FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

Exhibit 10.3

FIRST AMENDMENT
TO
EMPLOYMENT AGREEMENT

This amendment dated and effective January 1, 2009 (this “Amendment”), amends that certain Employment Agreement dated effective as of October 1, 2007 (the “Original Agreement”) by and between United Online, Inc. (the “Company”) and Scott H. Ray. Capitalized terms used and not otherwise defined herein shall have the respective meanings set forth in the Original Agreement.

RECITALS

WHEREAS, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), places certain restrictions, among other things, as to the timing of distributions from nonqualified deferred compensation plans and arrangements; and

WHEREAS, the parties desire to amend the Original Agreement to comply with Section 409A of the Code.

NOW, THEREFORE, in consideration of the mutual promises set forth herein, the parties hereto hereby agree as follows:

1.             The first sentence of Section 3 of the Original Agreement is hereby deleted and replaced as follows:

“You will also be eligible to receive an annual bonus of up to 100% of your annual base salary for each fiscal year (the ‘Annual Bonus’), less withholding required by law, based on performance criteria established by the Board of Directors.”

2.             A new sentence is hereby added to the end of Section 3 of the Original Agreement, as follows:

“Your annual bonus award shall in no event be paid later than the 15th day of the third month following the end of your taxable year or, if later, the end of the Company’s taxable year in which such bonus award is earned.”

3.             A new sentence is hereby added to the end of each of Section 4(b) and 4(c) of the Original Agreement, as follows:

“Except as otherwise expressly provided in the agreement evidencing a particular  restricted stock unit award, the shares of common stock underlying the restricted 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 below), on which the executed Release required of you pursuant to Section 7(b) is effective and enforceable in accordance with its terms following any applicable revocation period, or as soon thereafter as administratively practicable, but in no event later than the last business day of that sixty (60)-day period on which such Release is effective and enforceable.”

4.             The first sentence of Section 7(a) is hereby amended to read as follows:

“If you terminate your employment with the Company for any reason other than for “good reason”( as defined below), then all obligations of the Company as set forth in this letter will cease, other than the obligation to pay you any accrued base salary for services rendered through the  date of such termination, to pay you for any accrued but unused vacation days as of the date of such termination, and to fulfill its obligations in accordance with terms of the applicable stock plan or restrict stock unit agreement, with the payment of your accrued base salary and vacation pay to be made to you on your termination date.”

5.             The first paragraph of Section 7(b) of the Original Agreement is hereby deleted and replaced in its entirety to read as follows:

“If (A) your employment is terminated by the Company “without cause” (as defined below) prior to November 15, 2011, (B) you execute and deliver to the Company, within twenty-one (21) days (or forty-five (45) days to the extent such longer period is required under applicable law) after the effective date of your termination of employment, a Release (as defined in Section 4(b)) and (C) such Release becomes effective and enforceable after the expiration of any applicable revocation period under federal or state law, then the Company will pay you a separation payment (the “Separation Payment”) equal to the sum of (i) twenty-four (24) months of your then current monthly base salary, (ii) your Annual Bonus (as defined below), and (iii) a prorated portion of your Annual Bonus (as defined below) based upon the time elapsed between December 31 of the preceding year and your date of termination. For purposes of clauses (ii) and (iii) above, “Annual Bonus” shall mean the lesser of 100% of your then current annual base salary or the Annual Bonus paid to you for the preceding fiscal year.  Payment of the Separation Payment under this Section 7(b) and the accelerated vesting of your equity awards under Section 4 will each be contingent upon the satisfaction of the following requirements: (i) you execute and deliver to the Company on a timely basis your required Release in accordance with this Section 7(b) and (ii) such Release becomes effective and enforceable after the expiration of any applicable revocation period under federal or state law. The Separation Payment under this Section 7(b) will be payable in a series of twenty-four (24) successive equal monthly installments, beginning on the first regular payday for 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 is effective and enforceable in accordance with its terms following any applicable revocation period, or as soon thereafter as administratively practicable, but in no event later than the last day of that sixty (60)-day period on which such Release is effective and enforceable. Your right to each such monthly installment of the Separation Payment shall be deemed, for purposes of Section 409A of the Code, to be a right to a series of separate payments. Upon termination of your employment by the Company “without cause,” other than the obligations set forth in the first sentence of Section 7(a) above and the acceleration of vesting provided in Section 4 above, the Company will have no further obligation to you except pursuant to this paragraph.”