Document:

Exhibit 10.1

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

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

 

WHEREAS, Employee and the Company had previously entered into an
employment agreement (the “Prior Agreement”)
effective April 3, 2007, amended as of August 22, 2007; and

 

WHEREAS, effective as of the date hereof, Employee and the Company
desire to amend and restate the Prior Agreement.

 

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

 

1.             EMPLOYMENT

 

1.1           The Company hereby agrees to employ Employee, and
Employee hereby accepts such employment, on the terms and conditions set forth
herein, commencing the date hereof and continuing through March 1, 2011
(the “Term”), unless this Agreement expires
or Employee is terminated earlier as provided in Section 4 below.  Employee’s place of employment shall be the
in the greater Los Angeles metropolitan area.

 

2.             DUTIES OF EMPLOYEE

 

2.1           Employee shall serve as the Chief Executive Officer
and Chairman of the Company. In these capacities, Employee shall perform such
customary, appropriate and reasonable executive duties as are usually performed
by the Chief Executive Officer and Chairman, including such executive duties as
are delegated to him from time to time by the Board of Directors of the Company
or a committee thereof (the “Board”). Company agrees that Employee also may
serve as Chief Executive Officer and Chairman of Classmates Media Corporation
or such other entity which is the IPO entity described in Section 3.8 of
this Agreement (“Classmates”) and will in good faith allocate his time between
the Company and Classmates in accordance with the goals and objectives
established by the Board.

 

2.2           Employee agrees to devote Employee’s good faith, full
time, attention, skill and efforts to the performance of his duties for the
Company and for Classmates during the Term; provided, however, this paragraph
shall not preclude Employee from writing and promoting books or other published
materials, engaging in civic, charitable or religious activities, or from
serving on boards of directors of companies or organizations that do not
present any conflict with the interests of the Company or Classmates or
otherwise adversely affect Employee’s performance of the services required
under this Agreement. This Agreement also shall not be interpreted to prohibit
Employee from making personal investments (including the 

 

 

purchase of
interests in professional sports teams) if those activities do not materially
interfere with the services required under this Agreement.

 

3.             COMPENSATION AND OTHER BENEFITS

 

3.1           Base Salary.  During the
Term, the Company shall pay to Employee a base salary per fiscal year equal to
Employee’s current base salary (the “Base Salary”),
with payments to be made in accordance with the Company’s standard payment
policy and subject to such withholding as may be required by law.  Employee’s Base Salary shall be increased to
include any increases in Employee’s base salary as approved by the Board, but
may not be reduced during the Term without Employee’s written consent other
than in connection with a general salary reduction applicable to senior
executives of the Company generally.

 

3.2           Bonus.  During the
Term, Employee shall also be eligible to receive an annual target bonus of 100%
of Employee’s base salary for each fiscal year (the “Annual Bonus”),
less withholding required by law, based on performance criteria established by
the Board provided that this target shall not be deemed to establish a maximum
bonus and the Board or its compensation committee may award a bonus equal to
more than 100% of Base Salary.  Employee’s
Annual Bonus shall be increased to include any increases in Employee’s Annual
Bonus as approved by the Board.  Employee
shall not be eligible to receive any unpaid Annual Bonus if his employment
hereunder is terminated pursuant to either Section 4.1 or if Employee
voluntarily resigns.  Employee’s bonus
awards shall be paid in no event later than the 15th day of the third month
following the end of the taxable year (of the Company or Employee, whichever is
later) in which such bonus award is earned.

 

3.3           Sign-On Restricted Unit Grant. 
Employee shall be granted a restricted unit award covering 750,000
shares of the Company’s common stock, par value $0.0001 per share (the “Sign-On Restricted Unit Award”).  Except as otherwise provided in this
Agreement, the Sign-On Restricted Unit Award shall vest in full on February 15,  2011. 
Except as otherwise provided in this Agreement, the Sign-On Restricted
Unit Award shall be granted pursuant to and subject to the terms and conditions
of the Company’s 2001 Stock Incentive Plan and form of restricted unit
agreement previously approved by the Board. 
The Company agrees that, unless required by applicable law, no amendment
to the 2001 Stock Incentive Plan will eliminate the ability of Employee to
satisfy income tax withholding obligations by the surrender of shares to the
Company in any manner that would affect the Sign-on Restricted Unit Award or
any shares which are part of such award, and that unless required by applicable
law, the Company will not exercise its discretion under the 2001 Stock
Incentive Plan, or any applicable award agreement, to eliminate or limit
Employee’s ability to satisfy income tax withholding obligations by the
surrender of shares of Company’s (or its successor’s) common stock with respect
to equity awards granted prior to the date hereof.

 

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

 

3.5           Other Benefits.  During the
Term, Employee shall be entitled to participate in all group life, health,
medical, dental or disability insurance or other employee, health and welfare
benefits made available generally to other executives of the Company.  If Employee 

 

 

elects to
participate in any of such plans, Employee’s portion of the premium(s) will
be deducted from Employee’s paycheck.

 

3.6           Business Expenses.  The Company
shall promptly reimburse Employee for all reasonable and necessary business
expenses incurred by Employee in connection with the business of the Company
and the performance of his duties under this Agreement, subject to Employee
providing the Company with reasonable documentation thereof.  Any such reimbursements paid to Employee
shall be made in no event later than the end of the calendar year following the
calendar year in which the expenses were incurred and any amounts so reimbursed
in any one calendar year shall not affect the amounts reimbursable in any other
calendar year. Employee’s right to receive such reimbursements may not be
exchanged or liquidated for any other benefit.

 

3.7           Board of Directors.  Employee
shall be Chairman of the Company and also a member and chairman of the Company’s
Board of Directors.  Employee’s appointments
as Chairman and as a member of the Board will automatically terminate upon the
termination of Employee’s employment with the Company for any reason.

 

3.8           Additional Grant of Restricted Stock Units.   
Contingent on the effectiveness of an initial public offering of
securities of Classmates Media Corporation, a Delaware corporation, or
securities issued by an entity that is a direct or indirect parent of
Classmates Media Corporation (which entity shall be referred to as the “IPO
entity,” and such initial public offering shall be referred to as the “CMC IPO”)
Employee will be awarded restricted stock units covering 250,000 shares of the
Company’s common stock (the “Restricted Stock Units”). Subject to Employee’s
continued employment with the Company, one-third of the Restricted Stock Units
will vest on each anniversary of the effective date of the CMC IPO. In all
other respects, except as set forth herein (including provisions for vesting
upon an Involuntary Termination), the Restricted Stock Units will be subject to
the terms and conditions set forth in the Company’s 2001 Stock Incentive Plan
and the applicable restricted stock unit agreement between the Company and the
Employee. The last sentence of Section 3.3 of this Agreement (limiting
amendments to such plan that would limit the use of Company shares to satisfy
tax liabilities) and the provisions of Section 4.3 of this Agreement
(pertaining to severance) shall apply to the Restricted Stock Units and shares
contemplated by this Section 3.8.

 

4.             TERMINATION

 

4.1           Termination for Cause.

 

(a)     Termination “for cause” is defined as follows:  (1) if Employee is convicted of, or
enters a plea of nolo contendere to, a felony,
including any act of moral turpitude that adversely impacts the Company or any
of its subsidiaries, (2) if Employee commits an act of actual fraud,
embezzlement, theft or similar dishonesty against the Company or any of its
subsidiaries that adversely and materially impacts the Company or any of its
subsidiaries, (3) if Employee commits any willful misconduct or gross
negligence resulting in material harm to the Company or any of its
subsidiaries, or (4) if Employee fails, after receipt of detailed written
notice and after receiving a period of at least thirty (30) days following such
notice to cure such 

 

 

failure,
to use his reasonable good faith efforts to follow the reasonable and lawful
direction of the Company’s Board of Directors and to perform his obligations
hereunder.

 

The Company may terminate 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 notice to Employee without prejudice to any other remedy to
which the Company may be entitled.  The
notice of termination shall specify the grounds for termination.  If Employee’s employment hereunder is
terminated “for cause” pursuant to this Section 4.1, Employee shall be
entitled to receive hereunder his accrued but unpaid Base Salary and vacation
pay through the date of termination, and reimbursement for any expenses as set
forth in Section 3.6, through the date of termination, but shall not be
entitled to receive any unpaid portion of the Annual Bonus or any other amount
except for amounts earned under any plan (including criteria for the Annual
Bonus) but not yet paid as of the date of termination.

 

4.2           Termination Without Cause. 
If Employee’s employment is terminated without “cause” as defined in Section 4.1(a) or
he is Involuntarily Terminated, he will be eligible for the severance benefits
set forth in Section 4.3.

 

4.3           Severance Payments and Other Benefits Upon Termination
Without Cause or Involuntary Termination.  If the
Company terminates Employee’s employment hereunder without cause, or if
Employee is Involuntarily Terminated, the Company (or its successor, as the
case may be) shall pay to Employee (i) any accrued but unpaid Base Salary
and vacation through the date of termination and (ii) reimbursement for
any expenses as set forth in Section 3.6, through the date of
termination.  Additionally, subject to
Employee entering into and not revoking a release of claims in favor of the
Company and abiding by the non-competition and non-solicitation provisions set
forth in Section 5 below, 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’s Base Salary and Annual Bonus, payable in one
lump sum on the date of termination, subject to withholding as may be required
by law.  For the purposes of Section 4.3(x) and
Section 4.3(y) above, Annual Bonus shall mean 100% of Employee’s then
current Base Salary or, in the event of Involuntary Termination, the greater of
100% of Employee’s then current Base Salary, or the Annual Bonus paid to
Employee for the preceding fiscal year.  The
release required as a condition to Employee’s entitlement to such severance
payment must be delivered within twenty-one (21) days (or forty-five (45) days
if such longer period is required under applicable law) after the date of
Employee’s termination of employment. 
The severance payment to which Employee accordingly becomes entitled
upon the effectiveness of the delivered release following the expiration of all
applicable revocation periods will be made to Employee on such effective date
or as soon as administratively practicable thereafter, but in no event later
than the later of the following dates on which the release is so effective: (i) the
fifteenth (15th) day of the third month following the end of
Employee’s taxable year in which Employee’s employment terminates or (ii) the
fifteenth (15th) day of the third month following the end of the
Company’s taxable year in which such termination of employment occurs.

 

With respect to Employee’s outstanding options to purchase shares of
the Company’s Common Stock (“Option Awards”),
restricted unit awards covering 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 death
or permanent disability, or if Employee is Involuntarily Terminated:

 

(i)         Each Option Award will become vested
and exercisable with respect to all non-vested shares;

 

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

 

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

 

If Employee is Involuntarily Terminated, to the extent permitted under Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”),
all of Employee’s options to purchase the Company’s Common Stock shall be
exercisable for a one (1) year period following the date of termination
(or until expiration of their term, if earlier).

 

Employee shall be deemed terminated without cause if Employee resigns
following a material breach by the Company of its obligations hereunder;
provided, however, (i) Employee shall first provide the Company with
written notice of such breach within ninety (90) days after the conduct occurs
giving rise to such breach, (ii) the Company shall have fifteen (15) days
following such notice to cure such breach and (iii) Employee’s termination
of employment must occur within one hundred eighty (180) days following the
initial existence of such breach. 
Employee shall be deemed “Involuntarily Terminated” if (i) the
Company or any successor to the Company terminates Employee’s employment
without cause in connection with or following a Corporate Transaction; or (ii) in
connection with or following a Corporate Transaction there is both (A) (a) a
decrease in Employee’s authorities, duties or responsibilities (it being deemed
to be a decrease in authorities, duties and/or responsibilities if Employee is
not offered and provided the position of Chairman of the Board of Directors and
Chief Executive Officer of the Company or its successor as well as the
acquiring and ultimate parent entity, if any, following a Corporate
Transaction), (b) a material decrease in pay and/or benefits from those
provided by the Company immediately prior to the Corporate Transaction, (c) a
requirement that Employee re-locate out of the greater Los Angeles metropolitan
area, or (d) a failure by any successor to Company to confirm in writing
that this Agreement remains in full force and effect, and (B) Employee
terminates his employment with the Company before the last day of the calendar
year in which the Corporate Transaction occurs. 
Notwithstanding any provision to the contrary in this Agreement, upon
the earlier of (i) one hundred eighty (180) days following a Corporate
Transaction or (ii) the last day of the calendar year in which a Corporate
Transaction occurs, this Agreement shall expire on such date, in which event
Employee shall be entitled to the same benefits that otherwise would have been
payable to Employee had Employee been Involuntarily Terminated prior to such Corporate
Transaction, as set forth in Section 4.3.

 

“Corporate Transaction” shall mean:  (a) a change in ownership or control of
the Company effected through the acquisition, directly or indirectly, by any
person or related group of persons (other than the Company or a person that
directly or indirectly controls, is 

 

 

controlled by, or is under common control with, the Company), 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 Company’s outstanding securities; (b) 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) a merger, consolidation or
reorganization approved by the Company’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 Company’s
outstanding voting securities immediately prior to such transaction; or (d) any
stockholder-approved transfer or other disposition of all or substantially all
of the Company’s assets.

 

5.             NON-COMPETITION; NON-SOLICITATION

 

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

 

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

 

 

6.             GROSS-UP PAYMENT

 

If the aggregate of all payments or benefits made or provided to
Employee under this Agreement and under all other plans and programs of the
Company (the “Aggregate Payment”) is determined
to constitute a “parachute payment,” as such term is defined in Section 280G(b)(2) of
the Code, the Company shall pay to Employee, prior to or coincident with the
time any excise tax imposed by Section 4999 of the Code (the “Excise Tax”) is payable with respect to such Aggregate
Payment, an additional amount that, after the imposition of all penalties,
income, excise and other federal, state and local taxes thereon, is equal to
the sum of the Excise Tax on the Aggregate Payment and interest and penalties
imposed with respect to the Excise Tax and such additional amount (the “Gross-Up Payment”). 
For example, if the Excise Tax imposed with respect to the Aggregate
Payment equals $1,000,000, and all penalties, income, excise and other federal,
state and local taxes on the Gross-Up Payment equal $2,333,333, the Gross-Up
Payment will be $3,333,333.  The
determination of whether the Aggregate Payment constitutes a parachute payment
and, if so, the amount to be paid to Employee and the time of payment pursuant
to this Section 6 shall be made by an independent auditor (the “Auditor”) selected and paid by the Company and reasonably
acceptable to Employee.  The Auditor
shall be a nationally recognized United States public accounting firm.  For purposes of determining the amount of the
Gross-Up Payment, Employee shall be deemed to pay income tax at the highest
marginal rates of federal, state and local income taxation in the calendar year
in which the Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes.

 

In the event that the Excise Tax is finally determined to be less than
the amount taken into account hereunder in calculating the Gross-Up Payment,
Employee shall repay to the Company, within five (5) business days
following the time that the amount of such reduction in the Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus that portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income and employment taxes imposed on the
Gross-Up Payment being repaid by Employee, to the extent that such repayment
results in a reduction in the Excise Tax and a dollar-for-dollar reduction in
Employee’s taxable income and wages for purposes of federal, state and local
income and employment taxes, plus interest on the amount of such repayment at
120% of the rate provided in section 1274(b)(2)(B) of the Code.  In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder in calculating the
Gross-Up Payment (including by reason of any payment the existence or amount of
which 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 to
such excess) within five (5) business days following the time that the
amount of such excess is finally determined. 
Employee and the Company shall cooperate with each other in connection
with any proceeding or claim relating to the existence or amount of liability
for Excise Tax, and all expenses incurred by Employee in connection therewith
shall be paid by the Company promptly upon notice of demand from Employee.  Any payments made by the Company to or on
behalf of Employee pursuant to this Section 6 shall be made in no event
later than the end of Employee’s taxable year next following Employee’s taxable
year in which the related taxes are remitted.

 

 

7.             ASSIGNMENT

 

Neither the Company nor Employee may assign this Agreement or any
rights or obligations hereunder except as provided herein.  The Company may assign this Agreement and all
of its rights and obligations hereunder to any successor to the business of the
Company.  This Agreement will be binding
upon the Company and its successors and assigns.  In the event of a Corporate Transaction, the
Company shall cause this Agreement to be assumed by the Company’s successor as
well as any acquiring or ultimate parent entity, if any, following any
Corporate Transaction, and all references herein to the “Company” shall be
deemed to include such successor or assignee.

 

8.             MISCELLANEOUS

 

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

 

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

 

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

 

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

 

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

 

8.6           All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class
mail, postage prepaid, registered or certified, or delivered either by hand, by
messenger or by overnight courier service, and addressed to the receiving party
at the respective address set forth in the heading of this Agreement, or at
such other address as such party shall have furnished to the other party in
accordance with this Section 8.6 prior to the giving of such notice or
other communication.

 

8.7           Notwithstanding any provision to the contrary in this
Agreement, no payment or distribution under this Agreement which constitutes an
item of deferred compensation under Section 409A of the Code and becomes
payable by reason of Employee’s 

 

 

termination
of employment with the Company will be made to Employee unless Employee’s
termination of employment constitutes a “separation from service” (as such term
is defined in Treasury Regulations issued under Section 409A of the
Code).  For purposes of this Agreement,
each amount to be paid or benefit to be provided shall be construed as a
separate identified payment for purposes of Section 409A of the Code.  If Employee is a ‘specified employee’ as
defined in Section 409A of the Code and, as a result of that status, any
portion of the payments under this Agreement would otherwise be subject to
taxation pursuant to Section 409A of the Code, Employee shall not be
entitled to any payments upon a termination of his employment until the earlier
of (i) the expiration of the six (6)-month period measured from the date
of Employee’s “separation from service” (as such term is defined in Treasury
Regulations issued under Section 409A of the Code) or (ii) the date
of Employee’s death.  Upon the expiration
of the applicable Section 409A deferral period, all payments and benefits
deferred pursuant to this Section 8.7 (whether they would have otherwise
been payable in a single sum or in installments in the absence of such
deferral) shall be paid or reimbursed to Employee in a lump sum, and any
remaining payments due under this Agreement will be paid in accordance with the
normal payment dates specified for them herein.

 

 

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

 

	
   

  	
  UNITED
  ONLINE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Robert Berglass

  
	
   

  	
  Name:

  	
  Robert Berglass

  
	
   

  	
  Title:

  	
  Lead Independent Director,

  
	
   

  	
   

  	
  Compensation Committee Chair of

  
	
   

  	
   

  	
  United Online, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
  Dated:

  	
  December 21, 2008

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  

  	
  /s/ Frederic A. Randall, Jr.

  
	
   

  	
  Name:

  	
  Frederic A.
  Randall, Jr.

  
	
   

  	
  Title:

  	
  EVP and General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
  Dated: 

  	
  December 29, 2008

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MARK R.
  GOLDSTON

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Mark R.
  Goldston

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Dated: 

  	
  December 19,
  2008Exhibit 10.2

 

AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”) is made and entered into
effective this 1st day of January, 2009 by and between Classmates Media
Corporation, a Delaware corporation (“Classmates”), with principal corporate
offices at 21301 Burbank Boulevard, Woodland Hills, California 91367, and Mark
R. Goldston, whose business address is 21301 Burbank Boulevard, Woodland Hills
California 91367 (“Mr. Goldston”).

 

WHEREAS, Employee and Classmates had previously entered into an
employment agreement (the “Prior Agreement”) effective August 22, 2007;

 

WHEREAS, effective as of the date hereof, Employee and Classmates
desire to amend and restate the Prior Agreement;

 

WHEREAS, Classmates has been formed to assume and continue certain
business activities of United Online, Inc. (“Parent”), and intends to
register an initial public offering (“IPO”) of shares to the public
with the Securities and Exchange Commission (“SEC”). The date the
underwriting agreement with respect to the IPO is executed is referred to
herein as the “Effective Date;” and

 

WHEREAS, Mr. Goldston is willing to become employed by Classmates
upon the terms and conditions hereinafter set forth in this Agreement and
Classmates desires to employ him upon such terms and conditions.

 

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

 

1.                                      EMPLOYMENT

 

1.1           Classmates
hereby agrees to employ Mr. Goldston, and Mr. Goldston hereby accepts
such employment, on the terms and conditions set forth herein, commencing the
Effective Date and continuing for three years (the “Term”), unless this
Agreement expires or Mr. Goldston is terminated earlier as provided in Section 4
below.  Mr. Goldston’s place of
employment shall be the in the greater Los Angeles metropolitan area.

 

 

2.                                      DUTIES OF EXECUTIVE

 

2.1           Mr. Goldston
shall serve as the Chief Executive Officer and Chairman of Classmates.  In this capacity, Mr. Goldston shall be
responsible for the general management of Classmates and shall perform such
customary, appropriate and reasonable executive duties as are usually performed
by the Chief Executive Officer and Chairman, including such specific executive
duties consistent with such position as are delegated to him from time to time
by the Board of Directors of Classmates or a committee thereof (the “Board”).  Mr. Goldston shall report directly to
Classmates’ Board. Classmates agrees that Mr. Goldston will also continue
to serve as Chief Executive Officer and Chairman of Parent and will in good
faith allocate his time between Classmates and Parent in accordance with the
goals and objectives established by the Board.

 

2.2           Mr. Goldston
agrees to devote his good faith, attention, skill and efforts to the
performance of his duties for Classmates during the Term.   This Agreement shall not preclude Mr. Goldston
from writing and promoting books or other published materials, engaging in
civic, charitable or religious activities, or from serving on boards of
directors of companies or organizations that do not present any conflict with
the interests of Classmates or otherwise adversely affect Mr. Goldston’s
performance of the services required under this Agreement.  This Agreement shall not be interpreted to
prohibit Mr. Goldston from making and monitoring personal investments
(including the purchase of interests in professional sports teams) if such
activities do not materially interfere with the services required under this
Agreement.

 

3.                                      COMPENSATION AND OTHER BENEFITS

 

3.1           Base
Salary.  During the Term, Classmates
shall pay to Mr. Goldston a Base Salary per fiscal year equal to One
Dollar ($1.00) on the Effective Date and each annual anniversary of the
Effective Date.  Classmates may, but has
no obligation to, increase the Base Salary.

 

3.2           Initial
Grant of Stock Options.  Classmates
hereby agrees to grant to Mr. Goldston as of the Effective Date options
(the “Options”) to purchase that number of shares which represents, on the
Effective Date, 4.2857% of Classmates’ fully diluted Class A common stock
(the “Option Shares”) at an exercise price equal to the price per share of such
Class A common stock offered to the public on the Effective Date pursuant
to the terms and conditions contained herein. 
The Options shall vest as provided below.  On the Effective Date, the number of Options
and Option Shares shall be computed to represent 4.2857% of the fully diluted
shares of Class A common stock, and the Options shall be issued, subject
to adjustment in the number of covered shares as provided below.  The Options shall be subject to customary
adjustments for 

 

2

 

stock
splits, stock dividends and similar events, shall be exercisable for ten years
from their date of grant, and shall be evidenced by a separate option agreement
or certificate.

 

For
purposes hereof, “fully diluted shares of Class A common stock” means, at
the Effective Date, the total number of outstanding shares of Classmates’ Class A
common stock assuming exercise of all options (including, the Options),
warrants and similar securities exercisable for Class A common stock  that are outstanding or issuable pursuant to
then existing agreements,  the conversion
or exchange of all other securities of Classmates convertible into or
exchangeable for shares of Class A common stock (including Classmates’ Class B
common stock), treating all shares of Class A common stock covered by
restricted stock units and similar instruments that are outstanding or issuable
pursuant to then existing agreements as outstanding, and assuming the
underwriters in the IPO sell all of the “firm shares” set forth in the IPO
underwriting agreement and fully exercise the over-allotment option given them
to purchase additional Class A common stock within the time provided in
the IPO underwriting agreement.  In the
event the over-allotment option is not exercised in full by the underwriters
within the time provided in the IPO underwriting agreement, an appropriate
number of Options shall be cancelled and the Option agreement shall be amended,
to achieve the intended percentage.   For
the avoidance of doubt, fully diluted shares of Class A common stock do not
include any securities held in treasury.

 

3.3           Vesting
of Options.

 

(a)     Release Date.  Subject to the remaining provisions of this Section 3.3,
thirty-three and one-third percent (331/2 %) of the Options
shall be vested on each annual anniversary of the Effective Date provided that Mr. Goldston
has remained continuously employed by Classmates and/or Parent until such date.

 

(b)     Vesting Upon
Termination without Cause or Involuntary Termination.  In the event of termination by Classmates of Mr. Goldston’s
employment without “Cause” (as defined in Section 4.1(a) below) or
by  Involuntary Termination (as defined
in Section 4.1(c) below) prior to the date all Options vest, any
previously unvested Options shall be fully vested in Mr. Goldston as of
such termination date.  In addition, if Mr. Goldston
is employed by Parent, in the event of termination by Parent of Mr. Goldston’s
employment without “Cause” (as defined in the Employment Agreement by and
between Parent and Mr. Goldston effective April 3, 2007, as may be
amended from time to time (the “UOL Agreement”)) or if Mr. Goldston is
Involuntarily Terminated (as defined in the UOL Agreement) prior to the date
all Options vest and he is not employed by Classmates immediately following
such termination, any previously unvested Options shall be fully vested in Mr. Goldston
as of such termination date.

 

3

 

(c)     Termination
Due to Death or Disability.  In the
event of termination of employment from Classmates due to Mr. Goldston’s
death or Disability (as defined in Section 4 below) prior to the third
anniversary of the Effective Date, all Options shall be immediately vested in Mr. Goldston
or his estate as of the date of death or Disability.  In addition, if Mr. Goldston’s
employment with Classmates is terminated for any reason other than a reason
that would give rise to the acceleration of vesting or cancellation of unvested
Options under this Agreement and following such termination he remains employed
by Parent, in the event of a subsequent termination of employment from Parent
due to Mr. Goldston’s death or permanent disability prior to the third
anniversary of the Effective Date, all Options shall be immediately vested in Mr. Goldston
or his estate as of the date of death or permanent disability.

 

(d)     [Intentionally
Omitted]

 

(e)     Resignation
Following a Corporate Transaction. 
In the event there is a “Corporate Transaction” as described below and,
following such Corporate Transaction, (i) Mr. Goldston resigns from
Classmates under circumstances constituting an Involuntary Termination (as
defined in Section 4.1(c)) or (ii) if Mr. Goldston is then
employed by Parent and Mr. Goldston resigns from Parent such that he is
Involuntarily Terminated (as defined in the UOL Agreement) and he is not
employed by Classmates immediately following such resignation, all Options
shall immediately be vested in Mr. Goldston.

 

(f)      Voluntary
Resignation.  If Mr. Goldston
resigns his employment with Classmates under circumstances not deemed under
this Agreement to constitute an Involuntary Termination and he is not employed
by Parent immediately following such resignation, or if Mr. Goldston is
employed by Parent and Mr. Goldston resigns his employment with Parent
under circumstances not deemed to constitute him being Involuntarily Terminated
under the UOL Agreement and he is not employed by Classmates immediately
following such resignation, all unvested Options shall never vest and shall be
cancelled.

 

3.4           Eligibility
for Awards and Bonuses.  Mr. Goldston
shall be eligible to receive, and Classmates intends to consider him for annual
bonuses (“Annual Bonuses”) and equity awards with respect to Classmates stock (“Equity
Awards”).  However, the Board or the
Compensation Committee may, but is not obligated to, grant such Annual Bonuses
or Equity Awards.  Any such Annual
Bonuses may be in (a) shares of Classmates stock, (b) cash or (c) any
combination thereof.  For the avoidance
of doubt, Mr. Goldston shall be entitled to participate in all incentive plans
generally available to Classmates’ senior management, including without
limitation any option or stock incentive plan (the “Stock Incentive Plans”).  Classmates agrees that, unless required by
applicable law, no amendment to any Stock Incentive Plan will eliminate the
ability of Mr. Goldston to satisfy income tax withholding obligations by
the surrender of shares or options to Classmates.  Mr. Goldston’s bonus awards shall be
paid in no event later 

 

4

 

than the
15th day of the third month following the end of the taxable year (of the
Company or Mr. Goldston, whichever is later) in which such bonus award is
earned.

 

3.5           Withholding
for Taxes.  Classmates recognizes that Mr. Goldston
will incur obligations for withholding of income and social security taxes with
respect to any bonus paid in the form of shares of Classmates stock and any
other award based on shares of Classmates stock.  To satisfy such obligations Classmates
agrees, at Mr. Goldston’s request, to treat as sold to Classmates, or to
take other appropriate actions  to reduce
the number of shares of Classmates stock delivered to Mr. Goldston, with
the result that such number of shares of Classmates stock, multiplied by the
applicable price, is sufficient to satisfy Mr. Goldston’s withholding
obligations, to the extent permitted by applicable law.

 

3.6           Other
Benefits.  During the Term, Mr. Goldston
shall be entitled to participate in all group life, health, medical, dental or
disability insurance or other employee, health and welfare benefits made
available generally to other executives of Classmates.

 

3.7           Vacation.  Mr. Goldston shall be entitled to
five (5) weeks vacation per year in accordance with Classmates’
vacation policies.  Until a Corporate
Transaction, such vacation shall be taken concurrently with vacation as an
officer of Parent.

 

3.8           Business
Expenses.  Classmates shall promptly
(and in no event more than two and one-half months after receiving
documentation from Mr. Goldston) reimburse Mr. Goldston for all
reasonable and necessary business expenses incurred by Mr. Goldston in
connection with the business of Classmates and the performance of his duties
under this Agreement, subject to Mr. Goldston requesting such
reimbursement and providing Classmates with reasonable documentation thereof
within one year of incurring any expense. Mr. Goldston’s right to receive
such reimbursements may not be exchanged or liquidated for any other benefit.

 

3.9           Board
of Directors.  Mr. Goldston
shall be Chairman of Classmates and also a member and chairman of the
Classmates Board of Directors.  Mr. Goldston’s
appointments as Chairman and as a member of the Board will automatically
terminate upon the termination of Mr. Goldston’s employment with
Classmates for any reason.

 

5

 

4.                                      TERMINATION

 

4.1           Termination
for Cause; Certain Definitions.

 

(a)     Termination “for
Cause” is defined as follows:  (1) if
Mr. Goldston is convicted of, or enters a plea of nolo
contendere to, a felony, including any act of moral turpitude that
adversely impacts Classmates or any of its subsidiaries, (2) if Mr. Goldston
commits an act of actual fraud, embezzlement, theft or similar dishonesty
against Classmates or any of its subsidiaries that adversely and materially
impacts Classmates or any of its subsidiaries, (3) if Mr. Goldston
commits any willful misconduct resulting in material harm to Classmates or any
of its subsidiaries, or (4) if Mr. Goldston fails, after receipt of
detailed written notice and after receiving a period of at least
thirty (30) days following such notice to cure such failure, to use his
reasonable good faith efforts to follow the reasonable and lawful direction of
Classmates’ Board of Directors and to perform his obligations hereunder.

 

(b)     Classmates may
terminate 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
notice to Mr. Goldston without prejudice to any other remedy to which
Classmates may be entitled.  The notice
of termination shall specify the grounds for termination or shall state that
Classmates is exercising its rights to terminate Mr. Goldston without
Cause.  If Mr. Goldston’s employment
hereunder is terminated “for Cause” pursuant to this Section 4.1, Mr. Goldston
shall be entitled to receive reimbursement for any expenses, as set forth in Section 3.8,
through the date of termination, but shall not be entitled to retain any
unvested Options, unvested Equity Awards or any other amount except for amounts
earned under any plan but not yet paid as of the date of termination.

 

(c)     Mr. Goldston
shall be deemed “Involuntarily Terminated” if: (i) Mr. Goldston
resigns following a material breach by Classmates of its obligations hereunder;
provided, however, (a) Mr. Goldston shall provide Classmates with
written notice of such breach within ninety (90) days after the conduct occurs
giving rise to such breach, (b) Classmates shall have thirty (30) days
following such notice to cure such breach and (c) Mr. Goldston
resigns within one hundred eighty (180) days following the initial existence of
such breach; (ii) Classmates or any successor to Classmates terminates Mr. Goldston’s
employment without Cause in connection with or following a Corporate
Transaction; or (iii) in connection with or after a Corporate Transaction
there is both (A) (a) a material decrease in Mr. Goldston’s
authorities, duties or responsibilities (it being deemed to be a decrease in
authorities, duties and/or responsibilities if Mr. Goldston is not offered
and provided the position of Chairman of the Board of Directors and Chief
Executive Officer of Classmates or its successor as well as the position of
Chairman of the Board of Directors and Chief Executive Officer of the acquiring
and ultimate parent entity, if any, following a Corporate Transaction), (b) a
material decrease in compensation from that provided by Classmates immediately
prior to the Corporate Transaction, (c) a requirement that Mr. Goldston
re-locate out of the greater Los Angeles metropolitan area, or (d) a
failure by any successor to Classmates to confirm in writing that this
Agreement remains in full force and effect, and (B) Mr. Goldston
terminates his employment with Classmates before the last day of the calendar
year in which such Corporate Transaction occurs.  A resignation or 

 

6

 

termination
under circumstances described above shall be deemed an “Involuntary
Termination.”  Notwithstanding any provision
to the contrary in this Agreement, upon the earlier of (i) one hundred
eighty (180) days following a Corporate Transaction or (ii) the last day
of the calendar year in which a Corporate Transaction occurs, this Agreement
shall expire on such date, in which event Mr. Goldston shall be entitled
to the same benefits that otherwise would have been payable to him had Mr. Goldston
been Involuntarily Terminated prior to such Corporate Transaction, as set forth
in Sections 4.2 and 4.3 below.

 

(d)     “Corporate Transaction”
shall mean:  (x) a change in
ownership or control of Classmates effected through the acquisition, directly
or indirectly, of beneficial ownership (within the meaning of Rule 13d-3
of the Securities Exchange Act of 1934) of securities such that Parent (or a
person that directly or indirectly controls, is controlled by, or is under
common control with, Parent) no longer has the voting power to elect a majority
of the Classmates Board of Directors; (y) a merger, consolidation or
reorganization approved by Classmates’ stockholders, unless securities
representing the voting power to elect a majority of the Classmates Board of
Directors are thereafter held by Parent; or (z) any stockholder-approved
transfer or other disposition of a majority of Classmates’ assets.  In addition any of the following transactions
shall be deemed a Corporate Transaction with respect to Classmates: (i) a
change in ownership or control of Parent effected through the acquisition,
directly or indirectly, by any person or related group of persons, of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934) of securities possessing more than fifty percent (50%) of
the total combined voting power of the Parent’s outstanding securities; (ii) a
change in the composition of the Parent’s Board over a period of thirty-six
(36) consecutive months or less such that a majority of the Parent’s Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Parent
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Parent Board members during such
period by at least a majority of the Parent’s Board members described in clause
(A) who were still in office at the time the Parent Board approved such
election or nomination; (iii) a merger, consolidation or reorganization
approved by the Parent’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 Parent’s outstanding voting securities immediately
prior to such transaction; or (iv) any stockholder-approved transfer or
other disposition of all or substantially all of the Parent ‘s assets.

 

(e)     Disability.  “Disability” shall mean that Mr. Goldston,
due to physical or mental illness or injury, is precluded from performing his
duties under this Agreement for a period of 120 days or more, and shall be
evidenced by a resolution of the Board following the recommendation of Mr. Goldston’s
physician or an independent physician selected by the Board (a “Doctor’s Report”).  If Mr. Goldston refuses to submit to an
examination by such an 

 

7

 

independent
physician reasonably requested by the Board, the Board may declare him Disabled
without a Doctor’s Report.

 

4.2           Termination
Without Cause.  If Mr. Goldston’s
employment is terminated without “Cause” as defined in Section 4.1(a) or
if there is an Involuntary Termination, he will be eligible for the severance
benefits set forth in Section 4.3.

 

4.3           Severance
Payments and Other Benefits Upon Termination Without Cause or Involuntary
Termination.  If Classmates
terminates Mr. Goldston’s employment hereunder without Cause, or if there
is an Involuntary Termination, Classmates (or its successor, as the case may
be) shall (i) pay to Mr. Goldston any accrued but unpaid Base Salary
and paid time off under any benefit plan to the extent required by law through
the date of termination, (ii) reimburse Mr. Goldston for any
expenses, as set forth in Section 3.8, through the date of termination and
(iii) to the extent Mr. Goldston has not already received them and to
the extent the underlying shares have vested (including vesting related to the
termination), deliver to Mr. Goldston certificates representing Mr. Goldston’s
ownership of Classmates stock under any restricted share award.  Additionally, subject to Mr. Goldston
entering into and not revoking a release of claims in favor of Classmates and
abiding by the non-competition and non-solicitation provisions set forth in Section 5
below, (A) Classmates (or its successor, as the case may be) shall pay to Mr. Goldston
an amount in cash (the “Release Amount”) equal to 3 times the sum of Mr. Goldston’s
(a) Base Salary and (b) Annual Bonus, if any, paid in the preceding
twelve (12) months and (B) any outstanding Equity Awards shall become
fully vested and exercisable (as applicable). 
The Release Amount shall be payable in one lump sum, subject to
withholding as may be required by law.  
The release required as a condition to Mr. Goldston’s entitlement
to such Release Amount must be delivered within twenty-one (21) days (or
forty-five (45) days if such longer period is required under applicable law)
after the date of Mr. Goldston’s termination of employment.  The Release Amount to which Mr. Goldston
accordingly becomes entitled upon the effectiveness of the delivered release
following the expiration of all applicable revocation periods will be made to Mr. Goldston
on such effective date or as soon as administratively practicable thereafter,
but in no event later than the later of the following dates on which the
release is so effective: (i) the fifteenth day of the third month
following the end of Mr. Goldston’s taxable year in which his employment
terminates or (ii) the fifteenth day of the third month following the end
of the taxable year of Classmates in which such termination of employment
occurs.

 

If Mr. Goldston is Involuntarily Terminated (as defined in Section 4.1(c) above)
or is terminated due to death or Disability, Mr. Goldston’s options to
purchase Classmates’ Class A common stock shall be exercisable by Mr. Goldston,
or, upon Mr. Goldston’s death, his estate, for a one (1) year
period following the date of termination (or until expiration of their term, if
earlier).  In addition, if Mr. Goldston
is employed by Parent and Mr. Goldston is Involuntarily Terminated (as
defined in the UOL Agreement) or is terminated from Parent due to death or 

 

8

 

permanent disability and he is not employed
by Classmates immediately following such termination, Mr. Goldston’s
options to purchase Classmates’ Class A common stock shall be exercisable
by Mr. Goldston, or, upon Mr. Goldston’s death, his estate, for a
one (1) year period following the date of termination (or until
expiration of their term, if earlier).

 

5.                                      NON-COMPETITION; NON-SOLICITATION

 

5.1           For the
twelve (12) month period following the termination of Mr. Goldston’s
employment with Classmates (but in the case of a termination without Cause or
an Involuntary Termination only if Mr. Goldston has received the severance
payments specified in Section 4.3 above) (the “Restricted Period”), Mr. Goldston
shall not directly engage in, or manage or direct persons engaged in, a
Competitive Business Activity (as defined below) anywhere in the Restricted
Territory (as defined below); provided, that the Restricted Period shall
terminate if Classmates terminates operations or if Classmates no longer
engages in any Competitive Business Activity. 
The term “Competitive Business Activity” shall mean  a business primarily involved in online
social networking or a business primarily involving online loyalty rewards
programs.  The term “Restricted Territory”
shall mean each and every county, city or other political subdivision of the
United States in which Classmates is engaged in business or providing its
services.  Classmates agrees that
providing services to a company or entity that is involved in a Competitive
Business Activity but which services are unrelated to the Competitive Business
Activity shall not be deemed a violation of this Agreement.

 

5.2           During the
Restricted Period (but in the case of a termination without Cause or an
Involuntary Termination only if Mr. Goldston has received the severance
payments specified in Section 4.3 above), Mr. Goldston shall not
directly or indirectly solicit or recruit for employment any person or persons
who are employed by Classmates or any of its subsidiaries or affiliates, or who
were so employed at any time within a period of twelve (12) months immediately
prior to the date Mr. Goldston’s employment terminated, or otherwise
interfere with the relationship between any such person and Classmates; nor
will Mr. Goldston assist anyone else in recruiting any such employee to
work for another company or business or discuss with any such person his or her
leaving the employ of Classmates or engaging in a business activity in
competition with Classmates.

 

6.                                      CERTAIN PAYMENTS

 

(a)     If any payment or
benefits received or to be received by Mr. Goldston in connection with or
contingent on a change in ownership or control, within the meaning defined in Section 280G
of the Internal Revenue Code (the “Code”) (or any successor provision thereto),
whether or not in connection with Mr. Goldston’s termination of
employment, and 

 

9

 

whether or
not pursuant to this Agreement (such payments or benefits, excluding the
Gross-Up Payment, as hereinafter defined, shall hereinafter be referred to as
the “Total Payments”) will be subject to an excise tax as provided for in Section 4999
of the Code (the “Excise Tax”), Classmates shall pay to Mr. Goldston an
additional amount no later than the due date for Mr. Goldston’s tax return
with respect to such Excise Tax (the “Gross-Up Payment”) such that the net
amount retained by Mr. Goldston, after deduction of any Excise Tax on the
Total Payments and any federal, state and local income and employment taxes and
Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments.

 

(b)     For purposes of
determining whether any of the Total Payments will be subject to the Excise Tax
and the amount of such Excise Tax, (i) all of the Total Payments shall be
treated as “parachute payments” (within the meaning of Section 280G(b)(2) of
the Code) unless, in the opinion of tax counsel (“Tax Counsel”) reasonably
acceptable to Mr. Goldston and selected by the accounting firm acting as
the “Auditor”, as defined below, such payments or benefits (in whole or in
part) do not constitute parachute payments, including by reason of Section 280G(b)(4)(A) of
the Code, (ii) all “excess parachute payments” within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax unless, in the opinion
of Tax Counsel, such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered (within the meaning of Section 280G(b)(4)(B) of
the Code) in excess of the Base Amount allocable to such reasonable
compensation, or are otherwise not subject to the Excise Tax, and (iii) the
value of any noncash benefits or any deferred payment or benefit shall be
determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and
(4) of the Code.  For purposes of
determining the amount of the Gross-Up Payment, Mr. Goldston shall be
deemed to pay federal income tax at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to be made and
state and local income taxes at the highest marginal rate of taxation in the
state and locality of Mr. Goldston’s residence or, if higher, in the state
and locality of Mr. Goldston’s principal place of employment, on the date
of termination (or if there is no date of termination, then the date on which
the Gross-Up Payment is calculated for purposes of this Section 6), net of
the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.

 

(c)     In the event
that the Excise Tax is finally determined to be less than the amount taken into
account hereunder in calculating the Gross-Up Payment, Mr. Goldston shall
repay to Classmates, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to
such reduction (including that portion of the Gross-Up Payment attributable to
the Excise Tax and federal, state and local income and employment taxes imposed
on the Gross-Up Payment being repaid by Mr. Goldston to the extent that
such repayment results in a reduction in Excise Tax and/or a federal, state or
local income or employment tax deduction). 
In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up Payment (including 

 

10

 

by reason
of any payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), Classmates shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or additions
payable by Mr. Goldston with respect to such excess) at the time that the
amount of such excess is finally determined. 
Mr. Goldston and Classmates shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments.

 

(d)     All
determinations under this Section 6 shall be made by a nationally
recognized accounting firm selected by Mr. Goldston (the “Auditor”), and
Classmates shall pay all costs and expenses of the Auditor.  Classmates shall cooperate in good faith in
making such determinations and in providing the necessary information for this
purpose.  Any payments made by the
Company to or on behalf of Mr. Goldston pursuant to this Section 6
shall be made in no event later than the end of Mr. Goldston’s taxable
year next following his taxable year in which the related taxes are remitted.

 

7.                                      INDEMNIFICATION

 

Classmates will indemnify Mr. Goldston (and his legal
representative or other successors) to the fullest extent permitted (including
a payment of expenses in advance of final disposition of a proceeding) by
applicable law, as in effect at the time of the subject act or omission, or by
the Certificate of Incorporation and By-Laws of Classmates, as in effect at
such time or on the Effective Date, or by the terms of any indemnification
agreement between Classmates and Mr. Goldston, whichever affords or
afforded greatest protection to Mr. Goldston, and Mr. Goldston shall
be entitled to the protection of any insurance policies Classmates may elect to
maintain generally for the benefit of its directors and officers (and to the
extent Classmates maintains such an insurance policy or policies, Mr. Goldston
shall be covered by such policy or policies, in accordance with its or their
terms to the maximum extent of the coverage available for any Classmates
officer or director), against all costs, charges and expenses whatsoever
incurred or sustained by him or his legal representatives (including but not
limited to any judgment entered by a court of law) at the time such costs,
charges and expenses are incurred or sustained, in connection with any action,
suit or proceeding to which Mr. Goldston (or his legal representatives or
other successors) may be made a party by reason of his having accepted
employment with Classmates or by reason of his being or having been a director,
officer or employee of Classmates, or any subsidiary of Classmates, or his
serving or having served any other enterprise as a director, officer or
employee at the request of Classmates.  Mr. Goldston’s
rights under this Section 7 shall continue without time limit for so long
as he may be subject to any such liability, whether or not the Employment Term
may have ended, and the execution of a release of claims as required under this
Agreement shall in no way diminish or eliminate the right to indemnification
and protection under applicable insurance policies of Classmates as described
in this Section 7.

 

11

 

8.                                      ASSIGNMENT

 

Neither Classmates nor Mr. Goldston may
assign this Agreement or any rights or obligations hereunder except as provided
herein.  Classmates may assign this
Agreement and all of its rights and obligations hereunder to any successor to
the business of Classmates.  This
Agreement will be binding upon Classmates and its successors and assigns.  In the event of a Corporate Transaction,
Classmates shall cause this Agreement to be assumed by Classmates’ successor as
well as any acquiring or ultimate parent entity, if any, following any
Corporate Transaction, and all references herein to “Classmates” shall be
deemed to include such successor or assignee.

 

9.                                      MISCELLANEOUS

 

9.1           This Agreement supersedes any and
all other agreements, either oral or in writing, between the parties hereto
with respect to the employment of Mr. Goldston by Classmates and
constitutes the entire agreement between Classmates and Mr. Goldston with
respect to its subject matter.  For the
avoidance of doubt, any agreement between Mr. Goldston and Parent shall
not be modified, amended or superseded by this Agreement.

 

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

 

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

 

9.4           If any provision of this Agreement
is held by an arbitrator or a court of competent jurisdiction to conflict with
any federal, state or local law, or to be otherwise invalid or unenforceable,
such provision shall be construed in a manner so as to maximize its
enforceability while giving the greatest effect as possible to the parties’
intent.  To the extent any provision
cannot be construed to be enforceable, such provision shall be deemed to be
eliminated from this Agreement and of no force or effect and the remainder of
this Agreement shall otherwise remain in full force and effect and be construed
as if such portion had not been included in this Agreement.

 

9.5           Mr. Goldston represents and
warrants to Classmates that there is no restriction or limitation, by reason of
any agreement or otherwise, upon Mr. Goldston’s right or 

 

12

 

ability to enter into this
Agreement and fulfill his obligations under this Agreement.  The parties acknowledge that the Parent has
consented to this Agreement.

 

9.6           All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
first-class mail, postage prepaid, registered or certified, or delivered either
by hand, by messenger or by overnight courier service, and addressed to the receiving
party at the respective address set forth in the heading of this Agreement, or
at such other address as such party shall have furnished to the other party in
accordance with this Section 9.6 prior to the giving of such notice or
other communication.

 

9.7           Notwithstanding any provision to the
contrary in this Agreement, no payment or distribution under this Agreement
which constitutes an item of deferred compensation under Section 409A of
the Code and becomes payable by reason of Mr. Goldston’s termination of
employment with the Company will be made to Mr. Goldston unless his
termination of employment constitutes a “separation from service” (as such term
is defined in Treasury Regulations issued under Section 409A of the
Code).  For purposes of this Agreement,
each amount to be paid or benefit to be provided shall be construed as a
separate identified payment for purposes of Section 409A of the Code.  If Mr. Goldston is a “specified employee”
as defined in Section 409A of the Code and, as a result of that status,
any portion of the payments under this Agreement would otherwise be subject to
taxation pursuant to Section 409A of the Code, Mr. Goldston shall not
be entitled to any payments upon a termination of his employment until the
earlier of (i) the expiration of the six (6)-month period measured from
the date of Mr. Goldston’s “separation from service” (as such term is
defined in Treasury Regulations issued under Section 409A of the Code) or (ii) the
date of Mr. Goldston’s death.  Upon
the expiration of the applicable Section 409A deferral period, all
payments and benefits deferred pursuant to this Section 9.7 (whether they
would have otherwise been payable in a single sum or in installments in the
absence of such deferral) shall be paid or reimbursed to Mr. Goldston in a
lump sum, and any remaining payments due under this Agreement will be paid in
accordance with the normal payment dates specified for them herein.

 

(Signature Page Follows)

 

13

 

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

 

 

	
   

  	
  CLASSMATES
  MEDIA CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert
  Berglass

  
	
   

  	
  Name: Robert
  Berglass

  
	
   

  	
  Title: Lead
  Independent Director,

  Compensation Committee Chair

  of United Online, Inc.

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
  December 23,
  2008

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Frederic
  A. Randall, Jr.

  
	
   

  	
  Name:
  Frederic A. Randall, Jr.

  
	
   

  	
  Title: EVP
  and General Counsel

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
  December 29,
  2008

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MARK R.
  GOLDSTON

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Mark R.
  Goldston

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
  December 19,
  2008

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