Classmates.com 2003 Annual Report Download - page 61

Notes Payable
During the year ended June 30, 2002, the Company repaid all of its notes payable obligations. The weighted average interest rate
associated with notes payable was 14% for the years ended June 30, 2002 and 2001.
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Line of Credit
In December 2003, United Online obtained a one-year $25 million unsecured revolving line of credit from a bank that expires in
December 2004. This facility is available for general corporate purposes and the interest rates on borrowings are based on current market rates.
The line of credit contains covenants pertaining to the maintenance of a minimum quick ratio, minimum cash balances with the lender and
minimum profitability levels. The line of credit provides additional working capital to support the Company's growth and overall business
strategy. At December 31, 2003, a $0.7 million letter of credit in connection with one of the Company's leased facilities was outstanding,
reducing the amount available under the line of credit and restricted cash previously held as collateral.
5. RELATED-PARTY TRANSACTIONS
In February 2002, the Company's Board of Directors authorized loans to five officers for a total of $700,000, which was used to exercise
572,000 stock options. In the June 2003 quarter, all five loans were repaid in full. The principal balance of the notes accrued interest at annual
rates ranging from prime plus 1% to prime plus 2%, which was payable at the end of each calendar quarter. The terms of the notes required the
principal balance of the notes to be paid in full on February 5, 2007. Additionally, under the terms of the notes, the entire principal balance and
any accrued interest were to become due and payable 90 days following the termination of employment with the Company. The notes, which
were classified as a component of stockholders' equity, were full recourse obligations and secured by the underlying shares.
During the year ended June 30, 1999, the Company loaned two officers a total of $1,029,000, which was used to exercise approximately
2,246,000 stock options. In the June 2003 quarter, both loans were repaid in full. The principal balance of the notes accrued interest at 4.83%
and 5.28% per annum, respectively, and the notes were to become due on March 20, 2004 and April 16, 2004, respectively, unless paid earlier.
The notes, which were classified as a component of stockholders' equity, were full recourse to the officers and secured by the underlying
shares.
During the year ended June 30, 2001, a shareholder of the Company and certain of its affiliates purchased $1.3 million in banner
advertisements.
6. CAPITALIZATION
NetZero and Juno Merger
On September 25, 2001, each share of NetZero common stock issued and outstanding was converted into 0.2000 of a share of United
Online common stock, and each share of Juno common stock issued and outstanding was converted into 0.3570 of a share of United Online
common stock. Additionally, each outstanding stock option of NetZero and Juno was converted into an option to purchase that number of
United Online shares of common stock equal to the product of 0.2000 and 0.3570, respectively, multiplied by the number of shares of common
stock underlying the option. Given that NetZero is the Company's predecessor for financial reporting purposes, all prior period NetZero
numbers of shares and per share price amounts herein have been restated to account for the NetZero conversion ratio.
Stockholders' Rights Plan
On November 15, 2001, the Board of Directors declared a dividend of one preferred share purchase right for each outstanding share of its
common stock. The dividend was paid on November 26, 2001 to the stockholders of record at the close of business on that date. Each right
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2003 2003 2002
Employee compensation and related expenses
$
8,205
$
11,224
$
6,950
Subscriber referral fees
4,281
4,281
3,557
Other
1,542
1,568
705
Total $
14,028
$
17,073
$
11,212