Exhibit 10.7

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This Amended and Restated Employment Agreement (the “Agreement”) is made and
entered into effective as of the 1st day of October 2003 by and between United
Online, Inc. a Delaware corporation (the “Company”), with principal corporate
offices at 2555 Townsgate Road, Westlake Village, California 91361, and Mark
Goldston, whose address is 14139 Beresford Road, Beverly Hills, California 90210
(“Employee”).

 

WHEREAS, the Employee had previously entered into an employment agreement (the
“Prior Agreement”) effective March 20, 1999, with NetZero, Inc., a wholly-owned
subsidiary of the Company; and

 

WHEREAS, the Prior Agreement was amended in July 1999 and February 9, 2001 and,
effective as of the date hereof, the Employee and the Company desire to further
amend the Prior Agreement.

 

NOW THEREFORE, the Employee and the Company hereby amend and restate the Prior
Agreement as follows.

 

1.                                       Employment.

 

1.1                                 The Company hereby agrees to employ
Employee, and Employee hereby accepts such employment, on the terms and
conditions set forth herein, commencing the date hereof and continuing through
February 9, 2005 (the “Term”), unless terminated earlier as provided in
Section 4 below.

 

2.                                       Duties of Employee.

 

2.1                                 Employee shall serve as the Chief Executive
Officer and Chairman of the Company.  In this capacity, Employee shall perform
such customary, appropriate and reasonable executive duties as are usually
performed by the Chief Executive Officer and Chairman, including such duties as
are delegated to him from time to time by the Board of Directors of the Company
or a committee thereof  (the “Board”).  Employee shall report directly to the
Company’s Board.

 

2.2                                 Employee agrees to devote Employee’s good
faith, full time, attention, skill and efforts to the performance of his duties
for the Company during the Term; provided, however, that the Company
acknowledges that Employee has certain responsibilities to and involvement with
other entities and agrees to allow Employee to continue his involvement with
such entities without in anyway jeopardizing his employment with the Company. 
This Agreement shall not be interpreted to prohibit Employee from making passive
personal investments if those activities do not materially interfere with the
services required under this Agreement.

 

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3.                                       Compensation and Other Benefits.

 

3.1                                 Base Salary.  During the Term, the Company
shall pay to Employee a base salary per fiscal year equal to Employee’s current
base salary (the “Base Salary”), with payments to be made in accordance with the
Company’s standard payment policy and subject to such withholding as may be
required by law.  Employee’s Base Salary shall be increased to include any
increases in Employee’s base salary as approved by the Board.

 

3.2                                 Bonus.  During the Term, the Employee shall
also be eligible to receive an annual cash bonus of up to 125% of Employee’s
base salary for each fiscal year (the “Annual Bonus”), less withholding required
by law, based on performance criteria established by the Board.  Employee’s
Annual Bonus shall be increased to include any increases in Employee’s Annual
Bonus as approved by the Board.  Employee shall not be eligible to receive any
unpaid Annual Bonus if his employment hereunder is terminated pursuant to either
Section 4.1 or if Employee voluntarily resigns.

 

3.3                                 Vacation.  Employee shall be entitled to a
minimum of four (4) weeks paid vacation per year.

 

3.4                                 Other Benefits.  During the Term, Employee
shall be entitled to participate in all group life, health, medical, dental or
disability insurance or other employee, health and welfare benefits made
available generally to other executives of the Company.   If Employee elects to
participate in any of such plans, Employee’s portion of the premium(s) will be
deducted from Employee’s paycheck.

 

3.5                                 Business Expenses.  The Company shall
promptly reimburse Employee for all reasonable and necessary business expenses
incurred by Employee in connection with the business of the Company and the
performance of his duties under this Agreement, subject to Employee providing
the Company with reasonable documentation thereof.

 

3.6                                 Board of Directors.  Employee shall be
Chairman of the Company and also a member of the Company’s Board of Directors. 
Employee’s appointments as Chairman and as a member of the Board will
automatically terminate upon the termination of Employee’s employment with the
Company for any reason.

 

4.                                       Termination.

 

4.1                                 Termination for Cause.

 

(a)  Termination “for cause” is defined as follows: (1) if Employee is convicted
of a felony, including any act of moral turpitude, or (2) if

 

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Employee materially breaches the Company’s Confidentiality and Proprietary
Agreement.

 

(b) The Company may terminate this Agreement immediately for any of the reasons
stated in Section 4.1(a) by giving written notice to Employee without prejudice
to any other remedy to which the Company may be entitled.  The notice of
termination shall specify the grounds for termination.  If Employee’s employment
hereunder is terminated “for cause” pursuant to this Section 4.1, Employee shall
be entitled to receive hereunder his accrued but unpaid Base Salary and vacation
pay through the date of termination, and reimbursement for any expenses as set
forth in Section 3.5, through the date of termination, but shall not be entitled
to receive any unpaid portion of the Annual Bonus or any other amount.

 

4.2                                 Termination Without Cause.  If Employee’s
employment is terminated without “cause” as defined in Section 4.1(a) or he is
Involuntarily Terminated, he will be eligible for the severance benefits set
forth in Section 4.3.

 

4.3                                 Severance Payments and Other Benefits Upon
Termination Without Cause or Involuntary Termination.   If the Company
terminates Employee’s employment hereunder without cause, or if Employee is
Involuntarily Terminated, the Company (or its successor, as the case may be)
shall pay to Employee (i) any accrued but unpaid Base Salary and vacation
through the date of termination, (ii) reimbursement for any expenses as set
forth in Section 3.5, through the date of termination, (iii) Employee’s Annual
Bonus, prorated through the date of termination, and (iv) a severance payment in
an amount equal to (A) three times Employee’s Base Salary and Annual Bonus in
the event of an Involuntary Termination or (B) four times Employee’s Base Salary
and Annual Bonus in the event Employee’s employment is terminated without cause,
payable in one lump sum on the date of termination, subject to withholding as
may be required by law.  For the purposes of Section 4.3 (iv)(A) above, Annual
Bonus shall mean the greater of 100% of Employee’s then current Base Salary or
the Annual Bonus paid to Employee for the preceding fiscal year.  For the
purposes of Section 4.3 (iv) (B) above, Annual Bonus shall mean 100% of
Employee’s then current Base Salary.  In addition, if Employee’s employment is
terminated without cause vesting of all options to purchase shares of the
Company’s Common Stock and all restricted stock grants (“Option Shares”) will be
accelerated in full.   If Employee’s employment is terminated due to death or
permanent disability, Employee will be credited with an additional twenty-four
(24) months of service toward vesting in all Options Shares then held by
Employee in addition to the service he has accrued toward vesting through the
date of termination.  If Employee is Involuntarily Terminated, vesting of all
Option Shares will be accelerated in full; and all such options shall remain in
effect for a one (1) year period following the date of termination.

 

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As used in this Section 4.3, “Involuntarily Terminated” shall mean (a)
Employee’s voluntary resignation following a Corporate Transaction in which
Employee is not offered a position of comparable pay and responsibilities in the
greater Los Angeles, California metropolitan area, or (b) where, in connection
with or following a Corporate Transaction, Employee voluntarily resigns
following either (X) a reduction of Employee’s salary or (Y) a material change
of Employee’s responsibilities.  As used in this Section 4.3, “Corporate
Transaction” shall mean (i) a merger or consolidation or other reorganization or
transaction in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company’s outstanding securities are
transferred or issued to a person or persons different from the persons holding
those securities immediately prior to such transaction, or (ii) the sale,
transfer or other disposition of all or substantially all of the Company’s
assets in complete liquidation or dissolution of the Company.  As used in this
Section 4.3, a “material change” in Employee’s responsibilities includes any
decrease in Employee’s compensation or benefits or any material change in
Employee’s job duties, title, or location of employment (out of the greater Los
Angeles, California metropolitan area). A Change of Control or a Corporate
Transaction under the Company’s 1999 Stock Incentive Plan shall be deemed to be
a Corporate Transaction hereunder.  Also, for purposes of clarification, it will
be deemed to be a material change in Employee’s responsibilities and Employee
shall not be deemed to have been offered a comparable position following a
Corporate Transaction if Employee is not offered the position of Chairman and
Chief Executive Officer of the Company or it’s successor as well as the entity
acquiring the Company in a Corporate Transaction.

 

5.                                       Noncompetition.  For the eighteen (18)
month period following the termination of Employee’s employment with the Company
(but only if Employee has received the severance payments specified in Section
4.3 above) (the “Noncompetition Period”), Employee shall not directly engage in,
or manage or direct persons engaged in, a Competitive Business Activity (as
defined below) anywhere in the Restricted Territory (as defined below);
provided, that the Noncompetition Period shall terminate if the Company
terminates operations or if the Company no longer engages in any Competitive
Business Activity.  The term “Competitive Business Activity” shall mean the
business of providing consumers with dial-up Internet access services (free or
pay).  The term “Restricted Territory” shall mean each and every county, city or
other political subdivision of the United States in which the Company is engaged
in business or providing its services.  The Company agrees that providing
services to a company or entity that is involved in a Competitive Business
Activity but which services are unrelated to the Competitive Business Activity
shall not be deemed a violation of this Agreement.  For the purposes of damages
to the Company with respect to any breach of this Section 5, the value of
Employee’s obligations to the Company under this Section 5 equals 37.5% of the
cash severance payment in Section 4.3(iv) above.

 

6.                                       Gross-Up Payment.  If the aggregate of
all payments or benefits made or

 

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provided to the Employee under this Agreement and under all other plans and
programs of the Company (the “Aggregate Payment”) is determined to constitute a
“parachute payment,” as such term is defined in Section 280G(b)(2) of the
Internal Revenue Code of 1986, as amended (the “Code”), the Company shall pay to
the Employee, prior to or coincident with the time any excise tax imposed by
Section 4999 of the Code (the “Excise Tax”) is payable with respect to such
Aggregate Payment, an additional amount that, after the imposition of all
penalties, income, excise and other federal, state and local taxes thereon, is
equal to the sum of the Excise Tax on the Aggregate Payment and interest and
penalties imposed with respect to the Excise Tax and such additional amount (the
“Gross-Up Payment”).  For example, if the Excise Tax imposed with respect to the
Aggregate payment equals $1,000,000, and all penalties, income, excise and other
federal, state and local taxes on the Gross-Up Payment equal $2,333,333, the
Gross-Up Payment will be $3,333,333.  The determination of whether the Aggregate
Payment constitutes a parachute payment and, if so, the amount to be paid to the
Employee and the time of payment pursuant to this Section 6 shall be made by an
independent auditor (the “Auditor”) selected and paid by the Company and
reasonably acceptable to the Employee.  The Auditor shall be a nationally
recognized United States public accounting firm.  For purposes of determining
the amount of the Gross-Up Payment, the Employee shall be deemed to pay income
tax at the highest marginal rates of federal, state and local income taxation in
the calendar year in which the Gross-Up Payment is to be made, net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes.

 

In the event that the Excise Tax is finally determined to be less than the
amount taken into account hereunder in calculating the Gross-Up Payment, the
Employee shall repay to the Company, within five (5) business days following the
time that the amount of such reduction in the Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such reduction plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and employment taxes imposed on the Gross-Up Payment
being repaid by the Employee, to the extent that such repayment results in a
reduction in the Excise Tax and a dollar-for-dollar reduction in the Employee’s
taxable income and wages for purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment at 120% of the
rate provided in section 1274(b)(2)(B) of the Code.  In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the payment of
the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or additions payable by the
Employee with respect to such excess) within five (5) business days following
the time that the amount of such excess is finally determined.  The Employee and
the Company shall cooperate with each other in connection with any proceeding or
claim relating to the existence or amount of liability for Excise Tax, and all
expenses incurred by

 

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the Employee in connection therewith shall be paid by the Company promptly upon
notice of demand from the Employee.

 

7,                                       Assignment.   Neither the Company nor
Employee may assign this Agreement or any rights or obligations hereunder.  
This Agreement will be binding upon the Company and its successors and assigns. 
In the event of a Corporate Transaction, the Company shall cause this Agreement
to be assumed by the Company’s successor as well as any acquiring or ultimate
parent entity, if any, following any Corporate Transaction.

 

8.                                       Miscellaneous.

 

8.1                                 This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the employment of Employee by the Company and constitutes the entire
agreement between the Company and the Employee with respect to its subject
matter.

 

8.2                                 This Agreement may not be amended,
supplemented, modified or extended, except by written agreement which expressly
refers to this Agreement, which is signed by of the parties hereto and which is
authorized by the Company’s Board.

 

8.3                                 This Agreement is made in and shall be
governed by the laws of California, without giving effect to its
conflicts-of-law principles.

 

8.4                                 If any provision of this Agreement is held
by an arbitrator or a court of competent jurisdiction to conflict with any
federal, state or local law, or to be otherwise invalid or  unenforceable, such
provision shall be construed in a manner so as to maximize its enforceability
while giving the greatest effect as possible to the parties’ intent.   To the
extent any provision cannot be construed to be enforceable, such provision shall
be deemed to be eliminated from this Agreement and of no force or effect and the
remainder of this Agreement shall otherwise remain in full force and effect and
be construed as if such portion had not been included in this Agreement.

 

8.5                                 Employee represents and warrants to the
Company that there is no restriction or limitation, by reason of any agreement
or otherwise, upon Employee’s right or ability to enter into this Agreement and
fulfill his obligations under this Agreement.

 

8.6                                 All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
first-class mail, postage prepaid, registered or certified, or delivered either
by hand, by messenger or by overnight courier service, and addressed to the
receiving party at the respective address set forth in the heading of this
Agreement, or at such other address as such party shall have furnished to the
other party in

 

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accordance with this Section 8.6 prior to the giving of such notice or other
communication.

 

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

 

 

 

UNITED ONLINE, INC.

 

 

 

 

 

By:

  /s/ Frederic A. Randall, Jr.

 

 

 

Frederic A. Randall, Jr.

 

 

Executive Vice President and

 

 

General Counsel

 

 

 

/s/ Mark Goldston

 

 

Mark Goldston

 

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