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UNITED ONLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. COMMITMENTS AND CONTINGENCIES (Continued)
NetZero and the underwriters of NetZero's initial public offering, Goldman Sachs Group, Inc., BancBoston Robertson Stephens, Inc. and
Salomon Smith Barney, Inc. A consolidated amended complaint, which is the operative complaint, was filed in April 2002. The complaint
alleges that the prospectus through which NetZero conducted its initial public offering in September 1999 was materially false and misleading
because it failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed commissions
from certain investors in exchange for which the underwriters allocated to those investors material portions of the restricted number of NetZero
shares issued in connection with the offering; and (ii) the underwriters had entered into agreements with customers whereby the underwriters
agreed to allocate NetZero shares to those customers in the offering in exchange for which the customers agreed to purchase additional NetZero
shares in the aftermarket at pre-determined prices. Plaintiffs are seeking injunctive relief and damages. The case against NetZero was
coordinated with approximately 300 other suits filed against more than 300 issuers that conducted their initial public offerings between 1998 and
2000, their underwriters and an unspecified number of their individual corporate officers and directors. On October 13, 2004, the district court
certified a class in six of the other nearly identical actions (the "focus cases"). The underwriter defendants appealed the decision and the United
States Court of Appeals for the Second Circuit vacated the district court's decision granting class certification on December 5, 2006. Plaintiffs
filed a petition for rehearing. On April 6, 2007, the Second Circuit denied the petition, but noted that the plaintiffs could ask the district court to
certify a more narrow class than the one that was rejected. Prior to the Second Circuit's decision, the majority of issuers, including NetZero, and
their insurers had submitted a settlement agreement to the district court for approval. In light of the Second Circuit opinion, the parties agreed
that the settlement could no longer be approved, and on June 25, 2007, the court approved a stipulation filed by the plaintiffs and the issuers
which terminated the proposed settlement. On August 14, 2007, the plaintiffs filed Second Amended class action complaints in the focus cases.
The issuers' motion to dismiss the Second Amended class action complaints is pending.
On March 6, 2006, plaintiff Anthony Piercy filed a purported consumer class action lawsuit in the Superior Court of the State of California,
County of Los Angeles, against NetZero claiming that NetZero continues to charge consumers fees after they cancel their Internet access
account. On July 27, 2006, plaintiff Donald E. Ewart filed a purported consumer class action lawsuit in the Superior Court of the State of
California, County of Los Angeles, against NetZero containing substantially similar allegations to the Piercy case. Plaintiffs in both cases are
seeking injunctive and declaratory relief and damages. NetZero filed a response to both lawsuits denying the material allegations of the
complaints. Both Messrs. Piercy and Ewart subsequently withdrew from the actions as class representatives. On March 16, 2007, Barbara
Rasnake and Robert Du Verger were substituted as purported class representatives. On May 25, 2007, the court consolidated the actions under
the caption Rasnake v. NetZero, Inc., Case No. BC348461. On June 13, 2007, Peter Chrisler was substituted as a purported class representative.
On July 13, 2007, the plaintiffs filed a consolidated amended class action complaint. A trial date has not yet been set.
The pending lawsuits involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of
other resources to defend. Although the Company does not believe the outcome of the above outstanding legal proceedings, claims and litigation
will have a material adverse effect on its business, financial position, results of operations or cash flows, the results of litigation are inherently
uncertain and the Company can provide no assurance that it will not be materially and adversely impacted by the results of such proceedings. At
December 31, 2007, the
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