Employment Agreement - United Online Inc. and Charles S. Hilliard
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the "Agreement") is made and entered into effective as of the 27th day of January 2004, by and between United Online, Inc., a Delaware corporation (the "Company"), with principal corporate offices at 2555 Townsgate Road, Westlake Village, California 91361, and Charles S. Hilliard, whose address is [Address] ("Employee").
WHEREAS, the Employee had previously entered into an employment agreement (the "Prior Agreement") effective April 17, 1999, with NetZero, Inc., a wholly-owned subsidiary of the Company; and
WHEREAS, the Prior Agreement was amended effective February 9, 2001 and October 1, 2003 and that, effective as of the date hereof, the Employee and the Company desire to further amend the Prior Agreement.
NOW THEREFORE, the Employee and the Company hereby amend and restate the Prior Agreement as follows.
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.
(a) Termination "for cause" is defined as follows: the Company terminates Employee's employment with the Company (1) if Employee is convicted of a felony, including any act of moral turpitude, which adversely impacts the Company, or (2) 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 direction of the Company's Board of Directors and to perform his obligations hereunder.
(b) The Company may terminate this Agreement 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.
4.2 Termination Without Cause. If Employee's employment is terminated without "cause" as defined in Section 4.1(a), or if Employee is Involuntarily Terminated (as defined below), 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, (ii) reimbursement for any expenses as set forth in Section 3.6, through the date of termination, (iii) Employee's Annual Bonus, prorated through the date of termination, and (iv) a severance payment in an amount equal to three times 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 4.2(iii) and Section 4.2(iv) above, Annual Bonus shall mean the greater of 75% of Employee's then current Base Salary or the Annual Bonus paid to Employee for the preceding fiscal year in the event of Involuntary Termination, or 75% of Employee's then current Base Salary in the event of termination without cause. In addition, if Employee's employment is terminated without cause (other than if Employee is Involuntarily Terminated), Employee will be credited with an additional twelve (12) months of service toward vesting in all stock options then held by Employee (the "Option Shares") in addition to the service he has accrued toward vesting through the date of termination, and the Repurchase Option will lapse with respect to a number of Restricted Shares equal to (x) the sum of the number of full months that have elapsed between the Grant Date and the date of termination, plus twelve (12) additional months, divided by (y) 48 months, multiplied by (z) the total number of Restricted Shares (for purposes of illustration, if Employee's employment is terminated without cause on January 27, 2005, the Repurchase Option will lapse with respect to 62,500 Restricted Shares). If Employee's employment is terminated due to death or permanent disability, vesting of all Option Shares will be accelerated in full and the Repurchase Option will lapse with respect to all Restricted Shares. If Employee is Involuntarily Terminated, vesting of all Option Shares will be accelerated in full and all such options shall remain in effect for a one (1) year period following the date of termination, and the Repurchase Option will lapse with respect to all Restricted Shares.
As used in this Section 4.2, Employee shall be deemed terminated without cause if Employee resigns following a breach by the Company of its obligations hereunder; provided, however, in the event of an unintentional breach by the Company, Employee shall provide the Company with written notice of such breach and the Company shall have fifteen days following such notice to cure such breach. As used in this Section 4.2, 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 (a) a decrease in Employee's title or responsibilities (it being deemed to be a decrease in title and/or responsibilities if Employee is not offered the position of Executive Vice President, Finance and Chief Financial Officer of the Company or its successor as well as the acquiring and ultimate parent entity, if any, following the Corporate Transaction), (b) a decrease in pay and/or benefits from those provided by the Company immediately prior to the Corporate Transaction or (c) a requirement that Employee re-locate out of the greater Los Angeles metropolitan area. "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.
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, the 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 the Employee, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the 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 the Employee with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The 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 the Employee in connection therewith shall be paid by the Company promptly upon notice of demand from the Employee.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the first date written above.
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|UNITED ONLINE, INC.|
/s/ MARK GOLDSTON
Mark Goldston, Chief Executive Officer
/s/ CHARLES S. HILLIARD
Charles S. Hilliard