Juno 2013 Annual Report Download - page 14

Table of Contents
amended. In addition, prior to the consummation of the FTD Spin-Off Transaction, United Online, Inc. received a legal opinion, substantially to the
effect that the FTD Spin-Off Transaction so qualifies. The IRS ruling and the tax opinion rely on certain facts, assumptions and undertakings, and
certain representations from United Online, Inc. and FTD, regarding the past and future conduct of both respective businesses and other matters, and the
tax opinion relies on the IRS ruling. Notwithstanding the IRS ruling and the tax opinion, the IRS could determine that the FTD Spin-Off Transaction
should be treated as a taxable transaction if it determines that any of these facts, assumptions, representations, or undertakings is not correct, or that the
FTD Spin-Off Transaction should be taxable for other reasons, including if the IRS were to disagree with the conclusions in the tax opinion that are not
covered by the IRS ruling.
If the FTD Spin-Off Transaction ultimately is determined to be taxable, then a stockholder of United Online, Inc. that received shares of FTD
common stock in the FTD Spin-Off Transaction would be treated as having received a distribution of property in an amount equal to the fair market
value of such shares on the distribution date and could incur significant income tax liabilities. Such distribution would be taxable to such stockholder as
a dividend to the extent of United Online's current and accumulated earnings and profits. Any amount that exceeded United Online's earnings and
profits would be treated first as a non-taxable return of capital to the extent of such stockholder's tax basis in its shares of United Online, Inc. stock with
any remaining amount being taxed as a capital gain. In addition, United Online would recognize a taxable gain in an amount equal to the excess, if any,
of the fair market value of the shares of common stock of FTD held by United Online, Inc. on the distribution date over United Online, Inc.'s tax basis
in such shares.
In connection with the FTD Spin-Off Transaction, FTD indemnified us for certain liabilities and we indemnified FTD for certain liabilities. This
indemnity may not be sufficient to insure us against the full amount of the liabilities assumed by FTD and FTD may be unable to satisfy its
indemnification obligations to us in the future.
Pursuant to the Separation and Distribution Agreement and certain other agreements with FTD, FTD agreed to indemnify us for certain liabilities,
and we agreed to indemnify FTD for certain liabilities, in certain cases, for unlimited amounts. There can be no assurance that the indemnity from FTD
will be sufficient to protect us against the full amount of such liabilities, or that FTD will be able to fully satisfy its indemnification obligations. Third-
parties could also seek to hold us responsible for any of the liabilities that FTD has agreed to assume. Even if we ultimately succeed in recovering from
FTD any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves. In addition, certain indemnities that we
may be required to provide to FTD are not subject to any limits on the aggregate amount of the liability, may be significant and could negatively impact
our business. Each of these risks could negatively affect our business, financial condition, results of operations, and cash flows.
Completion of the FTD Spin-Off Transaction may not enhance long-term shareholder value.
We completed the FTD Spin-Off Transaction on November 1, 2013. At the time of the consummation of the FTD Spin-Off Transaction, our
Board of Directors and management team, after consultation with independent financial and legal advisors, believed that the FTD Spin-Off Transaction
as planned would enhance long-term shareholder value. There can be no assurance, however, that the combined value of our common stock and the
common stock of FTD in the long term will equal or exceed what the value of our common stock would have been in the absence of the FTD Spin-Off
Transaction. The combined value of the common stock of the two companies following the distribution could be lower than anticipated for a variety of
reasons, including, among others, changes in the Company's dividend policy, the inability of either company to compete effectively as an independent
company, realignment of the stockholder population of both the Company and FTD in the period
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