**Exhibit 10.12**

**EMPLOYMENTAGREEMENT**

This Employment Agreement (the “Agreement”) is made and entered intoeffective as of the 3rd day of April 2007 by and between United Online, Inc., aDelaware corporation (the “Company”), with principal corporate offices at 21301Burbank Boulevard, Woodland Hills, California 91367, and Mark R. Goldston,whose address is 21301 Burbank Boulevard, Woodland Hills California 91367 (“Employee”).

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

WHEREAS, the Prior Agreement was amended in July 1999, February 9,2001, October 1, 2003, and January 27, 2004,

WHEREAS, Employee and the Company have terminated the Prior Agreement.

NOW THEREFORE, in consideration of the mutual covenants containedherein and other good and valuable consideration, the receipt and sufficiencyof which are hereby acknowledged, the parties hereto agree as follows:

**1.**                                      EMPLOYMENT

1.1           TheCompany hereby agrees to employ Employee, and Employee hereby accepts suchemployment, on the terms and conditions set forth herein, commencing the datehereof and continuing through March 1, 2011 (the “Term”), unless terminatedearlier as provided in Section 4 below. Employee’s place of employment shall be the in the greater Los Angelesmetropolitan area.

**2.**                                      DUTIES OFEMPLOYEE

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

2.2           Employeeagrees to devote Employee’s good faith, full time, attention, skill and effortsto the performance of his duties for the Company during the Term**;**provided, 

 

 

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however,this paragraph shall not preclude Employee from writing and promoting books orother published materials, engaging in civic, charitable or religiousactivities, or from serving on boards of directors of companies ororganizations that do not present any conflict with the interests of theCompany or otherwise adversely affect Employee’s performance of the servicesrequired under this Agreement.  ThisAgreement also shall not be interpreted to prohibit Employee from makingpersonal investments (including the purchase of interests in professionalsports teams) if those activities do not materially interfere with the servicesrequired under this Agreement.

**3.**                                      COMPENSATION ANDOTHER BENEFITS

3.1           BaseSalary.  During the Term, the Companyshall pay to Employee a base salary per fiscal year equal to Employee’s currentbase salary (the “Base Salary”), with payments to be made in accordance withthe Company’s standard payment policy and subject to such withholding as may berequired by law.  Employee’s Base Salaryshall be increased to include any increases in Employee’s base salary asapproved by the Board, but may not be reduced during the Term without Employee’swritten consent other than in connection with a general salary reductionapplicable to senior executives of the Company generally.

3.2           Bonus.  During the Term, Employee shall also beeligible to receive an annual target cash bonus of 100%****ofEmployee’s base salary for each fiscal year (the “Annual Bonus”), lesswithholding required by law, based on performance criteria established by theBoard provided that this target shall not be deemed to establish a maximumbonus and the Board or its compensation committee may award a bonus equal tomore than 100% of Base Salary.  Employee’sAnnual Bonus shall be increased to include any increases in Employee’s AnnualBonus as approved by the Board.  Employeeshall not be eligible to receive any unpaid Annual Bonus if his employmenthereunder is terminated pursuant to either Section 4.1 or if Employeevoluntarily resigns.

3.3           Sign-OnRestricted Unit Grant.  Employeeshall be granted a restricted unit award covering 750,000 shares of the Company’scommon stock, par value $0.0001 per share (the “Sign-On Restricted Unit Award”),with a per share purchase price equal to par value for an aggregate cashpurchase price of Seventy-Five Dollars ($75.00).  Except as otherwise provided in thisAgreement, the Sign-On Restricted Unit Award shall vest in full on February 15,  2011. Except as otherwise provided in this Agreement, the Sign-On RestrictedUnit Award shall be granted pursuant to and subject to the terms and conditionsof the Company’s 2001 Stock Incentive Plan and form of restricted unitagreement previously approved by the Board. The Company agrees that, unless required by applicable law, no amendmentto the 2001 Stock Incentive Plan will eliminate the ability of Employee tosatisfy income tax withholding obligations by the surrender of shares to theCompany in any manner that would affect the Sign-on Restricted Unit Award orany shares which are part of such award, and that unless required by applicablelaw, the Company will not exercise its discretion under the 2001 StockIncentive Plan, or any applicable award agreement, to eliminate or limitEmployee’s ability to satisfy income tax 

 

 

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withholdingobligations by the surrender of shares of Company’s (or its successor’s) commonstock with respect to equity awards granted prior to the date hereof.

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

3.5           OtherBenefits.  During the Term, Employeeshall be entitled to participate in all group life, health, medical, dental ordisability insurance or other employee, health and welfare benefits made availablegenerally to other executives of the Company. If Employee elects to participate in any of such plans, Employee’sportion of the premium(s) will be deducted from Employee’s paycheck.

3.6           BusinessExpenses.  The Company shall promptlyreimburse Employee for all reasonable and necessary business expenses incurredby Employee in connection with the business of the Company and the performanceof his duties under this Agreement, subject to Employee providing the Companywith reasonable documentation thereof.

3.7           Boardof Directors.  Employee shall beChairman of the Company and also a member and chairman of the Company’s Boardof Directors.  Employee’s appointments asChairman and as a member of the Board will automatically terminate upon thetermination of Employee’s employment with the Company for any reason.

**4.**                                      TERMINATION

4.1           Terminationfor Cause.

(a)     Termination “forcause” is defined as follows:  (1) ifEmployee is convicted of, or enters a plea of *nolocontendere* to, a felony, including any act of moral turpitude thatadversely impacts the Company or any of its subsidiaries, (2) if Employeecommits an act of actual fraud, embezzlement, theft or similar dishonestyagainst the Company or any of its subsidiaries that adversely and materiallyimpacts the Company or any of its subsidiaries, (3) if Employee commits anywillful misconduct or gross negligence resulting in material harm to theCompany or any of its subsidiaries, or (4)**if Employeefails, after receipt of detailed written notice and after receiving a period ofat least thirty (30) days following such notice to cure such failure, to usehis reasonable good faith efforts to follow the reasonable and lawful directionof the Company’s Board of Directors and to perform his obligations hereunder.

(b)     The Company mayterminate this Agreement immediately (except as required by clause 4.1(a)(4)above) for any of the reasons stated in Section 4.1(a) by giving written noticeto Employee without prejudice to any other remedy to which the Company may beentitled.  The notice of terminationshall specify the grounds for termination. If Employee’s 

 

 

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employmenthereunder is terminated “for cause” pursuant to this Section 4.1, Employeeshall be entitled to receive hereunder his accrued but unpaid Base Salary andvacation pay through the date of termination, and reimbursement for anyexpenses as set forth in Section 3.6, through the date of termination, butshall not be entitled to receive any unpaid portion of the Annual Bonus or anyother amount except for amounts earned under any plan (including criteria forthe Annual Bonus) but not yet paid as of the date of termination.

4.2           TerminationWithout Cause.  If Employee’semployment is terminated without “cause” as defined in Section 4.1(a) or he isInvoluntarily Terminated, he will be eligible for the severance benefits setforth in Section 4.3.

4.3           SeverancePayments and Other Benefits Upon Termination Without Cause or InvoluntaryTermination.  If the Companyterminates Employee’s employment hereunder without cause, or if Employee isInvoluntarily Terminated, the Company (or its successor, as the case may be)shall pay to Employee (i) any accrued but unpaid Base Salary and vacationthrough the date of termination and (ii) reimbursement for any expenses as setforth in Section 3.6, through the date of termination.  Additionally, subject to Employee enteringinto and not revoking a release of claims in favor of the Company and abidingby the non-competition and non-solicitation provisions set forth in Section 5below, the Company (or its successor, as the case may be) shall pay to Employee(x) Employee’s Annual Bonus, prorated through the date of termination, and (y)a severance payment in an amount equal to three times the sum of Employee’sBase Salary and Annual Bonus, payable in one lump sum on the date oftermination, subject to withholding as may be required by law.  For the purposes of Section 4.3(x) andSection 4.3(y) above, Annual Bonus shall mean 100% of Employee’s then currentBase Salary or, in the event of Involuntary Termination, the greater of 100% ofEmployee’s then current Base Salary, or the Annual Bonus paid to Employee forthe preceding fiscal year.

With respect to Employee’s outstanding options to purchaseshares of the Company’s Common Stock (“Option Awards”), restricted unit awardscovering shares of the Company’s Common Stock (the “Restricted Unit Awards”)and restricted shares of the Company’s Common Stock (the “Restricted Shares”),if Employee’s employment is terminated without cause or due to Employee’s deathor permanent disability, or if Employee is Involuntarily Terminated:

(i) EachOption Award will become vested and exercisable with respect to all non-vestedshares;

(ii)Each Restricted Unit Award (including the Sign-On Restricted Unit Award) willbecome vested with respect to all non-vested shares; and

(iii)The Company’s repurchase option will lapse with respect to all RestrictedShares.

 

 

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If Employee is InvoluntarilyTerminated, to the extent permitted under Section 409A of the Internal RevenueCode of 1986, as amended (the “Code”), all of Employee’s options to purchasethe Company’s Common Stock shall be exercisable for a one (1) year periodfollowing the date of termination.

As used in this Section 4.3, Employee shall be deemedterminated without cause if Employee resigns following a breach by the Companyof its obligations hereunder; provided, however, in the event of anunintentional breach by the Company, Employee shall provide the Company withwritten notice of such breach and the Company shall have fifteen (15) daysfollowing such notice to cure such breach. As used in this Section 4.3, Employee shall be deemed “InvoluntarilyTerminated” if (i) the Company or any successor to the Company terminatesEmployee’s employment without cause in connection with or following a CorporateTransaction; or (ii) in connection with or following a Corporate Transactionthere is both (A) (a) a decrease in Employee’s title or responsibilities (itbeing deemed to be a decrease in title and/or responsibilities if Employee isnot offered and provided the position of Chairman of the Board of Directors andChief Executive Officer of the Company or its successor as well as theacquiring and ultimate parent entity, if any, following a CorporateTransaction), (b) a decrease in pay and/or benefits from those provided by theCompany immediately prior to the Corporate Transaction, (c) a requirement thatEmployee re-locate out of the greater Los Angeles metropolitan area, or (d) afailure by any successor to Company to confirm in writing that this Agreementremains in full force and effect and (B) Employee terminates his employmentwith the Company within 180 days following a Corporate Transaction.

“Corporate Transaction” shall mean:  (a) a change in ownership or control of theCompany effected through the acquisition, directly or indirectly, by any personor related group of persons (other than the Company or a person that directlyor indirectly controls, is controlled by, or is under common control with, theCompany), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934Act) of securities possessing more than fifty percent (50%) of the totalcombined voting power of the Company’s outstanding securities; (b) a change inthe composition of the Board over a period of thirty-six (36) consecutivemonths or less such that a majority of the Board members ceases, by reason ofone or more contested elections for Board membership, to be comprised ofindividuals who either (A) have been Board members continuously since thebeginning of such period or (B) have been elected or nominated for election asBoard members during such period by at least a majority of the Board membersdescribed in clause (A) who were still in office at the time the Board approvedsuch election or nomination; (c) a merger, consolidation or reorganizationapproved by the Company’s stockholders, unless securities representing morethan fifty percent (50%) of the total combined voting power of the votingsecurities of the successor corporation are immediately thereafter beneficiallyowned, directly or indirectly and in substantially the same proportion, by thepersons who beneficially owned the Company’s outstanding voting securitiesimmediately prior to such transaction; or (d) any stockholder-approved transferor other disposition of all or substantially all of the Company’s assets.

 

 

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**5.**                                      NON-COMPETITION;NON-SOLICITATION

5.1           For theeighteen (18) month period following the termination of Employee’s employmentwith the Company (but only if Employee has received the severance paymentsspecified in Section 4.3 above) (the “Restricted Period”), Employee shall notdirectly engage in, or manage or direct persons engaged in, a CompetitiveBusiness Activity (as defined below) anywhere in the Restricted Territory (asdefined below); provided, that the Restricted Period shall terminate if theCompany terminates operations or if the Company no longer engages in anyCompetitive Business Activity.  The term “CompetitiveBusiness Activity” shall mean the business of providing consumers with dial-up Internet access services (free orpay).  The term “Restricted Territory”shall mean each and every county, city or other political subdivision of theUnited States in which the Company is engaged in business or providing itsservices.  The Company agrees thatproviding services to a company or entity that is involved in a CompetitiveBusiness Activity but which services are unrelated to the Competitive BusinessActivity shall not be deemed a violation of this Agreement.  For the purposes of damages to the Companywith respect to any breach of this Section 5, the value of Employee’sobligations to the Company under this Section 5 equals 37.5% of the cashseverance payment in Section 4.3(iv) above.

5.2           During theRestricted Period, Employee shall not directly or indirectly solicit or recruitfor employment, any person or persons who are employed by Company or any of itssubsidiaries or affiliates, or who were so employed at any time within a periodof twelve (12) months immediately prior to the date Employee’s employmentterminated, or otherwise interfere with the relationship between any suchperson and the Company; nor will Employee assist anyone else in recruiting anysuch employee to work for another company or business or discuss with any suchperson his or her leaving the employ of the Company or engaging in a businessactivity in competition with the Company.

**6.**                                      GROSS-UP PAYMENT

If the aggregate of all payments or benefits made or provided toEmployee under this Agreement and under all other plans and programs of theCompany (the “Aggregate Payment”) is determined to constitute a “parachutepayment,” as such term is defined in Section 280G(b)(2) of the Code, theCompany shall pay to Employee, prior to or coincident with the time any excisetax imposed by Section 4999 of the Code (the “Excise Tax”) is payable withrespect to such Aggregate Payment, an additional amount that, after theimposition of all penalties, income, excise and other federal, state and localtaxes thereon, is equal to the sum of the Excise Tax on the Aggregate Paymentand interest and penalties imposed with respect to the Excise Tax and suchadditional amount (the “Gross-Up Payment”). For example, if the Excise Tax imposed with respect to the AggregatePayment 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-UpPayment will be $3,333,333.  Thedetermination of whether the Aggregate Payment constitutes a parachute paymentand, if so, the amount to be paid to Employee and the time of payment pursuantto this Section 6 shall be made by an independent auditor (the “Auditor”)selected and 

 

 

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paid by the Company and reasonably acceptable toEmployee.  The Auditor shall be anationally recognized United States public accounting firm.  For purposes of determining the amount of theGross-Up Payment, Employee shall be deemed to pay income tax at the highestmarginal rates of federal, state and local income taxation in the calendar yearin which the Gross-Up Payment is to be made, net of the maximum reduction infederal income taxes which could be obtained from deduction of such state andlocal taxes.

In the event that the Excise Tax is finally determined to be less thanthe amount taken into account hereunder in calculating the Gross-Up Payment,Employee shall repay to the Company, within five (5) business days followingthe time that the amount of such reduction in the Excise Tax is finallydetermined, the portion of the Gross-Up Payment attributable to such reductionplus that portion of the Gross-Up Payment attributable to the Excise Tax andfederal, state and local income and employment taxes imposed on the Gross-UpPayment being repaid by Employee, to the extent that such repayment results ina reduction in the Excise Tax and a dollar-for-dollar reduction in Employee’staxable income and wages for purposes of federal, state and local income andemployment taxes, plus interest on the amount of such repayment at 120% of therate provided in section 1274(b)(2)(B) of the Code.  In the event that the Excise Tax isdetermined to exceed the amount taken into account hereunder in calculating theGross-Up Payment (including by reason of any payment the existence or amount ofwhich 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 Employee with respect tosuch excess) within five (5) business days following the time that the amountof such excess is finally determined. Employee and the Company shall cooperate with each other in connectionwith any proceeding or claim relating to the existence or amount of liabilityfor Excise Tax, and all expenses incurred by Employee in connection therewithshall be paid by the Company promptly upon notice of demand from Employee.

**7.**                                      ASSIGNMENT

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

**8.**                                      MISCELLANEOUS

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

 

 

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

8.3           ThisAgreement is made in and shall be governed by the laws of California, withoutgiving effect to its conflicts-of-law principles.

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

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

8.6           Allnotices and other communications required or permitted hereunder shall be inwriting and shall be mailed by first-class mail, postage prepaid, registered orcertified, or delivered either by hand, by messenger or by overnight courierservice, and addressed to the receiving party at the respective address setforth in the heading of this Agreement, or at such other address as such partyshall have furnished to the other party in accordance with this Section 8.6prior to the giving of such notice or other communication.

8.7           It isintended that this Agreement shall comply with the provisions of section 409Aof the Code and the Treasury Regulations relating thereto so as not to subjectEmployee to the payment of additional taxes and interest under section 409A ofthe Code.  In furtherance of this intent,this Agreement shall be interpreted, operated, and administered in a mannerconsistent with these intentions, and to the extent that any regulations orother guidance issued under section 409A of the Code would result in Employeebeing subject to payment of additional income taxes or interest under section409A of the Code, Employee and the Company agree to amend this Agreement inorder to avoid the application of such taxes or interest under section 409A ofthe Code.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement asof

 

 

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the first date written above.
|        |   | UNITED ONLINE, INC.  |
|--------|--------|----------------------|
|   |   |                 |   |   |
|   |   | By:                  |   | /s/ Charles S. Hilliard |
|   |   |                 |   | Charles S. Hilliard  President and Chief Financial Officer |
|   |   |                 |   |   |
|   |   |                 |   |   |
|   |   | MARK R. GOLDSTON     |
|   |   |                 |   |   |
|   |   | /s/ Mark R. Goldston |

 

 

 

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