Exhibit 10.16


 


August 1,
2005


 


Jon O. Fetveit


1485 Valecroft Avenue


Westlake Village, CA  91361


 


Dear
Jon,


 


This letter sets forth the
terms and conditions of your employment with United Online, Inc. (the “Company”),
effective as of August 1, 2005 (the “Effective Date”).


 


1.             Position.  You will serve in a
full-time capacity as Executive Vice President and Chief Strategy Officer of
the Company.  You will report to the
Chief Executive Officer of the Company.


 


2.             Salary and Benefits.  You will be paid an annual base salary equal
to your current annual base salary, payable in bi-weekly installments in
accordance with the Company’s standard payroll practices, subject to any
increases as determined by the Board of Directors of the Company (the “Board of
Directors”) from time to time.  You will
be eligible to participate in the Company’s employee benefits plans, including
its 401(k) plan.  In addition, you will
be entitled to participate in the Company’s Exec-U-Care Medical Reimbursement
Insurance Plan so long as such plan is made generally available to the Company’s
senior executives.  You will be entitled
to a minimum of 4 weeks of paid vacation each year or such greater amount as
determined in accordance with the Company’s standard vacation policy.


 


3.             Bonus.  For fiscal years 2005 and 2006, you will be
eligible to participate in a bonus program with eligibility for up to 100% of
your annual base salary.  The criteria
for a bonus for fiscal year 2005 is set forth in the United Online, Inc. 2005
Management Bonus Plan and the amount of such bonus will be determined by the
Compensation Committee of the Board of Directors.  The criteria for a bonus for fiscal year 2006
and the amount of such bonus will be determined by the Board of Directors or a
committee thereof.


 


4.             Acceleration of Stock Options and Restricted Stock Units.  Upon
the termination of your employment by the Company “without cause” or by you for
“good reason” (each term as defined below) within the two (2)-year period
following the Effective Date, the vesting of your outstanding stock options and
restricted stock units will be accelerated by the additional number of shares
in which you would have been vested at the time of such termination if you had
completed an additional twelve (12) months of service (calculated, with respect
to restricted stock units, as if such units vest on a monthly basis).  If such termination occurs within twelve (12)
months after a “Change in Control” or “Corporate Transaction” (as defined in
the applicable stock plan, option agreement or restricted stock unit
agreement), the vesting will be accelerated by the greater
of (i) the additional number of shares as calculated pursuant to the preceding
sentence and (ii) the additional number of shares in which you would have
been vested at the time of such termination if you had completed an additional
period of service equal in duration to the actual period of service completed
by you between the grant date for each applicable award and the date of the
termination (calculated, with respect to restricted stock units, as if such
units vest on a monthly basis).  Such
vesting acceleration will be contingent upon your signing the Release referred
to in Section 7(b) below.  Upon the
termination of your employment as a result of death or Disability (as defined
below) within the two (2)-year period following the Effective Date, the vesting
of your outstanding stock options and restricted stock units will be
accelerated by the additional number of shares in which you would have been
vested at the time of such termination if you had completed an additional
twelve (12) months of service (calculated, with respect to restricted stock
units, as if such units 


 





















 


vest on a monthly basis).  In the
event of an inconsistency between the terms set forth in this paragraph and the
terms set forth in the applicable stock plan, stock option agreement and/or
restricted stock unit agreement, the terms set forth in this letter will
control; provided, however, that the foregoing will not be construed to
diminish the rights that you currently have under the applicable stock plan,
stock option agreement and/or restricted stock unit agreement.  The provisions of this paragraph will only
apply to equity awards outstanding as of the date of this letter, although
future equity awards may also be covered by this paragraph if so stated in a
resolution of the Board of Directors or a committee thereof.


 


5.             Policies; Procedures; Proprietary Information and Inventions Agreement.  As
an employee of the Company, you will be expected to abide by all of the Company’s
policies and procedures, including, without limitation, the terms of the
Proprietary Information and Inventions Agreement between you and the Company,
the Insider Trading Policy, the Code of Ethics and the Employee Handbook.


 


6.             At Will Employment.  Notwithstanding anything to the contrary
contained herein, your employment with the Company will be “at will” and will
not be for any specified term, meaning that either you or the Company will be
entitled to terminate your employment at any time and for any reason, with or
without cause.  Any contrary
representations which may have been made to you are superseded by the terms set
forth in this paragraph.  This is the
full and complete agreement between you and the Company on this subject.  Although your job duties, title, compensation
and benefits, as well as the Company’s personnel policies and procedures, may
change from time to time, the “at will” nature of your employment may only be
changed in an express written agreement signed by you and a duly authorized
officer of the Company.


 


7.             Termination of Employment


 


a.             Termination by You.  If you terminate your employment with the Company for any reason, other
than as a result of death or Disability or for “good reason” as defined below,
all obligations of the Company as set forth in this letter will cease, other
than the obligation to pay you for services rendered through the date of
termination, to pay you for any accrued but unused vacation days as of the date
of termination, and to fulfill its obligations with respect to your exercise of
any vested stock options in accordance with the terms of the applicable stock
plan and option agreement.  If you
terminate your employment with the Company for “good reason,” as defined below,
in addition to the foregoing, the Company will pay you the Separation Payment
subject to the conditions set forth in Section 7(b) below.  However, and notwithstanding the termination
of your employment by you, you will continue to be obligated to comply with the
terms of the Proprietary Information and Inventions Agreement and if
applicable, the noncompetition provision set forth in Section 9 below.


 


b.             Termination by the Company.  If your employment is terminated by the Company “without cause” as
defined below, and subject to the signing of a release, the form of which is
attached hereto as Exhibit A (the “Release”), the Company will pay you a
separation payment (the “Separation Payment”) equal to an amount equal to one
year of your then current annual base salary plus
the Annual Bonus (as defined herein). 
For purposes of the immediately preceding sentence, “Annual Bonus” means
your then current annual base salary multiplied by the bonus percentage used to
calculate the bonus awarded to you for the immediately preceding year.  This Separation Payment will be payable
monthly on a pro rata basis over twelve (12) months after such
termination.  Payment of this Separation
Payment will be contingent on your signing the Release.  Upon termination of your employment “without
cause,” other than the obligations set forth in the first sentence of Section 7(a)
above and the acceleration of vesting provided in Section 4 above, the
Company will have no further obligation to you except pursuant to this
paragraph.


 


2





















 


If your employment is
terminated by the Company “with cause” as defined below, the Company will have
no further obligation to you under the terms of this letter, other than the
obligations set forth in the first sentence of Section 7(a) above.  However, and notwithstanding the termination
of your employment by the Company “with cause” or “without cause,” or by you
for “good reason,” you will continue to be obligated to comply with the terms
of the Proprietary Information and Inventions Agreement and if applicable, the
noncompetition provision set forth in Section 9 below.


 


You have the right decline
to receive a portion of the benefits set forth under Sections 4 and 7 in the
event that you determine that the provision of such benefits to you would
result in a “parachute payment” as such term is defined in Section 280(G)(b)(2)
of the Internal Revenue Code of 1986.


 


c.             Termination by Death or
Disability.  If your employment is terminated as a result
of your death, the Company will be obligated to pay your estate or
beneficiaries (as the case may be) for services rendered by you for the Company
through the date of your death.  If your
employment is terminated as a result of your Disability, as defined below, the
Company will be obligated to pay you for services rendered by you for the
Company through the date of your termination. 
In the event of termination of your employment due to death or
Disability, you, your estate or your beneficiaries, as appropriate, will be
entitled to the acceleration benefits set forth in Section 4.  The provisions of this Section 7(c) will
not affect or change the rights or benefits to which you are otherwise entitled
under the Company’s benefits plans or otherwise.


 


d.             Definitions.


 


For purposes of this letter,
“good reason” means:


 


	
  (i)

  	
  a reduction in your base
  salary without your prior written consent;

  
	
  (ii)

  	
  a material reduction in
  your position, duties or responsibilities, without your prior written
  consent, unless such reduction is effected at the request of Mark R.
  Goldston;

  
	
  (iii)

  	
  a change in your place of
  employment which is not within a 50-mile radius of the following address,
  without your prior written consent: 21301 Burbank Boulevard, Woodland Hills,
  CA 91367, or;

  
	
  (iv)

  	
  any material breach by the
  Company of the terms of this letter which is not cured by the Company within
  30 days following receipt of written notice thereof.

  
	
   

  	
   

  
	
  For purposes of this
  letter, “with cause” means your commission of any one or more of the
  following acts:

  
	
   

  	
   

  
	
  (i)

  	
  willfully damaging of the
  property, business, business relationships, reputation or goodwill of the
  Company or its subsidiaries;

  
	
  (ii)

  	
  commission of a felony or
  a misdemeanor involving moral turpitude;

  
	
  (iii)

  	
  theft, dishonesty, fraud
  or embezzlement;

  
	
  (iv)

  	
  willfully violating any
  rules or regulations of any governmental or regulatory body that is or is
  reasonably expected to be injurious to the Company or its subsidiaries;

  
	
  (v)

  	
  the use of alcohol,
  narcotics or other controlled substances to the extent that it prevents you
  from efficiently performing services for the Company or its subsidiaries;

  
	
  (vi)

  	
  willfully injuring any
  other employee of the Company or its subsidiaries;

  
	
  (vii)

  	
  willfully injuring any
  person in the course of performance of services for the Company or its
  subsidiaries;

  
	
  (viii)

  	
  disclosing to a competitor
  or other unauthorized persons confidential or proprietary information or
  secrets of the Company or its subsidiaries;

  
	
  (ix)

  	
  solicitation of business
  on behalf of a competitor or a potential competitor of the Company or its
  subsidiaries;

  



 


3





















 


	
  (x)

  	
  harassment of any other
  employee of the Company or its subsidiaries or the commission of any act
  which otherwise creates an offensive work environment for other employees of
  the Company or its subsidiaries;

  
	
  (xi)

  	
  failure for any reason
  within five (5) days after receipt by you of written notice thereof from the
  Company, to correct, cease or otherwise alter any insubordination, failure to
  comply with instructions, inattention to or neglect of the duties to be
  performed by you or other act or omission to act that in the opinion of the
  Company does or may adversely affect the business or operations of the
  Company or its subsidiaries;

  
	
  (xii)

  	
  breach of any material
  term of this letter; or

  
	
  (xiii)

  	
  any other act or omission
  that is determined to constitute “cause” in the good faith discretion of the
  Board of Directors.

  



 


For purposes of this letter,
“without cause” means any reason not within the scope of the definition of the
term “with cause.”


 


For purposes of this letter,
“Disability” means your inability to engage in any substantial gainful activity
necessary to perform your duties as Chief Strategy Officer by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted, or can be expected to last, for a
continuous period of not less than twelve (12) months.


 


8.             Withholding Taxes.  All forms of compensation referred to in this
letter are subject to reduction to reflect applicable withholding and payroll
taxes.


 


9.             Noncompetition and Nonsolicitation Covenants.  From
and after the Effective Date until one year after termination of your
employment with the Company for any reason, you will not directly or indirectly
solicit, attempt to solicit, interfere or attempt to interfere with the
relationship of the Company or its subsidiaries with existing customers for the
products or services of the Company or its subsidiaries, on your behalf or any
other person or entity engaged in the design, development, manufacture,
marketing or sale of a product or service which is in competition with the
products or services of the Company or its subsidiaries; or directly or
indirectly solicit any of the employees of the Company or its subsidiaries for
the purpose of hiring them or inducing them to leave their employment with the
Company or its subsidiaries, on your own behalf or on behalf of any other
person or entity.  In addition, from and
after the Effective Date until one year after termination of your employment
with the Company for any reason, so long as you are receiving the Separation
Payment, you will not, at any place in any county, city or other political
subdivision of the United States in which the Company or its subsidiaries is
engaged in business or providing its services:


 


a.             directly or
indirectly design, develop, manufacture, market or sell any product or service
which is in competition with the products or services of the Company or its
subsidiaries; or


 


b.             directly or indirectly own any interest in,
control, be employed by or associated with or render advisory, consulting or
other services (including but not limited to services in research) to any
person or entity, or subsidiary, subdivision, division or joint venture of such
entity in connection with the design, development, manufacture, marketing or
sale of a product or service which is in competition with the products or
services of the Company or its subsidiaries; provided, however, that nothing in
this letter will prohibit you from owning less than one percent (1%) of the
equity interests of any publicly held entity.


 


10.           Entire Agreement.  This letter, together with the Proprietary
Information and Inventions Agreement, any Company handbooks and policies in
effect from time to time and the Company’s stock 


 


4





















 


option plan, stock option agreement and restricted stock unit
agreement, contains all of the terms of your employment with the Company and
supersedes any prior understandings or agreements, whether oral or written,
between you and the Company.  If any
provision of this letter 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 will be deemed
to be eliminated from this letter and of no force or effect and the remainder
of this letter will otherwise remain in full force and effect and be construed
as if such portion had not been included in this letter.  This letter is not assignable by you.  This letter may be assigned by the Company to
its subsidiaries or to successors in interest to the Company or its lines of
business.


 


11.           Amendment and Governing Law.  This letter may not be amended
or modified except by an express written agreement signed by you and the
Company.  The terms of this letter and
the resolution of any disputes will be governed by California law, and venue
for any disputes will be in Los Angeles, California.


 


12.           Term.  This
letter will expire on the two (2) year-anniversary of the Effective Date,
except Sections 6, 9, 10, 11, and 12 will survive such expiration.  Following the expiration of this letter, your
employment with the Company will continue to be “at will.”


 


We look forward to
continuing our successful relationship. 
You may indicate your agreement with these terms by signing and dating
this letter.


 


If you have any questions,
please call the undersigned.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
  UNITED ONLINE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark R. Goldston

  	
   

  
	
   

  	
  Name:

  	
  Mark R. Goldston

  
	
   

  	
  Title:

  	
  Chairman, President & Chief Executive Officer

  
					



 


I have read the foregoing and accept the
terms set forth in this letter:


 


	
  /s/
  Jon O. Fetveit

  	
   

  
	
  Jon
  O. Fetveit

  	
   

  



 


Dated: 
August 1, 2005


 


5