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1 800 FLOWERS COM INC FORM 10-K (Annual Report) Filed 09/12/08 for the Period Ending 06/29/08 Address 1600 STEWART AVE WESTBURY, NY 11590 Telephone 5162376000 CIK 0001084869 Symbol FLWS SIC Code 5990 - Retail Stores, Not Elsewhere Classified Industry Retail (Specialty) Sector Services Fiscal Year 06/27 http://www.edgar-online.com © Copyright 2008, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

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1 800 FLOWERS COM INC

FORM 10-K(Annual Report)

Filed 09/12/08 for the Period Ending 06/29/08

Address 1600 STEWART AVE

WESTBURY, NY 11590Telephone 5162376000

CIK 0001084869Symbol FLWS

SIC Code 5990 - Retail Stores, Not Elsewhere ClassifiedIndustry Retail (Specialty)

Sector ServicesFiscal Year 06/27

http://www.edgar-online.com© Copyright 2008, EDGAR Online, Inc. All Rights Reserved.

Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 29, 2008

or

___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-26841

1-800-FLOWERS.COM, Inc. (Exact name of registrant as specified in its charter)

One Old Country Road, Carle Place, New York 11514

(Address of principal executive offices)(Zip code)

Registrant's telephone number, including area code: (516) 237-6000

Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each Exchange on which registered

Class A common stock, par value The Nasdaq Stock Market, Inc. $0.01 per share

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes | | No |X|

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes | | No |X|

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes |X| No | |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X|

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of

DELAWARE 11-3117311 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)

"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act). (Check one):

Large accelerated filer | | Accelerated filer |X| Non-accelerated filer | |(Do not check if a smaller reporting company) Smaller reporting company | |

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes | | No |X|

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the closing price as of the last business day of the registrant's most recently completed second fiscal quarter, December 28, 2007, was approximately $227,449,000. The registrant has no non-voting common stock.

26,671,031

(Number of shares of class A common stock outstanding as of September 4, 2008)

36,858,465 (Number of shares of class B common stock outstanding as of September 4, 2008)

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant's Definitive Proxy Statement for the 2008 Annual Meeting of Stockholders (the Definitive Proxy Statement) are incorporated by reference into Part III of this Report.

1-800-FLOWERS.COM, INC. FORM 10-K

For the fiscal year ended June 29, 2008

INDEX

PART I Item 1. Business 1 Item 1A. Risk Factors 12 Item 1B. Unresolved Staff Comments 20 Item 2. Properties 21 Item 3. Legal Proceedings 21 Item 4. Submission of Matters to a Vote of Sec urity Holders 21 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities 24 Item 6. Selected Financial Data 26 Item 7. Management's Discussion and Analysis o f Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosur es about Market Risk 41 Item 8. Financial Statements and Supplementary Data 41 Item 9. Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure 41 Item 9A. Controls and Procedures 41 Item 9B. Other Information 44 PART III Item 10. Directors, Executive Officers and Corp orate Governance 45 Item 11. Executive Compensation 45 Item 12. Security Ownership of Certain Benefici al Owners and Management and Related Stockholder Mat ters 45 Item 13. Certain Relationships and Related Tran sactions, and Director Independence 45 Item 14. Principal Accountant Fees and Services 45 Part IV Item 15. Exhibits and Financial Statement Sched ules 46 Signatures 48

PART I

Item 1. BUSINESS

The Company

1-800-FLOWERS.COM, Inc. is the world's leading florist and gift shop. For more than 30 years, 1-800-FLOWERS.COM, Inc. has been providing customers with fresh flowers and the finest selection of plants, gift baskets, gourmet foods, confections, balloons and plush stuffed animals perfect for every occasion. Named one of the top 50 online retailers by Internet Retailer, as well as 2008 Laureate Honoree by the Computerworld Honors Program and the recipient of ICMI's 2006 Global Call Center of the Year Award, 1-800-FLOWERS.COM(R) (1-800-356-9377 or www.1800flowers.com) offers the best of both worlds: exquisite arrangements created by some of the nation's top floral artists and hand-delivered the same day, and spectacular flowers shipped overnight through our Fresh From Our Growers(R) program. As always, 100% satisfaction and freshness are guaranteed. The Company's BloomNet(R) (www.mybloomnet.net) international floral wire service provides a broad range of quality products and value-added services designed to help professional florists grow their businesses profitably. The 1-800-FLOWERS.COM, Inc. "Gift Shop" also includes gourmet gifts such as popcorn and specialty treats from The Popcorn Factory(R) (1-800-541-2676 or (www.thepopcornfactory.com); exceptional cookies and baked gifts from Cheryl&Co.(R) (1-800-443-8124 or www.cherylandco.com); premium chocolates and confections from Fannie May Confections Brands (www.fanniemay.com and www.harrylondon.com); gourmet foods from Greatfood.com(R) (www.greatfood.com); wine gifts from Ambrosia(R) (www.ambrosia.com or www.winetasting.com); gift baskets from 1-800-BASKETS.COM(R) (www.1800baskets.com) and DesignPac Giftssm (www.designpac.com) as well as Home Decor and Children's Gifts from Plow & Hearth(R) (1-800-627-1712 or www.plowandhearth.com), Wind & Weather(R) (www.windandweather.com), HearthSong(R) (www.hearthsong.com) and Magic Cabin(R) (www.magiccabin.com).

1-800-FLOWERS.COM, Inc. stock is traded on the NASDAQ Global Select Market under ticker symbol FLWS.

References in this Annual Report on Form 10-K to "1-800-FLOWERS.COM" and the "Company" refer to 1-800-FLOWERS.COM, Inc. and its subsidiaries. The Company's principal offices are located at One Old Country Road, Suite 500, Carle Place, NY 11514 and its telephone number at that location is (516) 237-6000.

The Origins of 1-800-FLOWERS.COM

The Company's operations began in 1976 when James F. McCann, its Chairman and Chief Executive Officer, acquired a single retail florist in New York City, which he subsequently expanded to a 14-store chain. Thereafter, the Company modified its business strategy to take advantage of the rapid emergence of toll-free calling. The Company acquired the right to use the toll-free telephone number 1-800-FLOWERS, adopted it as its corporate identity and began to aggressively build a national brand around it. The Company believes it was one of the first companies to embrace this new way of conducting business.

In order to support the growth of its toll-free business and to provide superior customer service, the Company developed an operating infrastructure that incorporated the best available technologies. Over time, the Company implemented a sophisticated transaction processing system that facilitated rapid order entry and fulfillment, an advanced telecommunications system and multiple customer service centers to handle increasing call volume.

To enable the Company to deliver products reliably nationwide on a same-day or next-day basis and to market pre-selected, high-quality floral products, the Company created BloomNet(R), a nationwide network including independent local florists selected for their high-quality products, superior customer service and order fulfillment and delivery capabilities.

The Company's online presence has enabled it to expand the number and types of products it can effectively offer to its customers. As a result, the Company has developed relationships with customers who purchase products for both a broad range of celebratory gifting occasions as well as for everyday personal use. The Company has broadened its product offering to include products that a customer could expect to find in a high-end florist shop, including a wide assortment of

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cut flowers and plants, candy, balloons, plush toys, giftware and gourmet gift baskets. In addition, the Company has further expanded its product offering to include home and garden merchandise through its April 1998 acquisition of The Plow & Hearth, Inc.; unique and educational children's gifts through its acquisition of the HearthSong and Magic Cabin product lines in June 2001 and, more recently, weather-themed gifts and instruments through the acquisition of Wind & Weather in October 2005. The Company has also significantly expanded its presence in the gourmet food and gift baskets category through a combination of organic initiatives and strategic acquisitions beginning with the purchase of GreatFood.com, Inc. in November 1999, followed by the purchase of certain assets of The Popcorn Factory, Inc. in May 2002, the addition of wine gifts through the acquisition of The WineTasting Network in November 2004, the addition of cookies and other bakery gift items through the purchase of Cheryl & Co. in March 2005, premium chocolates and confections with the acquisition of Fannie May Confections Brands, Inc. in May 2006, and most recently, gourmet gift baskets, food towers and gift sets through the acquisition of DesignPac Gifts LLC in April 2008.

The Company's Strategy

1-800-FLOWERS.COM's objective is to become the leading authority on thoughtful gifting, to serve an expanding range of our customers' celebratory needs, thereby helping our customers express themselves and connect with the important people in their lives. The Company will continue to build on the trusted relationships with our customers by providing them with ease of access, tasteful and appropriate gifts, and superior service.

The Company believes that 1-800-FLOWERS.COM is one of the most recognized brands in the floral and gift industry. The strength of its brand has enabled the Company to extend its product offerings beyond the floral category into complementary products, which include home and garden merchandise, children's toys and games, gourmet popcorn, cookies and related baked and snack food products, premium chocolate and confections, wine gifts and gourmet gift baskets. This extension of gift offerings helps our customers in all of their celebratory occasions, and has enabled the Company to increase the number of purchases and the average order value by existing customers who have come to trust the 1-800-FLOWERS.COM brand, as well as continue to attract new customers.

The Company believes its brands are characterized by:

o Convenience. All of the Company's product offerings can be purchased either via the web, or via the Company's toll-free telephone numbers, 24 hours a day, seven days a week, for those customers who prefer a personal gift advisor to assist them. The Company offers a variety of delivery options, including same-day or next-day service throughout the world. o Quality. High-quality products are critical to the Company's continued brand strength and are integral to the brand loyalty that it has built over the years. The Company offers its customers a 100% satisfaction guarantee on all of its products. o Delivery. The Company has developed a market-proven fulfillment infrastructure that allows delivery on a same-day, next-day and any-day basis. Key to the Company's fulfillment capability is an innovative "hybrid" model which combines BloomNet (comprised of independent florists operating retail flower shops and Local Fulfillment or Design Centers ("LFC's"), Company-owned stores, LFC's, and franchise stores), with its eleven distribution centers located in California, Illinois, New York, Nevada, Ohio, and Virginia, and third-party vendors who ship directly to the Company's customers. These fulfillment points are connected by the Company's proprietary "BloomLink(R)" communication system, a secure internet-based system through which orders and related information are transmitted. o Selection. Over the course of a year, the Company offers more than 2,600 varieties of fresh-cut flowers, floral arrangements and plants, more than 7,000 SKUs of gifts, gourmet foods, cookies, chocolates and wines, more than 10,000 different SKUs for the home, including garden accessories, casual lifestyle furnishings, weather themed instruments and gift items, and unique and educational toys and games. o Customer Service. The Company strives to ensure that customer service, whether online, via the telephone, or in one of its retail stores is of the highest caliber. The Company operates four customer service facilities and employs a network of home agents to provide helpful assistance on everything from advice on product selection to the monitoring of the fulfillment and delivery process.

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As part of the Company's continuing effort to serve the thoughtful gifting needs of its customers, and leverage its business platform, where appropriate, the Company intends to market other high-quality brands in addition to the 1-800-Flowers.com brand. The Company intends to accomplish this through organic growth, and where appropriate, through acquisition of complementary businesses. In keeping with this strategy, in April 2008, the Company acquired DesignPac Gifts LLC, a designer, assembler and distributor of gourmet gift baskets, gourmet food towers and gift sets, including a broad range of branded and private label components. Subsequent to year end, in July 2008, the Company acquired selected assets of Napco Marketing Corp. Napco is a wholesale merchandiser and marketer of products designed primarily for the floral industry, and will complement the product line already offered by BloomNet. In May 2006, the Company acquired Fannie May Confections Brands, Inc. a manufacturer and direct retailer of premium chocolates and confections, through its Fannie May(R), Harry London(R) and Fanny Farmer(R) brands, while in March 2005, the Company acquired Cheryl & Co., a manufacturer and direct marketer of premium cookies and related baked gift items, and, in November 2004, The Winetasting Network, a distributor and direct-to-consumer marketer of wine. These acquisitions have enabled the Company to more fully develop its gourmet food and gift baskets product line, which the Company has identified as having significant revenue and earnings growth potential. In November 2005, the Company acquired Wind & Weather, a direct-marketer of weather-themed instruments and gift items. In June 2001 the Company acquired The Children's Group, Inc., including its two brands of unique and educational children's toys and games, HearthSong and Magic Cabin, deepening its product assortment in the home and children's gift category which the Company first entered in 1998, through its acquisition of The Plow & Hearth, Inc., a direct marketer of home decor and garden merchandise. As a complement to the Company's own brands and product lines, the Company has formed strategic relationships, including Martha Stewart for 1-800-FLOWERS.COM, a co-branded line of fresh, seasonal flower arrangements and plants which was launched during the latter part of fiscal 2008, as well as with Lenox(R), Waterford(R), Godiva(R) and Junior's Cheesecake(R). The Company also continues to develop signature products with renowned celebrity floral artisans and celebrity chefs in order to provide its customers with differentiated products and further its position as a destination for all of their gifting needs.

Having now achieved a solid base of business, through organic efforts and strategic acquisitions, management's current focus is on improving the Company's earnings performance through a combination of gross margin improvement from expanded overseas product sourcing and expected manufacturing efficiencies, leveraging the Company's operating platform to reduce operating expenses, and changes in advertising and marketing strategies designed to increase its effectiveness.

Business Category Reorganization

With the addition of Fannie May Confections Brands, Inc. in May 2006, and the growing importance of BloomNet to the Company's operating results, the Company restructured its organization during fiscal 2007 in order to strengthen its execution and customer focus, and align resources to better meet the demands of the consumers that it serves and to deliver improved financial performance. To enhance the visibility of the growth and profit characteristics of its different business categories, the Company has provided results for its Consumer Floral, Home & Children's Gifts, Gourmet Food and Gift Baskets, and BloomNet Wire Service businesses (see Management Discussion and Analysis of Financial Condition and Results of Operations section for details). The Consumer Floral business category includes the operations of the Company's flagship brand, 1-800-Flowers.com, while the Home & Children's Gifts business category includes the Company's Plow & Hearth, Wind & Weather, HearthSong and Magic Cabin brands. The Gourmet Food and Gift Baskets category includes the operations of Fannie May Confections Brands, Cheryl & Co., The Popcorn Factory, The Winetasting Network and DesignPac. The BloomNet Wire Service includes the operations of BloomNet, BloomNet Technologies, and beginning in fiscal 2009, Napco.

The Company's Products and Service Offerings

The Company offers a wide range of products including fresh-cut flowers, floral arrangements and plants, gifts, popcorn, gourmet foods and gift baskets, cookies, candy and wine, home and garden merchandise and unique toys and games for children. In order to maximize sales opportunities, products are not exclusive to certain brands, and may be sold across business categories. In addition to selecting its core products, the Company's merchandising team works closely with manufacturers and suppliers to select and design products that meet the seasonal, holiday and other special needs of its customers.

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The Company's differentiated and value-added product offerings create the opportunity to have a relationship with customers who purchase items not only for gift-giving occasions but also for everyday consumption. The Company's merchandising team works closely with manufacturers and suppliers to select and design its floral, gourmet foods and gift baskets, home and garden and children's toys, as well as other gift-related products that accommodate our customers' needs to celebrate a special occasion, convey a sentiment or cater to a casual lifestyle. As part of this continuing effort, the Company intends to continue to develop differentiated products and signature collections that our customers have embraced and come to expect from us, while we eliminate marginal performers from our product offerings.

Over the course of a year, the Company's product selection consists of:

Flowers & Plants. The Company offers more than 2,000 varieties of fresh-cut flowers and floral arrangements for all occasions and holidays, available for same-day delivery. The Company provides its customers with a choice of florist designed products, flowers delivered through its Fresh From Our Growers(R) program, and its successful "celebrity" gift collections, including the unique floral creations of Jane Carroll, Julie McCann Mulligan, Jane Packer and Preston Bailey. The Company also offers approximately 500 varieties of popular plants to brighten the home and/or office, and accent gardens and landscapes.

Gourmet Foods and Gift Baskets. The Company offers more than 1,000 premium popcorn and specialty snack products from The Popcorn Factory brand, as well as approximately 600 carefully selected gourmet food and sweet products from the GreatFood.com brand. Additionally, the Company has more than 1,100 premium cookies and baked gift items from Cheryl & Co., which are delivered in beautiful and innovative gift baskets and containers, providing customers with a variety of assortments to choose from. Through The Winetasting Network, the Company now offers its customers more than 500 different wines, primarily from the prestigious wine regions in California. Currently, restrictions exist in many states regarding interstate shipment of wine. As such, these items are only available in selected states. Through the Company's Fannie May Confections Brands, the Company offers more than 900 different selections of premium chocolate and candy. Many of the Company's gourmet products can be packaged in seasonal, occasion specific or decorative tins, fitting the "giftable" requirement of our individual customers, while also adding the capability to customize the tins with corporate logos and other personalized features for the Company's corporate customer's gifting needs. The Company offers more than 300 specially selected gift items, including plush toys, balloons, bath and spa items and gift baskets, candles, wreaths, ornaments, collectibles, home accessories and giftware.

Home and Children's Gifts. Through the Company's Plow & Hearth and Wind & Weather brands, the Company offers approximately 10,000 SKUs for the home, hearth and outdoor living, including casual lifestyle furniture and home accessories, clothing, footwear, candles and lighting, vases, kitchen items and accents and gardening items, including tools and accessories, pottery, nature and weather-related products, books and related products. Through the HearthSong and Magic Cabin brands, the Company offers environmentally friendly toys, plush stuffed animals, crafts and books with educational, nature and art themes, as well as, natural-fiber soft dolls, kits and accessories for children ages 3 through 12.

BloomNet Products and Services

In order to further strengthen its florist designed fulfillment capabilities, and to compete in the profitable florist-to-florist business, during fiscal 2005, the Company began expanding its network of BloomNet florists. The Company's BloomNet business provides its members with products and services, including: (i) clearinghouse services, consisting of the settlement of orders between sending florists (including the 1-800-Flowers.com brand) and receiving florists, (ii) advertising, in the form of member directories, including the industry's first on-line directory, (iii) communication services, by which BloomNet florists are able to send and receive orders and communicate between members, using Bloomlink(R), the Company's proprietary electronic communication system, (iv) other services including web hosting and point of sale, and (v) wholesale products, which consist of branded and non-branded floral supplies, enabling member florists to reduce their costs through 1-800-Flowers purchasing leverage, while also ensuring that member florists will be able to fulfill 1-800-Flowers.com brand orders based on recipe specifications. In order to

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further enhance the wholesale capability of BloomNet, in July 2008, the Company acquired selected assets of Napco Marketing Corp., a wholesale merchandiser and marketer of products designed primarily for the floral industry. While maintaining industry-high quality standards for its 1-800-Flowers.com brand customers, the Company offers florists a compelling value proposition, offering products and services that its florists need to grow their business and to enhance profitability. With the completion of the Company's BloomNet investment phase in fiscal 2006, and following its strong operating results in fiscal 2007 and 2008, the company expects that its BloomNet operations will continue to contribute an increasing level of profitability during fiscal 2009.

Marketing and Promotion

The Company's marketing and promotion strategy is designed to strengthen the 1-800-FLOWERS.COM brands, increase customer acquisition, build customer loyalty, and encourage repeat purchases. The Company's goal is to make its brands synonymous with thoughtful gifting. To do this, the Company intends to continue to invest in its brands and acquisition of new customers through the use of selective on and off-line media, direct marketing, public relations and strategic internet relationships, while cost-effectively capitalizing on the Company's large and loyal customer base.

Enhance its Customer Relationships. The Company intends to deepen its relationship with its customers and be their trusted resource to fulfill their need for quality, tasteful gifts. We plan to encourage more frequent and extensive use of our branded web sites, by continuing to provide product-related content and interactive features which will enable the Company to reach its customers during non-holiday periods, thereby increasing everyday purchases for birthdays, anniversaries, weddings, and sympathy. Through customer panel research, the 1-800-Flowers.com brand recently introduced a number of new signature products designed to increase everyday purchases. From its celebrity floral artisan collection, including the exclusive Martha Stewart for 1-800-FLOWERS.COM, a co-branded line of fresh, seasonal flower arrangements and plants which was launched during the latter part of fiscal 2008, to the successful introduction of its "Happy Hour" collection of margarita, martini and daiquiri inspired floral arrangements, which are advertised using innovative outdoor bus and billboard campaigns, the Company's marketing and product offerings continue to evolve to meet consumer needs. The Company will also continue to improve its customers' shopping experience by personalizing the features of its web site and, in compliance with the Company's privacy policy, utilizing customer information to target product promotions, identify individual and mass market consumption trends, remind customers of upcoming occasions and convey other marketing messages. In addition, the Company plans to drive purchase frequency improvements through the use of loyalty, thank-you and reminder programs, as well as targeting catalog content and mailings based on consumers changing purchasing habits. For example, the 1-800-Flowers.com brand introduced its Fresh Rewards(R) loyalty program whereby customers earn credit towards future purchases upon achieving targeted spending levels, while the Fannie May Confections Brands expanded its bounce back programs during its key holiday selling seasons. As of June 29, 2008, the Company's total database of unique customers numbered approximately 34.4 million (14.4 million of which have transacted business with the Company within the past 36 months).

Through its Business Gift Services division, the Company believes it has significant opportunity to expand its corporate customer base and leverage existing and/or develop successful gifting programs with corporate customers', many of which are included in the Fortune 1000, such as AT&T, American Express, Bank of America, General Electric, Deloitte, IBM, Verizon, Honeywell, Microsoft, Hewlett Packard, Sodexho, and UPS, to name a few. These programs focus on developing and/or strengthening strategic partnerships through the coordinated development of customized and personalized gifts for their clients and employees, and are tailored to meet the needs of small, mid-sized and large businesses. The Company helps its corporate customers manage the Life Celebrations at Work(SM) programs, which include occasions such as Sympathy, Get Well, Anniversary, Birthday, Thank You and other daily floral needs.

Additionally, through the many brands supported by the Company, the Business Gift Services division supports corporate customers' holiday gifting, rewards and recognition programs, conferences and events, as well as client acquisition and customer retention programs to support their growth strategies.

Increase the Number of Online Customers. Online transactions are more cost efficient to process. Although the Company expects its customers to choose the most convenient channel available to them at the time of their purchase, the Company expects its trend of online growth to continue. In order to maximize the value of this trend, the Company intends to continue to:

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o further build brand awareness to drive customers directly to the Company's URLs, further reducing reliance on internet portals and search engines; currently, greater than 73% of online revenues comes directly to the Company's websites; o cost effectively promote its web site through internet portals, online networks and search engines and affiliates; o aggressively market the Company's web site in its marketing campaigns; o facilitate access to the Company's web site for its corporate customers by implementing direct links from their internal corporate networks, and develop customized co-branded micro-sites for larger corporate partners; and o actively promote the Company's Fresh Rewards loyalty program to increase customer frequency and average order value.

In order to attract new customers and to increase purchase frequency and average order value of existing customers, the Company markets and promotes its brands and products as follows:

Direct Mail and Catalogs. The Company uses its direct mail promotions and catalogs to increase the number of new customers and to increase purchase frequency of its existing customers. Through the use of the Plow & Hearth, Wind & Weather, HearthSong, Magic Cabin, Popcorn Factory and Cheryl & Co. catalogs, the Company can utilize its extensive customer database to effectively cross-promote its products. In addition to providing a direct sale mechanism, these catalogs drive on-line sales and will attract additional customers to the Company's web sites. For the year ended June 29, 2008, the Company mailed in excess of 115 million branded catalogs.

Off-line Media. The Company utilizes off-line media, including television, radio and print to market its 1-800-Flowers.com brand and products. Off-line media allows the Company to reach a large number of customers and to target particular market segments.

The Company's Strategic Online Relationships. The Company promotes its products through strategic relationships with leading internet portals, search engines and online networks. The Company's online relationships include, among others, AOL, Yahoo!, Microsoft, and Google.

Affiliate and Co-Marketing Promotions. In addition to securing alliances with frequently visited web sites, the Company developed an affiliate network that includes thousands of web sites operated by third parties. Affiliate participation may be terminated by them or by the Company at any time. These web sites earn commissions on purchases made by customers referred from their sites to the Company's web site. In order to expand the reach of its marketing programs and stretch its marketing dollars, the Company has established a number of co-marketing relationships and promotions to advertise its products. For example, the Company has established co-marketing arrangements with American Airlines, Delta Airlines, Starwood Hotels, Choice Hotels, Next Jump, Bank Of America , SunTrust, American Express, MasterCard, Visa and Paypal, among others.

E-mails. The Company is able to capitalize on its customer database of approximately 34.4 million unique customers (14.7 million of which have transacted business with the Company within the past 36 months), 20.3 million of which have transacted business with the Company on-line (10.5 million of which have transacted business with the Company online within the past 36 months), by utilizing cost-effective, targeted e-mails to notify customers of product promotions, remind them of upcoming gifting occasions and convey other marketing messages.

The Company's Web Sites

The Company offers floral, plant, gift baskets, gourmet foods, chocolate and candies, plush and specialty gift products through its 1-800-FLOWERS.COM web site (www.1800flowers.com). Customers can come to the web site directly or be linked by one of the Company's portal providers, search engine, or affiliate relationships. These include AOL (keyword:flowers), Yahoo!, Microsoft and Google, as well as thousands of its online affiliate program members. The Company also offers home and garden products through Plow & Hearth (www.plowandhearth.com), weather-themed gifts through Wind & Weather (www.windandweather.com), premium chocolates and confections from Fannie May

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Confections Brands, (www.fanniemay.com and www.harrylondon.com), gourmet food products through GreatFood.com (www.greatfood.com), premium popcorn and specialty food products through The Popcorn Factory (www.thepopcornfactory.com), exceptional baked cookies and baked gifts from Cheryl&Co. (www.cherylandco.com), children's gifts through its HearthSong (www.hearthsong.com) and Magic Cabin (www.magiccabin.com), and wine gifts from The Winetasting Network (www.ambrosiawine.com and www.winetasting.com) web sites. Greater than 73% of online revenues are derived from traffic coming directly to one of the Company's Universal Resource Locators ("URL's").

The Company's web sites allow customers to easily browse and purchase its products, promote brand loyalty and encourage repeat purchases by providing an inviting customer experience. The Company's web sites offer customers detailed product information, complete with photographs, personalized shopping services, including search and order tracking, contests, sweepstakes, gift-giving suggestions and reminder programs, home decorating and how-to-tips and information about special events and offers. The Company has designed its web sites to be fast, secure and easy to use and allows customers to order products with minimal effort. The Company's web sites include the following key features in addition to the variety of delivery and shipping options (same day/next day) and 24 hour/7 day customer service that are available to all its customers:

Technology Infrastructure

The Company believes it has been and continues to be a leader in implementing new technologies and systems to give its customers the best possible shopping experience, whether online or over the telephone. Through the use of customized software applications, the Company is able to retrieve, sort and analyze customer information to enable it to better serve its customers and target its product offerings. The Company's online and telephonic orders are fed directly from the Company's secure web sites, or with the assistance of a gift advisor, into a transaction processing system which captures the required customer and recipient information. The system then routes the order to the appropriate Company warehouse, or for florist fulfilled or drop-shipped items, selects a vendor to fulfill the customer's order and electronically transmits the necessary information using BloomLink(R), the Company's proprietary communication system, assuring timely delivery. In addition, the Company's gift advisors have electronic access to this system, enabling them to assist in order fulfillment and subsequently track other customer and/or order information.

In prior years, the Company has invested heavily in building a scalable technology platform to support the Company's order volume growth. The Company employs a combination of in-house personnel which concentrate on core competencies, including strategic direction and system and project management and implementation. However, more recently, the Company began outsourcing certain of its programming and support services in order to achieve cost efficiencies, allowing the Company to focus its resources on customer specific projects to ensure an enjoyable shopping experience while providing improved operational flexibility, additional capacity and system redundancy.

The Company's technology infrastructure, primarily consisting of the Company's web sites, transaction processing, manufacturing and warehouse management, customer databases and telecommunications systems, is built and maintained for reliability, security, scalability and flexibility. To minimize the risk of service interruptions from unexpected component or telecommunications failure, maintenance and upgrades, the Company has built full back-up and system redundancies into those components of its systems that have been identified as critical. The Company plans to continue to invest in technologies that will improve and expand its e-commerce and telecommunication capabilities and utilize its informational technology expertise to improve the technology infrastructure of its recently acquired businesses to accommodate anticipated growth and improve their customers' shopping experiences.

Fulfillment and Manufacturing Operations

The Company's customers primarily place their orders either online or over the telephone. The Company's development of a hybrid fulfillment system which enables the Company to offer same-day, next-day and any-day delivery, combines the use of BloomNet (comprised of independent florists operating retail flower shops and LFC's, Company-owned stores, LFC's, and franchise stores), with the Company-owned distribution centers and brand-name vendors who ship directly to the Company's customers. While providing a significant competitive advantage in

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terms of delivery options, the Company's fulfillment system also has the added benefit of reducing the Company's capital investments in inventory and infrastructure. All of the Company's products are backed by a 100% satisfaction guarantee, and the Company's business is not dependent on any single third-party supplier.

To ensure reliable and efficient communication of online and telephonic orders to its BloomNet members and third party gift vendors, the Company developed BloomLink(R), a proprietary and secure internet-based communications system which is available to all BloomNet members and third-party gift vendors. The Company also has the ability to arrange for international delivery of floral products through independent wire services and direct relationships.

The Company intends to improve its fulfillment capabilities to make its operations more efficient by:

o strengthening relationships and increasing the number of its vendors and BloomNet member florists, as appropriate, to ensure geographic coverage and shorten delivery times; o continuing to improve warehousing operations and reduce fulfillment times in support of its floral, gifts, gourmet food and wines, and home product lines; and o expanding the use of cross-dock logistics, and work with additional third party carriers to increase volume capability and utilizing cross brand fulfillment capabilities to mitigate the impact of fuel cost increases.

Fulfillment of products is as follows:

Flowers and Plants. A majority of the Company's floral orders are fulfilled by one of the Company's BloomNet members, allowing the Company to deliver its floral products on a same-day or next-day basis to ensure freshness and to meet its customers' need for immediate gifting. In addition, the Company is better positioned to ensure consistent product quality and presentation and offer a greater variety of arrangements, which creates a better experience for its customers and gift recipients. The Company selects retail florists for BloomNet based upon the florist's design staff, facilities, quality of floral processing, and delivery capabilities and allocates orders to members within a geographical area based on historical performance of the florist in fulfilling orders, and the number of BloomNet florists currently serving the area. The Company regularly monitors BloomNet florists' performance and adherence to the Company's quality standards to ensure proper fulfillment.

The Company's relationships with its BloomNet members are non-exclusive. Many florists, including many BloomNet florists, also are members of other floral fulfillment organizations. The BloomNet agreements generally are cancelable by either party with ten days notification and do not guarantee any orders, dollar amounts or exclusive territories from the Company to the florist. In fiscal 2001, the Company began entering into Order Fulfillment Agreements with selected BloomNet members to operate LFC's in high volume markets to facilitate the fulfillment of the Company's floral and gift orders, improving the economics of florist fulfilled transactions, and improving the Company's ability to control product quality and branding. In consideration of the operator's satisfactory performance, the Company agrees to use reasonable efforts to forward orders with a specified minimum merchandise value during each year of the agreement. The Company has not granted an exclusive territory to any operator.

In certain instances, the Company is required to fulfill orders through non-BloomNet members, and transmits these orders to the fulfilling florist using the communication system of an independent wire service or via telephone.

In addition to its florist designed product, the Company offers its customers an alternative to florist designed products through its Fresh From Our Growers(R) program, and by providing for a full array of products from bouquets to unique floral celebrity expert designed products.

As of June 29, 2008, the Company operates 4 floral retail stores located in New York and 1 fulfillment center. In addition, the Company has 104 franchised stores, located primarily in California, Colorado, Florida, New Jersey, New York and Texas. Company-owned stores serve as local points of fulfillment and enable the Company to test new products and marketing programs.

Gourmet Foods and Gift Baskets. In order to take advantage of improved margins, better control quality and to offer premium branded signature products in the

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Gourmet Food and Gift Baskets product category, which was identified by the Company as one of its fastest growing and most profitable product lines, the Company has acquired several gourmet food retailers with manufacturing operations. The Company's premium chocolates are manufactured and distributed from its 200,000 square foot production facility in Akron, Ohio, and the Company's cookie and baked gifts are fulfilled from its 176,000 square foot baking and distribution center in Obetz, Ohio, while its premium popcorn and related snack products are shipped from the Company's 148,000 square foot manufacturing and distribution center located in Lake Forest, Illinois. Most wine gift and fulfillment services are provided through the Company's 52,000 square foot fulfillment center in Napa, California and 42,000 square foot fulfillment center in Albany, New York. The remainder of the Company's wine and wine-related items are fulfilled by third-party gift vendors that ship products directly to the customer by next-day or other delivery options chosen by the customer. In April 2008, through the acquisition of DesignPac Gifts LLC, the Company significantly improved its gift basket fulfillment capabilities. Initially, DesignPac's confection and fulfillment, through its 249,000 square foot distribution center located in Melrose Park, IL, will focus on wholesale operations. During fiscal 2009, the Company will begin to leverage the capabilities of DesignPac to enable it to handle its expanding direct-to-consumer demand.

Home and Children's Gifts. The Company packages and ships its home and children's gift products primarily from three locations; (i) a 300,000 square foot distribution center located in Madison, Virginia, (ii) a 200,000 square foot distribution center in Vandalia, Ohio and (iii) a 140,000 square foot distribution center in Reno, Nevada. A smaller portion of the Company's home and children's items are shipped by third-party product suppliers using next-day or other delivery options selected by the customer.

Seasonality

The Company's quarterly results may experience seasonal fluctuations. Due to the Company's expansion into non-floral products, the Thanksgiving through Christmas holiday season, which falls within the Company's second fiscal quarter, generates the highest proportion of the Company's annual revenues. In addition, as the result of a number of major floral gifting occasions, including Mother's Day and Administrative Professionals Week, revenues also rise during the Company's fiscal fourth quarter. Finally, results during the Company's fiscal first quarter are negatively impacted by the lack of major gift-giving holidays, and the disproportionate amount of overhead incurred during this slow period.

Adjusting for its most recent acquisitions, during fiscal 2009, the Company's fiscal second quarter, its largest in terms of revenues, is expected to account for approximately 38-40% of sales, followed by its fiscal fourth quarter, which is expected to account for 23-25% of sales, including the shift in the timing of the Easter Holiday from Q3 during fiscal 2008 to Q4 during fiscal 2009. The Company's fiscal third quarter is expected to account for approximately 21-23% of sales, also adjusting for the timing of the Easter Holiday, while the Company's fiscal first quarter is expected to account for approximately 14-16% of sales.

Accordingly, a disproportionate amount of operating cash flows are generated in the Company's fiscal second and fourth quarters. In preparation for the Company's second quarter holiday season, the Company significantly increases its inventories, and therefore, corresponding cash requirements, which traditionally have been financed by cash flows from operations and bank lines of credit, are highest during the latter part of the Company's fiscal first quarter, peaking within its second fiscal quarter. The Company has historically repaid all revolving bank lines of credit with cash generated from operations, prior to the end of the Company's fiscal second quarter.

Competition

The growing popularity and convenience of e-commerce has continued to give rise to established businesses on the Internet. In addition to selling their products over the Internet, many of these retailers sell their products through a combination of channels by maintaining a web site, a toll-free phone number and physical locations. Additionally, several of these merchants offer an expanding variety of products and some are attracting an increasing number of customers. Certain mass merchants have expanded their offerings to include competing products and may continue to do so in the future. These mass merchants, as well as other potential competitors, may be able to:

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o undertake more extensive marketing campaigns for their brands and services; o adopt more aggressive pricing policies; and o make more attractive offers to potential employees, distributors and retailers.

In addition, the Company faces intense competition in each of its individual product categories. In the floral industry, there are various providers of floral products, none of which is dominant in the industry. The Company's competitors include:

o retail floral shops, some of which maintain toll-free telephone numbers and web sites; o online floral retailers; o catalog companies that offer floral products; o floral telemarketers and wire services; and o supermarkets, mass merchants and specialty retailers with floral departments.

Similarly, the plant, gift basket, gourmet foods and wine, unique gifts, children's toys and home and garden categories are highly competitive. Each of these categories encompasses a wide range of products, is highly fragmented and is served by a large number of companies, none of which is dominant. Products in these categories may be purchased from a number of outlets, including mass merchants, telemarketers, retail specialty shops, online retailers and mail-order catalogs.

The Company believes the strength of its brands, product selection, customer relationships, technology infrastructure and fulfillment capabilities position it to compete effectively against its current and potential competitors in each of its product categories. However, increased competition could result in:

o price reductions, decreased revenues and lower profit margins; o loss of market share; and o increased marketing expenditures.

These and other competitive factors may adversely impact the Company's business and results of operations.

Government Regulation and Legal Uncertainties

The Internet continues to evolve and there are laws and regulations directly applicable to e-commerce. Legislatures are also considering an increasing number of laws and regulations pertaining to the Internet, including laws and regulations addressing:

o user privacy; o pricing; o content; o connectivity; o intellectual property; o distribution; o taxation; o liabilities; o antitrust; and o characteristics and quality of products and services.

Further, the growth and development of the market for online services may prompt more stringent consumer protection laws that may impose additional burdens on those companies conducting business online. The adoption of any additional laws or regulations may impair the growth of the Internet or commercial online services. This could decrease the demand for the Company's services and increase its cost of doing business. Moreover, the applicability to the Internet of existing laws regarding issues like property ownership, taxes, libel and personal privacy is uncertain. Any new legislation or regulation that has an adverse impact on the Internet or the application of existing laws and regulations to the Internet could have a material adverse effect on the Company's business, financial condition and results of operations.

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States or foreign countries might attempt to regulate the Company's business or levy additional sales or other taxes relating to its activities. Because the Company's products and services are available over the Internet anywhere in the world, multiple jurisdictions may claim that the Company is required to do business as a foreign corporation in one or more of those jurisdictions. Failure to qualify as a foreign corporation in a jurisdiction where the Company is required to do so could subject it to taxes and penalties. States or foreign governments may charge the Company with violations of local laws.

Intellectual Property and Proprietary Rights

The Company regards its service marks, trademarks, trade secrets, domain names and similar intellectual property as critical to its success. The Company has applied for or received trademark and/or service mark registration for, among others, "1-800-FLOWERS.COM", "1-800-FLOWERS", "Plow & Hearth", "Wind & Weather", "GreatFood.com", "The Popcorn Factory", "TheGift.com", "HearthSong", "Magic Cabin", "Winetasting Network", "Cheryl&Co.", "Fannie May" and "Harry London". The Company also has rights to numerous domain names, including www.1800flowers.com, www.800flowers.com, www.flowers.com, www.plowandhearth.com, www.windandweather.com, www.greatfood.com, www.thepopcornfactory.com, www.hearthsong.com, www.magiccabin.com, www.ambrosiawine.com, www.winetasting.com, www.cherylandco.com, www.fanniemay.com, www.harrylondon.com and www.designpac.com. In addition, the Company has developed transaction processing and operating systems as well as marketing data, and customer and recipient information databases.

The Company relies on trademark, unfair competition and copyright law, trade secret protection and contracts such as confidentiality and license agreements with its employees, customers, vendors and others to protect its proprietary rights. Despite the Company's precautions, it may be possible for competitors to obtain and/or use the Company's proprietary information without authorization or to develop technologies similar to the Company's and independently create a similarly functioning infrastructure. Furthermore, the protection of proprietary rights in Internet-related industries is uncertain and still evolving. The laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the United States. The Company's means of protecting its proprietary rights in the United States or abroad may not be adequate.

The Company intends to continue to license technology from third parties, including Oracle, Microsoft, Verizon and AT&T, for its communications technology and the software that underlies its business systems. The market is evolving and the Company may need to license additional technologies to remain competitive. The Company may not be able to license these technologies on commercially reasonable terms or at all.

Third parties have in the past infringed or misappropriated the Company's intellectual property or similar proprietary rights. The Company believes infringements and misappropriations will continue to occur in the future. The Company intends to police against infringement and misappropriation. However, the Company cannot guarantee it will be able to enforce its rights and enjoin the alleged infringers from their use of confusingly similar trademarks, service marks, telephone numbers and domain names.

In addition, third parties may assert infringement claims against the Company. The Company cannot be certain that its technologies or its products and services do not infringe valid patents, trademarks, copyrights or other proprietary rights held by third parties. The Company may be subject to legal proceedings and claims from time to time relating to its intellectual property and the intellectual property of others in the ordinary course of its business. Intellectual property litigation is expensive and time-consuming and could divert management resources away from running the Company's business.

Employees

As of June 29, 2008, the Company had a total of approximately 4,000 full and part-time employees. During peak periods, the Company substantially increases the number of customer service, manufacturing and retail and fulfillment personnel. The Company's personnel are not represented under collective bargaining agreements and the Company considers its relations with its employees to be good.

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Item 1A. Risk Factors

Cautionary Statements Under the Private Securities Litigation Reform Act of 1995

Our disclosures and analysis in this Form 10-K contain some forward-looking statements that set forth anticipated results based on management's plans and assumptions. From time to time, we also provide forward-looking statements in other statements we release to the public as well as oral forward-looking statements. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. We have tried, wherever possible, to identify such statements by using words such as "anticipate," "estimate," "expect," "project," "intend," "plan, "believe" and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions; the effectiveness of our marketing programs; the performance of our existing products and services; our ability to attract and retain customers and expand our customer base; our ability to enter into or renew online marketing agreements; our ability to respond to competitive pressures; expenses, including shipping costs and the costs of marketing our current and future products and services; the outcome of contingencies, including legal proceedings in the normal course of business; and our ability to integrate acquisitions.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risk, uncertainties and potentially inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward looking statements.

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our 10-Q and 8-K reports to the SEC. Also note we provide the following cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business. These are factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks and uncertainties.

The Company's operating results may fluctuate, and this fluctuation could cause financial results to be below expectations. The Company's operating results may fluctuate from period to period for a number of reasons. In budgeting the Company's operating expenses for the foreseeable future, the Company assumes that revenues will continue to grow; however, some of the Company's operating expenses are fixed in the short term. Sales of the Company's products are seasonal, concentrated in the fourth calendar quarter, due to the Thanksgiving and Christmas-time holidays, and the second calendar quarter, due to Mother's Day and Administrative Professionals' Week. In anticipation of increased sales activity during these periods, the Company hires a significant number of temporary employees to supplement its permanent staff and the Company increases its inventory levels. If revenues during these periods do not meet the Company's expectations, it may not generate sufficient revenue to offset these increased costs and its operating results may suffer.

The Company's quarterly operating results may significantly fluctuate and you should not rely on them as an indication of its future results. The Company's future revenues and results of operations may significantly fluctuate due to a combination of factors, many of which are outside of management's control. The most important of these factors include:

o seasonality; o the retail economy; o the timing and effectiveness of marketing programs; o the timing of the introduction of new products and services; o the Company's ability to find and maintain reliable sources for certain of its products;

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o the timing and effectiveness of capital expenditures; o the Company's ability to enter into or renew online marketing agreements; and o competition.

The Company may be unable to reduce operating expenses quickly enough to offset any unexpected revenue shortfall. If the Company has a shortfall in revenue without a corresponding reduction to its expenses, operating results may suffer. The Company's operating results for any particular quarter may not be indicative of future operating results. You should not rely on quarter-to-quarter comparisons of results of operations as an indication of the Company's future performance. It is possible that results of operations may be below the expectations of public market analysts and investors, which could cause the trading price of the Company's Class A common stock to fall.

Consumer spending on flowers, gifts and other products sold by the Company may vary with general economic conditions. If general economic conditions continue to deteriorate and the Company's customers have less disposable income, consumers may spend less on its products and its quarterly operating results may suffer.

During peak periods, the Company utilizes temporary employees and outsourced staff, who may not be as well-trained or committed to its customers as its permanent employees, and if they fail to provide the Company's customers with high quality customer service the customers may not return, which could have a material adverse effect on the Company's business, financial condition, results of operations and cash flows. The Company depends on its customer service department to respond to its customers should they have questions or problems with their orders. During peak periods, the Company relies on its permanent employees, as well as temporary employees and outsourced staff to respond to customer inquiries. These temporary employees and outsourced staff may not have the same level of commitment to the Company's customers or be as well trained as its permanent employees. If the Company's customers are dissatisfied with the quality of the customer service they receive, they may not shop with the Company again, which could have a material adverse effect on its business, financial condition, results of operations and cash flows.

If the Company's customers do not find its expanded product lines appealing, revenues may not grow and net income may decrease. The Company's business historically has focused on offering floral and floral-related gift products. Although the Company has been successful in its expanded product lines including plants, gift baskets, popcorn, gourmet food and wine, unique or specialty gifts, home and garden accessories, and children's gifts, it expects to continue to incur significant costs in marketing these products. If the Company's customers do not continue to find its product lines appealing, the Company may not generate sufficient revenue to offset its related costs and its results of operations may be negatively impacted.

If the Company fails to develop and maintain its brands, it may not increase or maintain its customer base or its revenues. The Company must continue to develop and maintain the 1-800-FLOWERS.COM brands to expand its customer base and its revenues. In addition, the Company has introduced and acquired other brands in the past, and may continue to do so in the future. The Company believes that the importance of brand recognition will increase as it expands its product offerings. Many of the Company's customers may not be aware of the Company's non-floral products. If the Company fails to advertise and market its products effectively, it may not succeed in establishing its brands and may lose customers leading to a reduction of revenues.

The Company's success in promoting and enhancing the 1-800-FLOWERS.COM brands will also depend on its success in providing its customers high-quality products and a high level of customer service. If the Company's customers do not perceive its products and services to be of high quality, the value of the 1-800-FLOWERS.COM brands would be diminished and the Company may lose customers and its revenues may decline.

A failure to establish and maintain strategic online relationships that generate a significant amount of traffic could limit the growth of the Company's business. Although the Company expects a significant portion of its online customers will continue to come directly to its website, it will also rely on third party web sites, search engines and affililates with which the Company has strategic relationships for traffic. If these third-parties do not attract a significant number of visitors, the Company may not receive a significant number of online customers from these relationships and its revenues from these

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relationships may decrease or remain flat. There continues to be strong competition to establish or maintain relationships with leading Internet companies, and the Company may not successfully enter into additional relationships, or renew existing ones beyond their current terms. The Company may also be required to pay significant fees to maintain and expand existing relationships. The Company's online revenues may suffer if it does not enter into new relationships or maintain existing relationships or if these relationships do not result in traffic sufficient to justify their costs.

If local florists and other third-party vendors do not fulfill orders to the Company's customers' satisfaction, customers may not shop with the Company again. In many cases, floral orders placed by the Company's customers are fulfilled by local independent florists, a majority of which are members of BloomNet. The Company does not directly control any of these florists. In addition, many of the non-floral products sold by the Company are manufactured and delivered to its customers by independent third-party vendors. If customers are dissatisfied with the performance of the local florist or other third-party vendors, they may not utilize the Company's services when placing future orders and its revenues may decrease.

If a florist discontinues its relationship with the Company, the Company's customers may experience delays in service or declines in quality and may not shop with the Company again. Many of the Company's arrangements with local florists for order fulfillment may be terminated by either party with 10 days notice. If a florist discontinues its relationship with the Company, the Company will be required to obtain a suitable replacement located in the same geographic area, which may cause delays in delivery or a decline in quality, leading to customer dissatisfaction and loss of customers.

If a significant number of customers are not satisfied with their purchase, the Company will be required to incur substantial costs to issue refunds, credits or replacement products. The Company offers its customers a 100% satisfaction guarantee on its products. If customers are not satisfied with the products they receive, the Company will either replace the product for the customer or issue the customer a refund or credit. The Company's net income would decrease if a significant number of customers request replacement products, refunds or credits and the Company is unable to pass such costs onto the supplier.

Increased shipping costs and labor stoppages may adversely affect sales of the Company's products. Many of the Company's products are delivered to customers either directly from the manufacturer or from the Company's fulfillment centers located in California, Illinois, New York, Nevada, Ohio and Virginia. The Company has established relationships with Federal Express, UPS and other common carriers for the delivery of these products. If these carriers were to increase the prices they charge to ship the Company's goods, and the Company passes these increases on to its customers, its customers might choose to buy comparable products locally to avoid shipping charges. In addition, these carriers may experience labor stoppages, which could impact the Company's ability to deliver products on a timely basis to our customers and adversely affect its customer relationships.

If the Company fails to continuously improve its web site, it may not attract or retain customers. If potential or existing customers do not find the Company's web site a convenient place to shop, the Company may not attract or retain customers and its sales may suffer. To encourage the use of the Company's web site, it must continuously improve its accessibility, content and ease of use. Customer traffic and the Company's business would be adversely affected if competitors' web sites are perceived as easier to use or better able to satisfy customer needs.

Competition in the floral, plant, gift basket, gourmet food and wine, specialty gift, children's toys and games and home and garden industries is intense and a failure to respond to competitive pressure could result in lost revenues. There are many companies that offer products in these categories. In the floral category, the Company's competitors include:

o retail floral shops, some of which maintain toll-free telephone numbers, and web sites; o online floral retailers; o catalog companies that offer floral products; o floral telemarketers and wire services; and o supermarkets, mass merchants and specialty gift retailers with floral departments.

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Similarly, the plant, gift basket, gourmet food, cookie, candy, wine, specialty gift, children's toys and home and garden categories are highly competitive. Each of these categories encompasses a wide range of products and is highly fragmented. Products in these categories may be purchased from a number of outlets, including mass merchants, retail shops, online retailers and mail-order catalogs.

Competition is intense and the Company expects it to increase. Increased competition could result in:

o price reductions, decreased revenue and lower profit margins; o loss of market share; and o increased marketing expenditures.

These and other competitive factors could materially and adversely affect the Company's results of operations.

If the Company does not accurately predict customer demand for its products, it may lose customers or experience increased costs. In the past, the Company did not need to maintain a significant inventory of products. However, as the Company expands the volume of non-floral products offered to its customers, the Company will be required to increase inventory levels and the number of products maintained in its warehouses. If the Company overestimates customer demand for its products, excess inventory and outdated merchandise could accumulate, tying up working capital and potentially resulting in reduced warehouse capacity and inventory losses due to damage, theft and obsolescence. If the Company underestimates customer demand, it may disappoint customers who may turn to its competitors. Moreover, the strength of the 1-800-FLOWERS.COM brands could be diminished due to misjudgments in merchandise selection.

If the supply of flowers for sale becomes limited, the price of flowers could rise or flowers may be unavailable and the Company's revenues and gross margins could decline. A variety of factors affect the supply of flowers in the United States and the price of the Company's floral products. If the supply of flowers available for sale is limited due to weather conditions, farm closures, economic conditions, or other factors, prices for flowers could rise and customer demand for the Company's floral products may be reduced, causing revenues and gross margins to decline. Alternatively, the Company may not be able to obtain high quality flowers in an amount sufficient to meet customer demand. Even if available, flowers from alternative sources may be of lesser quality and/or may be more expensive than those currently offered by the Company.

Most of the flowers sold in the United States are grown by farmers located abroad, primarily in Colombia, Ecuador and Holland, and the Company expects that this will continue in the future. The availability and price of flowers could be affected by a number of factors affecting these regions, including:

o import duties and quotas; o agricultural limitations and restrictions to manage pests and disease; o changes in trading status; o economic uncertainties and currency fluctuations; o severe weather; o work stoppages; o foreign government regulations and political unrest; and o trade restrictions, including United States retaliation against foreign trade practices.

The Company's franchisees may damage its brands or increase its costs by failing to comply with its franchise agreements or its operating standards. The Company's franchise business is governed by its Uniform Franchise Offering Circulars, franchise agreements and applicable franchise law. If the Company's franchisees do not comply with its established operating standards or the terms of the franchise agreements, the 1-800-FLOWERS.COM brands may be damaged. The Company may incur significant additional costs, including time-consuming and expensive litigation, to enforce its rights under the franchise agreements. Additionally, the Company is the primary tenant on certain leases, which the franchisees sublease from the Company. If a franchisee fails to meet its obligations as subtenant, the Company could incur significant costs to avoid default under the primary lease. Furthermore, as a franchiser, the Company has obligations to its franchisees. Franchisees may challenge the performance of the

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Company's obligations under the franchise agreements and subject it to costs in defending these claims and, if the claims are successful, costs in connection with their compliance.

If third parties acquire rights to use similar domain names or phone numbers or if the Company loses the right to use its phone numbers, its brands may be damaged and it may lose sales. The Company's Internet domain names are an important aspect of its brand recognition. The Company cannot practically acquire rights to all domain names similar to www.1800flowers.com, or its other brands, whether under existing top level domains or those issued in the future. If third parties obtain rights to similar domain names, these third parties may confuse the Company's customers and cause its customers to inadvertently place orders with these third parties, which could result in lost sales and could damage its brands.

Likewise, the phone number that spells 1-800-FLOWERS is important to the Company's brand and its business. While the Company has obtained the right to use the phone numbers 1-800-FLOWERS, 1-888-FLOWERS and 1-877-FLOWERS, as well as common toll-free "FLOWERS" misdials, it may not be able to obtain rights to use the FLOWERS phone number as new toll-free prefixes are issued, or the rights to all similar and potentially confusing numbers. If third parties obtain the phone number which spells "FLOWERS" with a different prefix or a toll-free number similar to FLOWERS, these parties may also confuse the Company's customers and cause lost sales and potential damage to its brands. In addition, under applicable FCC rules, ownership rights to phone numbers cannot be acquired. Accordingly, the FCC may rescind the Company's right to use any of its phone numbers, including 1-800-FLOWERS (1-800-356-9377).

A lack of security over the Internet may cause Internet usage to decline and cause the Company to expend capital and resources to protect against security breaches. A significant barrier to electronic commerce over the Internet has been the need for secure transmission of confidential information and transaction information. Internet usage could decline if any well-publicized compromise of security occurred. Additionally, computer "viruses" may cause the Company's systems to incur delays or experience other service interruptions. Such interruptions may materially impact the Company's ability to operate its business. If a computer virus affecting the Internet in general is highly publicized or particularly damaging, the Company's customers may not use the Internet or may be prevented from using the Internet, which would have an adverse effect on its revenues. As a result, the Company may be required to expend capital and resources to protect against or to alleviate these problems.

The Company's business could be injured by significant credit card or debit card fraud. Customers typically pay for their on-line or telephone orders with debit or credit cards. The Company's revenues and gross margins could decrease if it experienced significant credit card or debit card fraud. Failure to adequately detect and avoid fraudulent credit card or debit card transactions could cause the Company to lose its ability to accept credit cards or debit cards as forms of payment and result in charge-backs of the fraudulently charged amounts. Furthermore, widespread credit card or debit card fraud may lessen the Company's customers' willingness to purchase products through the Company's web sites or toll-free telephone numbers. For this reason, such failure could have a material adverse effect on the Company's business, financial condition, results of operations and cash flows.

Unexpected system interruptions caused by system failures may result in reduced revenues and harm to the Company's brand. In the past, particularly during peak holiday periods, the Company has experienced significant increases in traffic on its web site and in its toll-free customer service centers. The Company's operations are dependent on its ability to maintain its computer and telecommunications systems in effective working order and to protect its systems against damage from fire, natural disaster, power loss, telecommunications failure or similar events. The Company's systems have in the past, and may in the future, experience:

o system interruptions; o long response times; and o degradation in service.

The Company's business depends on customers making purchases on its systems. Its revenues may decrease and its reputation could be harmed if it experiences frequent or long system delays or interruptions or if a disruption occurs during a peak holiday season.

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If AT&T and Verizon do not adequately maintain the Company's telephone service, the Company may experience system failures and its revenues may decrease. The Company is dependent on AT&T and Verizon to provide telephone services to its customer service centers. Although the Company maintains redundant telecommunications systems, if AT&T and Verizon experience system failures or fail to adequately maintain the Company's systems, the Company may experience interruptions and its customers might not continue to utilize its services. If the Company loses its telephone service, it will be unable to generate revenue. The Company's future success depends upon these third-party relationships because it does not have the resources to maintain its telephone service without these or other third parties. Failure to maintain these relationships or replace them on financially attractive terms may disrupt the Company's operations or require it to incur significant unanticipated costs.

Interruptions in Teleflora's Dove System or a reduction in the Company's access to this system may disrupt order fulfillment and create customer dissatisfaction. A minimal portion of the Company's customers' orders are communicated to the fulfilling florist through a third party system. This system is an order processing and messaging network used to facilitate the transmission of floral orders between florists. If this system experiences interruptions in the future, the Company could experience difficulties in fulfilling some of its customers' orders and those customers might not continue to shop with the Company.

The Company's operating results may suffer due to economic, political and social unrest or disturbances. Like other American businesses, the Company is unable to predict what long-term effect acts of terrorism, war, or similar unforeseen events may have on its business. The Company's results of operations and financial condition could be adversely impacted if such events cause an economic slowdown in the United States, or other negative effects that cannot now be anticipated.

If the Company is unable to hire and retain key personnel, its business may suffer. The Company's success is dependent on its ability to hire, retain and motivate highly qualified personnel. In particular, the Company's success depends on the continued efforts of its Chairman and Chief Executive Officer, James F. McCann, and its President, Christopher G. McCann, as well as its senior management team which help manage its business. The loss of the services of any of the Company's executive management or key personnel or its inability to attract qualified additional personnel could cause its business to suffer and force it to expend time and resources in locating and training additional personnel.

Many governmental regulations may impact the Internet, which could affect the Company's ability to conduct business. Any new law or regulation, or the application or interpretation of existing laws, may decrease the growth in the use of the Internet or the Company's web site. The Company expects there will be an increasing number of laws and regulations pertaining to the Internet in the United States and throughout the world. These laws or regulations may relate to liability for information received from or transmitted over the Internet, online content regulation, user privacy, taxation and quality of products and services sold over the Internet. Moreover, the applicability to the Internet of existing laws governing intellectual property ownership and infringement, copyright, trademark, trade secret, obscenity, libel, employment, personal privacy and other issues is uncertain and developing. This could decrease the demand for the Company's products, increase its costs or otherwise adversely affect its business.

Regulations imposed by the Federal Trade Commission may adversely affect the growth of the Company's Internet business or its marketing efforts. The Federal Trade Commission has proposed regulations regarding the collection and use of personal identifying information obtained from individuals when accessing web sites, with particular emphasis on access by minors. These regulations may include requirements that the Company establish procedures to disclose and notify users of privacy and security policies, obtain consent from users for collection and use of information and provide users with the ability to access, correct and delete personal information stored by the Company. These regulations may also include enforcement and redress provisions. Moreover, even in the absence of those regulations, the Federal Trade Commission has begun investigations into the privacy practices of other companies that collect information on the Internet. One investigation resulted in a consent decree under which an Internet company agreed to establish programs to implement the principles noted above. The Company may become a party to a similar investigation, or the Federal Trade Commission's regulatory and enforcement efforts, or those of other governmental bodies, may adversely affect its ability to collect demographic and personal information from users, which could adversely affect its marketing efforts.

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Unauthorized use of the Company's intellectual property by third parties may damage its brands. Unauthorized use of the Company's intellectual property by third parties may damage its brands and its reputation and may likely result in a loss of customers. It may be possible for third parties to obtain and use the Company's intellectual property without authorization. Third parties have in the past infringed or misappropriated the Company's intellectual property or similar proprietary rights. The Company believes infringements and misappropriations will continue to occur in the future. Furthermore, the validity, enforceability and scope of protection of intellectual property in Internet-related industries is uncertain and still evolving. The Company has been unable to register certain of its intellectual property in some foreign countries and furthermore, the laws of some foreign countries are uncertain or do not protect intellectual property rights to the same extent as do the laws of the United States.

Defending against intellectual property infringement claims could be expensive and, if the Company is not successful, could disrupt its ability to conduct business. The Company has been unable to register certain of its intellectual property in some foreign countries, including, "1-800-Flowers.com", "1-800-Flowers" and "800-Flowers". The Company cannot be certain that any of its intellectual property and the products it sells, or services it offers, do not or will not infringe valid patents, trademarks, copyrights or other intellectual property rights held by third parties. The Company may be a party to legal proceedings and claims relating to the intellectual property of others from time to time in the ordinary course of its business. The Company may incur substantial expense in defending against these third-party infringement claims, regardless of their merit. Successful infringement claims against the Company may result in substantial monetary liability or may materially disrupt its ability to conduct business.

The Company may lose sales or incur significant expenses should states be successful in imposing broader guidelines to state sales and use taxes. In addition to the Company's retail store operations, the Company collects sales or other similar taxes in states where the Company's ecommerce channel has applicable nexus. Our customer service and fulfillment networks, and any further expansion of those networks, along with other aspects of our evolving business, may result in additional sales and use tax obligations. A successful assertion by one or more states that we should collect sales or other taxes on the sale of merchandise could result in substantial tax liabilities for past sales, decrease our ability to compete with traditional retailers, and otherwise harm our business.

Currently, decisions of the U.S. Supreme Court restrict the imposition of obligations to collect state and local sales and use taxes with respect to sales made over the Internet. However, a number of states, as well as the U.S. Congress, have been considering and/or implementing various initiatives that could limit or supersede the Supreme Court's position regarding sales and use taxes on Internet sales. If any of these initiatives addressed the Supreme Court's constitutional concerns and resulted in a reversal of its current position, we could be required to collect additional sales and use taxes. The imposition by state and local governments of various taxes upon Internet commerce could create administrative burdens for us and could decrease our future sales.

A failure to integrate our acquisitions may cause the results of the acquired company as well as the results of the Company to suffer . The Company has opportunistically acquired a number of companies over the past several years. Additionally the Company may look to acquire additional companies in the future. As part of the acquisition process, the Company embarks upon a project management effort to integrate the acquisition onto our information technology systems and management processes. If we are unsuccessful in integrating our acquisitions, the results of our acquisitions may suffer, management may have to divert valuable resources to oversee and manage the acquisitions, the Company may have to expend additional investments in the acquired company to upgrade personnel and/or information technology systems and the results of the Company may suffer.

Product liability claims may subject the Company to increased costs. Several of the products the Company sells, including perishable food and alcoholic beverage products, home and garden products, or children's toys may expose it to product liability claims in the event that the use or consumption of these products results in personal injury or property damage. Although the Company has not experienced any material losses due to product liability claims to date, it may be a party to product liability claims in the future and incur significant costs in their defense. Product liability claims often create negative publicity, which could materially damage the Company's reputation and its brands. Although the Company maintains insurance against product liability claims, its coverage may be inadequate to cover any liabilities it may incur.

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The wine industry is subject to governmental regulation. The alcoholic beverage industry is subject to extensive specialized regulation under state and federal laws and regulations, including the following matters: licensing; the payment of excise taxes; advertising, trade and pricing practices; product labeling; sales to minors and intoxicated persons; changes in officers, directors, ownership or control; and, relationships among product producers, importers, wholesalers and retailers. While the Company believes that it is in material compliance with all applicable laws and regulations, in the event that it should be determined that the Company is not in compliance with any applicable laws or regulations, the Company could become subject to cease and desist orders, injunctive proceedings, civil fines, license revocations and other penalties which could have a material adverse effect on the Company's business and its results of operations.

In addition, the alcoholic beverage industry is subject to potential legislation and regulation on a continuous basis including in such areas as direct and Internet sales of alcohol. Certain states still prohibit the sale of alcohol into their jurisdictions from out of state wineries and/or retailers. There can be no assurance that new or revised laws or regulations, increased licensing fees, specialized taxes or other regulatory requirements will not have a material adverse effect on the Company's business and its results of operations. While, to date, the Company has been able to obtain and retain licenses necessary to sell wine at retail, the failure to obtain renewals or otherwise retain such licenses in one or more of the states in which the Company operates would have a material adverse effect on the Company's business and its results of operations. The Company's growth strategy for its wine business includes expansion into additional states; however, there can be no assurance that the Company will be successful in obtaining the required permits or licenses in any additional states. From time to time, the Company may introduce new marketing initiatives, which may be expected to undergo regulatory scrutiny. There can be no assurance that such initiatives will not be stymied by regulatory criticism.

The Company is dependent on common carriers to deliver its wine shipments. The company uses UPS and FedEx to deliver its wine shipments. If UPS or FedEx were to terminate delivery services for alcoholic beverages in certain states, as it did in 1999 in Florida, Nevada and Connecticut, the Company would likely incur significantly higher shipping rates that would have a material adverse effect on the Company's business and its results of operations. If any state prohibits or limits intrastate shipping of alcoholic beverages by third party couriers, the Company would likely incur significantly higher shipping rates that would have a material adverse effect on the Company's business and its results of operations.

There are various health issues regarding wine consumption. Since 1989, federal law has required health-warning labels on all alcoholic beverages. Although an increasing number of research studies suggest that health benefits may result from the moderate consumption of wine, these suggestions have been widely challenged and a number of groups advocate increased governmental action to restrict consumption of alcoholic beverages. Restrictions on the sale and consumption of wine or increases in the taxes imposed on wine in response to concerns regarding health issues may have a material adverse effect on the Company's business and operating results. There can be no assurance that there will not be legal or regulatory challenges to the industry as a whole, and any such legal or regulatory challenge may have a material adverse effect on the Company's business and results of operations.

The price at which the Company's Class A common stock will trade may be highly volatile and may fluctuate substantially. The stock market has from time to time experienced price and volume fluctuations that have affected the market prices of securities, particularly securities of companies with Internet operations. As a result, investors may experience a material decline in the market price of the Company's Class A common stock, regardless of the Company's operating performance. In the past, following periods of volatility in the market price of a particular company's securities, securities class action litigation has often been brought against that company. The Company may become involved in this type of litigation in the future. Litigation of this type is often expensive and diverts management's attention and resources and could have a material adverse effect on the Company's business and its results of operations.

Additional Information

The Company's internet address is www.1800flowers.com. We make available, through the investor relations tab located on our website at

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www.1800flowers.com, access to our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission. All such filings on our investor relations website are available free of charge. (The information posted on the Company's website is not incorporated into this Annual Report of Form 10-K.)

A copy of this annual report on Form 10-K is available without charge upon written request to: Investor Relations, 1-800-FLOWERS.COM, Inc., One Old Country Road, Suite 500, Carle Place, NY 11514. In addition, the SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Item 1B. Unresolved Staff Comments

We have received no written comments regarding our current or periodic reports from the staff of the SEC that were issued 180 days or more preceding the end of our fiscal year ended June 29, 2008 that remain unresolved.

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Item 2. PROPERTIES

(*) Facility was closed during July 2008. (**) In July 2008, the Company acquired selected assets of Napco Marketing Corp. (Napco), a wholesale merchandiser and marketer of products designed primarily for the floral industry. The purchase price of approximately $9.5 million included the acquisition of a 180,000 square foot administrative and fulfillment center located in Jacksonville, FL.

In addition to the above properties, the Company leases approximately 315,000 square feet for owned or franchised retail stores and local fulfillment centers with lease terms typically ranging from 5 to 20 years. Some of its leases provide for a minimum rent plus a percentage rent based upon sales after certain minimum thresholds are achieved. The leases generally require the Company to pay insurance, utilities, real estate taxes and repair and maintenance expenses. In general, our properties are well maintained, adequate and suitable for their purposes.

Item 3. LEGAL PROCEEDINGS

There are various claims, lawsuits, and pending actions against the Company and its subsidiaries incident to the operations of its businesses. It is the opinion of management, after consultation with counsel, that the ultimate resolution of such claims, lawsuits and pending actions will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity.

In the Company's Form 10Q for the quarterly period ended March 30, 2008, the Company disclosed that in October 2007, 1-800-Flowers.Com., Inc. and its subsidiary, 1-800-Flowers Retail, Inc., (collectively "the Company"), were served with a purported nationwide class action lawsuit filed in the United States District Court, in and for the Southern District of Florida (Grabein v. 1-800-Flowers.Com., Inc., et al; Case No. 07-22235). The Complaint alleged violation of the Federal Fair and Accurate Credit Transaction Act ("FACTA") based upon the allegation that the Company printed/provided receipts to consumers at the point of sale or transaction on which receipts appeared more than the last five digits of customers' credit or debit card numbers and/or the expiration dates of such cards. The Complaint did not specify any actual damages for any member of the purported class. However, the Complaint sought statutory damages of $100 to $1,000 for each alleged willful violation of the statute, as well as, attorneys' fees, costs, punitive damages and a permanent injunction. The Company vigorously defended the action and on June 13, 2008, the presiding Judge issued a Final Order of Dismissal whereby the case was dismissed with prejudice and no payment of any kind was made by the Company or its subsidiary.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the last quarter of our fiscal year ended June 29, 2008.

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Square Location Type Princi pal Use Footage Ownership ----------------------- -------------------- ------ ------------------------------------------ -------- ---------- ---------------- Office and Distri bution, administrative and customer Napa, CA warehouse servic e 68,000 leased Chicago, IL Office Admini strative and customer service 18,000 leased Lake Forest, IL Office, plant and Manufa cturing, distribution and administrative warehouse 148,000 leased Office and Melrose Park, IL warehouse Distri bution, administrative and customer 249,000 leased servic e Reno, NV Warehouse Distri bution 140,000 leased Alamogordo, NM Office Custom er service 23,000 owned Albany, NY Warehouse Distri bution 42,000 leased Carle Place, NY Office Headqu arters and customer service 92,000 leased Akron, OH Office, plant and Manufa cturing, distribution and administrative warehouse 200,000 leased Bethpage, NY Warehouse Distri bution 44,000 leased Obetz, OH Warehouse Distri bution 176,000 leased Vandalia, OH Warehouse Distri bution 200,000 owned Office and Westerville, OH warehouse Distri bution and customer service 21,000 leased Westerville, OH Office, plant and Manufa cturing, distribution and administrative warehouse 44,000 owned Ardmore, OK (*) Office Custom er service 24,000 leased Office and Madison, VA warehouse Distri bution, administrative and customer 300,000 owned servic e

EXECUTIVE OFFICERS OF THE REGISTRANT

The following individuals were serving as executive officers of the Company and certain of its subsidiaries on September 4, 2008:

James F. McCann has served as the Company's Chairman of the Board and Chief Executive Officer since inception. Mr. McCann has been in the floral industry since 1976 when he began a retail chain of flower shops in the New York metropolitan area. Mr. McCann is a member of the board of directors of Lottomatica S.p.A and Willis Holdings Group. James F. McCann is the brother of Christopher G. McCann, a Director and the President of the Company.

Christopher G. McCann has been the Company's President since September 2000 and prior to that had served as the Company's Senior Vice President. Mr. McCann has been a Director of the Company since inception. Mr. McCann serves on the board of directors of Bluefly, Inc. and is a member of the Board of Trustees of Marist College. Christopher G. McCann is the brother of James F. McCann, the Company's Chairman of the Board and Chief Executive Officer.

Gerard M. Gallagher has been our Senior Vice President, General Counsel and Corporate Secretary since August 1999 and has been providing legal services to the Company since its inception. Mr. Gallagher is the founder and a managing partner in the law firm Gallagher, Walker, Bianco and Plastaras, based in Mineola, New York, specializing in corporate, litigation and intellectual property matters since 1993. Mr. Gallagher is duly admitted to practice before the New York State Courts and the United States District Courts of both the Eastern District and Southern District of New York.

Thomas G. Hartnett has been Chief Operating Officer of the 1-800-Flowers.com Consumer Floral brand since July 2006. Before holding this position, Mr. Hartnett held various positions within the Company since joining the Company in 1991, including Senior Vice President of Retail and Fulfillment, Controller, Director of Store Operations, Vice President of Retail Operations and Vice President of Strategic Development.

Timothy J. Hopkins has been President of the Madison Brands division since January 2007 and prior to that served as President of Specialty Brands since joining the Company in March 2005. Immediately before joining the Company, Mr. Hopkins consulted for various retail companies after serving as Chief Executive Officer and Director of Sur La Table, Inc., a multi-channel upscale specialty retailer of gourmet culinary and serveware products where he was employed from

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Name A ge Position with the Company ------------------------------------------------ -- ---- ------------------------------------------- --------------- James F. McCann........................... 57 Chairman of the Board and Chief Executive Officer Christopher G. McCann..................... 47 Director and President Gerard M. Gallagher....................... 55 Senior Vice President of Business Affairs , General Counsel, and Corporate Secretary Thomas G. Hartnett........................ 45 Chief Operating Officer of Consumer Flora l Tim Hopkins............................... 54 President of Madison Brands Stephen J. Bozzo.......................... 53 Senior Vice President and Chief Informati on Officer William E. Shea........................... 49 Senior Vice President, Treasurer, and Chief Financial Officer David Taiclet............................. 45 Chief Executive Officer - Fannie May Conf ection Brands, Inc.

2001-2004. From 2000-2001 he was the CEO at LeGourmet Chef, a specialty retailer of housewares and from 1995-2000, Mr. Hopkins was President, Corporate Merchandising and Logistics Worldwide for BORDERS Group, Inc, a multi-channel retailer of books and multi-media. Before this position Mr. Hopkins held other senior level positions in the multi-channel retailing sector.

Stephen J. Bozzo has been our Chief Information Officer since May 2007. Prior to joining the Company, Mr. Bozzo served as Chief Information Officer for the International Division of MetLife Insurance Company since 2001. Mr. Bozzo's business background includes senior executive positions at Bear Stearns Inc. as Managing Director Principal, AIG as Senior Vice President Telecommunications and Technical Services and Chase Manhattan Bank, where he was Senior Vice President Global Telecommunications.

David Taiclet has been our Chief Executive Officer of the Fannie May Confections Brands since April 2006, upon our acquisition of the company. Prior thereto and commencing in January 1995, Mr. Taiclet was a Co-Founder of a business that ultimately became known as Fannie May Confections Brands, Inc. (formerly Alpine Confections, Inc.), a multi-branded and multi-channel retailer, manufacturer, and distributor of confectionery and specialty food products. From May 1991 to January 1995, Mr. Taiclet served in a variety of management positions with Cargill, Inc. including the Strategy and Business Development Group. Cargill, Inc. is an international marketer, processor and distributor of food, financial and industrial products. Mr. Taiclet also served four years of active duty in the U.S. Army, attaining the rank of Captain.

William E. Shea has been our Senior Vice President of Finance and Administration and Chief Financial Officer since September 2000. Before holding his current position, Mr. Shea was our Vice President of Finance and Corporate Controller after joining us in April 1996. From 1980 until joining us, Mr. Shea was a certified public accountant with Ernst & Young LLP.

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PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND R ELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

1-800-FLOWERS.COM's Class A common stock trades on The Nasdaq Stock Market under the ticker symbol "FLWS." There is no established public trading market for the Company's Class B common stock. The following table sets forth the reported high and low sales prices for the Company's Class A common stock for each of the fiscal quarters during the fiscal years ended June 29, 2008 and July 1, 2007.

Rights of Common Stock

Holders of Class A common stock generally have the same rights as the holders of Class B common stock, except that holders of Class A common stock have one vote per share and holders of Class B common stock have 10 votes per share on all matters submitted to the vote of stockholders. Holders of Class A common stock and Class B common stock generally vote together as a single class on all matters presented to the stockholders for their vote or approval, except as may be required by Delaware law. Class B common stock may be converted into Class A common stock at any time on a one-for-one share basis. Each share of Class B common stock will automatically convert into one share of Class A common stock upon its transfer, with limited exceptions.

Holders

As of September 4, 2008, there were approximately 271 stockholders of record of the Company's Class A common stock, although the Company believes that there is a significantly larger number of beneficial owners. As of September 4, 2008, there were approximately 22 stockholders of record of the Company's Class B common stock.

Dividend Policy

Although the Company has never declared or paid any cash dividends on its Class A or Class B common stock, the Company anticipates that it will generate increasing free cash flow in excess of its capital investment requirements. Although the Company has no current intent to do so, the Company may choose, at some future date, to use some portion of its cash for the purpose of cash dividends.

Resales of Securities

36,923,032 shares of Class A and Class B common stock are "restricted securities" as that term is defined in Rule 144 under the Securities Act. Restricted securities may be sold in the public market from time to time only if registered or if they qualify for an exemption from registration under Rule 144 or 701 under the Securities Act. As of September 4, 2008, all of such shares of

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High Low -------------- -------------- Year ended June 29, 2008 July 2, 2007 - September 30, 2007 $ 12.38 $ 8.47 October 1, 2007 - December 30, 2007 $ 13.42 $ 8.66 December 31, 2007 - March 30, 2008 $ 9.00 $ 6.35 March 31, 2008 - June 29, 2008 $ 9.26 $ 6.51 Year ended July 1, 2007 July 3, 2006 - October 1, 2006 $ 6.10 $ 4.33 October 2, 2006 - December 31, 2006 $ 6.35 $ 4.94 January 1, 2007 - April 1, 2007 $ 8.00 $ 5.84 April 2, 2007 - July 1, 2007 $ 9.47 $ 7.66

the Company's common stock could be sold in the public market pursuant to and subject to the limits set forth in Rule 144. Sales of a large number of these shares could have an adverse effect on the market price of the Company's Class A common stock by increasing the number of shares available on the public market.

Purchases of Equity Securities by the Issuer

On January 21, 2008, the Company's Board of Directors authorized an increase to its stock repurchase plan which, when added to the $8.7 million remaining on its earlier authorization, increased the amount available for repurchase to $15.0 million. Any such purchases could be made from time to time in the open market and through privately negotiated transactions, subject to general market conditions. The repurchase program will be financed utilizing available cash. As of June 29, 2008, $14.0 remains authorized but unused.

Under this program, as of June 29, 2008, the Company had repurchased 1,660,786 shares of common stock for $12.3 million, of which $1.1 million (133,609 shares), $0.2 million (24,627 shares) and $1.3 million (182,000 shares) were repurchased during the fiscal years ending June 29, 2008, July, 1 2007 and July 2, 2006, respectively. In a separate transaction, during fiscal 2007, the Company's Board of Directors authorized the repurchase of 3,010,740 shares from an affiliate. The purchase price was $15,689,000 or $5.21 per share. The repurchase was approved by the disinterested members of the Company's Board of Directors and was in addition to the Company's existing stock repurchase authorization.

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Item 6. SELECTED FINANCIAL DATA

The selected consolidated statement of income data for the years ended June 29, 2008, July 1, 2007 and July 2, 2006 and the consolidated balance sheet data as of June 29, 2008 and July 1, 2007, have been derived from the Company's audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The selected consolidated statement of income data for the years ended July 3, 2005 and June 27, 2004, and the selected consolidated balance sheet data as of July 2, 2006, July 3, 2005 and June 27, 2004, are derived from the Company's audited consolidated financial statements which are not included in this Annual Report on Form 10-K.

The following tables summarize the Company's consolidated statement of income and balance sheet data. The Company acquired DesignPac Gifts LLC in April 2008, Fannie May Confections Brands, Inc. in May 2006, Wind & Weather in October 2005, Cheryl & Co. in March 2005 and The Winetasting Network in November 2004. The following financial data reflects the results of operations of these subsidiaries since their respective dates of acquisition. This information should be read together with the discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's consolidated financial statements and notes to those statements included elsewhere in this Annual Report on Form 10-K.

Note (1): The Company's fiscal year is a 52- or 53-week period ending on the Sunday nearest to June 30. Fiscal years ended June 29, 2008, July 1, 2007, July 2, 2006 and June 27, 2004 consisted of 52 weeks, while the fiscal years ended July 3, 2005 consisted of 53 weeks.

Note (2): Effective July 4, 2005, the Company adopted the fair value recognition provisions of SFAS No. 123(R) using the modified prospective application method.

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Years ended (1),(2) --------------------------------------------------- ------------------- June 29, July 1, July 2, July 3, June 27, 2008 2007 2006 2005 2004 ------------- -------------- ------------- -------- ---- -------------- (in thousands, except per share data) Consolidated Statement of Income Data: Net revenues: E-commerce $ 749,857 $ 749,238 $ 706,001 $ 620, 831 $ 570,509 Other 169,535 163,360 75,740 49, 848 33,469 ------------- -------------- ------------- -------- ---- -------------- Total net revenues 919,392 912,598 781,741 670, 679 603,978 Cost of revenues 525,638 520,132 456,097 395, 028 351,111 ------------- -------------- ------------- -------- ---- -------------- Gross profit 393,754 392,466 325,644 275, 651 252,867 Operating expenses: Marketing and sales 256,604 262,303 239,573 198, 935 172,251 Technology and development 21,539 21,316 19,819 14, 757 13,799 General and administrative 57,881 56,017 43,978 35, 572 30,415 Depreciation and amortization 20,363 17,837 15,765 14, 489 14,992 ------------- -------------- ------------- -------- ---- -------------- Total operating expenses 356,387 357,473 319,135 263, 753 231,457 ------------- -------------- ------------- -------- ---- -------------- Operating income 37,367 34,993 6,509 11, 898 21,410 Other income (expense), net (3,997) (5,984) (141) 1, 349 320 ------------- -------------- ------------- -------- ---- -------------- Income before income taxes 33,370 29,009 6,368 13, 247 21,730 Income tax expense (benefit) 12,316 11,891 3,181 5, 398 (19,174) ------------- -------------- ------------- -------- ---- -------------- Net income $21,054 $17,118 $ 3,187 $ 7, 849 $ 40,904 ============= ============== ============= ======== ==== ============== Net income per common share: Basic $0.33 $0.27 $0.05 $0 .12 $0.62 ============= ============== ============= ======== ==== ============== Diluted $0.32 $0.26 $0.05 $0 .12 $0.60 ============= ============== ============= ======== ==== ============== Shares used in the calculation of net income per common share: Basic 63,074 63,786 65,100 66, 038 65,959 ============= ============== ============= ======== ==== ============== Diluted 65,458 65,526 66,429 67, 402 68,165 ============= ============== ============= ======== ==== ==============

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIN ANCIAL CONDITION AND RESULT OF OPERATIONS

This "Management's Discussion and Analysis of Financial Condition and Results of Operations" (MD&A) is intended to provide an understanding of our financial condition, change in financial condition, cash flow, liquidity and results of operations. The following MD&A discussion should be read in conjunction with the consolidated financial statements and notes to those statements that appear elsewhere in this Form 10-K. The following discussion contains forward-looking statements that reflect the Company's plans, estimates and beliefs. The Company's actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to any differences include, but are not limited to, those discussed under the caption "Forward-Looking Information" and under Item 1A -- "Risk Factors".

Overview

1-800-FLOWERS.COM, Inc. is the world's leading florist and gift shop. For more than 30 years, 1-800-FLOWERS.COM, Inc. has been providing customers with fresh flowers and the finest selection of plants, gift baskets, gourmet foods, confections, balloons and plush stuffed animals perfect for every occasion. 1-800-FLOWERS.COM(R) (1-800-356-9377 or www.1800flowers.com), was named as one of the top 50 online retailers by Internet Retailer, as well as 2008 Laureate Honoree by the Computerworld Honors Program and the recipient of ICMI's 2006 Global Call Center of the Year Award. 1-800-FLOWERS.COM offers the best of both worlds: exquisite arrangements created by some of the nation's top floral artists and hand-delivered the same day, and spectacular flowers shipped overnight under our Fresh From Our Growers(R) program. As always, 100% satisfaction and freshness are guaranteed. The Company's BloomNet(R) international floral wire service (www.mybloomnet.net) provides a broad range of quality products and value-added services designed to help professional florists grow their businesses profitably.

The 1-800-FLOWERS.COM, Inc. "Gift Shop" also includes gourmet gifts such as popcorn and specialty treats from The Popcorn Factory(R) (1-800-541-2676 or www.thepopcornfactory.com); cookies and baked gifts from Cheryl&Co.(R) (1-800-443-8124 or www.cherylandco.com); premium chocolates and confections from Fannie May Confections Brands(R) (www.fanniemay.com and www.harrylondon.com); gourmet foods from Greatfood.com(R) (www.greatfood.com); wine gifts from Ambrosia(R) (www.ambrosia.com or www.winetasting.com); gift baskets from 1-800-BASKETS.COM(R) (www.1800baskets.com) and DesignPac Gifts(TM) (www.designpac.com) as well as Home Decor and Children's Gifts from Plow & Hearth(R) (1-800-627-1712 or www.plowandhearth.com), Wind & Weather(R) (www.windandweather.com), HearthSong(R) (www.hearthsong.com) and Magic Cabin(R) (www.magiccabin.com).

Shares in 1-800-FLOWERS.COM, Inc. are traded on the NASDAQ Global Select Market under ticker symbol FLWS.

Category Information

During the first quarter of fiscal 2007, the Company segmented its organization to improve execution and customer focus and to align its resources to meet the demands of the markets it serves. The following table presents the contribution

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As of -------------- ------------- -------------- ------ --------- -------------- June 29, 2008 July 1, 2007 July 2, 2006 July 3, 2005 June 27, 2004 -------------- ------------- -------------- ------ --------- -------------- (in thousands) Consolidated Balance Sheet Data: Cash and equivalents and short-term investments $ 12,124 $ 16,087 $ 24,599 $ 4 6,608 $ 103,374 Working capital 33,416 51,419 44,250 4 4,739 83,704 Investments-non current - - - - 8,260 Total assets 371,338 352,507 346,634 25 1,952 261,552 Long-term liabilities 63,739 78,911 79,221 5,281 8,874 Total stockholders' equity 231,465 201,031 193,183 18 6,334 186,390

of net revenues, gross profit and "EBITDA" (earnings before interest, taxes, depreciation and amortization) from each of the Company's business categories.

(*) Corporate expenses consist of the Company's enterprise shared service cost centers, and include, among other items, Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service Center functions, as well as Stock-Based Compensation. In order to leverage the Company's infrastructure, these functions are operated under a

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Years Ended ------- --------------------------------------------------- ------------ June 29, July 1, July 2, Net revenues 200 8 % Change 2007 % Change 2006 ------- ----- --------------- ------------- ------------- - ------------ (in thousands) Net revenues: 1-800-Flowers.com Consumer Floral $491, 696 0.1% $491,404 8.7% $452,188 BloomNet Wire Service 53, 488 20.5% 44,379 48.5% 29,884 Gourmet Food & Gift Baskets 196, 298 1.9% 192,698 83.5% 105,002 Home & Children's Gifts 180, 181 (3.6%) 186,948 (5.1%) 196,919 Corporate (*) 2, 431 47.2% 1,652 19.0% 1,388 Intercompany eliminations (4, 702) (4.9%) (4,483) (23.2%) (3,640) ------- ----- ------------- - ------------ Total net revenues $919, 392 0.7% $912,598 16.7% $781,741 ======= ===== ============= = ============

Years Ended ------- --------------------------------------------------- ------------ June 29, July 1, July 2, Gross Profit 200 8 % Change 2007 % Change 2006 ------- ----- --------------- ------------- ------------- - ------------ (in thousands) Gross profit: 1-800-Flowers.com Consumer Floral $190, 259 (1.4%) $192,921 13.2% $170,352 3 8.7% 39.3% 37.7% BloomNet Wire Service 30, 080 21.1% 24,844 55.4% 15,989 5 6.2% 56.0% 53.5% Gourmet Food & Gift Baskets 91, 713 4.0% 88,207 85.9% 47,442 4 6.7% 45.8% 45.2% Home & Children's Gifts 81, 459 (5.2%) 85,899 (6.2%) 91,555 4 5.2% 45.9% 46.5% Corporate (*) 970 27.0% 764 38.7% 551 3 9.9% 46.2% 39.7% Intercompany eliminations ( 727) (169) (245) ------- ----- ------------- - ------------ Total gross profit $393, 754 0.3% $392,466 20.5% $325,644 ======= ====== ============= = ============= 4 2.8% 43.0% 41.7% ======= ====== ============= = ============= Years Ended ------- --------------------------------------------------- ------------ June 29, July 1, July 2, EBITDA(**) 200 8 % Change 2007 % Change 2006 ------- ----- --------------- ------------- ------------- - ------------ (in thousands) Category Contribution Margin: 1-800-Flowers.com Consumer Floral $62, 967 (3.4%) $65,166 40.1% $46,518 BloomNet Wire Service 18, 509 30.7% 14,162 99.3% 7,106 Gourmet Food & Gift Baskets 24, 593 (6.8%) 26,377 286.4% 6,827 Home & Children's Gifts 3, 438 383.0% (1,215) (117.0%) 7,134 ------- ----- ------------- - ------------ Category Contribution Margin Subtotal 109, 507 4.8% 104,490 54.6% 67,585 Corporate (*) (51, 777) (0.2%) (51,660) (14.0%) (45,311) ------- ----- ------------- - ------------ EBITDA $57, 730 9.3% $52,830 137.2% $22,274 ======= ===== ============= = ============

centralized management platform, providing support services throughout the organization. The costs of these functions, other than those of the Customer Service Center, which are allocated directly to the above categories based upon usage, are included within corporate expenses as they are not directly allocable to a specific category.

(**) Performance is measured based on category contribution margin or category EBITDA, reflecting only the direct controllable revenue and operating expenses of the categories. As such, management's measure of profitability for these categories does not include the effect of corporate overhead, described above, nor does it include depreciation and amortization, other income (net), and income taxes. Management utilizes EBITDA as a performance measurement tool because it considers such information a meaningful supplemental measure of its performance and believes it is frequently used by the investment community in the evaluation of companies with comparable market capitalization. The Company also uses EBITDA as one of the factors used to determine the total amount of bonuses available to be awarded to executive officers and other employees. The Company's credit agreement uses EBITDA (with additional adjustments) to measure compliance with covenants such as interest coverage and debt incurrence. EBITDA is also used by the Company to evaluate and price potential acquisition candidates. EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of these limitations are: (a) EBITDA does not reflect changes in, or cash requirements for, the Company's working capital needs; (b) EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debts; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA does not reflect any cash requirements for such capital expenditures. Because of these limitations, EBITDA should only be used on a supplemental basis combined with GAAP results when evaluating the Company's performance.

Reconciliation of Net Income to EBITDA:

Results of Operations

The Company's fiscal year is a 52- or 53-week period ending on the Sunday nearest to June 30. Fiscal years 2008, 2007 and 2006, which ended on June 29, 2008, July 1, 2007 and July 2, 2006, respectively, consisted of 52 weeks.

Net Revenues

Net revenues consist primarily of the selling price of the merchandise, service or outbound shipping charges, less discounts, returns and credits.

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Years Ended ------------------------------------------- June 29, July 1, July 2, 2008 2007 2006 ------------- ------------- ------------- (in thousands) Net income $21,054 $17,118 $3,187 Add: Interest expense 5,081 7,390 1,407 Depreciation and amortization 20,363 17,837 15,765 Income tax expense 12,316 11,891 3,181 Less: Interest income 999 1,381 1,260 Other income 85 25 6 ------------- ------------- ------------- EBITDA $57,730 $52,830 $22,274 ============= ============= =============

Years Ended -------- --------------------------------------------------- ----------- June 29, July 1, July 2, 2008 % Change 2007 % Change 2006 -------- ---- --------------- ------------- ------------- -- ----------- (in thousands) Net revenues: E-Commerce $749,8 57 0.1% $749,238 6.1% $706,001 Other 169,5 35 3.8% 163,360 115.7% 75,740 ----- -- ------ ------ $919,3 92 0.7% $912,598 16.7% $781,741 ====== == ======== ========

The Company's revenue growth of 0.7% during the fiscal year ended June 29, 2008 was primarily attributable to the continued expansion of the Company's BloomNet Wire Service business, which increased 20.5% over the prior fiscal year, as well as growth from the Gourmet Food & Gift Basket business, which increased 1.9% over the same period of the prior year, partially offset by a decline in the Home and Children's Gifts business as a result of the discontinuation of non-performing catalog titles in order to improve the overall operating results within this category. During this challenging consumer environment, which was characterized by cautious consumer spending and aggressive promotional activity by competitors across the gifting industry, the Company made the decision not to chase revenue growth in its direct-to-consumer businesses, instead focusing on achieving its primary goal of leveraging its business platform to drive profitable growth while reducing its operating expense ratio. As a result, despite the difficult retail consumer environment experienced during the year, the Company was able to achieve EBITDA growth of 9.3%, on more modest revenue growth, and despite the negative contribution from DesignPac (acquired on April 30, 2008), due to the highly seasonal nature of its business.

The Company's revenue growth of 16.7% during the fiscal year ended July 1, 2007 was due to a combination of organic growth, as well as the acquisitions of Fannie May Confections Brands, a manufacturer and retailer of premium chocolates and other confections, acquired on May 1, 2006 and Wind & Weather, a direct marketer of weather-themed gifts, acquired on October 31, 2005. Organic revenue growth, including post acquisition growth of the aforementioned acquisitions, adjusted for the disposition of certain Company owned floral retail stores, during fiscal 2007 was approximately 8%.

The Company fulfilled approximately 11.5 million, 11.6 million and 11.3 million orders through its e-commerce (combined online and telephonic) sales channel during fiscal 2008, 2007 and 2006, respectively. The Company's e-commerce (combined online and telephonic) sales channel average order value increased 1.3% to $65.21 during fiscal 2008, and 3.2% to $64.37 during fiscal 2007, primarily as a result of increased service and shipping charges (in line with industry norms) to partially offset the impact of increased fuel costs passed on from freight carriers.

Other revenues for the fiscal years ended June 29, 2008 and July 1, 2007, increased in comparison to the same periods of the prior year due the continued revenue growth of the Company's BloomNet Wire Service category. Also contributing to the increase in other revenues during fiscal 2007 was the increase from the retail/wholesale component of Fannie May Confections Brands, which was acquired in May 2006.

The 1-800-Flowers.com Consumer Floral category includes the 1-800-Flowers brand operations which derives revenue from the sale of consumer floral products through its e-commerce sales channels (telephonic and online sales) and company-owned and operated retail floral stores, as well as royalties and rental income from its franchise operations. Net revenues during the fiscal years ended June 29, 2008 and July 1, 2007, increased by 0.1% and 8.7% over the respective prior year periods, primarily from an increased average order value from its e-commerce sales channel, offset in part by lower retail sales from its company-owned floral stores due to the planned transition of Company stores to franchise ownership. Fiscal 2007 net revenues were also favorably affected by increased order volume from its e-commerce sales channel.

The BloomNet Wire Service category includes revenues from membership fees as well as other service and product offerings to florists. Net revenues during the fiscal years ended June 29, 2008 and July 1, 2007 increased by 20.5% and 48.5% over the respective prior year periods, primarily as a result of increased florists' membership fees, expanded product and service offerings, and pricing initiatives. During fiscal 2007, net revenues were also favorably affected by the introduction of BloomNet's Floral Selection Guide, which is published once every three years.

The Gourmet Food & Gift Basket category includes the operations of the Cheryl & Co., Fannie May Confections Brands, The Popcorn Factory, The Winetasting Network and DesignPac Gifts brands. Revenue is derived from the sale of cookies, baked gifts, premium chocolates and confections, gourmet popcorn, wine gifts and gourmet gift baskets through its E-commerce sales channels (telephonic and online sales) and company-owned and operated retail stores under the Cheryl & Co. and Fannie May Confections brands, as well as wholesale operations. Net revenue for the fiscal year ended June 29, 2008 increased 1.9% compared to the prior fiscal year as a result of increased direct-to-consumer order volume from Cheryl & Co. and Fannie May Confections brands. Revenues from DesignPac, which was acquired on April 30, 2008, were immaterial during fiscal 2008 due to the highly seasonal nature of its business. Net revenue during the fiscal year ended

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July 1, 2007 increased by 83.5% over the prior year period, as a result of the contribution of Fannie May Confections Brands, which was acquired in May 2006, and strong organic growth from Cheryl & Co.

The Home & Children's Gifts category includes revenues from the Plow & Hearth, Wind & Weather, Problem Solvers, Madison Place, HearthSong and Magic Cabin brands. Revenue is derived from the sale of home decor and children's gifts through its e-commerce sales channels (telephonic and online sales) or company-owned and operated retail stores operated under the Plow & Hearth brand. Net revenue during the fiscal year ended June 29, 2008 decreased by 3.6% over the prior year period due to the planned elimination of the Madison Place and Problem Solvers catalog titles, which were launched during fiscal 2007. Excluding these titles, fiscal 2008 net revenue for the Home & Children's Gifts category was relatively consistent with the prior year period. Net revenue during the fiscal year ended July 1, 2007 decreased by 5.1% over the prior year period due to a lack of new "hit" products and an overall macro decline in customer demand within this category. During the second quarter of fiscal 2007, efforts to expand titles outside of the core Plow & Hearth brand did not attract the level of customer demand to justify the increase in marketing costs. In response to the poor results, during the third quarter of fiscal 2007, management implemented several changes to improve the performance within this category: (i) revised the aforementioned plans to expand and add titles, (ii) strengthened the management team, (iii) improved the creative look and feel of the catalogs and (iv) revised the circulation plans for all titles to place more focus on the category's existing customer base. As a result, during fiscal 2008, category contribution margin within this category improved by $4.6 million, from a loss of $1.2 million, to contribution of $3.4 million.

While the Company does not anticipate any significant improvement in the current economic environment during fiscal 2009, it expects to achieve revenue growth in excess of 10 percent compared with the prior year period. Revenue growth is expected to come from a combination of organic initiatives and contributions from its recent acquisitions. Among the organic initiatives that the Company believes will help drive profitable growth are (i) the first year benefit from the exclusive relationship with Martha Stewart Living Omnimedia for both 1-800-FLOWERS.COM and BloomNet; (ii) BloomNet's expanded products and service offerings, designed to deepen its relationship with florists and increase market share gains; (iii) Fannie May's continued strong ecommerce channel growth; (iv) Cheryl & Co.'s new product introductions, increased customization capabilities and improved website functionality; as well as (v) continued focus on cross-marketing and merchandising across all enterprise brands.

Gross Profit

Gross profit consists of net revenues less cost of revenues, which is comprised primarily of florist fulfillment costs (primarily fees paid directly to florists), the cost of floral and non-floral merchandise sold from inventory or through third parties, and associated costs including inbound and outbound shipping charges. Additionally, cost of revenues include labor and facility costs related to direct-to-consumer and wholesale production operations.

Gross profit increased during the fiscal years ended June 29, 2008 and July 1, 2007, in comparison to the same periods of the prior years, primarily as a result of the revenue growth described above. Gross margin percentage during the fiscal year ended June 29, 2008 decreased 20 basis points, primarily as a result of increased promotional activity and higher fuel surcharges from third party shippers. During fiscal 2007, gross profit percentage increased by 130 basis points as a result of product mix and pricing initiatives, as well as continued improvements in customer service, and fulfillment, as a result of improved outbound shipping rates, and merchandising programs.

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Years Ended --------------- --------------------------------------------------- ---- June 29, July 1, July 2 , 2008 % Change 2007 % Change 2006 ------------ -- ------------- ------------- ------------- --------- ---- (in thousands) Gross profit $393,754 0.3% $392,466 20.5% $325,64 4 Gross margin % 42.8% 43.0% 41. 7%

The 1-800-Flowers.com Consumer Floral category gross profit and gross profit margin percentage decreased by 1.4% and 60 basis points, respectively during fiscal 2008, as a result of increased promotional activity and higher fuel surcharges from third party shippers. During fiscal 2007, gross profit and gross margin percentage increased 13.2% and 160 basis points, respectively, as a result of the aforementioned increase in net revenue, as well improvements in sourcing, reduced outbound shipping rates, and pricing initiatives.

The BloomNet Wire Service category gross profit for the fiscal years ended June 29, 2008 and July 1, 2007, increased by 21.1% and 55.4% over the respective prior year periods as a result of the above mentioned revenue growth resulting from an increase in membership services and pricing initiatives.

The Gourmet Food & Gift Basket category gross profit for the fiscal year ended June 29, 2008 increased by 4.0% over the prior year period as a result of higher revenues and higher gross margin percentage, which increased 90 basis points to 46.7%, as a result of manufacturing efficiencies, and sales channel mix. During fiscal 2007, gross profit increased 85.9% primarily as a result of the incremental revenue generated by Fannie May Confections Brands and strong organic growth within the Cheryl & Co. brand, combined with an increase in gross margin percentage of 60 basis points, to 45.8%, as a result of improvements in outbound shipping rates and merchandising programs across all brands within the category.

The Home & Children's Gift category gross profit for the fiscal years ended June 29, 2008 and July 1, 2007 decreased by 5.2% and 6.2% over the respective prior year periods as a result of the aforementioned revenue decline, combined with lower gross margin percentages. The gross margin percentage during fiscal 2008 declined 70 basis points to 45.2%, due to promotional offers designed to re-engage core customers who had left the brand during fiscal 2007 when it had unsuccessfully moved away from its traditional product offerings, as well as from higher fuel surcharges on its outbound shipments. During fiscal 2007, the gross margin percentage declined 60 basis points to 45.9%, due to sales mix and markdowns to move inventory.

During fiscal year 2009, the Company expects its gross margin percentage will decline slightly as a result of the acquisition of DesignPac, which carries a lower wholesale gross margin, but a strong overall contribution margin due to its efficient high volume packaging and distribution operations. This mix decline is expected to be partially offset by anticipated gross margin improvements in most of its existing businesses through a combination of product sourcing, fulfillment improvements and pricing initiatives.

Marketing and Sales Expense

Marketing and sales expense consists primarily of advertising and promotional expenditures, catalog costs, online portal and search costs, retail store and fulfillment operations (other than costs included in cost of revenues) and customer service center expenses, as well as the operating expenses of the Company's departments engaged in marketing, selling and merchandising activities.

During fiscal 2008, marketing and sales expenses decreased by 2.2% from the prior year, and declined from 28.7% of net revenues to 27.9% of net revenues as a result of improved operating leverage from a number of cost-saving initiatives, including catalog printing and e-mail pricing improvements, and planned reductions in catalog prospecting and the discontinuation of the Madison Place and Problem Solvers titles within the Home & Children's category, as well as continued growth and operating improvements within the BloomNet Wire Service category.

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Years Ended --------------- --------------------------------------------------- ---- June 29, July 1, July 2 , 2008 % Change 2007 % Change 2006 ------------ -- ------------- ------------- ------------- --------- ---- (in thousands) Marketing and sales $256,604 (2.2%) $262,303 9.5% $239,57 3 Percentage of sales 27.9% 28.7% 30.6 %

During fiscal 2007, marketing and sales expense increased over the prior year period by 9.5% as a result of several factors, including: (i) incremental expenses associated with the acquisition of Fannie May Confections Brands in May 2006, (ii) incremental variable costs to accommodate higher sales volumes, and (iii) personnel associated with the expansion of the BloomNet Wire Service business. However, marketing and sales expenses decreased from 30.6% to 28.7% of net revenues, reflecting improved operating leverage from cost-saving initiatives and the completion of the investment phase of BloomNet, including the absorption of incremental personnel to expand membership, increase product and service offerings, and increased BloomNet Technologies penetration. This leverage was achieved through significant improvement within the Company's 1-800-Flowers Consumer Floral, BloomNet Wire Service and Gourmet Food & Gift Baskets categories. As efforts to grow the Home & Children's Gifts businesses through the introduction of titles outside the core Plow & Hearth brand did not attract the necessary level of consumer demand to justify the costs, as noted above, non-productive titles were discontinued during the latter half of fiscal 2007, resulting in improved contribution margin during fiscal 2008.

During the fiscal year ended June 29, 2008 the Company added approximately 3.4 million new e-commerce customers, compared to 3.5 million and 3.6 million in fiscal 2007 and fiscal 2006, respectively. Of the 6.8 million total customers who placed e-commerce orders during the fiscal 2008, approximately 50% were repeat customers, compared to 48% and 46% in fiscal 2007 and fiscal 2006, respectively, reflecting the Company's ongoing focus on deepening the relationship with its existing customers as their trusted source for gifts and services for all of their celebratory occasions.

During fiscal 2009, the Company expects that marketing and sales expense will continue to decrease as a percentage of net revenue in comparison to the prior years, in part due to the acquisition of DesignPac which, as noted above, carries a lower wholesale gross margin, but a strong overall contribution margin due to its cost efficient, high volume product assembly and distribution operations, as well as Company initiatives which will gain further leverage within existing operations.

Technology and Development Expense

Technology and development expense consists primarily of payroll and operating expenses of the Company's information technology group, costs associated with its web sites, including hosting, design, content development and maintenance and support costs related to the Company's order entry, customer service, fulfillment and database systems.

During fiscal 2008, technology and development expense increased 1.0%, in comparison to the prior year period as a result of increased labor costs, but was consistent as a percentage of net revenues. The increased labor costs were necessary to support the Company's technology platform, and were offset in part by savings derived from renegotiating various technology maintenance and license agreements.

During fiscal 2007, technology and development expense decreased 20 basis points to 2.3% of net revenue, reflecting improved operating leverage, however, technology and development expense increased by 7.6% over the prior year period, as a result of the incremental expenses associated with Fannie May Confections Brands, as well as for increases in the cost of maintenance and license agreements required to support the Company's technology platform.

During the fiscal years ended June 29, 2008, July 1, 2007, and July 2, 2006 the Company expended $35.3 million, $32.3 million, and $33.6 million, respectively, on technology and development, of which $13.8 million, $11.0 million, and $13.8 million, respectively, has been capitalized.

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Years Ended --------------- --------------------------------------------------- ---- June 29, July 1, July 2 , 2008 % Change 2007 % Change 2006 ------------ -- ------------- ------------- ------------- --------- ---- (in thousands) Technology and development $21,539 1.0% $21,316 7.6% $19,81 9 Percentage of sales 2.3% 2.3% 2. 5%

The Company believes that continued investment in technology and development is critical to attaining its strategic objectives, and as such, the Company expects that its spending for the fiscal 2009 will be consistent, as a percentage of net revenues, in comparison to the prior year.

General and Administrative Expenses

General and administrative expense consists of payroll and other expenses in support of the Company's executive, finance and accounting, legal, human resources and other administrative functions, as well as professional fees and other general corporate expenses.

General and administrative expense increased 3.3% during the fiscal year ended June 29, 2008 and by 20 basis points as a percentage of net revenues in comparison to the prior year, due to increased professional fees and corporate initiatives. The benefit of these increased costs are reflected in the improvements within the Company's overall operating expense ratios, in comparison to the same period of the prior year.

During the fiscal year ended July 1, 2007 general and administrative expense increased 27.4% and by 50 basis points as a percentage of net revenues in comparison to the prior year period, primarily as a result of: (i) incremental expenses associated with the acquisitions of Fannie May Confections Brands in May 2006, (ii) increased legal and professional fees, and (iii) the achievement of certain performance related bonus targets in fiscal 2007 which were not earned in the prior fiscal year.

Although the Company believes that its current general and administrative infrastructure is sufficient to support existing requirements and drive operating leverage, the Company expects that its fiscal 2009 general and administrative expenses will be consistent, as a percentage of net revenue, with fiscal 2008.

Depreciation and Amortization

Depreciation and amortization expense increased by 14.2% during the fiscal 2008 in comparison to the prior year as a result of capital additions for technology platform improvements and the incremental amortization expense related to the intangibles established as a result of the acquisition of DesignPac, which was acquired on April 30, 2008.

Depreciation and amortization expense increased by 13.1% during the fiscal year ended July 1, 2007 in comparison to the prior year period primarily as a result of the incremental amortization expense as a result of the acquisitions of Fannie May Confections Brands and Wind & Weather in fiscal 2006, as well as depreciation associated with completed technology projects designed to provide improved order/warehouse management functionality across the enterprise.

The Company believes that continued investment in its infrastructure, primarily in the areas of technology and development, including the improvement of the technology platforms are critical to attaining its strategic objectives. As a result of these improvements, and the increase in amortization expense associated with intangibles established as a result of recent acquisitions, the Company expects that depreciation and amortization for the fiscal 2009 will increase slightly as a percentage of net revenues in comparison to the prior year.

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Years Ended ---------- --------------------------------------------------- --------- June 29 , July 1, J uly 2, 2008 % Change 2007 % Change 2006 ---------- -- --------------- ------------- ------------- ---- --------- (in thousands) General and administrative $57,881 3.3% $56,017 27.4% $ 43,978 Percentage of sales 6.3% 6.1% 5.6 %

Years Ended --------------- --------------------------------------------------- ---- June 29, July 1, July 2 , 2008 % Change 2007 % Change 2006 ------------ -- ------------- ------------- ------------- --------- ---- (in thousands) Depreciation and amortization $20,363 14.2% $17,837 13.1% $15,76 5 Percentage of sales 2.2% 2.0% 2. 0%

Other Income (Expense)

Other income (expense) consists primarily of interest income earned on the Company's investments and available cash balances, offset by interest expense, primarily attributable to the Company's long-term debt, and revolving line of credit.

Net borrowing costs declined during fiscal 2008, in comparison to fiscal 2007, as a result of declining interest rates and a reduction in outstanding debt.

Net borrowing costs increased during fiscal 2007, in comparison to fiscal 2006, due to the interest expense incurred in order to finance the acquisition of Fannie May Confections Brands, Inc. on May 1, 2006. On May 1, 2006, the Company entered into a $135.0 million secured credit facility with JPMorgan Chase Bank, N.A., as administrative agent, and a group of lenders (the "2006 Credit Facility"). The 2006 credit facility, as amended, included an $85.0 million term loan and a $75.0 million revolving facility, which bear interest at LIBOR plus 0.625% to 1.125%, with pricing based upon the Company's leverage ratio. At closing, the Company borrowed $85.0 million of the term facility to acquire all of the outstanding capital stock of Fannie May Confections Brands, Inc.

On August 28, 2008, the Company entered into a $293.0 million Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a group of lenders (the "2008 Credit Facility"). The 2008 Credit Facility provides for borrowings of up to $293.0 million, including: (i) a $165.0 million revolving credit commitment, (ii) $60.0 million of new term loan debt, and (iii) $68.0 million of existing term loan debt associated with the Company's 2006 Credit Facility. Interest is at LIBOR plus 1.5% to 2.5% for the Company's existing term loan and revolving credit facility, and LIBOR plus 2.0% to 3.0%, for the Company's new term loan, with pricing based upon the Company's leverage ratio. At closing of the 2008 Credit Facility, the Company utilized the proceeds of the new term loan to pay down amounts outstanding under its previous revolving credit facility.

Income Taxes

During the fiscal years ended June 29, 2008, July 1, 2007 and July 2, 2006, the Company recorded income tax expense of $12.3 million, $11.9 million and $3.2 million, respectively. The Company's effective tax rate for the fiscal years ended June 29, 2008, July 1, 2007 and July 2, 2006 was 36.9%, 41.0% and 50.0%, respectively. The decrease in the effective tax rate during the fiscal year ended June 29, 2008 resulted primarily from lower state taxes, as well as various tax credits programs. The decrease in the effective tax rate during the fiscal year ended July 1, 2007 resulted from the dilution of the impact of stock-based compensation recognized in accordance with SFAS No. 123(R), over an increased level of income before taxes in comparison the prior fiscal year. The Company's effective tax rate for the fiscal years ended June 29, 2008, July 1, 2007 and July 2, 2006 differed from the U.S. federal statutory rate of 35% primarily due to state income taxes, partially offset by various tax credits.

At June 29, 2008, the Company's federal net operating loss carryforwards were approximately $4.5 million, which, if not utilized, will begin to expire in fiscal year 2025.

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Years Ended --------------- --------------------------------------------------- ---- June 29, July 1, July 2 , 2008 % Change 2007 % Change 2006 ------------ -- ------------- ------------- ------------- --------- ---- (in thousands) Interest income $ 999 (27.7)% $1,381 9.6% $1,260 Interest expense (5,081) 31.2% (7,390) (425.2)% (1,407 ) Other, net 85 240.0% 25 316.7 6 ------------ ------------- --------- ---- $(3,997) 33.2% $(5,984) (4,144.0)% $(141 ) ============ ============= ========= ====

Quarterly Results of Operations

The following table provides unaudited quarterly consolidated results of operations for each quarter of fiscal years 2008 and 2007. The Company believes this unaudited information has been prepared substantially on the same basis as the annual audited consolidated financial statements and all necessary adjustments, consisting of only normal recurring adjustments, have been included in the amounts stated below to present fairly the Company's results of operations. The operating results for any quarter are not necessarily indicative of the operating results for any future period.

The Company's quarterly results may experience seasonal fluctuations. Due to the Company's expansion into non-floral products, including the recent acquisition of DesignPac Gifts LLC, which was acquired in May 2008, Thanksgiving through Christmas holiday season, which falls within the Company's second fiscal quarter, generates the highest proportion of the Company's annual revenues. Additionally, as the result of a number of major floral gifting occasions, including Mother's Day, Administrative Professionals Week and Easter, revenues also rise during the Company's fiscal fourth quarter. For fiscal 2008, however, the Easter holiday occurred in the Company's fiscal third quarter, thus moving revenue from the Company's fiscal fourth quarter to its fiscal third quarter. For fiscal 2009, the Easter Holiday returns to the Company's fiscal fourth quarter.

Liquidity and Capital Resources

At June 29, 2008 the Company had working capital of $33.4 million, including cash and equivalents of $12.1 million, compared to working capital of $51.4 million, including cash and equivalents of $16.1 million, at July 1, 2007.

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Three months ended -------------- --------------------------------------------------- --------------------- Jun.29, Ma r.30, Dec.30, Sep.30, Jul. 1, Apr. 1, Dec.31, Oct. 1 2008 2 008 2007 2007 2007 2007 2006 2006 --------- ---- ----- ---------- ----------- --------- ---------- - --------- ----------- (in thousands, except per share data) Net revenues: Ecommerce (telephonic/online) $183,710 $177 ,476 $274,168 $114,503 $194,228 $175,592 $ 270,159 $109,259 Other 36,103 42 ,091 60,034 31,307 37,593 38,187 59,707 27,873 --------- ---- ----- ---------- ----------- --------- ---------- - --------- ---------- Total net revenues 219,813 219 ,567 334,202 145,810 231,821 213,779 329,866 137,132 Cost of revenues 128,501 130 ,062 181,146 85,929 132,833 127,092 177,889 82,318 --------- ---- ----- ---------- ----------- --------- ---------- - --------- ---------- Gross profit 91,312 89 ,505 153,056 59,881 98,988 86,687 151,977 54,814 Operating expenses: Marketing and sales 59,644 60 ,587 93,594 42,779 61,873 59,023 99,037 42,370 Technology and development 5,370 5 ,515 5,419 5,235 5,485 5,469 5,201 5,161 General and administrative 14,064 13 ,151 15,448 15,218 14,545 14,198 13,931 13,343 Depreciation and amortization 5,515 5 ,011 4,967 4,870 4,812 4,447 3,834 4,744 --------- ---- ----- ---------- ----------- --------- ---------- - --------- ---------- Total operating expenses 84,593 84 ,264 119,428 68,102 86,715 83,137 122,003 65,618 --------- ---- ----- ---------- ----------- --------- ---------- - --------- ---------- Operating income (loss) 6,719 5 ,241 33,628 (8,221) 12,273 3,550 29,974 (10,804) Other income (expense), net (533) (685) (1,430) (1,349) (979) (1,347) (2,178) (1,480) --------- ---- ----- ---------- ----------- --------- ---------- - --------- ---------- Income (loss) before income taxes 6,186 4 ,556 32,198 (9,570) 11,294 2,203 27,796 (12,284) Income tax expense (benefit) 1,888 1 ,266 12,942 (3,780) 4,732 1,150 10,874 (4,865) --------- ---- ----- ---------- ----------- --------- ---------- - --------- ---------- Net income (loss) $4,298 $3 ,290 $19,256 ($5,790) $6,562 $1,053 $16,922 ($7,419) ========= ==== ===== ========== =========== ========= ========== = ========= ========== Net income (loss) per share: Basic $0.07 $ 0.05 $0.31 ($0.09) $0.10 $0.02 $0.26 ($0.11) ========= ==== ===== ========== =========== ========= ========== = ========= ========== Diluted $0.07 $ 0.05 $0.29 ($0.09) $0.10 $0.02 $0.26 ($0.11) ========== === ===== ========== =========== ========= ========== = ========= ==========

Net cash provided by operating activities of $57.9 million for the fiscal year ended June 29, 2008 was primarily attributable to net income, adjusted to add back non-cash charges for depreciation and amortization, deferred income taxes and stock-based compensation, offset in part by increases in inventory (due primarily to the recently acquired DesignPac business).

Net cash used in investing activities of $57.7 million for the fiscal year ended June 29, 2008 was primarily attributable to the payment of Fannie May Confections Brands "earn-out" incentives ($4.4 million), as well as capital expenditures, primarily related to the Company's technology and distribution infrastructure, and the acquisition of DesignPac ($33.3 million) on April 30, 2008. DesignPac is a designer, assembler and distributor of gourmet gift baskets, gourmet food towers and gift sets, including a broad range of branded and private label components, based in Melrose Park, IL. The purchase price of approximately $33.3 million in cash, net of cash acquired, is subject to "earn-out" incentives which amount to a maximum of $2.0 million through the years ending June 27, 2010, upon achievement of specified performance targets.

Net cash used in financing activities of $4.2 million for the fiscal year ended June 29, 2008 was primarily due to the scheduled repayments (net) of the Company's debt and bank borrowings against the Company's 2006 Credit Facility and the repurchase of 133,609 shares of treasury stock, offset in part by proceeds from employee stock option exercises and the related excess tax benefits.

In order to fund the increase in working capital requirements associated with DesignPac, and to provide operating flexibility, on August 28, 2008, the Company entered into a $293.0 million Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a group of lenders (the "2008 Credit Facility"). The 2008 Credit Facility provides for borrowings of up to $293.0 million, including: (i) a $165.0 million revolving credit commitment, (ii) $60.0 million of new term loan debt, and (iii) $68.0 million of existing term loan debt associated with the Company's previous credit facility. Interest is at LIBOR plus 1.5% to 2.5% for the Company's existing term loan and revolving credit facility, and LIBOR plus 2.0% to 3.0%, for the Company's new term loan, with pricing based upon the Company's leverage ratio. At closing of the 2008 Credit Facility, the Company utilized the proceeds of the new term loan to pay down amounts outstanding under its previous revolving credit facility. The repayment terms of the existing term loan remain unchanged, while the new term loan is required to be repaid in equal quarterly installments of $3.0 million beginning in December 2008, with the final installment payment due on August 28, 2013. The 2008 Credit Facility contains various conditions to borrowing, and affirmative and negative financial covenants. The obligations of the Company and its subsidiaries under the 2008 Credit Facility are secured by liens on all personal property of the Company and its subsidiaries.

The Company expects to borrow against its 2008 Credit Facility to fund working capital requirements related to pre-holiday manufacturing and inventory purchases. At June 29, 2008, the Company had no outstanding amounts under its revolving credit facility. However, it anticipates borrowing against the facility prior to the end of its first quarter. The Company anticipates that such borrowings will peak during its fiscal second quarter, before being repaid prior to the end of that quarter.

On January 21, 2008, the Company's Board of Directors authorized an increase to its stock repurchase plan which, when added to the funds remaining on its earlier authorization, increased the amount available for repurchase to $15.0 million. Any such purchases could be made from time to time in the open market and through privately negotiated transactions, subject to general market conditions. The repurchase program will be financed utilizing available cash. As of June 29, 2008, $14.0 million remains authorized but unused.

Under this program, as of June 29, 2008, the Company had repurchased 1,660,786 shares of common stock for $12.3 million, of which, $1.1 million (133,609 shares), $0.2 million (24,627 shares) and $1.3 million (182,000 shares) were repurchased during the fiscal years ending June 29, 2008, July 1, 2007 and July 2, 2006, respectively. In a separate transaction, during fiscal 2007, the Company's Board of Directors authorized the repurchase of 3,010,740 shares of common stock from an affiliate. The purchase price was $15,689,000, or $5.21 per share. The repurchase was approved by the disinterested members of the Company's Board of Directors and was in addition to the Company's then existing stock repurchase authorization.

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At June 29, 2008, the Company's contractual obligations consist of:

(*)1 On August 28, 2008, the Company entered into a $293.0 million Amended and Restated Credit Agreement (the "2008 Credit Facility"). The 2008 Credit Facility provides for borrowings of up to $293.0 million, including: (i) a $165.0 million revolving credit commitment, (ii) $60.0 million of new term loan debt, and (iii) $68.0 million of existing term loan debt associated with the Company's previous credit facility. The repayment terms of the existing term loan remain unchanged, while the new term loan is required to be repaid in equal quarterly installments of $3.0 million beginning in December 2008, with the final installment payment due on August 28, 2013.

(**)2 Purchase commitments consist primarily of inventory, equipment purchase orders and online marketing agreements made in the ordinary course of business.

Critical Accounting Policies and Estimates

The Company's discussion and analysis of its financial position and results of operations are based upon the consolidated financial statements of 1-800-FLOWERS.COM, Inc., which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, inventory and long-lived assets, including goodwill and other intangible assets related to acquisitions. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in preparation of its consolidated financial statements.

Revenue Recognition

Net revenues are generated by E-commerce operations from the Company's online and telephonic sales channels as well as other operations (retail/wholesale) and primarily consist of the selling price of merchandise, service or outbound shipping charges, less discounts, returns and credits. Net revenues are recognized upon product shipment. Shipping terms are FOB shipping point. Net revenues generated by the Company's BloomNet Wire Service operations include membership fees as well as other products and service offerings to florists. Membership fees are recognized monthly in the period earned, and products sales are recognized upon product shipment with shipping terms of FOB shipping point.

Accounts Receivable

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers or franchisees to make required

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Payments due by period -------------- --------------------------------------------------- ----------- (in thousands) Less than 1 1 - 3 3 - 5 More than Total year years years 5 years ----------- -------------- ---------- ------------ -- ----------- Long-term debt (including interest)(*)1 $ 78,498 $16,830 $35,167 $26,501 $ - Capital lease obligations 52 13 21 18 - Operating lease obligations 70,217 12,048 18,863 15,121 24,185 Sublease obligations 8,507 2,814 3,324 1,483 886 Purchase commitments (**)2 82,783 72,783 10,000 - - ----------- -------------- ---------- ------------ -- ----------- Total $240,057 $104,488 $67,375 $43,123 $25,071 =========== =============== ========== ============ == ===========

payments. If the financial condition of the Company's customers or franchisees were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventory

The Company states inventory at the lower of cost or market. In assessing the realization of inventories, we are required to make judgments as to future demand requirements and compare that with inventory levels. It is possible that changes in consumer demand could cause a reduction in the net realizable value of inventory.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired and is evaluated annually for impairment. The cost of intangible assets with determinable lives is amortized to reflect the pattern of economic benefits consumed, on a straight-line basis, over the estimated periods benefited, ranging from 3 to 16 years.

The Company performs an annual impairment test as of the first day of its fiscal fourth quarter, or earlier if indicators of potential impairment exist, to evaluate goodwill. Goodwill is considered impaired if the carrying amount of the reporting unit exceeds its estimated fair value. In assessing the recoverability of goodwill, the Company reviews both quantitative as well as qualitative factors to support its assumptions with regard to fair value. Judgment regarding the existence of impairment indicators is based on market conditions and operational performance of the Company. Future events could cause the Company to conclude that impairment indicators exist and that goodwill and other intangible assets associated with our acquired businesses is impaired.

Capitalized Software

The carrying value of capitalized software, both purchased and internally developed, is periodically reviewed for potential impairment indicators. Future events could cause the Company to conclude that impairment indicators exist and that capitalized software is impaired.

Stock-based Compensation

SFAS No. 123R requires the measurement of stock-based compensation expense based on the fair value of the award on the date of grant. The Company determines the fair value of stock options issued by using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model considers a range of assumptions related to volatility, dividend yield, risk-free interest rate and employee exercise behavior. Expected volatilities are based on historical volatility of the Company's stock price. The dividend yield is based on historical experience and future expectations. The risk-free interest rate is derived from the US Treasury yield curve in effect at the time of grant. The Black-Scholes model also incorporates expected forfeiture rates, based on historical behavior. Determining these assumptions are subjective and complex, and therefore, a change in the assumptions utilized could impact the calculation of the fair value of the Company's stock options.

Income Taxes

The Company has established deferred income tax assets and liabilities for temporary differences between the financial reporting bases and the income tax bases of its assets and liabilities at enacted tax rates expected to be in effect when such assets or liabilities are realized or settled. The Company has recognized as a deferred tax asset the tax benefits associated with losses related to operations, which are expected to result in a future tax benefit. Realization of this deferred tax asset assumes that we will be able to generate sufficient future taxable income so that these assets will be realized. The factors that we consider in assessing the likelihood of realization include the forecast of future taxable income and available tax planning strategies that could be implemented to realize the deferred tax assets.

It is the Company's policy to provide for uncertain tax positions and the related interest and penalties based upon management's assessment of whether a tax benefit is more-likely-than-not to be sustained upon examination by taxing authorities. To the extent that the Company prevails in matter for which a liability for an unrecognized tax benefit is established or is required to pay amounts in the excess of the liability, the Company's effective tax rate in a given financial statement period may be affected.

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Recent Accounting Pronouncements

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS No. 162"). SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles. SFAS No. 162 will become effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles." The Company does not anticipate the adoption of SFAS No. 162 will have a material impact on its results of operations, cash flows or financial condition.

In April 2008, the FASB issued FSP FAS 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP FAS 142-3"). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No.142, Goodwill and Other Intangible Asset. FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. FSP FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of FSP FAS 142-3 will have on its consolidated results of operation, cash flows or financial condition.

In March 2008, the FASB issued Statement No.161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161 amends and expands the disclosure requirements of Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities and it requires qualitative disclosures about objectives and strategies for using derivatives and quantitative disclosures about credit-risk-related contingent features in derivative agreements. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not anticipate the adoption of SFAS No. 161 will have a material impact on its results of operations, cash flows or financial condition.

In December 2007, the FASB issued Statement No. 141 (revised 2007), "Business Combinations" ("SFAS No. 141R"). SFAS No. 141R establishes principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any controlling interest in the business and the goodwill acquired. SFAS No. 141R further requires that acquisition-related costs and costs associated with restructuring or exiting activities of an acquired entity will be expensed as incurred. SFAS No. 141R also establishes disclosure requirements that will require disclosure of the nature and financial effects of the business combination. SFAS No. 141R will impact business combinations for the Company that may be completed on or after June 29, 2009. The Company cannot anticipate whether the adoption of SFAS No. 141R will have a material impact on its results of operations and financial condition as the impact is solely dependent on the terms of any business combination entered into by the Company after June 29, 2009 and the terms of such transactions.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. This statement provides companies with an option to measure selected financial assets and liabilities at fair value. The Company does not expect the adoption of SFAS No. 159 to have a material impact on its consolidated results of operations, cash flows or financial condition.

In September 2006, the FASB issued Statement No. 157, "Fair Value Measurements" ("SFAS 157") which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-2, delaying the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value on a nonrecurring basis. The delayed portions of SFAS 157 will be adopted by the Company beginning in its fiscal year ending June 27, 2010, while all other portions of the standard will be adopted by the Company beginning in its fiscal year ending June 28, 2009, as required. The Company does not expect that SFAS 157 will have a material impact on its consolidated results of operations, cash flows or financial condition.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES A BOUT MARKET RISK

The Company's earnings and cash flows are subject to fluctuations due to changes in interest rates primarily from its investment of available cash balances in money market funds and investment grade corporate and U.S. government securities, as well as from outstanding debt. As of June 29, 2008, the Company's outstanding debt, including current maturities, approximated $68.1 million, of which $68.0 million was variable rate debt. Each 25 basis point change in interest rates would have a corresponding effect on our interest expense of approximately $0.2 million as of June 29, 2008. Under its current policies, the Company does not use interest rate derivative instruments to manage exposure to interest rate changes.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Annual Financial Statements: See Part IV, Item 15 of this Annual Report on Form 10-K. Selected Quarterly Financial Data: See Part II, Item 7 of this Annual Report on Form 10-K.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTAN TS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as of June 29, 2008. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 29, 2008.

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Management's Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13-a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Company's principal executive and principal financial officers and effectuated by the Company's board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles and includes those policies and procedures that:

o pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

o provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and

o provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting as of June 29, 2008. In making this assessment, management used the criteria established in "Internal Control-Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this assessment, management believes that, as of June 29, 2008 the Company's internal control over financial reporting is effective.

The Company acquired DesignPac Gifts LLC on April 30, 2008, and has excluded the acquired company from its assessment of and conclusion on the effectiveness of internal control over financial reporting. The acquired business constituted approximately 10.0% of total assets as of June 29, 2008, and less than one percent of revenues for the fiscal year then ended.

Ernst & Young LLP, the Company's independent registered public accounting firm, has issued a report on the effectiveness of the Company's internal control over financial reporting, as of June 29, 2008; their report is included below.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of 1-800-FLOWERS.COM, Inc. and Subsidiaries

We have audited 1-800-FLOWERS.COM, Inc. and Subsidiaries (the "Company") internal control over financial reporting as of June 29, 2008, based on criteria established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Management's Report on Internal Control Over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of DesignPac Gifts LLC, which is included in the fiscal 2008 consolidated financial statements of the Company and constituted approximately 10.0% of total assets as of June 29, 2008 and less than one percent of revenues for the fiscal year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of DesignPac Gifts LLC.

In our opinion, 1-800-FLOWERS.COM, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of June 29, 2008, based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of 1-800-FLOWERS.COM, Inc. and Subsidiaries as of June 29, 2008 and July 1, 2007, and the related consolidated statements of

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income, stockholders' equity, and cash flows for each of the three years in the period ended June 29, 2008 and our report dated September 10, 2008 expressed an unqualified opinion thereon.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended June 29, 2008 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B. OTHER INFORMATION

None.

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/s/ Ernst & Young LLP Melville, New York September 10, 2008

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORAT E GOVERNANCE

The information set forth in the Proxy Statement for the 2008 annual meeting of stockholders is incorporated herein by reference.

The Company maintains a Code of Ethics, which is applicable to all directors, officers and employees on the Investor Relations-Corporate Governance tab of the Company's website at www.1800flowers.com. Any amendment or waiver to the Code of Ethics that applies to our directors or executive officers will be posted on our website or in a report filed with the SEC on Form 8-K. A copy of the Code of Ethics is available without charge upon written request to: Investor Relations, 1-800-FLOWERS.COM, Inc., One Old Country Road, Suite 500, Carle Place, New York 11514.

Item 11. EXECUTIVE COMPENSATION

The information set forth in the Proxy Statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL O WNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information set forth in the Proxy Statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACT IONS, AND DIRECTOR INDEPENDENCE

The information set forth in the Proxy Statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information set forth in the Proxy Statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

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PART IV

All other information and financial statement schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto.

(a) (3) Index to Exhibits

Exhibits marked with an asterisk (*) are incorporated by reference to exhibits or appendices previously filed with the Securities and Exchange Commission, as indicated by the reference in brackets. All other exhibits are filed herewith. Exhibits 10.3, 10.4, 10.5, 10.6, 10.7 and 10.8 are management contracts or compensatory plans or arrangements.

Exhibit Description *3.1 Third Amended and Restated Certificate of Incorporation. (Registration Statement on Form S-1/A (No. 333-78985) filed on July 9, 1999, Exhibit 3.1) *3.2 Amendment No. 1 to Third Amended and Restated Certificate of Incorporation. (Registration Statement on Form S-1/A (No. 333-78985) filed on July 22, 1999, Exhibit 3.2) *3.3 Amended and Restated By-laws. (Registration Statement on Form S-1

(No 333-78985) filed on May 21, 1999, Exhibit 3.3)

*4.1 Specimen Class A common stock certificate. (Registration Statement on Form S-1/A (No. 333-78985 filed on July 9, 1999, Exhibit 4.1) *4.2 See Exhibits 3.1, 3.2 and 3.3 for provisions of the Certificate of Incorporation and By-laws of the Registrant defining the rights of holders of Common Stock of the Registrant. *10.3 1997 Stock Option Plan, as amended. (Registration Statement on Form S-1 (no. 333-78985) filed on May 21, 1999, Exhibit 10.10)

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Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE S (a) (1) Index to Consolidated Financial Statements : Page ---- Report of Independent Registered Public Account ing Firm F-1 Consolidated Balance Sheets as of June 29, 2008 and July 1, 2007 F-2 Consolidated Statements of Income for the years ended June 29, 2008, July 1, 2007 and July 2, 2006 F-3 Consolidated Statements of Stockholders' Equity for the years ended June 29, 2008, July 1, 2007 and July 2, 2006 F-4 Consolidated Statements of Cash Flows for the y ears ended June 29, 2008, July 1, 2007 and July 2, 2006 F-5 Notes to Consolidated Financial Statements F-6 (a) (2) Index to Financial Statement Schedules: Schedule II - Valuation and Qualifying Accounts S-1

*10.4 1999 Stock Incentive Plan. (Registration Statement on Form S-1/A (No. 333-78985) filed on July 27, 1999, Exhibit 10.18)

*10.5 Employment Agreement, effective as of July 1, 1999, between James F. McCann and 1-800-FLOWERS.COM, Inc. (Form S-1/A (No. 333-78985) filed on July 9, 1999, Exhibit 10.19) *10.6 Employment Agreement, effective as of July 1, 1999, between Christopher G. McCann and 1-800-FLOWERS.COM, Inc. (Form S-1/A (No. 333-78985) filed on July 9, 1999, Exhibit 10.20) *10.7 2003 Long Term Incentive and Share Award Plan. (Definitive Proxy Statement filed on October 27, 2003 (No. 000-26841), Annex D) *10.8 Employment Agreement, dated as of May 2, 2006, by and among 1-800-FLOWERS.COM, Inc., Fannie May Confections Brands, Inc. and David Taiclet. *10.9 Lease, dated May 20, 2005, between Treeline Mineola, LLC and 1-800-FLOWERS.COM, Inc. (Annual Report on Form 10-K for the fiscal year ended July 3, 2005 filed on September 15, 2005, Exhibit 10.26) 10.12 Offer letter to Julie McCann Mulligan 10.13 Offer letter to Timothy J. Hopkins (quarterly report on Form 10Q, filed on November 8, 2007, Exhibit 10.3) 10.14 Offer letter to Stephen Bozzo (quarterly report on Form 10Q, filed on November 8, 2007, Exhibit 10.4) 10.15 Form of Restricted Share Agreement under 2003 Long Term Incentive and Share Award Plan 10.16 Form of Incentive Stock Option Agreement under 2003 Long Term Incentive and Share Award Plan 10.17 Form of Non-Statutory Stock Option Agreement under 2003 Long Term Incentive and Share Award Plan 10.18 Amended and Restated Credit Agreement dated as of August 28, 2008 among 1-800-Flowers.com, Inc., The Subsidiary Borrowers Party Hereto, The Guarantors Party Hereto, The Lenders Party Hereto and JP Morgan Chase Bank, N.A. as Administrative Agent. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Independent Registered Public Accounting Firm. 24.1 Powers of Attorney (included in the signature page). 31.1 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated below:

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Dated: September 12, 2008 1-800-FLOWERS.COM, Inc. By: /s/ James F. McCann ---------------------------- James F. McCann Chief Executive Officer Chairman of the Board of Directors (Principal Executive Officer)

Dated: September 12, 2008 By: /s/ James F. McCann ------------------------- James F. McCann Chief Executive Officer Chairman of the Board of Directors (Principal Executive Officer) Dated: September 12, 2008 By: /s/ William E. Shea -------------------------- William E. Shea Senior Vice President Finance and Administration (Principal Financial and Accounting Officer)

49

Dated: September 12, 2008 By: /s/ Christopher G. McCann ------------------------------- Christopher G. McCann Director, President Dated: September 12, 2008 By: /s/ Lawrence Calcano ------------------------------- Lawrence Calcano Director Dated: September 12, 2008 By: /s/ James A. Cannavino ------------------------------- James A. Cannavino Director Dated: September 12, 2008 By: /s/ John J. Conefry, Jr. ------------------------------- John J. Conefry, Jr. Director Dated: September 12, 2008 By: /s/ Leonard J. Elmore ------------------------------- Leonard J. Elmore Director Dated: September 12, 2008 By: /s/ Jan L. Murley ------------------------------- Jan L. Murley Director Dated: September 12, 2008 By: /s/ Jeffrey C. Walker ------------------------------- Jeffrey C. Walker Director

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of 1-800-FLOWERS.COM, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of 1-800-FLOWERS.COM, Inc. and Subsidiaries (the "Company") as of June 29, 2008 and July 1, 2007, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended June 29, 2008. Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of 1-800-FLOWERS.COM, Inc. and Subsidiaries at June 29, 2008 and July 1, 2007, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 29, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 9 to the consolidated financial statements the Company adopted FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109," effective July 2, 2007.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), 1-800-FLOWERS.COM, Inc. and Subsidiaries' internal control over financial reporting as of June 29, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 10, 2008 expressed an unqualified opinion thereon.

F-1

/s/ Ernst & Young LLP Melville, New York September 10, 2008

1-800-FLOWERS.COM, Inc. and Subsidiaries Consolidated Balance Sheets

(in thousands, except share data)

See accompanying notes.

F-2

June, 29 July 1, 2008 2007 ------------- ------------ Assets Current assets: Cash and equivalents $ 12,124 $ 16,087 Receivables, net 13,443 17,010 Inventories 67,283 62,051 Deferred income taxes 7,977 19,260 Prepaid and other 8,723 9,576 ------------- ------------ Total current assets 109,550 123,984 Property, plant and equipment, net 65,737 62,561 Goodwill 124,164 112,131 Other intangibles, net 68,760 52,750 Other assets 3,127 1,081 ------------- ------------ Total assets $371,338 $352,507 ============= ============ Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $63,248 $62,433 Current maturities of long-term debt and obligatio ns under capital leases 12,886 10,132 ------------- ------------ Total current liabilities 76,134 72,565 Long-term debt and obligations under capital leases 55,250 68,000 Deferred income taxes 5,527 8,230 Other liabilities 2,962 2,681 ------------- ------------ Total liabilities 139,873 151,476 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued - - Class A common stock, $.01 par value, 200,000,000 shares authorized, 31,368,241 and 30,298,019 shares issued in 2008 and 2007, respectively 314 303 Class B common stock, $.01 par value, 200,000,000 shares authorized, 42,138,465 shares issued in 2008 and 2007 421 421 Additional paid-in capital 279,718 269,270 Retained deficit (17,839) (38,893) Treasury stock, at cost,4,724,326 and 4,590,717 Cl ass A shares in 2008 and 2007, respectively, and 5,280,000 Class B shares (31,149) (30,070) ------------- ------------ Total stockholders' equity 231,465 201,031 ------------- ------------ Total liabilities and stockholders' equity $371,338 $352,507 ============= ============

1-800-FLOWERS.COM, Inc. and Subsidiaries Consolidated Statements of Income

(in thousands, except per share data)

See accompanying notes.

F-3

Years ended ---------------------------------- ---------- June 29, July 1, J uly 2, 2008 2007 2006 -------------- -------------- --- ---------- Net revenues 919,392 $912,598 $ 781,741 Cost of revenues 525,638 520,132 456,097 -------------- -------------- --- ---------- Gross profit 393,754 392,466 325,644 Operating expenses: Marketing and sales 256,604 262,303 239,573 Technology and development 21,539 21,316 19,819 General and administrative 57,881 56,017 43,978 Depreciation and amortization 20,363 17,837 15,765 -------------- -------------- --- ---------- Total operating expenses 356,387 357,473 319,135 -------------- -------------- --- ---------- Operating income 37,367 34,993 6,509 Other income (expense): Interest income 999 1,381 1,260 Interest expense (5,081) (7,390) (1,407) Other, net 85 25 6 -------------- -------------- --- ---------- Total other income (expense), net (3,997) (5,984) (141) -------------- -------------- --- ---------- Income before income taxes 33,370 29,009 6,368 Income tax expense 12,316 11,891 3,181 -------------- -------------- --- ---------- Net income 21,054 $17,118 $3,187 ============== ============== === ========== Net income per common share: Basic $0.33 $0.27 $0.05 ============== ============== === ========== Diluted $0.32 $0.26 $0.05 ============== ============== === ========== Weighted average shares used in the calculation of net income per common share: Basic 63,074 63,786 65,100 ============== ============== == =========== Diluted 65,458 65,526 66,429 ============== ============== === ==========

F-4

1-800-FLOWERS.COM, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity

Years ended June 29, 2008, July 1, 2007 and July 2, 2006 (in thousands, except share data)

See accompanying notes.

F-4

Common Stock ------------------------------ -------- Class A Class B Additional Unearned Tre asury Stock ------------------- ---------- --------- Paid-in Retained Stock-Based ---- -------------- Stockholders' Shares Amount Shares Amount Capital Deficit Compensation Sh ares Amount Equity ---------- -------- ---------- - -------- ---------- ----------- ------------ ---- ------- --------- ------------ Balance at July 3, 2005 29,888,603 $300 42,144,465 $421 $258,848 $(59,198) $(1,116) 6,6 60,850 $(12,921) $186,334 Exercise of employee stock options and vesting of resricted stock 133,499 1 - - 649 - - - - 650 Stock-based compensation - - - - 4,284 - - (7,500) 52 4,336 Reclassification of unvested restricted stock upon adoption of SFAS No. 123R- Share Based Payment (155,919) (2) - - (1,114) - 1,116 - - - Stock repurchase Program - - - - - - - 1 82,000 (1,324) (1,324) Conversion of Class B common stock into Class A common stock 6,000 - (6,000) - - - - - - - Net Income - - - - - 3,187 - - - 3,187 ---------- -------- ---------- - -------- ---------- ----------- ------------ ---- ------ ---------- ------------ Balance at July 2, 2006 29,872,183 299 42,138,465 421 262,667 (56,011) - 6,8 35,350 (14,193) 193,183 Exercise of employee stock options and vesting of restricted stock 425,836 4 - - 2,003 - - - - 2,007 Stock-based compensation - - - - 4,600 - - - - 4,600 Stock repurchase program - - - - - - - 3,0 35,367 (15,877) (15,877) Net Income - - - - - 17,118 - - - 17,118 ---------- -------- ---------- - -------- ---------- ----------- ------------ ---- ------- ---------- ----------- Balance at July 1, 2007 30,298,019 303 42,138,465 421 269,270 (38,893) - 9,8 70,717 (30,070) 201,031 Exercise of employee stock options and vesting of restricted stock 1,070,222 11 - - 4,718 - - - - 4,729 Stock-based compensation - - - - 3,534 - - - - 3,534 Excess tax benefit from stock based compensation - - - - 2,196 - - - - 2,196 Stock repurchase program - - - - - - - 1 33,609 (1,079) (1,079) Net Income - - - - - 21,054 - - - 21,054 ---------- -------- ---------- - -------- ---------- ----------- ------------ ---- ------ ---------- ------------ Balance at June 29, 2008 31,368,241 $314 42,138,465 $421 $279,718 $(17,839) - 10,0 04,326 $(31,149) $231,465

1-800-FLOWERS.COM, Inc. and Subsidiaries Consolidated Statements of Cash Flows

(in thousands)

Supplemental Cash Flow Information: - Interest paid amounted to $5,081, $7,390, and $1,407 for the years ended June 29, 2008, July 1, 2007 and July 2, 2006, respectively. - The Company paid income taxes of approximately $2,141, $1,429 and $23, net of tax refunds received, for the years ended June 29, 2008, July 1, 2007, and July 2, 2006, respectively.

See accompanying notes.

F-5

Years ended ------------------------------ ------------------ June 29, 2008 July 1, 2007 July 2, 2006 --------------- ------------- -- --------------- Operating activities: Net income $21,054 $17,118 $3,187 Reconciliation of net income to net cash provided b y operations: Depreciation and amortization 20,363 17,837 15,765 Deferred income taxes 8,581 10,325 2,175 Bad debt expense 2,203 1,880 476 Stock-based compensation 3,534 4,600 4,336 Excess tax benefits from stock based compensa tion (2,196) - - Other non-cash items 810 (791) 125 Changes in operating items, excluding the effects of acquisitions: Receivables 1,422 (5,737) 1,316 Inventories (4,410) (9,800) (9,106) Prepaid and other 889 771 5,513 Accounts payable and accrued expenses 7,284 (5,562) (1,046) Other assets (1,926) 177 (6,208) Other liabilities 294 1,523 (1,795) --------------- ------------- -- --------------- Net cash provided by operating activities 57,902 32,341 14,738 Investing activities: Capital expenditures (19,942) (18,043) (20,491) Acquisitions, net of cash acquired (37,849) (347) (96,874) Dispositions 463 1,463 - Proceeds from sales of investments - - 6,647 Other (387) 242 2 --------------- ------------- -- --------------- Net cash used in investing activities (57,715) (16,685) (110,716) Financing activities: Acquisition of treasury stock (1,079) (15,877) (1,324) Excess tax benefits from stock based compensation 2,196 - - Proceeds from employee stock options 4,729 2,007 558 Proceeds from bank borrowings and revolving line of 110,000 110,000 105,000 credit Repayment of notes payable and bank borrowings (119,966) (119,913) (22,482) Repayment of capital lease obligations (30) (385) (1,228) Other - - 92 --------------- ------------- -- --------------- Net cash (used in) provided by financing activitie s (4,150) (24,168) 80,616 --------------- ------------- -- --------------- Net change in cash and equivalents (3,963) (8,512) (15,362) Cash and equivalents: Beginning of year 16,087 24,599 39,961 --------------- ------------- -- --------------- End of year $12,124 $16,087 $24,599 =============== ============= == ===============

Notes to Consolidated Financial Statements

Note 1. Description of Business

For more than 30 years, 1-800-FLOWERS.COM, Inc. has been providing customers with fresh flowers and the finest selection of plants, gift baskets, gourmet foods, confections, balloons and plush stuffed animals perfect for every occasion. 1-800-FLOWERS.COM(R) offers the best of both worlds: exquisite arrangements individually created by some of the nation's top floral artists and hand-delivered the same day, and spectacular flowers shipped overnight under our Fresh From Our Growers(R) program. As always, 100 percent satisfaction and freshness are guaranteed. The Company's BloomNet(R) (www.mybloomnet.net) international floral wire service provides a broad range of quality products and value-added services designed to help professional florists to grow their businesses profitably. The 1-800-FLOWERS.COM, Inc. "Gift Shop" also includes gourmet gifts such as popcorn and specialty treats from The Popcorn Factory(R) (1-800-541-2676 or www.thepopcornfactory.com); exceptional cookies and baked gifts from Cheryl&Co.(R) (1-800-443-8124 or www.cherylandco.com); premium chocolates and confections from Fannie May Confections Brands (www.fanniemay.com and www.harrylondon.com); gourmet foods from Greatfood.com(R) (www.greatfood.com); wine gifts from Ambrosia(R) (www.ambrosia.com or www.winetasting.com); gift baskets from 1-800-BASKETS.COM(R) (www.1800baskets.com) and DesignPac Giftssm (www.designpac.com) as well as Home Decor and Children's Gifts from Plow & Hearth(R) (1-800-627-1712 or www.plowandhearth.com), Wind & Weather(R) (www.windandweather.com), HearthSong(R) (www.hearthsong.com) and Magic Cabin(R) (www.magiccabin.com). 1-800-FLOWERS.COM, Inc. stock is traded on the NASDAQ Global Select Market under ticker symbol FLWS.

Note 2. Significant Accounting Policies

Fiscal Year

The Company's fiscal year is a 52- or 53-week period ending on the Sunday nearest to June 30. Fiscal years 2008, 2007 and 2006, which ended on June 29, 2008, July 1, 2007 and July 2, 2006, respectively, consisted of 52 weeks.

Basis of Presentation

The consolidated financial statements include the accounts of 1-800-FLOWERS.COM, Inc. and its wholly-owned subsidiaries (collectively, the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Equivalents

Cash and equivalents consist of demand deposits with banks, highly liquid money market funds, United States government securities, overnight repurchase agreements and commercial paper with maturities of three months or less when purchased.

Inventories

Inventories are valued at the lower of cost or market using the first-in, first-out method of accounting.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost reduced by accumulated depreciation. Depreciation expense is recognized over the assets' estimated useful lives using the straight-line method. Amortization of leasehold improvements and capital leases are calculated using the straight-line method over the shorter of the lease terms, including renewal options expected to be exercised, or estimated useful lives of the improvements. Estimated useful lives are periodically reviewed, and where appropriate, changes are made prospectively. The Company's property plant and equipment is depreciated using the following estimated lives:

F-6

Goodwill and Other Intangible Assets

Goodwill and indefinite-lived intangibles are not amortized, but are evaluated annually for impairment. The Company performs its annual impairment test as of the first day of its fiscal fourth quarter, or earlier if indicators of potential impairment exist, to evaluate goodwill. Goodwill is considered impaired if the carrying amount of the reporting unit exceeds its estimated fair value. In assessing the recoverability of goodwill, the Company reviews both quantitative as well as qualitative factors to support its assumptions with regard to fair value. To date, there has been no impairment of these assets.

The cost of intangible assets with determinable lives is amortized to reflect the pattern of economic benefits consumed, on a straight-line basis, over the estimated periods benefited, ranging from 3 to 16 years.

Deferred Catalog Costs

The Company capitalizes the costs of producing and distributing its catalogs. These costs are amortized in direct proportion with actual sales from the corresponding catalog over a period not to exceed 26-weeks. Included within prepaid and other current assets was $3.4 million and $4.3 million at June 29, 2008 and July 1, 2007, respectively, relating to prepaid catalog expenses.

Investments

The Company considers all of its debt and equity securities, for which there is a determinable fair market value and no restrictions on the Company's ability to sell within the next 12 months, as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported as a separate component of stockholders' equity. For the years ended June 29, 2008, July 1, 2007 and July 2, 2006, there were no significant unrealized gains or losses. Realized gains and losses are included in other income. The cost basis for realized gains and losses on available-for-sale securities is determined on a specific identification basis.

Fair Values of Financial Instruments

The recorded amounts of the Company's cash and equivalents, short-term investments, receivables, accounts payable, and accrued liabilities approximate their fair values principally because of the short-term nature of these items. The fair value of investments, including available-for-sale securities, is based on quoted market prices where available. The fair value of the Company's long-term obligations, the majority of which are carried at a variable rate of interest, are estimated based on the current rates offered to the Company for obligations of similar terms and maturities. Under this method, the Company's fair value of long-term obligations was not significantly different than the carrying values at June 29, 2008 and July 1, 2007.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and equivalents, investments and accounts receivable. The Company maintains cash and equivalents and investments with high credit, quality financial institutions. Concentration of credit risk with respect to accounts receivable are limited due to the Company's large number of customers and their dispersion throughout the United States, and the fact that a substantial portion of receivables are related to balances owed by major credit card companies. Allowances relating to consumer, corporate and franchise accounts receivable ($1.4 million at June 29, 2008 and July 1, 2007) have been recorded based upon previous experience and management's evaluation.

F-7

Buildings 40 years Leasehold Improvements 3 -10 years Furniture, Fixtures and Equipment 3 -10 years Software 3-5 years

Revenue Recognition

Net revenues are generated by E-commerce operations from the Company's online and telephonic sales channels as well as other operations (retail/wholesale) and primarily consist of the selling price of merchandise, service or outbound shipping charges, less discounts, returns and credits. Net revenues are recognized upon product shipment and do not include sales tax. Shipping terms are FOB shipping point. Net revenues generated by the Company's BloomNet Wire Service operations include membership fees as well as other products and service offerings to florists. Membership fees are recognized monthly in the period earned, and products sales are recognized upon product shipment with shipping terms of FOB shipping point.

Cost of Revenues

Cost of revenues consists primarily of florist fulfillment costs (fees paid directly to florists), the cost of floral and non-floral merchandise sold from inventory or through third parties, and associated costs including inbound and outbound shipping charges. Additionally, cost of revenues includes labor and facility costs related to manufacturing and production operations.

Marketing and Sales

Marketing and sales expense consists primarily of advertising and promotional expenditures, catalog costs, online portal and search expenses, retail store and fulfillment operations (other than costs included in cost of revenues), and customer service center expenses, as well as the operating expenses of the Company's departments engaged in marketing, selling and merchandising activities.

The Company expenses all advertising costs, with the exception of catalog costs (see Deferred Catalog Costs above) at the time the advertisement is first shown. Advertising expense was $127.2 million, $133.2 million and $127.4 million for the years ended June 29, 2008, July 1, 2007 and July 2, 2006, respectively.

Technology and Development

Technology and development expense consists primarily of payroll and operating expenses of the Company's information technology group, costs associated with its web sites, including hosting, content development and maintenance and support costs related to the Company's order entry, customer service, fulfillment and database systems. Costs associated with the acquisition or development of software for internal use are capitalized if the software is expected to have a useful life beyond one year and amortized over the software's useful life, typically three to five years. Costs associated with repair, maintenance or the development of web site content are expensed as incurred as the useful lives of such software modifications are less than one year.

Stock-Based Compensation

The Company records compensation expense associated with stock options and other forms of equity compensation in accordance with SFAS No. 123(R), "Share-Based Payment." The Company adopted the modified prospective application method provided for under SFAS 123(R) and consequently did not retroactively adjust results from prior periods. Under this transition method, compensation cost associated with stock options and awards recognized in the fiscal years ended June 29, 2008, July 1, 2007 and July 2, 2006, includes: (a) compensation cost of all stock-based payments granted prior to, but not yet vested as of, July 4, 2005 (based on grant-date fair value estimated in accordance with the original provisions of SFAS No. 123), and (b) compensation cost for all stock-based payments granted subsequent to July 3, 2005 (based on the grant-date fair value estimated in accordance with the new provision of SFAS No. 123(R)).

Income taxes

The Company has established deferred income tax assets and liabilities for temporary differences between the financial reporting bases and the income tax bases of its assets and liabilities at enacted tax rates expected to be in effect when such assets or liabilites are realized or settled. During fiscal 2008, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN 48") prescribes a recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There was no material impact on the Company's consolidated financial position or results of operations as a result of the adoption of the provisions of FIN 48.

Comprehensive Income

For the years ended June 29, 2008, July 1, 2007 and July 2, 2006, the Company's comprehensive income was equal to the respective net income for each of the periods presented.

F-8

Net Income Per Share

Basic net income per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common and dilutive common equivalent shares (consisting primarily of employee stock options and restricted stock awards) outstanding during the period.

Recent Accounting Pronouncements

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS No. 162"). SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles. SFAS No. 162 will become effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles." The Company does not anticipate the adoption of SFAS No. 162 will have a material impact on its results of operations, cash flows or financial condition.

In April 2008, the FASB issued FSP FAS 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP FAS 142-3"). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No.142, Goodwill and Other Intangible Asset. FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. FSP FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company is currently evaluating the impact that the adoption of FSP FAS 142-3 will have on its consolidated results of operation, cash flows or financial condition.

In March 2008, the FASB issued Statement No.161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161 amends and expands the disclosure requirements of Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" and requires qualitative disclosures about objectives and strategies for using derivatives and quantitative disclosures about credit-risk-related contingent features in derivative agreements. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not anticipate the adoption of SFAS No. 161 will have a material impact on its results of operations, cash flows or financial condition.

In December 2007, the FASB issued Statement No. 141 (revised 2007), "Business Combinations" ("SFAS No. 141R"). SFAS No. 141R establishes principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any controlling interest in the business and the goodwill acquired. SFAS No. 141R further requires that acquisition-related costs and costs associated with restructuring or exiting activities of an acquired entity will be expensed as incurred. SFAS No. 141R also establishes disclosure requirements that will require disclosure of the nature and financial effects of the business combination. SFAS No. 141R will impact business combinations for the Company that may be completed on or after June 29, 2009. The Company cannot anticipate whether the adoption of SFAS No. 141R will have a material impact on its results of operations and financial condition as the impact is solely dependent on the terms of any business combination entered into by the Company after June 29, 2009.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. This statement provides companies with an option to measure selected financial assets and liabilities at fair value. The Company does not expect the adoption of SFAS No. 159 to have a material impact on its consolidated results of operations, cash flows or financial condition.

In September 2006, the FASB issued Statement No. 157, "Fair Value Measurements" ("SFAS 157") which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. In February

F-9

2008, the FASB issued FASB Staff Position (FSP) No. 157-2, delaying the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value on a nonrecurring basis. The delayed portions of SFAS 157 will be adopted by the Company beginning in its fiscal year ending June 27, 2010, while all other portions of the standard will be adopted by the Company beginning in its fiscal year ending June 28, 2009, as required. The Company does not expect that SFAS 157 will have a material impact on its consolidated results of operations, cash flows or financial condition.

Reclassifications

Certain balances in the prior fiscal years have been reclassified to conform with the presentation in the current fiscal year.

Note 3 - Net Income Per Common Share

The following table sets forth the computation of basic and diluted net income per common share:

Note (1): The effect of options to purchase 3.2 million, 5.8 million and 5.9 million shares for the years ended June 29, 2008, July 1, 2007, and July 2, 2006, respectively, were excluded from the calculation of net income per share on a diluted basis as their effect is anti-dilutive.

Note 4. Acquisitions

The Company accounts for its business combinations in accordance with SFAS No. 141, "Business Combinations," which addresses financial accounting and reporting for business combinations and requires that all such transactions be accounted for using the purchase method. Under the purchase method of accounting for business combinations, the aggregate purchase price for the acquired business is allocated to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date.

Acquisition of DesignPac Gifts LLC

On April 30, 2008, the Company acquired all of the membership interest in DesignPac Gifts LLC (DesignPac), a designer, assembler and distributor of gourmet gift baskets, gourmet food towers and gift sets, including a broad range of branded and private label components, based in Melrose Park, IL. The acquisition, for approximately $33.3 million in cash, net of cash acquired, was financed utilizing a combination of available cash generated from operations and through borrowings against the Company's revolving credit facility. The purchase price is subject to "earn-out" incentives which amount to a maximum of $2.0 million through the years ending June 27, 2010, upon achievement of specified performance targets. In its most recently completed year ended December 31, 2007, prior to the acquisition, DesignPac generated revenues of approximately $53.3 million.

F-10

Years Ended ----------------------------------------------- ----------- June 29, 2008 July 1, 2007 July 2, 2006 ----------------- ------------------ ---------- ----------- (in thousands, except per share data ) Numerator: Net income $21,054 $17,118 $ 3 ,187 ================= ================== ========== =========== Denominator: Weighted average shares outstanding 63,074 63,786 65 ,100 Effect of dilutive securities: Employee stock options (1) 1,808 1,282 1 ,282 Employee restricted stock awards 576 458 47 ------------------ ----------------- --------- ---------- 2,384 1,740 1 ,329 ------------------ ----------------- --------- ---------- Adjusted weighted-average shares and assumed conversions 65,458 65,526 66 ,429 ================== ================= ========= ========== Net income per common share: Basic $0.33 $0.27 $ 0.05 ================== ================= ========= ========== Diluted $0.32 $0.26 $ 0.05 ================== ================= ========= ==========

As described further under "Subsequent Events" in order to fund the increase in working capital requirements associated with DesignPac, and to provide for additional operational flexibility, on August 28, 2008, the Company entered into a $293.0 million Amended and Restated Credit Agreement with JPMorgan Chase Bank N.A., as administrative agent, and a group of lenders (the "2008 Credit Facility"). The 2008 Credit Facility provides for borrowings of up to $293.0 million, including: (i) a $165.0 million revolving credit commitment, (ii) $60.0 million of new term loan debt, and (iii) $68.0 million of existing term loan debt associated with the Company's previous credit facility. Interest is at LIBOR plus 1.5% to 2.5% for the Company's existing term loan and revolving credit facility, and LIBOR plus 2.0% to 3.0%, for the Company's new term loan, with pricing based upon the Company's leverage ratio.

The Company is in the process of finalizing its allocation of the purchase price to individual assets acquired and liabilities assumed as a result of the acquisition of DesignPac. This will result in potential adjustments to the carrying value of DesignPac's recorded assets and liabilities, the establishment of certain additional intangible assets, revisions of useful lives of intangible assets, some of which will have indefinite lives not subject to amortization, and the determination of any residual amount that will be allocated to goodwill. The preliminary allocation of the purchase price included in the current period balance sheet is based on the best estimates of management and is subject to revision based on final determination of asset fair values and useful lives. The following table summarizes the allocation of purchase price to the estimated fair values of assets acquired and liabilities assumed at the date of the acquisition of DesignPac:

Although not finalized, of the $18.9 million of acquired intangible assets related to the DesignPac acquisition, $6.4 million was assigned to trademarks that are not subject to amortization, while the remaining acquired intangibles of $12.5 million were allocated primarily to customer related intangibles which are being amortized over the assets' determinable useful life of 10 years. Approximately $12.1 million of goodwill is deductible for tax purposes.

Acquisition of Fannie May Confections Brands, Inc.

On May 1, 2006, the Company acquired all of the outstanding common stock of Fannie May Confections Brands, Inc. (hereafter referred to as "Fannie May Confections Brands"), a manufacturer and multi-channel retailer and wholesaler of premium chocolate and other confections under the well-known Fannie May, Harry London and Fanny Farmer brands. The acquisition, for a purchase price of approximately $96.6 million in cash, including the achievement of certain "earn-out" incentives and transaction costs, included a 200,000-square foot manufacturing facility in North Canton, Ohio and 52 Fannie May retail stores in the Chicago area, where the chocolate brand has been a tradition since 1920. The purchase price was subject to "earn-out" incentives which amounted to a maximum of $6.0 million (of which $4.4 million was achieved), upon achievement of specified earnings targets.

F-11

DesignPac Purchase Price Allocation -------------------- (in thousands) Current assets $1,287 Property, plant and equipment 1,172 Intangible assets 18,908 Goodwill 12,085 Other 81 -------------------- Total assets acquired 33,533 -------------------- Current liabilities 184 -------------------- Total liabilities assumed 184 -------------------- Net assets acquired $33,349 ====================

In order to finance the Fannie May Confections Brands acquisition, on May 1, 2006, the Company entered into a $135.0 million secured credit facility with JPMorgan Chase Bank, N.A., as administrative agent, and a group of lenders (the "2006 Credit Facility"). The 2006 Credit Facility, as amended, which was subsequently amended and restated on August 28, 2008 (refer to "Subsequent Events"), included an $85.0 million term loan and a $75.0 million revolving facility, which carried interest at LIBOR plus 0.625% to 1.125%, with pricing based upon the Company's leverage ratio. At closing, the Company borrowed $85.0 million of the term facility to acquire all of the outstanding capital stock of Fannie May Confections Brands.

Acquisition of Wind & Weather

On October 31, 2005, the Company acquired all of the outstanding common stock of Wind & Weather, a Fort Bragg, California based direct marketer of weather-themed gifts, with annual revenues of approximately $14.4 million during its then most recently completed fiscal year ended March 31, 2005. The purchase price of approximately $5.2 million, including acquisition costs, was funded utilizing the Company's then existing line of credit which was repaid during the Company's second quarter of fiscal 2006 utilizing cash generated from operations, and excludes the assumption of Wind & Weather's $1.2 million balance on its seasonal working capital line. The Company has since relocated the operations of Wind & Weather to its Madison, Virginia facility, and terminated operations in California.

Pro forma Results of Operation

The following unaudited pro forma consolidated financial information has been prepared as if the acquisitions of DesignPac, Fannie May Confections Brands and Wind & Weather had taken place at the beginning of fiscal year 2006. The following unaudited pro forma information is not necessarily indicative of the results of operations in future periods or results that would have been achieved had the acquisitions taken place at the beginning of the periods presented.

F-12

Years Ended -------------------------------------- ------- June 29, 2008 July 1, 2007 July 2, 2006 --------------- ------------- -------- ------- (in thousands, except per share da ta) Net revenues $973,140 $963,620 $900,3 21 Operating income $ 44,227 $ 39,608 $ 18,6 01 Net income $ 24,250 $ 18,751 $ 5,7 34 Net income per common share Basic $ 0.38 $ 0.29 $ 0. 09 Diluted $ 0.37 $ 0.29 $ 0. 09

Note 5. Inventory

The Company's inventory, stated at cost, which is not in excess of market, includes purchased and manufactured finish goods for resale, packaging supplies, raw material ingredients for manufactured products and associated manufacturing labor, and is classified as follows:

Note 6. Goodwill and Intangible Assets

The change in the net carrying amount of goodwill is as follows (in thousands):

The Company's intangible assets consist of the following:

F-13

June 29, 2008 July 2, 2007 --------------- -------------- (in thousands) Finished goods $48,986 $43,113 Work-in-process 3,442 3,911 Raw materials 14,855 15,027 --------------- -------------- $67,283 $62,051 =============== ==============

1-8 00- Flower s.com BloomNet Gourmet Home and Cons umer Wire Food and Childr en's Flo ral Service Gift Baskets Gif ts Total ------- --------------------------------------------------- ----------------------- Balance at July 2, 2006 $6,6 52 $- $105,935 $18 ,554 $131,141 Acquisition of Wind & Weather - - - (54) (54) Acquisition of Fannie May Confections Brands - - 6,023 - 6,023 Purchase Price Allocation of Fannie May Confections- Reclassification of goodwill to intangible assets - - (24,679) - (24,679) Other (3 00) - - - (300) ------- ------- ------------- ------------- ----- -------- -------------- Balance at July 1, 2007 6,3 52 - 87,279 18 ,500 112,131 Acquisition of DesignPac - - 12,085 - 12,085 Other (1 87) - 373 (238) (52) ------- ------- ------------- ------------- ----- -------- -------------- Balance at June 29, 2008 $6,1 65 $- $99,737 $18 ,262 $124,164 ======= ======= ============= ============= ===== ======== ==============

June 29, 2008 Jul y 1, 2007 ------- --------------------------------------------------- ------------------- Gros s Gross Amortization Carryi ng Accumulated Carrying Accu mulated Period Amoun t Amortization Net Amount Amor tization Net -------------- ------- ---- ---------------- ---------- ------------ ----- --------- --------- (in thousands) Intangible assets with determinable lives: Investment in licenses 14 - 16 years $ 4,92 7 $4,408 $519 $ 4,927 $ 4,085 $842 Customer lists 3 - 10 years 25,57 0 6,042 19,528 14,260 3,919 10,341 Other 5 - 8 years 3,86 8 1,208 2,660 2,639 748 1,891 ------- ----- --------------------------------------------- -------------------------- 34,36 5 11,658 22,707 21,826 8,752 13,074 Trademarks with indefinite lives 46,05 3 - 46,053 39,676 - 39,676 ------- ----- --------------------------------------------- -------------------------- Total intangible assets $80,41 8 $11,658 $68,760 $61,502 $ 8,752 $52,750 ======= ===== ============================================= ==========================

The amortization of intangible assets for the years ended June 29, 2008, July 1, 2007 and July 2, 2006 was $2.9 million, $2.5 million, and $1.6 million, respectively. Future estimated amortization expense is as follows: 2009 - $4.0 million, 2010 - $3.9 million, 2011 - $3.4 million, 2012 - $2.2 million, and 2013 - $2.0 million, and thereafter - $7.2 million.

Note 7. Property, Plant and Equipment

(1) Term loan and revolving credit line - In order to finance the acquisition of Fannie May Confections Brands, Inc. on May 1, 2006, the Company entered into a secured credit facility with JPMorgan Chase Bank, N.A., as administrative agent, and a group of lenders (the "2006 Credit Facility"). The 2006 Credit Facility, as amended, includes an $85.0 million term loan and a $75.0 million revolving facility, which bear interest at LIBOR (2.4% at June 29, 2008) plus 0.625% to 1.125%, with pricing based upon the Company's leverage ratio (3.2% at June 29, 2008). At closing, the Company borrowed $85.0 million of the term facility to acquire all of the outstanding capital stock of Fannie May Confections Brands. The Company is required to pay the outstanding term loan in escalating quarterly installments, with the final installment payment due on May 1, 2012. The 2006 Credit Facility contains various conditions to borrowing, and affirmative and negative financial covenants. Concurrent with the establishment of the 2006 Credit Facility, the Company's previous $25.0 million revolving credit facilities were terminated. The obligations of the Company and its subsidiaries under the 2006 Credit Facility are secured by liens on all personal property of the Company and its subsidiaries. No amounts were outstanding under the revolving credit facility at June 29, 2008.

As described further under "Subsequent Events" in order to fund the

F-14

June 29, July 1, 2008 2007 ------------ ----------- - (in thousands) Land $2,516 $2,516 Building and building improvements 15,944 16,209 Leasehold improvements 21,051 19,087 Furniture and fixtures 6,032 5,637 Equipment 26,258 21,278 Computer equipment 57,832 54,942 Telecommunication equipment 9,331 9,106 Software 69,158 57,763 -------------- ---------- --- 208,122 186,538 Accumulated depreciation and amortization 142,385 123,977 -------------- ---------- --- $ 65,737 $62,561 ============== ========== === Note 8. Long-Term Debt June 29, July 1, 2008 2007 -------------- --------- --- (in thousands) Term loan and revolving credit line (1) $68,000 $76,500 Commercial note (2) 84 1,553 Obligations under capital leases (see Note 14) 52 79 -------------- --------- --- 68,136 78,132 Less current maturities of long-term debt and obligations under capital leases 12,886 10,132 -------------- --------- --- $55,250 $68,000 ============== ========= ===

increase in working capital requirements associated with DesignPac, and to provide for additional operational flexibility, on August 28, 2008, the Company entered into a $293.0 million Amended and Restated Credit Agreement with JPMorgan Chase Bank N.A., as administrative agent, and a group of lenders (the "2008 Credit Facility"). The 2008 Credit Facility provides for borrowings of up to $293.0 million, including: (i) a $165.0 million revolving credit commitment, (ii) $60.0 million of new term loan debt, and (iii) $68.0 million of existing term loan debt associated with the Company's previous credit facility. Interest is at LIBOR plus 1.5% to 2.5% for the Company's existing term loan and revolving credit facility, and LIBOR plus 2.0% to 3.0%, for the Company's new term loan, with pricing based upon the Company's leverage ratio.

(2) Commercial note - Bank note relating to obligations arising from, and collateralized by, the underlying assets of the Company's Plow & Hearth facility in Madison, Virginia. The note, dated June 27, 2003, in the amount of $6.6 million, bears interest at 5.44% per annum, and resulted from the consolidation and refinancing of a series of fixed and variable rate mortgage and equipment notes. The note is payable in 60 equal monthly installments of principal and interest commencing August 1, 2003, of which $0.1 million is outstanding at June 29, 2008.

As of June 29, 2008, long-term debt maturities, excluding amounts relating to capital leases, are as follows:

Note 9. Income Taxes

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109, or FIN 48, on July 2, 2007. The Company did not have any significant unrecognized tax benefits and there was no material effect on its financial condition or results of operations as a result of implementing FIN 48.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The tax years that remain subject to examination are fiscal 2003 through fiscal 2006. The Company does not believe there will be any material changes in its unrecognized tax positions over the next twelve months.

The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of the date of adoption of FIN 48, the Company did not have any material accrued interest or penalties associated with any unrecognized tax benefits, nor was any material interest expense recognized during the year.

Significant components of the income tax provision are as follows:

F-15

Debt Year Maturities ---- -------------- (in thousands) 2009 $12,886 2010 12,750 2011 17,000 2012 25,500 $68,136 ==============

Years ended ------------------------------------------ June 29, July 1, July 2, 2008 2007 2006 ------------- -------------- ------------- (in thousands) Current provision: Federal $2,207 $(275) $351 State 1,528 1,841 655 ------------- -------------- ------------- 3,735 1,566 1,006 Deferred provision: Federal 8,767 9,082 2,120 State (186) 1,243 55 ------------- -------------- ------------- 8,581 10,325 2,175 ------------- -------------- ------------- Income tax provision $12,316 $11,891 $3,181 ============= ============== =============

A reconciliation of the U.S. federal statutory tax rate to the Company's effective tax rate is as follows:

At June 29, 2008, the Company's federal net operating loss carryforwards were approximately $4.5 million, which, if not utilized, will begin to expire in fiscal year 2025.

Note 10. Capital Stock

Holders of Class A common stock generally have the same rights as the holders of Class B common stock, except that holders of Class A common stock have one vote per share and holders of Class B common stock have 10 votes per share on all matters submitted to the vote of stockholders. Holders of Class A common stock and Class B common stock generally vote together as a single class on all matters presented to the stockholders for their vote or approval, except as may be required by Delaware law. Class B common stock may be converted into Class A common stock at any time on a one-for-one share basis. Each share of Class B common stock will automatically convert into one share of Class A common stock upon its transfer, with limited exceptions.

On January 21, 2008, the Company's Board of Directors authorized an increase to its stock repurchase plan which, when added to the $8.7 million remaining on its earlier authorization, increased the amount available for repurchase to $15.0 million. Any such purchases could be made from time to time in the open market and through privately negotiated transactions, subject to general market conditions. The repurchase program will be financed utilizing available cash. As of June 29, 2008, $14.0 remains authorized but unused.

Under this program, as of June 29, 2008, the Company had repurchased 1,660,786 shares of common stock for $12.3 million, of which $1.1 million (133,609 shares), $0.2 million (24,627 shares) and $1.3 million (182,000 shares) were

F-16

Years ended ------------------------------------------ June 29, July 1, July 2, 2008 2007 2006 ------------- -------------- ------------- (in thousands) Tax at U.S. statutory rates 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit 3.1 6.9 7.3 Non-deductible stock-based compensation 0.1 1.7 8.5 Non-deductible goodwill amortization 0.3 0.4 2.2 Tax credits (0.8) (0.4) (5.0) Tax settlements (0.4) (3.1) - Other, net (0.4) 0.5 2.0 ------------- -------------- ------------- - 36.9% 41.0% 50.0% ============= ============== ============= = Deferred income taxes reflect the net tax effects o f temporary differences between the carrying amounts of assets and lia bilities for financial reporting purposes and the amounts used for in come tax purposes. The significant components of the Company's defer red income tax assets (liabilities) are as follows: Years ended ------------------------------------------ June 29, July 1, July 2, 2008 2007 2006 ------------- -------------- ------------- (in thousands) Deferred income tax assets: Net operating loss carryforwards $3,483 $12,944 $25,963 Accrued expenses and reserves 5,876 6,318 6,325 Stock-based compensation 3,407 2,529 1,098 Deferred income tax liabilities: Other intangibles (8,834) (9,112) (9,285) Installment sales - - (25) Tax in excess of book depreciation (1,482) (1,649) (425) ------------- -------------- ------------- Net deferred income tax assets $2,450 $11,030 $23,651 ============= ============== =============

repurchased during the fiscal years ending June 29, 2008, July, 1 2007 and July 2, 2006, respectively. In a separate transaction, during fiscal 2007, the Company's Board of Directors authorized the repurchase of 3,010,740 shares from an affiliate. The purchase price was $15,689,000 or $5.21 per share. The repurchase was approved by the disinterested members of the Company's Board of Directors and was in addition to the Company's existing stock repurchase authorization.

Note 11. Stock Based Compensation

The Company has stock options and restricted stock awards outstanding to participants under the 1-800-FLOWERS.COM 2003 Long Term Incentive and Share Award Plan (the "Plan"). Options are also outstanding under the Company's 1999 Stock Incentive Plan, but no further options may be granted under this plan. The Plan is a broad-based, long-term incentive program that is intended to attract, retain and motivate employees, consultants and directors to achieve the Company's long-term growth and profitability objectives, and therefore align stockholder and employee interests. The Plan provides for the grant to eligible employees, consultants and directors of stock options, share appreciation rights ("SARs"), restricted shares, restricted share units, performance shares, performance units, dividend equivalents, and other share-based awards (collectively "Awards").

The Plan is administered by the Compensation Committee or such other Board committee (or the entire Board) as may be designated by the Board (the "Committee"). Unless otherwise determined by the Board, the Committee will consist of two or more members of the Board who are non-employee directors within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934 and "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended. The Committee will determine which eligible employees, consultants and directors receive awards, the types of awards to be received and the terms and conditions thereof. The Chief Executive Officer shall have the power and authority to make Awards under the Plan to employees and consultants not subject to Section 16 of the Exchange Act, subject to limitations imposed by the Committee.

At June 29, 2008, the Company has reserved approximately 14.2 million shares of common stock for issuance, including options previously authorized for issuance under the 1999 Stock Incentive Plan.

The amounts of stock-based compensation expense recognized in the periods presented are as follows:

F-17

Years Ended ------------------------------------- June 29, July 1, July 2, 2008 2007 2006 ---------- ------------------------- (in thousands, except per share data) Stock options $1,416 $2,736 $3,710 Restricted stock awards 2,118 1,864 626 ---------- ------------------------- Total 3,534 4,600 4,336 Deferred income tax benefit 1,333 1,353 1,120 ---------- ------------------------- Stock-based compensation expense, net $2,201 $3,247 $3,216 ========== =========================

Stock based compensation expense is recorded within the following line items of operating expenses:

Stock-based compensation expense has not been allocated between business segments, but is reflected in Corporate. (Refer to Note 13 - Business Segments.)

Stock Options Plans

The weighted average fair value of stock options on the date of grant, and the assumptions used to estimate the fair value of the stock options using the Black-Scholes option valuation model, were as follows:

The expected volatility of the option is determined using historical volatilities based on historical stock prices. The Company estimated the expected life of options granted to be the average of the Company's historical expected term from vest date and the midpoint between the average vesting term and the contractual term. The risk-free interest rate is determined using the yield available for zero-coupon U.S. government issues with a remaining term equal to the expected life of the option. The Company has never paid a dividend, and as such the dividend yield is 0.0%.

The following table summarizes stock option activity during the year ended June 29, 2008:

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the company's closing stock price on the last trading day of fiscal 2008 and the exercise price, multiplied by the number

F-18

Years Ended ------------------------------------- June 29, July 1, July 2, 2008 2007 2006 ---------- ------------ ------------- (in thousands) Marketing and sales $1,051 $1,605 $1,504 Technology and development 546 690 642 General and administrative 1,937 2,305 2,190 ---------- ------------- ------------ Total 3,534 $4,600 $4,336 ========== ============= ============

Years Ended ------------------------------------- June 29, July 1, July 2, 2008 2007 2006 ---------- ------------ ------------- Weighted average fair value of options granted $4.36 $3.29 $3.16 Expected volatility 45% 46% 46% Expected life (in years) 5.3 5.3 5.3 Risk-free interest rate 4.1% 4.6% 4.6% Expected dividend yield 0.0% 0.0% 0.0%

Weighted Average Weighted Remaining Ag gregate Average Contractual In trinsic Options Exercise Price Term Val ue (000s) ---------------------------------------------- ----------- Outstanding - beginning of period 9,152,665 $8.10 Granted 201,000 $9.50 Exercised (1,049,839) $4.50 Forfeited/Expired (431,482) $9.65 ------------- Outstanding - end of period 7,872,344 $8.47 4.0 years $5,364 ============= Options vested or expected to vest at end of period 7,669,842 $8.49 3.9 years $5,336 Exercisable at end of period 6,731,372 $8.63 3.5 years $5,208

of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 29, 2008. This amount changes based on the fair market value of the company's stock. The total intrinsic value of options exercised for the years ended June 29, 2008, July 1, 2007 and July 2, 2006 was $5.9 million, $1.0 million, and $0.3 million, respectively.

The following table summarizes information about stock options outstanding at June 29, 2008:

As of June 29, 2008, the total future compensation cost related to nonvested options not yet recognized in the statement of income was $2.4 million and the weighted average period over which these awards are expected to be recognized was 1.6 years.

The Company grants shares of Common Stock to its employees that are subject to restrictions on transfer and risk of forfeiture until fulfillment of applicable service conditions and, in certain cases, holding periods (Restricted Stock). In fiscal 2005, the Company recorded the grant date fair value of unvested shares of Restricted Stock as unearned stock-based compensation ("Deferred Compensation"). In accordance with SFAS No. 123(R), in fiscal 2006, the Company reclassified the balance of Deferred Compensation against additional paid-in capital, and reduced its shares of Class A Common Stock issued accordingly.

The following table summarizes the activity of non-vested restricted stock during the year ended June 29, 2008:

The fair value of nonvested shares is determined based on the closing stock price on the grant date. As of June 29, 2008, there was $4.4 million of total unrecognized compensation cost related to non-vested restricted stock-based compensation to be recognized over a weighted-average period of 1.7 years.

Note 12. Profit Sharing Plan

The Company has a 401(k) Profit Sharing Plan covering substantially all of its eligible employees. All full-time employees who have attained the age of 21 are eligible to participate upon completion of one year of service. Participants may elect to make voluntary contributions to the 401(k) plan in amounts not exceeding federal guidelines. On an annual basis the Company, as determined by its board of directors, may make certain discretionary contributions. Employees are vested in the Company's contributions based upon years of service. The Company made contributions of $0.7 million, $0.5 million, and $0.4 million, for the years ended June 29, 2008, July 1, 2007 and July 2, 2006, respectively.

During fiscal 2008, the Company adopted a nonqualified supplemental deffered compensation plan for certain executives pursuant to Section 409A of the Internal Revenue Code. Participants can defer from 1% up to a maximum of 100% of salary and performance and non-performance based bonus. The Company will match 50% of the deferrals made by each paricipant during the applicable period, up to a maximum of $2,500. Employees are vested in the Company's contributions based upon years of participation in the plan. Distributions will be made to Participants upon termination of employment or death in a lump sum, unless installments are selected.

F-19

Options Outstand ing Options Exercisable ------------------------------- ------------------ ------------------------------- Weighted- Weighted- Weighted- Average Average Average Options Remaining Exercise Options Exercise Exercise Price Outstanding Contractual Life Price Exercisable Price ------------------- -------------- ---------------- -- --------------- --------------- --------------- $2.00 - 4.50 1,722,735 2.1 years $4.03 1,722,735 $4.03 $5.25 - 6.52 1,940,662 5.2 years $6.39 1,537,162 $6.40 $6.58 - 8.45 1,713,463 6.0 years $7.42 1,118,451 $7.26 $8.56 - 12.87 1,947,438 3.5 years $12.04 1,804,978 $12.21 $13.05 - 21.00 548,046 1.2 years $20.33 548,046 $20.33 -------------- --------------- 7,872,344 4.0 years $8.47 6,731,372 $8.63 ============== ===============

Weighted Average Grant Date Fair Shares Value ------------- --------------- Non-vested - beginning of period 1,101,982 $5.70 Granted 665,399 $11.40 Vested (18,677) $7.44 Forfeited (473,551) $8.57 ------------- Non-vested - end of period 1,275,153 $7.58 =============

Note 13. Business Segments

During the first quarter of fiscal 2007, the Company segmented its organization to improve execution and customer focus and to align its resources to meet the demands of the markets it serves. The Company's management reviews the results of the Company's operations by the following four business categories:

o 1-800-Flowers.com Consumer Floral; o BloomNet Wire Service; o Gourmet Food and Gift Baskets; and o Home and Children's Gifts.

Category performance is measured based on contribution margin, which includes only the direct controllable revenue and operating expenses of the categories. As such, management's measure of profitability for these categories does not include the effect of corporate overhead (see * below), which are operated under a centralized management platform, providing services throughout the organization, nor does it include stock-based compensation, depreciation and amortization, other income (net), and income taxes. Assets and liabilities are reviewed at the consolidated level by management and not accounted for by category.

(*) Corporate expenses consist of the Company's enterprise shared service cost centers, and include, among others, Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service Center functions, as well as Stock-Based Compensation. In order to leverage the Company's infrastructure, these functions are operated under a centralized management platform, providing support services throughout the organization. The costs of these functions, other than those of the Customer Service Center which are allocated directly to the above categories based upon usage, are included within corporate expenses, as they are not directly allocable to a specific category.

F-20

Years ended ------------------------------------------- June 29, July 1, July 2, Net revenues 2008 2007 2006 ------------- -------------- -------------- (in thousands) Net revenues: 1-800-Flowers.com Consumer Floral $491,696 $491,404 $452,188 BloomNet Wire Service 53,488 44,379 29,884 Gourmet Food & Gift Baskets 196,298 192,698 105,002 Home & Children's Gifts 180,181 186,948 196,919 Corporate (*) 2,431 1,652 1,388 Intercompany eliminations (4,702) (4,483) (3,640) ------------- -------------- -------------- Total net revenues $919,392 $912,598 $781,741 ============= ============== ==============

Years ended ------------------------------------------- June 29, July 1, July 2, Operating Income 2008 2008 2006 ------------- -------------- -------------- (in thousands) Category Contribution Margin: 1-800-Flowers.com Consumer Floral $62,967 $64,580 $46,518 BloomNet Wire Service 18,509 14,169 7,106 Gourmet Food & Gift Baskets 24,593 26,377 6,827 Home & Children's Gifts 3,438 (1,215) 7,134 ------------- -------------- -------------- Category Contribution Margin Subtotal 109,507 103,911 67,585 Corporate (*) (51,777) (51,081) (45,311) Depreciation and amortization (20,363) (17,837) (15,765) ------------- -------------- -------------- Operating income (loss) $37,367 $34,993 $6,509 ============= ============== ==============

Note 14. Commitments and Contingencies

Leases

The Company currently leases office, store facilities, and equipment under various operating leases through fiscal 2019. As these leases expire, it can be expected that in the normal course of business they will be renewed or replaced. Most lease agreements contain renewal options and rent escalation clauses and require the Company to pay real estate taxes, insurance, common area maintenance and operating expenses applicable to the leased properties. The Company has also entered into leases that are on a month-to-month basis. All leases and subleases with an initial term of greater than one year are accounted for under SFAS No. 13, Accounting for Leases. These leases are classified as either capital leases, operating leases or subleases, as appropriate.

As of June 29, 2008 future minimum payments under non-cancelable capital lease obligations and operating leases with initial terms of one year or more consist of the following:

At June 29, 2008, the aggregate future sublease rental income under long-term operating sub-leases for land and buildings and corresponding rental expense under long-term operating leases were as follows:

Rent expense was approximately $19.8 million, $18.9 million, and $13.7 million for the years ended June 29, 2008, July 1, 2007 and July 2, 2006, respectively.

F-21

Obligations Under Capital Operating Leases Leases ------------ ------------- (in thousands) 2009 $14 $14,863 2010 13 11,906 2011 13 10,279 2012 13 8,938 2013 6 7,666 Thereafter - 25,070 ------------ ------------- Total minimum lease payments $59 $78,722 ============= Less amounts representing interest (7) ------------ Present value of net minimum lease payments $52 ============

Sublease Sublease Income Expense -------------- -------------- (in thousands) 2009 $2,814 $2,814 2010 1,940 1,940 2011 1,384 1,384 2012 933 933 2013 550 550 Thereafter 886 886 -------------- -------------- $8,507 $8,507 ============== ==============

Litigation

There are various claims, lawsuits, and pending actions against the Company and its subsidiaries incident to the operations of its businesses. It is the opinion of management, after consultation with counsel, that the ultimate resolution of such claims, lawsuits and pending actions will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity.

In the Company's Form 10Q for the quarterly period ended March 30, 2008, the Company disclosed that in October 2007, 1-800-Flowers.Com., Inc. and its subsidiary, 1-800-Flowers Retail, Inc., (collectively "the Company"), were served with a purported nationwide class action lawsuit filed in the United States District Court, in and for the Southern District of Florida (Grabein v. 1-800-Flowers.Com., Inc., et al; Case No. 07-22235). The Complaint alleged violation of the Federal Fair and Accurate Credit Transaction Act ("FACTA") based upon the allegation that the Company printed/provided receipts to consumers at the point of sale or transaction on which receipts appeared more than the last five digits of customers' credit or debit card numbers and/or the expiration dates of such cards. The Complaint did not specify any actual damages for any member of the purported class. However, the Complaint sought statutory damages of $100 to $1,000 for each alleged willful violation of the statute, as well as, attorneys' fees, costs, punitive damages and a permanent injunction. The Company vigorously defended the action and on June 13, 2008, the presiding Judge issued a Final Order of Dismissal whereby the case was dismissed with prejudice and no payment of any kind was made by the Company or its subsidiary.

Note 15. Subsequent Events

Acquisition of Napco Marketing Corp.

On July 21, 2008, the Company acquired selected assets of Napco Marketing Corp. (Napco), a wholesale merchandiser and marketer of products designed primarily for the floral industry. The purchase price of approximately $9.5 million included the acquisition of a fulfillment center located in Jacksonville, FL, inventory, and certain other assets, as well as the assumption of certain related liabilities, including their seasonal line of credit of approximately $4.0 million. The acquisition was financed utilizing a combination of available cash generated from operations and through borrowings against the Company's revolving credit facility, which as described below, was subsequently amended by the Company's 2008 Credit Facility. The purchase price is subject to "earn-out" incentives which amount to a maximum of $1.6 million through the years ending July 2, 2012, upon achievement of specified performance targets.

2008 Credit Facility

On August 28, 2008, the Company entered into a $293.0 million Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a group of lenders (the "2008 Credit Facility"). The 2008 Credit Facility provides for borrowings of up to $293.0 million, including: (i) a $165.0 million revolving credit commitment, (ii) $60.0 million of new term loan debt, and (iii) $68.0 million of existing term loan debt associated with the Company's previous credit facility. Interest is at LIBOR plus 1.5% to 2.5% for the Company's existing term loan and revolving credit facility, and LIBOR plus 2.0% to 3.0%, for the Company's new term loan, with pricing based upon the Company's leverage ratio. At closing of the 2008 Credit Facility, the Company utilized the proceeds of the new term loan to pay down amounts outstanding under its previous revolving credit facility. The repayment terms of the existing term loan remain unchanged, while the new term loan is required to be repaid in equal quarterly installments of $3.0 million beginning in December 2008, with the final installment payment due on August 28, 2013. The 2008 Credit Facility contains various conditions to borrowing, and affirmative and negative financial covenants. The obligations of the Company and its subsidiaries under the 2008 Credit Facility are secured by liens on all personal property of the Company and its subsidiaries.

F-22

1-800-FLOWERS.COM, INC.

Schedule II - Valuation and Qualifying Accounts

(a) Reduction in reserve due to write-off of accounts/notes receivable balances. (b) Amount represents opening balances from acquired businesses.

S-1

Addi tions -------- ------------------- Description Balance at Charged to Charged to Balance at Beginning Costs Other Deductions- End of of Period and Accounts- Describe (a) Period Expens es Describe (b) --------------------------- -------------- -------- ---- --------------- ------------- -------------- Reserves and allowances deducted from asset accounts: Reserve for estimated doubtful accounts- accounts/notes receivable Year Ended June 29, 2008 $1,113,000 $1,000, 000 $ - $(727,000) $1,386,000 Year Ended July 1, 2007 $2,090,000 $1,040, 000 $ - $(2,017,000) $1,113,000 Year Ended July 2, 2006 $1,537,000 $537, 000 $694,000 $(678,000) $2,090,000

Exhibit 10.14

February 20, 2007

Stephen Bozzo 25 Robert Crescent Stony Brook, NY 11790

Dear Stephen:

It is my pleasure to extend an offer of employment to you for the position of Chief Information Officer reporting to the President of the Company (the "Supervisor"). We trust you will make a significant contribution to 1-800-Flowers.com, Inc. (the "Company") and its ongoing success.

Our offer is as follows:

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Title: Chief Information Officer ----- Duties: You will perform faithfully and diligen tly the duties customarily ------ performed by persons in the position for which you are employed and such other duties as from time to tim e may be prescribed by your supervisor. You shall devote your full business time and efforts to the rendition of services and performanc e of all duties contemplated hereunder. You shall at all times be in compliance with, and ensure that the Company is in compliance with, any and all laws, rules and regulations applicable to the Company or its business. Your employment is subject to the terms and conditions c ontained in the then-current Employee Handbook of the Company. Salary: $ 11,538.46 biweekly ($300,000.00 an nualized) ------ Bonus: You will be eligible to participate in our Company's Sharing Success ----- Program, as amended from time to ti me, with a target bonus of 50% of your base compensation. The pla n is performance based and requires satisfactory attainment of both corporate financial performance and your individual performan ce measures, which goals and measures shall be set by your Supervisor. Our plan year coincides with our fiscal year. Fiscal year 2007 began July 3, 2006 and ends on July 1, 2007. To be eligible for a prorat ed bonus your first day of employment with the Company must be no later than April lst of the then current year. As your first date of employment will be April 30, 2007, your first year of eligibility for participating in our Company's Sharing Success Program will be fiscal year 2008. For the first full year of your employment (FY'08), which begins July 2, 2007 and ends on June 29, 2008 you will be guaranteed a minimum bonus of $50,000 under the Sharing Success Program. Of course, to be eligible for any bon us compensation you must be employed by the Company at the time the c ompensation is actually paid. Long Term Incentive Plan: You will be eligible to participate in 1800flowers.com Long Term Incentive P rogram ("LTIP"). The LTIP currently consists of awards of Rest ricted Stock ("performance shares") which are earned based on the Co mpany's actual three (3) year financial performance results vs. pre- established financial goals. Your first year of eligibility to partici pate in the LTIP is FY'08 and you are eligible for a long-term incentiv e opportunity of up to 90% of your base salary. All shares once earned are fully vested. The actual LTIP is subject to the approval of the C ompensation Committee of the Board of Directors on a yearly basis.

Benefits: You will be eligible to participate in all Company benefit programs -------- subject to the terms of each plan. You may participate in Company medical, dental, life insurance, and short term and long term disability beginning on the first day of employment. You will be eligible to participate in the Company 401k plan after one (1) month of service. You will be eligible to accrue three (3) weeks vacation.

Sign on Bonus: Stock Options: You are eligible to participate in the Company's 2003 Long Term Incentive and Share Award Plan (the "Plan"). Your initial option award will be an option to purchase 75,000 (seventy five thousand) shares of the Company's Class "A" Common Stock, subject to the terms of the Plan and the Stock Option Agreement. Assuming your continued employment with the Company, these stock options will vest commencing with 40% on the second anniversary of the first day of your employment with the Company, then 20% for each subsequent year you remain employed by the Company up to the fifth anniversary of the first day of your employment with the Company, when they will be 100% vested. The grant date shall be the third business day following the date the Company's first releases to the financial community its quarterly financial results, which release date follows your first date of employment with the Company (the "grant date"). The exercise price of your initial award shall be the closing price of the Company's Class "A" Common Stock on the grant date. All stock option awards are at the discretion of the Compensation Committee.

Cash: You are eligible to obtain a one-time bonus of $50,000 to be paid $25,000 in June, 2007 and $25,000 in September, 2007. In the event you voluntarily resign your employment with the Company, or are terminated for Cause as defined in this letter, during the first 24 months of your tenure, you are obligated to reimburse the Company the $50,000, amortized monthly, on or before your last day of employment. For example, if you resigned in your eighteenth (18th) month of employment then you will be obligated to reimburse the Company $12,500.

Gold Rush Days: While considering employment with the Company, it is important to be aware of our Company culture regarding our Gold Rush Days that surround our busiest holidays. The holidays that are subject to Gold Rush Days are: Christmas, Valentine's Day and Mother's Day. Our Gold Rush Days are a period of time whereby you will be required to work additional daily hours, which can also include being scheduled to work on a holiday and/or on a day that you are normally off.

At-Will Employment: We are committed to maintaining a competitive position in the employment marketplace. However, it is agreed that neither this offer of employment, its acceptance, nor the maintenance of personnel policies, procedures and benefits creates a contract of employment or a guarantee of any length of employment or specific benefits. Your employment with the Company is "at-will", meaning that you retain the option, as does the Company, to end your employment at any time, for any reason or for no reason.

If, however, you are terminated during your employment for death, disability (unable to perform your duties on a full time basis for two or more consecutive months or an aggregate of four months in any six month period), resignation, or Cause, then you will be entitled to base salary through the date of termination and any other amounts earned, accrued, due and owing, but not yet paid as of the date of your death or termination of employment.

In the event that you are terminated without Cause (other than resignation, death, or disability), within your first twelve (12) months of employment, then you shall be entitled to, subject to execution of the Company's then current Separation Agreement and General Release,:

(a) an amount equal to your base salary through the date of termination, (b) any amounts, earned, accrued, due and owing, but not yet paid as of the date of termination, (c) a severance package equal to:

(i) your then base compensation for a period of 6 months following termination of your employment with the Company or until you find new employment, whichever event first occurs. This compensation shall be paid out on a bi-weekly basis. You agree to actively seek new employment in the event of termination from the Company; and

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(ii) the ability to exercise any options for the allowable period of time set forth in the Plan that fully vested prior to your termination of employment, except that in no event can the vested options be exercised past the life of the option grant (for example, the options granted under this letter have a life of 10 years from date of the grant and that date cannot be extended). You have the ability to sell any restricted shares that were vested prior to your termination of employment provided any additional restriction period has expired; and

(d) such other benefits, if any, as are payable to, or for your benefit, as of the date of your termination in accordance with the applicable plans and programs of the Company.

For the purposes of the letter, "Cause" is defined as: (a) you fail to substantially perform the duties and responsibilities of your position as Chief Information Officer or to comply in all respects with the material policies or directives of the Company, which failure continues unremedied for a period of fourteen (14) days after your receipt of written notice from the Company, specifying the nature of the failure; (b) you engage in any conduct which is unethical, illegal, involves misappropriation of trade secrets, fraud, embezzlement, dishonesty, disloyalty, breach of a fiduciary duty or which otherwise brings notoriety to the Company or which has an adverse affect on the name or public image or reputation of the Company; (c) you engage in conduct that is in bad faith and/or injurious to the Company as determined in good faith by the Company; (d) you willfully fail to implement or follow a reasonable and lawful policy or directive of the Company ; (e) you (i) are declared of unsound mind by an order of court, (ii) are convicted of or plead guilty or nolo contendere to a crime, or (iii) fraudulently or intentionally commit an act which is detrimental to the Company; or (f) you breach of any material provisions of this letter or any other agreement you may have with the Company, including, without limitation, any agreement referred to herein.

Your employment and the terms of this letter and all the rights and obligations of the parties hereto shall be governed by the laws of the State of New York. Any suit, action, or proceeding relating to this letter or your employment with the Company, including the termination of same, shall be exclusively brought, and you hereby irrevocably submit to the exclusive jurisdiction of, the Supreme Court of the State of New York, County of Nassau and the United District Court, in and for the Eastern District of New York. ANY SUCH DISPUTE BROUGHT IN SUCH COURTS SHALL BE RESOLVED BY A JUDGE SITTING WITHOUT A JURY TO ENSURE RAPID ADJUDICATION OF ANY SUCH DISPUTE. THE PARTIES HERETO EXPRESSLY WAIVE THEIR RIGHT TO A JURY TRIAL.

Prior Agreements: You hereby represent to the Company that you have no agreements or understandings, whether in writing or oral, which would, in any way, be violated by, or prevent you from taking, employment with the Company and performing the services contemplated hereunder, including without limitation any Confidentiality Agreement, Non-Compete Agreement, Non-Solicitation Agreement, or other similar agreement.

Miscellaneous: In order to be in compliance with the Immigration and Reform Control Act of 1986, we require that you provide proof of employment eligibility and identity on your first day. Please bring with you one document from List A or one document from List B and one from List C, as listed on the attached Lists of Acceptable Documents Form. As a condition of your employment, you will also be required to sign and return to the Company prior to your first date of employment (i) our "Confidentiality and Non-compete Agreement" and "Insider Trading Notification" as requested by the Company.

Stephen, we are very excited about having someone with your background and experience joining our team. Please report to Human Resources on the 5th floor at 9:00AM on your first day of employment with the Company. The anticipated start date for this position is April 30, 2007.

Please acknowledge your agreement to these terms of employment by signing below and returning the original to us along with the signed "Confidentiality and Non-Compete Agreement" and "Insider Trading Notification" within ten (10) days from the date of this letter. This offer, if not so accepted within this period will expire ten (10) days from the date of the letter. This offer is contingent upon the following: 1) a favorable review of two (2) professional references from your prior employers and 2) pre-hire screening, which will require that you execute documents required by the Company for a background investigation.

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If you have questions or need additional information, feel free to contact me at (516) 237-7843.

Sincerely,

/s/ Maureen Paradine -------------------- Maureen Paradine Vice President, Human Resources

Enclosures Accepted: Confirmed Start Date: /s/ Stephen Bozzo 4/30/2007 ----------------- --------- Stephen Bozzo

Exhibit 10.13

February 9, 2005

Mr. Timothy J. Hopkins 15409 NE 153rd Street Woodinville, WA 98072

Dear Tim:

It is my pleasure to extend an offer of employment to you for the position of President of our Specialty Brands Division, reporting to the President of 1-800-Flowers.Com, Inc. (the "Company"). I believe and expect you will make a significant contribution to the Company and its ongoing success.

Please note that in view of the position you will be holding with the Company, your employment and the terms thereof are subject to the prior approval of the Compensation Committee of the Board of Directors.

Our offer is as follows:

Company 401(k) plan after twelve (12) months of service. You will be eligible for three (3) weeks vacation accruing pursuant to the Company's policy.

Title: President of Specialty Brands Duties: You will perform faithfully and diligently the duties customarily performed by persons in the position for which you are employed and such other dutie s as from time to time may be prescribed by the Company's Ch ief Executive Officer, its President, or the Board of Direct ors. You shall devote your full bus iness time and efforts to the rendition of services and performance of all duties contemplated hereunder. You shall at all times be in compliance with, and ensure that the Company is in compliance with, any and all laws, rules a nd regulations applicable to the Company or its business. Salary: $13,461.00 biweekly. ($350,0 00.00 annualized). Once eligible, your base salary will be reviewed on an annual basis to ascertain what merit in crease, if any, will be given based upon your performance and that of the Company for the prior fiscal year. As you are starting with us more than halfway through the current fi scal year (FY'05) then your first review will be following the end of fiscal year 2006, which year ends on or about June 30, 2006. Benefits: You will be eligible to partici pate in all Company benefit programs subject to the term s of each plan. You may participate in Company medical, dental, life insurance, and short term and long term disabil ity commencing on the first day of employment. You will be el igible to participate in the

Bonus: You will be eligible to particip ate in our Company's Sharing Success Program with an annual target bonus of 50% of your base compensation, of which 40% w ill be the cash component and the remaining 10% paid through r estricted stock. The plan is performance based and requires satisfactory attainment of established corporate and your Division performance goals. These goals will be set by the P resident of the Company and your bonus will be tied 75% to your Division goals and the remaining 25% tied to the Company 's performance. Our plan year coincides with our fiscal year; therefore, it begins on about July 1 and ends on about Jun e 30. Any earned bonus is generally paid out in approximate ly mid-September.

We are committed to maintaining a competitive position in the employment marketplace. However, it is agreed that neither this offer of employment, its acceptance, nor the maintenance of personnel policies, procedures and benefits creates a contract of employment or a guarantee of any length of employment or specific benefits. Your employment with the Company is "at-will", meaning that you retain the option, as does the Company, to end your employment at any time, for any reason or for no reason. In addition, this offer of employment is contingent upon the completion of satisfactory reference and background checks.

If, however, you are terminated during your employment for death, disability (unable to perform your duties on a full time basis for two or more consecutive months or an aggregate of four months in any six month period), resignation, or Cause, then you will be entitled to base salary through the date of termination and any other amounts earned, accrued, due and owing, but not yet paid as of the date of your death or termination of employment. In the event that you resign your position with the Company within the first 12 months of employment then you shall reimburse the Company for all expenses paid for your relocation as further set forth on the attachment hereto regarding relocation.

In the event that you are terminated without Cause (other than resignation, death, or disability), or terminated at your own initiative due to a Constructive Termination Without Cause, or terminated without Cause after the occurrence of a Change of Control, then you shall be entitled to:

(a) an amount equal to your base salary through the date of termination, (b) any amounts, earned, accrued, due and owing, but not yet paid as of the date of termination , (c) a severance package equal to:

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Your first year of eligibilit y for participation in the Company's Sharing Success Program will be for fiscal year '06. The vesting on any restricted stock will be subject to the direction of the Compensation Committee. Currently, the Sharing Success Program provid es that any restricted stock paid as part of the bonus compens ation shall vest on the first anniversary of the grant date with an additional one year "holding period" ("restriction") before any of such restricted stock can be sold. Of course, t o be eligible for any bonus compensation you must be employe d by the Company at the time the compensation is paid. For the balance of this current fiscal year '05, you will be guaranteed a bonus equal to 4 0% of your base compensation, prorated from the first day of your employment with the Company until the end of the fisc al year. Stock Options: You will be recommended to the Compensation Committee of the Board of Directors for inclusion in the Company's 2003 Long Term Incentive and Share Award P lan (the "Plan"). Subject to the Committee's approval, your in itial option award will be an option to purchase 200,000 (Two h undred thousand)shares of the Company's Class A Common Stock, subject to the terms of the Plan and the Stock Option Agreem ent. These stock options will vest commencing with 40% on th e second anniversary of the grant, then 20% for each subsequ ent year you remain employed by the Company up to the fifth a nniversary of the grant, when they will be 100% vested. The gr ant date shall be your first date of employment with the Comp any. The exercise price of your initial award shall be the c losing price of the Company's Class A Common Stock on the d ay your employment commences. Future stock options awards a re at the discretion of the Compensation Committee. Restricted Stock: In addition, you will be eligibl e to receive a one-time grant of 12,500 shares of restricted stock. These shares will vest on a four (4) year cliff-vesting schedule meaning that none will vest until the 4th annivers ary of your employment start date when all will vest assuming you are still employed by the Company at that time. Relocation: See the attached Relocation Agree ment for specifics.

(i) your then base compensation for a period of 12 months following termination of your employment with the Company or until you find new employment, whichever event first occurs. This compensation shall be paid out on a bi-weekly basis. You agree to actively seek new employment in the event of termination from the Company; and

(ii) the ability to exercise any options for the allowable period of time set forth in the Plan that fully vested prior to your termination of employment, except that in no event can the vested options be exercised past the life of the option grant (for example, the options granted under this letter have a life of 10 years from date of the grant and that date cannot be extended). The ability to sell any restricted shares that were vested prior to your termination of employment and provided any additional restriction period has expired.

(d) such other benefits, if any, as are payable to, or for your benefit, as of the date of your termination in accordance with the applicable plans and programs of the Company.

For the purposes of the letter, "Cause" is defined as: (a) you fail to substantially perform the duties and responsibilities of your position as President of Specialty Brands or to comply in all material respects with the material policies or directives of the Company, which failure continues unremedied for a period of fourteen (14) days after your receipt of written notice from the Company, specifying the nature of the failure; (b) you engage in any conduct which is unethical, illegal, involves misappropriation of trade secrets, fraud, embezzlement, dishonesty, disloyalty, breach of a fiduciary duty or which otherwise brings notoriety to the Company or which has an adverse affect on the name or public image or reputation of the Company; (c) you engage in conduct that is in bad faith and/or injurious to the Company as determined in good faith by the Company; (d) you willfully fail to implement or follow a reasonable and lawful policy or directive of the Company ; (e) you (i) are declared of unsound mind by an order of court, (ii) are convicted of or plead guilty or nolo contendere to a crime, or (iii) fraudulently or intentionally commit an act which is detrimental to the Company; or (f) your breach of any material provisions of this letter or any other agreement you may have with the Company, including, without limitation, any agreement referred to herein.

For purposes of this letter, "Constructive Termination Without Cause" shall mean a termination of your employment at your own initiative following the occurrence, without your prior written consent, of any of the following events:

(i) any action by the Company which results in a material change and diminution in your authority and duties as the President of Specialty Brands of the Company and which is not cured by the Company within 30 days following its receipt of written notice from you specifying in detail the reasons why you believe there has been a material diminution in your authority and duties as the President of Specialty Brands of the Company.

(ii) failure by the Company to make any undisputed payments due you, provided they have not timely paid any such payments due you within 7 business days after receipt from you of a written notice specifying the payment then allegedly due and owing; or

(iii) change in the location of the Company's headquarters to a new venue outside of the greater New York metropolitan area and which would require a complete geographical relocation on your part.

For purposes of this letter, a "Change of Control" means (i) a merger, consolidation or reorganization approved by the Company's shareholders, unless securities representing 50% or more of the total combined voting power of the voting securities of the successor corporation are thereafter owned, directly or indirectly, by the McCann Family (Jim McCann, Chris McCann, and their respective families and affiliates) or (ii) an acquisition by an unaffiliated third party of more that 50% of the votes attributable to all the voting securities of the Company's voting securities (currently Class A and Class B common stock); provided any such event results in a material change and diminution in your authority and duties as the President of Specialty Brands of the Company and which change and diminution are not cured within thirty (30) days after the Company's receipt of a written notice from you detailing the alleged change and diminution. To exercise your rights to terminate under "Constructive Termination Without Cause" or "Change of Control", you must exercise your right to terminate your employment within thirty (30) days after the event complained of occurred or you have waived your right to do so.

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For purposes of this letter, "affiliates" means any person or entity who or which is, directly or indirectly, in control of, controlled by, or under common control with one of the McCann Family.

In order to be in compliance with the Immigration and Reform Control Act of 1986, we require that you provide proof of employment eligibility and identity on your first day. Please bring with you two forms of current identification, one of which must contain a photograph. As a condition of your employment, you will also be required to sign a Confidentiality and Non-Compete Agreement and Critical Days Notice on or before your first day of employment. Your execution and abidance by the terms of the Confidentiality and Non-Compete Agreement and the Critical Days Notice are a material condition of your employment.

The terms of this letter and all the rights and obligations of the parties hereto shall be governed by the laws of the State of New York. Any suit, action, or proceeding relating to this letter or your employment with the Company, including the termination of same, shall be exclusively brought, and you hereby irrevocably submit to the jurisdiction of, the Supreme Court of the State of New York, County of Nassau and the United District Court, in and for the Eastern District of New York.

You hereby represent to the Company that you have no agreements or understandings, whether in writing or oral, which would, in any way, be violated by, or prevent you from taking, employment with the Company and performing the services contemplated hereunder. You further represent that you are not a party to any Confidentiality Agreement, Non-Compete Agreement, Non-Solicitation Agreement, or similar agreement. You have been represented by legal counsel, or have been afforded the opportunity to do so, with reference to the negotiation and execution of this letter and also the Confidentiality and Non-Compete Agreement referred to above.

Tim, we are very excited about having someone with your background and experience joining our team. Please report to Human Resources on the 4th floor at 9:00am on your first day of employment with the Company. Your anticipated start date will be on or before March 15, 2005.

Please acknowledge your agreement to these terms of employment by signing below and returning the original to me along with the signed Confidentiality Agreement and Non-Compete and Critical Day's Notice. This offer, if not so accepted within this period will expire five (5) days from the date of the letter.

This letter can be executed in counterparts, including facsimile counterparts.

If you have any questions or need additional information feel free to contact me at (516) 237-6112.

Sincerely,

* In NY office, earlier date if planned for visit to Chicago is confirmed

/s/ Christopher G. McCann ------------------------- Christopher G. McCann

I hereby agree to the terms of this letter Confirmed Start Date: /s/ Timothy J. Hopkins 3/15/2005 ---------------------- --------------------- Timothy J. Hopkins

ATTACHMENT TO OFFER LETTER - RELOCATION AGREEMENT

February 9, 2005

Timothy Hopkins 15409 NE 153rd Street Woodinville, WA 98072

This is to specify the relocation provisions being offered to you as part of your offer of employment with 1-800-flowers.com as President of Specialty Brands. Please read the important notes below.

Customary Closing Costs - This provision will cover reasonable and actual customary closing costs related to the sale of your current out-of-state residence and purchase of a new home in New York. For purposes of this Agreement "closing costs" shall mean reasonable legal fees, customary title company charges, and a real estate commission on the sale of your current residence, not to exceed five percent of the purchase price. However, we will not cover any other costs including, without limitation, taxes, fees related to a mortgage or homeowner insurance premiums.

Physical Move - The Company will provide you with the services of a professional moving company. They will handle the reasonable and customary packing, ground transportation, and unpacking of your personal belongings.

Storage - The Company will assume the expense of storing your personal belongings for up to ninety (90) days.

Movement of Personal Auto(s) - The Company will make arrangements through a professional relocation company to have up to three (3) of your personal vehicles shipped via ground transportation from your home state to a location of your choice in New York.

Relocation Allowance - You shall submit relocation-related expenses for up to $1,000 in reimbursement for items such as car registration, utility hook-ups, etc. In addition, the Company will pay up to $15,000 towards any Mansion Tax that may be due as a result of a new home in New York, provided said closing occurs within one (1) year of your employment start date and you, of course, are still employed by the Company at the time of such closing.

Airline Travel - The Company will pay the cost of reasonable and actual airline travel expense to commence your employment with 1-800-flowers.com and return to Washington for your home closing. In addition, the Company will pay for up to 3 round trips for your wife and children for house hunting in New York. You agree to give the Company as much prior notice as possible so as to lessen the cost of the plane tickets.

Temporary Living Allowance - The Company will pay for reasonable temporary living quarter's expense for up to six (6) months. This payment pertains to housing only.

Travel Home - The Company will pay all reasonable travel expenses related to any approved trips to visit your immediate family in Washington for a period of six (6) months or until your family moves to New York; whichever event first occurs.

The Company shall pay the relocation expenses directly to the provider of the services and you shall direct the service providers to forward their bills directly to the Company. Any expenses for which you receive a 1099 from the Company shall be grossed up for income tax purposes.

IMPORTANT NOTE: In the event you decide to resign your employment with the Company during the first twelve (12) months of your tenure, then you shall be obligated to reimburse the Company for all of the above expenses, on or before your last day of employment.

Relocation Company: our contact is Jodi O'Donnell of Relocation Solutions at 631-261-1137.

* In NY office, earlier date if planned for visit to Chicago is confirmed

Accepted By: Confirmed Start Date: /s/ Timothy J. Hopkins 3/15/2005 ---------------------- ---------------------- Timothy Hopkins

Exhibit 10.12

Ms. Julie Mulligan 554 Beach 133rd Street Belle Harbor, New York 11694

Dear Julie:

This letter will serve as our understanding of the services you will be rendering as an employee in the position of Personality Expert Designer for the 1-800-Flowers.Com brand (the "Company") for the Company's FY'08.

Responsibilities

Your responsibilities will include (i) working with the Company's Merchandising Department to develop and maintain an exclusive product line for the Company under the name of "Designs by Julie Mulligan", or any other name agreed to by you and the Company (the "Line"). Development of the Line includes not only the products themselves, but also any applicable product descriptions, photography, content and copy related to the products. The products, their descriptions, content and copy are subject to the final approval of the Company. It is anticipated that there will be approximately 6-8 products from the Line on the 1800flowers.com web site at any one given time; (ii) making recommendations on how to repurpose excess inventory of floral and hard goods; (iii) assist the Company with the photography of its floral products with special focus on optimizing florist designed products; (iv) act as a Company spokesperson at marketing, gift shows and media events (up to a maximum of 12 per fiscal year) and shall support the Company in marketing projects (i.e. appear in video advertising and/or programming); and (v) in addition you will perform the duties customarily performed in persons in the position for which you are employed and such other duties as from time to time may be prescribed by the Company.

It is agreed that all products designed and developed by you will be made available for sale once all varieties are confirmed as available by Merchandising Operations and Planning. All your products must meet or surpass the quality standards designated by QA and the products must successfully pass ship testing through the Vendor Relations group. Furthermore, notwithstanding anything to the contrary contained herein, the Company has the sole discretion as to which products you design it chooses to use and the manner and extent of the marketing of any such products. All products developed shall be and remain the property of the Company.

Compensation

Base salary: $130,000 (annualized)

Benefits: Except as otherwise provided herein, you are eligible to continue to participate in all Company benefit programs subject to the terms of each plan. You are eligible to participate in the Company medical, dental, life insurance, and short term and long term disability commencing. You are eligible to participate in the Company 401(k) plan. You are eligible for three (3) weeks vacation accruing pursuant to the Company's policy.

Floral Sales Commission": For sales of floral products under the Line you will be paid a quarterly commission (the "Quarterly Commission") based upon the following formula:

I. The Line---Direct Shipped Products: A) 5% of Net Sales of the products sold under the Line in the event that the gross product margin on any such product is 65%-69% fully loaded; B) 6% of Net Sales of products sold under the Line in the event that the gross product margin on any such product is between 70%-74% fully loaded; C) 7% of Net Sales of the products sold under the Line in the event that the gross product margin on any such product is 75% or higher. II. The Line---Florist Fulfilled Products: A) 2.5% of Net Sales of the products sold under the Line.

For the purposes of this Agreement, Net Sales means the gross sales price of the products of the Line sold less any and all taxes, service, shipping, relay and handling charges, credits, chargebacks, refunds, returns, rebates, discounts, gift certificates, promotional offers, and credit card processing fees. Any commission earned shall be paid on a quarterly basis and such payment shall be accompanied by a report showing how the commission was calculated for said quarter. The Company and you may mutually agree on arrangements for more frequent reporting on the sales generated under the Line.

The Quarterly Commission provided for herein is in lieu of any cash bonus programs that the Company may make available to its employees. For instance, you will not be participating in the Company's Sharing Success Program.

Equity: As an employee you may be eligible for stock option or restricted stock grants subject to the approval of the Compensation Committee of the Board of Directors pursuant to the terms of the Company's 2003 Long Term Incentive and Share Award Plan (the "Plan"). All future stock option and restricted stock awards are at the discretion of the Compensation Committee.

We are committed to maintaining a competitive position in the employment marketplace. However, it is agreed that neither the terms of this letter, your acceptance of same, nor the maintenance of personnel policies, procedures and benefits creates a contract of employment or a guarantee of any length of employment or specific benefits. Your employment with the Company is "at-will", meaning that you retain the option, as does the Company, to end your employment at any time, for any reason or for no reason.

If, however, your employment is terminated then you will be entitled to base salary through the date of termination and any other bonus amounts earned, accrued, due and owing, but not yet paid as of the date of your termination.

Julie, we look forward to the continuation of our relationship together and a prosperous fiscal year.

Very truly yours,

Agreed to:

/s/ MONICA WOO ---------------------- Monica Woo President of Consumer Floral

/s/ JULIE MCCANN MULLIGAN -------------------------- Julie McCann Mulligan

Exhibit 10.15 1-800-FLOWERS.COM, INC. 2003 LONG TERM INCENTIVE AND SHARE AWARD PLAN

RESTRICTED SHARE AGREEMENT

THIS AGREEMENT, dated as of __________, 200_, between 1-800-Flowers.Com, Inc. (the "Company"), a Delaware corporation, and _______________ (the "Participant").

WHEREAS, the Participant has been granted the following award under the Company's 2003 Long Term Incentive and Share Award Plan (the "Plan");

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows.

1. Award of Shares. Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Participant is hereby awarded ______________ Restricted Shares (the "Award"), subject to the terms and conditions of the Plan and those herein set forth. The Award is granted as of __________, 200_ (the "Date of Grant"). Capitalized terms used herein and not defined shall have the meanings set forth in the Plan. In the event of any conflict between this Agreement and the Plan, the Plan shall control.

2. Terms and Conditions. It is understood and agreed that the Award of Restricted Shares evidenced hereby is subject to the following terms and conditions:

(a) Vesting of Award. Subject to Section 2(b) below and the other terms and conditions of this Agreement, this Award shall become vested in full on the _____ anniversary of the Date of Grant; provided, however that the Award shall become immediately vested in full upon a Change of Control of the Company. Unless otherwise provided by the Committee, all dividends and other amounts receivable in connection with any adjustments to the Shares under Section 4(c) of the Plan shall be subject to the vesting schedule in this Section 2(a) and shall be paid to the Participant upon any vesting of the Award in respect of which such dividends or other amounts are payable.

(b) Termination of Service; Forfeiture of Unvested Shares. In the event of Termination of Service of the Participant prior to the date the Award otherwise becomes vested, the unvested portion of the Award shall immediately be forfeited by the Participant and become the property of the Company. For purposes hereof, "Termination of Service" means the termination of the Participant's employment, consulting services or directorship with the Company, its Subsidiaries and its Affiliates, as the case may be. A Participant employed by, a Director of, or a consultant to a Subsidiary of the Company or one of its Affiliates shall also be deemed to incur a Termination of Service if the Subsidiary of the Company or Affiliate ceases to be such a Subsidiary or an Affiliate, as the case may be, and the Participant does not immediately thereafter become an employee or director of, or a consultant to, the Company, another Subsidiary of the Company or an Affiliate. However, unless so determined by the Committee,

"Termination of Service" shall not include a change in status from an employee, director or consultant of the Company, a Subsidiary of the Company or an Affiliate to another such status. Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its Subsidiaries and Affiliates shall not be considered a Termination of Service.

(c) Certificates. Each certificate or other evidence of ownership issued in respect of Restricted Shares awarded hereunder shall be deposited with the Company, or its designee, together with, if requested by the Company, a stock power executed in blank by the Participant, and shall bear a legend disclosing the restrictions on transferability imposed on such Restricted Shares by this Agreement (the "Restrictive Legend"). Upon the vesting of Restricted Shares pursuant to Section 2(a) hereof and the satisfaction of any withholding tax liability pursuant to Section 5 hereof, the certificates evidencing such vested Shares, not bearing the Restrictive Legend, shall be delivered to the Participant or other evidence of vested Shares shall be provided to the Participant.

(d) Rights of a Stockholder. Prior to the time a Restricted Share is fully vested hereunder, the Participant shall have no right to transfer, pledge, hypothecate or otherwise encumber such Restricted Share. During such period, the Participant shall have all other rights of a stockholder, including, but not limited to, the right to vote and to receive dividends (subject to Section 2(a) hereof) at the time paid on such Restricted Shares.

(e) No Right to Continued Employment. This Award shall not confer upon the Participant any right with respect to continuance of employment by the Company nor shall this Award interfere with the right of the Company to terminate the Participant's employment at any time.

3. Transfer of Shares. The Shares delivered hereunder, or any interest therein, may be sold, assigned, pledged, hypothecated, encumbered, or transferred or disposed of in any other manner, in whole or in part, only in compliance with the terms, conditions and restrictions as set forth in the governing instruments of the Company, applicable federal and state securities laws or any other applicable laws or regulations and the terms and conditions hereof.

4. Expenses of Issuance of Shares. The issuance of stock certificates hereunder shall be without charge to the Participant. The Company shall pay, and indemnify the Participant from and against any issuance, stamp or documentary taxes (other than transfer taxes) or charges imposed by any governmental body, agency or official (other than income taxes) by reason of the issuance of Shares.

5. Withholding. No later than the date of vesting of (or the date of an election by the Participant under Section 83(b) of the Code with respect to) the Award granted hereunder, the Participant shall pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal,

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state or local taxes of any kind required by law to be withheld at such time with respect to such Award and the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the Participant, federal, state and local taxes of any kind required by law to be withheld at such time. Notwithstanding any provision to the contrary, unless otherwise determined by the Committee, the Company shall withhold Shares to pay the minimum amount of applicable withholding taxes resulting from the Award in accordance with any rules or regulations of the Committee then in effect.

6. References. References herein to rights and obligations of the Participant shall apply, where appropriate, to the Participant's legal representative or estate without regard to whether specific reference to such legal representative or estate is contained in a particular provision of this Agreement.

7. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:

If to the Company:

1-800 Flowers.Com, Inc.

One Old Country Road Suite 500 Carle Place, NY 11514

Attn.: Gerard M. Gallagher

If to the Participant:

At the Participant's most recent address shown on the Company's corporate records, or at any other address which the Participant may specify in a notice delivered to the Company in the manner set forth herein.

8. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of New York without resort to that State's conflict-of-laws rules. Each party hereto agrees to submit to the exclusive jurisdiction of the United States District Court for the Eastern District of New York or the Supreme Court of the State of New York, County of Nassau in any action or proceeding arising out of or relating to this Agreement.

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9. Counterparts. This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

1-800 FLOWERS.COM, INC.

By: Participant

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Exhibit 10.16 1-800-FLOWERS.COM, INC. 2003 LONG TERM INCENTIVE AND SHARE AWARD PLAN

INCENTIVE STOCK OPTION AGREEMENT

THIS AGREEMENT, dated as of __________, 200_, between 1-800-Flowers.Com, Inc. (the "Company"), a Delaware corporation, and _______________ (the "Optionee").

WHEREAS, the Board has adopted the Plan for the purpose of retaining the services of selected Employees, non-employee members of the Board or of the board of directors of any Parent, Subsidiary or Affiliate and consultants and other independent advisors who provide services to the Company (or any Parent, Subsidiary or Affiliate);

WHEREAS, the Optionee is an Employee and has been granted the following award under the Company's 2003 Long Term Incentive and Share Award Plan (the "Plan");

WHEREAS, the Optionee is to render valuable services to the Company (or a Parent, Subsidiary or Affiliate) and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company's grant of an option to Optionee;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows.

1. Grant of Option. The Company has granted to Optionee, on _____________ (the "Grant Date"), an option (the "Option") to purchase up to ____________ Option Shares. The Option Shares shall be purchasable from time to time during the option term specified in Section 2 at $__________ per share (the "Exercise Price"). This Option is intended to be an Incentive Option.

2. Option Term. This Option shall have a maximum term of ten (10) years measured from the Grant Date and shall accordingly expire at the close of business on the tenth (10th) anniversary of the Grant Date (the "Expiration Date"), unless sooner terminated in accordance with Section 5.

3. Limited Transferability. This Option shall be neither transferable nor assignable by Optionee other than by will or by the laws of descent and distribution following Optionee's death and may be exercised, during Optionee's lifetime, only by Optionee.

4. Vesting and Exercise. The Option shall vest and become exercisable with respect to ___________ (__%) of the Option Shares upon Optionee's completion of each year of Service over the ____ (__) year period measured from the Grant Date. As the Option vests and becomes exercisable in such installments, those installments shall accumulate, and the Option shall remain exercisable for the accumulated installments until the earlier of the Expiration Date or the termination of the Option following termination of Service as set forth in Section 5 below.

5. Termination of Service. The option term specified in Section 2 shall terminate (and this Option shall cease to be outstanding) prior to the Expiration Date should any of the following provisions become applicable:

(i) Should Optionee cease to remain in Service for any reason (other than death, Permanent Disability or Misconduct) while this Option is outstanding, then the vested portion of this Option (on the date of termination of Service) shall remain exercisable until the earlier of (i) the expiration of the three (3)-month period measured from the date of such cessation of Service or (ii) the Expiration Date.

(ii) Should Optionee die while this Option is outstanding, then the Optionee's Beneficiary shall have the right to exercise the portion of this Option vested on the date of the Optionee's death until the earlier of (A) the expiration of the twelve (12)-month period measured from the date of Optionee's death or (B) the Expiration Date.

(iii) Should Optionee cease Service by reason of Permanent Disability while this Option is outstanding, then the vested portion of this Option (on the date of termination of Service) shall remain exercisable until the earlier of (i) the expiration of the twelve (12)-month period measured from the date of such cessation of Service or (ii) the Expiration Date.

(iv) During the applicable post-Service exercise period, this Option may not be exercised in the aggregate for more than the number of vested Option Shares for which the Option is exercisable on the date of Optionee's cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the Expiration Date, this Option shall terminate and cease to be outstanding for any vested Option Shares for which the Option has not been exercised. However, this Option shall, immediately upon Optionee's cessation of Service for any reason, terminate and cease to be outstanding to the extent this option is not otherwise at that time vested and exercisable.

(v) Should Optionee's Service be terminated for Misconduct or should Optionee engage in Misconduct while this Option is outstanding, then this Option shall terminate immediately and cease to be outstanding.

6. Special Acceleration of Option.

(a) In the event of a Change of Control, this Option, to the extent outstanding at that time but not otherwise fully vested and exercisable, shall automatically become fully vested and exercisable immediately prior to the time of the Change of Control so that the Option Shares will be entitled to participate in the Change of Control transaction.

(b) This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

7. Adjustment in Option Shares. In the event that the Plan Administrator shall determine that any dividend in Shares, recapitalization, Share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Shares such that an adjustment is appropriate in order to prevent

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dilution or enlargement of the rights of Optionee under this Option, then the Plan Administrator shall make such equitable changes or adjustments as it deems appropriate and, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares, other securities or other consideration issued or issuable in respect of this Option, and (ii) the Exercise Price; provided, however, that no adjustment shall be made pursuant to this Section 7 that causes the Option to be treated as deferred compensation pursuant to Section 409A of the Code.

8. Stockholder Rights. The holder of this Option shall not have any stockholder rights with respect to the Option Shares until such person exercises the Option, pays the Exercise Price and becomes a holder of record of the purchased Shares.

9. Manner of Exercising Option.

(a) In order to exercise this Option with respect to all or any part of the Option Shares for which this Option is at the time exercisable, Optionee (or any other person or persons exercising the Option) must take the following actions:

(i)Execute and deliver to the Company a Notice of Exercise for the Option Shares for which the Option is exercised.

(ii) Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms:

(A) cash or check made payable to the Company;

(B) apromissory note payable to the Company, but only to the extent authorized by the Plan Administrator in accordance with Section 13;

(C) shares of Common Stock held by Optionee (or any other person or persons exercising the Option) for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or

(D) to the extent authorized by the Plan Administrator, through a special sale and remittance procedure pursuant to which Optionee (or any other person or persons exercising the Option) shall concurrently provide irrevocable instructions (I) to a brokerage firm to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the purchased shares plus all applicable income and employment taxes required to be withheld by the Company by reason of such exercise and (II) to the Company to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale.

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Except to the extent the sale and remittance procedure is utilized in connection with the Option exercise, payment of the Exercise Price must accompany the Notice of Exercise delivered to the Company in connection with the Option exercise.

(iii) Furnish to the Company appropriate documentation that the person or persons exercising the Option (if other than Optionee) have the right to exercise this Option.

(iv) Make appropriate arrangements with the Company (or Parent, Subsidiary or Affiliate employing or retaining Optionee) for the satisfaction of all income and employment tax withholding requirements applicable to the Option exercise.

(b) As soon as practical after the Exercise Date, the Company shall issue to or on behalf of Optionee (or any other person or persons exercising this Option) a certificate for the purchased Option Shares, with the appropriate legends affixed thereto.

(c) In no event may this Option be exercised for any fractional shares.

10. Compliance with Laws and Regulations.

(a) The exercise of this Option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Company and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or the Nasdaq National Market, if applicable) on which the Common Stock may be listed for trading at the time of such exercise and issuance. (b) The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to this Option shall relieve the Company of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Company, however, shall use its best efforts to obtain all such approvals.

11. Successors and Assigns. Except to the extent otherwise provided in Section 3, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and Optionee and Optionee's Beneficiaries.

12. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at Optionee's most recent address shown on the Company's corporate records or at any other address which Optionee may specify in a written notice delivered to the Company. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

13. Financing. The Plan Administrator may, in its absolute discretion and without any obligation to do so, permit Optionee to pay the Exercise Price for the purchased Option Shares by delivering a full-recourse promissory note

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payable to the Company. The terms of any such promissory note (including the interest rate, the requirements for collateral and the terms of repayment) shall be established by the Plan Administrator in its sole discretion.

14. Construction. This Agreement and the Option evidenced hereby are made and granted pursuant to the Plan, the terms of which are incorporated herein by reference, and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this Option.

15. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of New York without resort to that State's conflict-of-laws rules. Each party hereto agrees to submit to the exclusive jurisdiction of the United States District Court in and for the Eastern District of New York or the Supreme Court of the State of New York, County of Nassau in any action or proceeding arising out of or relating to this Agreement.

16. Excess Shares. If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may without stockholder approval be issued under the Plan, then this Option shall be void with respect to those excess shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.

17. Leave of Absence. The following provisions shall apply upon the Optionee's commencement of an authorized leave of absence:

(i) The exercise schedule in effect under Section 4 above shall be frozen as of the first day of the authorized leave, and this Option shall not become exercisable for any additional installments of the Option Shares during the period Optionee remains on such leave.

(ii) Should Optionee resume active Employee status within sixty (60) days after the start date of the authorized leave, Optionee shall, for purposes of the exercise schedule set forth in Section 4 above, receive Service credit for the entire period of such leave. If Optionee does not resume active Employee status within such sixty (60)-day period, then no Service credit shall be given for the period of such leave.

(iii) If the leave of absence continues for more than ninety (90) days, then this Option shall automatically convert to a Non-Statutory Option at the end of the three (3) month period measured from the ninety-first (91st) day of such leave, unless Optionee's reemployment rights are guaranteed by statute or by written agreement. Following any such conversion of this Option, all subsequent exercises of this Option, whether effected before or after Optionee's return to active Employee status, shall result in an immediate taxable event, and the Company shall be required to collect from Optionee the income and employment withholding taxes applicable to such exercise.

(iv) In no event shall this Option become exercisable for any additional Option Shares or otherwise remain outstanding if Optionee does not resume Employee status prior to the Expiration Date of the option term.

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18. Additional Incentive Option Terms. The following terms and conditions shall also apply to the Option:

(i) No installment under this Option shall qualify for favorable tax treatment as an Incentive Option if (and to the extent) the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which such installment first becomes exercisable hereunder would, when added to the aggregate value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which this Option or any other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Company or any Parent or Subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar year, this Option shall nevertheless become exercisable for the excess shares in such calendar year as a Non-Statutory Option.

(ii) Should the exercisability of this Option be accelerated upon a Change of Control, then this Option shall qualify for favorable tax treatment as an Incentive Option only to the extent the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which this Option first becomes exercisable in the calendar year in which the Change of Control occurs does not, when added to the aggregate value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which this Option or one or more other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Company or any Parent or Subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in the calendar year of such Change of Control, the Option may nevertheless be exercised for the excess shares in such calendar year as a Non-Statutory Option.

(iii) Should Optionee hold, in addition to this Option, one or more other options to purchase Common Stock which become exercisable for the first time in the same calendar year as this Option, then the foregoing limitations on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted.

19. Defined Terms. Capitalized terms in this Agreement shall have the meaning assigned to them in this Agreement, the attached Appendix and the Plan. In the event of any conflict between this Agreement and the Plan, the Plan shall control.

BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK

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20. No Employment or Service Contract. Nothing in this Agreement or in the Plan shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent, Subsidiary or Affiliate employing or retaining Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionee's Service at any time for any reason, with or without cause.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

1-800 FLOWERS.COM, INC.

By:

Optionee

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APPENDIX

The following definitions shall be in effect under the Agreement:

A. Agreement shall mean this Stock Option Agreement.

B. Board shall mean the Company's Board of Directors.

C. Change of Control shall mean:

(a) a merger, consolidation or reorganization approved by the Company's stockholders, unless securities representing more than fifty percent (50%) of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Company's outstanding voting securities immediately prior to such transaction.

(b) any stockholder-approved transfer or other disposition of all or substantially all of the Company's assets, or

(c) the acquisition after the Effective Date, directly or indirectly, by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company), of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities.

D. Code shall mean the Internal Revenue Code of 1986, as amended.

E. Common Stock or Shares shall mean the common stock, $.01 par value per share, of the Company.

F. Company shall mean 1-800-FLOWERS.COM, Inc., a Delaware corporation.

G. Effective Date shall mean December 3, 2003.

H. Employee shall mean an individual who is in the employ of the Company (or any Parent, Subsidiary or Affiliate), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.

I. Exchange Act means the Securities Exchange Act of 1934, as amended from time to time. References to any provision of the Exchange Act shall be deemed to include successor provisions thereto and the regulations thereunder.

J. Exercise Date shall mean the date on which the option shall have been exercised in accordance with Section 9 of the Agreement.

K. Incentive Option shall mean an option which satisfies the requirements of Code Section 422.

L. Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of confidential information or trade secrets of the Company (or any Parent, Subsidiary or Affiliate), or any intentional wrongdoing by Optionee, whether by omission or commission, which adversely affects the business or affairs of the Company (or any Parent, Subsidiary or Affiliate). The foregoing definition shall not limit the grounds for the dismissal or discharge of Optionee or any other individual in the Service of the Company (or any Parent, Subsidiary or Affiliate).

M. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422.

N. Notice of Exercise shall mean the notice of exercise in the form prescribed by the Committee, from time to time. Such Notice of Exercise may be in written or electronic form.

O. Option Shares shall mean the number of shares of Common Stock subject to the option as specified in Section 1 of this Agreement.

P. Parent shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, provided each corporation in the unbroken chain (other than the Company) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

Q. Permanent Disability shall mean the inability of Optionee to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which is expected to result in death or has lasted or can be expected to last for a continuous period of twelve (12) months or more.

R. Plan shall mean the Company's 2003 Long Term Incentive and Share Award Plan.

S. Plan Administrator shall mean the Committee, as defined in the Plan.

T. Service shall mean Optionee's performance of services for the Company (or any Parent, Subsidiary or Affiliate) in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor.

A-2

Exhibit 10.17

1-800-FLOWERS.COM, INC.

2003 LONG TERM INCENTIVE AND SHARE AWARD PLAN

NON-STATUTORY STOCK OPTION AGREEMENT

THIS AGREEMENT, dated as of __________, 200_, between 1-800-Flowers.Com, Inc. (the "Company"), a Delaware corporation, and _______________ (the "Optionee").

WHEREAS, the Board has adopted the Plan for the purpose of retaining the services of selected Employees, non-employee members of the Board or of the board of directors of any Parent, Subsidiary or Affiliate and consultants and other independent advisors who provide services to the Company (or any Parent, Subsidiary or Affiliate);

WHEREAS, the Optionee has been granted the following award under the Company's 2003 Long Term Incentive and Share Award Plan (the "Plan");

WHEREAS, the Optionee is to render valuable services to the Company (or a Parent, Subsidiary or Affiliate) and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Company's grant of an option to Optionee;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree as follows.

1. Grant of Option. The Company has granted to Optionee, on _____________ (the "Grant Date"), an option (the "Option") to purchase up to ____________ Option Shares. The Option Shares shall be purchasable from time to time during the option term specified in Section 2 at $__________ per share (the "Exercise Price"). This Option is intended to be a Non-Statutory Option.

2. Option Term. This Option shall have a maximum term of ten (10) years measured from the Grant Date and shall accordingly expire at the close of business on the tenth (10th) anniversary of the Grant Date (the "Expiration Date"), unless sooner terminated in accordance with Section 5.

3. Limited Transferability. Except as otherwise provided in this Section 3, this Option shall be neither transferable nor assignable by Optionee other than by will or by the laws of descent and distribution following Optionee's death and may be exercised, during Optionee's lifetime, only by Optionee. However, this Option may be assigned in whole or in part during Optionee's lifetime either as (i) a gift to one or more family members of Optionee's Immediate Family, to a trust in which Optionee and/or one or more such family members hold more than fifty percent (50%) of the beneficial interest or an entity in which more than fifty percent (50%) of the voting interests are owned by Optionee and/or one or more such family members, or (ii) pursuant to a domestic relations order. The assigned portion shall be exercisable only by the person or persons who acquire a proprietary interest in the Option pursuant to such assignment. The terms applicable to the assigned portion shall be the same as those in effect for this Option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate.

4. Vesting and Exercise. The Option shall vest and become exercisable with respect to __________ (__%) of the Option Shares upon Optionee's completion of each year of Service over the ____ (__) year period measured from the Grant Date. As the Option vests and becomes exercisable in such installments, those installments shall accumulate, and the Option shall remain exercisable for the accumulated installments until the earlier of the Expiration Date or the termination of the Option following termination of Service as set forth in Section 5 below.

5. Termination of Service. The option term specified in Section 2 shall terminate (and this Option shall cease to be outstanding) prior to the Expiration Date should any of the following provisions become applicable:

(i) Should Optionee cease to remain in Service for any reason (other than death, Permanent Disability or Misconduct) while this Option is outstanding, then the vested portion of this Option (on the date of termination of Service) shall remain exercisable until the earlier of (i) the expiration of the three (3)-month period measured from the date of such cessation of Service or (ii) the Expiration Date.

(ii) Should Optionee die while this Option is outstanding, then the Optionee's Beneficiary shall have the right to exercise the portion of this Option vested on the date of the Optionee's death until the earlier of (A) the expiration of the twelve (12)-month period measured from the date of Optionee's death or (B) the Expiration Date.

(iii) Should Optionee cease Service by reason of Permanent Disability while this Option is outstanding, then the vested portion of this Option (on the date of termination of Service) shall remain exercisable until the earlier of (i) the expiration of the twelve (12)-month period measured from the date of such cessation of Service or (ii) the Expiration Date.

(iv) During the applicable post-Service exercise period, this Option may not be exercised in the aggregate for more than the number of vested Option Shares for which the Option is exercisable on the date of Optionee's cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the Expiration Date, this Option shall terminate and cease to be outstanding for any vested Option Shares for which the Option has not been exercised. However, this Option shall, immediately upon Optionee's cessation of Service for any reason, terminate and cease to be outstanding to the extent this option is not otherwise at that time vested and exercisable.

(v) Should Optionee's Service be terminated for Misconduct or should Optionee engage in Misconduct while this Option is outstanding, then this Option shall terminate immediately and cease to be outstanding.

6. Special Acceleration of Option.

(a) In the event of a Change of Control, this Option, to the extent outstanding at that time but not otherwise fully vested and exercisable, shall automatically become fully vested and exercisable immediately prior to the time of the Change of Control so that the Option Shares will be entitled to participate in the Change of Control transaction.

(b) This Agreement shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

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7. Adjustment in Option Shares. In the event that the Plan Administrator shall determine that any dividend in Shares, recapitalization, Share split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Optionee under this Option, then the Plan Administrator shall make such equitable changes or adjustments as it deems appropriate and, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares, other securities or other consideration issued or issuable in respect of this Option, and (ii) the Exercise Price; provided, however, that no adjustment shall be made pursuant to this Section 7 that causes the Option to be treated as deferred compensation pursuant to Section 409A of the Code.

8. Stockholder Rights. The holder of this Option shall not have any stockholder rights with respect to the Option Shares until such person exercises the Option, pays the Exercise Price and becomes a holder of record of the purchased Shares.

9. Manner of Exercising Option.

(a) In order to exercise this Option with respect to all or any part of the Option Shares for which this Option is at the time exercisable, Optionee (or any other person or persons exercising the Option) must take the following actions:

(i)Execute and deliver to the Company a Notice of Exercise for the Option Shares for which the Option is exercised.

(ii) Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms:

(A) cash or check made payable to the Company;

(B) apromissory note payable to the Company, but only to the extent authorized by the Plan Administrator in accordance with Section 13;

(C) shares of Common Stock held by Optionee (or any other person or persons exercising the Option) for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or

(D) to the extent authorized by the Plan Administrator, through a special sale and remittance procedure pursuant to which Optionee (or any other person or persons exercising the Option) shall concurrently provide irrevocable instructions (I) to a brokerage firm to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient

3

funds to cover the aggregate Exercise Price payable for the purchased shares plus all applicable income and employment taxes required to be withheld by the Company by reason of such exercise and (II) to the Company to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale.

Except to the extent the sale and remittance procedure is utilized in connection with the Option exercise, payment of the Exercise Price must accompany the Notice of Exercise delivered to the Company in connection with the Option exercise.

(iii) Furnish to the Company appropriate documentation that the person or persons exercising the Option (if other than Optionee) have the right to exercise this Option.

(iv) Make appropriate arrangements with the Company (or Parent, Subsidiary or Affiliate employing or retaining Optionee) for the satisfaction of all income and employment tax withholding requirements applicable to the Option exercise.

(b) As soon as practical after the Exercise Date, the Company shall issue to or on behalf of Optionee (or any other person or persons exercising this Option) a certificate for the purchased Option Shares, with the appropriate legends affixed thereto.

(c) In no event may this Option be exercised for any fractional shares.

10. Compliance with Laws and Regulations.

(a) The exercise of this Option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Company and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange (or the Nasdaq National Market, if applicable) on which the Common Stock may be listed for trading at the time of such exercise and issuance.

(b) The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of any Common Stock pursuant to this Option shall relieve the Company of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Company, however, shall use its best efforts to obtain all such approvals.

11. Successors and Assigns. Except to the extent otherwise provided in Section 3, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Company and its successors and assigns and Optionee and Optionee's assigns and Beneficiaries.

12. Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Company at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at Optionee's most recent address shown on the Company's corporate records or at any other address which Optionee may specify in a written notice delivered to

4

the Company. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

13. Financing. The Plan Administrator may, in its absolute discretion and without any obligation to do so, permit Optionee to pay the Exercise Price for the purchased Option Shares by delivering a full-recourse promissory note payable to the Company. The terms of any such promissory note (including the interest rate, the requirements for collateral and the terms of repayment) shall be established by the Plan Administrator in its sole discretion.

14. Construction. This Agreement and the Option evidenced hereby are made and granted pursuant to the Plan, the terms of which are incorporated herein by reference, and are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this Option.

15. Governing Law. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of New York without resort to that State's conflict-of-laws rules. Each party hereto agrees to submit to the exclusive jurisdiction of the United States District Court for the Eastern District of New York or the Supreme Court of the State of New York, County of Nassau in any action or proceeding arising out of or relating to this Agreement.

16. Excess Shares. If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may without stockholder approval be issued under the Plan, then this Option shall be void with respect to those excess shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.

17. Leave of Absence. The following provisions shall apply upon the Optionee's commencement of an authorized leave of absence:

(i) The exercise schedule in effect under Section 4 above shall be frozen as of the first day of the authorized leave, and this Option shall not become exercisable for any additional installments of the Option Shares during the period Optionee remains on such leave.

(ii) Should Optionee resume active Employee status within sixty (60) days after the start date of the authorized leave, Optionee shall, for purposes of the exercise schedule set forth in Section 4 above, receive Service credit for the entire period of such leave. If Optionee does not resume active Employee status within such sixty (60)-day period, then no Service credit shall be given for the period of such leave.

(iii) In no event shall this Option become exercisable for any additional Option Shares or otherwise remain outstanding if Optionee does not resume Employee status prior to the Expiration Date of the option term.

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18. Terms. Capitalized terms in this Agreement shall have the meaning assigned to them in this Agreement, the attached Appendix and the Plan. In the event of any conflict between this Agreement and the Plan, the Plan shall control.

19. No Employment or Service Contract. Nothing in this Agreement or in the Plan shall confer upon Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent, Subsidiary or Affiliate employing or retaining Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionee's Service at any time for any reason, with or without cause.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

1-800 FLOWERS.COM, INC.

By:

Optionee

6

A-2

APPENDIX

The following definitions shall be in effect under the Agreement:

A. Agreement shall mean this Stock Option Agreement.

B. Board shall mean the Company's Board of Directors.

C. Change of Control shall mean:

(a) a merger, consolidation or reorganization approved by the Company's stockholders, unless securities representing more than fifty percent (50%) of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Company's outstanding voting securities immediately prior to such transaction.

(b) any stockholder-approved transfer or other disposition of all or substantially all of the Company's assets, or

(c) the acquisition after the Effective Date, directly or indirectly, by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company), of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities.

D. Code shall mean the Internal Revenue Code of 1986, as amended.

E. Common Stock or Shares shall mean the common stock, $.01 par value per share, of the Company.

F. Company shall mean 1-800-FLOWERS.COM, Inc., a Delaware corporation.

G. Effective Date shall mean December 3, 2003.

H. Employee shall mean an individual who is in the employ of the Company (or any Parent, Subsidiary or Affiliate), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.

I. Exchange Act means the Securities Exchange Act of 1934, as amended from time to time. References to any provision of the Exchange Act shall be deemed to include successor provisions thereto and the regulations thereunder.

J. Exercise Date shall mean the date on which the option shall have been exercised in accordance with Section 9 of the Agreement.

K. Immediate Family of Optionee shall mean Optionee's child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships.

L. Incentive Option shall mean an option which satisfies the requirements of Code Section 422.

M. Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of confidential information or trade secrets of the Company (or any Parent, Subsidiary or Affiliate), or any intentional wrongdoing by Optionee, whether by omission or commission, which adversely affects the business or affairs of the Company (or any Parent, Subsidiary or Affiliate). The foregoing definition shall not limit the grounds for the dismissal or discharge of Optionee or any other individual in the Service of the Company (or any Parent, Subsidiary or Affiliate).

N. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422.

O. Notice of Exercise shall mean the notice of exercise in the form prescribed by the Committee, from time to time. Such Notice of Exercise may be in written or electronic form.

P. Option Shares shall mean the number of shares of Common Stock subject to the option as specified in Section 1 of this Agreement.

Q. Parent shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, provided each corporation in the unbroken chain (other than the Company) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

R. Permanent Disability shall mean the inability of Optionee to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which is expected to result in death or has lasted or can be expected to last for a continuous period of twelve (12) months or more.

S. Plan shall mean the Company's 2003 Long Term Incentive and Share Award Plan.

T. Plan Administrator shall mean the Committee, as defined in the Plan.

U. Service shall mean Optionee's performance of services for the Company (or any Parent, Subsidiary or Affiliate) in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor.

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Exhibit 10.18

AMENDED AND RESTATED CREDIT AGREEMENT

dated as of

August 28, 2008

among

1-800-FLOWERS.COM, INC.,

The SUBSIDIARY BORROWERS Party Hereto,

The GUARANTORS Party Hereto,

The LENDERS Party Hereto

and

JPMORGAN CHASE BANK, N.A., as Administrative Agent

$293,000,000

J.P. MORGAN SECURITIES INC., as Sole Lead Arranger and Sole Bookrunner

BANK OF AMERICA, N.A. and

WACHOVIA BANK, NATIONAL ASSOCIATION, as Syndication Agents

CAPITAL ONE, N.A., as Documentation Agent

TABLE OF CONTENTS

Page ARTICLE I..................................... ............................1 DEFINITIONS................................... ............................1 SECTION 1.01. Defined Terms..................... ............................1 ------------- SECTION 1.02. Terms Generally................... ...........................23 --------------- SECTION 1.03. Accounting Terms; GAAP............ ...........................23 ---------------------- ARTICLE II.................................... ...........................23 THE CREDITS................................... ...........................23 SECTION 2.01. The Commitments................... ...........................23 --------------- SECTION 2.02. Loans and Borrowings.............. ...........................24 -------------------- SECTION 2.03. Requests for Borrowings........... ...........................25 ----------------------- SECTION 2.04. Swingline Loans................... ...........................26 --------------- SECTION 2.05. Letters of Credit................. ...........................27 ----------------- SECTION 2.06. Funding of Borrowings............. ...........................31 --------------------- SECTION 2.07. Interest Elections................ ...........................31 ------------------ SECTION 2.08. Termination, Reduction and Increas e of the Commitments.......33 ---------------------------------- -------------------- SECTION 2.09. Repayment of Loans; Evidence of De bt.........................36 ---------------------------------- -- SECTION 2.10. Prepayment of Loans............... ...........................39 ------------------- SECTION 2.11. Fees.............................. ...........................40 ---- SECTION 2.12. Interest.......................... ...........................41 -------- SECTION 2.13. Alternate Rate of Interest........ ...........................42 -------------------------- SECTION 2.14. Increased Costs................... ...........................42 --------------- SECTION 2.15. Break Funding Payments............ ...........................43 ---------------------- SECTION 2.16. Taxes............................. ...........................44 ----- SECTION 2.17. Payments Generally; Pro Rata Treat ment; Sharing of Set-offs..47 ---------------------------------- ------------------------- SECTION 2.18. Mitigation Obligations; Replacemen t of Lenders...............49 ---------------------------------- ------------ SECTION 2.19. Designation of Subsidiary Borrower s..........................49 ---------------------------------- - ARTICLE III................................... ...........................50 GUARANTEE..................................... ...........................50 SECTION 3.01. The Guarantee..................... ...........................50 ------------- SECTION 3.02. Obligations Unconditional......... ...........................51 ------------------------- SECTION 3.03. Reinstatement..................... ...........................52 ------------- SECTION 3.04. Subrogation....................... ...........................52 ----------- SECTION 3.05. Remedies.......................... ...........................52 -------- SECTION 3.06. Instrument for the Payment of Mone y..........................52 ---------------------------------- - SECTION 3.07. Continuing Guarantee.............. ...........................52 -------------------- SECTION 3.08. Rights of Contribution............ ...........................52 ---------------------- -i-

SECTION 3.09. General Limitation on Guarantee Ob ligations..................53 ---------------------------------- --------- ARTICLE IV.................................... ...........................54 REPRESENTATIONS AND WARRANTIES................ ...........................54 SECTION 4.01. Organization; Powers.............. ...........................54 -------------------- SECTION 4.02. Authorization; Enforceability..... ...........................54 ----------------------------- SECTION 4.03. Governmental Approvals; No Conflic ts.........................54 ---------------------------------- -- SECTION 4.04. Financial Condition; No Material A dverse Change..............54 ---------------------------------- ------------- SECTION 4.05. Properties........................ ...........................55 ---------- SECTION 4.06. Litigation and Environmental Matte rs.........................55 ---------------------------------- -- SECTION 4.07. Compliance with Laws and Contractu al Obligations.............56 ---------------------------------- -------------- SECTION 4.08. Investment Company Act Status..... ...........................56 ----------------------------- SECTION 4.09. Taxes............................. ...........................56 ----- SECTION 4.10. ERISA............................. ...........................56 ----- SECTION 4.11. Disclosure........................ ...........................56 ---------- SECTION 4.12. Use of Credit..................... ...........................57 ------------- SECTION 4.13. Labor Matters..................... ...........................57 ------------- SECTION 4.15. Indebtedness...................... ...........................57 ------------ SECTION 4.16. Liens 57 ----- SECTION 4.17. Subsidiaries...................... ...........................57 ------------ ARTICLE V..................................... ...........................58 CONDITIONS.................................... ...........................58 SECTION 5.01. Conditions to Effective Date...... ...........................58 ---------------------------- SECTION 5.02. Each Credit Event................. ...........................60 ----------------- ARTICLE VI.................................... ...........................60 AFFIRMATIVE COVENANTS......................... ...........................60 SECTION 6.01. Financial Statements and Other Inf ormation...................60 ---------------------------------- -------- SECTION 6.02. Notices of Material Events........ ...........................62 -------------------------- SECTION 6.03. Existence; Conduct of Business.... ...........................62 ------------------------------ SECTION 6.04. Payment of Taxes and Other Obligat ions.......................62 ---------------------------------- ---- SECTION 6.05. Maintenance of Properties......... ...........................63 ------------------------- SECTION 6.06. Maintenance of Insurance.......... ...........................63 ------------------------ SECTION 6.07. Books and Records................. ...........................63 ----------------- SECTION 6.08. Inspection Rights................. ...........................63 ----------------- SECTION 6.09. Compliance with Laws and Contractu al Obligations.............63 ---------------------------------- -------------- SECTION 6.10. Use of Proceeds and Letters of Cre dit........................63 ---------------------------------- --- SECTION 6.11. Additional Subsidiary Guarantors; Further Assurances.........63 ---------------------------------- ------------------ ARTICLE VII................................... ...........................64 NEGATIVE COVENANTS............................ ...........................64 -ii-

SECTION 7.01. Indebtedness...................... ...........................64 ------------ SECTION 7.02. Liens............................. ...........................65 ----- SECTION 7.03. Mergers, Consolidations, Etc...... ...........................66 ----------------------------- SECTION 7.04. Dispositions...................... ...........................67 ------------ SECTION 7.05. Lines of Business................. ...........................67 ----------------- SECTION 7.06. Investments and Acquisitions...... ...........................68 ---------------------------- SECTION 7.07. Restricted Payments............... ...........................69 ------------------- SECTION 7.08. Transactions with Affiliates...... ...........................69 ---------------------------- SECTION 7.09. Restrictive Agreements............ ...........................70 ---------------------- SECTION 7.10. Swap Agreements................... ...........................70 --------------- SECTION 7.11. Financial Covenants............... ...........................71 ------------------- SECTION 7.12. Sale-Leasebacks................... ...........................71 --------------- SECTION 7.13. Modifications of Organizational Do cuments....................71 ---------------------------------- ------- ARTICLE VIII.................................. ...........................71 EVENTS OF DEFAULT............................. ...........................71 ARTICLE IX.................................... ...........................74 THE ADMINISTRATIVE AGENT...................... ...........................74 ARTICLE X..................................... ...........................76 MISCELLANEOUS................................. ...........................76 SECTION 10.01. Notices.......................... ...........................76 ------- SECTION 10.02. Waivers; Amendments.............. ...........................76 ------------------- SECTION 10.03. Expenses; Indemnity; Damage Waive r..........................78 --------------------------------- - SECTION 10.04. Successors and Assigns........... ...........................79 ---------------------- SECTION 10.05. Survival......................... ...........................82 -------- SECTION 10.06. Counterparts; Integration; Effect iveness....................82 --------------------------------- ------- SECTION 10.07. Severability..................... ...........................83 ------------ SECTION 10.08. Right of Setoff.................. ...........................83 --------------- SECTION 10.09. Governing Law; Jurisdiction; Cons ent to Service of Process..83 --------------------------------- ------------------------- SECTION 10.10. WAIVER OF JURY TRIAL............. ...........................84 -------------------- SECTION 10.11. Headings......................... ...........................84 -------- SECTION 10.12. Confidentiality.................. ...........................84 --------------- SECTION 10.13. USA PATRIOT Act.................. ...........................85 --------------- SECTION 10.14. Authorization of Company......... ...........................86 ------------------------ SCHEDULE 1.01 - Commitments SCHEDULE 4.06(a) - Litigation SCHEDULE 4.06(b) - Environmental Matters SCHEDULE 4.17 - Subsidiaries -iii-

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SCHEDULE 7.01 - Existing Indebtedness SCHEDULE 7.02 - Existing Liens SCHEDULE 7.06 - Existing Investments SCHEDULE 7.09 - Restrictive Agreements SCHEDULE 10.01 - Addresses for Notices EXHIBIT A - Form of Assignment and Assumpti on EXHIBIT B-1 - Form of Revolving Credit Note EXHIBIT B-2 - Form of [A][A-1]Term Loan Note EXHIBIT B-3 - Form of Swingline Loan Note EXHIBIT C - Form of Amended and Restated Se curity Agreement EXHIBIT D - Form of Subsidiary Joinder Agre ement EXHIBIT E-1 - Form of Subsidiary Borrower Des ignation Letter EXHIBIT E-2 - Form of Termination Letter EXHIBIT F - Form of Opinion of Counsel to t he Loan Parties EXHIBIT G - Form of Opinion of Special New York Counsel to JPMCB EXHIBIT H - Form of U.S. Tax Compliance Cer tificate

AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 28, 2008 (this "Agreement"), among 1-800-FLOWERS.COM, INC., the SUBSIDIARY BORROWERS party hereto, the GUARANTORS party hereto, the LENDERS party hereto, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.

W I T N E S S E T H :

WHEREAS, the Company (as hereinafter defined) entered into that certain Credit Agreement, dated as of May 1, 2006 (as amended, the "Existing Credit Agreement"), among the Company, the several lenders party thereto (the "Existing Lenders") and JPMorgan Chase Bank, N.A., as administrative agent, pursuant to which the Existing Lenders made available a senior secured credit facility in the initial aggregate principal amount of $135,000,000;

WHEREAS, the Company has requested that the Existing Lenders agree to amend and restate the Existing Credit Agreement to, among other things, provide for (x) an additional tranche of terms loans in the amount of $60,000,000 (the "A-1 Term Loans") and (y) an increase to the Revolving Credit Commitment (as hereinafter defined) in the amount of $90,000,000, to be used for working capital and other general corporate purposes (including, without limitation, the consummation of any Acquisitions permitted under this Agreement) of the Company and its Subsidiaries; and

WHEREAS, the parties to the Existing Credit Agreement wish to amend and restate the Existing Credit Agreement in its entirety upon the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein set forth, the parties hereto agree that the Existing Credit Agreement is hereby amended and restated as of the Effective Date (as hereinafter defined) to read in its entirety as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

"A Term Loans" means the term loans made by the Lenders to the Company pursuant to Section 2.01(b) of the Existing Credit Agreement. The outstanding aggregate amount of A Term Loans is $68,000,000 as of the Effective Date.

"A Term Loan Commitment" means, with respect to each A Term Loan Lender, the commitment, if any, of such A Term Loan Lender to make an A Term Loan on the Closing Date pursuant to the Existing Credit Agreement (which commitment was funded on the Closing Date).

"A Term Loan Lender" means a Lender with an outstanding A Term Loan.

"A Term Loan Maturity Date" means May 1, 2012.

"A-1 Term Loans" means the term loans made by the Lenders to the Company pursuant to Section 2.01(c).

"A-1 Term Loan Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make an A-1 Term Loan hereunder on the Effective Date in the amount of such Lender's A-1 Term Loan Commitment as set forth on Schedule 1.01 under the caption "A-1 Term Loan Commitment", or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its A-1 Term Loan Commitment, as applicable. The aggregate amount of the Lenders' A-1 Term Loan Commitments is $60,000,000 as of the Effective Date.

"A-1 Term Loan Lender" means a Lender with an A-1 Term Loan Commitment or, following the Effective Date, an outstanding A-1 Term Loan.

"A-1 Term Loan Maturity Date" means August 28, 2013.

"ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

"Acquisition" mean the acquisition by the Company or any other Loan Party of (a) Capital Stock of any other Person if, after giving effect thereto, (i) at least 80% of the Capital Stock of such other Person is owned by the Company or any other Loan Party, (ii) such other Person is consolidated with the Company in accordance with GAAP and (iii) such other Person is a Subsidiary Guarantor, (b) all or substantially all of the assets of any other Person or (c) assets constituting one or more business units of any other Person.

"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

"Administrative Agent" means JPMCB, in its capacity as administrative agent for the Lenders hereunder.

"Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent.

"Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

"Alternate Base Rate" means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 0.50%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

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"Applicable Percentage" means (a) with respect to any Revolving Credit Lender for purposes of Sections 2.04 or 2.05 or in respect of any indemnity claim under Section 10.03(c) arising out of an action or omission of the Swingline Lender or any Issuing Lender under this Agreement, the percentage of the total Revolving Credit Commitments represented by such Revolving Credit Lender's Revolving Credit Commitment, and (b) with respect to any Lender in respect of any indemnity claim under Section 10.03(c) arising out of an action or omission of the Administrative Agent under this Agreement, the percentage of the total Commitments or Loans of all Classes hereunder represented by the aggregate amount of such Lender's Commitments or Loans of all Classes hereunder. With respect to the Revolving Credit Lenders, if the Revolving Credit Commitments have terminated or expired, the Applicable Percentages shall be determined on the basis of the percentage of the total Revolving Credit Exposures represented by such Revolving Credit Lender's Revolving Credit Exposure.

"Applicable Rate" means, for any day, with respect to any ABR Loan or Eurodollar Loan, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption "ABR Spread", "Eurodollar Spread" or "Commitment Fee Rate", respectively, based upon the Consolidated Leverage Ratio as of the most recent determination date provided that from the Effective Date until the delivery of the Company's consolidated financial statements for the fiscal quarter ending on or nearest to December 31, 2008, the "Applicable Rate" shall be the applicable rate per annum set forth below in Category 3:

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============================ ================ ===== ================ ================== =============== === ================== Consolidated Leverage ABR Spread for Euro dollar Spread ABR Spread for Eurodollar Commitment Fee Ratio: A Term Loans for A Terms Loans A-1 Term Loans Spread for A-1 Rate and Revolving an d Revolving Terms Loans Credit Loans C redit Loans ---------------------------- ---------------- ----- ---------------- ------------------ --------------- --- ------------------ Category 1 1.50% 2.50% 2.00% 3.00% 0.50% Greater than or equal to 3.00:1.00 ---------------------------- ---------------- ----- ---------------- ------------------ --------------- --- ------------------ Category 2 1.25% 2.25% 1.75% 2.75% 0.45% ---------- Greater than or equal to 2.50:1.00 but less than 3.00:1.00 ---------------------------- ---------------- ----- ---------------- ------------------ --------------- --- ------------------ Category 3 1.00% 2.00% 1.50% 2.50% 0.40% ---------- Greater than or equal to 2.00:1.00 but less than 2.50:1.00 ---------------------------- ---------------- ----- ---------------- ------------------ --------------- --- ------------------ Category 4 0.75% 1.75% 1.25% 2.25% 0.35% ---------- Greater than or equal to 1.50:1.00 but less than 2.00:1.00 ---------------------------- ---------------- ----- ---------------- ------------------ --------------- --- ------------------ Category 5 0.50% 1.50% 1.00% 2.00% 0.30% ---------- Less than 1.50:1.00 ============================ ================ ===== ================ ================== =============== === ==================

For purposes of the foregoing, (i) the Consolidated Leverage Ratio shall be determined as of the end of each fiscal quarter of the Company based upon the Company's consolidated financial statements delivered pursuant to Section 6.01(a) or (b) (and the related compliance certificate delivered pursuant to Section 6.01(c)) and (ii) each change in the Applicable Rate resulting from a change in the Consolidated Leverage Ratio shall be effective during the period commencing on and including the date three Business Days after delivery to the Administrative Agent of such consolidated financial statements and compliance certificate indicating such change and ending on the date immediately preceding the effective date of the next such change; provided that the Consolidated Leverage Ratio shall be deemed to be in Category 1 (A) at any time that an Event of Default has occurred and is continuing or (B) if the Company fails to deliver the consolidated financial statements (and related compliance certificate) required to be delivered by it pursuant to Section 6.01(a), (b) and/or (c), during the period from the expiration of the time for delivery thereof specified in such sections until such financial statements and compliance certificate are delivered.

"Approved Fund" means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

"Asset Sale" means any Disposition of property or series of related Dispositions of property (excluding any such Disposition permitted by clauses (a), (b), (c), (d) and (e) of Section 7.04) which yields gross proceeds to the Company or any of its Subsidiaries (valued at the initial principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of $500,000.

"Assignment and Assumption" means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.

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"Assuming Revolving Credit Lender" has the meaning set forth in Section 2.08(c).

"Board" means the Board of Governors of the Federal Reserve System of the United States of America.

"Borrower" means the Company or any Subsidiary Borrower, as applicable.

"Borrower Guaranteed Obligations" has the meaning set forth in Section 3.01(b).

"Borrower Obligations" means, with respect to any Borrower, all of the Obligations of such Borrower.

"Borrowing" means (a) all ABR Loans (other than Swingline Loans) of the same Class made, converted or continued on the same date, (b) all Eurodollar Loans of the same Class that have the same Interest Period or (c) a Swingline Loan.

"Borrowing Request" means a request by a Borrower for a Borrowing in accordance with Section 2.03.

"Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

"Capital Expenditures" means, for any period, expenditures (including the aggregate amount of Capital Lease Obligations incurred during such period) made by the Company or any of its Subsidiaries to acquire or construct fixed assets, plant and equipment (including renewals, improvements and replacements, but excluding repairs) during such period computed in accordance with GAAP.

"Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

"Capital Stock" means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

"Cash Equivalent" means:

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(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

(b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's;

(c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;

(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) of this definition and entered into with a financial institution satisfying the criteria described in clause (c) of this definition; and

(e) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody's and (iii) have portfolio assets of at least $5,000,000,000.

"Change in Control" means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Exchange Act and the rules of the SEC thereunder as in effect on the date hereof) (other than James F. McCann, Christopher G. McCann and their respective descendants and/or trusts for their benefit and any other Person Controlled by any of the foregoing (collectively, the "McCann Group")), of shares representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company; or (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Company by Persons who were neither (i) nominated by the board of directors of the Company nor (ii) appointed by directors so nominated or (c) the McCann Group (as defined above) shall cease to own a majority of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company.

"Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or any Issuing Lender (or, for purposes of Section 2.14(b), by any lending office of such Lender or by such Lender's or such Issuing Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

"Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Credit Loans, A Term Loans, A-1 Term Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Credit Commitment or A-1 Term Loan Commitment.

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"Cleanup Period" has the meaning set forth in Section 2.10(c).

"Closing Date" means May 1, 2006.

"Code" means the Internal Revenue Code of 1986, as amended from time to time.

"Commitment" means a Revolving Credit Commitment, an A-1 Term Loan Commitment or any combination thereof (as the context requires).

"Company" means 1-800-FLOWERS.COM, Inc., a Delaware corporation.

"Consolidated EBITDA" means, for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) Consolidated Interest Expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) any extraordinary, unusual or non-recurring non-cash expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, non-cash losses on sales of assets outside of the ordinary course of business), (f) any non-cash stock-based compensation expense relating to stock options and restricted stock granted to employees or directors and (g) any non-cash charges resulting from writeoffs or write-downs of inventory during such period directly or indirectly attributable to Acquisitions permitted under this Agreement, and minus, (a) to the extent included in the statement of such Consolidated Net Income for such period, the sum of (i) any extraordinary, unusual or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business) and (ii) any other non-cash income and (b) any cash payments made during such period in respect of items described in clause (e) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were reflected as a charge in the statement of Consolidated Net Income, all as determined on a consolidated basis. For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a "Reference Period") pursuant to any determination of the Consolidated Leverage Ratio, (x) if at any time during such Reference Period the Company or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period and (y) if during such Reference Period the Company or any Subsidiary shall have made an Acquisition, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto as if such Acquisition occurred on the first day of such Reference Period. As used in this definition, "Material Disposition" means any Disposition of property or series of related Dispositions of property that yields gross proceeds to the Company or any of its Subsidiaries in excess of $5,000,000.

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"Consolidated Fixed Charge Coverage Ratio" means, at any date, the ratio of (a) Consolidated EBITDA for the period of four consecutive fiscal quarters of the Company ended on or most recently ended prior to such date, plus, without duplication and to the extent reflected as a charge in the statement of Consolidated Net Income for such period, Consolidated Lease Expenses for such period, minus Capital Expenditures for such period (other than to the extent such Capital Expenditures are financed with Indebtedness other than with the Loans) to (b) the sum of (i) Consolidated Interest Expense for such period plus (ii) Consolidated Lease Expenses for such period plus (iii) Restricted Payments made under Section 7.07(c) during such period plus (iv) all regularly scheduled payments of principal of Indebtedness for such period.

"Consolidated Funded Debt" means, at any date, all Indebtedness of the Company and its Subsidiaries that matures more than one year from the date of its creation or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including all current maturities and current sinking fund payments in respect of such Indebtedness whether or not required to be paid within one year from the date of its creation and, in the case of the Borrowers, Indebtedness in respect of the Loans, determined on a consolidated basis in accordance with GAAP.

"Consolidated Interest Expense" means, for any period, total interest expense (including that attributable to Capital Lease Obligations) of the Company and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Company and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Swap Agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP), minus interest income of the Company and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.

"Consolidated Lease Expenses" means, for any period, the aggregate amount of fixed and contingent rentals payable by the Company or any Subsidiary for such period with respect to operating leases of real and personal property, minus the aggregate amount of cash rentals received by the Company or any Subsidiary in respect of subleases of any such property for such period, determined on a consolidated basis in accordance with GAAP.

"Consolidated Leverage Ratio" means, at any date, the ratio of (a) the aggregate principal amount of all Consolidated Funded Debt on such date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of the Company ended on or most recently ended prior to such date.

"Consolidated Net Income" means, for any period, the consolidated net income (or loss) of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or loss) of any Person (other than a Subsidiary of the Company) in which the Company or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Company or such Subsidiary in the form of dividends or similar distributions and (b) the undistributed earnings of any Subsidiary of the Company (other than a Loan Party) to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary.

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"Consolidated Net Worth" means, at any date, the sum of (a) all amounts that would, in conformity with GAAP, be included on a consolidated balance sheet of the Company and its Subsidiaries under stockholders' equity at such date plus (b) (without duplication) the liquidation value of all preferred Capital Stock of the Company (other than such preferred stock that is mandatorily redeemable on or prior to the date that is six months after the A-1 Term Loan Maturity Date).

"Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

"Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto.

"Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

"DesignPac Acquisition" means the acquisition of the membership interests of DesignPac Gifts LLC, an Illinois limited liability company, pursuant to the Interest Purchase Agreement, dated as of April 30, 2008, by and among DPAC Holdings Inc., a Delaware corporation, DesignPac Gifts LLC, the Company and the founders named therein.

"Disclosed Matters" means the actions, suits and proceedings disclosed in Schedule 4.06(a) and the environmental matters disclosed in Schedule 4.06(b).

"Disposition" means, with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof (excluding the sale by the Company of its own Capital Stock).

"Dollars" or "$" refers to lawful money of the United States of America.

"Domestic Subsidiary" means any Subsidiary of the Company organized or incorporated under the laws of any jurisdiction within the United States of America.

"Effective Date" means the date (which shall be a Business Day not later than September 30, 2008) on which the conditions specified in Section 5.01 are satisfied (or waived in accordance with Section 10.02).

"Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating to pollution or protection of the environment and public health (to the extent relating to exposure to Hazardous Material), preservation or reclamation of natural resources, including those relating to the management, release or threatened release of any Hazardous Material.

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"Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Company or any Subsidiary arising under any Environmental Law and resulting from (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

"Equity Issuance" means (a) any issuance or sale by the Company or any of its Subsidiaries after the date hereof of (i) any of its Capital Stock, (ii) any warrants or options exercisable in respect of its Capital Stock (other than any warrants or options issued to directors, officers, employees or consultants of the Company or any of its Subsidiaries pursuant to benefit plans established in the ordinary course of business and any Capital Stock of the Company issued upon the exercise of such warrants or options) or (iii) any other security or instrument representing an equity interest (or the right to obtain any equity interest) in the Company or any of its Subsidiaries or (b) the receipt by the Company or any of its Subsidiaries after the date hereof of any capital contribution (whether or not evidenced by any equity security issued by the recipient of such contribution); provided that Equity Issuance shall not include (x) any such issuance or sale by any Subsidiary of the Company to the Company or any Subsidiary of the Company or (y) any capital contribution by the Company or any Subsidiary of the Company to any Subsidiary of the Company.

"Equity Rights" means, with respect to any Person, any subscriptions, options, warrants, commitments, preemptive rights or agreements of any kind (including any shareholders' or voting trust agreements) for the issuance, sale, registration or voting of, or securities convertible into, any additional shares of Capital Stock of any class or type of such Person.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.

"ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with any Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414(m) of the Code.

"ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Pension Plan (other than an event for which the 30-day notice period is waived); (b) with respect to plan years prior to 2008, the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) any failure by any Pension Plan to satisfy the minimum funding standards (within the meaning of Sections 412 or 430 of the Code or Section 302 of ERISA) applicable to such Pension Plan, whether or not waived; (d) the filing pursuant to Section 412 of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Pension Plan, or the failure to make by its due date a required installment under Section 430(j) of the Code with respect to any Pension Plan; (e) the incurrence by any Borrower or any of their ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Pension Plan; (f) a determination that any Pension Plan is,

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or is expected to be, in "at risk" status (within the meaning of Section 430 of the Code or Title IV of ERISA); (g) the receipt by any Borrower or any of their ERISA Affiliates from the PBGC or a plan administrator of any notice relating to an intention to terminate any Pension Plan or to appoint a trustee to administer any Pension Plan under Section 4042 of ERISA; (h) the incurrence by any Borrower or any of their ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Pension Plan or Multiemployer Plan; or (i) the receipt by any Borrower or any of their ERISA Affiliates of any notice from any plan administrator of any Multiemployer Plan concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent, in reorganization or in endangered or critical status (within the meaning of Section 432 of the Code or Section 305 or Title IV of ERISA).

"Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

"Event of Default" has the meaning assigned to such term in Article VIII.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Excluded Taxes" means, with respect to the Administrative Agent, any Lender, any Issuing Lender or any other recipient of any payment to be made by or on account of any obligation of any Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed on any Lender by the United States of America and (c) in the case of a Non-U.S. Lender (other than an assignee pursuant to a request by the Company under Section 2.18(b)), any withholding tax that is imposed on amounts payable to such Non-U.S. Lender at the time such Non-U.S. Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Non-U.S. Lender's failure to comply with Section 2.16(e), except to the extent that such Non-U.S. Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the applicable Borrower with respect to such withholding tax pursuant to Section 2.16(a).

"Existing Credit Agreement" has the meaning set forth in the recitals hereto.

"Existing Lenders" has the meaning set forth in the recitals hereto.

"Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

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"Foreign Lender" means any Lender or Issuing Lender that is not a "US person" as defined by Section 7701(a)(30) of the Code.

"Foreign Subsidiary" means any Subsidiary of the Company that is not a Domestic Subsidiary.

"GAAP" means generally accepted accounting principles in the United States of America.

"Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

"Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

"Guaranteed Obligations" means, collectively, the Borrower Guaranteed Obligations and the Subsidiary Borrower Guaranteed Obligations.

"Guarantors" means the Company and the Subsidiary Guarantors, in each case with respect to its respective Guaranteed Obligations.

"Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

"Increasing Revolving Credit Lender" has the meaning set forth in Section 2.08(c).

"Increasing Term Loan Lender" has the meaning set forth in Section 2.08(d).

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"Incremental Term Loan" has the meaning set forth in Section 2.08(d).

"Incremental Term Loan Effective Date" has the meaning set forth in Section 2.08(d).

"Incremental Term Loan Lender" has the meaning set forth in Section 2.08(d).

"Incremental Term Loan Supplement" has the meaning set forth in Section 2.08(d).

"Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances and (k) the liquidation value of all preferred Capital Stock of such Person that is mandatorily redeemable on or prior to the date that is six months after the A-1 Term Loan Maturity Date. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

"Indemnified Taxes" means Taxes other than Excluded Taxes.

"Interest Election Request" means a request by a Borrower to convert or continue a Borrowing in accordance with Section 2.07.

"Interest Payment Date" means (a) with respect to any ABR Loan (other than a Swingline Loan), each Quarterly Date, (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable thereto and, in the case of any Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three-months' duration after the first day of such Interest Period and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid.

"Interest Period" means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months or (if agreed to by all the Lenders of the applicable Class of Loans) nine or twelve months thereafter, as the applicable Borrower may elect; provided that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless

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such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing, and the date of a Borrowing comprising Loans of any Class that have been converted or continued shall be the effective date of the most recent conversion or continuation of such Borrowing.

"Investment" means, by any Person, (a) the amount paid or committed to be paid, or the value of property or services contributed or committed to be contributed, by such Person for or in connection with the acquisition by such Person of any stock, bonds, notes, debentures, partnership or other ownership interests or other securities of any other Person and (b) the amount of any advance, loan or extension of credit by such Person, to any other Person, or guaranty or other similar obligation of such Person with respect to any Indebtedness of such other Person (other than Indebtedness constituting trade payables in the ordinary course of business), and (without duplication) any amount committed to be advanced, loaned, or extended by such Person to any other Person, or any amount the payment of which is committed to be assured by a guaranty or similar obligation by such Person for the benefit of, such other Person.

"Issuing Lender" means each of JPMCB and Wachovia Bank, National Association, each in its capacity as the issuer of Letters of Credit hereunder, and in each case its successors in such capacity as provided in Section 2.05(j). Each Issuing Lender may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Lender, in which case the term "Issuing Lender" shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

"JPMCB" means JPMorgan Chase Bank, N.A.

"LC Disbursement" means a payment made by an Issuing Lender pursuant to a Letter of Credit.

"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrowers at such time. The LC Exposure of any Revolving Credit Lender at any time shall be its Applicable Percentage of the total LC Exposures at such time.

"Lenders" means the Persons listed on Schedule 1.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption or an instrument entered into pursuant to Section 2.08(c), other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term "Lenders" includes the Swingline Lender.

"Letter of Credit" means any standby or commercial letter of credit issued pursuant to this Agreement.

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"Letter of Credit Documents" means, with respect to any Letter of Credit, collectively, any application therefor and any other agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk with respect to such Letter of Credit or (b) any collateral security for any of such obligations, each as the same may be modified and supplemented and in effect from time to time.

"Letter of Credit Sublimit Amount" means $25,000,000.

"LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on the Reuters Screen LIBOR 01 Page (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

"Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

"Loan Documents" means, collectively, this Agreement, the Letter of Credit Documents, the promissory notes (if any) executed and delivered pursuant to Section 2.09(g) and the Security Documents.

"Loan Parties" means the Borrowers and the Guarantors.

"Loans" means the loans made by the Lenders to any or all the Borrowers pursuant to this Agreement.

"Margin Stock" means "margin stock" within the meaning of Regulations T, U and X of the Board.

"Material Adverse Effect" means a material adverse effect on (a) the business, property, operation or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Loan Parties to perform their respective obligations hereunder and under the other Loan Documents or (c) the validity or enforceability of this Agreement or any other Loan Document or the rights or remedies of the Administrative Agent and the Lenders hereunder or thereunder.

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"Material Indebtedness" means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the Company and its Subsidiaries in an aggregate outstanding principal amount exceeding $7,500,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Company or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Company or any Subsidiary would be required to pay if such Swap Agreement were terminated at such time.

"Moody's" means Moody's Investors Service, Inc.

"Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

"Napco Acquisition" means the acquisition of the assets of Napco Marketing Corp, a Florida corporation, pursuant to the Asset Purchase Agreement, dated as of July 21, 2008, by and among the Company, Napco Marketing Corp., a Delaware corporation and Napco Marketing Corp, a Florida corporation.

"Net Cash Proceeds" means (a) in connection with any Asset Sale or any Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or the sale or disposition of any non-cash consideration or otherwise, but only as and when received and excluding the portion of such deferred payment constituting interest) of such Asset Sale or Recovery Event, net of attorneys' fees, accountants' fees, investment banking fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset which is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security Document) and other customary costs, fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and net of amounts deposited in escrow in connection therewith or reasonably expected to be paid as a result of any purchase price adjustment, indemnities or reserves related thereto (such amounts shall be Net Cash Proceeds to the extent and at the time released or not required to be so used) and (b) in connection with any issuance or sale of equity securities or debt securities or instruments or the incurrence of loans or capital contribution, the cash proceeds received from such issuance, incurrence or capital contribution, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith.

"Non-U.S. Lender" means any Lender that is organized under the laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia.

"Obligations" means, collectively, (a) all of the Indebtedness, liabilities and obligations of any Loan Party to the Administrative Agent, the Lenders, the Swingline Lender and/or the Issuing Lenders arising under the Loan Documents (including all reimbursement obligations in respect of Letters of Credit), in each case whether fixed, contingent (including without limitation those

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Obligations incurred as a Guarantor pursuant to Article III), now existing or hereafter arising, created, assumed, incurred or acquired, and whether before or after the occurrence of any Event of Default under clause (h) or (i) of Article VIII and including any obligation or liability in respect of any breach of any representation or warranty and all post-petition interest and funding losses, whether or not allowed as a claim in any proceeding arising in connection with such an event, (b) all obligations of any Loan Party owing to any Lender or any Affiliate of any Lender under any treasury management services agreement, any service terms or any service agreements, including electronic payments service terms and/or automated clearing house agreements, and all overdrafts on any account which any Loan Party maintains with any Lender or any Affiliate of any Lender and (c) all obligations of any Loan Party owing to any Lender or any Affiliate of any Lender under (i) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements, (ii) other agreements or arrangements designed to manage interest rates or interest rate risk and (iii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices. The term `Obligations" shall include Borrower Obligations and Subsidiary Borrower Obligations.

"Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under this Agreement or any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

"Participant" has the meaning set forth in Section 10.04(c).

"PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

"Pension Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which any Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

"Permitted Liens" means:

(a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 6.04;

(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 6.04;

(c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations;

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(d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VIII; and

(f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Company or any Subsidiary;

provided that the term "Permitted Liens" shall not include any Lien securing Indebtedness.

"Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

"Prime Rate" means the rate of interest per annum publicly announced from time to time by JPMCB as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

"Principal Payment Dates" means (a) the Quarterly Dates of each year, commencing with the Quarterly Date falling on or nearest to September 30, 2008, in the case of A Term Loans, and December 31, 2008, in the case of A-1 Term Loans, and (b) the A Term Loan Maturity Date, in the case of A Term Loans, and the A-1 Term Loan Maturity Date, in the case of A-1 Term Loans.

"Pro Forma Financial Statements" has the meaning set forth in Section 5.01(h).

"Quarterly Dates" means the last Business Day of September, December, March and June in each year, the first of which shall be the first such day after the date hereof.

"Recovery Event" means any settlement of or payment in respect of any property or casualty insurance claim (but not to the extent such claim compensates for any loss of revenues or interruption of business or operations caused thereby) or any condemnation proceeding relating to any asset of the Company or any of its Subsidiaries with a value in excess of $500,000.

"Register" has the meaning set forth in Section 10.04.

"Reinvestment Deferred Amount" means, with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by the Company or any of its Subsidiaries in connection therewith which are not applied to prepay the Term Loans pursuant to Section 2.10(b)(iii) as a result of the delivery of a Reinvestment Notice.

"Reinvestment Event" means any Asset Sale or Recovery Event in respect of which the Company has delivered a Reinvestment Notice.

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"Reinvestment Notice" means a written notice executed by a Responsible Officer stating that no Default has occurred and is continuing and that the Company or any Subsidiary intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or Recovery Event to acquire assets useful in its business.

"Reinvestment Prepayment Amount" means, with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date to acquire assets useful in the Company's or any Subsidiary's business.

"Reinvestment Prepayment Date" means, with respect to any Reinvestment Event, the earlier of (a) the date occurring twelve months after such Reinvestment Event (or in the case of any Reinvestment Event arising out of a casualty insurance claim where the Company or any of its Subsidiaries is rebuilding or restoring the property subject to such casualty, the date occurring twelve months after such Reinvestment Event) and (b) the date on which the Company shall have determined not to, or shall have otherwise ceased to, acquire assets useful in the Company's or any Subsidiary's business with all or any portion of the relevant Reinvestment Deferred Amount.

"Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates.

"Required Lenders" means, at any time, Lenders having Revolving Credit Exposures, outstanding Term Loans and unused Commitments representing more than 50% of the sum of the total Revolving Credit Exposures, outstanding Term Loans and unused Revolving Credit Commitments at such time. The "Required Lenders" of a particular Class of Loans means Lenders having Revolving Credit Exposures, outstanding Term Loans and/or unused Commitments of such Class, as applicable, representing more than 50% of the total Revolving Credit Exposures, outstanding Term Loans and/or unused Commitments of such Class, as applicable, at such time.

"Requirement of Law" means, as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

"Responsible Officer" means the chief executive officer, president or chief financial officer of the Company, but in any event, with respect to financial matters, the chief financial officer of the Company.

"Restricted Payment" means any dividend or other distribution (whether in cash, securities or other property) with respect to any Capital Stock of the Company or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Capital Stock of the Company or any option, warrant or other right to acquire any such Capital Stock of the Company.

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"Revolving Credit", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are made pursuant to Section 2.01(a).

"Revolving Credit Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Revolving Credit Commitment Termination Date and the date of termination of the Revolving Credit Commitments.

"Revolving Credit Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Credit Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such commitment may be (a) reduced or increased from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Revolving Credit Commitment is set forth on Schedule 1.01 under the caption "Revolving Credit Commitment", or in the Assignment and Acceptance or other instrument pursuant to which such Lender shall have assumed its Revolving Credit Commitment, as applicable. The initial aggregate amount of the Revolving Credit Commitments is $165,000,000.

"Revolving Credit Commitment Increase" has the meaning set forth in Section 2.08(c).

"Revolving Credit Commitment Increase Date" has the meaning set forth in Section 2.08(c).

"Revolving Credit Commitment Termination Date" means April 29, 2011.

"Revolving Credit Exposure" means, with respect to any Revolving Credit Lender at any time, the sum of (a) the outstanding principal amount of such Lender's Revolving Credit Loans, (b) the LC Exposure of such Lender and (c) the Swingline Exposure of such Lender at such time.

"Revolving Credit Lender" means a Lender with a Revolving Credit Commitment or, if the Revolving Credit Commitments have terminated or expired, a Lender with Revolving Credit Exposure.

"Revolving Credit Loans" means the loans made by the Lenders to the Borrowers pursuant to Section 2.01(a).

"S&P" means Standard & Poor's Ratings Services.

"SEC" means the Securities and Exchange Commission, or any regulatory body that succeeds to the functions thereof.

"Security Agreement" means an Amended and Restated Security Agreement substantially in the form of Exhibit C between the Loan Parties and the Administrative Agent.

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"Security Documents" means, collectively, the Security Agreement, each Subsidiary Joinder Agreement, any security or similar agreement entered into pursuant to Section 6.11 in favor of the Administrative Agent, and all Uniform Commercial Code financing statements required by the terms of any such agreement to be filed with respect to the security interests created pursuant thereto.

"Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

"Subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless otherwise specified, "Subsidiary" means a Subsidiary of the Company.

"Subsidiary Borrower" means (a) each Domestic Subsidiary of the Company (if any) that is listed under the caption "Subsidiary Borrowers" on the signature pages hereof and (b) each other Domestic Subsidiary of the Company that shall become a Subsidiary Borrower pursuant to Section 2.19, in each case so long as such Subsidiary shall remain a Subsidiary Borrower hereunder.

"Subsidiary Borrower Designation Letter" means the Subsidiary Borrower Designation Letter entered into by the Company and a wholly-owned Domestic Subsidiary of the Company pursuant to Section 2.19, pursuant to which such Subsidiary shall (subject to the terms and conditions of Section 2.19(b)) be designated as a Subsidiary Borrower, substantially in the form of Exhibit E-1 or any other form approved by the Administrative Agent.

"Subsidiary Borrower Guaranteed Obligations" has the meaning set forth in Section 3.01.

"Subsidiary Borrower Obligations" means, with respect to any Subsidiary Borrower, all of the Obligations of such Subsidiary Borrower.

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"Subsidiary Guarantors" means (a) each Subsidiary of the Company that is listed under the caption "Subsidiary Guarantors" on the signature pages hereof and (b) each other Subsidiary of the Company that shall become a Subsidiary Guarantor pursuant to Section 6.11.

"Subsidiary Joinder Agreement" means a Subsidiary Joinder Assumption Agreement substantially in the form of Exhibit D executed and delivered by a Domestic Subsidiary that, pursuant to Section 6.11(a), is required to become a "Subsidiary Guarantor" hereunder and a "Securing Party" under the Security Agreement in favor of the Administrative Agent.

"Swap Agreement" means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Company or any Subsidiary shall be a Swap Agreement.

"Swingline Exposure" means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time.

"Swingline Lender" means JPMCB, in its capacity as lender of Swingline Loans hereunder.

"Swingline Loan" means a Loan made pursuant to Section 2.04.

"Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

"Term", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are made pursuant to Section 2.01(b) or 2.01(c).

"Term Loans" means the collective reference to the A Term Loans and the A-1 Term Loans.

"Term Loan Lender" means a Lender with an outstanding A Term Loan or A-1 Term Loan.

"Termination Letter" has the meaning set forth in Section 2.19(c).

"Transactions" means the execution, delivery and performance by each Loan Party of this Agreement and the other Loan Documents to which such Loan Party is intended to be a party, the borrowing of Loans hereunder and the use of proceeds thereof, and the issuance of Letters of Credit hereunder.

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"Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

"Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.02. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

SECTION 1.03. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Company notifies the Administrative Agent that the Company requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Company that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. To enable the ready and consistent determination of compliance with the covenants set forth in Article VII, the Company will not permit the fiscal year of the Company to end on a day other than July 1 or any other day within one week of July 1.

ARTICLE II

THE CREDITS

SECTION 2.01. The Commitments.

(a) Revolving Credit Loans. Subject to the terms and conditions set forth herein, each Revolving Credit Lender agrees to make Revolving Credit Loans to any of the Borrowers from time to time during the Revolving Credit Availability

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Period in an aggregate principal amount that will not result in (i) such Lender's Revolving Credit Exposure exceeding such Lender's Revolving Credit Commitment or (ii) the total Revolving Credit Exposures exceeding the total Revolving Credit Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may borrow, prepay and reborrow Revolving Credit Loans.

(b) Term Loans. Each A Term Loan Lender made to the Company on the Closing Date shall continue to be outstanding under this Agreement and governed by the terms of this Agreement. Amounts prepaid or repaid in respect of A Term Loans may not be reborrowed.

(b) A-1 Term Loans. Subject to the terms and conditions set forth herein, each A-1 Term Loan Lender agrees to make an A-1 Term Loan to the Company on the Effective Date in a principal amount equal to its A-1 Term Loan Commitment. Amounts prepaid or repaid in respect of A-1 Term Loans may not be reborrowed.

SECTION 2.02. Loans and Borrowings.

(a) Obligations of Lenders. Each Loan shall be made as part of a Borrowing by any Borrower consisting of Loans of the same Class and Type made to such Borrower by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required.

(b) Type of Loans. Subject to Section 2.13, each Borrowing by any Borrower shall be comprised entirely of ABR Loans or of Eurodollar Loans as such Borrower may request in accordance herewith. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the applicable Borrower to repay such Loan in accordance with the terms of this Agreement.

(c) Minimum Amounts; Limitation on Number of Borrowings. Each Eurodollar Borrowing shall be in an aggregate amount of $3,000,000 or a larger multiple of $500,000. Each ABR Borrowing shall be in an aggregate amount equal to $1,000,000 or a larger multiple of $100,000; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused amount of the total Revolving Credit Commitment or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(f). Each Swingline Loan shall be in an amount that is a multiple of $100,000 and not less than $100,000. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of six Eurodollar Borrowings outstanding.

(d) Limitations on Interest Periods. Notwithstanding any other provision of this Agreement, no Borrower shall be entitled to request (or to elect to convert to or continue as a Eurodollar Borrowing) (i) any Revolving Credit Eurodollar Borrowing if the Interest Period requested therefor would end after the Revolving Credit Commitment Termination Date; (ii) any Term Eurodollar Borrowing if the Interest Period requested therefor would end after the A Term Loan

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Maturity Date or A-1 Term Loan Maturity Date, as the case may be; or (iii) any Term Eurodollar Borrowing if the Interest Period requested therefor would commence before and end after any applicable Principal Payment Date unless, after giving effect thereto, the aggregate principal amount of the A Term Loans or A-1 Term Loans, as the case may be, having Interest Periods that end after such Principal Payment Date shall be equal to or less than the aggregate principal amount of the Term Loans and A-1 Term Loans, as the case may be, permitted to be outstanding after giving effect to the applicable payments of principal required to be made on such Principal Payment Date.

SECTION 2.03. Requests for Borrowings.

(a) Notice by the Borrowers. To request a Borrowing, a Borrower shall notify the Administrative Agent of such request by telephone (i) in the case of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of the proposed Borrowing or (ii) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(f) may be given not later than 12:00 noon, New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by such Borrower.

(b) Content of Borrowing Requests. Each telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

(i) whether the requested Borrowing is to be a Revolving Credit Borrowing or Term Borrowing;

(i) the aggregate amount of the requested Borrowing;

(iii) the date of such Borrowing, which shall be a Business Day;

(iv) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

(v) in the case of a Eurodollar Borrowing, the Interest Period therefor, which shall be a period contemplated by the definition of the term "Interest Period" and permitted under Section 2.02(d); and

(vi) the location and number of the applicable Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06.

(c) Notice by the Administrative Agent to the Lenders. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing.

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(d) Failure to Elect. If no election as to the Type of a Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, the requested Borrowing shall be made instead as an ABR Borrowing.

SECTION 2.04. Swingline Loans.

(a) Agreement to Make Swingline Loans. Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Company from time to time during the Revolving Credit Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $10,000,000 or (ii) the total Revolving Credit Exposures exceeding the total Revolving Credit Commitments; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Company may borrow, prepay and reborrow Swingline Loans.

(b) Notice of Swingline Loans by Company. To request a Swingline Loan, the Company shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than 12:00 noon, New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Company. The Swingline Lender shall make each Swingline Loan available to the Company by means of a credit to an account of the Company with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(f), by remittance to the applicable Issuing Lender) by 3:00 p.m., New York City time, on the requested date of such Swingline Loan.

(c) Participations by Lenders in Swingline Loans. The Swingline Lender may by written notice given to the Administrative Agent not later than 10:00 a.m., New York City time, on any Business Day require the Revolving Credit Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Revolving Credit Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Revolving Credit Lender, specifying in such notice such Revolving Credit Lender's Applicable Percentage of such Swingline Loan or Loans. Each Revolving Credit Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Revolving Credit Lender's Applicable Percentage of such Swingline Loan or Loans. Each Revolving Credit Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Revolving Credit Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Revolving Credit Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving Credit Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Revolving Credit

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Lenders. The Administrative Agent shall notify the Company of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Company (or other party on behalf of the Company) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Credit Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to the Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Company for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Company of any default in the payment thereof.

SECTION 2.05. Letters of Credit.

(a) General. Subject to the terms and conditions set forth herein, in addition to the Loans provided for in Section 2.01, any Borrower may request an Issuing Lender to issue, at any time and from time to time during the Revolving Credit Availability Period, Letters of Credit denominated in Dollars for such Borrower's account in such form as is acceptable to such Issuing Lender in its reasonable determination. Letters of Credit issued hereunder shall constitute utilization of the Commitments.

(b) Notice of Issuance, Amendment, Renewal or Extension. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), a Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the applicable Issuing Lender and the Administrative Agent) to such Issuing Lender and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (d) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by an Issuing Lender, such Borrower also shall submit a letter of credit application on such Issuing Lender's standard form in connection with any request for a Letter of Credit. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by such Borrower to, or entered into by such Borrower with, the applicable Issuing Lender relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

(c) Limitations on Amounts. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the applicable Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the total LC Exposures shall not exceed the Letter of Credit Sublimit Amount and (ii) the total Revolving Credit Exposures shall not exceed the total Revolving Credit Commitments.

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(d) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Revolving Credit Commitment Termination Date.

(e) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) by an Issuing Lender, and without any further action on the part of such Issuing Lender or the Revolving Credit Lenders, such Issuing Lender hereby grants to each Revolving Credit Lender, and each Revolving Credit Lender hereby acquires from such Issuing Lender, a participation in such Letter of Credit equal to such Revolving Credit Lender's Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. Each Revolving Credit Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments.

In consideration and in furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for account of each Issuing Lender, such Revolving Credit Lender's Applicable Percentage of each LC Disbursement made by such Issuing Lender promptly upon the request of such Issuing Lender at any time from the time of such LC Disbursement until such LC Disbursement is reimbursed by the applicable Borrower or at any time after any reimbursement payment is required to be refunded to such Borrower for any reason. Such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each such payment shall be made in the same manner as provided in Section 2.06 with respect to Revolving Credit Loans made by such Revolving Credit Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving Credit Lenders), and the Administrative Agent shall promptly pay to the applicable Issuing Lender the amounts so received by it from the Revolving Credit Lenders. Promptly following receipt by the Administrative Agent of any payment from a Borrower pursuant to paragraph (f) of this Section, the Administrative Agent shall distribute such payment to the applicable Issuing Lender or, to the extent that the Revolving Credit Lenders have made payments pursuant to this paragraph to reimburse such Issuing Lender, then to such Revolving Credit Lenders and such Issuing Lender as their interests may appear. Any payment made by a Revolving Credit Lender pursuant to this paragraph to reimburse any Issuing Lender for any LC Disbursement (other than the funding of ABR Revolving Credit Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve such Borrower of its obligation to reimburse such LC Disbursement.

(f) Reimbursement. If any Issuing Lender shall make any LC Disbursement in respect of a Letter of Credit, the applicable Borrower shall reimburse such Issuing Lender in respect of such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on (i) the Business Day that such Borrower receives notice of such LC Disbursement, if such notice is received prior to 10:00 a.m., New York City time, or (ii) the Business Day immediately following the day that such Borrower receives such notice, if such notice is not received prior to such time; provided that, if such LC Disbursement is not less than $100,000, such Borrower may, subject to the conditions to borrowing set forth

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herein, request in accordance with Section 2.03 that such payment be financed with an ABR Revolving Credit Borrowing or (in the case of the Company) a Swingline Loan in an equivalent amount and, to the extent so financed, such Borrower's obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Credit Borrowing or (in the case of the Company) Swingline Loan.

If a Borrower fails to make such payment when due, the Administrative Agent shall notify each Revolving Credit Lender of the applicable LC Disbursement, the payment then due from such Borrower in respect thereof and such Revolving Credit Lender's Applicable Percentage thereof.

(g) Obligations Absolute. Each Borrower's obligation to reimburse LC Disbursements as provided in paragraph (f) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by any Issuing Lender under a Letter of Credit against presentation of a draft or other document that does not comply strictly with the terms of such Letter of Credit, and (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, such Borrower's obligations hereunder. Neither the Administrative Agent, the Revolving Credit Lenders nor any Issuing Lender, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of such Issuing Lender; provided that the foregoing shall not be construed to excuse such Issuing Lender from liability to the applicable Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by such Borrower to the extent permitted by applicable law) suffered by such Borrower that are caused by such Issuing Lender's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of any Issuing Lender (as finally determined by a court of competent jurisdiction), such Issuing Lender shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, any Issuing Lender may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(h) Disbursement Procedures. Each Issuing Lender shall, within a reasonable time following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Each Issuing Lender

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shall promptly after such examination notify the Administrative Agent and the applicable Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing Lender has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve such Borrower of its obligation to reimburse such Issuing Lender and the Revolving Credit Lenders with respect to any such LC Disbursement.

(i) Interim Interest. If any Issuing Lender shall make any LC Disbursement, then, unless the applicable Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that such Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving Credit Loans; provided that, if such Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (f) of this Section, then Section 2.12(c) shall apply. Interest accrued pursuant to this paragraph shall be for account of the applicable Issuing Lender, except that interest accrued on and after the date of payment by any Revolving Credit Lender pursuant to paragraph (f) of this Section to reimburse such Issuing Lender shall be for account of such Revolving Credit Lender to the extent of such payment.

(j) Replacement of Issuing Lender. Any Issuing Lender may be replaced at any time by written agreement among the Company, the Administrative Agent, the replaced Issuing Lender and the successor Issuing Lender thereto. The Administrative Agent shall notify the Revolving Credit Lenders of any such replacement of an Issuing Lender. At the time any such replacement shall become effective, the Company shall pay all unpaid fees accrued for account of the replaced Issuing Lender pursuant to Section 2.11(b). From and after the effective date of any such replacement, (i) the successor Issuing Lender shall have all the rights and obligations of the replaced Issuing Lender under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Lender" shall be deemed to refer to such successor or to any previous Issuing Lender, or to such successor and all previous Issuing Lenders, as the context shall require. After the replacement of an Issuing Lender hereunder, the replaced Issuing Lender shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Lender under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

(k) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Company receives notice from the Administrative Agent or the Required Revolving Credit Lenders (or, if the maturity of the Revolving Credit Loans has been accelerated, Revolving Credit Lenders representing greater than 50% of the total LC Exposures) demanding the deposit of cash collateral pursuant to this paragraph, the Company shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to 105% of the total LC Exposures as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to any Loan Party described in clause (h) or (i) of Article VIII. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Loan Parties under this Agreement and the other Loan Documents. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and

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sole discretion of the Administrative Agent and at the Company's risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse each Issuing Lender for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrowers for the LC Exposure at such time or, if the maturity of the Revolving Credit Loans has been accelerated (but subject to the consent of Revolving Credit Lenders representing greater than 50% of the total LC Exposures), be applied to satisfy other obligations of the Loan Parties under this Agreement and the other Loan Documents. If the Company is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Company within three Business Days after all Events of Default have been cured or waived.

SECTION 2.06. Funding of Borrowings.

(a) Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.04. The Administrative Agent will make such Loans available to the applicable Borrower by promptly crediting the amounts so received, in like funds, to an account of such Borrower designated by such Borrower in the applicable Borrowing Request; provided that ABR Revolving Credit Borrowings made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(f) shall be remitted by the Administrative Agent to the applicable Issuing Lender.

(b) Presumption by the Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the applicable Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and such Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to such Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of such Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing.

SECTION 2.07. Interest Elections.

(a) Elections by the Borrowers. The Loans constituting each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the applicable

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Borrower may elect to convert such Borrowing to a Borrowing of a different Type or to continue such Borrowing as a Borrowing of the same Type and, in the case of a Eurodollar Borrowing, may elect Interest Periods, all as provided in this Section. The applicable Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans of the respective Class constituting such Borrowing, and the Loans of such Class constituting each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued.

(b) Notice of Elections. To make an election pursuant to this Section, the applicable Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if such Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by such Borrower.

(c) Content of Interest Election Requests. Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period" and permitted under Section 2.02(d); provided that with respect to the conversion of the initial Borrowing from an ABR Borrowing to a Eurodollar Borrowing effective on August 28, 2008, the Interest Period for such Eurodollar Borrowing shall end on September 30, 2008.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the applicable Borrower shall be deemed to have selected an Interest Period of one month's duration.

(d) Notice by the Administrative Agent to the Lenders. Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing.

(e) Failure to Elect; Events of Default. If a Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing

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is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Company, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

SECTION 2.08. Termination, Reduction and Increase of the Commitments.

(a) Scheduled Termination. Unless previously terminated, (i) the A-1 Term Loan Commitments shall terminate at 5:00 p.m., New York City time, on the Effective Date and (ii) the Revolving Credit Commitments shall terminate on the Revolving Credit Commitment Termination Date.

(b) Voluntary Termination or Reduction. The Company may at any time terminate, or from time to time reduce, the Revolving Credit Commitments; provided that (i) each reduction of the Revolving Credit Commitment pursuant to this Section shall be in an amount that is $1,000,000 or a larger multiple of $1,000,000 and (ii) the Company shall not terminate or reduce the Revolving Credit Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.10, the total Revolving Credit Exposures would exceed the total Revolving Credit Commitments. The Company shall notify the Administrative Agent of any election to terminate or reduce the Revolving Credit Commitments under this paragraph (b) at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Company pursuant to this Section shall be irrevocable; provided that a notice of such termination may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Company (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Revolving Credit Commitments shall be permanent.

(c) Increase of Revolving Credit Commitment.

(i) Requests for Increase. The Company may propose at any time that the Revolving Credit Commitments hereunder be increased (each such proposed increase being a "Revolving Credit Commitment Increase") by having an existing Revolving Credit Lender agree to increase its then existing Revolving Credit Commitment (each an "Increasing Revolving Credit Lender") and/or by adding as a new Revolving Credit Lender hereunder any Person which shall agree to provide a Revolving Credit Commitment hereunder (each an "Assuming Revolving Credit Lender"), in each case with the consent of the Administrative Agent, each Issuing Lender and the Swingline Lender (such consent in each case not to be unreasonably withheld), by notice to the Administrative Agent specifying the amount of the relevant Revolving Credit Commitment Increase, the Revolving Credit Lender(s) providing for such Revolving Credit Commitment Increase and the date on which such increase is to be effective (the "Revolving Credit Commitment Increase Date"), which shall be a Business Day at least three Business Days after delivery of such notice and 30 days prior to the Revolving Credit Commitment Termination Date; provided that:

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(A) the minimum amount of each Revolving Credit Commitment Increase shall be $5,000,000 or a larger multiple of $1,000,000;

(B) the aggregate amount of all Revolving Credit Commitment Increases hereunder, together with the aggregate amount of all Incremental Term Loans, shall not exceed $50,000,000;

(C) both at the time of any such request and upon the effectiveness of any Revolving Credit Commitment Increases, no Default shall have occurred and be continuing or would result from such proposed Revolving Credit Commitment Increase; and

(D) the representations and warranties set forth in Article IV and in the other Loan Documents shall be true and correct on and as of the Revolving Credit Commitment Increase Date as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).

Each notice by the Company under this paragraph shall be deemed to constitute a representation and warranty by the Company Parties as to the matters specified in clauses (C) and (D) above. Notwithstanding anything herein to the contrary, no Revolving Credit Lender shall have any obligation hereunder to become an Increasing Revolving Credit Lender and any election to do so shall be in the sole discretion of each Revolving Credit Lender.

(ii) Effectiveness of Increase. Each Revolving Credit Commitment Increase (and the increase of the Revolving Credit Commitment of each Increasing Revolving Credit Lender and/or the new Revolving Credit Commitment of each Assuming Revolving Credit Lender, as applicable, resulting therefrom) shall become effective as of the relevant Revolving Credit Commitment Increase Date upon receipt by the Administrative Agent, on or prior to 9:00 a.m., New York City time, on such Revolving Credit Commitment Increase Date, of (A) a certificate of a duly authorized officer of the Company stating that the conditions with respect to such Revolving Credit Commitment Increase under this paragraph (c) have been satisfied, (B) an agreement, in form and substance satisfactory to the Company and the Administrative Agent, pursuant to which, effective as of such Revolving Credit Commitment Increase Date, as applicable, the Revolving Credit Commitment of each such Increasing Revolving Credit Lender shall be increased or each such Assuming Revolving Credit Lender shall undertake a Revolving Credit Commitment, in each case duly executed by such Increasing Revolving Credit Lender or Assuming Revolving Credit Lender, as the case may be, and the Company and acknowledged by the Administrative Agent and (C) such certificates or other documents from the Borrowers reasonably requested by the Administrative Agent in connection with such Revolving Credit Commitment Increase. Upon the Administrative Agent's receipt of a fully executed agreement from each Increasing Revolving Credit Lender and/or Assuming Revolving Credit Lender referred to in clause (B) above, together with the certificate and other documents referred to in clauses (A) and (C) above, the Administrative Agent shall record the information contained in each such agreement in the Register and give prompt notice of the relevant Revolving Credit Commitment Increase to the Company and the Lenders (including, if applicable, each Assuming Revolving Credit Lender). On each Revolving Credit Commitment Increase Date, the Borrowers shall simultaneously (i) prepay in full the outstanding Revolving Credit Loans (if any) held by the Revolving Credit Lenders immediately prior to giving effect

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to the relevant Revolving Credit Commitment Increase, (ii) if any Borrower shall have so requested in accordance with this Agreement, borrow new Revolving Credit Loans from all Revolving Credit Lenders (including, if applicable, any Assuming Revolving Credit Lender) such that, after giving effect thereto, the Revolving Credit Loans are held ratably by the Revolving Credit Lenders in accordance with their respective Revolving Credit Commitments (after giving effect to such Revolving Credit Commitment Increase) and (iii) pay to the Revolving Credit Lenders the amounts, if any, payable under Section 2.15; provided that, notwithstanding the foregoing, at the election of the Administrative Agent in its sole discretion, any Revolving Credit Loans outstanding on such Revolving Credit Commitment Increase Date shall be reallocated among the Revolving Credit Lenders to the extent necessary to keep the outstanding Revolving Credit Loans ratable with any revised pro rata shares of such Lenders arising from any nonratable increase in the Revolving Credit Commitments under this Section 2.08(c). Upon each such Revolving Credit Commitment Increase, the participation interests of the Revolving Credit Lenders in the then outstanding Letters of Credit and Swingline Loans shall automatically be adjusted to reflect, and each Revolving Credit Lender (including, if applicable, each Assuming Revolving Credit Lender) shall have a participation in each such Letter of Credit and Swingline Loan equal to, the Revolving Credit Lenders' respective Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit or such Swingline Loan, as applicable, after giving effect to such increase.

(d) Incremental Term Loans.

(i) Requests for Incremental Term Loans. The Company and any one or more Lenders or other lenders arranged by the Company and reasonably acceptable to the Administrative Agent (an "Incremental Term Loan Lender") may from time to time agree that such Incremental Term Loan Lenders shall make one or more tranches of term loans available to the Company (each an "Incremental Term Loan"). Any such Incremental Term Loan shall be made available (the date such Incremental Term Loan is made available, an "Incremental Term Loan Effective Date") to the Company pursuant to a supplement to this Agreement in form and substance reasonably satisfactory to the Administration Agent (an "Incremental Term Loan Supplement") executed and delivered by the Company, the applicable Incremental Term Loan Lenders and the Administrative Agent (which Incremental Term Loan Supplement may include such amendments to this Agreement as shall be required in the reasonable judgment of the Administrative Agent to effect the intent of this Section); provided that:

(A) the minimum amount of each Incremental Term Loan shall be $5,000,000 or a larger multiple of $1,000,000;

(B) the aggregate amount of all Incremental Term Loans hereunder, together with the aggregate amount of Revolving Credit Commitment Increases made under Section 2.08(c), shall not exceed $50,000,000;

(C) both at the time of any such request and upon the effectiveness of any Incremental Term Loans, no Default shall have occurred and be continuing or would result from such proposed Incremental Term Loan;

(D) the representations and warranties set forth in Article IV and in the other Loan Documents shall be true and correct on and as of the Incremental Term Loan Effective Date

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as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and

(E) the Incremental Term Loans shall have the same terms and conditions as the Term Loans except that Incremental Term Loans may have (i) a final maturity no earlier than the A-1 Term Loan Maturity Date, (ii) a weighted average life to maturity no shorter than the weighted average life of the A-1 Term Loans and (iii) pricing (which shall include all upfront or similar fees or original issue discount payable to all Lenders providing such Incremental Term Loans) different than the pricing applicable to the A Term Loans and A-1 Term Loans.

Notwithstanding anything herein to the contrary, no Lender shall have any obligation hereunder to become an Incremental Term Loan Lender and any election to do so shall be in the sole discretion of each Lender.

(ii) Effectiveness of Increase. On each Incremental Term Loan Effective Date, the Company shall deliver to the Administrative Agent (A) a certificate of a duly authorized officer of the Company stating that the conditions with respect to such Incremental Term Loan under this paragraph (d) have been satisfied, (B) an executed Incremental Term Loan Supplement and (C) such certificates or other documents from the Company reasonably requested by the Administrative Agent in connection with such Incremental Term Loan. Upon the Administrative Agent's receipt of a fully executed Incremental Term Loan Supplement, together with the certificate and other documents referred to in clauses (A) and (C) above, the Administrative Agent shall record the information contained in each such agreement in the Register and give prompt notice of the relevant Incremental Term Loan to the Company and the Lenders.

SECTION 2.09. Repayment of Loans; Evidence of Debt.

(a) Repayment.

(i) Each Borrower hereby unconditionally promises to pay to the Administrative Agent for account of each Revolving Credit Lender the full outstanding principal amount of such Revolving Credit Lender's Revolving Credit Loans made to such Borrower, and each such Revolving Credit Loan shall mature, on the Revolving Credit Commitment Termination Date.

(ii) The Company hereby unconditionally promises to pay to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Credit Commitment Termination Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least two Business Days after such Swingline Loan is made (provided that on each date that a Revolving Credit Borrowing is made, the Company shall repay all Swingline Loans then outstanding); and

(iii) The Company hereby unconditionally promises to pay to the Administrative Agent for account of each A Term Loan Lender the principal amount of the A Term Loan held by such A Term Loan Lender in 16 consecutive quarterly installments payable on the Principal Payment Dates, the aggregate principal

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amount to be paid on each Principal Payment Date in respect of all A Term Loans held by the A Term Loan Lenders to be in the amount specified below (with the final such installment being in the aggregate principal amount of the A Term Loans then outstanding):

(iv) The Company hereby unconditionally promises to pay to the Administrative Agent for account of each A-1 Term Loan Lender the principal amount of the A-1 Term Loans held by such A-1 Term Loan Lender in 20 consecutive quarterly installments payable on the Principal Payment Dates, the aggregate principal amount to be paid on each Principal Payment Date in respect of all A-1 Term Loans held by the A-1 Term Loan Lenders to be in the amount specified below (with the final such installment being in the aggregate principal amount of the A-1 Term Loans then outstanding):

Principal Payment Date Aggre gate Amount Falling on or Nearest to: of Payment --------------------------- ----- ----------- September 30, 2008 $3, 187,500 December 31, 2008 $3, 187,500 March 31, 2009 $3, 187,500 June 30, 2009 $3, 187,500 September 30, 2009 $3, 187,500 December 31, 2009 $3, 187,500 March 31, 2010 $3, 187,500 June 30, 2010 $3, 187,500 September 30, 2010 $4, 250,000 December 31, 2010 $4, 250,000 March 31, 2011 $4, 250,000 June 30, 2011 $4, 250,000 September 30, 2011 $6, 375,000 December 31, 2011 $6, 375,000 March 31, 2012 $6, 375,000 A Term Loan Maturity Date $6, 375,000

Principal Payment Date Aggre gate Amount Falling on or Nearest to: of Payment --------------------------- ----- ----------- December 31, 2008 $3, 000,000 March 31, 2009 $3, 000,000 June 30, 2009 $3, 000,000 September 30, 2009 $3, 000,000 December 31, 2009 $3, 000,000 March 31, 2010 $3, 000,000 June 30, 2010 $3, 000,000 September 30, 2010 $3, 000,000 -37-

(b) Adjustment of Amortization Schedule. Any prepayment of an A Term Loan or an A-1 Term Loan under Section 2.10 shall be applied ratably to reduce the then remaining principal installments of the A Term Loans and A-1 Term Loans, as applicable.

(c) Maintenance of Records by Lenders. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(d) Maintenance of Records by the Administrative Agent. The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for account of the Lenders and each Lender's share thereof.

(e) Effect of Entries. The entries made in the accounts maintained pursuant to paragraph (c) or (d) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the applicable Borrower to repay the Loans made to it in accordance with the terms of this Agreement.

(g) Promissory Notes. Any Lender may request that Loans made by it to any Borrower be evidenced by a promissory note of such Borrower. In such event, such Borrower, at its own expense, shall prepare, execute and deliver to such Lender a promissory note(s) payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and substantially in the form of Exhibit B-1, B-2 or B-3, as appropriate, and such note(s) shall be evidence of such Loans (and all amounts payable in respect thereof). Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

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December 31, 2010 $3, 000,000 March 31, 2011 $3, 000,000 June 30, 2011 $3, 000,000 September 30, 2011 $3, 000,000 December 31, 2011 $3, 000,000 March 31, 2012 $3, 000,000 June 30, 2012 $3, 000,000 September 30, 2012 $3, 000,000 December 31, 2012 $3, 000,000 March 31, 2013 $3, 000,000 June 30, 2013 $3, 000,000 A-1 Term Loan Maturity Date $3, 000,000

SECTION 2.10. Prepayment of Loans.

(a) Optional Prepayments. The Borrowers shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of paragraph (c) of this Section.

(b) Mandatory Prepayments. The Company will prepay the Term Loans as follows:

(i) If after the date hereof any Indebtedness is incurred by the Company or any of its Subsidiaries (excluding any Indebtedness incurred in accordance with Section 7.01), an amount equal to 100% of the Net Cash Proceeds thereof shall be applied on the date of such incurrence toward the prepayment of the Term Loans as set forth in Section 2.10(b)(iv).

(ii) So long as at the time of the prepayment the Consolidated Leverage Ratio is greater than 2.50 to 1.00, upon any Equity Issuance by the Company or any of its Subsidiaries, an amount equal to 100% of the Net Cash Proceeds thereof shall be applied on the date of such issuance toward the prepayment of the Term Loans as set forth in Section 2.10(b)(iv); provided that, in such case, such application shall only be made to the extent required to reduce the Consolidated Leverage Ratio to 2.50 to 1.00 or below (calculated on a pro forma basis after giving effect to such application).

(iii) If after the date hereof the Company or any of its Subsidiaries shall receive Net Cash Proceeds from any Asset Sale or Recovery Event then, unless a Reinvestment Notice shall be delivered to the Administrative Agent in respect thereof within five Business Days after such Asset Sale or Recovery Event, an amount equal to 50% of such Net Cash Proceeds shall be applied on such fifth Business Day toward the prepayment of the Term Loans as set forth in Section 2.10(b)(iv); provided that, notwithstanding the foregoing, on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied toward the prepayment of the Term Loans as set forth in Section 2.10(b)(iv).

(iv) Each such prepayment of the Term Loans shall be applied ratably to the then remaining principal installments thereof.

(c) Clean-Down. For at least 30 consecutive days during each fiscal year and at least ten consecutive days during the period commencing on December 1 through and including January 31(such applicable period, the "Cleanup Period") of each fiscal year of the Company, the outstanding principal amount of all Revolving Credit Loans may not exceed zero (or, to the extent the excess of aggregate cash consideration paid in connection with Acquisitions permitted under this Agreement made after the Effective Date over any Incremental Term Loans made after the Effective Date exceeds $30,000,000, 25% of the amount of the Revolving Credit Commitment).

(d) Notices, Etc. The applicable Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of prepayment, (ii) in the case

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of prepayment of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 noon, New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Revolving Credit Commitments as contemplated by Section 2.08, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.08. Promptly following receipt of any such notice relating to a Borrowing of any Class, the Administrative Agent shall advise the applicable Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing of any Class shall be applied ratably to the Loans of such Class included in such Borrowing and (unless the Company shall otherwise direct) shall be made, first, to ABR Loans and, second, to Eurodollar Loans. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12 and prepayments of Term Loans shall be applied in the manner specified in Section 2.09(b).

SECTION 2.11. Fees.

(a) Commitment Fee. The Company agrees to pay to the Administrative Agent for account of each Revolving Credit Lender a commitment fee, which shall accrue at the Applicable Rate on the average daily unused amount of such Lender's Revolving Credit Commitment during the period from and including the Effective Date to but excluding the earlier of the date the Revolving Credit Commitments terminate and the Revolving Credit Commitment Termination Date. Accrued commitment fees shall be payable on each Quarterly Date and on the earlier of the date the Revolving Credit Commitments terminate and the Revolving Credit Commitment Termination Date, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing commitment fees, the Revolving Credit Commitment of a Revolving Credit Lender shall be deemed to be used to the extent of the outstanding Revolving Credit Loans and LC Exposure of such Revolving Credit Lender (and the Swingline Exposure of such Revolving Credit Lender shall be disregarded for such purpose).

(b) Letter of Credit Fees. The Company agrees to pay (i) to the Administrative Agent for account of each Revolving Credit Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Rate used to determine the interest rate on Eurodollar Revolving Credit Loans on the average daily amount of such Revolving Credit Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date the Revolving Credit Commitments terminate and the date on which there ceases to be any LC Exposure, and (ii) to the applicable Issuing Lender a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the total LC Exposures in respect of Letters of Credit issued by such Issuing Lender (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date the Revolving Credit Commitments terminate and the date on which there ceases to be

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any LC Exposure in respect of Letters of Credit issued by such Issuing Lender, as well as such Issuing Lender's standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of each of March, June, September and December shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Revolving Credit Commitments terminate and any such fees accruing after the date on which the Revolving Credit Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Lenders pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(c) Administrative Agent Fees. The Company agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Company and the Administrative Agent.

(d) Payment of Fees. All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the applicable Issuing Lender, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances.

SECTION 2.12. Interest.

(a) ABR Loans. The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.

(b) Eurodollar Loans. The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.

(c) Default Interest. Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrowers hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section.

(d) Payment of Interest. Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of the Revolving Credit Loans, upon termination of the Revolving Credit Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Credit Loan prior to the end of the Revolving Credit Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

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(e) Computation. All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

SECTION 2.13. Alternate Rate of Interest. If prior to the commencement of any Interest Period for any Eurodollar Borrowing:

(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or

(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their respective Loans included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Company and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Company and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or the continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and such Borrowing (unless prepaid) shall be continued as, or converted to, an ABR Borrowing and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

SECTION 2.14. Increased Costs.

(a) Increased Costs Generally. If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Lender; or

(ii) impose on any Lender or any Issuing Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or such Issuing Lender of participating in, issuing or maintaining any Letter of Credit

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or to reduce the amount of any sum received or receivable by such Lender or such Issuing Lender hereunder (whether of principal, interest or otherwise), then the applicable Borrower will pay to such Lender or such Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Lender, as the case may be, for such additional costs incurred or reduction suffered.

(b) Capital Requirements. If any Lender or any Issuing Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or such Issuing Lender's capital or on the capital of such Lender's or such Issuing Lender's holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Lender, to a level below that which such Lender or such Issuing Lender or such Lender's or such Issuing Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or such Issuing Lender's policies and the policies of such Lender's or such Issuing Lender's holding company with respect to capital adequacy), then from time to time the Borrowers will pay to such Lender or such Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Lender or such Lender's or such Issuing Lender's holding company for any such reduction suffered.

(c) Certificates from Lenders. A certificate of a Lender or an Issuing Lender setting forth the amount or amounts, necessary to compensate such Lender or such Issuing Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the applicable Borrower and the Company and shall be conclusive absent manifest error. The applicable Borrower shall pay such Lender or such Issuing Lender, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

(d) Delay in Requests. Failure or delay on the part of any Lender or any Issuing Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's or such Issuing Lender's right to demand such compensation; provided that the Borrowers shall not be required to compensate a Lender or an Issuing Lender pursuant to this Section for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or such Issuing Lender, as the case may be, notifies the Company of the Change in Law giving rise to such increased costs or reductions and of such Lender's or such Issuing Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.

SECTION 2.15. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.12(b) and is revoked in accordance therewith) or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Company pursuant to Section 2.19, then, in any such event, the applicable Borrower shall compensate each Lender for the loss (other than any loss of anticipated profits), cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss (other than any loss

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of anticipated profits), cost or expense to any Lender shall be deemed to include an amount reasonably determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Company and shall be conclusive absent manifest error. The Company shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

SECTION 2.16. Taxes.

(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrowers hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if a Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) Payment of Other Taxes by the Borrowers. In addition, each Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Indemnification by the Borrowers. Each Borrower shall indemnify the Administrative Agent, each Lender and each Issuing Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or such Issuing Lender, as the case may be, on or with respect to any payment by or on account of any obligation of such Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to a Borrower by a Lender or an Issuing Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender or an Issuing Lender, shall be conclusive absent manifest error.

(d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Borrower to a Governmental Authority, such Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

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(e) Tax Forms. Any Lender or Issuing Lender that is entitled to an exemption from or reduction of any applicable withholding tax with respect to payments hereunder or under any other Loan Document shall deliver to the applicable Borrower (with a copy to the Administrative Agent), at the time or times reasonably requested by such Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law or as reasonably requested by the applicable Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender or Issuing Lender, if requested by the applicable Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by such Borrower or the Administrative Agent as will enable such Borrower or the Administrative Agent to determine whether or not such Lender or Issuing Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, in the case of any withholding tax other than the U.S. federal withholding tax, the completion, execution and submission of such forms shall not be required if in the Foreign Lender's reasonable judgment such completion, execution or submission would subject such Foreign Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Foreign Lender.

Without limiting the generality of the foregoing, in the event that any Borrower is a United States person under Section 7701(a)(30) of the Code, any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to such Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement, and after the occurrence of a change in the Lender's circumstances which require a change in the most recent form or certification previously delivered by it (and from time to time thereafter upon the request of such Borrower or the Administrative Agent), whichever of the following is applicable:

(i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,

(ii) duly completed copies of Internal Revenue Service Form W-8ECI,

(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate substantially in the Form of Exhibit H to the effect that such Foreign Lender is not (A) a "bank" within the meaning of section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of the Borrower within the meaning of section 881(c)(3)(B) of the Code, (C) a "controlled foreign corporation" described in section 881(c)(3)(C) of the Code and (D) the interest payment in question are not effectively connected with the United States trade or business conducted by such Lender (a "U.S. Tax Compliance Certificate") and (y) duly completed copies of Internal Revenue Service Form W-8BEN,

(iv) to the extent a Foreign Lender is not the beneficial owner (for example, where the Foreign Lender is a partnership or participating Lender granting a typical participation), an Internal Revenue Service Form W-8IMY, accompanied by a Form W-8ECI, W-8BEN, U.S. Tax Compliance Certificate, Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that, if

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the Foreign Lender is a partnership (and not a participating Lender) and one or more beneficial owners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate on behalf of each such beneficial owner, or

(v) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit a Borrower or the Administrative Agent to determine the withholding or deduction required to be made, if any.

Each Lender and Issuing Lender agrees that if any form or certification it previously delivered by it expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the applicable Borrower and the Administrative Agent in writing of its legal inability to do so.

Any Lender or Issuing Lender that is a United States person under Section 7701(a)(30) of the Interval Revenue Code, to the extent it may lawfully do so, shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender or Issuing Lender becomes a Lender or Issuing Lender, as applicable, under this Agreement, on or prior to the date on which any such form or certification expires or becomes obsolete, and after the occurrence of a change in the Lender or Issuing Lender's circumstances which require a change in the most recent form or certification previously delivered by it (and from time to time thereafter upon the request of the Borrower or the Administrative Agent), duly completed copies of Internal Revenue Service Form W-9 (or any successor form) certifying that such Lender or Issuing Lender is entitled to an exemption from U.S. backup withholding tax.

(f) Each Lender shall indemnify the Administrative Agent within 10 days after demand therefor, for the full amount of any Excluded Taxes attributable to such Lender that are payable or paid by the Administrative Agent, and reasonable expenses arising therefrom or with respect thereto, whether or not such Excluded Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error.

(g) Refunds. If the Administrative Agent, a Lender or an Issuing Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by a Borrower or with respect to which a Borrower has paid additional amounts pursuant to this Section, it shall pay over such refund to such Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by such Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender or such Issuing Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that such Borrower, upon the request of the Administrative Agent or such Lender or such Issuing Lender, agrees to repay the amount paid over to such Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender or such Issuing Lender in the event the Administrative Agent or such Lender or such Issuing Lender is required to repay such refund to such Governmental Authority. This Section shall not be construed to require the Administrative Agent, any Lender or any Issuing Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Company, any of its Subsidiaries or any other Person.

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SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a) Payments by the Borrowers. Each Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.14, 2.15 or 2.16, or otherwise) or under any other Loan Document (except as otherwise expressly provided therein) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at an account maintained with the Administrative Agent as notified to the Company and the Lenders, except as otherwise expressly provided in the relevant Loan Document and except payments to be made directly to the Issuing Lenders or the Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.14, 2.15, 2.16 and 10.03, which shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder and under any other Loan Document shall be made in Dollars.

(b) Application of Insufficient Payments. If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

(c) Pro Rata Treatment. Except to the extent otherwise provided herein: (i) each Borrowing of a particular Class shall be made from the applicable Lenders, pro rata according to the amounts of the respective Commitments of such Class and shall be allocated pro rata among the applicable Lenders according to the amounts of their respective Commitments of such Class (in the case of the making of Loans) or their respective Loans of such Class that are to be included in such Borrowing (in the case of conversions and continuations of Loans), (ii) each payment of commitment fees under Section 2.11 shall be made for account of the Revolving Credit Lenders, and each termination or reduction of the amount of the Revolving Credit Commitments under Section 2.08 shall be applied to the Revolving Credit Commitments, pro rata according to the respective Revolving Credit Commitments of the Revolving Credit Lenders; (iii) each payment or prepayment of principal of Loans of any Class by any Borrower shall be made for account of the applicable Lenders pro rata according to the respective unpaid principal amounts of the Loans of such Class held by such Lenders; and (iv) each payment of interest on Loans of any Class by any Borrower shall be made for account of the applicable Lenders pro rata according to the amounts of interest on such Loans of such Class then due and payable to such Lenders.

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(d) Sharing of Payments by Lenders. If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and Swingline Loans, as applicable, and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements and Swingline Loans, as applicable, of other applicable Lenders to the extent necessary so that the benefit of all such payments shall be shared by the applicable Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements and Swingline Loans, as applicable; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrowers pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Company or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation.

(e) Presumptions of Payment. Unless the Administrative Agent shall have received notice from any Borrower prior to the date on which any payment is due to the Administrative Agent for account of the Lenders or the Issuing Lenders hereunder that such Borrower will not make such payment, the Administrative Agent may assume that such Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Lenders, as the case may be, the amount due. In such event, if such Borrower has not in fact made such payment, then each of the applicable Lenders or the applicable Issuing Lender, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or such Issuing Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(f) Certain Deductions by the Administrative Agent. If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(e), 2.06(b) or 2.17(e), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid.

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SECTION 2.18. Mitigation Obligations; Replacement of Lenders.

(a) Designation of a Different Lending Office. If any Lender requests compensation under Section 2.14, or if a Borrower is required to pay any additional amount to any Lender or any Governmental Authority for account of any Lender pursuant to Section 2.16, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.14 or 2.16, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Company hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b) Replacement of Lenders. If any Lender requests compensation under Section 2.14, or if a Borrower is required to pay any additional amount to any Lender or any Governmental Authority for account of any Lender pursuant to Section 2.16, or if any Lender defaults in its obligation to fund Loans hereunder, then the Company may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Company shall have received the prior written consent of the Administrative Agent (unless a Term Loan is being assigned to an existing Term Loan Lender or an Affiliate or Approved Fund thereof and (if a Revolving Credit Commitment is being assigned) each Issuing Lender and the Swingline Lender, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the applicable Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.14 or payments required to be made pursuant to Section 2.16, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Company to require such assignment and delegation cease to apply.

SECTION 2.19. Designation of Subsidiary Borrowers.

(a) Designation. Subject to the terms and conditions of this Section (including paragraph (b) of this Section), the Company may, at any time or from time to time upon not less than five Business Days' notice to the Administrative Agent (or such other period which is acceptable to the Administrative Agent), request that a wholly-owned Domestic Subsidiary specified in such notice become a party to this Agreement as a Subsidiary Borrower; provided that each such designation shall be subject to the prior approval of the Administrative Agent (which approval in each case shall not be unreasonably withheld). The Administrative Agent shall upon receipt of such notice from the Company promptly notify each Revolving Credit Lender and the Issuing Lenders of the Company's designation. Upon such approval and the satisfaction of the conditions specified

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in paragraph (b) of this Section, the Administrative Agent shall accept the relevant Subsidiary Borrower Designation Letter whereupon the applicable Subsidiary shall become a party to this Agreement as a Subsidiary Borrower and entitled to borrow Revolving Credit Loans and to have Letters of Credit issued for its own account hereunder.

(b) Conditions Precedent to Effectiveness of Designation. The effectiveness of a designation by the Company of any Subsidiary as a Borrower hereunder shall be subject to the receipt by the Administrative Agent of each of the following documents (each of which shall be in satisfactory to the Administrative Agent in form and substance): (i) a Subsidiary Borrower Designation Letter, duly completed and executed by the Company and the applicable Subsidiary, delivered to the Administrative Agent at least five Business Days before the date on which such Subsidiary is proposed to become a Borrower; and (ii) such opinions, documents and certificates as the Administrative Agent may reasonably request (including certified copies of the organizational documents of such Subsidiary and of resolutions of its board of directors authorizing such Subsidiary becoming a Borrower hereunder, and of all documents evidencing all other necessary corporate or other action required with respect to such Subsidiary becoming party to this Agreement) that are consistent with conditions for the Loan Parties set forth in Section 5.01.

(c) Termination of Subsidiary Borrower. The Company may, at any time at which no Revolving Credit Loans or any other amounts hereunder or under any other Loan Documents shall be outstanding to, nor any Letters of Credit shall be outstanding for the account of, any Subsidiary Borrower, terminate such Subsidiary Borrower as a Borrower hereunder by delivering an executed notice thereof (each a "Termination Letter"), substantially in the form of Exhibit E-2, to the Administrative Agent. Any Termination Letter furnished hereunder shall be effective upon receipt thereof by the Administrative Agent (which shall promptly so notify the Revolving Credit Lenders and the Issuing Lenders), whereupon all commitments of the Revolving Credit Lenders to make Revolving Credit Loans to, and all obligations of the Issuing Lenders to issue Letters of Credit for the account of, such Subsidiary Borrower and all of rights of such Subsidiary Borrower hereunder shall terminate and such Subsidiary Borrower shall cease to be a Borrower hereunder. Notwithstanding the foregoing, the delivery of a Termination Letter with respect to any Subsidiary Borrower shall not terminate (i) any obligation of such Subsidiary Borrower that remains unpaid at the time of such delivery or (ii) the obligations of the Company under Article III with respect to any such unpaid obligations.

ARTICLE III

GUARANTEE

SECTION 3.01. The Guarantee. (a) The Company hereby guarantees to each Lender and the Administrative Agent and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Subsidiary Borrower Obligations, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "Subsidiary Borrower Guaranteed Obligations"). The Company hereby further agrees that if any Subsidiary Borrower shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of such Subsidiary Borrower Guaranteed Obligations, the Company will promptly pay the same, without any demand or notice whatsoever, and that in the case of any

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extension of time of payment or renewal of any of such Subsidiary Borrower Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.

(b) Each Subsidiary Guarantor hereby jointly and severally guarantees to each Lender and the Administrative Agent and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Borrower Obligations (other than such obligations, if any, of such Subsidiary Guarantor), in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "Borrower Guaranteed Obligations"). The Subsidiary Guarantors hereby further jointly and severally agree that if any such Borrower shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of such Borrower Guaranteed Obligations, the Subsidiary Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of such Borrower Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.

SECTION 3.02. Obligations Unconditional. The obligations of the Guarantors under Section 3.01 are absolute and unconditional, and (in the case of the Subsidiary Guarantors) joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the other Loan Parties under this Agreement or any other agreement or instrument referred to herein, or any substitution, release or exchange of any other guarantee of or security for any of their respective Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder, which shall remain absolute and unconditional as described above:

(i) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of their respective Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;

(ii) any of the acts mentioned in any of the provisions of this Agreement or any other agreement or instrument referred to herein shall be done or omitted;

(iii) the maturity of any of their respective Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement or any other agreement or instrument referred to herein shall be waived or any other guarantee of any of their respective Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or

(iv) any lien or security interest granted to, or in favor of, the Administrative Agent or any Lender or Lenders as security for any of the Guaranteed Obligations shall fail to be perfected.

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The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against the Company under this Agreement or any other agreement or instrument referred to herein, or against any other Person under any other guarantee of, or security for, any of their respective Guaranteed Obligations.

SECTION 3.03. Reinstatement. The obligations of each Guarantor under this Article shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the other Borrowers in respect of the relevant Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of such Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including fees of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.

SECTION 3.04. Subrogation. Each Guarantor hereby agrees that, until the payment and satisfaction in full of all Guaranteed Obligations and the expiration and termination of the Commitments of the Lenders under this Agreement, it shall not exercise any right or remedy arising by reason of any performance by it of its guarantee in Section 3.01, whether by subrogation or otherwise, against the Company or any other guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations.

SECTION 3.05. Remedies. Each Guarantor agrees that, as between such Guarantor and the Lenders, the obligations of the Borrowers under this Agreement may be declared to be forthwith due and payable as provided in Article VIII (and shall be deemed to have become automatically due and payable in the circumstances provided in Article VIII) for purposes of Section 3.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against any Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by any Borrower) shall forthwith become due and payable by such Guarantor for purposes of Section 3.01.

SECTION 3.06. Instrument for the Payment of Money. Each Guarantor hereby acknowledges that the guarantee in this Article constitutes an instrument for the payment of money, and consents and agrees that any Lender or the Administrative Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to proceed by motion for summary judgment in lieu of complaint pursuant to N.Y. Civ. Prac. L&R ss. 3213.

SECTION 3.07. Continuing Guarantee. The guarantee in this Article is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising.

SECTION 3.08. Rights of Contribution. The Subsidiary Guarantors hereby agree, as between themselves, that if any Subsidiary Guarantor shall become an Excess Funding Guarantor (as defined below) by reason of the payment by such

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Subsidiary Guarantor of any Guaranteed Obligations, then each other Subsidiary Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the next sentence), pay to such Excess Funding Guarantor an amount equal to such Subsidiary Guarantor's Pro Rata Share (as defined below and determined, for this purpose, without reference to the properties, debts and liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined below) in respect of such Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to any Excess Funding Guarantor under this Section 3.08 shall be subordinate and subject in right of payment to the prior payment in full of the obligations of such Subsidiary Guarantor under the other provisions of this Article III and such Excess Funding Guarantor shall not exercise any right or remedy with respect to such excess until payment and satisfaction in full of all of such obligations.

For purposes of this Section 3.08, (i) "Excess Funding Guarantor" means, in respect of any Guaranteed Obligations, a Subsidiary Guarantor that has paid an amount in excess of its Pro Rata Share of such Guaranteed Obligations, (ii) "Excess Payment" means, in respect of any Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of such Guaranteed Obligations and (iii) "Pro Rata Share" means, for any Subsidiary Guarantor, the ratio (expressed as a percentage) of (x) the amount by which the aggregate fair saleable value of all properties of such Subsidiary Guarantor (excluding any shares of stock or other equity interest of any other Subsidiary Guarantor) exceeds the amount of all the debts and liabilities of such Subsidiary Guarantor (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of such Subsidiary Guarantor hereunder and any obligations of any other Subsidiary Guarantor that have been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which the aggregate fair saleable value of all properties of the Company and all of the Subsidiary Guarantors exceeds the amount of all the debts and liabilities (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of the Obligors hereunder and under the other Loan Documents) of all of the Subsidiary Guarantors, determined (A) with respect to any Subsidiary Guarantor that is a party hereto on the Effective Date, as of the Effective Date, and (B) with respect to any other Subsidiary Guarantor, as of the date such Subsidiary Guarantor becomes a Subsidiary Guarantor hereunder.

SECTION 3.09. General Limitation on Guarantee Obligations. In any action or proceeding involving any state corporate law, or any state or Federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Subsidiary Guarantor under Section 3.01 would otherwise be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 3.01, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by such Subsidiary Guarantor, any Lender, the Administrative Agent or any other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Each of the Company and the Subsidiary Borrowers represents and warrants (as to itself and each of its Subsidiaries) to the Lenders that:

SECTION 4.01. Organization; Powers. Each of the Company and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

SECTION 4.02. Authorization; Enforceability. The Transactions are within each Borrower's and each other Loan Party's corporate powers and have been duly authorized by all necessary corporate and, if required, by all necessary shareholder action. This Agreement and each of the other Loan Documents have been duly executed and delivered by each Loan Party party thereto and constitutes, or when executed and delivered by such Loan Party will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party in accordance with its terms, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 4.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except for (i) such as have been obtained or made and are in full force and effect and (ii) filings and recordings in respect of the Liens created pursuant to the Security Documents, (b) will not violate any Requirement of Law, (c) will not violate or result in a default under any Contractual Obligation upon the Company and its Subsidiaries or its or their respective assets, or give rise to a right thereunder to require any payment to be made by the Company or any of its Subsidiaries, and (d) except for the Liens created pursuant to the Security Documents, will not result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries.

SECTION 4.04. Financial Condition; No Material Adverse Change.

(a) Financial Condition. The Company has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders' equity and cash flows as of and for the fiscal years ended July 2, 2006 and July 1, 2007, in each case reported on by Ernst & Young LLP. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Company and its Subsidiaries as of such dates and for such periods in accordance with GAAP. There are no liabilities of the Company or any of its Subsidiaries, fixed or contingent, which are material in relation to the consolidated financial condition of the Company that are not reflected in the most recent consolidated financial statements of the Company delivered pursuant to this Section or Section 6.01(a) or (b) or in the notes thereto, other than liabilities arising in the ordinary course of business since the date of such financial statements. The Pro Forma Financial Statements, copies of which have heretofore been furnished to each

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Lender, have been prepared giving effect (as if such events had occurred on such date or at the beginning of such period, as the case may be) to the Napco Acquisition and the DesignPac Acquisition and all other transactions that would be required to be given pro forma effect by Regulation S-X promulgated under the Exchange Act (including other adjustments, if any, as agreed between the Company and the Administrative Agent). The Pro Forma Financial Statements have been prepared in good faith, based on assumptions believed by the Company to be reasonable as of the date of preparation thereof, and present fairly in all material respects on a pro forma basis and in accordance with GAAP the estimated financial position of the Company and its Subsidiaries as at the date thereof and their estimated results of operations for the periods covered thereby, assuming that the events specified in the preceding sentence had actually occurred at such date or at the beginning of the periods covered thereby.

(b) No Material Adverse Change. Since July 1, 2007, there has not occurred any event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect.

SECTION 4.05. Properties.

(a) Property Generally. Each of the Company and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, subject only to Liens permitted by Section 7.02 and except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. The Liens granted by the Security Documents constitute valid perfected first priority Liens on the properties and assets covered by the Security Documents, to the extent required by the Security Documents and subject to no prior or equal Lien except those Liens permitted by Section 7.02.

(b) Intellectual Property. Each of the Company and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Company and its Subsidiaries does not infringe upon the rights of any other Person except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 4.06. Litigation and Environmental Matters.

(a) Actions, Suits and Proceedings. There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or that involve this Agreement or the Transactions.

(b) Environmental Matters. Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Company nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any facts that could reasonably be expected to result in any Environmental Liability.

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(c) Disclosed Matters. Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.

SECTION 4.07. Compliance with Laws and Contractual Obligations. Each of the Company and its Subsidiaries is in compliance with all Requirements of Law applicable to it or its property or all Contractual Obligations binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 4.08. Investment Company Act Status. Neither the Company nor its Subsidiaries is an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.

SECTION 4.09. Taxes. Each of the Company and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Company or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

SECTION 4.10. ERISA. Except with respect to any matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, (a) no ERISA Event has occurred or is reasonably expected to occur and (b) each Pension Plan has complied with the applicable provisions of ERISA and the Code. The present value of all accumulated benefit obligations under each Pension Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) does not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Pension Plan by an amount that could not reasonably be expected to result in a Material Adverse Effect.

SECTION 4.11. Disclosure. The Loan Parties have disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the written reports, financial statements, certificates or other written information (other than projections, other forward looking information and information of a general economic and/or industry specific nature) furnished by or on behalf of the Company or any Subsidiary to the Administrative Agent or any Lender in connection with the negotiation of this Agreement and the other Loan Documents or delivered hereunder or thereunder (as modified or supplemented by other information so furnished) taken as a whole contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading; provided that, with respect to projected financial information, each Borrower represents only that such information was prepared in good faith based upon reasonable assumptions believed to be reasonable at the time of preparation thereof.

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SECTION 4.12. Use of Credit. Neither the Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of any extension of credit hereunder will be used to buy or carry any Margin Stock.

SECTION 4.13. Labor Matters. Except with respect to any Disclosed Matters and except with respect to any matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, (a) no collective bargaining agreement or other labor contract will expire during the term of this Agreement, (b) to the Company's knowledge, no union or other labor organization is seeking to organize, or to be recognized as bargaining representative for, a bargaining unit of employees of the Company or any of its Subsidiaries, (c) there is no pending or, to the Company's knowledge, threatened strike, work stoppage, material unfair labor practice claim or charge, arbitration or other labor dispute against or affecting the Company or any of its Subsidiaries or their representative employees and (d) there are no actions, suits, charges, demands, claims, counterclaims or proceedings pending or, to the best of the Company's knowledge, threatened against the Company or any of its Subsidiaries, by or on behalf of, or with, its employees.

SECTION 4.15. Indebtedness. Schedule 7.01 is a complete and correct list of each credit agreement, loan agreement, indenture, purchase agreement, guarantee, letter of credit or other arrangement providing for or otherwise relating to any Indebtedness or any extension of credit (or commitment for any extension of credit) to, or guarantee by, the Company or any of its Subsidiaries, in each case, outstanding as of the date hereof, and the aggregate principal or face amount outstanding or that may become outstanding under each such arrangement is correctly described in Schedule 7.01.

SECTION 4.16. Liens. Schedule 7.02 is a complete and correct list of each Lien securing Indebtedness of any Person outstanding as of the date hereof and covering any property of the Company or any of its Subsidiaries, and the aggregate Indebtedness secured (or that may be secured) by each such Lien and the property covered by each such Lien is correctly described in Schedule 7.02.

SECTION 4.17. Subsidiaries. Schedule 4.17 is a complete and correct list of all of the Subsidiaries of the Company as of the date hereof, together with, for each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary and (iii) the nature of the ownership interests held by each such Person and the percentage of ownership of such Subsidiary represented by such ownership interests. Except as disclosed in Schedule 4.17, (x) each of the Company and its Subsidiaries owns, free and clear of Liens (other than Liens created pursuant to the Security Documents), and has the unencumbered right to vote, all outstanding ownership interests in each Person shown to be held by it in Schedule 4.17, (y) all of the issued and outstanding Capital Stock of each such Person organized as a corporation is validly issued, fully paid and nonassessable and (z) there are no outstanding Equity Rights with respect to such Person.

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ARTICLE V

CONDITIONS

SECTION 5.01. Conditions to Effective Date. The effectiveness of this Agreement and the obligations of the Lenders to make the Loans and of the Issuing Lenders to issue Letters of Credit hereunder shall not become effective until the date on which the Administrative Agent shall have received each of the following documents, each of which shall be satisfactory to the Administrative Agent in form and substance (or such condition shall have been waived in accordance with Section 10.02):

(a) Executed Counterparts. From each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page to this Agreement) that such party has signed a counterpart of this Agreement.

(b) Opinion of Counsel to the Loan Parties. A written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of Cahill Gordon & Reindel LLP, counsel for the Loan Parties, substantially in the form of Exhibit F and of such other counsel for the Loan Parties satisfactory to the Administrative Agent in form and substance reasonably satisfactory to the Administrative Agent (if requested by the Administrative Agent), and covering such other matters relating to the Loan Parties, this Agreement or the Transactions as the Administrative Agent shall reasonably request (and the Company hereby instructs such counsel to deliver such opinion to the Lenders and the Administrative Agent).

(c) Opinion of Special New York Counsel to JPMCB. A written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of Simpson Thacher & Bartlett LLP, special New York counsel to JPMCB, substantially in the form of Exhibit G (and JPMCB hereby instructs such counsel to deliver such opinion to the Lenders).

(d) Corporate Documents. Such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of the Transactions and any other legal matters relating to the Loan Parties, this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel.

(e) Officer's Certificate. A certificate, dated the Effective Date and signed by a senior executive officer of the Company, to the effect that (a) the representations and warranties set forth in Article IV shall be true and correct on the Effective Date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date), and (b) immediately after giving effect to the extensions of credit hereunder on the Effective Date, no Default shall have occurred and be continuing.

(f) Security Agreement. The Security Agreement, duly executed and delivered by the Company and the Administrative Agent, together with (i) certificates, if any, representing the Pledged Equity accompanied by undated stock powers executed in blank and instruments evidencing the Pledged Debt indorsed in blank, and (ii) each document (including, without limitation, any Uniform

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Commercial Code financing statement) required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a perfected Lien on the collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 7.02), which shall have been delivered to the Administrative Agent be in proper form for filing, registration or recordation (it being understood that no account control agreements or landlord waivers shall be required to be obtained or otherwise delivered by any of the Loan Parties). In addition, the Administrative Agent shall have received the results of recent lien searches in each relevant jurisdiction with respect to the Company and its subsidiaries, and such searches shall reveal no Liens on any of the assets of the Company or its subsidiaries except for Liens permitted by Section 7.02 or Liens to be discharged pursuant to documentation or arrangements reasonably satisfactory to the Administrative Agent.

(h) Financial Information. (i) The consolidated financial statements of the Company referred to in the first sentence in Section 4.04(a); and (ii) an estimated pro forma consolidated balance sheet of the Company and an estimated pro forma consolidated income statement of the Company, each as of June 30,2008, giving pro forma effect to the Napco Acquisition and the DesignPac Acquisition (the "Pro Forma Financial Statements").

(i) Insurance. Evidence that all insurance required to be maintained pursuant to the Loan Documents has been obtained and is in effect and that the Administrative Agent has been named as loss payee under each insurance policy with respect to such insurance as to which the Administrative Agent shall have reasonably requested to be so named.

(j) Borrowing Request. A Borrowing Request or notice of issuance of Letter of Credit, as applicable, relating to the initial credit extensions hereunder.

(k) Fees and Expenses. All fees and expenses required to be paid hereunder and invoiced before the Effective Date shall have been paid in full in cash.

(l) Execution by Lenders. This Agreement shall have been executed and delivered by each Increasing Revolving Credit Lender and each Lender with an A-1 Term Loan Commitment hereunder, and the Administrative Agent shall have received written consents from the Existing Lenders which constitute Required Lenders under the Existing Credit Agreement to the execution and delivery of this Agreement (it being agreed that the entering into this Agreement by such Existing Lender shall constitute such written consent).

(m) The Borrowers shall have paid all accrued interest and fees under the Existing Credit Agreement as of the Effective Date and shall be deemed to have prepaid and reborrowed as ABR Loans all outstanding Revolving Credit Loans under the Existing Credit Agreement as of the Effective Date. In addition, in order to ensure that all outstanding Revolving Credit Loans are held ratably by the Revolving Credit Lenders as of the Effective Date after giving effect to the increase in the Revolving Credit Commitments pursuant to this Agreement, the Revolving Credit Lenders shall make such payments to each other (through the Administrative Agent and as notified by the Administrative Agent) as may be required to effect the foregoing.

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(n) Other Documents. Such other closing certificates as the Administrative Agent may reasonably request.

SECTION 5.02. Each Credit Event. The obligation of each Lender to make any Loan, and of the Issuing Lenders to issue, amend, renew or extend any Letter of Credit, is additionally subject to the satisfaction of the following conditions:

(a) the representations and warranties of the Borrowers set forth in Article IV, and of each Loan Party in each of the other Loan Documents to which it is a party, shall be true and correct on and as of the date of such Loan or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and

(b) at the time of and immediately after giving effect to such Loan or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing.

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Company on the date thereof as to the matters specified in clauses (a) and (b) of the immediately preceding sentence.

ARTICLE VI

AFFIRMATIVE COVENANTS

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, each Borrower (on behalf of itself and each of its Subsidiaries) covenants and agrees with the Lenders that:

SECTION 6.01. Financial Statements and Other Information. The Company will furnish to the Administrative Agent and each Lender:

(a) within 90 days after the end of each fiscal year of the Company, the audited consolidated balance sheet and related statements of income, stockholders' equity and cash flows of the Company and its Subsidiaries as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Ernst & Young LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Company and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;

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(b) within 45 days after the end of the first three fiscal quarters of the Company, the consolidated balance sheets and related consolidated statements of income and cash flows of the Company and its Subsidiaries as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for (or, in the case of the balance sheet, as of the end of) the corresponding period or periods of the previous fiscal year, all certified by a Responsible Officer as presenting fairly in all material respects the financial condition and results of operations of the Company and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;

(c) concurrently with any delivery of financial statements under clause (a) or (b) of this Section, a certificate of a Responsible Officer (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Section 7.11 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the most recent audited financial statements of the Company referred to in Section 4.04(a) and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

(d) concurrently with any delivery of financial statements under clause (a) of this Section, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines);

(e) promptly upon receipt thereof, copies of all other reports submitted to the Company by its independent certified public accountants in connection with any annual or interim audit or review of the books of the Company made by such accountants;

(f) annually, as soon as available, but in any event within 30 days after the first day of each fiscal year of the Company, an annual budget of the Company and its Subsidiaries for such fiscal year in the same form prepared for the Company's board of directors or in such other form reasonably satisfactory to the Administrative Agent;

(g) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Company or any Subsidiary with the SEC, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Company to its shareholders generally, as the case may be;

(h) promptly following receipt thereof, copies of any documents described in Sections 101(k) or 101(l) of ERISA that any Borrower or any ERISA Affiliate may request with respect to any Multiemployer Plan; provided, that if the Borrowers or any of their ERISA Affiliates have not requested such documents or notices from the administrator or sponsor of the applicable

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Multiemployer Plan, then, upon reasonable request of the Administrative Agent, the Borrowers and/or their ERISA Affiliates shall promptly make a request for such documents or notices from such administrator or sponsor and the Borrower shall provide copies of such documents and notices to the Administrative Agent promptly after receipt thereof; and

(i) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Company or any Subsidiary, or compliance with the terms of this Agreement and the other Loan Documents, as the Administrative Agent or any Lender may reasonably request.

Documents required to be delivered pursuant to Sections 6.01(a), (b) or (g) (to the extent any such documents are included in materials otherwise filed with the SEC) shall be deemed to have been delivered on the date (i) on which the Company posts such documents or provides a link thereto on the Company's website or (ii) on which such documents are posted on the Company's behalf on Intralinks/IntraAgency or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that the Company shall notify the Administrative Agent (by telecopier or electronic mail) of the posting of any such documents and provide the Administrative Agent with electronic mail versions of such documents.

SECTION 6.02. Notices of Material Events. The Company will furnish to the Administrative Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Company or any of its Affiliates, other than disputes in the ordinary course of business or, whether or not in the ordinary of business, disputes involving amounts exceeding $10,000,000;

(c) the occurrence of any ERISA Event that, individually or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; and

(d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

SECTION 6.03. Existence; Conduct of Business. The Company will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 7.03.

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SECTION 6.04. Payment of Taxes and Other Obligations. The Company will, and will cause each of its Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Company or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

SECTION 6.05. Maintenance of Properties. The Company will, and will cause each of its Subsidiaries to, keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted.

SECTION 6.06. Maintenance of Insurance. The Company will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations; provided that the Company may maintain self-insurance reasonable and customary for similarly situated Persons.

SECTION 6.07. Books and Records. The Company will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities.

SECTION 6.08. Inspection Rights. The Company will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at the expense of the Company and at such reasonable times and as often as reasonably requested; provided that any such request and visit by any Lender shall be coordinated through the Administrative Agent.

SECTION 6.09. Compliance with Laws and Contractual Obligations. The Company will, and will cause each of its Subsidiaries to, comply with all Requirements of Law (including any Environmental Laws) applicable to it or its property, and all Contractual Obligations binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 6.10. Use of Proceeds and Letters of Credit. The proceeds of the A-1 Term Loans, the Revolving Credit Loans, the Letters of Credit issued hereunder and any Incremental Term Loans, will be used for general corporate purposes of the Company and its Subsidiaries (including for the consummation of any Acquisitions not prohibited by this Agreement). No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X.

SECTION 6.11. Additional Subsidiary Guarantors; Further Assurances.

(a) Subsidiary Guarantors. The Company will take such action, and will cause each of its Domestic Subsidiaries to take such action, from time to time as shall be necessary to ensure that all such Domestic Subsidiaries of the Company are "Subsidiary Guarantors" hereunder. Without limiting the generality

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of the foregoing, in the event that the Company or any of its Subsidiaries shall form or acquire any new Domestic Subsidiary that shall constitute a Subsidiary hereunder, the Company and its Subsidiaries will cause such new Subsidiary to:

(i) become a "Subsidiary Guarantor" hereunder, and a "Securing Party" under the Security Agreement pursuant to a Subsidiary Joinder Agreement;

(ii) cause such Domestic Subsidiary to take such action (including delivering such shares of stock, executing and delivering such Uniform Commercial Code financing statements) as shall be necessary to create and perfect valid and enforceable first priority Liens on substantially all of the personal property of such new Subsidiary as collateral security for the obligations of such new Subsidiary hereunder to the extent required pursuant to the Security Agreement; and

(iii) deliver such proof of corporate action, incumbency of officers, opinions of counsel and other documents as is consistent with those delivered by the Loan Parties pursuant to Section 5.01 on the Effective Date as the Administrative Agent shall reasonably request.

(b) Further Assurances. The Company will, and will cause each of its Subsidiaries to, take such action from time to time as shall reasonably be requested by the Administrative Agent to effectuate the purposes and objectives of this Agreement. Without limiting the foregoing, in the event that any additional Capital Stock shall be issued by any Subsidiary, the Loan Party agrees forthwith to deliver to the Administrative Agent pursuant to the Security Agreement the certificates evidencing such shares of stock, accompanied by undated stock powers executed in blank and to take such other action as the Administrative Agent shall request to perfect the security interest created therein pursuant to the Security Agreement.

ARTICLE VII

NEGATIVE COVENANTS

Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, each Borrower (on behalf of itself and each of its Subsidiaries) covenants and agrees with the Lenders that:

SECTION 7.01. Indebtedness. The Company will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except:

(a) Indebtedness created hereunder and the other Loan Documents;

(b) Indebtedness existing on the date hereof and set forth on Schedule 7.01;

(c) (i) Indebtedness of the Company to any Loan Party, (ii) Indebtedness of any Loan Party (other than the Company) to the Company or any other Loan Party and (iii) Indebtedness of the Company or any Subsidiary to any Subsidiary that is not a Loan Party; provided that the aggregate principal amount of

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Indebtedness incurred by the Loan Parties to any Subsidiary that is not a Loan Party after the date hereof, together with the aggregate amount of Investments by the Loan Parties in such Subsidiaries made under Section 7.06(c)(ii) after the date hereof, shall not exceed $5,000,000 at any time outstanding;

(d) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; provided that (i) such Indebtedness is incurred prior to, at the time of or within 90 days after such acquisition or the completion of such construction or improvement and (ii) the sum of the aggregate principal amount of Indebtedness permitted by this clause (d) and clause (e) of this Section shall not exceed $10,000,000 at any time outstanding;

(e) Indebtedness of any Person that becomes a Subsidiary after the date hereof; provided that (i) such Indebtedness exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary and (ii) the sum of the aggregate principal amount of Indebtedness permitted by this clause (e) and clause (d) of this Section shall not exceed $10,000,000 at any time outstanding;

(f) Indebtedness incurred after the date hereof by the Company or any Subsidiary not exceeding an aggregate principal amount of $20,000,000 at any time outstanding for the purpose of financing the expansion of the facilities of the Company or its Subsidiaries; provided that, any such Indebtedness shall (x) mature at least six months after the A-1 Term Loan Maturity Date, (y) have a weighted average life to maturity not shorter than the Term Loans and (z) not contain any covenants or events of default more onerous than those set forth in this Agreement;

(g) other Indebtedness in an aggregate principal amount not exceeding $25,000,000 at any time outstanding;

(h) Indebtedness secured by a Lien permitted under Section 7.02(g) in an aggregate principal amount not exceeding $10,000,000 at any time outstanding; and

(i) Indebtedness incurred after the date hereof by the Company or any Subsidiary not exceeding an aggregate principal amount of $20,000,000 at any time outstanding pursuant to Sale/Leaseback Transactions permitted under Section 7.12.

SECTION 7.02. Liens. The Company will not, and will not permit any of its Subsidiaries to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

(a) Liens created pursuant to the Loan Documents;

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(b) Permitted Liens;

(c) any Lien on any property or asset of the Company or any of its Subsidiaries existing on the date hereof and set forth on Schedule 7.02; provided that (i) no such Lien shall extend to any other property or asset of the Company or any of its Subsidiaries and (ii) any such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals, replacements and combinations thereof that do not increase the outstanding principal amount thereof or commitment therefor, in each case, as in effect on the date hereof;

(d) Liens on fixed or capital assets acquired, constructed or improved by the Company or any Subsidiary; provided that (i) such security interests secure (x) Indebtedness permitted by Section 7.01(d), (y) Indebtedness permitted by Section 7.01(f) and/or (z) Indebtedness permitted by Section 7.01(g) so long as such Indebtedness permitted by Section 7.01(g) does not exceed an aggregate principal amount of $15,000,000 at any time outstanding, (ii) such security interests and the Indebtedness secured thereby are incurred prior to, at the time of or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of the Company or any Subsidiary;

(e) any Lien existing on any property or asset prior to the acquisition thereof by the Company or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such security interests secure Indebtedness permitted by Section 7.01(e), (ii) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (iii) such Lien shall not apply to any other property or assets of the Company or any Subsidiary and (iv) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the original outstanding principal amount thereof;

(f) Liens on deposit accounts required to be established in connection with, and securing, the financing permitted by Section 7.01(f)(i) and monies on deposit in such accounts; and

(g) Liens on real property acquired in the Napco Acquisition; provided that (i) such Liens and the Indebtedness secured thereby are incurred within 365 days after the closing date of such acquisition and (ii) such security interests shall not apply to any other mortgaged property of the Company or any Subsidiary.

SECTION 7.03. Mergers, Consolidations, Etc. The Company will not, and will not permit any of its Subsidiaries to, enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), except that:

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(a) any Subsidiary may be merged or consolidated with or into any Borrower, so long as (i) if the Company is a party to such transaction, the Company is the surviving entity or (ii) otherwise, any Subsidiary which is a Loan Party is the surviving entity;

(b) any Subsidiary may be merged or consolidated with or into any other Subsidiary, so long as if any Subsidiary party to such transaction is a Loan Party, the surviving entity thereof is a Loan Party; and

(c) any Subsidiary may be dissolved or liquidated if the Company determines in good faith such liquidation or dissolution is in the best interests of the Company and not materially disadvantageous to the Lenders.

SECTION 7.04. Dispositions. The Company will not, and will not permit any of its Subsidiaries to, convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, any part of its business or property, whether now owned or hereafter acquired (including receivables and leasehold interests), except:

(a) obsolete or worn-out property, tools or equipment no longer used or useful in its business;

(b) any inventory or other property sold or disposed of in the ordinary course of business and for fair consideration;

(c) the sale, conversion or other disposition of any stores or "flower fulfillment centers" operated by the Company or any Subsidiary to franchisees for fair consideration;

(d) any Subsidiary of the Company may sell, lease, transfer or otherwise dispose of any or all of its property to the Company or any wholly owned Subsidiary of the Company;

(e) the Capital Stock of any Subsidiary may be sold, transferred or otherwise disposed of to the Company or any wholly owned Subsidiary of the Company; and

(f) Dispositions of property by the Company or any Subsidiary having an aggregate fair market value not exceeding $10,000,000; and

(g) Dispositions of property by the Company or any Subsidiary to effect Sale/Leaseback Transactions permitted under Section 7.12.

SECTION 7.05. Lines of Business. The Company will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Company and its Subsidiaries on the date hereof and businesses reasonably related or incidental or ancillary thereto.

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SECTION 7.06. Investments and Acquisitions. The Company will not, and will not permit any of its Subsidiaries to, make or suffer to exist any Investment in any Person or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except:

(a) Cash Equivalents;

(b) Investments (other than Investments permitted under clauses (a) and (c) of this Section) existing on the date hereof and set forth on Schedule 7.06;

(c) (i) Investments by any Loan Party in any other Loan Party; and (ii) Investments by the Company or any Subsidiary in any Subsidiary that is not a Loan Party; provided that that the aggregate amount of Investments by the Loan Parties in any Subsidiary that is not a Loan Party after the date hereof, together with the aggregate principal amount of Indebtedness owing by any Loan Party to such Subsidiaries incurred under Section 7.01(c)(iii) after the date hereof, shall not exceed $5,000,000;

(d) Indebtedness permitted by Section 7.01;

(e) purchases of inventory and other property to be sold or used in the ordinary course of business;

(f) Acquisitions after the date hereof by the Company or any other Loan Party; provided that (i) the aggregate consideration (including assumed Indebtedness, but excluding consideration in the form of Capital Stock of the Company) for all such Acquisitions shall not exceed $100,000,000, (ii) if such Acquisition is an acquisition of Capital Stock of a Person, such Acquisition shall not be opposed by the board of directors (or similar governing body) of such Person, (iii) no Default shall have then occurred and be continuing or would result therefrom, (iv) after giving effect to such Acquisition on a pro forma basis as if such Acquisition had occurred on the first day of the most recent period of four consecutive fiscal quarters, the Consolidated Leverage Ratio on the last day of such period would not have been greater than 2.50 to 1.0; provided that the Company shall be permitted to consummate Acquisitions having aggregate consideration (including assumed Indebtedness, but excluding consideration in the form of Capital Stock of the Company) not exceeding $25,000,000 without complying with the requirements of this clause (iv); and (v) prior to the consummation of any such Acquisition, the Administrative Agent shall have received a certificate of a Responsible Officer setting forth the calculations required to determine compliance with clause (iv) above (if applicable) and certifying that the conditions set forth in this clause (f) with respect to such Acquisition have been satisfied.

(g) Investments (including debt obligations) received by the Company and its Subsidiaries in connection with the bankruptcy or reorganization of suppliers and/or customers and in good faith settlement of delinquent obligations of, and other disputes with, customers and/or suppliers arising in the ordinary course of business;

(h) Investments under Swap Agreements permitted by Section 7.10;

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(i) bona fide advances to employees and officers of the Company and its Subsidiaries for the purpose of paying payroll, travel and related expenses incurred for proper business purposes of the Company or such Subsidiary;

(j) Investments received by the Company and its Subsidiaries in connection with any Disposition permitted by Section 7.04;

(k) Investments held by any Person that becomes a Subsidiary after the date hereof; provided that (i) such Investments exist at the time such Person becomes a Subsidiary and are not created in contemplation of or in connection with such Person becoming a Subsidiary and (ii) such Investments shall not be increased after such time unless such increase is permitted by another clause of this Section;

(l) Investments by the Company or any Subsidiary in the Capital Stock of any other Person (other than any Acquisition) in an aggregate amount (valued at cost) not exceeding $10,000,000; and

(m) other Investments in an aggregate amount (valued at cost) not exceeding $20,000,000.

SECTION 7.07. Restricted Payments. The Company will not, and will not permit any of its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except that:

(a) the Company may declare and pay dividends with respect to its Capital Stock payable solely in additional shares of its Capital Stock;

(b) the Company may make Restricted Payments after the date hereof in an aggregate amount not exceeding $50,000,000; provided that, at the time of such Restricted Payment and immediately after giving effect thereto, (i) no Default shall have occurred and be continuing and (ii) (other than in respect of purchases of Capital Stock of the Company not exceeding an aggregate amount of $10,000,000 after the date hereof), the Consolidated Leverage Ratio shall not be greater than 2.50 to 1.0; and

(c) the Company may pay cash dividends in respect of preferred Capital Stock of the Company not exceeding an aggregate amount of $10,000,000 in any fiscal year; provided that, at the time of such dividend and immediately after giving effect thereto, (i) no Default shall have occurred and be continuing and (ii) the Consolidated Leverage Ratio shall not be greater than 2.50 to 1.0;

provided that nothing herein shall be deemed to prohibit (x) the payment of dividends by any Subsidiary of the Company to the Company or any other Subsidiary of the Company or, if applicable, any minority shareholder of such Subsidiary (in accordance with the percentage of the Capital Stock of such Subsidiary owned by such minority shareholder) and (y) repurchases of Capital Stock deemed to occur as a result of the surrender of such Capital Stock for cancellation in connection with the exercise of stock options or warrants.

SECTION 7.08. Transactions with Affiliates. The Company will not, and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except:

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(a) transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Company or such Subsidiary than could be obtained on an arm's-length basis from a Person that is not an Affiliate;

(b) transactions between or among the Company and its wholly-owned Subsidiaries not involving any other Affiliate;

(c) any Investment permitted by Section 7.06;

(d) any Restricted Payment permitted by Section 7.07; and

(e) any Affiliate who is a natural person may serve as an employee or director of any Borrower and receive reasonable compensation for his services in such capacity.

SECTION 7.09. Restrictive Agreements. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Company or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its Capital Stock or to make or repay loans or advances to the Company or any other Subsidiary or to Guarantee Indebtedness of the Company or any other Subsidiary; except:

(i) restrictions and conditions imposed by law or by this Agreement;

(ii) restrictions and conditions existing on the date hereof set forth on Schedule 7.09 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition);

(iii) customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale; provided that such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder;

(iv) (with respect to clause (a) above) (x) restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (y) customary provisions in leases and other contracts restricting the assignment thereof; and

(v) (with respect to clause (a) above) provisions in any lease or lease agreement, or any restrictions or conditions imposed by any landlord, prohibiting or restricting the granting, creation or incurrence of any liens on any premises leased by the Company or any of its Subsidiaries.

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SECTION 7.10. Swap Agreements. The Company will not, and will not permit any of its Subsidiaries to, enter into any Swap Agreement, other than Swap Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Company or any Subsidiary is exposed in the conduct of its business or the management of its liabilities.

SECTION 7.11. Financial Covenants.

(a) Consolidated Leverage Ratio. The Company will not, as of the last day of any fiscal quarter of the Company, permit the Consolidated Leverage Ratio to exceed (i) 2.50 to 1.0, as of the end of each fiscal quarter of each fiscal year ending on or nearest to March 31, June 30 and December 31 and (ii) 3.50 to 1.0, as of the end of the fiscal quarter of each fiscal year ending on or nearest to September 30.

(b) Consolidated Fixed Charges Ratio. The Company will not, as of the last day of any fiscal quarter of the Company, permit the Consolidated Fixed Charge Coverage Ratio to be less than 1.25 to 1.0.

(c) Consolidated Net Worth. The Company will not, as of the last day of any fiscal quarter of the Company, permit the Consolidated Net Worth to be less than the sum of (i) $200,000,000, (ii) 50% of consolidated net income of the Company and its Subsidiaries for each fiscal year of the Company (beginning with the fiscal year ending on or nearest to June 30, 2009) for which such consolidated net income is positive and (iii) 50% of the Net Proceeds of any Equity Issuance.

SECTION 7.12. Sale-Leasebacks. The Company will not, and will not permit any of its Subsidiaries to, enter into any arrangement with any Person providing for the leasing by the Company or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Company or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Company or such Subsidiary (a "Sale/Leaseback Transaction"), except for Sale/Leaseback Transactions by the Company and its Subsidiaries with an aggregate sales price not exceeding $20,000,000.

SECTION 7.13. Modifications of Organizational Documents. The Company will not, and will not permit any of its Subsidiaries to, consent to any modification, supplement or waiver of any of the provisions of the charter, by-laws or other organizational documents of the Company or any of its Subsidiaries that could reasonably be expected to be materially adverse to the interests of the Lenders, in each case, without the prior consent of the Required Lenders (or the Administrative Agent, with the approval of the Required Lenders); provided that the foregoing shall not apply to any modification of the charter, by-laws or other organizational documents of any Subsidiary effected solely in connection with the liquidation or dissolution thereof permitted by Section 7.03.

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ARTICLE VIII

EVENTS OF DEFAULT

If any of the following events ("Events of Default") shall occur:

(a) any Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b) any Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or under any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three or more Business Days;

(c) any representation or warranty made or deemed made by or on behalf of the Company or any of its Subsidiaries in or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Loan Document or any such amendment, modification or waiver, shall prove to have been incorrect when made or deemed made in any material respect;

(d) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in Section 6.02, 6.03 (with respect to the existence of any Borrower) or 6.09 or in Article VII or any of its respective obligations contained in Section 4.01 or 4.02 of the Security Agreement;

(e) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Article) or any other Loan Document and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Company (given at the request of any Lender);

(f) the Company or any of its Subsidiaries shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable;

(g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;

(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Company or any Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Subsidiary or for a substantial part of its assets, and,

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in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(i) the Company or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

(j) the Company or any Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

(k) one or more judgments for the payment of money in an aggregate amount in excess of $7,500,000 (not covered by insurance where the carrier has accepted responsibility) shall be rendered against the Company or any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Company or any Subsidiary to enforce any such judgment;

(l) an ERISA Event shall have occurred that when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;

(m) a Change in Control shall occur; or

(n) the Liens created by the Security Documents shall at any time not constitute a valid and perfected Lien on the collateral intended to be covered thereby (to the extent perfection by filing, registration, recordation or possession is required herein or therein) in favor of the Administrative Agent, free and clear of all other Liens (other than Liens permitted under Section 7.02 or under the respective Security Documents), or, except for expiration in accordance with its terms, any of the Security Documents shall for whatever reason be terminated or cease to be in full force and effect, or the enforceability thereof shall be contested by any Loan Party;

then, and in every such event (other than any event with respect to any Loan Party described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Company, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued

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interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers; and in case of any event with respect to any Loan Party described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers.

ARTICLE IX

THE ADMINISTRATIVE AGENT

Each of the Lenders and the Issuing Lenders hereby irrevocably appoints the Administrative Agent as its agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.

The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such Person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Company or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.

The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances provided in Section 10.02), and (c) except as expressly set forth herein and in the other Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Company or any of its Subsidiaries that is communicated to or obtained by the Person serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances provided in Section 10.02) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Company or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any

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of the covenants, agreements or other terms or conditions set forth herein or therein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article V or elsewhere herein or therein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for a Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Lenders and the Company. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Company, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Lenders, appoint a successor Administrative Agent which shall be a Lender with an office in New York, New York or an Affiliate of a Lender. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Company to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Company and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 10.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time

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to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

Notwithstanding anything herein to the contrary the Sole Bookrunner and the Sole Lead Arranger, the Syndication Agents and the Documentation Agent named on the cover page of this Agreement shall not have any duties or liabilities under this Agreement, except in their capacity, if any, as Lenders.

ARTICLE X

MISCELLANEOUS SECTION 10.01. Notices.

(a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) of this Section), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, (i) if to the Company, any Subsidiary Borrower, the Administrative Agent, any Issuing Lender or the Swingline Lender, as set forth in Schedule 10.01; and (ii) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

(b) Electronic Communications. Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or a Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

(c) Change of Address, Etc. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

SECTION 10.02. Waivers; Amendments.

(a) No Deemed Waivers; Remedies Cumulative. No failure or delay by the Administrative Agent, any Issuing Lender or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Lenders and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by a Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then

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such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or any Issuing Lender may have had notice or knowledge of such Default at the time.

(b) Amendments. Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Loan Parties and the Required Lenders (or, in the case of any such waiver, amendment or modification relating to Letters of Credit or Swingline Loans, the Required Revolving Credit Lenders) or by the Loan Parties and the Administrative Agent with the consent of the Required Lenders (or the Required Revolving Credit Lenders, as applicable); provided that no such agreement shall:

(i) increase the Commitment of any Lender without the written consent of each Lender directly adversely affected thereby;

(ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender directly adversely affected thereby;

(iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender directly adversely affected thereby;

(iv) change Section 2.17(b), (c) or (d) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender affected thereby;

(v) change any of the provisions of this Section or the definition of the term "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender affected thereby; or

(vi) release all or substantially all of the Guarantors from their guarantee obligations under Article III or all or substantially all of the collateral, in each case without the written consent of each Lender;

and provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, any Issuing Lender or the Swingline Lender hereunder without the prior written consent of the Administrative Agent, such Issuing Lender or the Swingline Lender, as the case may be.

Except as otherwise provided in this Section with respect to this Agreement, the Administrative Agent may, with the prior consent of the Required Lenders (but not otherwise), consent to any modification, supplement or waiver under any of the Security Documents; provided that, without the prior consent of

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each Lender, the Administrative Agent shall not (except as provided herein or in the Security Documents) release all or substantially all of the collateral or otherwise terminate all or substantially all of the Liens under any Security Document providing for collateral security, except that no such consent shall be required, and the Administrative Agent is hereby authorized, to release any Lien covering property (and to release any such guarantor) that is the subject of either a disposition of property permitted hereunder or a disposition to which the Required Lenders have consented.

SECTION 10.03. Expenses; Indemnity; Damage Waiver.

(a) Costs and Expenses. The Company shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by any Issuing Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (iii) all out-of-pocket expenses incurred by the Administrative Agent, any Issuing Lender or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent, any Issuing Lender or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect thereof and (iv) and all reasonable costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated by any Security Document or any other document referred to therein.

(b) Indemnification by the Company. The Company shall indemnify the Administrative Agent, each Issuing Lender and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by any Issuing Lender to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any Environmental Liability related in any way to the Company or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee.

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(c) Reimbursement by Lenders. To the extent that the Company fails to pay any amount required to be paid by it to the Administrative Agent, any Issuing Lender or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, each Issuing Lender or the Swingline Lender, as the case may be, such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, any Issuing Lender or the Swingline Lender in its capacity as such.

(d) Waiver of Consequential Damages, Etc. To the extent permitted by applicable law, no Borrower shall assert, and each Borrower hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

(e) Payments. All amounts due under this Section shall be payable promptly after written demand therefor.

SECTION 10.04. Successors and Assigns.

(a) Assignments Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Lender that issues any Letter of Credit), except that (i) no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by any Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Lender that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Lenders and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) Assignments by Lenders.

(i) Assignments Generally. Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:

(A) the Company; provided that no consent of the Company shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee;

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(B) the Administrative Agent; provided that no consent of the Company shall be required for an assignment of a Term Loan to an existing Term Loan Lender or an Affiliate or Approved Fund thereof; and

(C) (in the case of assignments of the Revolving Credit Commitment and Revolving Credit Loans) each Issuing Lender and the Swingline Lender.

(ii) Certain Conditions to Assignments. Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 or, in the case of an assignment of a Term Loan, $1,000,000, unless each of the Company and the Administrative Agent otherwise consent; provided that no such consent of the Company shall be required if an Event of Default has occurred and is continuing;

(B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement; provided that this clause shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender's rights and obligations in respect of one Class of Commitments or Loans;

(C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and

(D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire in which the assignee designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Company and its Related Parties or their respective securities) will be made available and who may receive such information in accordance with the assignee's compliance procedures and applicable laws, including Federal and state securities laws.

(iii) Effectiveness of Assignments. Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.14, 2.15, 2.16 and 10.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

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(iv) Maintenance of Register. The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrowers, the Administrative Agent, the Issuing Lenders and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrowers, any Issuing Lender and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(v) Acceptance of Assignments by Administrative Agent. Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(c) Participations.

(i) Participations Generally. Any Lender may, without the consent of the Borrowers, the Administrative Agent, any Issuing Lender or the Swingline Lender, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lender's obligations under this Agreement and the other Loan Documents shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrowers, the Administrative Agent, the Issuing Lenders and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or any other Loan Document; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.02(b) that affects such Participant. Subject to paragraph (c)(ii) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.17(c) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrowers, maintain a register on which it enters the

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name and address of each Participant and the principal amounts (and stated interest) of each Participant's interest in the Loans, LC Disbursements or other obligations under this Agreement (the "Participant Register"). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

(ii) Limitations on Rights of Participants. A Participant shall not be entitled to receive any greater payment under Section 2.14 or 2.16 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Company's prior written consent. A Participant that would be a Non-U.S. Lender if it were a Lender shall not be entitled to the benefits of Section 2.16 unless Company is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrowers, to comply with Section 2.16(e) as though it were a Lender.

(d) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

SECTION 10.05. Survival. All covenants, agreements, representations and warranties made by the Borrowers herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any Issuing Lender or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.14, 2.15, 2.16, 3.03 and 10.03 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

SECTION 10.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 5.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding

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upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 10.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 10.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Borrower against any of and all the obligations of any Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process.

(a) Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of New York.

(b) Submission to Jurisdiction. Each Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in Nassau County and of the United States District Court of the Eastern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, any Issuing Lender or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against any Borrower or its properties in the courts of any jurisdiction.

(c) Waiver of Venue. Each Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

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(d) Service of Process. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 10.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 10.12. Confidentiality. Each of the Administrative Agent, the Issuing Lenders and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Company and its Subsidiaries and their respective obligations, (g) with the consent of the Company or (h) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (iii) becomes available to the Administrative Agent, any Issuing Lender or any Lender on a nonconfidential basis from a source other than a Borrower. For the purposes of this Section, "Information" means all information received from any Loan Party relating to the Company and its Subsidiaries and their business, other than any such information that is available to the Administrative Agent, any Issuing Lender or any Lender on a nonconfidential basis prior to disclosure by a Borrower; provided that, in the case of information received from any Loan Party after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

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EACH LENDER ACKNOWLEDGES THAT INFORMATION (AS DEFINED IN THIS SECTION) FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING THE BORROWERS AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED BY THE BORROWERS OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE BORROWERS AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES. ACCORDINGLY, EACH LENDER REPRESENTS TO THE BORROWERS AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

SECTION 10.13. USA PATRIOT Act. Each Lender hereby notifies the Borrowers that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), such Lender may be required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of each Borrower and other information that will allow such Lender to identify the Borrowers in accordance with said Act.

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SECTION 10.14. Authorization of Company. Each Subsidiary Borrower hereby authorizes the Company to give on behalf of such Subsidiary Borrower all notices, consents and other communications that may be given by such Subsidiary Borrower under or in connection with this Agreement or any other Loan Document, and to receive on behalf of such Subsidiary Borrower all notices, consents and other communications that may be given to such Subsidiary Borrower under or in connection with this Agreement or any other Loan Document (in each case, irrespective of whether or not such notice, consent or other communication is expressly provided elsewhere in this Agreement to be given or received by the Company on behalf of such Subsidiary Borrower). Such notices, consents and other communications may include Borrowing Requests, notices as to continuations, conversions and prepayments of Loans, notices and demands in connection with Defaults, and notices and demands in connection with the exercise by the Administrative Agent or any Lender of remedies. Such notices, consents and other communications may be given by or to the Company in its own name or in the name of the applicable Subsidiary Borrower. The authority given by each Subsidiary Borrower in this Section is coupled with an interest and is irrevocable until all the Revolving Credit Commitments and all Letters of Credit have expired or been terminated and all the obligations of such Subsidiary Borrower under this Agreement and the other Loan Documents have been paid in full.

[Signature pages follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

1-800-FLOWERS.COM, INC.

[Signature Page to Credit Agreement]

By: /s/WILLIAM E. SHEA -------------------------------------------------- Name: WILLIAM E. SHEA Title: CFO

SUBSIDIARY GUARANTORS

CONROY'S, INC. THE WINTASTING NETWORK 1-800-FLOWERS RETAIL INC.

1-800-FLOWERS SEASONAL TEAN, INC. 1-800-FLOWERS TEAM SERVICES, INC.

1-800-FLOWERS.COM FRANCHISE CO., INC. BLOOMNET, INC.

THE CHILDREN'S GROUP, INC. THE POPCORN FACTORY, INC.

AMALGAMATED CONSOLIDATED ENTERPRISES, INC. 800-FLOWERS, INC.

BLOOMNET TECHNOLOGIES, INC. CHERYL&CO.

THE PLOW & HEARTH, INC. FANNIE MAY CONFECTIONS BRANDS, INC.

HARRY LONDON CANDIES, INC. FMCB ACQUISITION CO., INC.

DESIGNPAC CO., INC. FRESH GIFT CARDS, INC.

1-800-FLOWERS SERVICE SUPPORT CENTER, INC. NAPCO MARKETING CORP.

For each of the foregoing entities:

DESIGNPAC GIFTS LLC By: DESIGNPAC CO., its sole member

GUARDED REALTY HOLDINGS, LLC By: 1-800-FLOWERS SERVICE SUPPORT CENTER,

INC., its sole member

THE PLOW & HEARTH, LLC By: THE PLOW & HEARTH, INC., it sole member

CONNECT 7 PRODUCTIONS, LLC By: 800-FLOWERS, INC., its sole member

WTN SERVICES, LLC By: THE WINTASTING NETWORK, its sole member

By: /s/ GERARD M. GALLAGHER ------------------------------------------- Name: GERARD M. GALLAGHER Title:Corporate Secretary

By: /s/ GERARD M. GALLAGHER ------------------------------------------- Name: GERARD M. GALLAGHER Title:Corporate Secretary

By: /s/ GERARD M. GALLAGHER ------------------------------------------- Name: GERARD M. GALLAGHER Title:Corporate Secretary

By: /s/ GERARD M. GALLAGHER ------------------------------------------- Name: GERARD M. GALLAGHER Title:Corporate Secretary

By: /s/ GERARD M. GALLAGHER ------------------------------------------- Name: GERARD M. GALLAGHER Title:Corporate Secretary

By: /s/ GERARD M. GALLAGHER ------------------------------------------- Name: GERARD M. GALLAGHER Title:Corporate Secretary

SUBSIDIARY BORROWERS:

THE WINETASTING NETWORK BLOOMNET, INC.

THE CHILDREN'S GROUP, INC. THE POPCORN FACTORY, INC.

800-FLOWERS, INC. BLOOMNET TECHNOLOGIES, INC.

CHERYL & CO. THE PLOW & HEARTH, INC.

FANNIE MAY CONFECTIONS BRANDS, INC. FANNIE MAY CONFECTIONS, INC. HARRY LONDON CANDIES, INC.

NAPCO MARKETING CORP.

For each of the foregoing entities:

DESIGNPAC GIFTS LLC By: DESIGNPAC CO., INC. its sole member

WTN SERVICES, LLC By: THE WINETASTING NETWORK, its sole member

By: /s/ GERARD M. GALLAGHER ------------------------------------------- Name: GERARD M. GALLAGHER Title:Corporate Secretary

By: /s/ GERARD M. GALLAGHER ------------------------------------------- Name: GERARD M. GALLAGHER Title:Corporate Secretary

By: /s/ GERARD M. GALLAGHER ------------------------------------------- Name: GERARD M. GALLAGHER Title:Corporate Secretary

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

JPMORGAN CHASE BANK, N.A. as Administrative Agent and as a Lender,

and as Swing Line Lender, and as Issuing Lender

By: /s/ HELENE P. SPRUNG -------------------------------------------- Name: HELENE P. SPRUNG Title: Senior Vice President

BANK OF AMERICA, N.A., as Syndication Agent and as a Lender

By: /s/ STEVEN J. MELCHAREK -------------------------------------------- Name: STEVEN J. MELCHAREK Title: Senior Vice President

WACHOVIA BANK, N.A. as Syndication Agent and as a Lender

By: /s/ MICHAEL T. KEENAN -------------------------------------------- Name: MICHAEL T. KEENAN Title: Senior Vice President

CAPITAL ONE, N.A. as Documentation Agent and as a Lender

By: /s/ PHILIP DAVI -------------------------------------------- Name: PHILIP DAVI Title: Senior Vice President

HSBC BANK USA, National Association as a Lender

By: /s/ CHRISTOPHER J. MENDELSOHN -------------------------------------------- Name: CHRISTOPHER J. MENDELSOHN Title: First Vice President

RBS CITIZENS, N.A. as a Lender

By: /s/ PAUL DARRIGO -------------------------------------------- Name: PAUL DARRIGO Title: Senior Vice President

TD BANK N.A. as a Lender

By: /s/ STEVEN P. CAVALUZZO -------------------------------------------- Name: STEVEN P. CAVALUZZO Title: Senior Loan Officer

S

Exhibit 32.1

CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of 1-800-FLOWERS.COM, Inc. (the "Company") hereby certifies, to the best of such officer's knowledge, that:

(1) the Annual Report on Form 10-K of the Company for the year ended June 29, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of 1-800-FLOWERS.COM, Inc. (the "Company") hereby certifies, to the best of such officer's knowledge, that:

(1) the Annual Report on Form 10-K of the Company for the year ended June 29, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

These certifications are furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such certifications will not be deemed to be incorporated by reference in to any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates them by reference.

Dated: September 10, 2008 /s/ James F. McCann ------------------------ James F. McCann Chief Executive Officer and Chairman of the Board

Dated: September 10, 2008 /s/ William E. Shea ------------------------ William E. Shea Senior Vice President of Finance and Administration and Chief Financial Officer

Exhibit 31.1

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 (RULE 13a-14(a))

I, James F. McCann, certify that:

(1) I have reviewed this annual report on Form 10-K of 1-800-FLOWERS.COM, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

(5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 10, 2008 /s/ James F. McCann --------------------------- ---------------------------------- James F. McCann Chief Executive Officer Chairman of the Board of Directors

I, William E. Shea, certify that:

(1) I have reviewed this annual report on Form 10-K of 1-800-FLOWERS.COM, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

(5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 10, 2008 /s/ William E. Shea ------------------------- ---------------------------------- Senior Vice President of Finance and Administration and Chief Financial Officer

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

o The Registration Statement (Form S-8 No. 333-84281) pertaining to the 1-800-FLOWERS.COM, Inc. 1999 Stock Incentive Plan and the 1997 Stock Option Plan, o the Registration Statement (Form S-8 No. 333-54590) pertaining to the 1-800-FLOWERS.COM, Inc. 2001 Employee Stock Purchase Plan, and o the Registration Statement (Form S-8 No. 333-119999) pertaining to the 1-800-FLOWERS.COM, Inc. 2003 Long Term Incentive and Share Award Plan;

of our reports dated September 10, 2008, with respect to the consolidated financial statements and schedule of 1-800-FLOWERS.COM, Inc. and Subsidiaries and the effectiveness of internal control over financial reporting of 1-800-FLOWERS.COM, Inc. and Subsidiaries, included in this Annual Report (Form 10-K) for the year ended June 29, 2008.

/s/ Ernst & Young LLP Melville, New York September 10, 2008

Exhibit 21.1

Subsidiaries of the Registrant (as of June 29, 2008)

1-800-Flowers Service Support Center, Inc. (New York) 1-800-Flowers Team Services, Inc. (Delaware) 1-800-Flowers Seasonal Team, Inc. (Delaware) 1-800-Flowers Retail, Inc. (Delaware) 1-800-Flowers.com Franchise Co., Inc. (Delaware) 800-Flowers, Inc. (New York) Amalgamated Consolidated Enterprises, Inc. (Nevada) BloomNet Technologies, Inc. (New York) Conroy's Inc. (California) The Plow & Hearth I, LLC (Virginia) The Plow & Hearth, Inc (Virginia) The Children's Group, Inc. (Delaware) The Popcorn Factory, Inc. (Delaware) Guarded Realty Holdings, LLC (Delaware) BloomNet, Inc. (Delaware) The Winetasting Network (California) WTN Services, LLC (California) Cheryl & Co. (Ohio) Floranet Iberia S.L. (Spain) Fannie May Confections Brands, Inc. (Utah) Fannie May Confections, Inc. (Delaware) Harry London Candies, Inc. (Ohio) FMCB Acquisition Co., Inc. (Delaware) Fresh Gift Cards, Inc. (Florida) DesignPac Co., Inc. (Delaware) Connect 7 Productions, LLC (Delaware) DesignPac Gifts LLC (Illinois) Napco Marketing Corp. (Delaware)