Upon the removal for cause or the resignation, death or
disability of a Nominee serving as a director of the Board, the Perry Entities
or the Bain Entities, as the case may be, shall have the right to designate a
replacement Nominee and, without regard to the level of Beneficial Ownership of
Shares by the Perry Entities or the Bain Entities, as the case may be, at the
time of any such resignation, death or disability, either the remaining
directors on the Board shall promptly (and in any event within ten business
days) appoint such replacement Nominee to fill the vacancy on the Board or, if
the remaining directors fail to the appoint such replacement Nominee to fill
such vacancy, then the Company shall duly nominate such replacement Nominee for
election to the Board pursuant to SECTION 2(b), and, if requested by the Perry
Entities or the Bain Entities, promptly call (or cause to be called) and hold a
special meeting of the Company's stockholders for the purpose of voting on such
replacement Nominee.
4. COMMITTEES AND SUBSIDIARY BOARDS. Unless otherwise prohibited by
applicable law or the Listing Rules, the composition of (i) any committee of the
Board and (ii) the board of directors (and any committees thereof) of all of the
Company's majority-owned subsidiaries shall include at least one Perry Nominee
and such committees shall make
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recommendations to their respective boards of directors but shall not have the
authority to act in lieu of their respective boards.
5. EXPENSES. The Company shall pay the reasonable out-of-pocket
expenses incurred by each Nominee (including any serving as an Observer) in
connection with attending any meeting of the Board, any board of directors of
the Company's direct or indirect subsidiaries or any committee of the Board and
other travel expenses reasonably incurred in discharging such individuals duties
as a director or Observer.
6. CERTAIN ACTIONS. The affirmative vote of at least two Perry
Nominees (for so long as the Perry Entities shall be entitled to designate any
Perry Nominees) and one Bain Nominee (for so long as the Bain Entities shall be
entitled to designate any Bain Nominee) shall be required with respect to any of
the following actions:
(i) amendment of the charter or by-laws of the Company or any
subsidiary of the Company;
(ii) (A) any recapitalization of the Company or any issuance or sale
by the Company or any subsidiary of the Company of any of its
equity or debt securities (or any other instrument convertible
into such securities) (whether by public offering, private
placement or otherwise), provided this provision shall not apply
to any issuance of shares of common stock in connection with an
employee benefit plan (so long as the aggregate number of shares
of common stock issued or issuable in connection with all such
plans does not exceed 15% of the outstanding shares of common
stock of the Company or the applicable subsidiary) or (B) any
incurrence of any long-term indebtedness (including guarantees
of such indebtedness) by the Company or any subsidiary of the
Company which is not reflected in the Board approved annual
operating budget;
(iii) the registration by the Company or any subsidiary of the Company
of any of its equity or debt securities pursuant to the
Securities Act in connection with a public offering of such
securities, except on a Form S-8 registration statement (or
pursuant to contractual registration rights);
(iv) except for (A) assets acquired in the ordinary course of
business and (B) capital assets acquired in accordance with the
Company's or any of its subsidiaries' board of
directors-approved annual budgets, any material acquisition by
the Company or any of its subsidiaries, by merger, consolidation
or otherwise, of assets or stock of any other person or entity;
(v) except for transactions between the Company and any of its
subsidiaries or between any of the Company's subsidiaries, any
merger, consolidation or sale of the Company or any subsidiary,
any mortgage, lease or other disposition of a material amount of
the assets of the Company or any subsidiary of the Company, or
the liquidation of the Company or any subsidiary of the Company;
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(vi) except for transactions in the ordinary course of business or
that would not ordinarily be submitted to the Board for
authorization or approval, transactions with any Affiliates of
the Company; and
(vii) approval of the annual operating budget for the Company and any
of its subsidiaries and any material amendment or modification
thereof or material deviation therefrom.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Investors as follows: (i) it has full power and
authority to execute, deliver and perform its obligations under this Agreement
and (ii) this Agreement and all actions to be undertaken by the Company
contemplated hereby have been, or will be when taken, duly and validly
authorized by all necessary action on its part and constitutes a legal, valid
and binding obligation enforceable against the Company in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application which
may affect the enforcement of creditors' rights generally and by general
equitable principles.
7. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
represents and warrants to the Company, with respect to itself, as follows: (i)
such Investor has full power and authority to execute, deliver and perform its
obligations under this Agreement and (ii) this Agreement and all actions to be
undertaken by such Investor contemplated hereby have been, or will be when
taken, duly and validly authorized by all necessary action on such Investor's
part and constitutes a legal, valid and binding obligation enforceable against
such Investor in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general application which may affect the enforcement of creditors'
rights generally and by general equitable principles.
8. TERMINATION. This Agreement shall terminate automatically and be of
no further force and effect upon THE FIRST TO OCCUR of:
(i) the Perry Entities and the Other Investors and their
respective Affiliates Beneficially Own in the aggregate
(for a period of at least 30 consecutive days) less than
ten percent (10%) of the outstanding shares of Common Stock
of the Company; or
(ii) the agreement of the parties to this Agreement to terminate
this Agreement.
9. COMPANY BYLAWS.
(a) The Company hereby covenants and agrees not to amend and to use
its best efforts to prevent an amendment of the bylaws of the Company (as in
effect on the date hereof) if such amendment could adversely affect the
Investors' rights hereunder without the Investors' prior written consent
thereto.
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(b) In furtherance of SECTION 9(a) HEREOF, the Company hereby
covenants and agrees that, until the termination of this Agreement, the Company
shall use its best efforts to include the following provision in its Bylaws:
VACANCIES. Any vacancy occurring in the Board of Directors for
any reason and any newly created directorship may be filled by
either (i) a majority of the remaining Directors, although less
than a quorum, or (ii) by a plurality of the votes of the shares
present in person or represented by proxy at a stockholders'
meeting and entitled to vote in the election of Directors;
provided, that any (i) vacancy resulting from the death,
disability, resignation or removal for cause of a Nominee (as
such term is defined in the Governance Agreement, dated as of
[________, 2002], between the Corporation and the stockholders of
the Corporation party thereto (as such agreement may be amended
from time to time pursuant to its terms, the "Governance
Agreement"), a true and correct copy of which shall be available
for inspection by the Corporation's stockholders during normal
business hours at the Corporation's corporate headquarters upon
reasonable prior request and (ii) any newly created directorship
shall, in each case, only be filled by either (1) a majority of
the remaining Directors with a replacement Nominee designated
pursuant to the terms of the Governance Agreement or (2) by the
stockholders of the Corporation. Each Director elected to replace
a former Director shall hold such office until the expiration of
the term of office of the Director whom he or she has replaced
and the election and qualification of his or her successor, or
until his or her earlier death, resignation or removal for cause.
A Director elected to fill a newly created directorship shall
serve until the next annual meeting of stockholders at which the
terms of office of the class of Directors to which he or she is
assigned expire and the election and qualification of his or her
successor, or until his or her earlier death, resignation or
removal for cause. Notwithstanding any provision in these Bylaws
to the contrary, any amendment or revision of this subsection of
these Bylaws shall be subject to and in compliance with the
restrictions thereon set forth in Section 9(a) of the Governance
Agreement.
10. AMENDMENT AND WAIVER. This Agreement may be amended only by a
writing signed by the Company and the holders of at least a majority of the
Perry Shares and at least a majority of the Other Investor Shares. Any provision
of this Agreement may be waived by a writing signed by the party granting such
waiver. Notwithstanding anything contained herein to the contrary, the amendment
or waiver of any material provision of this Agreement by the Company shall
require the approval of a majority of the directors of the Company who are not
Perry Nominees or Bain Nominees.
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11. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been herein.
12. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein,
this document embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
13. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
14. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and permitted assigns and the Investors and their
successors and permitted assigns. Neither the Company nor any Investor may
assign, directly or indirectly, this Agreement to any Person (other than, in the
case of an Investor, an Affiliate of such Investor) without the prior consent of
the other parties hereto.
15. REMEDIES. The Investors shall be entitled to enforce their rights
under this Agreement specifically to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. The Company agrees and acknowledges that money damages may not be an
adequate remedy for any breach by the Company of the provisions of this
Agreement and that the Investors may in their sole discretion apply to any court
of law or equity of competent jurisdiction for specific performance and/or
injunctive relief (without posting a bond or other security) in order to enforce
or prevent any violation (or threatened violation) of the provisions of this
Agreement. The Company hereby consents to and submits to the jurisdiction of any
state or federal court located in New York, New York, and irrevocably agree
that, subject to the Investor's election hereunder, all actions relating to
enforcement of this Agreement shall be litigated in such courts and the Company
waives any objection which it may have based on improper venue or forum NON
CONVENIENS to the conduct of any proceeding in any such court.
16. GOVERNING LAW. The laws of Delaware shall govern all issues
concerning the relative rights of the Company and the Investors and all other
questions concerning the construction, validity and interpretation of this
Agreement, without giving effect to any choice of law or other conflict of law
provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
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17. COUNTERPARTS. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
FTD, INC. (f/k/a IOS BRANDS CORPORATION)
By:
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Name:
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Its:
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PERRY ACQUISITION PARTNERS, L.P.
By: PERRY INVESTORS, L.L.C.
Its: General Partner
By:
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Name:
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Its:
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PERRY PARTNERS, L.P.
By: PERRY CORP.
Its: Managing General Partner
By:
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Name:
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Its:
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PERRY PARTNERS INTERNATIONAL, INC.
By: PERRY INVESTORS, L.L.C.,
Its: Investment Manager
By:
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Name:
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Its:
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PERRY PRINCIPALS HOLDINGS, LLC
By:
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Name: Xxxxxxx X. Xxxxx
Its: Managing Member
[SIGNATURE PAGE TO GOVERNANCE AGREEMENT]
XXXX CAPITAL FUND IV, X.X.
XXXX CAPITAL FUND IV-B, L.P.
By: XXXX CAPITAL PARTNERS IV, L.P.
Their: General Partner
By: XXXX CAPITAL INVESTORS, L.L.C.
Its: General Partner
By:
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Name: Xxxxxxx X. Xxxxxxxx
Its: Managing Director
INFORMATION PARTNERS CAPITAL FUND, L.P.
By: INFORMATION PARTNERS
Its: General Partner
By: XXXX CAPITAL PARTNERS IV, L.P.
Its: General Partner
By: XXXX CAPITAL INVESTORS, L.L.C.
Its: General Partner
By:
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Name: Xxxxxxx X. Xxxxxxxx
Its: Managing Director
BCIP ASSOCIATES
BCIP TRUST ASSOCIATES, L.P.
By:
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Name: Xxxxxxx X. Xxxxxxxx
Their: Authorized Partner
[SIGNATURE PAGE TO GOVERNANCE AGREEMENT]
XXXXXXXX PARTNERS II, L.P.
By: SILVERADO II, L.P.
Its: General Partner
By: SILVERADO II CORP.
Its: General Partner
By:
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Name: Xxxxx X. Xxxxx
Its: President
FLEET EQUITY PARTNERS VII, L.P.
By: SILVERADO V CORP.
Its: General Partner
By:
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Name: Xxxxx X. Xxxxx
Its: President
FLEET GROWTH RESOURCES III, INC.
By:
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Name: Xxxxx X. Xxxxx
Its: Attorney in Fact (Granted 8/4/00)
XXXXXXXX STREET PARTNERS
By:
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Name:
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Its:
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[SIGNATURE PAGE TO GOVERNANCE AGREEMENT]
