Exhibit 10.8

 

CLASSMATES ONLINE, INC.

 

2004 STOCK PLAN

 

Amended and Restated as of April 22, 2005

 

Assumed and Administered by UNITED ONLINE, INC.

 

1.     Purposes of the Plan. The purposes of this Plan are to attract and retain
the best available personnel for positions of substantial responsibility, to
provide additional incentive to Employees, Directors and Consultants and to
promote the success of the Company’s business. Options granted under the Plan
may be Incentive Stock Options or Nonstatutory Stock Options, as determined by
the Administrator at the time of grant, subject to the limitations of Section 7.
Stock Purchase Rights and Stock Appreciation Rights may also be granted under
the Plan.

 

2.     Assumption of Plan.  The Plan was originally implemented by Classmates
Online, Inc. and assumed by the Company in connection with its acquisition of
Classmates Online, Inc. pursuant to that certain Agreement and Plan of Merger by
and among the Company, Classmates Online, Inc. and Mariner Acquisition Corp.
dated October 23, 2004 (the “Merger Agreement”).  In connection with such
assumption, each outstanding option under the Plan was assumed by the Company
and converted into an option to acquire shares of the Company’s common stock at
an adjusted exercise price per share. Both the number of shares subject to each
such option and the exercise price payable per share have been adjusted to
reflect the exchange ratio in effect for the exchange of Classmates Online, Inc.
shares for shares of the Company’s common stock pursuant to the Merger
Agreement.  All assumed options continue to be governed by the terms and
provisions of the agreements in effect for those options immediately prior to
their assumption by the Company, except for certain adjustments specified in the
document evidencing the Company’s assumption of each such option.  The Company
has also assumed the unallocated share reserve existing under the Plan
immediately prior to the Company’s acquisition of Classmates Online, Inc. 
However, such share reserve has been adjusted to reflect the exchange ratio in
effect under the Merger Agreement.

 

3.     Definitions. As used herein, the following definitions shall apply:

 

(a)   “Administrator” means the Board or any of its Committees as shall be
administering the Plan in accordance with Section 5 hereof.

 

(b)   “Applicable Laws” means the requirements relating to the administration of
equity compensation plans under U.S. state corporate laws, U.S. federal and
state securities laws, the Code, any stock exchange or quotation system on which
the Common Stock is listed or quoted and the applicable laws of any other
country or jurisdiction where Options, Stock Appreciation Rights or Stock
Purchase Rights are granted under the Plan.

 

(c)   “Board” means the Board of Directors of the Company.

 

(d)   “Change in Control” means a change in ownership or control of the Company
effected through either of the following transactions:

 

(i)            the acquisition, 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

 

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Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company’s outstanding securities pursuant to
a tender or exchange offer made directly to the Company’s stockholders, or

 

(ii)           a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time the Board approved such election or nomination.

 

(e)   “Code” means the Internal Revenue Code of 1986, as amended.

 

(f)    “Committee” means a committee of Directors or of other individuals
satisfying Applicable Laws appointed by the Board in accordance with Section 5
hereof.

 

(g)   “Common Stock” means the Common Stock of the Company.

 

(h)   “Company” means United Online, Inc., a Delaware corporation which has
assumed the Plan in connection with its acquisition of Classmates Online, Inc.

 

(i)    “Consultant” means any person who is engaged by the Company or any Parent
or Subsidiary to render consulting or advisory services to such entity.

 

(j)    “Corporate Transaction” means either of the following stockholder
approved transactions to which the Company is a party:

 

(i)            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, or

 

(ii)           any stockholder-approved transfer or other disposition of all or
substantially all of the Company’s assets.

 

(k)   “Director” means a member of the Board.

 

(l)    “Disability” means total and permanent disability as defined in
Section 22(e)(3) of the Code.

 

(m)  “Employee” means any person, including officers and Directors, employed by
the Company or any Parent or Subsidiary of the Company. Neither service as a
Director nor payment of a director’s fee by the Company shall be sufficient to
constitute employment” by the Company.

 

(n)   “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(o)   “Fair Market Value” means, as of any date, the value of Common Stock
determined as follows:

 

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(i)            If the Common Stock is at the time traded on the Nasdaq Stock
Market, then the Fair Market Value shall be the closing selling price per share
of Common Stock on the date in question, as such price is reported by the
National Association of Securities Dealers on the Nasdaq Stock Market.  If there
is no closing selling price for the Common Stock on the date in question, then
the Fair Market Value shall be the closing selling price on the last preceding
date for which such quotation exists.

 

(ii)           If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by the
Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange.  If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

 

(p)   “Hostile Tender-Offer” shall mean the acquisition, 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
pursuant to a tender or exchange offer made directly to the Company’s
stockholders which the Board does not recommend such stockholders to accept.

 

(q)   “Incentive Stock Option” means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

 

(r)    “Involuntary Termination” shall mean the termination of Optionee’s
Service by reason of:

 

(i)            Optionee’s involuntary dismissal or discharge by the Company (or
any Parent or Subsidiary) for reasons other than Misconduct, or

 

(ii)           Optionee’s voluntary resignation following (A) a material
reduction in the scope of his or her day-to-day responsibilities at the Company
(or any Parent or Subsidiary), it being understood that a change in Optionee’s
title shall not, in and of itself, be deemed a material reduction, (B) a
reduction in Optionee’s base salary or (C) a relocation of Optionee’s place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Company (or any Parent or Subsidiary)
without Optionee’s consent.

 

(s)   “Misconduct” means 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 or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Company (or any Parent or Subsidiary) in a
material manner.  The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Company (or any Parent or Subsidiary) may
consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Company (or any Parent or Subsidiary).

 

(t)    “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

 

(u)   “Option” means a stock option granted pursuant to the Plan.

 

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(v)   “Option Agreement” means a written or electronic agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.

 

(w)  “Option Exchange Program” means a program under which outstanding Options
are surrendered or cancelled in exchange for new Options (which may have lower
exercise prices and different terms), Stock Purchase Rights, and/or cash. The
terms and conditions of any Option Exchange Program will be determined by the
Administrator in its sole discretion.

 

(x)    “Optioned Stock” means the Common Stock subject to an Option, Stock
Appreciation Right or Stock Purchase Right.

 

(y)   “Optionee” means the holder of an outstanding Option, Stock Appreciation
Right or Stock Purchase Right granted under the Plan.

 

(z)    “Parent” means a “parent corporation,” whether now or hereafter existing,
as defined in Section 424(e) of the Code.

 

(aa) “Plan” means this 2004 Stock Plan.

 

(bb) “Restricted Stock” means Shares issued pursuant to a Stock Purchase Right
or Shares of restricted stock issued pursuant to an Option.

 

(cc) “Restricted Stock Purchase Agreement” means a written agreement between the
Company and the Optionee evidencing the terms and restrictions applying to
Shares purchased under a Stock Purchase Right. The Restricted Stock Purchase
Agreement is subject to the terms and conditions of the Plan.

 

(dd) “Section 16 Insider” shall mean an officer or director of the Company
subject to the short-swing profit liabilities of Section 16 of the 1934 Act.

 

(ee) “Securities Act” means the Securities Act of 1933, as amended.

 

(ff)   “Service” means the performance of services to the Company by a Service
Provider.

 

(gg) “Service Provider” means an Employee, Director or Consultant.

 

(hh) “Share” means a share of the Common Stock, as adjusted in accordance with
Section 15 below.

 

(ii)   “Stock Appreciation Right” means any Tandem Right or Limited Right
granted pursuant to the provisions of Section 13 of the Plan.

 

(jj)   “Stock Appreciation Right Agreement” means a written or electronic
agreement between the Company and an Optionee evidencing the terms and
conditions of an individual Stock Appreciation Right award. The Stock
Appreciation Right Agreement is subject to the terms and conditions of the Plan.

 

(kk) “Stock Exchange” means either the American Stock Exchange or the New York
Stock Exchange.

 

(ll)   “Stock Purchase Right” means a right to purchase Common Stock pursuant to
Section 12 below.

 

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(mm)    “Subsidiary” means a “subsidiary corporation,” whether now or hereafter
existing, as defined in Section 424(f) of the Code.

 

(nn)     “Take-Over Price” shall mean the greater of (i) the Fair Market Value
per Share on the date the option is surrendered to the Company in connection
with a Hostile Take-Over or, if applicable, (ii) the highest reported price per
Share paid by the tender offeror in effecting such Hostile Take-Over..

 

4.     Stock Subject to the Plan.  Subject to the provisions of Section 15 of
the Plan, the maximum aggregate number of Shares that may be issued under the
Plan is limited to 952,533 Shares (as adjusted for the exchange ratio in effect
under the Merger Agreement and subject to further adjustment pursuant to
Section 14 below) plus any additional Shares subject to options outstanding
under the Classmates Online 1999 Stock Plan and assumed by the Company pursuant
to the Merger Agreement which expire or terminate for any reason prior to
exercise in full or are surrendered pursuant to an Option Exchange Program.
However, the maximum number of Shares that may be issued pursuant to Incentive
Stock Options over the term of the Plan shall in no event exceed 1,159,682
Shares (as adjusted to reflect the exchange ratio in effect under the Merger and
subject to further adjustment pursuant to Section 15 below); provided, however,
that no further Incentive Stock Options shall be granted under the Plan after
November 16, 2004. The Shares may be authorized but unissued, or reacquired
Common Stock.

 

If an Option or other award granted under this Plan becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unissued Shares that were subject thereto shall become
available for future grant or issuance under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan, upon exercise
of either an Option (including options granted under the Classmates Online, Inc.
1999 Stock Plan) or Stock Purchase Right, and that are subsequently reacquired
by the Company pursuant to any forfeiture provision or right to repurchase
unvested shares upon an Optionee’s cessation of Service shall be returned to the
Plan and shall become available for future distribution under the Plan.  Shares
as to which one or more Stock Appreciation Rights are exercised shall not be
available for subsequent issuance under the Plan.

 

5.     Administration of the Plan.

 

(a)   Administrator. The Plan shall be administered by the Board or a Committee
appointed by the Board, which Committee shall be constituted to comply with
Applicable Laws.

 

(b)   Powers of the Administrator. Subject to the provisions of the Plan and, in
the case of a Committee, the specific duties delegated by the Board to such
Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:

 

(i)            to determine the Fair Market Value;

 

(ii)           to select the Service Providers to whom Options, Stock
Appreciation Rights and Stock Purchase Rights may from time to time be granted
hereunder;

 

(iii)          to determine the number of Shares to be covered by each such
award granted hereunder;

 

(iv)          to approve forms of agreement for use under the Plan;

 

(v)           to determine the terms and conditions of any Option, Stock
Appreciation Right or Stock Purchase Right granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options, Stock Appreciation Rights or Stock Purchase Rights may

 

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be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option, Stock Appreciation Right or Stock Purchase
Right or the Common Stock relating thereto, based in each case on such factors
as the Administrator, in its sole discretion, shall determine;

 

(vi)          to reduce the exercise price of any Option or Stock Purchase Right
to the then current Fair Market Value if the Fair Market Value of the Common
Stock covered by such Option or Stock Purchase Right shall have declined since
the date the Option or Stock Purchase Right was granted;

 

(vii)         to institute an Option Exchange Program;

 

(viii)        to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules and regulations relating to sub-plans established for
the purpose of satisfying applicable foreign laws;

 

(ix)           to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option, Stock Appreciation Right or Stock Purchase Right that number of
Shares having a Fair Market Value equal to the minimum amount required to be
withheld. The Fair Market Value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined. All
elections by Optionees to have Shares withheld for this purpose shall be made in
such form and under such conditions as the Administrator may deem necessary or
advisable;

 

(x)            to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan; and

 

(xi)           to make all other determinations, in its sole discretion,
necessary or desirable for the administration of the Plan.

 

(c)   Effect of Administrator’s Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all
Optionees.

 

6.     Eligibility. Nonstatutory Stock Options, Stock Appreciation Rights and
Stock Purchase Rights may be granted to Service Providers.  Incentive Stock
Options may be granted only to Employees.  In no event will any Options, Stock
Appreciation Rights or Stock Purchase Rights be granted to individuals who were
employed by United Online, Inc. or any Subsidiary (other than Classmates
Online, Inc. and any subsidiary of Classmates Online, Inc.) on or before
November 17, 2004.

 

7.     Limitations.

 

(a)   Incentive Stock Option Limit. Each Option shall be designated in the
Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by the Optionee during any calendar
year (under all plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options. For
purposes of this Section 7(a), Incentive Stock Options shall be taken into
account in the order in which they were granted. The Fair Market Value of the
Shares shall be determined as of the time the Option with respect to such Shares
is granted. Notwithstanding the foregoing, no Incentive Stock Options will be
granted under the Plan following the assumption of the Plan by United Online on
November 17, 2004.

 

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(b)   At-Will Employment. Neither the Plan nor any Option, Stock Appreciation
Right or Stock Purchase Right shall confer upon any Optionee any right with
respect to continuing the Optionee’s relationship as a Service Provider with the
Company, nor shall it interfere in any way with his or her right or the
Company’s right to terminate such relationship at any time, with or without
cause, and with or without notice.

 

8.     Term of Plan. Unless sooner terminated under Section 17, the Plan shall
continue in effect for a term of ten (10) years from the later of (i) the
effective date of the Plan or (ii) the earlier of the most recent Board or
shareholder approval of an increase in the number of Shares reserved for
issuance under the Plan.

 

9.     Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five
(5) years from the date of grant or such shorter term as may be provided in the
Option Agreement.

 

10.   Option Exercise Price and Consideration.

 

(a)   Exercise Price. The per Share exercise price for the Shares to be issued
upon exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:

 

(i)            In the case of an Incentive Stock Option

 

(A)          granted to an Employee who, at the time of grant of such Option,
owns stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the exercise price
shall be no less than 110% of the Fair Market Value per Share on the date of
grant.

 

(B)           granted to any other Employee, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.

 

(ii)           In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant; provided, however, that if, at the time of the grant of such
Option, the Optionee owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than 110% of the Fair Market Value per Share
on the date of grant.

 

(iii)          Notwithstanding the foregoing, Options may be granted with a per
Share exercise price other than as required above pursuant to a merger or other
corporate transaction.

 

(b)   Forms of Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock Option,
shall be determined at the time of grant). Such consideration may consist of,
without limitation, (1) cash, (2) check, (3) consideration received by the
Company under a cashless exercise program implemented by the Company in
connection with the Plan, (4) one of the alternative forms of consideration
outlined below, or (5) any combination of the foregoing methods of payment. In
making its determination as to whether to accept an alternative form of
consideration, the Administrator shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company. The alternative
forms of consideration that the Administrator may consider are as follows:

 

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(i)            Other Shares. The Administrator may determine, in its sole
discretion, that it will accept other Shares that are already owned by the
Optionee as consideration, provided that such Shares have been owned by the
Optionee for more than six (6) months on the date of surrender and have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which such Option shall be exercised. Such Shares shall be
surrendered to the Company in good form for transfer. The Optionee shall not
surrender Shares if such action would cause the Company to recognize
compensation expense (or additional compensation expense) with respect to the
Option for financial reporting purposes.

 

(ii)           Promissory Note. The Administrator may determine, in its sole
discretion, that it will accept a full-recourse, interest bearing promissory
note from the Optionee as consideration, provided that the promissory note shall
bear a market rate of interest, but in no event less than the minimum rate (if
any) required to avoid the imputation of additional interest under the Code and
that the Shares issued as a result of the exercise of the Option shall be
pledged as security for payment of the principal amount of the promissory note
and interest thereon. Subject to the foregoing, the Administrator, in its sole
discretion, shall specify the term, interest rate, amortization requirements (if
any) and other provisions of such promissory note.

 

11.   Exercise of Option.

 

(a)   Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable according to the terms hereof at such times and
under such conditions as determined by the Administrator and set forth in the
Option Agreement. An Option may not be exercised for a fraction of a Share.
Options shall become exercisable at a rate determined by the Administrator, in
its sole discretion, which shall be set forth in the Option Agreement.

 

An Option shall be deemed exercised when the Company receives (i) written or
electronic notice of exercise (in accordance with the Option Agreement) from the
person entitled to exercise the Option.  Except to the extent the Option is
exercised through cashless exercise program, the notice shall be accompanied by
full payment for the Shares with respect to which the Option is exercised.  Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 15 of the Plan.

 

Exercise of an Option in any manner shall result in a decrease in the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.

 

(b)   Termination of Relationship as a Service Provider. If an Optionee ceases
to be a Service Provider for any reason other than for Misconduct or as a result
of Optionee’s Disability or death, then his or her Option may be exercised
within the period of time following such termination specified in the Option
Agreement, to the extent that the Option is vested on the date of termination
(but in no event later than the expiration of the term of the Option as set
forth in the Option Agreement). If, on the date of termination, the Optionee is
not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately revert to the Plan. If, after
termination, the Optionee does not

 

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exercise his or her Option as to the vested Shares within the time specified in
the applicable option agreement, then the Option shall terminate as to those
Shares, and such Shares shall thereupon revert to the Plan.

 

(c)   Termination for Misconduct. If an Optionee’s Service with the Company is
terminated for Misconduct, the Optionee’s Option shall immediately terminate,
the Optionee shall not have the right to exercise his or her Option, and all of
the Shares covered by the Option (including those that have vested) shall revert
to the Plan.

 

(d)   Disability of Optionee. If an Optionee ceases to be a Service Provider as
a result of the Optionee’s Disability, then his or her Option may be exercised
within the period of time following such termination specified in the Option
Agreement, to the extent the Option is vested on the date of termination (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement). If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option as to the vested
Shares within the time specified in the applicable option agreement, then the
Option shall terminate as to those Shares, and such Shares shall thereupon
revert to the Plan.

 

(e)   Death of Optionee. If an Optionee dies while a Service Provider, the
Option may be exercised within the period of time following such termination
specified in the Option Agreement, to the extent that the Option is vested on
the date of death (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement).  If the Optionee dies while
holding the Option, then such Option may, within the applicable post-
termination exercise period, be exercised by the Optionee’s designated
beneficiary, provided such beneficiary has been designated prior to Optionee’s
death in a form acceptable to the Administrator. If no such beneficiary has been
designated by the Optionee, then such Option may be exercised by the personal
representative of the Optionee’s estate or by the person(s) to whom the Option
is transferred pursuant to the Optionee’s will or in accordance with the laws of
descent and distribution. If, at the time of death, the Optionee is not vested
as to his or her entire Option, the Shares covered by the unvested portion of
the Option shall immediately revert to the Plan. If the Option is not exercised
as to the vested Shares within the time specified in the applicable option
agreement, then the Option shall terminate as to those Shares, and such Shares
shall thereupon revert to the Plan.

 

12.   Stock Purchase Rights.

 

(a)   Rights to Purchase. Stock Purchase Rights may be issued either alone, in
addition to, or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan. After the Administrator determines that it will
offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing or electronically of the terms, conditions and restrictions related to
the offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid (which shall not be less than one hundred percent
(100%) of the Fair Market Value per Share on the award date), and the time
within which such person must accept such offer. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form determined by the
Administrator.

 

(b)   Repurchase Option. Unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable within 90 days after the voluntary or involuntary termination of the
purchaser’s Service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the lower of (i) the Fair Market
Value of the Shares repurchased and (ii) the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine.

 

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(c)   Other Provisions. The Restricted Stock Purchase Agreement shall contain
such other terns, provisions and conditions not inconsistent with the Plan as
may be determined by the Administrator in its sole discretion.

 

(d)   Rights as a Shareholder. Once the Stock Purchase Right is exercised, the
purchaser shall have rights equivalent to those of a shareholder and shall be a
shareholder when his or her purchase is entered upon the records of the duly
authorized transfer agent of the Company. No adjustment shall be made for a
dividend or other right for which the record date is prior to the date the Stock
Purchase Right is exercised, except as provided in Section 15 of the Plan.

 

13.   Stock Appreciation Rights.

 

(a)   Authority.  The Administrator shall have full power and authority,
exercisable in its sole discretion, to grant stock appreciation rights in
accordance with this Section 13 to selected Optionees or other individuals
eligible to receive option grants under the Plan.

 

(b)   Types.  Two types of stock appreciation rights shall be authorized for
issuance under this Section 13: (i) tandem stock appreciation rights (“Tandem
Rights”) and (ii) limited stock appreciation rights (“Limited Rights”).

 

(i)            Tandem Rights.  The following terms and conditions shall govern
the grant and exercise of Tandem Rights.

 

ONE OR MORE OPTIONEES MAY BE GRANTED A TANDEM RIGHT, EXERCISABLE UPON SUCH TERMS
AND CONDITIONS AS THE ADMINISTRATOR MAY ESTABLISH, TO ELECT BETWEEN THE EXERCISE
OF THE UNDERLYING STOCK OPTION FOR SHARES OR THE SURRENDER OF THAT OPTION IN
EXCHANGE FOR A DISTRIBUTION FROM THE COMPANY IN AN AMOUNT EQUAL TO THE EXCESS OF
(I) THE FAIR MARKET VALUE (ON THE OPTION SURRENDER DATE) OF THE NUMBER OF SHARES
IN WHICH THE OPTIONEE IS AT THE TIME VESTED UNDER THE SURRENDERED OPTION (OR
SURRENDERED PORTION THEREOF) OVER (II) THE AGGREGATE EXERCISE PRICE PAYABLE FOR
SUCH VESTED SHARES.

 

NO SUCH OPTION SURRENDER SHALL BE EFFECTIVE UNLESS IT IS APPROVED BY THE
ADMINISTRATOR, EITHER AT THE TIME OF THE ACTUAL OPTION SURRENDER OR AT ANY
EARLIER TIME.  IF THE SURRENDER IS SO APPROVED, THEN THE DISTRIBUTION TO WHICH
THE OPTIONEE SHALL ACCORDINGLY BECOME ENTITLED UNDER THIS SECTION 13 MAY BE MADE
IN SHARES VALUED AT FAIR MARKET VALUE ON THE OPTION SURRENDER DATE, IN CASH, OR
PARTLY IN SHARES AND PARTLY IN CASH, AS THE ADMINISTRATOR SHALL IN ITS SOLE
DISCRETION DEEM APPROPRIATE.

 

IF THE SURRENDER OF AN OPTION IS NOT APPROVED BY THE ADMINISTRATOR, THEN THE
OPTIONEE SHALL RETAIN WHATEVER RIGHTS THE OPTIONEE HAD UNDER THE SURRENDERED
OPTION (OR SURRENDERED PORTION THEREOF) ON THE OPTION SURRENDER DATE AND MAY
EXERCISE SUCH RIGHTS AT ANY TIME PRIOR TO THE LATER OF (I) FIVE (5) BUSINESS
DAYS AFTER THE RECEIPT OF THE REJECTION NOTICE OR (II) THE LAST DAY ON WHICH THE
OPTION IS OTHERWISE EXERCISABLE IN ACCORDANCE WITH THE TERMS OF THE INSTRUMENT
EVIDENCING SUCH OPTION, BUT IN NO EVENT MAY SUCH RIGHTS BE EXERCISED MORE THAN
TEN (10) YEARS AFTER THE DATE OF THE OPTION GRANT.

 

(ii)           Limited Rights.  The following terms and conditions shall govern
the grant and exercise of Limited Rights under this Section 13:

 

One or more Section 16 Insiders may, in the Administrator’s sole discretion, be
granted Limited Rights with respect to their outstanding options under this
Section 13.

 

UPON THE OCCURRENCE OF A HOSTILE TENDER-OFFER, THE SECTION 16 INSIDER SHALL HAVE
THE UNCONDITIONAL RIGHT (EXERCISABLE FOR A THIRTY (30)-DAY PERIOD FOLLOWING SUCH
HOSTILE TENDER-OFFER) TO

 

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SURRENDER EACH OPTION WITH SUCH A LIMITED RIGHT TO THE COMPANY. THE SECTION 16
INSIDER SHALL IN RETURN BE ENTITLED TO A CASH DISTRIBUTION FROM THE COMPANY IN
AN AMOUNT EQUAL TO THE EXCESS OF (I) THE TENDER-OFFER PRICE OF THE NUMBER OF
SHARES IN WHICH THE OPTIONEE IS AT THE TIME VESTED UNDER THE SURRENDERED OPTION
(OR SURRENDERED PORTION THEREOF) OVER (II) THE AGGREGATE EXERCISE PRICE PAYABLE
FOR THOSE VESTED SHARES. SUCH CASH DISTRIBUTION SHALL BE MADE WITHIN FIVE
(5) DAYS FOLLOWING THE OPTION SURRENDER DATE.

 

THE ADMINISTRATOR SHALL PRE-APPROVE, AT THE TIME SUCH LIMITED RIGHT IS GRANTED,
THE SUBSEQUENT EXERCISE OF THAT RIGHT IN ACCORDANCE WITH THE TERMS OF THE GRANT
AND THE PROVISIONS OF THIS SECTION 13.  NO ADDITIONAL APPROVAL OF THE
ADMINISTRATOR OR THE BOARD SHALL BE REQUIRED AT THE TIME OF THE ACTUAL OPTION
SURRENDER AND CASH DISTRIBUTION.  ANY UNSURRENDERED PORTION OF THE OPTION SHALL
CONTINUE TO REMAIN OUTSTANDING AND BECOME EXERCISABLE IN ACCORDANCE WITH THE
TERMS OF THE INSTRUMENT EVIDENCING SUCH GRANT.

 

(c)   Post-Service Exercise.  The provisions governing the exercise of Tandem
and Limited Stock Appreciation Rights following the cessation of the recipient’s
Service shall be substantially the same as those set forth in Section 11 for the
options granted under the Plan.

 

(d)   Reduction in Share Reserve.  The exercise of any Tandem or Limited Stock
Appreciation Right shall result in a reduction to the number of Shares
thereafter available for issuance under the Plan, by the gross number of Shares
as to which the Stock Appreciation Right is exercised and not by the net number
of Shares actually issued in connection with such exercise.

 

14.   Limited Transferability of Options, Stock Appreciation Rights and Stock
Purchase Rights. Unless determined otherwise by the Administrator, Options,
Stock Appreciation Rights and Stock Purchase Rights may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or the laws of descent and distribution, and may be exercised during the
lifetime of the Optionee, only by the Optionee. If the Administrator in its sole
discretion makes an Option, Stock Appreciation Right or Stock Purchase Right
transferable, such Option, Stock Appreciation Right or Stock Purchase Right may
only be transferred (i) by will, (ii) by the laws of descent and distribution,
or (iii) to family members (as determined pursuant to the regulations governing
S-8 registration statements under the Securities Act) through gifts or domestic
relations orders.

 

15.   Adjustments; Dissolution or Liquidation.

 

(a)   Adjustments. In the event that any stock split, stock dividend,
recapitalization, combination of Shares, exchange of Shares or other change
affecting the Shares as a class without the Company’s receipt of consideration,
the Administrator, in order to prevent diminution or enlargement of the benefits
or potential benefits intended to be made available under the Plan, shall make
appropriate adjustments to the number and class of Shares that may be delivered
under the Plan, and/or the number, class, and exercise or base price of Shares
covered by each outstanding Option, Stock Appreciation Right or Stock Purchase
Right.

 

(b)   Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Optionee as soon
as practicable prior to the effective date of such proposed transaction. To the
extent it has not been previously exercised, an Option, Stock Appreciation Right
or Stock Purchase Right will terminate immediately prior to the consummation of
such proposed action.

 

16.   Corporate Transaction/Change in Control.

 

(a)   In the event of any Corporate Transaction, the shares of Common Stock at
the time subject to each outstanding Option or Stock Appreciation Right shall
automatically vest in full so that

 

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each such Option or Stock Appreciation Right shall, immediately prior to the
effective date of the Corporate Transaction, become exercisable as to all the
shares of Common Stock at the time subject to such Option or Stock Appreciation
Right and may be exercised with respect to any or all of those shares as fully
vested shares of Common Stock.  However, an outstanding Option or Stock
Appreciation Right shall not become vested on such an accelerated basis if and
to the extent:  (i) such Option or Stock Appreciation Right is, in connection
with the Corporate Transaction, to be assumed by the successor corporation (or
parent thereof) or otherwise continued in full force and effect or (ii) such
Option or Stock Appreciation Right is to be replaced with a cash incentive
program of the successor corporation which preserves the spread existing at the
time of the Corporate Transaction on any Shares for which the Option or Stock
Appreciation Right is not otherwise at that time exercisable and provides for
subsequent payout in accordance with the same exercise/vesting
schedule applicable to those Shares or (iii) the acceleration of such Option or
Stock Appreciation Right is subject to other limitations imposed by the
Administrator at the time of the Option grant.

 

(b)   All outstanding repurchase rights shall automatically terminate, and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Corporate Transaction, except to the extent: 
(i) those repurchase rights are to be assigned to the successor corporation (or
parent thereof) in connection with such Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed by the
Administrator at the time the repurchase right is issued.  All repurchase rights
outstanding at the time of a Change in Control shall continue in full force and
effect, subject to adjustment pursuant to Paragraph 15(d) below.

 

(c)   Immediately following the consummation of the Corporate Transaction, all
outstanding Options or Stock Appreciation Rights shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof) or otherwise continued in full force and effect.

 

(d)   Each Option which is assumed in connection with a Corporate Transaction
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the Option been
exercised immediately prior to such Corporate Transaction.  Appropriate
adjustments to reflect such Corporate Transaction shall also be made to (i) the
exercise price payable per share under each outstanding Option, provided the
aggregate exercise price payable for such securities shall remain the same,
(ii) the maximum number and/or class of securities available for issuance over
the remaining term of the Plan and (iii) the maximum number and/or class of
securities which may be issued pursuant to Incentive Stock Options.  To the
extent the holders of Common Stock receive cash consideration for their Common
Stock in consummation of the Corporate Transaction, with the Administrator’s
consent the successor corporation may, in connection with the assumption of the
outstanding Options, substitute one or more shares of its own common stock with
a fair market value equivalent to the cash consideration paid per share of
Common Stock in such Corporate Transaction.

 

(e)   Among its discretionary powers, the Administrator shall have the ability
to structure an Option or Stock Appreciation Right (either at the time the
Option or Stock Appreciation Right is granted or at any time while the Option or
Stock Appreciation Right remains outstanding) so that the Option or Stock
Appreciation Right shall vest and become immediately exercisable as to all or a
portion of the shares subject to that Option or Stock Appreciation Right (and
the Company’s repurchase rights as to all or a portion of the unvested Shares
subject to that Option shall immediately terminate) upon the occurrence of a
Corporate Transaction, a Change in Control or the Optionee’s Involuntary
Termination within a designated period of time following such Corporate
Transaction or Change in Control.

 

17.   Time of Granting Options, Stock Appreciation Rights and Stock Purchase
Rights. The date of grant of an Option, Stock Appreciation Right or Stock
Purchase Right shall, for all purposes, be the date

 

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on which the Administrator makes the determination granting such Option, Stock
Appreciation Right or Stock Purchase Right, or such later date as is determined
by the Administrator. Notice of the determination shall be given to each Service
Provider to whom an Option, Stock Appreciation Right or Stock Purchase Right is
so granted within a reasonable time after the date of such grant.

 

18.   Amendment and Termination of the Plan.

 

(a)   Amendment and Termination. The Board may at any time amend, alter, suspend
or terminate the Plan.

 

(b)   Shareholder Approval. The Board shall obtain shareholder approval of any
Plan amendment to the extent necessary and desirable to comply with Applicable
Laws.

 

(c)   Effect of Amendment or Termination. No amendment, alteration, suspension
or termination of the Plan shall impair the rights of any Optionee, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator’s ability to exercise
the powers granted to it hereunder with respect to Options, Stock Appreciation
Rights and Stock Purchase Rights granted under the Plan prior to the date of
such termination.

 

19.   Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
the exercise of an Option, Stock Appreciation Right or Stock Purchase Right
unless the exercise of such award and the issuance and delivery of such Shares
shall comply with Applicable Laws and shall be further subject to the approval
of counsel for the Company with respect to such compliance.

 

20.   Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

 

21.   Reservation of Shares. The Company, during the term of this Plan, shall at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

 

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IN WITNESS WHEREOF, the Company, by its duly authorized officer, has executed
this Plan (as assumed and administered by the Company) on the date indicated
above.

 

 

 

UNITED ONLINE, INC.

 

 

 

 

 

By:

/s/ FREDERIC A. RANDALL, JR.

 

 

Name:

Frederic A. Randall, Jr.

 

Title:

EVP, General Counsel and Secretary

 

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