UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended June 30, 2003
or
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-33367
UNITED ONLINE, INC.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) | 77-0575839 (I.R.S. Employer Identification No.) | |
2555 Townsgate Road Westlake Village, California (Address of principal executive offices) | 91361 (Zip Code) |
(805) 418-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0001 per share
Preferred Stock Purchase Rights
Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o
As of December 31, 2002, 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 by the Nasdaq National Market, was approximately $639,899,217 (calculated by excluding shares beneficially owned by directors and officers). As of September 30, 2003, there were a total of 43,445,176 shares of the registrant's common stock outstanding.
UNITED ONLINE, INC.
INDEX TO FORM 10-K/A
For the Year Ended June 30, 2003
| | | Page | ||
|---|---|---|---|---|
Explanatory Note | 2 | |||
PART III | ||||
Item 10. | Directors and Executive Officers of the Registrant | 3 | ||
Item 11. | Executive Compensation | 6 | ||
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 11 | ||
Item 13. | Certain Relationships and Related Party Transactions | 14 | ||
PART IV | ||||
Item 15. | Exhibits, Financial Statement Schedules and Current Reports on Form 8-K | 15 | ||
Signatures | 17 | |||
In this document, "United Online," the "Company," "we," "us" and "our" collectively refer to United Online, Inc. and its wholly-owned subsidiaries. References in this document to the "Merger," refer to the mergers of NetZero, Inc. and Juno Online Services, Inc. into two wholly-owned subsidiaries of United Online on September 25, 2001.
The purpose of this Amendment No. 1 to Annual Report on Form 10-K is to include information required by Part III of Form 10-K, which was not included in our Annual Report on Form 10-K filed on August 1, 2003. In all other respects, our Annual Report on Form 10-K remains the same.
Stockholders may obtain an additional copy of our Annual Report on Form 10-K and this Amendment No. 1, free of charge, by writing to our corporate Secretary at United Online, Inc., 2555 Townsgate Road, Westlake Village, California 91361.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
The following table sets forth information with respect to members of our Board of Directors:
| Name | Age | Director Since | Term Expires at Annual Meeting Following Fiscal Year | Positions | ||||
|---|---|---|---|---|---|---|---|---|
| Mark R. Goldston | 48 | 2001 | 2004 | Chairman, Chief Executive Officer, President and Director | ||||
| James T. Armstrong(1) | 37 | 2001 | 2005 | Director | ||||
| Robert Berglass(2) | 65 | 2001 | 2003 | Director | ||||
| Kenneth L. Coleman(1)(2) | 60 | 2001 | 2003 | Director | ||||
| Dennis Holt | 67 | 2001 | 2005 | Director | ||||
| Carol A. Scott(1) | 54 | 2003 | 2004 | Director |
The following is a brief description of the capacities in which each of the directors has served during the past five years.
Mark R. Goldston has served as our Chairman, Chief Executive Officer and President and a director since the Merger. He served as NetZero's Chairman and Chief Executive Officer and one of its directors from March 1999 until the Merger. Prior to joining NetZero, Mr. Goldston served as Chairman and Chief Executive Officer of The Goldston Group, a strategic advisory firm, from December 1997 to March 1999. From April 1996 to December 1997, he served as President, Chief Executive Officer and a director of Einstein/Noah Bagel Corp. after founding and serving his initial term with The Goldston Group from June 1994 to April 1996. Mr. Goldston also served as President and Chief Operating Officer of L.A. Gear from September 1991 to June 1994 and as a principal of Odyssey Partners, L.P., a private equity firm, from September 1989 to September 1991. Before joining Odyssey Partners, Mr. Goldston held various executive positions including Chief Marketing Officer of Reebok, President of Faberge USA, Inc. and Vice President of Marketing Worldwide for fragrance and skincare at Revlon, Inc. Mr. Goldston is the author of a business book entitled,The Turnaround Prescription, which was published in 1992 and is the named inventor on 12 separate U.S. patents on products such as inflatable pump athletic shoes and lighted footwear. Mr. Goldston received his B.S.B.A. in Marketing and Finance from Ohio State University and his M.B.A. (M.M.) from the J.L. Kellogg School at Northwestern University. He serves on the Dean's Advisory Board of the J.L. Kellogg School and the Dean's Advisory Board of the Ohio State University Fisher School of Business.
James T. Armstrong has served as one of our directors since the Merger and was a director of NetZero from 1998 until the Merger. Mr. Armstrong has been a Managing Director with Clearstone Venture Partners (formerly idealab! Capital Partners) since August 1998. From May 1995 to August 1998, Mr. Armstrong was an associate with Austin Ventures. From September 1989 to March 1992, Mr. Armstrong was a senior auditor with Ernst & Young. Mr. Armstrong serves on the board of directors of several private companies. Mr. Armstrong received his B.A. in Economics from the University of California at Los Angeles and his M.B.A. from the University of Texas.
Robert Berglass has served as one of our directors since the Merger and was a director of NetZero from November 2000 until the Merger. Since January 2002, Mr. Berglass has been the Chairman of DAVEXLABS LLC. From 1998 until April 2001, Mr. Berglass was the Chairman, Chief Executive
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Officer and President of Schwarzkopf & DEP, Inc. (formerly DEP Corporation), a division of Henkel KGAA. Mr. Berglass had held those positions following Henkel KGAA's acquisition of DEP Corporation in 1998. From 1969 to 1998, Mr. Berglass was the Chairman, Chief Executive Officer and President of DEP Corporation. Before joining DEP Corporation, Mr. Berglass held various positions at Faberge, Inc., including Corporate Executive Vice President.
Kenneth L. Coleman has served as one of our directors since September 2001. Mr. Coleman founded ITM Software and has been its Chairman and Chief Executive Officer since May 2002. In May 2001, Mr. Coleman founded Coleman Consulting and consulted on various strategic matters for several companies through May 2002. From 1987 through May 2001, he held various positions, including Executive Vice President of Global Sales, Service and Marketing, with Silicon Graphics, Inc. Mr. Coleman serves on the board of directors of MIPS Technologies, Inc., Acclaim Entertainment, Inc., City National Bank and Pharmacopeia Inc. Mr. Coleman received his B.S. and M.B.A. from Ohio State University.
Dennis Holt has served as one of our directors since the Merger and was a director of NetZero from January 2001 until the Merger. Mr. Holt founded Western International Media, a media buying service, in 1970 and was the Chairman from 1970 through January 2002. Mr. Holt currently serves as Chairman and Chief Executive Officer of Patriot Communications LLC, a telecommunications service bureau, which he created in 1990 as a subsidiary of Western International Media. Mr. Holt also serves on the board of directors of Westwood One, Inc. and several private and philanthropic companies. Mr. Holt received his B.A. in Administration from the University of Southern California.
Carol A. Scott has served as one of our directors since April 29, 2003. Ms. Scott is a professor of marketing and faculty director of the Executive Program at The John E. Anderson Graduate School of Management at the University of California at Los Angeles. Ms. Scott has been on the faculty at UCLA since 1977, and served the school in a variety of administrative positions from 1986 through 1994, including chairman of the faculty and associate dean for academic affairs. She was also a visiting associate professor at the Harvard Business School in 1985, and was on the faculty at Ohio State University for three years prior to joining UCLA in 1977. Ms. Scott is a frequent author and lecturer and has served on the Editorial Board of the Journal of Consumer Research since 1980. Ms. Scott received her B.S. in Education from the University of Texas, Austin, and her M.S. in Management and her Ph.D. in Marketing from Northwestern University.
Executive Officers
The following table sets forth certain information regarding all our executive officers:
| Name | Age | Positions | ||
|---|---|---|---|---|
| Mark R. Goldston | 48 | Chairman, Chief Executive Officer, President and Director | ||
| Jon O. Fetveit | 33 | Executive Vice President and Chief Strategy Officer | ||
| Charles S. Hilliard | 40 | Executive Vice President, Finance and Chief Financial Officer | ||
| Gerald J. Popek | 56 | Executive Vice President and Chief Technology Officer | ||
| Frederic A. Randall, Jr. | 46 | Executive Vice President, General Counsel and Secretary | ||
| Robert J. Taragan | 47 | Executive Vice President and General Manager of CyberTarget | ||
| Brian Woods | 43 | Executive Vice President and Chief Marketing Officer |
The following is a brief description of the capacities in which each of the executive officers has served during the past five years. The biography for Mr. Goldston appears earlier in this Report under the heading "Directors."
Jon O. Fetveit has been our Executive Vice President and Chief Strategy Officer since the Merger. Prior to that, he served as NetZero's Senior Vice President and Chief Strategy Officer from July 2001 until the Merger. Mr. Fetveit joined NetZero in May 1999 as Director, Strategic Planning and served as
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NetZero's Vice President, Strategic Planning from April 2000 to July 2001. Prior to joining NetZero, Mr. Fetveit was engaged in the start-up of SRP Software, an enterprise software company, from July 1997 to May 1999. From June 1992 to July 1997, Mr. Fetveit was an investment banker in the corporate finance department of Hambrecht & Quist LLC, most recently as Vice President, Software Investment Banking. Mr. Fetveit received his B.S. in Symbolic Systems with distinction from Stanford University. Mr. Hilliard and Mr. Fetveit are brothers-in-law.
Charles S. Hilliard has been our Executive Vice President, Finance and Chief Financial Officer since the Merger. Prior to that, he served as NetZero's Senior Vice President, Finance and Chief Financial Officer from April 1999 to September 2001. Prior to joining NetZero, Mr. Hilliard served as an investment banker with Morgan Stanley & Co. from May 1994 to April 1999, most recently as a Principal in the Corporate Finance Department. From August 1990 to May 1994, he served in the Mergers & Acquisitions and Corporate Finance departments of Merrill Lynch & Co. Mr. Hilliard served as a tax accountant with Arthur Andersen & Co. from September 1985 to July 1988 and was licensed as a Certified Public Accountant in January 1988. Mr. Hilliard received his B.S. in Business Administration from the University of Southern California and his M.B.A. with distinction from the University of Michigan. Mr. Hilliard and Mr. Fetveit are brothers-in-law.
Gerald J. Popek has been our Executive Vice President and Chief Technology Officer since the Merger. Prior to that, he served as NetZero's Senior Vice President and Chief Technology Officer from October 2000 to September 2001. Prior to joining NetZero, Mr. Popek was Chief Technology Officer at CarsDirect.com from August 1999 to September 2000 and Chief Technology Officer at PLATINUM Technology, Inc. from August 1995 to August 1999. In the late 1970s, he was a member of the Defense Science Board, which selected the technology base for the United States Department of Defense that became the Internet. Mr. Popek has a B.S. in Nuclear Engineering, with honors, from New York University and a Ph.D. in Applied Mathematics from Harvard University.
Frederic A. Randall, Jr. has been our Executive Vice President, General Counsel and Secretary since the Merger. Prior to that, he served as NetZero's Senior Vice President and General Counsel from March 1999 until the Merger and was the Secretary from May 1999 to September 2001. Prior to joining NetZero, Mr. Randall was a partner at Brobeck, Phleger & Harrison LLP from January 1991 to March 1999, and an associate from 1984 to December 1990. Mr. Randall received his B.A. in English Literature with distinction from the University of Michigan and his J.D., cum laude, from the University of San Francisco School of Law.
Robert J. Taragan has been our Executive Vice President and General Manager of CyberTarget since the Merger. Prior to that, he served as NetZero's Senior Vice President and General Manager of CyberTarget from March 2000 until the Merger. Prior to joining NetZero, Mr. Taragan held various management positions with Nielsen Media Research for 21 years. His positions included Executive Vice President of Marketing and General Manager of Local Services. Mr. Taragan received his B.A. in Economics from Colgate University.
Brian Woods has been our Executive Vice President and Chief Marketing Officer since the Merger. Prior to that, he served as NetZero's Senior Vice President and Chief Marketing Officer from December 1999 until the Merger. Mr. Woods served as Chairman and Chief Executive Officer of AimTV, Inc. from May 1999 until NetZero acquired AimTV in December 1999. Prior to his position with AimTV, Mr. Woods was affiliated with Planet Hollywood from 1996 until 1998 as the President of the Entertainment Division for Planet Hollywood International. From 1988 to 1996, Mr. Woods served in several management positions at Blockbuster Entertainment Group, including Executive Vice President and Chief Marketing Officer. Mr. Woods was also Co-Chairman of the Viacom Marketing Council from 1993 to 1995.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, file reports of ownership and changes in ownership (Forms 3, 4 and 5) with the Securities and Exchange Commission. Executive officers, directors and greater-than-10% beneficial owners are required to furnish us with copies of all of the forms that they file.
Based solely on our review of these reports or written representations from certain reporting persons, we believe that during the 2003 fiscal year, all filing requirements applicable to our officers, directors, greater-than-10% beneficial owners and other persons subject to Section 16(a) of the Exchange Act were complied with, except with respect to Jennifer S. Fonstad, a member of our Board of Directors until her resignation April 29, 2003, who made two late filings of Form 4 reports covering a total of two transactions.
ITEM 11. EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table provides certain summary information concerning the compensation earned for services rendered during the 2001, 2002 and 2003 fiscal years by our Chief Executive Officer and each of the four other most highly compensated executive officers whose aggregate salary and bonus for the 2003 fiscal year were in excess of $100,000. The information provided for the 2001 fiscal year and the portion of the 2002 fiscal year prior to the Merger is the compensation that was paid to each individual by NetZero, and the securities appearing in the table have been adjusted to reflect the exchange ratio by which shares of NetZero common stock and options for shares of NetZero common stock were converted upon the Merger into shares of United Online common stock and options for shares of United Online common stock. No other executive officer who would have otherwise been included in such table on the basis of salary and bonus earned for the 2003 fiscal year has been excluded by reason of his or her termination of employment or change in executive status during that year. The listed individuals are sometimes referred to herein as the "named executive officers."
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| | | | | Long-Term Compensation Awards | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | Annual Compensation | |||||||||
| Name and Principal Position | Restricted Stock Award($)(1) | Securities Underlying Options(#) | ||||||||
| Year | Salary($) | Bonus($) | ||||||||
Mark R. Goldston Chairman, Chief Executive Officer and President | 2003 2002 2001 | 700,000 605,000 456,000 | 700,000 652,500 275,000 | — — 4,321,889 | 550,000 1,710,000 400,000 | |||||
Charles S. Hilliard Executive Vice President, Finance and Chief Financial Officer | 2003 2002 2001 | 350,000 275,000 240,000 | 262,500 312,500 125,000 | — — 660,000 | 150,000 450,000 85,000 | |||||
Gerald J. Popek Executive Vice President and Chief Technology Officer | 2003 2002 2001 | 325,000 275,000 178,000 | 243,750 262,500 125,000 | — — — | 100,000 350,000 125,000 | |||||
Frederic A. Randall, Jr. Executive Vice President and General Counsel | 2003 2002 2001 | 325,000 275,000 209,000 | 243,750 312,500 112,500 | — — 577,500 | 120,000 420,000 85,000 | |||||
Brian Woods Executive Vice President and Chief Marketing Officer | 2003 2002 2001 | 325,000 275,000 206,250 | 243,750 212,500 112,500 | — — 550,000 | 120,000 420,000 150,000 | |||||
Option/SAR Grants in Last Fiscal Year
The following table contains information concerning the stock options granted to the named executive officers during the 2003 fiscal year. All options were granted under our 2001 Plan. No stock appreciation rights were granted to the named executive officers during such fiscal year.
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
| | | Individual Grants | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | Potential Realized Value at Assumed Annual Rates of Stock Price Appreciation for Option Term($)(4) | ||||||||
| | Number of Securities Underlying Options Granted(#)(1) | | | | |||||||||
| Name | % of Total Options Granted to Employees in Fiscal Year 2003(2) | Exercise Price Per Share($) | Expiration Date(3) | ||||||||||
| 5% | 10% | ||||||||||||
Mark R. Goldston | 550,000 | 26.3 | % | $ | 26.92 | 06/17/2013 | 9,311,414 | 23,596,951 | |||||
Charles S. Hilliard | 150,000 | 7.2 | % | $ | 26.92 | 06/17/2013 | 2,539,477 | 6,435,532 | |||||
Gerald J. Popek | 100,000 | 4.8 | % | $ | 26.92 | 06/17/2013 | 1,692,984 | 4,290,355 | |||||
Frederic A. Randall, Jr. | 120,000 | 5.7 | % | $ | 26.92 | 06/17/2013 | 2,031,581 | 5,148,426 | |||||
Brian Woods | 120,000 | 5.7 | % | $ | 26.92 | 06/17/2013 | 2,031,581 | 5,148,426 | |||||
Aggregated Option Exercises and Fiscal Year End Values
The following table provides information with respect to the named executive officers concerning the exercise of options during the 2003 fiscal year and unexercised options held by them at the end of that fiscal year. None of the named executive officers exercised any stock appreciation rights during the 2003 fiscal year, and no stock appreciation rights were held by the named executive officers at the end of that year.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
| | | | Number of Securities Underlying Unexercised Options(#)(2) | Value of Unexercised in-the-Money Options at Fiscal Year End($)(3) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Name | Shares Acquired on Exercise(#) | Value Realized($)(1) | ||||||||||
| Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||
| Mark R. Goldston | 275,000 | 3,291,065 | 2,276,305 | — | 35,558,688 | — | ||||||
| Charles S. Hilliard | — | — | 535,000 | — | 7,757,400 | — | ||||||
| Gerald J. Popek | 176,508 | 1,839,887 | 398,490 | — | 6,081,781 | — | ||||||
| Frederic A. Randall, Jr. | 119,000 | 1,708,210 | 451,653 | — | 6,787,046 | — | ||||||
| Brian Woods | 140,905 | 1,776,545 | 575,202 | — | 6,435,065 | — | ||||||
Employment Contracts, Termination of Employment and Change in Control Arrangements
Mr. Goldston entered into an employment agreement with us effective until February 2005. Under this agreement, his annual base salary must not be less than $770,000, and the bonus for which he is eligible must be at least 125% of his base salary each year. Increases to his base salary and potential bonus may be made from time to time at the discretion of the Compensation Committee. If Mr. Goldston's employment is terminated without cause he will be entitled to a pro rata portion of his annual bonus, a lump sum severance payment of four times his base salary and a specified portion of his annual bonus, and vesting of all of his option shares. If following a change in control Mr. Goldston is involuntarily terminated, he will be entitled to a pro rata portion of his annual bonus, a lump sum severance payment of three times his base salary and a specified portion of his annual bonus, and vesting of all of his option shares. If the severance benefits following a change of control constitute a "parachute payment" under Section 280G of the Internal Revenue Code of 1986 resulting in the imposition of excise taxes, we have agreed to pay Mr. Goldston a gross-up payment in an amount that, after the imposition of all excise and other federal and state taxes, will equal the excise taxes imposed in connection with the severance benefits. In the event his employment is terminated by reason of death or permanent disability, Mr. Goldston will be credited with an additional twenty-four months of vesting on his option shares. Mr. Goldston has agreed that, for a period of eighteen months following the termination of his employment, he will not engage in specified competitive business activities, but only if he has received certain severance payments in connection with such termination.
Messrs. Hilliard, Randall and Woods each have an employment agreement with us, effective until February 2005. Under those agreements, the base salaries of these individuals must not be less than
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$385,000 for Mr. Hilliard, $357,500 for Mr. Randall and $357,500 for Mr. Woods, and the bonus for which they are eligible must not be less than 100% of their base salary each year. Their salaries and bonuses are subject to periodic increases as determined by the Compensation Committee. If their employment is terminated without cause they will be entitled to a lump sum payment of four times their base salary and a specified portion of their annual bonus, and vesting of an additional twelve months for each of their outstanding options; if their employment is involuntarily terminated following a change in control, they will be entitled to a lump sum payment of three times their base salary and a specified portion of their annual bonus, and vesting of all of their options shares. If the severance benefits following a change of control constitute a "parachute payment" under Section 280G of the Internal Revenue Code of 1986 resulting in the imposition of excise taxes, we have agreed to pay such executives a gross-up payment in an amount that, after the imposition of all excise and other federal and state taxes, will equal the excise taxes imposed in connection with the severance benefits. In the event their employment is terminated by reason of death or permanent disability, they will receive an additional twelve months of vesting credit under each of their outstanding options. Messrs. Hilliard, Randall and Woods have each agreed that, for a period of eighteen months following the termination of his employment, he will not engage in specified competitive business activities, but only if he has received certain severance payments in connection with such termination.
Our other executive officers generally are entitled to a severance payment equal to one year of their base salary if they are terminated without cause and are entitled to accelerated vesting on a portion of their option shares if they are terminated without cause following a change of control.
Director Compensation
During the 2003 fiscal year, our non-employee directors received an annual fee of $25,000, which was paid quarterly in arrears, as well as $1,000 for each meeting attended (including committee meetings). As of February 4, 2003, the annual fee for each non-employee director who serves on the Audit Committee was increased by an additional $6,000, and the annual fee for each non-employee director who serves as the Chairman of the Audit Committee or the Compensation Committee was increased by an additional $5,000.
Under our 2001 Stock Incentive Plan, non-employee directors may receive option grants, direct issuances of common stock and other equity incentives. On February 4, 2003, Messrs. Armstrong, Berglass, Coleman and Holt were each granted an immediately exercisable option to purchase 15,000 shares of our common stock at an exercise price of $14.23 per share, the fair market value of our common stock on the grant date. Upon her appointment to the Board of Directors on April 29, 2003, Ms. Scott was granted an immediately exercisable option to purchase 40,000 shares of our common stock at an exercise price of $20.60 per share, the fair market value of our common stock on the grant date. Any shares purchased under these options before such shares vest will be subject to repurchase by us, at the original purchase price paid per share, should the optionee cease to serve as a Board member prior to vesting in those shares. In the event of a change of control, the shares subject to each of these options will immediately vest in full, and upon a hostile takeover, these options may be surrendered to us for a cash payment based on the take-over price paid per share of our common stock. The shares subject to the options granted to Messrs. Armstrong, Berglass, Coleman and Holt vest in nine successive equal monthly installments upon the completion of each month of Board service over the nine-month period measured from the grant date. The shares subject to the option granted to Ms. Scott will vest in 36 successive equal monthly installments upon her completion of each month of Board service over the 36-month period measured from the grant date.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Berglass and Coleman. Neither of these individuals was employed by us at any time during the 2003 fiscal year, and neither has ever acted as one of our officers.
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None of our current executive officers has ever served as a member of the board of directors or compensation committee of any other entity that has or has had one or more of its executive officers serve as a member of our Board of Directors or our Compensation Committee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information known to us with respect to the beneficial ownership of our common stock as of September 30, 2003, by (i) each of our directors and nominees for director, (ii) each named executive officer (as listed in the summary compensation table which appears later in this report), (iii) each person who, to our knowledge, beneficially owns 5% or more of the outstanding shares of our common stock, and (iv) all current directors and executive officers as a group.
| Name and Address of Beneficial Owner | Shares Beneficially Owned | Percentage Beneficial Ownership(1) | ||||
|---|---|---|---|---|---|---|
| Directors and Named Executive Officers: | ||||||
| Mark R. Goldston(2) | 2,679,526 | 5.9 | % | |||
| Charles S. Hilliard(3) | 601,071 | 1.4 | % | |||
| Gerald J. Popek(4) | 369,901 | * | ||||
| Frederic A. Randall, Jr.(5) | 484,124 | 1.1 | % | |||
| Brian Woods(6) | 600,336 | 1.4 | % | |||
| James T. Armstrong(7) | 33,959 | * | ||||
| Robert Berglass(8) | 49,000 | * | ||||
| Kenneth L. Coleman(9) | 38,200 | * | ||||
| Dennis Holt(10) | 30,556 | * | ||||
| Carol A. Scott(11) | 40,200 | * | ||||
| All directors and executive officers as a group (12 persons)(12) | 5,494,137 | 11.4 | % | |||
5% Stockholders Not Listed Above: | ||||||
| FMR Corp.(13) | 4,600,209 | 10.6 | % | |||
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Equity Compensation Plan Information
The following table provides information as of June 30, 2003 with respect to the shares of our common stock that may be issued under our existing equity compensation plans:
| | A | B | C | |||||
|---|---|---|---|---|---|---|---|---|
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options | Weighted Average Exercise Price of Outstanding Options | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column A)(5) | |||||
| Equity Compensation Plans Approved by Stockholders(1)(2) | 7,787,309 | (4) | $ | 16.99 | (4) | 1,519,489 | (6) | |
| Equity Compensation Plans Not Approved by Stockholders(3) | 2,036,513 | $ | 7.25 | 39,235 | ||||
| Total | 9,823,822 | $ | 14.97 | 1,558,724 | ||||
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The 2001 Supplemental Plan
The company also maintains the 2001 Supplemental Stock Incentive Plan (the "2001 Supplemental Plan"), pursuant to which approximately 2.6 million additional shares of our common stock have been reserved for issuance to eligible individuals in our service or the service of our subsidiaries. Such eligible individuals include our continuing employees (other than executive officers) and independent consultants. In addition, newly-hired employees (including newly-hired executive officers) may receive an award under the plan in connection with their commencement of employment with us. The 2001 Supplemental Plan also contains an automatic share increase provision pursuant to which the share reserve will automatically increase on the first trading day of January each year over the 10-year term
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of the plan by an amount equal to 0.5% of the outstanding shares of our common stock on the last trading day in the immediately preceding calendar year, up to a maximum annual increase of 142,800 shares (adjusted for any subsequent stock dividends, stock splits, recapitalizations or similar transactions affecting our common stock). Awards under the 2001 Supplemental Plan may be either in the form of stock option grants or direct stock issuances with exercise or issue prices at, above or below the fair market value of our common stock on the award date. No option grants will have a maximum term in excess of 10 years, and each option grant or direct stock issuance will generally vest over one or more years of service. However, upon certain changes in control or ownership, those options and stock issuances may vest in whole or in part on an accelerated basis. As of June 30, 2003 options to purchase 2,036,513 shares of our common stock were outstanding under the supplemental plan, 548,652 shares of our common stock had been issued under such plan, and 39,235 shares of our common stock remained available for future issuance.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Management Indebtedness
During fiscal 1999 and fiscal 2002 (and before loans to officers were prohibited under the Sarbanes-Oxley Act of 2002), our Board of Directors authorized loans to certain of our executive officers to exercise a portion of their outstanding stock options. During the 2003 fiscal year, each officer who had an outstanding loan from the company voluntarily repaid the loan (including all accrued interest) prior to its due date. All of the promissory notes that were issued in connection with the loans were full recourse and secured by the shares of common stock purchased with the note. The table below shows the amount of each promissory note, the interest rate for each note, the date each note was to become due, the largest amount outstanding on each note during the 2003 fiscal year and the current balance on each note.
| Name | Amount of Promissory Note | Interest Rate | Due Date | Largest Amount of Indebtedness During 2003 Fiscal Year | Current Outstanding Balance | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Mr. Goldston | $ | 628,638 | 5.28% | March 2004 | $ | 557,450 | $ | 0 | |||||
| Mr. Goldston | $ | 200,000 | Prime + 1% | February 2007 | $ | 203,922 | $ | 0 | |||||
| Mr. Fetveit | $ | 100,000 | Prime + 2% | February 2007 | $ | 102,174 | $ | 0 | |||||
| Mr. Hilliard | $ | 400,000 | 4.83% | April 2004 | $ | 338,003 | $ | 0 | |||||
| Mr. Hilliard | $ | 200,000 | Prime + 1% | February 2007 | $ | 203,667 | $ | 0 | |||||
| Mr. Randall | $ | 100,000 | Prime + 1% | February 2007 | $ | 101,466 | $ | 0 | |||||
| Mr. Woods | $ | 100,000 | Prime + 1% | February 2007 | $ | 101,466 | $ | 0 | |||||
Indemnification Agreements
In addition to the indemnification provisions contained in our certificate of incorporation and bylaws, we have entered into separate indemnification agreements with each of our directors and executive officers. These agreements require that we, among other things, indemnify the person against expenses (including attorneys' fees), judgments, fines and settlements paid by such individual in connection with any action, suit or proceeding arising out of such individual's status or service as a director or officer of the company (other than liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately dishonest) and to advance expenses incurred by such individual in connection with any proceeding against such individual with respect to which such individual may be entitled to indemnification by us.
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND CURRENT REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
| | | | Incorporated by Reference to | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | | Filed with this Form 10-K/A | ||||||||
| No. | Exhibit Description | Form | File No. | Date Filed | ||||||
| 3.1 | Amended and Restated Certificate of Incorporation | 8-K | 000-33367 | 10/1/2001 | ||||||
| 3.2 | Amended and Restated Bylaws | 8-K | 000-33367 | 10/1/2001 | ||||||
| 3.3 | Certificate of Designation for Series A Junior Participating Preferred Stock (included in exhibit 4.1 below) | 8-K | 000-33367 | 11/23/2001 | ||||||
| 4.1 | Rights Agreement, dated as of November 15, 2001, between the Company and U.S. Stock Transfer Corporation, which includes the form of Certificate of Designation for the Series A junior participating preferred stock as Exhibit A, and the form of Rights Certificate as Exhibit B | 8-K | 000-33367 | 11/23/2001 | ||||||
| 4.2 | Amendment No. 1 to Rights Agreement, dated as of April 29, 2003, between Registrant and U.S. Stock Transfer Corporation | 10-Q | 000-33367 | 5/1/2003 | ||||||
| 10.1 | Amended and Restated Registration Rights Agreement | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.2 | Lease Agreement between Westlake Gardens and NetZero, Inc. | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.3 | 2001 Amended and Restated Employee Stock Purchase Plan | 10-K | 000-33367 | 8/1/2003 | ||||||
| 10.4 | 2001 Stock Incentive Plan | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.5 | 2001 Supplemental Stock Incentive Plan | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.6 | Employment Agreement between the Registrant and Mark R. Goldston | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.7 | Amendment to Employment Agreement between the Registrant and Mark R. Goldston | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.8 | Employment Agreement between the Registrant and Charles S. Hilliard | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.9 | Amendment to Employment Agreement between the Registrant and Charles S. Hilliard | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.10 | Employment Agreement between the Registrant and Frederic A. Randall, Jr. | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.11 | Amendment to Employment Agreement between the Registrant and Frederic A. Randall, Jr. | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.12 | Employment Agreement between the Registrant and Brian Woods | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.13 | Amendment to Employment Agreement between the Registrant and Brian Woods | 10-Q | 000-33367 | 11/14/2001 | ||||||
15
| 10.14 | United Online, Inc. Fiscal Year 2004 Management Bonus Plan | 10-K | 000-33367 | 8/1/2003 | ||||||
| 21.1 | List of Subsidiaries | 10-K | 000-33367 | 8/1/2003 | ||||||
| 23.1 | Consent of Independent Auditors | 10-K | 000-33367 | 8/1/2003 | ||||||
| 24.1 | Power of Attorney (see the Power of Attorney on the Signature Page to the Annual Report on Form 10-K) | 10-K | 000-33367 | 8/1/2003 | ||||||
| 31.1 | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | 000-33367 | 10/31/2003 | ||||||
| 31.2 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | 000-33367 | 10/31/2003 | ||||||
| 32.1 | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | 10-K | 000-33367 | 8/1/2003 | ||||||
| 32.2 | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | 10-K | 000-33367 | 8/1/2003 |
(c) Exhibits
The exhibits filed as part of this report are listed in Item 15(a)(3) of this Form 10-K/A.
16
Pursuant to the requirements of Section 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 October 28, 2003.
| UNITED ONLINE, INC. | ||||
| By: | /s/ MARK R. GOLDSTON Mark R. Goldston Chairman, Chief Executive Officer and President | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities indicated on the date set forth below.
| Signature | Title | Date | ||
|---|---|---|---|---|
| /s/ MARK R. GOLDSTON Mark R. Goldston | Chairman, Chief Executive Officer, President and Director (Principal Executive Officer and Director) | October 28, 2003 | ||
/s/ CHARLES S. HILLIARD Charles S. Hilliard | Executive Vice President, Finance and Chief Financial Officer (Principal Financial Officer) | October 28, 2003 | ||
/s/ NEIL P. EDWARDS Neil P. Edwards | Senior Vice President, Finance, Treasurer and Chief Accounting Officer (Principal Accounting Officer) | October 28, 2003 | ||
* James T. Armstrong | Director | October 28, 2003 | ||
* Robert Berglass | Director | October 28, 2003 | ||
* Kenneth L. Coleman | Director | October 28, 2003 | ||
* Dennis Holt | Director | October 28, 2003 | ||
* Carol S. Scott | Director | October 28, 2003 |
*By | /s/ MARK R. GOLDSTON Mark R. Goldston Attorney-in-Fact |
17
| | | | Incorporated by Reference to | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | | Filed with this Form 10-K/A | ||||||||
| No. | Exhibit Description | Form | File No. | Date Filed | ||||||
| 3.1 | Amended and Restated Certificate of Incorporation | 8-K | 000-33367 | 10/1/2001 | ||||||
| 3.2 | Amended and Restated Bylaws | 8-K | 000-33367 | 10/1/2001 | ||||||
| 3.3 | Certificate of Designation for Series A Junior Participating Preferred Stock (included in exhibit 4.1 below) | 8-K | 000-33367 | 11/23/2001 | ||||||
| 4.1 | Rights Agreement, dated as of November 15, 2001, between the Company and U.S. Stock Transfer Corporation, which includes the form of Certificate of Designation for the Series A junior participating preferred stock as Exhibit A, and the form of Rights Certificate as Exhibit B | 8-K | 000-33367 | 11/23/2001 | ||||||
| 4.2 | Amendment No. 1 to Rights Agreement, dated as of April 29, 2003, between Registrant and U.S. Stock Transfer Corporation | 10-Q | 000-33367 | 5/1/2003 | ||||||
| 10.1 | Amended and Restated Registration Rights Agreement | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.2 | Lease Agreement between Westlake Gardens and NetZero, Inc. | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.3 | 2001 Amended and Restated Employee Stock Purchase Plan | 10-K | 000-33367 | 8/1/2003 | ||||||
| 10.4 | 2001 Stock Incentive Plan | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.5 | 2001 Supplemental Stock Incentive Plan | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.6 | Employment Agreement between the Registrant and Mark R. Goldston | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.7 | Amendment to Employment Agreement between the Registrant and Mark R. Goldston | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.8 | Employment Agreement between the Registrant and Charles S. Hilliard | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.9 | Amendment to Employment Agreement between the Registrant and Charles S. Hilliard | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.10 | Employment Agreement between the Registrant and Frederic A. Randall, Jr. | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.11 | Amendment to Employment Agreement between the Registrant and Frederic A. Randall, Jr. | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.12 | Employment Agreement between the Registrant and Brian Woods | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.13 | Amendment to Employment Agreement between the Registrant and Brian Woods | 10-Q | 000-33367 | 11/14/2001 | ||||||
| 10.14 | United Online, Inc. Fiscal Year 2004 Management Bonus Plan | 10-K | 000-33367 | 8/1/2003 | ||||||
| 21.1 | List of Subsidiaries | 10-K | 000-33367 | 8/1/2003 | ||||||
| 23.1 | Consent of Independent Auditors | 10-K | 000-33367 | 8/1/2003 | ||||||
| 24.1 | Power of Attorney (see the Power of Attorney on the Signature Page to the Annual Report on Form 10-K) | 10-K | 000-33367 | 8/1/2003 | ||||||
18
| 31.1 | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | 000-33367 | 10/31/2003 | ||||||
| 31.2 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | 000-33367 | 10/31/2003 | ||||||
| 32.1 | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | 10-K | 000-33367 | 8/1/2003 | ||||||
| 32.2 | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | 10-K | 000-33367 | 8/1/2003 |
19
