Exhibit 10.3


 


FIRST AMENDMENT

TO

EMPLOYMENT AGREEMENT


 


This amendment dated and
effective January 1, 2009 (this “Amendment”), amends that certain
Employment Agreement dated effective as of October 1, 2007 (the “Original
Agreement”) by and between United Online, Inc. (the “Company”) and Scott
H. Ray. Capitalized terms used and not otherwise defined herein shall have the
respective meanings set forth in the Original Agreement.


 


RECITALS


 


WHEREAS, Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”), places certain
restrictions, among other things, as to the timing of distributions from
nonqualified deferred compensation plans and arrangements; and


 


WHEREAS, the parties desire
to amend the Original Agreement to comply with Section 409A of the Code.


 


NOW, THEREFORE, in
consideration of the mutual promises set forth herein, the parties hereto
hereby agree as follows:


 


1.             The first sentence of
Section 3 of the Original Agreement is hereby deleted and replaced as
follows:


 


“You will also be eligible
to receive an annual bonus of up to 100% of your annual base salary for each
fiscal year (the ‘Annual Bonus’), less withholding required by law, based on
performance criteria established by the Board of Directors.”


 


2.             A new sentence is
hereby added to the end of Section 3 of the Original Agreement, as
follows:


 


“Your annual bonus award
shall in no event be paid later than the 15th day of the third month following
the end of your taxable year or, if later, the end of the Company’s taxable
year in which such bonus award is earned.”


 


3.             A new sentence is
hereby added to the end of each of Section 4(b) and 4(c) of the
Original Agreement, as follows:


 


“Except as otherwise
expressly provided in the agreement evidencing a particular  restricted stock unit award, the shares of
common stock underlying the restricted stock units that vest on such an
accelerated basis will be issued to you on the first business day, within the
sixty (60)-day period following the date of your cessation from service as a
result of your termination “without cause” (as defined below) or your
resignation for “good reason” (as defined below), on which the executed Release
required of you pursuant to Section 7(b) is effective and enforceable
in accordance with its terms following any applicable revocation period, or as
soon thereafter as administratively practicable, but in no event later than the
last business day of that sixty (60)-day period on which such Release is
effective and enforceable.”


 

















 


4.             The
first sentence of Section 7(a) is hereby amended to read as follows:


 


“If you terminate your employment with the Company for
any reason other than for “good reason”( as defined below), then all
obligations of the Company as set forth in this letter will cease, other than
the obligation to pay you any accrued base salary for services rendered through
the  date of such termination, to pay you
for any accrued but unused vacation days as of the date of such termination,
and to fulfill its obligations in accordance with terms of the applicable stock
plan or restrict stock unit agreement, with the payment of your accrued base
salary and vacation pay to be made to you on your termination date.”


 


5.             The first paragraph
of Section 7(b) of the Original Agreement is hereby deleted and replaced
in its entirety to read as follows:


 


“If
(A) your employment is terminated by the Company “without cause” (as
defined below) prior to November 15, 2011, (B) you execute and
deliver to the Company, within twenty-one (21) days (or forty-five (45) days to
the extent such longer period is required under applicable law) after the
effective date of your termination of employment, a Release (as defined in Section 4(b))
and (C) such Release becomes effective and enforceable after the
expiration of any applicable revocation period under federal or state law, then
the Company will pay you a separation payment (the “Separation
Payment”) equal to the sum of (i) twenty-four (24) months
of your then current monthly base salary, (ii) your Annual Bonus (as
defined below), and (iii) a prorated portion of your Annual Bonus (as
defined below) based upon the time elapsed between December 31 of the
preceding year and your date of termination. For purposes of clauses (ii) and
(iii) above, “Annual Bonus” shall mean the
lesser of 100% of your then current annual base salary or the Annual Bonus paid
to you for the preceding fiscal year. 
Payment of the Separation Payment under this Section 7(b) and
the accelerated vesting of your equity awards under Section 4 will each be
contingent upon the satisfaction of the following requirements: (i) you
execute and deliver to the Company on a timely basis your required Release in
accordance with this Section 7(b) and (ii) such Release becomes effective and enforceable after the
expiration of any applicable revocation period under federal or state law. The Separation Payment under this Section 7(b) will
be payable in a series of twenty-four (24) successive equal monthly
installments, beginning on the first regular payday for the Company’s salaried
employees, within the sixty (60)-day period following the date of your “separation
from service” (as such term is defined in Treasury Regulations issued under
Code Section 409A) as a result of your termination “without cause” (as
defined below), on which your executed Release is effective and enforceable in
accordance with its terms following any applicable revocation period, or as
soon thereafter as administratively practicable, but in no event later than the
last day of that sixty (60)-day period on which such Release is effective and
enforceable. Your right to each such monthly installment of the
Separation Payment shall be deemed, for purposes of Section 409A of the
Code, to be a right to a series of separate payments. Upon termination of your
employment by the Company “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.”


 


6.             The last paragraph of
Section 7(b) of the Original Agreement is hereby deleted and replaced
in its entirety as follows:


 


“If any payment or
benefit received or to be received by you (including any payment or benefit
received pursuant to this letter or otherwise) would be (in whole or part)
subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the 


 


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‘Code’), or any successor provision thereto, or any
similar tax imposed by state or local law, or any interest or penalties with
respect to such excise tax (such tax or taxes, together with any such interest
and penalties, are hereafter collectively referred to as the ‘Excise Tax’),
then, the cash payments provided to you under this letter shall first be
reduced, with each such payment to be reduced pro-rata but without any change
in the payment date and with the monthly installments of the Separation Payment
to be the first such cash payments so reduced, and then, if necessary, the
accelerated vesting of your equity awards pursuant to the provisions of this letter
shall be reduced in the same chronological order in which those awards were
made, but only  to the extent necessary
to assure that  you receive only the greater of (i)  the amount
of those payments and benefits which would not constitute a parachute payment
under Code Section 280G or (ii)  the amount which yields you the
greatest after-tax amount of benefits after taking into account any Excise Tax
imposed on the payments and benefits provided you hereunder (or on any other
payments or benefits to which your may become entitled in connection with any
change in control or ownership of the Company or the subsequent termination of
your employment with the Company).”


 


7.             The definition of “good
reason” as set forth in Section 7(c) of the Original Agreement is
hereby deleted and replaced in its
entirety as follows:


 


“ For purposes of this
letter, ‘good reason’ means:


(i)               a material reduction in your base salary
without your prior written consent;


(ii)              a material reduction in your authority,
duties or responsibilities in a manner inconsistent with the terms of this letter,
without your prior written consent; or


(iii)             any material un-waived breach by the Company of
the terms of this letter; provided however, that with respect to any of the
clause (i) – (iii) events above, you will not be deemed to have
resigned for good reason unless (A) you provide written notice to the
Company of the existence of the good reason event within ninety (90) days after  its initial occurrence, (B) the Company
is provided with thirty (30) days in which to cure such good reason event, and (C) your
termination of employment is effected within one hundred eighty (180) days
following the occurrence of the non-cured clause (i) – (iii) event.”


 


8.             Section 7(d) of
the Original Agreement is hereby deleted and replaced in its entirety as
follows:


 


“d.           Notwithstanding any
provision in this letter to the contrary (other than Section 7(e) below),
no payment or distribution under this letter which constitutes an item of
deferred compensation under Section 409A of the Code and becomes payable
by reason of your termination of employment with the Company will be made to
you until you incur a “separation from service” (as such term is defined in
Treasury Regulations issued under Section 409A of the Code) in connection
with such termination of employment.  For
purposes of this letter, each amount to be paid or benefit to be provided you
shall be treated as a separate identified payment or benefit for purposes of Section 409A
of the Code.  In addition, no payment or
benefit which constitutes an item of deferred compensation under Section 409A
of the Code and becomes payable by reason of your  separation from service will be made to you
prior to the earlier of (i) the first
day of the seventh (7th) month measured from the date of such separation from
service or (ii) the date of your 
death, if you are deemed at the time of such separation from service to
be a specified employee (as determined pursuant to Code Section 409A and
the Treasury Regulations thereunder) and such delayed commencement is otherwise
required in order to avoid a prohibited distribution under Code Section 409A(a)(2).  Upon the expiration of the applicable
deferral period, all payments and 


 


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benefits deferred
pursuant to this Section 7(d) (whether they would have otherwise been
payable in a single sum or in installments in the absence of such deferral)
shall be paid or provided to you in a lump sum on the first day of the seventh
(7th) month after the date of your separation from service or, if earlier, the
first day of the month immediately following the date the Company receives
proof of your death. Any remaining payments or benefits due under this letter will
be paid in accordance with the normal payment dates specified herein.”


 


9.             A
new Section 7(e) is hereby added as follows:


 


“e.           Notwithstanding
Section 7(d) above, the following provisions shall also be applicable
to you if you are a specified employee at the time of your separation of
service:


 


(i)            Any payments or
benefits which become due and payable to you during the period beginning with
the date of your separation from service and ending on March 15 of the
following calendar year shall not be subject to the holdback provisions of Section 7(d) and
shall accordingly be paid as and when they become due and payable under this letter
in accordance with the short-term deferral exception to Code Section 409A.


 


(ii)           The remaining portion
of the payments and benefits to which you become entitled under this letter, to
the extent they do not in the aggregate exceed the dollar limit described below
and are otherwise scheduled to be paid no later than the last day of the second
calendar year following the calendar year in which your  separation from service occurs, shall not be
subject to any deferred commencement date under Section 7(d) and
shall be paid to you as they become due and payable under this letter.  For purposes of this subparagraph (ii), the
applicable dollar limitation will be equal to two times the lesser of (i) your annualized
compensation (based on your annual rate of pay for the calendar year preceding
the calendar year of your separation from service, adjusted to reflect any
increase during that calendar year which was expected to continue indefinitely
had such separation from service not occurred) or (ii) the compensation
limit under Section 401(a)(17) of the Code as in effect in the year of
such  separation from service.  To the extent the portion of the severance
payments and benefits to which you would otherwise be entitled under this letter
during the deferral period under Section 7(d) exceeds the foregoing
dollar limitation, such excess shall be paid in a lump sum upon the expiration
of that deferral period, in accordance with the deferred payment provisions of Section 7(d),
and the remaining severance payments and benefits (if any) shall be paid in
accordance with the normal payment dates specified for them herein.”


 


10.           Except as modified by this Amendment, all the terms and provisions of
the Original Agreement shall continue in full force and effect.


 


(Signature Page Follows)


 


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


 


	
   

  	
  UNITED
  ONLINE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Mark R. Goldston

  
	
   

  	
   

  	
  Mark R. Goldston

  
	
   

  	
   

  	
  Chairman, President and Chief Executive

  
	
   

  	
   

  	
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
  December 19,
  2008

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Scott H. Ray

  
	
   

  	
   

  	
  Scott H. Ray

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
  December 29,
  2008