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UNITED ONLINE INC
FORM 10-K
(Annual Report)
Filed 02/27/09 for the Period Ending 12/31/08
Address 21301 BURBANK BOULEVARD
WOODLAND HILLS, CA 91367
Telephone 8182873000
CIK 0001142701
Symbol UNTD
SIC Code 7370 - Computer Programming, Data Processing, And
Industry Computer Services
Sector Technology
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2009, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    ... ONLINE INC FORM 10-K (Annual Report) Filed 02/27/09 for the Period Ending 12/31/08 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 21301 BURBANK BOULEVARD WOODLAND HILLS, CA 91367 8182873000 0001142701 UNTD 7370 - Computer Programming, Data Processing, And Computer Services...

  • Page 2
    ...Class Name of Exchange on Which Registered Common Stock, par value $0.0001 per share Preferred Stock Purchase Rights The Nasdaq Stock Market LLC (Nasdaq Global Select Market) No 3 No Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities...

  • Page 3
    ... by check mark whether the Registrant is a shell company (as defined in Rule 12b-2) of the Act). Yes 1 At June 30, 2008, the aggregate market value of voting stock held by non-affiliates of the Registrant, based on the last reported sales price of the Registrant's common stock on such date reported...

  • Page 4
    ... Item 14. Principal Accounting Fees and Services PART IV. Item 15. Exhibits, Financial Statement Schedules Signatures In this document, "United Online," the "Company," "we," "us," and "our" refer to United Online, Inc. and its subsidiaries. 80 80 80 80 80 81 87 This Annual Report on Form 10-K and...

  • Page 5
    ... forward-looking statements in this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as the date hereof. Any such forward...

  • Page 6
    ...and other retail locations Online social networking and online loyalty marketing Internet access, email, Internet security, and Web hosting Revenue growth within our Classmates Media segment in recent years, combined with our acquisition of FTD in August 2008, has significantly reduced our exposure...

  • Page 7
    ... services in support of the floral network. The growth of nationwide floral marketers and the Internet channel has led traditional retail florists to increasingly rely on floral networks to augment their order volumes. Access to incremental consumer orders represents one of the principal benefits...

  • Page 8
    ... network services include: point-of-sale technology systems, branding and advertising services, credit card processing services, e-commerce Web sites, and telephone answering and order-taking services. Certain providers of floral network services have recently broadened their focus and developed new...

  • Page 9
    ... products and services. Most social networking Web sites are free to the user and rely on online advertising to generate revenues. Some social networking Web sites, including our Classmates Web site and our international social networking Web sites, rely primarily on paid subscriptions to generate...

  • Page 10
    ... II, Item 8 of this Annual Report on Form 10-K. Consumer Businesses. FTD is an Internet and telephone marketer of flowers and specialty gift items to consumers. FTD operates in the U.S. and Canada, primarily through the www.ftd.com Web site and 1-800-SEND-FTD toll-free telephone number, and in the...

  • Page 11
    ...Segment Information" of the Notes to the Consolidated Financial Statements, which appears in Part II, Item 8 of this Annual Report on Form 10-K. Online Social Networking Our social networking Web sites enable users to locate and interact with acquaintances from their past, with school affiliations...

  • Page 12
    ... Our social networking members can choose between free membership and a paid subscription offering additional features. Free accounts constitute the vast majority of our social networking accounts. Revenues from our social networking services are derived from subscription fees and advertising fees...

  • Page 13
    ... registration techniques; increase monetization of our social networking Web sites by marketing our pay account services to our free members; increase our advertising revenues; and evaluate further opportunities to expand internationally or through the acquisition of complementary services. Online...

  • Page 14
    ... customer traffic on an advertiser's Web site. All of our loyalty marketing service revenues are classified as advertising revenues. Advertisers primarily pay us when our emails are transmitted to members, when members respond to emails and when members complete online transactions. During 2008...

  • Page 15
    ... access accounts. For additional information regarding our Communications segment, see Note 3-"Segment Information" of the Notes to the Consolidated Financial Statements, which appears in Part II, Item 8 of this Annual Report on Form 10-K. Internet Access Services Our Internet access services...

  • Page 16
    ...FTD FTD services revenues consist of fees charged to florist members for access to the FTD and Interflora brands and the Mercury Man logo, access to the florist network, credit card processing services, e-commerce Web sites, online advertising tools, and telephone answering and order-taking services...

  • Page 17
    ... consumer business include: online advertising, primarily related to search engine marketing; co-marketing and affiliate partnerships with retailers and loyalty programs such as airlines, credit card companies and hotel chains; database marketing to existing consumer customers featuring timely email...

  • Page 18
    ... prospective accounts to call our toll-free telephone numbers to purchase our services, or to visit our main Web sites and download our software. In most distribution arrangements, we pay a per-pay account acquisition fee. Sales of Advertising Inventory We have internal sales organizations dedicated...

  • Page 19
    ... networking Web sites such as Facebook and MySpace; a number of specialty Web sites, including LinkedIn and Reunion.com, that offer online social networking services based on school or work communities; and schools, employers and associations that maintain their own Internet-based alumni information...

  • Page 20
    ... on our social networking. There can be no assurance that these seasonal trends will continue in the future. Billing Orders placed through FTD's consumer Web sites or toll free telephone numbers typically are paid for using a credit card or a debit card; therefore, consumers generally pay for floral...

  • Page 21
    ..., billing, email, customer support, customer loyalty applications, and targeted advertising. We have also internally-developed order processing, order fulfillment and customer service systems which provide communication to our florist members and third-party suppliers. We maintain data centers in...

  • Page 22
    ... terms ranging from several years to perpetual. Government Regulations We are subject to a number of international, federal, state and local laws and regulations, including, without limitation, those relating to taxation, bulk email or "spam," advertising, user privacy, data protection, and consumer...

  • Page 23
    ...Form 10-K for information about executive officers of the Registrant. Available Information Our corporate Web site is www.unitedonline.com . On this Web site, we make available, free of charge, our annual, quarterly and current reports (including all amendments to such reports), changes in the stock...

  • Page 24
    ... in our business models, changes in the online advertising market, changes in our advertising inventory, and changes in usage. Posttransaction sales are also dependent on the number of consumers purchasing our products and services. We expect our advertising revenues in our Communications segment to...

  • Page 25
    ... as credit card processors. Key systems include, without limitation, billing; Web site and database management; order acceptance, fulfillment and processing including the system for transmitting orders through florist members; customer support; telecommunications network management; advertisement...

  • Page 26
    ... management and employees of the acquired business; potential impairment of relationships with users, customers or vendors as a result of changes in management of the acquired business; potentially dilutive issuance of equity, large write-offs either at the time of the acquisition or in the future...

  • Page 27
    ... and may in the future, assert claims, institute legal actions, inquiries or investigations, or impose obligations relating to our business practices, such as our marketing, billing, customer retention, renewal, cancellation, refund, or disclosure practices. Defending against lawsuits, inquiries and...

  • Page 28
    ... of credit under the credit agreements, to call and enforce the guarantees, and to foreclose on the collateral securing such debt. We may not realize the benefits associated with our assets and may be required to record a significant charge to earnings if we are required to expense certain costs or...

  • Page 29
    ..., the adoption of new laws or regulations or changes in enforcement policies and procedures could increase the costs of operating our business. To the extent that our services and business practices change as a result of changes in regulations or claims or actions by governmental agencies, such...

  • Page 30
    ... terms, our business and future prospects may suffer. We may stop paying, or reduce, quarterly cash dividends on our common stock. The payment of future dividends is discretionary and is subject to determination by our Board of Directors each quarter following its review of our financial condition...

  • Page 31
    ...to the FTD and Interflora brands and the Mercury Man logo, access to the florist network, credit card processing services, e-commerce Web sites, online advertising tools, and telephone answering and order-taking services. The consumer market for flowers and specialty gifts is highly competitive, and...

  • Page 32
    ... level of customer service. Our business depends, in part, on the ability of our network of independent florist members and third-party suppliers who fulfill our orders to do so at high quality levels. We work with our florist members and third-party suppliers to develop best practices for quality...

  • Page 33
    ... tax cost that would be borne by the customer. In addition, future changes in the operation of our online and telephonic sales channels could result in the imposition of additional sales and use tax obligations. Moreover, a number of states have been considering or instituting policy initiatives...

  • Page 34
    ... networking Web sites such as Facebook and MySpace; a number of specialty Web sites, including LinkedIn and Reunion.com, that offer online social networking services based on school or work communities; and schools, employers and associations that maintain their own Internet-based alumni information...

  • Page 35
    ... results to suffer. Pay accounts are critical to our business model. Only a small percentage of users initially registering for our social networking services sign up for a paid subscription at the time of registration. As a result, our ability to generate subscription revenue is highly dependent on...

  • Page 36
    ... may have to make significant revisions to our services, pricing and marketing strategies, and business model. For example, we may have to lower our introductory rates, offer additional free periods of service, offer additional features at little or no additional cost to the consumer, or reduce the...

  • Page 37
    ... customer support and technology centers or for any additional sales offices. For additional information regarding our obligations under leases, see Note 16-"Commitments and Contingencies" to our Consolidated Financial Statements included in this Annual Report on Form 10-K. ITEM 3. LEGAL PROCEEDINGS...

  • Page 38
    ...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...

  • Page 39
    ..., 2008 and totaled $8.7 million. In January 2009, our Board of Directors declared a quarterly cash dividend of $0.10 per share of common stock. The record date for the dividend is February 13, 2009. The dividend was paid on February 27, 2009 and totaled $8.8 million. The payment of future dividends...

  • Page 40
    ... are issued, the portion of those shares with a fair market value equal to the amount of the employee withholding taxes due. We then pay the applicable withholding taxes in cash. Common stock repurchases through December 31, 2008 were as follows (in thousands, except per share amounts): Total Number...

  • Page 41
    ... filing of United Online under the Securities Act of 1933, as amended, or the Exchange Act. The following graph compares, for the five-year period ended December 31, 2008, the cumulative total stockholder return for the Company's common stock, The Nasdaq Global Select Market (U.S. companies) Index...

  • Page 42
    ...tax benefits of $68.6 million for the year ended December 31, 2004. In April 2006, we acquired MyPoints. The results of MyPoints are included in our consolidated statements of operations from the date of acquisition. For additional information regarding our acquisitions, see Note 2-"Acquisitions" of...

  • Page 43
    ... social networking and online loyalty marketing. Our primary Communications segment services are Internet access and email. On a combined basis, our Web properties attract a significant number of Internet users, and we offer a broad range of Internet marketing services for advertisers. Acquisition...

  • Page 44
    ... Metrics Floral and related products and services for consumers, retail florists and other retail locations Online social networking and online loyalty marketing Internet access, email, Internet security, and Web hosting We review a number of key business metrics to help us monitor our performance...

  • Page 45
    ... active accounts are defined as the sum of the following: all segment pay accounts as of the date presented; the monthly average for the reporting period of all free social networking accounts who have visited our domestic or international social networking Web sites (excluding The Names Database...

  • Page 46
    ..., 2007 Consolidated: Revenues (in thousands) FTD: Basis of presentation(a) Revenues(a) (in thousands) % of Total revenues(a) Consumer orders(a) (in thousands) Average order value(a) Currency exchange rate: GBP to USD Classmates Media: Segment revenues (in thousands) % of Total revenues Pay accounts...

  • Page 47
    ... which fees are fixed or determinable and the related services are provided to the customer. Our pay accounts generally pay in advance for their service by credit card, and revenue is then recognized ratably over the service period. Advance payments from pay accounts are recorded on the consolidated...

  • Page 48
    ... by personal check or money order, or through a local telephone company. In circumstances where payment is not received in advance, revenue is only recognized if collectibility is reasonably assured. Advertising revenues from our social networking services and Communications services consist...

  • Page 49
    ... the estimated fair values of our reporting units. The determination of the fair values of our reporting units generally includes a study of market comparables, including the selection of appropriate valuation multiples and discounted cash flow models based on our internal forecasts and projections...

  • Page 50
    ... Online, MyPoints, and Communications-for purposes of evaluating goodwill. These reporting units each constitute a business or group of businesses for which discrete financial information is available and is regularly reviewed by segment management. The goodwill related to our acquired businesses...

  • Page 51
    ... amounts and timing of future revenues and cash flows, assumed discount rates and other assumptions. Under the market approach, using the guideline company method, a reporting unit's fair value is estimated based on multiples of the cash-free market value of invested capital to revenue and EBITDA of...

  • Page 52
    ...such advertisers' promotion campaigns as they have been earned by MyPoints' members, less an allowance for points expected to expire prior to redemption. The estimated cost of points is primarily presented in cost of revenues, except for the portion related to member acquisition activities, internal...

  • Page 53
    ... to direct marketing offers delivered by MyPoints, purchase goods or services from advertisers, engage in certain promotional campaigns of advertisers, or engage in other specified activities. The member redemption liability is estimated based upon the weighted-average cost and number of points...

  • Page 54
    ... related to such pending litigation. Potential Subsidiary Initial Public Offering of Classmates Media Corporation Classmates Media Corporation ("CMC") was formed in August 2007 for the purposes of consolidating our Classmates, The Names Database and MyPoints business units in preparation of an...

  • Page 55
    .... Services Revenues FTD Services revenues consist of fees charged to florist members for access to the FTD and Interflora brands and the Mercury Man logo, access to the florist network, credit card processing services, e-commerce Web sites, online advertising tools, and telephone answering and order...

  • Page 56
    ... members; fees associated with the storage and processing of customer credit cards and associated bank fees; and domain name registration fees. Classmates Media Classmates Media cost of revenues includes costs of points earned by members of our online loyalty marketing service; data center costs...

  • Page 57
    ...related expenses for executive, finance, legal, human resources, facilities, and internal customer support personnel. In addition, general and administrative expenses include, among other costs, professional fees for legal, accounting and financial services; office relocation costs; non-income taxes...

  • Page 58
    ... August 26, 2008 (date of acquisition) to December 31, 2008 Classmates Media Year Ended December 31, 2008 2007 2006 Communications Year Ended December 31, 2008 2007 2006 Revenues: Products Services Advertising Total revenues Operating expenses: Cost of revenues Sales and marketing Technology and...

  • Page 59
    ...52.0%, 19.9% and 28.1%, respectively, of our total segment cost of revenues for the year ended December 31, 2008, compared to 0%, 36.3% and 63.7%, respectively, for the year ended December 31, 2007. Sales and Marketing Expenses. Consolidated sales and marketing expenses increased by $9.6 million, or...

  • Page 60
    ...; the effect of shares of common stock and restricted stock units awarded in the first quarter of fiscal 2008; and the effect of restricted stock units awarded in 2007 to members of senior management in connection with the execution or renewal of employment agreements. Also, the resignation of an...

  • Page 61
    ... restructuring charges totaling $3.0 million to better align the Communications segment's cost structure within a mature business for dial-up Internet access services. In addition, we recognized $0.4 million in restructuring charges in the year ended December 31, 2007 for termination benefits paid...

  • Page 62
    ...increase in customer support, overhead and personnel-related costs associated with our social networking services as a result of growth in the business and an increase in headcount, partially offset by decreased costs associated with our loyalty marketing service. The decrease in cost of revenues as...

  • Page 63
    ... access services due to a decrease in the number of pay accounts, a decrease in hourly usage per pay account, and lower average hourly telecommunications costs. In addition, Communications costs of revenues decreased as a result of a $3.5 million decrease in customer supportand billing-related costs...

  • Page 64
    ... and recorded restructuring charges totaling $3.0 million to better align the segment's cost structure within a mature business for dial-up Internet access services. In addition, we recognized $0.4 million in restructuring charges in the year ended December 31, 2007 for termination benefits paid to...

  • Page 65
    ... the SEC's Web site at www.sec.gov . Year Ended December 31, 2008 2007 Combined Pre-Acquisition (in thousands, except Average Order Value) % Change FTD segment revenues: Products Services Advertising Total FTD segment revenues Operating expenses: Cost of revenues Sales and marketing Technology and...

  • Page 66
    ...FTD revenues decreased to 16.1% for the year ended December 31, 2008, compared to 16.7% for the prior year period. Excluding the impact of foreign currency exchange rates, sales and marketing costs decreased by $3.5 million. The decrease was due to reduced costs in certain programs, including online...

  • Page 67
    ... charges totaling $3.0 million within our Communications segment to better align the segment's cost structure within a mature business for dial-up Internet access services. In addition, we recognized $0.4 million in restructuring charges in the year ended December 31, 2007 for termination benefits...

  • Page 68
    ...increase in foreign currency exchange rate losses, partially offset by a $0.3 million decrease in imputed interest on the acquired member redemption liability of our loyalty marketing service. Net realized gains on sales of our short-term investments were not significant for the years ended December...

  • Page 69
    ... social networking services. The increase in advertising revenues generated from our social networking services was primarily related to increased revenues from post-transaction sales resulting from pay account growth in the year ended December 31, 2007. Classmates Media Cost of Revenues. Classmates...

  • Page 70
    ... increase in marketing costs related to acquiring new free social networking members, a $2.6 million increase in personnel- and overhead-related expenses associated with our social networking services as a result of growth in our business and a $0.4 million increase in stock-based compensation...

  • Page 71
    ... or 30.3% of Communications revenues, for the year ended December 31, 2006. This decrease was attributable to a $24.3 million decline in advertising, promotion and distribution costs related to our dial-up Internet access services and an $8.6 million decrease in advertising costs associated with our...

  • Page 72
    ... the payment of cash in lieu of fractional shares of United Online common stock. The FTD acquisition was financed, in part, with the net proceeds from (i) a $60 million senior secured credit agreement with Silicon Valley Bank (the "UOL Credit Agreement") and (ii) $425 million of term loan borrowings...

  • Page 73
    ... to a number of factors including, without limitation, potential future acquisitions and new business initiatives, which are difficult to predict and which could change significantly over time. Additionally, technological advances may require us to make capital expenditures to develop or acquire new...

  • Page 74
    ... contractual payments and optional prepayments on the outstanding balances under the UOL Credit Agreement and FTD Credit Agreement, dividend payments, if declared by our Board of Directors; the development and acquisition of other services, businesses or technologies; to repurchase our common stock...

  • Page 75
    ...and stock awards issued; and to fund future capital expenditures. Under the terms of the UOL Credit Agreement and the FTD Credit Agreement, there are significant limitations on our ability to use cash flows from operations generated by our Communications and Classmates Media segments for the benefit...

  • Page 76
    ... at declining levels through the terms of the related leases. In addition, standby letters of credit are maintained by FTD to secure credit card processing activity. Other Commitments In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors...

  • Page 77
    ... In December 2007, the FASB issued SFAS No. 141(R), Business Combinations . SFAS No. 141(R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the...

  • Page 78
    ... FSP FAS 142-3 to have a material impact on our consolidated financial statements. Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities In June 2008, the FASB issued FSP EITF Issue No. 03-6-1, Determining Whether Instruments Granted in Share-Based...

  • Page 79
    ... we may suffer losses in principal by selling securities which have declined in market value due to changes in interest rates. During the year ended December 31, 2008, in connection with our acquisition of FTD, we liquidated our short-term investments portfolio and recognized gains of approximately...

  • Page 80
    ... ON ACCOUNTING AND FINANCIAL DISCLOSURE Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Acting Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in...

  • Page 81
    ..., 2008 the internal control over financial reporting of FTD Group, Inc. and its subsidiaries because FTD was acquired by the Company in a purchase business combination on August 26, 2008. FTD's total assets and total revenues represent 12% and 27%, respectively, of the related consolidated financial...

  • Page 82
    Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by Item 10 is hereby incorporated by reference to our definitive proxy statement relating to our 2009 annual meeting of stockholders to be filed with the SEC within 120 days after ...

  • Page 83
    ... actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Annual Report on Form 10-K and in the Company's other public filings, which are available without charge through the SEC's Web site at www.sec.gov. 81

  • Page 84
    ...Description Filed with this Form 10-K Incorporated by Reference to Form File No. Date Filed 2.1 Stock Purchase Agreement, dated as of April 9, 2006, by and between United Online, Inc. and UAL Corporation 2.2 Agreement and Plan of Merger, dated April 30, 2008, among United Online, Inc., UNOLA Corp...

  • Page 85
    ... Plan 10.12 Form of Option Agreement for 2001 Stock Incentive Plan 10.13 Form of Option Agreement for 2001 Supplemental Stock Incentive Plan 10.14 Form of Option Agreement for Classmates Online, Inc. 2004 Stock Plan 10.15 Employment Agreement between the Registrant and Mark R. Goldston 10.16 First...

  • Page 86
    ... Amendment to Employment Agreement between FTD Group, Inc. and Robert S. Apatoff 10.37 Restricted Stock Unit Issuance Agreement(s) Amendment Agreement between United Online, Inc. and Mark R. Goldston 10.38 Restricted Stock Unit Issuance Agreement Amendment Agreement between United Online, Inc. and...

  • Page 87
    ... 11, 2008, among United Online, Inc., the lenders party thereto from time to time and Silicon Valley Bank, as administrative agent 21.1 List of Subsidiaries 23.1 Consent of Independent Registered Public Accounting Firm 24.1 Power of Attorney (see signature page of this Annual Report on Form 10-K) 31...

  • Page 88
    ... by Reference to Form File No. Date Filed 32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Exhibits X 000-33367 2/27/2009 The exhibits filed as part of this report are listed in Item 15(a)(3) of this Annual Report on Form 10...

  • Page 89
    ... 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 27, 2009. UNITED ONLINE, INC. By: /s/ MARK R. GOLDSTON Mark R. Goldston Chairman, President and Chief Executive Officer KNOW ALL...

  • Page 90
    Table of Contents Signature Title Date /s/ DENNIS HOLT Director Dennis Holt /s/ HOWARD G. PHANSTIEL Director Howard G. Phanstiel /s/ CAROL A. SCOTT Director Carol A. Scott 88 February 27, 2009 February 27, 2009 February 27, 2009

  • Page 91
    ...this Annual Report on Form 10-K and in the Company's other public filings, which are available without charge through the SEC's Web site at www.sec.gov. No. Exhibit Description Filed with this Form 10-K Incorporated by Reference to Form File No. Date Filed 2.1 Stock Purchase Agreement, dated as...

  • Page 92
    ... Plan 10.12 Form of Option Agreement for 2001 Stock Incentive Plan 10.13 Form of Option Agreement for 2001 Supplemental Stock Incentive Plan 10.14 Form of Option Agreement for Classmates Online, Inc. 2004 Stock Plan 10.15 Employment Agreement between the Registrant and Mark R. Goldston 10.16 First...

  • Page 93
    ... No. Exhibit Description Filed with this Form 10-K Incorporated by Reference to Form File No. Date Filed 10.19 Amended and Restated Employment Agreement between Classmates Media Corporation and Mark R. Goldston 10.20 Employment Agreement between the Registrant and Jeremy E. Helfand 10.21 First...

  • Page 94
    ... 10.44 Restricted Stock Unit Issuance Agreement(s) Amendment Agreement between United Online, Inc. and Robert J. Taragan 10.45 United Online, Inc. 2008 Management Bonus Plan 10.46 Office Lease between LNR Warner Center, LLC and NetZero, Inc. 10.47 Commitment Letter, dated April 30, 2008, from Wells...

  • Page 95
    ... 11, 2008, among United Online, Inc., the lenders party thereto from time to time and Silicon Valley Bank, as administrative agent 21.1 List of Subsidiaries 23.1 Consent of Independent Registered Public Accounting Firm 24.1 Power of Attorney (see signature page of this Annual Report on Form 10K) 31...

  • Page 96
    Table of Contents UNITED ONLINE, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income (Loss) Consolidated Statements of ...

  • Page 97
    ... Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of United Online, Inc.: In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of United Online...

  • Page 98
    ... was acquired by the Company in a purchase business combination during 2008. We have also excluded FTD from our audit of internal control over financial reporting. FTD is a wholly-owned subsidiary whose total assets and total revenues represent 12% and 27%, respectively, of the related consolidated...

  • Page 99
    ... liabilities Member redemption liability Deferred revenue Long-term debt, net of discounts Deferred tax liabilities, net Other liabilities Total liabilities Commitments and contingencies (see Note 15) Stockholders' equity: Preferred stock, $0.0001 par value; 5,000 shares authorized; no shares issued...

  • Page 100
    ... ONLINE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Year Ended December 31, 2008 2007 2006 Revenues $669,403 $513,503 $522,654 Operating expenses: Cost of revenues (including stock-based compensation, see Note 10) 214,885 117,203 119,990 Sales and marketing...

  • Page 101
    ...of Contents UNITED ONLINE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Year Ended December 31, 2008 2007 2006 Net income (loss) Change in unrealized gain (loss) on short-term investments, net of tax of $(102), $184 and $120 for the years ended December 31, 2008, 2007...

  • Page 102
    ... payable on restricted stock units Stock-based compensation Change in unrealized loss on short-term investments, net of tax Change in unrealized loss on interest rate cap, net of tax Foreign currency translation Tax benefits from equity awards Net loss Balance at December 31, 2008 Deferred Paid-In...

  • Page 103
    ... for debt issue costs Proceeds from exercises of stock options Proceeds from employee stock purchase plan Repurchases of common stock Payments for dividends Excess tax benefits from equity awards Net cash provided by (used for) financing activities Effect of foreign currency exchange rate changes on...

  • Page 104
    ... marketing services for advertisers. United Online is a Delaware corporation that commenced operations in 2001 following the merger of Internet access providers NetZero, Inc. and Juno Online Services, Inc. In April 2004, the Company acquired the Web hosting and domain name registration business...

  • Page 105
    ... Information . In August 2008, the Company completed the acquisition of FTD. FTD's operating results are now reported as the FTD segment, which is aligned with how management measures and reviews segment performance for internal reporting purposes in accordance with the "management approach" defined...

  • Page 106
    ...ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued) rates, or the Company may suffer losses in principal by selling securities which have declined in market value...

  • Page 107
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued) approximately 15% of the Company's consolidated accounts receivable balance. For the...

  • Page 108
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued) sheets at their fair values based on third-party quotes. Long-term debt is carried at amortized cost...

  • Page 109
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued) impairment review include, but are not limited to, a significant adverse change in legal factors...

  • Page 110
    ... of future inactive points. Changes in, among other factors, the net number of points issued, redemption activities and members' activity levels could materially impact the member redemption liability. Points in active accounts do not expire. However, under the terms and conditions of membership in...

  • Page 111
    ... consolidated balance sheets as deferred revenue. The Company offers alternative payment methods to credit cards for certain pay service plans. These alternative payment methods currently include automated clearinghouse ("ACH"), payment by personal check or money order, or through a local telephone...

  • Page 112
    ...; costs related to providing telephone support; customer billing and billing support for the Company's pay accounts and florist members; fees associated with the storage and processing of customer credit cards and associated bank fees; and domain name registration fees. Sales and Marketing -Sales...

  • Page 113
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued) including branding and customer acquisition campaigns consisting of television, ...

  • Page 114
    ...stock, stock options and the discount on purchases related to the Company's employee stock purchase plan. SFAS No. 123R requires companies to estimate the fair value of share-based payment awards on the grant date using an option-pricing model. The Company uses the Black-Scholes option-pricing model...

  • Page 115
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued) employee share-based compensation, and to determine the subsequent impact on the ...

  • Page 116
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued) rights, and excludes any dilutive effects of options or warrants, restricted stock, restricted stock...

  • Page 117
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, ACCOUNTING POLICIES, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued) Noncontrolling Interests in Consolidated Financial Statements In December 2007, the FASB issued...

  • Page 118
    ... Company's marketing expertise to attract consumers to FTD's Web sites and thousands of florist members while cross-selling FTD products and services to the Company's existing member base of over 50 million registered consumer accounts that have similar demographic characteristics as FTD's customer...

  • Page 119
    ...(12.3 million shares of United Online common stock valued at $10.29) 126,151 Transaction costs 12,087 Total $444,795 The Company's common stock was valued at $10.29 for purposes of determining the total purchase price, based on the average of the Company's closing stock price for the period from two...

  • Page 120
    ... any further material changes to the purchase price allocation. The results of FTD's operations have been included in the Company's consolidated financial statements since the Closing Date. The following unaudited pro forma information assumes the FTD acquisition occurred at January 1, 2008 and 2007...

  • Page 121
    ...-related expenses Total MyPoints.com, Inc. $ $ 10,463 16,171 26,634 In April 2006, the Company acquired MyPoints.com, Inc. for approximately $56.6 million in cash, including acquisition costs. MyPoints is a leading provider of online loyalty marketing services. The acquisition was accounted for...

  • Page 122
    ... Estimated Fair Value Net liabilities assumed: Cash Accounts receivable Other current assets Property and equipment Other assets Accounts payable and accrued liabilities Deferred revenue Member redemption liability Total net liabilities assumed Intangible assets acquired: Customer contracts...

  • Page 123
    ...UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. SEGMENT INFORMATION Revenues and segment income (loss) from operations by segment are as follows (in thousands): Year Ended December 31, 2008 Classmates Media Communications FTD Total Products Services Advertising Total...

  • Page 124
    ... of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. SEGMENT INFORMATION (Continued) International revenues totaled $66.6 million, $7.3 million, and $2.6 million for the years ended December 31, 2008, 2007 and 2006, respectively. Geographic information for long...

  • Page 125
    ... UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. BALANCE SHEET COMPONENTS (Continued) Other Current Assets Other current assets consisted of the following (in thousands): December 31, 2008 2007 Prepaid expenses Income taxes receivable Gift cards related to member...

  • Page 126
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. BALANCE SHEET COMPONENTS (Continued) Accrued Liabilities Accrued liabilities consisted of the following (in thousands): December 31, 2008 2007 Employee compensation and related expenses Income taxes ...

  • Page 127
    ... thousands): December 31, 2008 Accumulated Amortization Net Cost or Fair Value Pay accounts and free accounts Customer contracts and relationships Trademarks and trade names Advertising contracts and related relationships Software and technology Patents, domain names and other Total $ 100,785 110...

  • Page 128
    ... Intangible Assets 2008 Impairment Charge As discussed in Note 2, the Company acquired the FTD and Interflora trademarks and trade names in the FTD acquisition. These were recorded at their estimated fair value of $229.8 million as of the Closing Date. Due to the proximity of the Closing Date to the...

  • Page 129
    ... amounts and timing of future revenues and cash flows, assumed discount rates and other assumptions. Under the market approach, using the guideline company method, a reporting unit's fair value is estimated based on multiples of the cash-free market value of invested capital to revenue and EBITDA of...

  • Page 130
    ....1% and 16.0% discount rate for the FTD and Interflora reporting units, respectively, to calculate the fair values of these reporting units. The sum of the fair values of the reporting units was reconciled to the Company's current market capitalization (based upon the Company's stock price) plus an...

  • Page 131
    ... $13,285 In connection with the FTD acquisition, in August 2008, United Online entered into a $60 million senior secured credit agreement (the "UOL Credit Agreement") and borrowed $60 million thereunder. The net proceeds of the term loans under the UOL Credit Agreement were used to finance, in part...

  • Page 132
    ...guarantors (provided that no more than 66% of the capital stock of any foreign subsidiary is pledged or otherwise secures the FTD Credit Agreement). On the date of the FTD acquisition, term loan A and term loan B under the FTD Credit Agreement were funded and FTD and its subsidiaries undertook UNOLA...

  • Page 133
    ... to such payments, the changes in the Company's debt balances for the year ended December 31, 2008 were as follows (in thousands): Drawn Downs of Debt Debt Discounts Repayments of Debt Accretion of Discounts Balance at December 31, 2008 UOL Credit Agreement FTD Credit Agreement, term loan A FTD...

  • Page 134
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. DERIVATIVE INSTRUMENT In November 2008, the Company entered into a three-year interest rate cap instrument to manage risks associated with interest rate fluctuations on a $150 million notional amount of ...

  • Page 135
    ... at the close of business on that date. Each right entitles the registered holder to purchase from the Company one unit consisting of one one-thousandth of a share of its Series A junior participating preferred stock at a price of $25 per unit. On April 29, 2003, the Board of Directors voted to...

  • Page 136
    ... restricted stock units and restricted stock awards which vested and stock awards that were issued. Dividends Dividends are paid on shares of common stock and unvested restricted stock units outstanding as of the record date. In January, April and July 2008, the Company's Board of Directors declared...

  • Page 137
    ... unless canceled earlier due to termination of employment or Board of Directors service. Certain stock option grants are immediately exercisable for unvested shares of common stock, with the unvested portion of the shares remaining subject to repurchase by the Company at the exercise price until...

  • Page 138
    ... in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the closing market price of United Online common stock at...

  • Page 139
    ...-pricing model. The assumptions represent the weighted average of the applicable assumption used to value stock options at their grant date. The Company did not grant any stock options in the years ended December 31, 2008 and 2007. Year Ended December 31, 2006 Risk-free interest rate Expected term...

  • Page 140
    ... stock and restricted stock units was approximately $42.0 million. The fair value of restricted stock units that vested during the year ended December 31, 2008 was approximately $20.5 million. Total unrecognized compensation cost related to unvested restricted stock and restricted stock units...

  • Page 141
    ...been recorded in the Company's consolidated financial statements from the execution dates of these agreements. During the year ended December 31, 2008, certain of the employment agreements with guaranteed values totaling $6.5 million in restricted stock units in CMC were canceled and $0.7 million of...

  • Page 142
    ... for the expected term. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by the closing market price of United Online common stock at the date of grant. For the years ended December 31, 2008, 2007 and 2006, the Company recognized $1.1 million...

  • Page 143
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. STOCK-BASED COMPENSATION PLANS (Continued) plan. Total unrecognized compensation cost related to the employee stock purchase plan at December 31, 2008 was approximately $2.1 million and was expected to...

  • Page 144
    Table of Contents UNITED ONLINE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. INCOME TAXES (Continued) The following is a reconciliation of the statutory federal income tax rate to the Company's effective income tax rate (in thousands): Year Ended December 31, 2008 2007 2006 ...

  • Page 145
    ...At December 31, 2008 and 2007, the Company had gross unrecognized tax benefits of $11.8 million and $10.3 million, respectively, all of which, if recognized, would have an impact on the Company's effective income tax rate, except for purchase accounting. The Company recognizes interest and penalties...

  • Page 146
    ...In October 2007, the Company eliminated 69 positions and recorded restructuring charges totaling $3.0 million for employee termination benefits within its Communications segment to better align the segment's cost structure within a mature business for dial-up Internet access services. All costs F-51

  • Page 147
    ...charges totaling $0.6 million primarily for lease termination costs and termination benefits paid to certain employees. 14. POTENTIAL SUBSIDIARY INITIAL PUBLIC OFFERING OF CLASSMATES MEDIA CORPORATION CMC was formed in August 2007 for the purposes of consolidating the Company's Classmates, The Names...

  • Page 148
    .... Standby Letters of Credit Standby letters of credit are maintained pursuant to certain of the Company's lease arrangements and to secure credit card processing activity. The standby letters of credit remain in effect, generally, at declining levels through the terms of the related leases...

  • Page 149
    ..., 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...

  • Page 150
    ... a consolidated amended class action complaint at which time Peter Chrisler was also substituted as a purported class representative. A settlement agreement was entered into by all parties in this case and was granted final approval by the court on November 6, 2008. The Company's pending lawsuits...

  • Page 151
    ... UNITED ONLINE, INC. SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS (in thousands) Balance at Beginning of Period Additions Charged (Credited) to Expense Charged to Other Accounts Charges Utilized (Write-offs) Balance at End of Period Allowance for doubtful accounts: Year ended December 31, 2008...

  • Page 152

  • Page 153
    ... of this Agreement. The number of shares of Common Stock subject to the awarded Restricted Stock Units, the applicable vesting schedule for those shares, the dates on which those vested shares shall become issuable to Participant and the remaining terms and conditions governing the award (the...

  • Page 154
    ...five (5) business day following the payment of the actual cash dividend on the outstanding Common Stock, subject to the Corporation's collection of all applicable federal, state and local income and employment withholding taxes. For any other dividend or distribution, a special book account shall be...

  • Page 155
    ...the time of the Change in Control. (b) In the event the Award is assumed or otherwise continued in effect, the Restricted Stock Units subject to the Award shall be adjusted immediately after the consummation of the Change in Control so as to apply to the number and class of securities into which the...

  • Page 156
    ... to the total number and/or class of securities issuable pursuant to this Award in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. 7. Issuance of Shares of Common Stock . (a) As soon as administratively practicable following each date one or more...

  • Page 157
    Common Stock. In no event, however, shall any fractional shares be issued. Accordingly, the total number of shares of Common Stock to be issued at the time the Award vests shall, to the extent necessary, be rounded down to the next whole share in order to avoid the issuance of a fractional share. 8....

  • Page 158
    ... date the Corporation receives proof of Participant's death. IN WITNESS WHEREOF , the parties have executed this Agreement on the day and year first indicated above. UNITED ONLINE, INC. By: Mark R. Goldston Title: Chairman, Chief Executive Officer and President PARTICIPANT Name:

  • Page 159
    ... the date indicated in Paragraph 1 of the Agreement. D. Board shall mean the Corporation's Board of Directors. Agreement shall mean this Restricted Stock Unit Issuance Agreement. Award shall mean the award of restricted stock units made to the Participant pursuant to the terms of this E. Change in...

  • Page 160
    ... who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. J. Fair Market Value per share of Common Stock on any relevant date shall be determined in...

  • Page 161
    ... standards of the Treasury Regulations issued under Internal Revenue Code Section 409A. S. Service shall mean the Participant's performance of services for the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-employee member of the board of directors or a consultant or...

  • Page 162
    of absence, no Service credit shall be given for vesting purposes for any period the Participant is on a leave of absence. T. Stock Exchange shall mean the American Stock Exchange or the New York Stock Exchange. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain...

  • Page 163
    ... of this Agreement. The number of shares of Common Stock subject to the awarded Restricted Stock Units, the applicable vesting schedule for those shares, the dates on which those vested shares shall become issuable to Participant and the remaining terms and conditions governing the award (the...

  • Page 164
    ..., and the number of Restricted Stock Units will be reduced accordingly. The Participant shall thereupon cease to have any right or entitlement to receive any Shares under those cancelled units. (b) The Participant's Employment Agreement sets forth certain terms and conditions under which Participant...

  • Page 165
    ... with those provisions shall be issued or distributed on the applicable date or dates determined for those Restricted Stock Units pursuant to terms of the Employment Agreement. Accordingly, the terms and provisions of the Employment Agreement (including any conditions, restrictions or limitations...

  • Page 166
    ... to the total number and/or class of securities issuable pursuant to this Award in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. 7. Issuance of Shares of Common Stock . (a) As soon as administratively practicable following each date one or more...

  • Page 167
    ... in Paragraph 5 or Paragraph 7(a), the settlement of all Restricted Stock Units which vest under the Award shall be made solely in shares of Common Stock. In no event, however, shall any fractional shares be issued. Accordingly, the total number of shares of Common Stock to be issued at the time the...

  • Page 168
    ... WITNESS WHEREOF , the parties have executed this Agreement on the day and year first indicated above. UNITED ONLINE, INC. By: Mark R. Goldston Title: Chairman, Chief Executive Officer and President PARTICIPANT Name: Signature: Social Security No: 6

  • Page 169
    ... the date indicated in Paragraph 1 of the Agreement. D. Board shall mean the Corporation's Board of Directors. Agreement shall mean this Restricted Stock Unit Issuance Agreement. Award shall mean the award of restricted stock units made to the Participant pursuant to the terms of this E. Change in...

  • Page 170
    ...of the employer entity as to both the work to be performed and the manner and method of performance. J. Employment Agreement shall mean the Employment Agreement between the Participant and the Corporation dated . Fair Market Value per share of Common Stock on any relevant date shall be...

  • Page 171
    ... standards of the Treasury Regulations issued under Internal Revenue Code Section 409A. R. Service shall mean the Participant's performance of services for the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-employee member of the board of directors or a consultant or...

  • Page 172
    ... 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...

  • Page 173
    ... 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...

  • Page 174
    ... be obligated to pay the Accrued Obligations to you, your estate or beneficiaries (as the case may be) on your termination date or as soon as administratively practicable thereafter, but in no event later than sixty (60) days after the date of such termination." 7. The definition of "good reason" as...

  • Page 175
    ... 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 agreement, each amount to be paid or benefit to be...

  • Page 176
    ... remaining severance payments and benefits (if any) shall be paid in accordance with the normal payment dates specified for them herein." 8. and effect. Except as modified by this Amendment, all the terms and provisions of the Original Agreement shall continue in full force ( Signature Page Follows...

  • Page 177
    ... 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/ Jeremy E. Helfand Jeremy E. Helfand Dated: December 22...

  • Page 178
    ... 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...

  • Page 179
    ... 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...

  • Page 180
    ... be obligated to pay the Accrued Obligations to you, your estate or beneficiaries (as the case may be) on your termination date or as soon as administratively practicable thereafter, but in no event later than sixty (60) days after the date of such termination." 7. The definition of "good reason" as...

  • Page 181
    ... 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 agreement, each amount to be paid or benefit to be...

  • Page 182
    10. Except as modified by this Amendment Agreement, all the terms and provisions of the Original Agreement shall continue in full force and effect. ( Signature Page Follows )

  • Page 183
    ... 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/ Paul E. Jordan Paul E. Jordan Dated: December 22...

  • Page 184
    ... (the "Agreement") dated August 14, 2008, between you and Classmates Online, Inc. (the "Company"), and any defined terms used but not otherwise defined herein will have the meanings ascribed thereto in the Agreement. For the purpose of complying with Section 409A of the Internal Revenue Code of 1986...

  • Page 185
    ... 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. Except as modified by this letter, all the terms and provisions of the Agreement will continue in full force and effect. [Signature Page Follows]

  • Page 186
    Please indicate your acceptance of the foregoing terms by signing the acknowledgement below. CLASSMATES ONLINE, INC. By: /s/ Mark R. Goldston Mark R. Goldston Chief Executive Officer Dated: December 19, 2008 Acknowledged and agreed to as of the date set forth below, and effective January 1, 2009: ...

  • Page 187
    ... 1, 2009 (this "Amendment"), amends that certain Employment Agreement dated as of August 15, 2007 (the "Original Agreement") by and between United Online, Inc. (the "Company"), and Robert J. Taragan. Capitalized terms used and not otherwise defined herein shall have the respective meanings set forth...

  • Page 188
    ... 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...

  • Page 189
    ... be obligated to pay the Accrued Obligations to you, your estate or beneficiaries (as the case may be) on your termination date or as soon as administratively practicable thereafter, but in no event later than sixty (60) days after the date of such termination." 8. The definition of "good reason" as...

  • Page 190
    ... 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 agreement, each amount to be paid or benefit to be...

  • Page 191
    ... remaining severance payments and benefits (if any) shall be paid in accordance with the normal payment dates specified for them herein." 8. and effect. Except as modified by this Amendment, all the terms and provisions of the Original Agreement shall continue in full force ( Signature Page Follows...

  • Page 192
    ... 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/ Robert J. Taragan Robert J. Taragan Dated: December 22...

  • Page 193
    ...first regular payday for the Company's salaried employees, within the 60-day period following the date of your "separation of service" (as defined in the Treasury Regulations issued under Code Section 409A) due to such termination, on which the executed Release is effective and enforceable following...

  • Page 194
    ... 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. Except as modified by this letter, all the terms and provisions of the Agreement will continue in full force and effect. [Signature Page Follows]

  • Page 195
    Please indicate your acceptance of the foregoing terms by signing the acknowledgement below. FTD GROUP, INC. By: /s/ Mark R. Goldston Mark R. Goldston Chief Executive Officer Dated: December 19, 2008 Acknowledged and agreed to on the date set forth below, and effective January 1, 2009: /s/ Robert ...

  • Page 196
    ..., 2004, into documentary compliance with the applicable provisions of Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. C. The Restricted Stock Unit Issuance Agreements that are subject to this Amendment Agreement are more particularly identified...

  • Page 197
    ... with those provisions shall be issued or distributed on the applicable date or dates determined for those Restricted Stock Units pursuant to terms of the Employment Agreement. Accordingly, the terms and provisions of the Employment Agreement (including any conditions, restrictions or limitations...

  • Page 198
    ... event later than three (3) business days following the effective date of that Change in Control. Such distribution shall be subject to the Corporation's collection of the applicable Withholding Taxes pursuant to the provisions of Paragraph 7." 5. There is hereby added to each Restricted Stock Unit...

  • Page 199
    ... from Service shall have the meaning ascribed to such (c) term under Code Section 409A and the Treasury Regulations issued thereunder." 6. There is hereby added to Appendix A of each Restricted Stock Unit Issuance Agreement the following definition of Employment Agreement: " Employment Agreement...

  • Page 200
    IN WITNESS WHEREOF, each of the parties has executed this Amendment Agreement on the date specified for that party below. UNITED ONLINE, INC. By: /s/ Mark R. Goldston Title: Chairman, President & CEO Dated: December 19, 2008 Jeremy Helfand PARTICIPANT Name: Jeremy Helfand Dated: December 22, 2008 5

  • Page 201
    ... Corporation and Participant governing the following Awards are subject to the Amendment Agreement: Number of Restricted Stock Units Originally Subject to Agreement: Number of Restricted Stock Units Currently Outstanding: Number of Restricted Stock Units Subject to Amendment Agreement: Award Date...

  • Page 202
    ..., 2004, into documentary compliance with the applicable provisions of Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. C. The Restricted Stock Unit Issuance Agreements that are subject to this Amendment Agreement are more particularly identified...

  • Page 203
    ... with those provisions shall be issued or distributed on the applicable date or dates determined for those Restricted Stock Units pursuant to terms of the Employment Agreement. Accordingly, the terms and provisions of the Employment Agreement (including any conditions, restrictions or limitations...

  • Page 204
    ... event later than three (3) business days following the effective date of that Change in Control. Such distribution shall be subject to the Corporation's collection of the applicable Withholding Taxes pursuant to the provisions of Paragraph 7." 5. There is hereby added to each Restricted Stock Unit...

  • Page 205
    ... term Separation from Service shall have the meaning ascribed to such term under Code Section 409A and the Treasury Regulations issued thereunder." 6. There is hereby added to Appendix A of each Restricted Stock Unit Issuance Agreement the following definition of Employment Agreement: " Employment...

  • Page 206
    IN WITNESS WHEREOF, each of the parties has executed this Amendment Agreement on the date specified for that party below. UNITED ONLINE, INC. By: /s/ Mark R. Goldston Title: Chairman, President & CEO Dated: December 19, 2008 Paul Jordan PARTICIPANT Name: Paul Jordan Dated: December 22, 2008 5

  • Page 207
    ... Corporation and Participant governing the following Awards are subject to the Amendment Agreement: Number of Restricted Stock Units Originally Subject to Agreement: Number of Restricted Stock Units Currently Outstanding: Number of Restricted Stock Units Subject to Amendment Agreement: Award Date...

  • Page 208
    ...is to bring each of those Restricted Stock Unit Issuance Agreements, to the extent they pertain to restricted stock units that were not vested as of December 31, 2004, into documentary compliance with the applicable provisions of Section 409A of the Internal Revenue Code of 1986, as amended, and the...

  • Page 209
    ... with those provisions shall be issued or distributed on the applicable date or dates determined for those Restricted Stock Units pursuant to terms of the Employment Agreement. Accordingly, the terms and provisions of the Employment Agreement (including any conditions, restrictions or limitations...

  • Page 210
    ... with those provisions shall be issued or distributed on the applicable date or dates determined for those Restricted Stock Units pursuant to terms of the Employment Agreement. Accordingly, the terms and provisions of the Employment Agreement (including any conditions, restrictions or limitations...

  • Page 211
    ... event later than three (3) business days following the effective date of that Change in Control. Such distribution shall be subject to the Corporation's collection of the applicable Withholding Taxes pursuant to the provisions of Paragraph 8." 8. There is hereby added to each Restricted Stock Unit...

  • Page 212
    ... in their entirety. 11. The definition of Good Reason set forth in Appendix A of the February 2007 Agreement is hereby deleted in its entirety. 12. Except as modified by this Amendment Agreement, all the terms and conditions of each Restricted Stock Unit Issuance Agreement subject to this Amendment...

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    IN WITNESS WHEREOF, each of the parties has executed this Amendment Agreement on the date specified for that party below. UNITED ONLINE, INC. By: /s/ Mark R. Goldston Title: Chairman, President & CEO Dated: December 19, 2008 Robert J. Taragan PARTICIPANT Name: Robert J. Taragan Dated: December 22, ...

  • Page 214
    ... Corporation and Participant governing the following Awards are subject to the Amendment Agreement: Number of Restricted Stock Units Originally Subject to Agreement: Number of Restricted Stock Units Currently Outstanding: Number of Restricted Stock Units Subject to Amendment Agreement: Award Date...

  • Page 215
    ...Network, Inc., a Delaware corporation (dba United Online Media Group) United Online Web Services, Inc., a Delaware corporation (dba 50 Megs, Bizhosting, Freeservers, GlobalServers, and MySite) United Online Software Development (India) Private Limited, a corporation organized under the laws of India...

  • Page 216
    QuickLinks Exhibit 21.1 List of Subsidiaries

  • Page 217
    ... INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-70532, 333-88766, 333-106003, 333-114919, 333-121217, 333-123392, 333-140999, 333-149324 and 333-155261) of United Online, Inc. of our report dated...

  • Page 218
    QuickLinks Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  • Page 219
    ... information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: February 27, 2009 /s/ MARK R. GOLDSTON Mark R. Goldston Chairman, President and Chief Executive...

  • Page 220
    QuickLinks CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13A-14 AND 15D-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

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    ... ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: February 27, 2009 /s/ NEIL P. EDWARDS Neil...

  • Page 222
    QuickLinks CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13A-14 AND 15D-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

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    ... the Securities Exchange Act of 1934; and The information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company. (b) Date: February 27, 2009 /s/ MARK R. GOLDSTON Mark R. Goldston Chairman, President and Chief Executive...

  • Page 224
    QuickLinks CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

  • Page 225
    ...pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (a) The Annual Report on Form 10-K of United Online, Inc. for the year ended December 31, 2008, as filed with the Securities and Exchange Commission fully complies with the requirements of Section 13(a) or 15(d) of the...

  • Page 226
    QuickLinks CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002