Exhibit 10.4

 

SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This Second Amended and Restated Employment Agreement (the “Agreement”) is made
and entered into effective the 1st day of January 2009, by and between United
Online, Inc., a Delaware corporation (“United Online”), with principal corporate
offices at 21301 Burbank Boulevard, Woodland Hills, California 91367, and
Frederic A. Randall, Jr. (“Employee”).

 

WHEREAS, the Employee had previously entered into an employment agreement
effective March 20, 1999 with NetZero, Inc., a wholly-owned subsidiary of United
Online which was subsequently amended and restated as an employment agreement
effective January 27, 2004, with United Online and again effective August 13,
2007 (the “Prior Agreement”); and

 

WHEREAS, effective as of the date hereof (the “Effective Date”), the Employee
and United Online desire to further amend and restate the Prior Agreement.

 

NOW THEREFORE, the Employee and United Online hereby agree as follows:

 

For purposes of this Agreement, the term “Company” shall mean (i) United Online
or (ii) in the event of an initial public offering of securities of Classmates
Media Corporation, a Delaware corporation, or securities issued by an entity
that is a direct or indirect parent of Classmates Media Corporation (which
entity shall hereinafter be referred to as “CMC,” and such initial public
offering shall be hereinafter referred to as the “CMC IPO”) and the assignment
of this Agreement to CMC pursuant to Section 7 hereof, CMC.

 

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 15, 2011 (the “Term”), unless such employment is terminated or this
Agreement expires earlier, as provided in Section 4 below.  Employee’s place of
employment shall be in the greater Los Angeles metropolitan area.

 

2.                                       Duties of Employee.

 

2.1                                 Employee shall serve as Executive Vice
President and General Counsel of the Company.  In this capacity, Employee shall
perform such customary, appropriate and reasonable executive duties as are
usually performed by the General Counsel, including such duties as are delegated
to him from time to time by the Board of Directors of the Company or a committee

 

1

--------------------------------------------------------------------------------

 

thereof (the “Board”).  Employee shall report directly to the Company’s Chief
Executive Officer.

 

2.2                                 Employee agrees to devote Employee’s full
time, attention, skill and efforts to the performance of his duties for the
Company during the Term.  This Agreement shall not be interpreted to prohibit
Employee from making passive personal investments or engaging in charitable and
public service activities if those activities do not materially interfere with
the services required under this Agreement.

 

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 bonus of up to 100% 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.  Employee’s bonus awards shall
be paid in no event later than the 15th day of the third month following the end
of the taxable year (of the Company or Employee, whichever is later) in which
such bonus award is earned.

 

3.3                                 Restricted Stock Units.

 

(a)           On August 15, 2007, the Employee was awarded restricted stock
units covering 210,000 shares of United Online’s common stock (the “UOL
Restricted Stock Units”).  The UOL Restricted Stock Units will vest according to
the following three (3)-year vesting schedule subject to Employee’s continued
employment with United Online (as determined in accordance with terms of the
applicable stock plan and the restricted unit agreement): one-third of the UOL
Restricted Stock Units will vest on February 15, 2009; one-third of the UOL
Restricted Stock Units will vest of February 15, 2010; and the remaining
on-third of the UOL Restricted Stock Units will vest on February 15, 2011.  In
all other respects, except as set forth herein, the UOL Restricted Stock Units
will be subject to the terms and conditions set forth in the applicable stock
plan and the

 

2

--------------------------------------------------------------------------------

 

restricted stock unit agreement between United Online and the Employee.

 

(b)           [Intentionally omitted.]

 

(c)           Contingent on the effectiveness of the CMC IPO prior to April 30,
2008, on the effective date of such CMC IPO, you will be awarded restricted
stock units covering that number of shares of common stock of CMC equal to
$2,800,000 divided by the initial offering price of a share of common stock in
such initial public offering (the “CMC Restricted Stock Units”).  For purposes
of this Agreement, all references to common stock of CMC shall be deemed
to refer to Class A common stock of CMC.  In the event that the CMC IPO does not
become effective prior to April 30, 2008, CMC will not be obligated to award the
CMC Restricted Stock Units described in the preceding sentence.  The CMC
Restricted Stock Units will vest according to the following schedule subject to
your continued employment with CMC: 50% of CMC Restricted Stock Units will vest
on February 15, 2009 and the remaining 50% of CMC Restricted Stock Units will
vest on February 15, 2010.  Except as otherwise set forth herein, in all other
respects, the CMC Restricted Stock Units will be subject to the terms and
conditions set forth in the applicable stock plan and the restricted stock unit
agreement.

 

(d)           If, following a CMC IPO, United Online ceases to own more than
fifty percent (50%) of the total combined voting power of all of CMC’s
outstanding securities, and at that time the Employee is employed by CMC or its
subsidiaries and not by United Online or any of its 50% or more owned
subsidiaries, then the vesting of all outstanding United Online equity-based
awards held by Employee will be accelerated in full and any Company repurchase
options applicable to any such awards will lapse.  For the avoidance of doubt,
unless otherwise specifically provided in this Agreement, applicable stock plan
or award agreement, the sale of CMC prior to a CMC IPO shall not cause or
otherwise give rise to such acceleration of vesting  or such lapse of repurchase
rights.

 

3.4                                 Vacation.  Employee shall be entitled to
five (5) weeks paid vacation per year in accordance with the Company’s vacation
policies.

 

3.5                                 Other Benefits.  Employee shall be eligible
to participate, as of the date of Employee’s employment, in all group life,
health, medical, dental or disability insurance or other employee, health and
welfare benefits made available generally to other similarly situated executives
of the Company or that have been made available to you by the Board or any
affiliate 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

--------------------------------------------------------------------------------

 

3.6                                 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.  Any such reimbursements paid
to Employee shall be made in no event later than the end of the calendar year
following the calendar year in which the expenses were incurred and any amounts
so reimbursed in any one calendar year shall not affect the amounts reimbursable
in any other calendar year.  Employee’s right to receive such reimbursements may
not be exchanged or liquidated for any other benefit.

 

3.7                                 Telecommuting.  Employee shall be entitled
to telecommute for a portion of the work week consistent with past practices or
otherwise as agreed by Employee and the Chief Executive Officer.

 

4.             Termination.

 

4.1           Termination for Cause.

 

(a)                                  Termination “for cause” is defined as
follows: the Company terminates Employee’s employment with the Company
(1) if Employee is convicted of a felony, including any act of moral turpitude, 
which adversely impacts the Company, or (2) if Employee fails, 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 his reasonable good
faith efforts to follow the direction of the Company’s Board of Directors and to
perform his obligations hereunder.

 

(b)                                 The Company may terminate this Agreement 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 3.6, 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 or Involuntary Termination.

 

(a)                                  If Employee’s employment is terminated
without “cause” as

 

4

--------------------------------------------------------------------------------

 

defined in Section 4.1(a), or if Employee is Involuntarily Terminated (as
defined below), 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 3.6,
through the date of termination, (iii) Employee’s Annual Bonus, prorated through
the date of termination, and (iv), subject to Employee’s execution (without
revocation) of a general waiver and release of all claims against the Company,
its affiliates and successors, in a form satisfactory to the Company (a
“Release”), a severance payment in an amount equal to three times Employee’s
Base Salary and Annual Bonus, payable in one lump sum on the date of
termination, subject to withholding as may be required by law, and such
severance payment will be paid upon the expiration of all applicable review and
revocation periods applicable to the Release as statutorily required by law, or
as soon thereafter as administratively practicable.  For the purposes of
Section 4.2(a)(iii) and Section 4.2(a)(iv) above, Annual Bonus shall mean the
greater of 75% of Employee’s then current Base Salary or the Annual Bonus paid
to Employee for the preceding fiscal year in the event of Involuntary
Termination, or 75% of Employee’s then current Base Salary in the event of
termination without cause.

 

(b)                                 In addition, if Employee’s employment is
terminated without cause (other than if Employee is Involuntarily Terminated)
and if Employee executes and does not revoke a Release, (i) the vesting of all
outstanding restricted stock units held by the Employee will be immediately
accelerated by the additional number of units in which the Employee would have
been vested at the time of such termination if he had completed an additional
twelve (12) months of service (calculated as if such units vest on a monthly
basis) and (ii) the Company repurchase option will lapse with respect to a
number of outstanding restricted shares equal to (x) the sum of the number of
full months that have elapsed between the grant date and the date of
termination, plus twelve (12) additional months, divided by (y) 48 months,
multiplied by (z) the total number of such outstanding restricted shares.  Such
acceleration will occur upon the expiration of all applicable review and
revocation periods applicable to the Release as statutorily required by law, or
as soon thereafter as administratively practicable, and in no event later than
the later of (i) the 15th day of the third month following the end of your
taxable year in which such termination of employment occurs or (ii) the 15th day
of the third month following the end of the Company’s taxable year in which such
termination of employment occurs.

 

5

--------------------------------------------------------------------------------

 

(c)                                  If Employee’s employment is terminated due
to death or permanent disability, the vesting of all outstanding equity-based
awards will be accelerated in full and any Company repurchase options applicable
to any such awards will lapse.

 

(d)                                 If Employee is Involuntarily Terminated, and
if Employee executes and does not revoke a Release (i) all outstanding options
shall remain in effect for a one (1) year period following the date of
termination but not beyond the expiration date of such option as set forth in
the applicable stock plan or award agreement, (ii) the vesting of all
outstanding restricted stock units will be accelerated in full and (iii) any
Company repurchase options applicable to restricted shares will lapse.   The
acceleration described above will occur upon the expiration of all applicable
review and revocation periods applicable to the Release as statutorily required
by law, or as soon thereafter as administratively practicable, and in no event
later than the later of (i) the 15th day of the third month following the end of
your taxable year in which such termination of employment occurs or (ii) the
15th day of the third month following the end of the Company’s taxable year in
which such termination of employment occurs.

 

(e)                                  As used in this Section 4.2, Employee shall
be deemed terminated without cause if Employee resigns following a material
breach by the Company of its obligations hereunder; provided, however, Employee
shall first provide the Company with written notice of such breach within ninety
(90) days after the conduct occurs giving rise to such breach, (ii) the Company
shall have fifteen (15) days following such notice to cure such breach and
(iii) Employee’s termination of employment must occur within one hundred eighty
(180) days following the initial existence of such breach.

 

As used in this Section 4.2, Employee shall be deemed “Involuntarily Terminated”
if (i) the Company or any successor to the Company terminates Employee’s
employment without cause in connection with or following a Change in Control (as
defined in Appendix A attached hereto); or (ii) in connection with or following
a Change in Control there is (a) a decrease in Employee’s authorities, duties or
responsibilities without Employee’s consent (it being deemed to be a decrease in
authorities, duties and/or responsibilities if Employee is not offered the
position of Executive Vice President and General Counsel of the Company or its
successor as well as the acquiring and ultimate parent entity, if any, following
the Change in Control), (b) a material decrease in base compensation from those
provided by the

 

6

--------------------------------------------------------------------------------

 

Company immediately prior to the Change in Control without Employee’s consent or
(c) a requirement that Employee re-locate out of the greater Los Angeles
metropolitan area without Employee’s consent; provided however that with respect
to any of (a) — (c), (i) Employee shall provide written notice to the Company of
the existence of the aforementioned condition within ninety (90) days of its
initial existence, (ii) the Company shall have until the first to occur of
(x) the thirty (30) day period immediately following such notice and (y) the end
of the calendar year in which such Change in Control occurs, to cure such
condition, and (iii)  Employee’s termination of employment must occur before the
last day of the calendar year in which such Change in Control occurs.

 

(f)                                    Notwithstanding any provision to the
contrary in this Agreement, upon the earlier of (i) one hundred eighty (180)
days following a Change in Control or (ii) the last day of the calendar year in
which a Change in Control occurs, this Agreement shall expire on such date, in
which event Employee shall be entitled to the same benefits that otherwise would
have been payable to Employee had Employee been Involuntarily Terminated prior
to such Change in Control, as set forth in Sections 4.2(a) and 4.2(d) above.

 

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 4.2 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, prior
to the effectiveness of the CMC IPO, the business of providing consumers with
dial-up Internet access services (free or pay) and, as of the effectiveness of
the CMC IPO, a business primarily involved in online social networking or a
business primarily involving online loyalty rewards programs.  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 4.2(a)(iv) above.

 

As an employee of the Company, you will be expected to abide by all of the

 

7

--------------------------------------------------------------------------------

 

policies and procedures applicable to similarly situated executives of the
Company, including, without limitation, the terms of the Proprietary Information
and Inventions Agreement between you and the Company (or any successor thereto
or affiliate thereof).

 

6.                                       Gross-Up Payment.     If the aggregate
of all payments or benefits made or provided to the Employee under this
Agreement, under all other plans and programs of the Company or otherwise (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

 

8

--------------------------------------------------------------------------------

 

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 the Employee in connection therewith shall be paid by the Company promptly
upon notice of demand from the Employee.  Any payments made by the Company to or
on behalf of the Employee pursuant to this Section 6 shall be made in no event
later than the end of the Employee’s taxable year next following the Employee’s
taxable year in which the related taxes are remitted.

 

7.                                       Assignment.  Except as provided herein,
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 Change in Control (as defined in
Appendix A attached hereto),  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.

 

Upon the effectiveness of the CMC IPO, the Company shall assign this agreement
to CMC.  Notwithstanding this assignment, however, Employee’s Annual Bonus
pursuant to Section 3.2 of this Agreement for fiscal year 2007 shall be payable
by United Online under its applicable bonus plans and any bonuses for subsequent
fiscal years during the Term shall be payable by CMC.

 

8.                                       Miscellaneous.

 

8.1                                 The Release required as a condition to
Employee’s entitlement to severance benefits under this Agreement must be
delivered within twenty-one (21) days (or forty-five (45) days if such longer
period is required under applicable law) after the date of Employee’s
termination of employment.  The severance benefits to which Employee becomes
entitled under this Agreement upon the effectiveness of the delivered Release
following the expiration of all applicable revocation periods shall be paid or
issued on such effective date or as soon as administratively practicable
thereafter, but in no event later than the later of the following dates on which
the Release is so effective: (i) the 15th day of the third month following the
end of Employee’s taxable year in which such termination of employment occurs or
(ii) the 15th day of the third month following the end of the Company’s taxable
year in which such termination of employment occurs.

 

8.2                                 This Agreement supersedes any and all other
agreements, either oral or in

 

9

--------------------------------------------------------------------------------

 

writing, between the parties hereto with respect to the employment of Employee
by the Company, other than the Confidentiality and Proprietary Agreement, and
constitutes the entire agreement between the Company and the Employee with
respect to its subject matter.

 

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

 

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

 

8.5                                 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.

 

8.6                                 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.

 

8.7                                 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 accordance with this Section 8.7 prior to the giving of such
notice or other communication.

 

8.8                                 Notwithstanding any provision to the
contrary in this Agreement, no payment or distribution under this Agreement
which constitutes an item of deferred compensation under Section 409A of Code
and becomes payable by reason of Employee’s termination of employment with the
Company will be made to Employee unless Employee’s termination of employment
constitutes a “separation from service” (as such term is defined in Treasury
Regulations issued under Section 409A of the Code).  For

 

10

--------------------------------------------------------------------------------

 

purposes of this Agreement, each amount to be paid or benefit to be provided
shall be construed as a separate identified payment for purposes of Section 409A
of the Code.  No payment or distribution under this Agreement which constitutes
an item of deferred compensation under Section 409A of the Code and becomes
payable by reason of Employee’s termination of employment with the Company will
be made to Employee prior to the earlier of (i) the expiration of the six
(6)-month period measured from the date of Employee’s “separation from service”
(as such term is defined in Treasury Regulations issued under Section 409A of
the Code) or (ii) the date of Employee’s death, if he is deemed at the time of
such separation from service to be a “key employee” within the meaning of that
term under Code Section 416(i) and such delayed commencement is otherwise
required in order to avoid a prohibited distribution under Section 409A of the
Code.  Upon the expiration of the applicable Section 409A deferral period, all
payments and benefits deferred pursuant to this Section 8.8 (whether they would
have otherwise been payable in a single sum or in installments in the absence of
such deferral) shall be paid or reimbursed to Employee in a lump sum, and any
remaining payments due under this Agreement will be paid in accordance with the
normal payment dates specified for them herein.

 

(Signature Page Follows)

 

11

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement on
the date specified therefor below.

 

 

UNITED ONLINE, INC.

 

 

 

 

 

By:

/s/ Robert Berglass

 

 

Name: Robert Berglass

 

 

Title: Lead Independent Director,

 

 

Compensation Committee Chair of

 

 

United Online, Inc.

 

 

 

 

 

Dated:

December 21, 2008

 

 

 

 

 

 

 

By:

/s/ Mark R. Goldston

 

 

Name: Mark R. Goldston

 

 

Title: Chairman, President and CEO

 

 

 

 

 

Dated:

December 19, 2008

 

 

 

 

 

 

 

/s/ Frederic A. Randall, Jr.

 

Frederic A. Randall, Jr.

 

 

 

 

 

Dated:

December 29, 2008

 

12

--------------------------------------------------------------------------------

 

Appendix A

 

For purposes of this Agreement, a Change in Control shall be deemed to have
occurred (i) if a Change in Control of United Online occurs as described in
Paragraph A below or (ii) if a Change in Control of CMC occurs as described in
Paragraph B below following the CMC IPO.

 

A.            If CMC IPO Does Not Become Effective or CMC IPO Becomes Effective
and United Online Owns 33 1/3% or More of CMC’s  Outstanding Securities:

 

In the event a CMC IPO does not become effective, or a CMC IPO becomes effective
and the Company owns 33-1/3% or more of the total combined voting power of all
of CMC’s outstanding securities, “Change in Control” shall mean a change in
ownership or control effected through any of the following transactions:

 

“United Online” shall mean United Online, Inc., a Delaware corporation, and any
successor corporation to all or substantially all of the assets or voting stock
of United Online, Inc.

 

“Board” shall mean United Online’s Board of Directors.

 

“1934 Act” shall mean the Securities Exchange Act of 1934, as amended from time
to time.

 

(i)                                     a merger or consolidation approved by
United Online’s stockholders, unless securities possessing 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 substantially in the same proportion, by the persons who
beneficially owned United Online’s outstanding voting securities immediately
prior to such transaction,

 

(ii)                                  the sale, transfer or other disposition of
all or substantially all of United Online’s assets approved by United Online’s
stockholders,

 

(iii)                                                                              
the acquisition, directly or indirectly by any person or related group of
persons (other than United Online or a person that directly or indirectly
controls, is controlled by, or is under common control with, United Online), of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of United Online’s outstanding securities, or

 

(iv)                              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

 

13

--------------------------------------------------------------------------------

 

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.

 

B.            Change in Control of Classmates Media Corporation

 

“Change in Control” of Classmates Media Corporation shall mean a change in
ownership or control of CMC effected through any of the following transactions:

 

“CMC” shall mean Classmates Media Corporation, a Delaware corporation, and any
successor corporation to all or substantially all of the assets or voting stock
of Classmates Media Corporation.

 

“Board” shall mean CMC’s Board of Directors.

 

“1934 Act” shall mean the Securities Exchange Act of 1934, as amended from time
to time.

 

(i)                                                 a merger, consolidation or
reorganization approved by CMC’s stockholders, unless securities representing
more than 33-1/3 percent (33.33%) of the total combined voting power of the
voting securities of the successor corporation are immediately thereafter
beneficially owned, directly or indirectly, by the person or persons who
beneficially owned 33-1/3 percent (33.33%) or more of CMC’s outstanding voting
securities immediately prior to such transaction,

 

(ii)                                              any stockholder-approved
transfer or other disposition of all or substantially all of CMC’s assets,

 

(iii)                                           the closing of any transaction
or series of related transactions pursuant to which any person or any group of
persons comprising a “group” within the meaning of Rule 13d-5(b)(1) of the 1934
Act (other than CMC or a person that, prior to such transaction or series of
related transactions, directly or indirectly controls, is controlled by or is
under common control with, CMC) becomes directly or indirectly (whether as a
result of a single acquisition or by reason of one or more acquisitions within
the twelve (12)-month period ending with the most recent acquisition) the
beneficial owner (within the meaning of Rule 13d-3 of the 1934 Act) of
(A) securities possessing (or convertible into or exercisable for securities
possessing) 33-1/3 percent (33.33%) or more of the total combined voting power
of all of CMC’s outstanding securities (as measured in terms of the power to
vote with respect to the election of Board members) or (B) securities
representing 33-1/3 percent (33.33%) or more of the aggregate market value of
all of the CMC’s outstanding capital stock, measured in each instance
immediately

 

14

--------------------------------------------------------------------------------

 

after the consummation of such transaction or series of related transactions and
whether such transaction or transactions involve a direct issuance from the CMC
or the acquisition of outstanding securities held by one or more of the CMC’s
existing stockholders; or

 

(iv)                                          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.

 

In no event, however, shall a Change in Control be deemed to occur as a result
of a spin-off distribution by United Online, Inc. of all or any portion of CMC’s
outstanding securities held by United Online, Inc. to its existing stockholders
in proportion to their holdings of United Online, Inc. capital stock.

 

15

--------------------------------------------------------------------------------