Exhibit 10.5


UNITED
ONLINE, INC.

2001 SUPPLEMENTAL STOCK INCENTIVE PLAN


(As
Amended and Restated Effective September 26, 2001)


ARTICLE ONE

GENERAL PROVISIONS


I.              PURPOSE
OF THE PLAN


This Plan is intended to supplement the United Online,
Inc. 2001 Stock Incentive Plan thereby promoting the interests of the
Corporation, by providing eligible persons in the Corporation’s service with
the opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
such service.


Capitalized terms shall have the meanings assigned to
such terms in the attached Appendix.


II.            STRUCTURE
OF THE PLAN


A.    The
Plan shall be divided into two separate equity incentive programs:


·      the
Discretionary Option Grant Program under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
Common Stock; and


·      the
Stock Issuance Program under which eligible persons may, at the discretion of
the Plan Administrator, be issued shares of Common Stock directly, either
through the immediate purchase of such shares or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary).


B.    The
provisions of Articles One and Four shall apply to all equity programs under
the Plan and shall govern the interests of all persons under the Plan.


III.           ADMINISTRATION
OF THE PLAN


A.    The
Primary Committee and the Board shall have concurrent authority to administer
the Discretionary Option Grant and Stock Issuance Programs with respect to
Section 16 Insiders.  Administration of
the Discretionary Option Grant and Stock Issuance Programs with respect to all
other persons eligible to participate in those programs may, at the Board’s
discretion, be vested in the Primary Committee or a Secondary Committee, or the
Board may retain the power to administer those programs with respect to all
such persons.  Members of the Primary
Committee or any Secondary Committee shall serve for such period of time as the
Board may determine and may be removed by the Board at any time.  The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.













B.    Each
Plan Administrator shall, within the scope of its administrative functions
under the Plan, have full power and authority (subject to the provisions of the
Plan) to establish such rules and regulations as it may deem appropriate for
proper administration of the Discretionary Option Grant and Stock Issuance
Programs and to make such determinations under, and issue such interpretations
of, the provisions of those programs and any outstanding options or stock
issuances thereunder as it may deem necessary or advisable.  Decisions of the Plan Administrator within
the scope of its administrative functions under the Plan shall be final and
binding on all parties who have an interest in the Discretionary Option Grant
and Stock Issuance Programs under its jurisdiction or any option or stock
issuance thereunder.


C.    Service
on the Primary Committee or the Secondary Committee shall constitute service as
a Board member, and members of each such committee shall accordingly be
entitled to full indemnification and reimbursement as Board members for their
service on such committee.  No member of
the Primary Committee or the Secondary Committee shall be liable for any act or
omission made in good faith with respect to the Plan or any option grants or
stock issuances under the Plan.


IV.           ELIGIBILITY


A.    The
persons eligible to participate in the Discretionary Option Grant and Stock
Issuance Programs are as follows:


1.     Employees
other than Section 16 Insiders;


2.     independent
contractors who provide services to the Corporation (or any Parent or
Subsidiary); and


3.     any
other individuals (including Section 16 Insiders) who are to receive option
grants under this Plan solely in connection with their commencement of Employee
status, whether as a result of an acquisition of their former employer by the
Corporation or any Parent or Subsidiary or by reason of their initial hire by
the Corporation or such Parent or Subsidiary.


B.    Each
Plan Administrator shall, within the scope of its administrative jurisdiction
under the Plan, have full authority to determine, (i) with respect to the option
grants under the Discretionary Option Grant Program, which eligible persons are
to receive such grants, the time or times when those grants are to be made, the
number of shares to be covered by each such grant, the time or times when each
option is to become exercisable, the vesting schedule (if any) applicable to
the option shares and the maximum term for which the option is to remain
outstanding and (ii) with respect to stock issuances under the Stock
Issuance Program, which eligible persons are to receive such issuances, the
time or times when the issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if any) applicable to the
issued shares and the consideration for such shares.


C.    The
Plan Administrator shall have the absolute discretion either to grant options
in accordance with the Discretionary Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.



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V.            STOCK
SUBJECT TO THE PLAN


A.    The
stock issuable under the Plan shall be shares of authorized but unissued or
reacquired Common Stock, including shares repurchased by the Corporation on the
open market.  The number of shares of
Common Stock reserved for issuance over the term of the Plan shall not exceed
2,235,322 shares.  Such reserve shall
consist of (1) 1,135,322 shares, the number of shares that remain available for
issuance immediately prior to the Plan Effective Date pursuant to the
Predecessor Plans, including the shares subject to outstanding options under
those plans and (2) an 1,100,000 share increase approved by the Board on
September 26, 2001.


B.    The
number of shares of Common Stock available for issuance under the Plan shall
automatically increase on the first trading day of January each calendar year
during the term of the Plan, beginning with calendar year 2002, by an amount
equal to one-half percent (0.5%) of the total number of shares of Common Stock
outstanding on the last trading day in December of the immediately preceding
calendar year, but in no event shall any such annual increase exceed 142,800
shares.


C.    Officers
of the Corporation may not receive options, separately exercisable stock
appreciation rights and direct stock issuances under the Plan for more than
671,000 shares of Common Stock in the aggregate.


D.    Shares
of Common Stock subject to outstanding options (including options transferred
to this Plan from the Predecessor Plans) shall be available for subsequent
issuance under the Plan to the extent (1) those options expire or
terminate for any reason prior to exercise in full or (2) the options are
cancelled in accordance with the cancellation-regrant provisions of
Article Two.  Unvested shares issued
under the Plan and subsequently cancelled or repurchased by the Corporation at
the original issue price paid per share, pursuant to the Corporation’s
repurchase rights under the Plan shall be added back to the number of shares of
Common Stock reserved for issuance under the Plan and shall accordingly be
available for reissuance through one or more subsequent option grants or direct
stock issuances under the Plan.  However,
should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes
incurred in connection with the exercise of an option or the vesting of a stock
issuance under the Plan, then the number of shares of Common Stock available
for issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised or which vest under the stock issuance, and not
by the net number of shares of Common Stock issued to the holder of such option
or stock issuance.  Shares of Common
Stock underlying one or more stock appreciation rights granted pursuant to the
Plan shall not be available for subsequent issuance
under the Plan if the stock appreciation right is exercised.


E.     If
any change is made to the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Corporation’s receipt of consideration, appropriate adjustments shall be made
by the Plan Administrator to (1) the maximum number and/or class of
securities issuable under the Plan, (2) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option under the Plan (including options transferred to this Plan from the
Predecessor Plans), (3) the maximum



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number and/or class of securities for which officers of the Corporation
may be granted stock options, separately exercisable stock appreciation rights
and direct stock issuances under the Plan in the aggregate and (4) the maximum
number and/or class of securities by which the share reserve is to increase
automatically each calendar year pursuant to the provisions of Section V.B of
this Article One.  Such adjustments to
the outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options.  The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.


F.     Outstanding
awards granted pursuant to the Plan shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital
or business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.



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ARTICLE
TWO

DISCRETIONARY OPTION GRANT PROGRAM


I.              OPTION
TERMS


Each option shall be evidenced by one or more
documents in the form approved by the Plan Administrator; provided,
however, that each such document shall comply with the terms
specified below.  All options granted
under the Plan shall be Non-Statutory Options.


A.    Exercise Price.


1.     The
exercise price per share shall be fixed by the Plan Administrator.


2.     The
exercise price shall become immediately due upon exercise of the option and
shall, subject to the provisions of this Plan and the documents evidencing the
option, be payable in one or more of the forms specified below:


(a)   cash or check made payable
to the Corporation,


(b)   shares of Common Stock held
for the requisite period necessary to avoid a charge to the Corporation’s
earnings for financial reporting purposes and valued at Fair Market Value on
the Exercise Date, or


(c)   if the option is exercised
for vested shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable instructions to
(i) a Corporation-designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (ii) the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale.


Except to the extent such sale and remittance
procedure is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.


B.    Exercise and Term of
Options.  Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option.  However,
no option shall have a term in excess of ten (10) years measured from the
option grant date.


C.    Effect of Termination of
Service.


1.     The following provisions shall govern the exercise of any
options granted pursuant to the Discretionary Option Grant Program that are
outstanding at the time of the Optionee’s cessation of Service:



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(a)   Any
option outstanding at the time of the Optionee’s cessation of Service shall
remain exercisable for such period of time thereafter as shall be determined by
the Plan Administrator and set forth in the documents evidencing the option,
but no such option shall be exercisable after the expiration of the option
term.


(b)   Any
option outstanding at the time of the Optionee’s death and exercisable in whole
or in part at that time may be subsequently exercised by the personal
representative of the Optionee’s estate or by the person or persons to whom the
option is transferred pursuant to the Optionee’s will or the laws of
inheritance or by the Optionee’s designated beneficiary or beneficiaries of
that option.


(c)   Should
the Optionee’s Service be terminated for Misconduct or should the Optionee
otherwise engage in Misconduct while options granted pursuant to this
Article Two are outstanding, then all of those options shall terminate
immediately and cease to be outstanding.


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


2.     The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:


(a)   extend
the period of time for which the option is to remain exercisable following the
Optionee’s cessation of Service from the limited exercise period otherwise in effect
for that option to such greater period of time as the Plan Administrator shall
deem appropriate, but in no event beyond the expiration of the option term,
and/or


(b)   permit
the option to be exercised, during the applicable post-Service exercise period,
not only with respect to the number of vested shares of Common Stock for which
such option is exercisable at the time of the Optionee’s cessation of Service
but also with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Service.


D.    Stockholder Rights.  The holder of an option shall have
no stockholder rights with respect to the shares subject to the option until
such person shall have exercised the option, paid the exercise price and become
a holder of record of the purchased shares.


E.     Repurchase Rights.  The Plan Administrator shall have
the discretion to grant options which are exercisable for unvested shares of
Common Stock.  Should the Optionee cease
Service while such shares are unvested, the Corporation shall have the right to
repurchase, at the exercise price paid per share, any or all of those unvested
shares.  The terms upon which



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such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.


F.     Limited Transferability of
Options.  During the lifetime
of the Optionee, Non-Statutory Options shall be exercisable only by the
Optionee and shall not be assignable or transferable other than by will or by
the laws of inheritance following the Optionee’s death.  However, the Plan Administrator may permit an
assignment, in whole or in part, during the Optionee’s lifetime, of a
Non-Statutory Option, if such assignment is in connection with the Optionee’s
estate plan and is to one or more members of the Optionee’s immediate family or
to a trust established exclusively for one or more such family members.  The assigned portion may only be exercised by
the person or persons who acquire a proprietary interest in the option pursuant
to the assignment.  The terms applicable
to the assigned portion shall be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.  Notwithstanding the foregoing, the Optionee
may also designate one or more persons as the beneficiary or beneficiaries of
his or her outstanding options under this Article Two, and any outstanding
options shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Optionee’s
death.  Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee’s death.


II.            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 shall automatically vest
in full so that each such option shall, immediately prior to the effective date
of the Corporate Transaction, become exercisable for all the shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully vested shares of Common Stock.  However, an outstanding option shall not become vested on such an accelerated basis if and to the
extent:  (1) such option is, in
connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or (2) such option 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 is not otherwise at that time exercisable and provides for
subsequent payout in accordance with the same exercise/vesting schedule
applicable to those option shares or (3) the acceleration of such option
is subject to other limitations imposed by the Plan 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:  (1) those repurchase
rights are to be assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (2) such accelerated vesting
is precluded by other limitations imposed by the Plan Administrator at the time
the repurchase right is issued.



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C.    Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).


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 (1) the exercise price payable
per share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same, (2) the maximum number
and/or class of securities available for issuance over the remaining term of
the Plan, (3) the maximum number and/or class of securities for which any
one person may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances under the Plan per calendar year
and (4) the maximum number and/or class of securities by which the share
reserve is to increase automatically each calendar year.  To the extent the holders of Common Stock
receive cash consideration for their Common Stock in consummation of the
Corporate Transaction, with the Plan 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 Plan Administrator shall have
the ability to structure an option (either at the time the option is granted or
at any time while the option remains outstanding) so that the option shall
become immediately exercisable and some or all of the shares subject to that
option shall automatically become vested (and some or all of the repurchase
rights of the Corporation with respect to the unvested shares subject to that
option shall immediately terminate) upon the occurrence of a Corporate
Transaction, a Change in Control, any other event or the Optionee’s Involuntary
Termination within a designated period of time following any of these events.


III.           CANCELLATION AND REGRANT OF OPTIONS


The Plan Administrator shall have the authority to
effect, at any time and from time to time, with the consent of the affected
option holders, the cancellation of any or all outstanding options under the
Discretionary Option Grant Program (including outstanding options incorporated
from the Predecessor Plans) and to grant in substitution new options covering the
same or different number of shares of Common Stock.


IV.           STOCK APPRECIATION RIGHTS


A.    The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights.


B.    The following terms shall govern the grant and exercise of tandem
stock appreciation rights:



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1.     One or more Optionees may be granted the right, exercisable upon
such terms as the Plan Administrator may establish, to elect between the
exercise of the underlying option for shares of Common Stock and the surrender
of that option in exchange for a distribution from the Corporation in an amount
equal to the excess of (a) 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 (b) the aggregate exercise price
payable for such shares.


2.     No such option surrender shall be effective unless it is
approved by the Plan 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 be
entitled may be made in shares of Common Stock valued at Fair Market Value on
the option surrender date, in cash, or partly in shares and partly in cash, as
the Plan Administrator shall in its sole discretion deem appropriate.


3.     If the surrender of an option is not approved by the Plan
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 (a) five (5) business days after the receipt of the
rejection notice or (b) the last day on which the option is otherwise
exercisable in accordance with the terms of the documents evidencing such
option, but in no event may such rights be exercised more than ten (10) years
after the option grant date.


 



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ARTICLE
THREE

STOCK ISSUANCE PROGRAM


I.              STOCK ISSUANCE TERMS


Shares of Common Stock may be issued under the Stock
Issuance Program through direct and immediate issuances without any intervening
option grants.  Each such stock issuance
shall be evidenced by a Stock Issuance Agreement which complies with the terms
specified below.  Shares of Common Stock
may also be issued under the Stock Issuance Program pursuant to share right
awards which entitle the recipients to receive those shares upon the attainment
of designated performance goals or the satisfaction of specified Service
requirements.


A.    Purchase Price.


1.     The purchase price per share shall be fixed by the Plan
Administrator.


2.     Subject to the provisions of Section I of
Article Four, shares of Common Stock may be issued under the Stock
Issuance Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:


(a)   cash
or check made payable to the Corporation, or


(b)   past
services rendered to the Corporation (or any Parent or Subsidiary).


B.    Vesting Provisions.


1.     Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant’s period of Service or upon attainment of specified performance
objectives.  The elements of the vesting
schedule applicable to any unvested shares of Common Stock issued under the
Stock Issuance Program shall be determined by the Plan Administrator and
incorporated into the Stock Issuance Agreement. 
Shares of Common Stock may also be issued under the Stock Issuance
Program pursuant to share right awards which entitle the recipients to receive
those shares upon the attainment of designated performance goals or the
satisfaction of specified Service requirements.


2.     Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant’s
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation’s
receipt of consideration shall be issued subject to (a) the same vesting
requirements applicable to the Participant’s unvested shares of Common Stock
and (b) such escrow arrangements as the Plan Administrator shall deem appropriate.


3.     The Participant shall have full stockholder rights with respect
to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or



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not the Participant’s interest in those
shares is vested.  Accordingly, the Participant
shall have the right to vote such shares and to receive any regular cash
dividends paid on such shares.


4.     Should the Participant cease to remain in Service while one or
more shares of Common Stock issued under the Stock Issuance Program are unvested
or should the performance objectives not be attained with respect to one or
more such unvested shares of Common Stock, then those shares shall be
immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares.  To the extent the surrendered
shares were previously issued to the Participant for consideration paid in cash
or cash equivalent (including the Participant’s purchase-money indebtedness),
the Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase money note of the Participant attributable to the
surrendered shares.


5.     The Plan Administrator may in its discretion waive the surrender
and cancellation of one or more unvested shares of Common Stock which would
otherwise occur upon the cessation of the Participant’s Service or the
non-attainment of the performance objectives applicable to those shares.  Such waiver shall result in the immediate
vesting of the Participant’s interest in the shares of Common Stock as to which
the waiver applies.  Such waiver may be
effected at any time, whether before or after the Participant’s cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.


6.     Outstanding share right awards under the Stock Issuance Program
shall automatically terminate, and no shares of Common Stock shall actually be
issued in satisfaction of those awards, if the performance goals or Service
requirements established for such awards are not attained or satisfied.  The Plan Administrator, however, shall have
the discretionary authority to issue shares of Common Stock under one or more
outstanding share right awards as to which the designated performance goals or
Service requirements have not been attained or satisfied.


II.            CORPORATE TRANSACTION/CHANGE IN
CONTROL


A.    All of the Corporation’s outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all 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 in the Stock
Issuance Agreement.


B.    The Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation’s repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights
shall immediately vest, upon the occurrence of a Corporate Transaction, a
Change in Control, any other event or the Participant’s Involuntary Termination
within a designated period of time following any of these events.



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ARTICLE
FOUR

MISCELLANEOUS


I.              FINANCING


The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price under the Discretionary Option
Grant Program or the purchase price of shares issued under the Stock Issuance
Program by delivering a full-recourse, interest bearing promissory note payable
in one or more installments.  The terms
of any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion.  In no event may the maximum
credit available to the Optionee or Participant exceed the sum of (A) the
aggregate option exercise price or purchase price payable for the purchased
shares (less the par value of those shares) plus (B) any Federal, state
and local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.


II.            TAX WITHHOLDING


A.    The Corporation’s obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under
the Plan shall be subject to the satisfaction of all applicable Federal, state
and local income and employment tax withholding requirements.


B.    The Plan Administrator may, in its discretion, provide any or all
holders (other than independent contractors) of Non-Statutory Options or
unvested shares of Common Stock under the Plan with the right to use shares of
Common Stock in satisfaction of all or part of the Withholding Taxes to which
such holders may become subject in connection with the exercise of their
options or the vesting of their shares. 
Such right may be provided to any such holder in either or both of the
following formats:


1.     Stock Withholding:  The election to have the
Corporation withhold, from the shares of Common Stock otherwise issuable upon
the exercise of such Non-Statutory Option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the Withholding Taxes (not to exceed one hundred percent (100%))
designated by the holder.


2.     Stock Delivery:  The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or the shares
vest, one or more shares of Common Stock previously acquired by such holder
(other than in connection with the option exercise or share vesting triggering
the Withholding Taxes) with an aggregate Fair Market Value equal to the
percentage of the Withholding Taxes (not to exceed one hundred percent (100%))
designated by the holder.


III.           SHARE ESCROW/LEGENDS


Unvested shares may, in the Plan Administrator’s
discretion, be held in escrow by the Corporation until the Participant’s or the
Optionee’s interest in such shares vests or may be



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issued directly to the Participant or the Optionee
with restrictive legends on the certificates evidencing those unvested shares.


IV.           EFFECTIVE DATE AND TERM OF THE PLAN


A.    The Plan shall become effective immediately on the Plan Effective
Date.


B.    The Plan shall serve as the successor to the Predecessor Plans,
and no further option grants or direct stock issuances shall be made under
those Predecessor Plans after the Plan Effective Date.  All options outstanding under the Predecessor
Plans on the Plan Effective Date shall be transferred to the Plan at that time
and shall be treated as outstanding options under the Plan.  However, each outstanding option so
incorporated shall continue to be governed solely by the terms of the documents
evidencing such option, and no provision of the Plan shall be deemed to affect
or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of Common
Stock.


C.    One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator’s discretion, be extended to one or more options incorporated
from the Predecessor Plans which do not otherwise contain such provisions.


D.    Unless terminated by the Board prior to such time, the Plan shall
terminate upon the tenth anniversary of the Plan’s adoption by the Board.  Should the Plan terminate when options and/or
unvested shares are outstanding, such awards shall continue in effect in
accordance with the provisions of the documents evidencing such grants or
issuances.


V.            AMENDMENT OF THE PLAN


A.    The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects.  However, no such amendment or modification
shall adversely affect the rights and obligations with respect to stock options
or unvested stock issuances at the time outstanding under the Plan unless the
Optionee or the Participant consents to such amendment or modification.


B.    The Board amended and restated the Plan on September 26, 2001 to
reflect a 1,100,000-share increase in the share reserve.


VI.           USE OF PROCEEDS


Any cash proceeds received by the Corporation from the
sale of shares of Common Stock under the Plan shall be used for any corporate
purpose.


VII.         REGULATORY APPROVALS


A.    The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (1) upon the
exercise of any granted option or (2) under the Stock Issuance Program
shall be subject to the Corporation’s procurement



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of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.


B.    No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing
requirements of any Stock Exchange (or the Nasdaq Stock Market, if applicable)
on which Common Stock is then listed for trading.


VIII.        NO EMPLOYMENT/SERVICE RIGHTS


Nothing in the Plan shall confer upon the Optionee or
the Participant any right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining such person) or
of the Optionee or the Participant, which rights are hereby expressly reserved
by each, to terminate such person’s Service at any time for any reason, with or
without cause.


 



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APPENDIX


The following definitions shall be in effect under the
Plan:


A.            Board shall mean the Corporation’s Board of
Directors.


B.            Change in Control shall mean a change in
ownership or control of the Corporation effected through either of the
following transactions:


(i)            the acquisition, directly or
indirectly by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation), 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 the
Corporation’s outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation’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.


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


D.            Common Stock shall mean the Corporation’s
common stock.


E.             Corporate Transaction shall mean either of
the following stockholder approved transactions to which the Corporation is a
party:


(i)            a merger, consolidation or
reorganization approved by the Corporation’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
Corporation’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 Corporation’s assets.


F.             Corporation shall mean United Online, Inc.,
a Delaware corporation, and any corporate successor to all or substantially all
of the assets or voting stock of United Online, Inc.  which has assumed the Plan.













G.            Discretionary Option Grant Program shall
mean the discretionary option grant program in effect under Article Two of
the Plan.


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


I.              Exercise Date shall mean the date on which
the Corporation shall have received written notice of the option exercise.


J.             Fair Market Value per share of Common Stock
on any relevant date shall be determined in accordance with the following
provisions:


(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 Plan 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.


K.            Involuntary Termination shall mean, except
as otherwise determined by the Plan Administrator, the termination of the
Service of any individual which occurs by reason of:


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


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


L.             Misconduct shall mean the commission of any
act of fraud, embezzlement or dishonesty by the Optionee or Participant, any
unauthorized use or disclosure by such person of confidential information or
trade secrets of the Corporation (or any Parent or Subsidiary), or any other
intentional misconduct by such person adversely affecting the business or
affairs of the Corporation (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
Corporation (or any Parent 



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or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).


M.           1934 Act shall mean the Securities Exchange
Act of 1934, as amended.


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


O.            Optionee shall mean any person to whom an
option is granted under the Discretionary Option Grant Program.


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


Q.            Participant shall mean any person who is
issued shares of Common Stock under the Stock Issuance Program.


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


S.             Plan shall mean the United Online, Inc.
2001 Supplemental Stock Incentive Plan, as set forth in this document.


T.            Plan Administrator shall mean the
particular entity, whether the Primary Committee, the Board or the Secondary
Committee, which is authorized to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to one or more classes of eligible
persons, to the extent such entity is carrying out its administrative functions
under those programs with respect to the persons under its jurisdiction.


U.            Plan Effective Date shall mean the date the
merger of NetZero, Inc. and NZ Acquisition Corp. and the merger of Juno Online
Services, Inc. and JO Acquisition Corp. become effective as contemplated by the
Agreement and Plan of Merger, by and among NetZero, Inc., Juno Online Services,
Inc., United Online, Inc. and the other parties thereto, dated as of June 7,
2001.


V.            Predecessor Plans shall mean the Juno
Online Services, Inc. 2001 Supplemental Stock Incentive Plan and the NetZero,
Inc. 2001 Non-Executive Stock Incentive Plan.


W.           Primary Committee shall mean the committee
of two or more non-employee Board members appointed by the Board to administer
the Discretionary Option Grant and Stock Issuance Programs with respect to
Section 16 Insiders.



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X.            Secondary Committee shall mean a committee
of one or more Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to eligible
persons other than Section 16 Insiders.


Y.            Section 16 Insider shall mean an
officer or director of the Corporation subject to the short-swing profit
liabilities of Section 16 of the 1934 Act.


Z.            Service shall mean the performance of
services for the Corporation (or any Parent or Subsidiary) by a person in the
capacity of an Employee, a non-employee member of the board of directors, or an
independent contractor, except to the extent otherwise specifically provided in
the documents evidencing the option grant or stock issuance.


AA.        Stock Exchange shall mean either the
American Stock Exchange or the New York Stock Exchange.


BB.          Stock Issuance Agreement shall mean the
agreement entered into by the Corporation and the Participant at the time of
issuance of shares of Common Stock under the Stock Issuance Program.


CC.          Stock Issuance Program shall mean the stock
issuance program in effect under Article Three of the Plan.


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


EE.          Withholding Taxes shall mean the Federal,
state and local income and employment withholding taxes to which the holder of
Non-Statutory Options or unvested shares of Common Stock may become subject in
connection with the exercise of those options or the vesting of those shares.



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