Exhibit 10.1

 

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July 20, 2015

 

Mark Harrington

 

Dear Mark:

 

It gives me great pleasure to present to you this offer of employment as the
Executive Vice President, General Counsel and Secretary of United Online, Inc.
(the “Company” or “United Online”). The start date of your employment will be
Monday, August 3, 2015 (the “Commencement Date”).

 

As the Executive Vice President and General Counsel, you will report to the
Company’s Chief Executive Officer. During your employment with the Company,
except as stated herein under the “Transition Services” heading, you will devote
your full business efforts and time to the Company and will not engage in any
other employment, occupation or consulting activity for any direct or indirect
remuneration without prior approval of the Chief Executive Officer of the
Company or the Company’s Board of Directors (the “Board”).

 

The primary location of your employment will be at the offices of the Company,
located in Woodland Hills, California. However, there may be occasional travel
required to other offices and locations.

 

Salary and Bonus

 

Your starting base salary will be $320,000 per year. You will receive a one-time
sign-on bonus in the amount of $60,000, payable to you no later than the last
day of the first full biweekly pay period after your Commencement Date.

 

You will also be eligible to receive an annual bonus, the target value of which
for the 2015 performance year will be 55% of your annual base salary for
achieving all goals, subject to the terms and conditions of the applicable bonus
plan maintained by the Company, which may require continued employment on each
bonus payment date as a condition of eligibility. Your annual bonus for 2015
will be pro-rated based on the start date of your employment. The performance
criteria for purposes of determining your actual bonus for each fiscal year, and
the target percentage for purposes of determining your actual bonus for each
fiscal year subsequent to 2015, will be established by the Board or the Board’s
Compensation Committee.

 

21255 Burbank Boulevard · Suite 400 · Woodland Hills, California 91367 · phone
818.287.3000 · fax 818.287.3001 · untd.com

 

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Equity Compensation

 

In addition to the cash compensation described above, you will receive a
one-time equity hiring “inducement” grant, with a grant date value equal to
$750,000. Such $750,000 value will be divided as follows: (i) 50% of the award
value will be granted as non-qualified stock options to purchase shares of
United Online common stock (the “Stock Options”), with a per share exercise
price equal to the per share fair market value of our common stock on the grant
date (expected to be August 15, 2015); and (ii) 50% of the award value will be
granted as restricted stock units (“RSUs”). The Stock Options and RSUs are
subject to approval by the Compensation Committee of the Board and are subject
to the terms and conditions, including with respect to vesting and exercise, as
set forth in the respective individual award agreements and the governing stock
incentive plan.

 

Subject to approval by the Compensation Committee of the Board, (i) the Stock
Options shall vest and become exercisable with respect to thirty-three and
one-third percent (33 1/3%) of the option shares upon your completion of one
(1) year of service measured from the vesting commencement date (expected to be
the Commencement Date) and the balance of the option shares in a series of
twenty-four (24) successive equal monthly installments upon your completion of
each additional month of service over the twenty-four (24)-month period
thereafter; and (ii) RSUs shall vest in a series of three (3) successive equal
annual installments on each of the first three (3) one-year anniversaries from
the vesting commencement date (expected to be the Commencement Date) upon your
continuation of service with the Company. Notwithstanding the generality of the
foregoing, no Stock Options or RSUs will vest earlier than the first anniversary
of the Commencement Date.

 

You will also be eligible to receive annual long-term incentive equity grants as
determined by the Board and/or the Compensation Committee of the Board, pursuant
to the terms of the applicable stock incentive plan then maintained by the
Company on the same or similar terms as similarly situated employees. The hiring
inducement award is intended to be the annual award for 2015 and the next
regularly scheduled date for eligibility is expected to be in February 2016 and
such 2016 award will not be subject to any proration related to your
Commencement Date.

 

Benefits

 

You will be eligible to participate in each of the Company’s employee benefit
plans that is made generally available either to the Company’s employees or to
the Company’s senior executives and for which you satisfy the applicable
eligibility requirements. You will be entitled to the greater of: (i) three
(3) weeks of paid vacation time each year or (ii) an amount as determined in
accordance with the Company’s standard vacation policy.

 

In addition, the Company will promptly reimburse you for all reasonable and
necessary business expenses you incur in connection with the business of the
Company and the performance of your duties hereunder (including expenses
associated with the travel requirements set forth in the third paragraph of this
letter) upon your submission of reasonable and timely documentation of those
expenses in accordance with the Company’s relevant policies.

 

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Transition Services

 

For a period of up to six (6) months after your Commencement Date, you shall
have a right to provide transition consulting services to your current employer,
Guidance Software, Inc. (“Prior Employer”) in order to assist in the orderly
transition of your obligations to the Prior Employer. Except for services that
may require in-person assistance (i.e. testimony at legal proceeding), such
consulting services shall be no more than five (5) hours per week and shall be
provided telephonically to the Prior Employer unless otherwise approved by the
Company’s Chief Executive Officer.

 

Policies; Procedures; Proprietary Information and Inventions Agreement;
Indemnification Agreement

 

As an employee of the Company, you will be expected to abide by all of the
Company’s policies and procedures, including (without limitation) the terms of
your Employee Proprietary Information and Inventions Agreement with the Company,
the Insider Trading Policy, the Code of Ethics and the Employee Handbook. You
and the Company will enter into the Company’s standard form of Indemnification
Agreement for directors and officers effective as of the Commencement Date.

 

At- Will Employment

 

Notwithstanding anything to the contrary contained herein, your employment with
the Company is “at will” and will not be for any specified term, meaning that
either you or the Company will be entitled to terminate your employment at any
time and for any reason, with or without cause or advance notice. Although the
Company’s personnel policies and procedures may change from time to time, the
“at will” nature of your employment may only be changed in an express written
agreement signed by you and the Chief Executive Officer of the Company and
approved by the Board.

 

If you are terminated for “Cause” (as defined below) or if you resign for any
reason other than “Good Reason” (as defined below) or if your employment
terminates by reason of death or Disability, you will not be entitled to any
severance and will only be entitled to earned but unpaid salary and accrued but
unused vacation earned through your final date of employment (the “Accrued
Obligations”), which amounts will be paid to you (or your estate, as the case
may be) within thirty (30) days of your termination of employment. Rights
arising from the terms of the Company’s benefit plans (including any equity
plans) will be governed by the terms of such plans.

 

Notwithstanding the at-will nature of your employment, if the Company terminates
your employment without “Cause” or you terminate employment for “Good Reason”
then, in addition to the Accrued Obligations, and subject to your execution and
non-revocation of a general release of claims in a form provided by the Company,
you will be eligible to receive a cash separation payment in the aggregate
amount of the sum of (a) your annual base salary in effect at the time of such
termination and (b) any earned but unpaid annual bonus for the fiscal year
preceding the year of termination (the “Separation Payment”). The amount set
forth in (a) will be payable in a series

 

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of twelve (12) successive equal monthly installments, beginning on the first
regular payday for the Company’s salaried employees, within the 60-day period
following the date of your termination of employment on which your executed
release is effective and enforceable in accordance with its terms following the
expiration of the applicable revocation period in effect for that release. The
remaining monthly installments will be paid on successive monthly anniversaries
of the initial monthly installment. The amount set forth in (b) will be paid in
a lump sum on the later of (i) the date on which the first monthly installment
of the Separation Payment is paid to you or (ii) the date on which such amount
would have been paid to you had you continued in the Company’s employ through
such payment date, but no later than the last day of the applicable period
necessary to qualify the payment for the short term deferral exception under
Section 409A of the Internal Revenue Code (“Section 409A”).

 

In addition, if the Company terminates your employment without “Cause” or you
terminate employment for “Good Reason” then, subject to your execution and
non-revocation of a general release of claims in a form provided by the Company,
you will be eligible to receive a pro-rated bonus for the fiscal year in which
such termination occurs based on the level at which the applicable performance
goals for such fiscal year are in fact attained, multiplied by a fraction, the
numerator of which is the number of whole months you were employed by the
Company during such fiscal year and the denominator of which is twelve (12),
with such pro-rated bonus (if any) to be paid at the same time and in the same
form that the bonus payment for such fiscal year would have been made following
completion of that fiscal year had you remained in the Company’s employ through
the payment date (such bonus, the “Pro Rata Bonus”).

 

For purposes of this letter, “Cause” means one or more of the following: (i) if
you are convicted of, or enter into a plea of nolo contendere to, a felony or a
misdemeanor involving any act of moral turpitude; (ii) if you commit an act of
actual fraud, embezzlement, theft or similar dishonesty against the Company or
any of its subsidiaries; (iii) if you commit any willful misconduct or gross
negligence resulting in material harm to the Company or any of its subsidiaries;
or (iv) if you fail, after receipt of detailed written notice and after
receiving a period of at least thirty (30) days following such notice to cure
such failure, to use your reasonable good faith efforts to follow the reasonable
and lawful direction of the Board and to perform your obligations hereunder.

 

For purposes of this letter, “Good Reason” means (i) a material reduction in
your base salary without your prior written consent; (ii) a material reduction
in your authority, duties or responsibilities, without your prior written
consent, including but not limited to a change in reporting structure to anyone
other than the Company’s Chief Executive Officer; (iii) a material change in the
geographic location at which you must perform services, as set forth in the
third paragraph of this letter, without your prior written consent (it being
acknowledged that the travel requirements set forth in that paragraph do not
constitute Good Reason); or (iv) any material un-waived breach by the Company of
the terms of this letter; provided however, that with respect to any of the
clause (i) - (iv) events above, you will not be deemed to have resigned for Good
Reason unless (A) you provide written notice to the Company of the existence of
the Good Reason event within ninety (90) days after its initial occurrence,
(B) the Company is provided with thirty (30) days after receipt of such notice
in which to cure such Good Reason event, and (C) you effectively terminate your
employment within one hundred eighty (180) days following the occurrence of the
non-cured clause (i) - (iv) event.

 

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For purposes of this letter, “Disability” means your inability to engage in any
substantial activity necessary to perform your duties and responsibilities
hereunder by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted, or can be expected
to last, for a continuous period of not less than twelve (12) months.

 

You will be eligible for any change in control policy or benefits which may be
established from time to time by the Board following the date of this letter, as
generally provided to other senior executives of the Company below the level of
Chief Executive Officer or as provided to any one or more such senior executives
hired after the date of this letter, based on the terms of such policy or
provisions (including but not limited to any requirement to provide a release of
claims). Subject to approval by the Compensation Committee of the Board, you
will be designated a Tier I Participant under the Company’s Change in Control
Policy for Executives, established as of February 19, 2015 (the “Change in
Control Policy”). The treatment of your Stock Options and RSUs, as well as any
subsequently-granted equity awards, will be as set forth in the Change in
Control Policy, the respective individual award agreements and the governing
stock incentive plan.

 

Withholding Taxes

 

All forms of compensation payable to you by the Company, whether in cash, common
stock or other property, are subject to reduction to reflect applicable
withholding and payroll taxes.

 

Restrictive Covenants

 

Until one year after the termination of your employment with the Company, you
agree not to, directly or indirectly, solicit or recruit for employment, any
person or persons who are employed by the Company or any of its subsidiaries or
affiliates, or who were so employed at any time within a period of twelve (12)
months immediately prior to the date your employment terminated, or otherwise
interfere with the relationship between any such person and the Company; nor
will you assist anyone else in recruiting any such employee to work for another
company or business or discuss with any such person his or her leaving the
employ of the Company or engaging in a business activity in competition with the
Company.

 

Clawback

 

Any amounts paid or payable to you pursuant to this letter or the Company’s
equity, bonus or other compensation plans will be subject to recovery or
clawback to the extent required by any applicable law or any applicable
securities exchange listing standards.

 

Section 409A Compliance

 

The intent of the parties is that payments and benefits described in this letter
comply with Section 409A and accordingly, to the maximum extent permitted, this
letter will be interpreted in compliance therewith. You will not be considered
to have terminated employment with the

 

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Company for purposes of any payments which are subject to Section 409A unless
you have incurred a “separation from service” from the Company within the
meaning of Section 409A. Should the 60-day period referred to in the “At Will
Employment” section above span two taxable years, then to the extent necessary
to comply with Section 409A, the first monthly severance payment installment
will be paid during the portion of that period that occurs in the second taxable
year. Any equity award which vests on an accelerated basis based on termination
of employment will be issued within the sixty 60-day period following your
“separation from service” within the meaning of Section 409A, so long as the
release has become effective and enforceable in accordance with its terms
following the expiration of the applicable revocation period in effect for that
release; provided, however, that should such sixty 60-day period span two
taxable years, the issuance shall be effected during the portion of that period
that occurs in the second taxable year; and provided further, however, that if a
different issuance date is required for purposes of Section 409A, then the
issuance shall occur on such different date. Each amount to be paid or benefit
to be provided under this letter will be construed as a separate identified
payment for purposes of Section 409A. Without limiting the foregoing and
notwithstanding anything contained herein to the contrary, to the extent
required in order to avoid an accelerated or additional tax under Section 409A
of the Code, amounts that would otherwise be payable and benefits that would
otherwise be provided pursuant to this letter during the six-month period
immediately following your separation from service will instead be paid on the
first business day after the date that is six months following your separation
from service. In no event will any expense be reimbursed later than the end of
the calendar year following the calendar year in which that expense is incurred,
and the amounts reimbursed in any one calendar year will not affect the amounts
reimbursable in any other calendar year. Your right to receive such
reimbursements may not be exchanged or liquidated for any other benefit.

 

Section 280G

 

If any payment or benefit received or to be received by you (including any
payment or benefit received pursuant to this letter or otherwise) would be (in
whole or part) subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code, or any successor provision thereto, or any similar tax imposed by
state or local law, or any interest or penalties with respect to such excise tax
(such tax or taxes, together with any such interest and penalties, are hereafter
collectively referred to as the “Excise Tax”), then the cash payments provided
to you under this letter will first be reduced, with each such payment to be
reduced pro-rata but without any change in the payment date and with the monthly
installments of the Separation Payment to be the first such cash payments so
reduced, and then, if necessary, any other payments or benefits reduced, but
only to the extent necessary to assure that you receive only the greater of
(i) the amount of those payments and benefits which would not constitute a
parachute payment under Section 280G of the Internal Revenue Code or (ii) the
amount which yields you the greatest after- tax amount of benefits after taking
into account any Excise Tax imposed on the payments and benefits provided to you
hereunder (or on any other payments or benefits to which you may become entitled
in connection with any change in control or ownership of the Company or the
subsequent termination of your employment with the Company). Calculations
required by this paragraph will be performed by a national accounting firm
mutually acceptable to you and the Company.

 

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Entire Agreement

 

This letter, together with the Employee Proprietary Information and Inventions
Agreement between you and the Company (or a Company subsidiary), any Company
handbooks and policies in effect from time to time and the applicable stock
plans and agreements evidencing the equity awards made to you from time to time
during your period of employment, contains all of the terms of your employment
with the Company and supersedes any prior understandings or agreements, whether
oral or written, between you and the Company.

 

Governing Law

 

The terms of this letter and the resolution of any disputes will be governed by
California law, and the venue for any disputes will be in Los Angeles,
California.

 

Mark, the team and I are looking forward to working with you. Please indicate
your acceptance of this offer on the terms and conditions described herein by
signing below and returning this document no later than July 24, 2015.

 

Please contact me if you have any questions.

 

 

Sincerely,

 

 

 

 

 

/s/ Francis Lobo

 

Francis Lobo

 

Chief Executive Officer

 

 

 

 

 

/s/ Mark Harrington

 

Signature of Acceptance

 

Mark Harrington

 

Date: July 20, 2015

 

 

cc:                      Human Resources Department, United Online, Inc.

 

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