Exhibit 10.26


 


DEMAND MEDIA, INC.


 


2010 EMPLOYEE STOCK PURCHASE PLAN


 


Demand Media, Inc., a Delaware corporation, hereby adopts the Demand
Media, Inc. 2010 Employee Stock Purchase Plan, effective as of September 27,
2010 (the “Adoption Date”), subject to stockholder
approval.


 


The
purposes of the Plan are as follows:


 


(1)                                 To assist
Eligible Employees of the Company and its Designated Subsidiaries in acquiring
stock ownership in the Company pursuant to a plan which is intended to qualify
as an “employee stock purchase plan,” within the meaning of Section 423(b) of
the Code.


 


(2)                                 To help such
employees provide for their future security and to encourage them to remain in
the employment of the Company and its Subsidiary Corporations.


 


1.                                      DEFINITIONS.  Whenever any of the following terms is used
in the Plan with the first letter or letters capitalized, it shall have the
following meaning unless context clearly indicates to the contrary (such
definitions to be equally applicable to both the singular and the plural forms
of the terms defined):


 


(a)           “Account” means
the account established for a Participant under the Plan.


 


(b)           “Agent” means
the brokerage firm, bank or other financial institution, entity or person(s),
if any, engaged, retained, appointed or authorized to act as the agent of the
Company or an Employee with regard to the Plan.


 


(c)           “Authorization”
means a Participant’s payroll deduction authorization with respect to an
Offering provided by such Participant in accordance with Section 3(b) hereof.


 


(d)           “Authorized Leave of
Absence” means military leave, sick leave or other bona fide leave
of absence from service with the Company or a Company Subsidiary if the period
of the leave does not exceed three months or, if longer, so long as the
individual’s right to reemployment with the Company or a Company Subsidiary is
guaranteed either by statute or contract.


 


(e)           “Board” means
the Board of Directors of the Company, as constituted from time to time.


 


(f)            “Code” means the
Internal Revenue Code of 1986, as amended.


 


(g)           “Committee”
means the committee of the Board appointed to administer the Plan pursuant to
Section 12 hereof.


 


(h)           “Company” means
Demand Media, Inc., a Delaware corporation, or any successor corporation or
entity.


 

















 


(i)            “Compensation”
of an Employee means the regular straight-time earnings or base salary and
commissions paid to the Employee from the Company or any Designated Subsidiary
on each Payday as compensation for services to the Company or any Designated
Subsidiary before deduction for any salary deferral contributions made by the
Employee to any tax-qualified or nonqualified deferred compensation plan of the
Company or any Designated Subsidiary, but excluding all overtime payments,
bonuses and other incentive-type payments, education or tuition reimbursements,
imputed income arising under any Company or Designated Subsidiary group
insurance or benefit program, travel expenses, business and moving
reimbursements, income received in connection with any stock options,
restricted stock, restricted stock units or other compensatory equity awards
and all contributions made by the Company or any Designated Subsidiary for the
Employee’s benefit under any employee benefit plan now or hereafter
established.  Such Compensation shall be
calculated before deduction of any income or employment tax withholdings, but
shall be withheld from the Employee’s net income.


 


(j)            “Date of Exercise”
of any Option means any date during an Offering Period on which such Option is
exercised in accordance with the terms set forth in the applicable Offering.


 


(k)           “Date of Grant”
of any Option means the date on which such Option is granted, which shall be
the later to occur of the first Trading Day of the Offering in which the Option
is granted in accordance with Section 3(a) hereof or, if applicable under the
terms of an Offering, the subsequent Quarterly Entry Date on which an Eligible
Employee’s participation in such Offering commences.


 


(l)            “Date of Termination”
means the date on which an individual ceases to be an Employee (taking into
account any Authorized Leave of Absence).


 


(m)          “Designated Subsidiary”
means any Subsidiary Corporation designated by the Committee or the Board in
accordance with Section 13 hereof.


 


(n)           “Disability”
shall have the meaning provided in an applicable employment agreement between
the Participant and the Company or a Parent Corporation or Subsidiary
Corporation or, if no such agreement exists or such agreement does not contain
an applicable definition, Disability shall mean the Participant’s total and
permanent disability as defined in Code Section 22(e)(3).


 


(o)           “Eligible Employee”
means an Employee of the Company or any Designated Subsidiary who does not,
immediately after an Option is granted, own (directly or through attribution)
stock possessing five percent or more of the total combined voting power or
value of all classes of Stock or other stock of the Company, a Parent
Corporation or a Subsidiary Corporation (as determined under Section 423(b)(3)
of the Code).  For purposes of the
foregoing, the rules of Section 424(d) of the Code with regard to the
attribution of stock ownership shall apply in determining the stock ownership
of an individual, and stock which an Employee may purchase under outstanding
options shall be treated as stock owned by the Employee.  Notwithstanding the foregoing, the Committee
may determine in its discretion, and if so determined, shall set forth in the
terms of the applicable Offering, that an Employee of the 


 


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Company or any Designated Subsidiary shall not be
eligible to participate in such Offering if: (1) such Employee has been in the
employ of the Company or any Designated Subsidiary for less than two years (or
any shorter period); (2) such Employee’s customary employment with the Company
or any Designated Subsidiary is twenty hours or less per week and/or not more
than five months per calendar year (or any lesser number of hours per week or
months per calendar year); (3) such Employee is a “highly compensated employee”
of the Company or any Designated Subsidiary (within the meaning of Code Section
414(q)), or is such a “highly compensated employee” (A) with compensation above
a specified level, (B) who is an officer and/or (C) is subject to the
disclosure requirements of Section 16(a) of the Exchange Act; and/or (4) such
employee is a citizen or resident of a foreign jurisdiction and the grant of an
Option under the Plan or Offering is prohibited under the laws of such foreign
jurisdiction, or compliance with the laws of such foreign jurisdiction would
cause the Plan or Offering to violate the requirements of Code Section 423; provided,
that any exclusion in clauses (1), (2), (3) and (4) shall be applied in an
identical manner under each Offering to all employees of the Company and all
Designated Subsidiaries, in accordance with Treasury Regulation Section
1.423-2(e).


 


(p)                                 “Employee” means an individual who renders services to the
Company or a Designated Subsidiary in the status of an “employee,” within the
meaning of Code Section 3401(c) and the regulations promulgated
thereunder.  During an Authorized Leave
of Absence meeting the requirements of Treasury Regulation Section
1.421-1(h)(2), an individual shall be treated as an Employee of the Company or
Designated Subsidiary that employs such individual immediately prior to such
leave.  “Employee” shall not include any
director of the Company or a Designated Subsidiary who does not render services
to the Company or the Designated Subsidiary in the capacity of an “employee,”
within the meaning of Code Section 3401(c).


 


(q)                                 “Exchange Act” means the Securities Exchange Act of 1934, as
amended.


 


(r)                                    “Fair Market Value” shall mean, as of any given date, the
value of a share of Stock determined as follows:


 


(i)            If the Stock is (A) listed on any established securities
exchange (such as the New York Stock Exchange, the NASDAQ Global Market and the
NASDAQ Global Select Market), (B) listed on any national market system or (C)
listed, quoted or traded on any automated quotation system, its Fair Market
Value shall be the closing sales price for a share of Stock as quoted on such
exchange or system for such date or, if there is no closing sales price for a
share of Stock on the date in question, the closing sales price for a share of Stock
on the last preceding date for which such quotation exists, as reported in The Wall Street Journal or such other source as the
Committee deems reliable;


 


(ii)           If the Stock is not listed on an established securities
exchange, national market system or automated quotation system, but the Stock
is regularly quoted by a recognized securities dealer, its Fair Market Value
shall be the mean of the high bid and low asked prices for such date or, if
there are no high bid and low asked prices for a share of Stock on such date,
the high bid and low asked prices for a share of Stock on the last preceding
date for which such information exists, as reported in The Wall
Street Journal or such other source as the Committee deems reliable;
or


 


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(iii)          If the Stock is neither listed on an established securities
exchange, national market system or automated quotation system nor regularly
quoted by a recognized securities dealer, its Fair Market Value shall be
established by the Committee in good faith.


 


(s)                                   “Offering” means each distinct offering of Options made under
this Plan, within the meaning of Treasury Regulation 1.423-2(a).


 


(t)                                    “Offering Period” means the period, which shall be set by the
Committee, with respect to which Options are granted to Participants under an
Offering; provided, that the duration of any Offering Period can be no
more than twenty-seven months.


 


(u)                                 “Option” means an option to purchase shares of Stock granted
under the Plan to a Participant in accordance with Section 3(a) hereof.


 


(v)                                 “Option Price” means the purchase price per share of Stock
determined in accordance with Section 4(b) hereof.


 


(w)                               “Parent Corporation” means any entity that is a parent
corporation of the Company within the meaning of Code Section 424 and the
regulations promulgated thereunder.


 


(x)                                 “Participant” means an Eligible Employee who has elected to
participate in an Offering under the Plan, in accordance with the provisions of
Section 3(b) hereof.


 


(y)                                 “Payday” means the regular and recurring established day for
payment of Compensation to an Employee of the Company or any Designated
Subsidiary.


 


(z)                                  “Plan” means this Demand Media, Inc. 2010 Employee Stock
Purchase Plan, as amended and/or restated from time to time.


 


(aa)                          “Quarterly Entry Date” shall have the meaning set forth in
the terms of an applicable Offering or, absent any such designation, shall mean
the first Trading Day in each of January, April, July and October.


 


(bb)                          “Stock” means the shares of the Company’s common stock,
$0.0001 par value per share.


 


(cc)                            “Subsidiary Corporation” means any entity that is a
subsidiary corporation of the Company within the meaning of Code Section 424
and the regulations promulgated thereunder. 
In addition, with respect to any sub-plans adopted under Section 12(c)
hereof which are designed to be outside the scope of Code Section 423,
Subsidiary Corporation shall include any corporate or noncorporate entity in
which the Company has a direct or indirect equity interest or significant business
relationship.


 


(dd)                          “Trading Day” means a day on which the principal securities
exchange on which the Stock is listed is open for trading or, if the Stock is
not listed on a securities exchange, shall mean a business day, as determined
by the Committee in good faith.


 


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2.                                      STOCK
SUBJECT TO THE PLAN.  Subject to
the provisions of Section 9 hereof (relating to adjustments upon changes in the
Stock) and Section 11 hereof (relating to amendments of the Plan), the Stock
that may be sold pursuant to Options granted under the Plan shall not exceed in
the aggregate ten million (10,000,000) shares of Stock.  The shares of Stock sold pursuant to Options
granted under the Plan may be unissued shares or treasury shares of Stock, or
shares reacquired in private transactions or open market purchases.  If and to the extent that any right to
purchase reserved shares is not exercised by any Participant for any reason, or
if such right to purchase shall terminate as provided herein, shares that have
not been so purchased hereunder shall again become available for the purposes
of this Plan, unless this Plan shall have been terminated, but all shares sold
under this Plan, regardless of source, shall be counted against the share
limitation set forth above.


 


3.                                      GRANT
OF OPTIONS.


 


(a)           Offerings.  The Company may make one or more Offerings
under the Plan, which may be successive and/or overlapping with one another,
until the earlier of: (1) the date on which the number of shares of Stock
available under the Plan have been sold, or (2) the date on which the Plan is
suspended or terminates.  The Committee
shall designate the terms and conditions of each Offering in writing, including
without limitation, the Offering Period, the applicable Date(s) of Exercise,
the applicable Option Price, the groups of Eligible Employees who may elect to
participate in accordance with Section 3(b) hereof (which groups of Eligible
Employees may vary from Offering to Offering, subject in all cases to the
eligibility requirements of Code Section 423 and the regulations promulgated
thereunder), the time or times at which elections to participate in the
Offering shall be made by Eligible Employees, the maximum percentage of an
Eligible Employee’s Compensation that may be withheld and any maximum number of
shares of Stock that may be sold under a particular Offering, if
applicable.  Each Participant shall be
granted an Option with respect to an Offering on the applicable Date of
Grant.  Each Option shall expire on the
last Date of Exercise for such Offering Period immediately after the automatic
exercise of the Option in accordance with Section 4(a) hereof, unless such
Option terminates earlier in accordance with Section 5, 6 or 9 hereof.  The number of shares of Stock subject to a
Participant’s Option shall equal (i) the cumulative payroll deductions
authorized by such Participant in accordance with subsection (b) for the
Offering Period (if any) and deducted by the Company in accordance with such
Authorization (as defined below) since the applicable Date of Grant or, if
later, the most recent prior Date of Exercise occurring during such Offering
Period, divided by (ii) the Option Price for the Option; provided, that
the number of shares of Stock subject to such Option shall not exceed the
number determined in accordance with Section 3(c) hereof.  In connection with each Offering under the
Plan, the Committee may specify a maximum number of shares of Stock that may be
purchased by any Employee pursuant to such Offering.


 


(b)           Election to Participate;
Payroll Deduction Authorization. 
An Eligible Employee shall become a Participant in the Plan only by
means of payroll deduction.  Each such
Participant who elects to participate in the Plan with respect to an Offering
shall deliver to the Company a completed and executed written payroll deduction
authorization in a form approved by the Company (the “Authorization”)
within the time determined by the Company and set forth in the terms of such
Offering.  Each Participant’s
Authorization shall give notice of such Participant’s election to participate
in the Plan for such Offering (and subsequent Offerings in 


 


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which such Participant is eligible to participate)
and shall designate a whole percentage of such Participant’s Compensation to be
withheld by the Company or the Designated Subsidiary employing such Participant
on each Payday during the Offering Period. 
A Participant may designate any whole percentage of Compensation that is
not less than one percent and not more than a maximum percentage determined by
the Committee in the Offering (which maximum percentage shall be fifty percent
in the absence of such determination).  A
Participant’s Compensation payable during an Offering Period shall be reduced
each Payday through payroll deduction in an amount equal to the percentage
specified in the Authorization, and such amount shall be credited to such
Participant’s Account under the Plan.  A
Participant may increase or decrease the percentage of Compensation designated
in the Authorization, subject to the limits of this subsection (b), and/or may
suspend the Authorization, in each case, as permitted by the Committee in its
sole discretion with respect to such Offering and set forth in the terms of
such Offering.  Any Authorization shall
remain in effect for each subsequent Offering in which the Participant is
eligible to participate, unless the Participant submits a new Authorization pursuant
to this subsection (b), withdraws from the Plan pursuant to Section 5 hereof or
terminates employment as provided in Section 6 hereof; provided, however,
that any Eligible Employee who elects to participate in one or more Offerings
that run, in whole or in part, concurrently with an Offering in which such
Eligible Employee is also participating, shall be required to submit a separate
Authorization with respect to any such concurrent Offering.  Notwithstanding the foregoing, to the extent
necessary to comply with Code Section 423(b)(8) and Sections 3(a), (c) and (d)
hereof, the Company may reduce a Participant’s rate of payroll deductions to
zero at any time during any Offering Period. 
Payroll deductions will recommence at the rate provided by the
Participant in his or her Authorization to the extent such payroll deductions
may be applied to purchase shares of Stock in accordance with Code Section
423(b)(8) and Sections 3(a), (c) and (d) hereof, unless terminated by the
Participant as provided in Section 5 hereof.


 


(c)           $25,000 Limitation.  No Participant shall be granted an Option
under the Plan which permits the Participant rights to purchase shares of Stock
under the Plan, together with other options to purchase shares of Stock or
other stock under all other employee stock purchase plans of the Company, any
Parent Corporation or any Subsidiary Corporation subject to Code Section 423
(any such Option or other option, a “Section 423 Option”),
to accrue at a rate which exceeds $25,000 of fair market value of such shares
of Stock or other stock (determined at the time the Section 423 Option is
granted) for each calendar year in which any Section 423 Option granted to the
Participant is outstanding at any time. 
For purposes of the limitation imposed by this subsection, (1) the right
to purchase shares of Stock or other stock under a Section 423 Option accrues
when the Section 423 Option (or any portion thereof) first becomes exercisable
during the calendar year, (2) the right to purchase shares of Stock or other
stock under a Section 423 Option accrues at the rate provided in the Section
423 Option, but in no case may such rate exceed $25,000 of fair market value of
such shares of Stock or other stock (determined at the time such Section 423
Option is granted) for any one calendar year, and (3) a right to purchase Stock
or other stock which has accrued under an Option may not be carried over to any
other Section 423 Option, provided, that Participants may carry forward
amounts so accrued that represent a fractional share of Stock and were withheld
but not applied toward the purchase of Stock under an earlier Offering, and may
apply such amounts toward the purchase of additional shares of Stock under a
subsequent Offering.  The limitation
under this subsection (c) shall be applied in accordance with Code Section
423(b)(8) and the regulations promulgated thereunder.


 


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(d)           5 Percent Holders.  No Employee will be granted an Option under
this Plan if or to the extent that, immediately after the grant, such Employee
would own shares of Stock (including stock (i) that would be attributed to such
Employee pursuant to Code Section 424(d), and/or (ii) that the Employee may
purchase under outstanding options, regardless of whether or not the options
either (A) qualify for the special tax treatment afforded by Code Section
421(a), (B) may only be exercised in installments or (C) may only be exercised
after the expiration of a fixed period of time) possessing five percent or more
of the total combined voting power or value of all classes of stock of the
Company or of any Subsidiary Corporation or Parent Corporation actually issued
and outstanding immediately after the grant of such Option (excluding the
voting power or value of treasury share or shares authorized for issue under
outstanding options held by the Employee or any other person).


 


4.                                      EXERCISE
OF OPTIONS; OPTION PRICE.


 


(a)           Option Exercise.  Each Participant automatically shall be
deemed to have exercised such Participant’s Option on the applicable Date(s) of
Exercise for an Offering Period to the extent that the balance then in the
Participant’s Account is sufficient to purchase, at the Option Price for such
Option, shares of the Stock subject to the Option, provided, that any
portion of an Account balance that is not used to purchase shares of Stock in
an Offering (other than any balance that is sufficient only to purchase a
fractional share of Stock) shall be paid to such Participant in one lump sum in
cash within thirty days after the termination of the Offering, without any
interest thereon.


 


(b)           Option Price Defined.  The purchase price per share of Stock (the “Option Price”) to be paid by a Participant upon the exercise
of the Participant’s Option on the applicable Date(s) of Exercise for an
Offering Period shall be determined by the Committee and set forth in the
applicable Offering, provided, that in all events, the Option Price
shall be equal to or greater than 85% of the lesser of: (1) the Fair Market
Value of a share of Stock on the Date of Exercise for such Offering Period and
(2) the Fair Market Value of a share of Stock on the applicable Date of Grant.


 


(c)           Pro Rata Allocations.  If the total number of shares of Stock for
which Options are to be exercised on any Date of Exercise exceeds the number of
shares of Stock remaining unsold under the Plan (after deduction for all shares
of Stock for which Options have theretofore been exercised), the Committee
shall make a pro rata allocation of the available remaining shares of Stock in
as nearly a uniform manner as shall be practicable, and the balance of the
amount credited to the Account of each Participant which has not been applied
to the purchase of shares of Stock shall be paid to such Participant in one
lump sum in cash within thirty days after the applicable Date of Exercise,
without any interest thereon.  All
Offerings shall terminate automatically upon any Date of Exercise requiring
such a pro rata allocation due to insufficient shares of Stock remaining available
under the Plan, and no further Offerings shall commence under the Plan unless
and until additional shares of Stock become available for issuance under the
Plan.  If one or more Offerings
terminates as a result of the preceding sentence, any remaining Account
balances shall be returned to Participants in single lump-sum payments in cash
within thirty days after such termination, without any interest thereon.


 


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(d)           Information Statement.  The Company shall provide each Participant
whose Option is exercised with an information statement in accordance with Code
Section 6039(a) and the regulations promulgated thereunder.  The Company shall maintain a procedure for
identifying certificates of shares of Stock sold upon the exercise of Options
in accordance with Code Section 6039(b).


 


5.                                      WITHDRAWAL
FROM THE PLAN.


 


(a)           Withdrawal Election.  A Participant may withdraw from participation
in an Offering at any time, except as otherwise determined by the Committee and
set forth in the terms of the applicable Offering.  A Participant electing to withdraw from the
Plan must deliver to the Company a notice of withdrawal in a form approved by
the Committee (the “Withdrawal Election”),
not later than fifteen calendar days before the next applicable Date of Exercise
with respect to such Date of Exercise, except as otherwise determined by the
Committee and set forth in the terms of the applicable Offering.  A Participant electing to withdraw from the
Plan may elect in his or her Withdrawal Election to either (i) withdraw all of
the funds then credited to the Participant’s Account as of the date on which
the Withdrawal Election is received by the Company, in which case amounts
credited to such Account shall be returned to the Participant in one lump-sum
payment in cash within thirty days after such Withdrawal Election is received
by the Company, without any interest thereon, and the Participant shall cease
to participate in the Plan and the Participant’s Option for such Offering shall
terminate; or (ii) exercise the Option for the maximum number of whole shares
of Stock on the applicable Date of Exercise with any remaining Account balance
returned to the Participant in one lump-sum payment in cash within thirty days
after such Date of Exercise, without any interest thereon, and after such
exercise cease to participate in the Plan.


 


(b)           Eligibility following
Withdrawal.  A Participant who
withdraws from the Plan with respect to an Offering and who is still an
Eligible Employee may elect to participate again in the Plan for any subsequent
Offering or, if permitted under the terms of the Offering, in the same Offering
with respect to portions of the Offering occurring after the Date of Exercise
immediately following the Participant’s withdrawal, in either case, by
delivering to the Company an Authorization pursuant to Section 3(b)
hereof.  In no event shall any
Participant be permitted to reenroll in an Offering prior to the Date of
Exercise immediately following such Participant’s withdrawal therefrom.


 


6.                                      TERMINATION
OF EMPLOYMENT.


 


(a)           Termination of Employment
for any Reason Other Than Death. 
If a Participant ceases to be an Employee for any reason other than due
to the Participant’s death at any time during an Offering Period, then any
Option(s) held by the Participant on the Date of Termination shall lapse and
terminate (taking into account any Authorized Leave of Absence).  Upon a
termination described in this Section 6(a), the Participant’s participation in
the Plan shall terminate and amounts credited to the Participant’s Account
shall be returned to the Participant in one lump-sum payment in cash within
thirty days after such termination, without any interest thereon.


 


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(b)           Termination of Employment
Due to Death.  If a Participant dies while an Employee, any
Option(s) then-held by such Participant may be exercised by the Participant’s
estate or beneficiary to which the Option is transferred by will or the laws of
descent and distribution, in accordance with Section 7 hereof, and after such
exercise, the Participant’s participation in the Plan shall terminate.  Notwithstanding the foregoing, the
Participant’s estate or beneficiary may instead elect by giving written notice
to the Committee, no later than five days prior to the applicable Date of
Exercise in accordance with procedures established by the Committee, to
withdraw all funds credited to the Participant’s Account upon the Participant’s
death, in which case amounts credited to the Participant’s Account shall be returned
to the Participant’s beneficiary or estate in one lump-sum payment in cash
within thirty days after such election, without any interest thereon.


 


7.                                      RESTRICTION
UPON ASSIGNMENT.  An Option
granted under the Plan shall not be transferable, other than by will or the
applicable laws of descent and distribution, and is exercisable during the
Participant’s lifetime only by the Participant. 
Other than the transfer of an Option by will or the applicable laws of
descent and distribution, the Company shall not recognize and shall be under no
duty to recognize any assignment or alienation of any interest of the
Participant in the Plan or any Option. 
Notwithstanding the foregoing, in the event of the death of a Participant,
the Company may recognize the transfer of an Option pursuant to the operation
of a will or the applicable laws of descent or distribution.


 


8.                                      NO
RIGHTS OF STOCKHOLDERS UNTIL SHARES ISSUED.  With respect to shares of Stock subject to an
Option, except for the limited purposes expressly described in Section 3(d)
above, a Participant shall not be deemed to be a stockholder of the Company,
and the Participant shall not have any of the rights or privileges of a
stockholder, unless and until such shares have been issued to the Participant
following exercise of the Participant’s Option. 
No adjustments shall be made for dividends (ordinary or extraordinary,
whether in cash securities, or other property) or distribution or other rights
for which the record date occurs before the date of such issuance, except as
otherwise expressly provided herein or by the Committee.


 


9.                                      CHANGES
IN THE STOCK AND CORPORATE EVENTS; ADJUSTMENT OF OPTIONS.


 


(a)           Subject to Section 9(c) hereof, in the event of any stock dividend, stock split, combination or exchange of
shares, merger, consolidation or other distribution (other than normal cash
dividends) of Company assets to stockholders, or any other change affecting the shares of the Company’s
stock or the share price of the Company’s stock, the Committee shall make
equitable adjustments, if any, to reflect such change with respect to:


 


(i)            the aggregate number and kind of shares of Stock with
respect to which Options may be granted (including, but not limited to,
adjustments of the limitation in Section 2 hereof on the maximum number of
shares of Stock which may be purchased),


 


(ii)           the number and kind of shares of Stock (or other
securities or property) subject to outstanding Options, and


 


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(iii)          the Option Price with respect to any Option.


 


(b)                                 Subject to
Section 9(c) hereof, in the event of any transaction or event described in
Section 9(a) hereof or any unusual or nonrecurring transactions or events
affecting the Company, any Parent Corporation, any Subsidiary Corporation, or
the financial statements of the Company or any Parent Corporation or Subsidiary
Corporation, or of changes in applicable laws, regulations, or accounting
principles, the Committee, in its sole discretion, and on such terms and
conditions as it deems appropriate, either by the terms of the Option or by
action taken prior to the occurrence of such transaction or event and either
automatically or upon the Participant’s request, is hereby authorized to take
any one or more of the following actions whenever the Committee determines that
such action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any Option under the Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:


 


(i)            To provide that all Options outstanding shall terminate
without being exercised on such date as the Committee determines in its sole
discretion, in which case all Participant Accounts shall be refunded to the
respective Participants in a lump sum in cash within thirty days after such
determination, without any interest thereon;


 


(ii)           To provide that all Options outstanding shall be exercised
before the Date of Exercise of such Options on such date as the Committee
determines in its sole discretion and such Options shall terminate immediately
after such exercises;


 


(iii)          To provide for either the purchase of any Option
outstanding for an amount of cash equal to the amount that could have been
obtained upon the exercise of such Option had such Option been currently
exercisable and shares issued thereunder sold, or the replacement of such
Option with other rights or property selected by the Committee in its sole
discretion;


 


(iv)          To provide that such Option be assumed by the successor or
survivor corporation, or a parent or subsidiary thereof, or shall be
substituted for by similar options, covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices; and


 


(v)           To make adjustments in the number and type of shares of
Stock (or other securities or property) subject to outstanding Options, or in
the terms and conditions of outstanding Options, or Options which may be
granted in the future.


 


(c)                                  No adjustment
or action described in this Section 9 or in any other provision of the Plan
shall be authorized to the extent that such adjustment or action would cause
the Plan to fail to satisfy the requirements of Code Section 423.  Furthermore, no such adjustment or action
shall be authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 of the Exchange Act, or violate
the exemptive conditions of Rule 16b-3 unless the Committee determines that the
Option is not to comply with such exemptive conditions.


 


10














 


(d)           The existence of the Plan and the Options granted
hereunder shall not affect or restrict in any way the right or power of the
Company or the stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company’s capital
structure or its business, any merger or consolidation of the Company, any
issue of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to
or affect the Stock or the rights thereof of which are convertible into or
exchangeable for Stock, or the dissolution or liquidation of the Company, or
any sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.


 


10.          USE OF FUNDS; NO INTEREST
PAID.  All funds received or
held by the Company under the Plan shall be included in the general funds of
the Company free of any trust or other restriction and may be used for any
corporate purpose.  No interest will be
paid to any Participant or credited to any Participant’s Account with respect
to such funds.


 


11.          AMENDMENT, SUSPENSION OR
TERMINATION OF THE PLAN.


 


(a)           The Board or the Committee may amend, suspend, or terminate
the Plan at any time and from time to time, provided that approval by the
Company’s stockholders shall be required to amend the Plan: (1) to
increase (other than an increase pursuant to Section 9(a) hereof) the
number of shares of Stock that may be sold pursuant to Options under the Plan,
or (2) in any manner that would cause the Plan to no longer be an “employee
stock purchase plan” within the meaning of Code Section 423(b).  Without stockholder consent and without
regard to whether any Participant rights may be considered to have been “adversely
affected,” the Board or the Committee, as applicable, shall be entitled to
implement new or additional Offerings, change the terms of Offerings (including
without limitation, the Offering Periods), limit the frequency and/or number of
changes in the amount withheld during an Offering Period, establish the
exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated by a Participant
in order to adjust for delays or mistakes in the Company’s processing of
properly completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to ensure that
amounts applied toward the purchase of Stock for each Participant properly
correspond with amounts withheld from the Participant’s Compensation, and
establish such other limitations or procedures as the Board or the Committee,
as applicable, determines in its sole discretion advisable which are consistent
with the Plan and Code Section 423.


 


(b)           In the event the Board or the Committee, as applicable,
determines that the ongoing operation of the Plan may result in unfavorable
financial accounting consequences, the Board or the Committee, as applicable,
may, to the extent permitted under Code Section 423, in its discretion
and, to the extent necessary or desirable, modify or amend the Plan to reduce
or eliminate such accounting consequence including, but not limited to:


 


(i)            altering, but not reducing, the Option Price for any
Offering Period including an Offering Period underway at the time of the change
in the Option Price;


 


(ii)           shortening any Offering Period, including an Offering
Period underway at the time of such action; and


 


11

















 


(iii)          allocating shares.


 


Such
modifications or amendments shall not require stockholder approval or the
consent of any Participants.


 


12.          ADMINISTRATION BY
COMMITTEE; RULES AND REGULATIONS.


 


(a)           Appointment of Committee.  The Plan shall be administered by the
Committee, which shall be composed of members of the Board.  Each member of the Committee shall serve for
a term commencing on a date specified by the Board and continuing until the
member dies, resigns or is removed from office by the Board.  The Committee at its option may utilize the
services of an Agent and/or employees of the Company to assist in the
administration of the Plan, including establishing and maintaining an
individual securities account under the Plan for each Participant.


 


(b)           Duties and Powers of
Committee.  It shall be the
duty of the Committee to conduct the general administration of the Plan in
accordance with the provisions of the Plan. 
The Committee shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:


 


(i)            To establish Offerings and applicable Offering Periods;


 


(ii)           To determine when and how Options shall be granted and the
provisions and terms of each Offering (which need not be identical);


 


(iii)          To select Designated Subsidiaries in accordance with Section 13
hereof; and


 


(iv)          To construe and interpret the Plan, the terms of any
Offering and the terms of the Options and to adopt such rules for the
administration, interpretation, and application of the Plan as are consistent
therewith and to interpret, amend or revoke any such rules.  The Committee, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan , any Offering or
any Option, in a manner and to the extent it shall deem necessary or expedient
to make the Plan fully effect, subject to Code Section 423 and the
regulations promulgated thereunder.


 


The
Committee may adopt rules or procedures relating to the operation and
administration of the Plan to accommodate the specific requirements of local
laws and procedures.  Without limiting
the generality of the foregoing, the Committee is specifically authorized to
adopt rules and procedures regarding handling of participation elections,
payroll deductions, payment of interest, conversion of local currency, payroll
tax, withholding procedures and handling of stock certificates which vary with
local requirements.  In its absolute
discretion, the Board may at any time and from time to time exercise any and
all rights and duties of the Committee under the Plan.


 


(c)           Sub-Plans.  The Committee may adopt sub-plans applicable
to particular Designated Subsidiaries or locations, which sub-plans may be
designed to be outside the scope of Code Section 423.  The rules of such sub-plans may take
precedence over other provisions of 


 


12

















 


this Plan, with the exception of Section 2
hereof, but unless otherwise superseded by the terms of such sub-plan, the
provisions of this Plan shall govern the operation of such sub-plan.


 


(d)           Expenses; Professional
Assistance; Good Faith Actions. 
All expenses and liabilities incurred by members of the Committee in
connection with the administration of the Plan shall be borne by the
Company.  The Committee may employ
attorneys, consultants, accountants, appraisers, brokers or other persons.  The Committee, the Company and its officers
and directors shall be entitled to rely upon the advice, opinions or valuations
of any such persons.  All actions taken
and all interpretations and determinations made by the Committee in good faith
shall be final and binding upon all Participants, the Company and all other
interested persons.  No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options, and
all members of the Committee shall be fully protected by the Company in respect
to any such action, determination, or interpretation.


 


(e)           Indemnification.  To the extent allowable pursuant to
applicable law, each member of the Board and any officer or other employee to
whom authority to administer any component of the Plan is delegated shall be
indemnified and held harmless by the Company from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by such member in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action or failure to act pursuant to the Plan and against and from any
and all amounts paid by him or her in satisfaction of judgment in such action,
suit or proceeding against him or her; provided, that he or she gives
the Company an opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or her own
behalf.  The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled pursuant to the Company’s Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.


 


13.          DESIGNATION OF SUBSIDIARY
CORPORATIONS.  The Board or
the Committee shall designate from among the Subsidiary Corporations, as
determined from time to time, the Subsidiary Corporation or Subsidiary
Corporations that shall constitute Designated Subsidiaries, as reflected on
Attachment 1, hereof.  The Board or the
Committee may designate a Subsidiary Corporation, or terminate the designation
of a Subsidiary Corporation, without the approval of the stockholders of the
Company.


 


14.          NO RIGHTS AS AN EMPLOYEE.  Nothing in the Plan shall be construed to
give any person (including any Participant) the right to remain in the employ
of the Company, a Parent Corporation or a Subsidiary Corporation or to affect
the right of the Company, any Parent Corporation or any Subsidiary Corporation
to terminate the employment of any person (including any Participant) at any
time, with or without cause, which right is expressly reserved.


 


15.          TERM; APPROVAL BY
STOCKHOLDERS.  Subject to
approval by the stockholders of the Company in accordance with this Section,
the Plan shall be in effect until the tenth anniversary of the Adoption Date,
unless sooner terminated in accordance with Section 11 hereof.  No Option may be granted during any period of
suspension of the Plan or after 


 


13

















 


termination of the Plan.  The Plan shall be submitted for the approval
of the Company’s stockholders within twelve months after the date of the
adoption of the Plan by the Board. 
Options may be granted before such stockholder approval; provided,
that such Options shall not be exercisable before the time when the Plan is
approved by the Company’s stockholders; and, provided, further,
that if such approval has not been obtained by the end of said 12-month period,
all Options previously granted under the Plan shall thereupon terminate without
being exercised.


 


16.          EFFECT UPON OTHER PLANS.  The adoption of the Plan shall not affect any
other compensation or incentive plans in effect for the Company, any Parent
Corporation or any Subsidiary Corporation. 
Nothing in this Plan shall be construed to limit the right of the
Company, any Parent Corporation or any Subsidiary Corporation to: (a) establish
any other forms of incentives or compensation for employees of the Company, any
Parent Corporation or any Subsidiary Corporation or (b) grant or assume
options otherwise than under the Plan in connection with any proper corporate
purpose, including, but not by way of limitation, the grant or assumption of
options in connection with the acquisition, by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.


 


17.          CONDITIONS TO ISSUANCE OF
STOCK CERTIFICATES.


 


(a)           Notwithstanding anything herein to the contrary, the
Company shall not be required to issue or deliver any certificates or make any
book entries evidencing shares of Stock pursuant to the exercise of an Option
by a Participant, unless and until the Board or the Committee has determined,
with advice of counsel, that the issuance of such shares of Stock is in compliance
with all applicable laws, regulations of governmental authorities and, if
applicable, the requirements of any securities exchange or automated quotation
system on which the shares of Stock are listed or traded, and the shares of
Stock are covered by an effective registration statement or applicable
exemption from registration.  In addition
to the terms and conditions provided herein, the Board or the Committee may
require that a Participant make such reasonable covenants, agreements, and
representations as the Board or the Committee, in its discretion, deems
advisable in order to comply with any such laws, regulations, or requirements.


 


(b)           All certificates for shares
of Stock delivered pursuant to the Plan and all shares of Stock issued pursuant
to book entry procedures are subject to any stop-transfer orders and other
restrictions as the Committee deems necessary or advisable to comply with
federal, state, or foreign securities or other laws, rules and regulations
and the rules of any securities exchange or automated quotation system on
which the shares of Stock are listed, quoted, or traded.  The Committee may place legends on any
certificate or book entry evidencing shares of Stock to reference restrictions applicable
to the shares of Stock.


 


(c)           The Committee shall have the right to require any
Participant to comply with any timing or other restrictions with respect to the
settlement, distribution or exercise of any Option, including a window-period
limitation, as may be imposed in the sole discretion of the Committee.


 


(d)           Notwithstanding any other provision of the Plan, unless
otherwise determined by the Committee or required by any applicable law, rule or
regulation, the Company 


 


14

















 


may, in lieu of delivering to any Participant
certificates evidencing shares of Stock issued in connection with any Option,
record the issuance of shares of Stock in the books of the Company (or, as
applicable, its transfer agent or stock plan administrator).


 


18.          NOTIFICATION OF
DISPOSITION.  Each Participant
shall give prompt notice to the Company of any disposition or other transfer of
any shares of Stock purchased upon exercise of an Option if such disposition or
transfer is made: (a) within two years from the Date of Grant of the Option, or
(b) within one year after the transfer of such shares of Stock to such
Participant upon exercise of such Option. 
Such notice shall specify the date of such disposition or other transfer
and the amount realized, in cash, other property, assumption of indebtedness or
other consideration, by the Participant in such disposition or other transfer.


 


19.          NOTICES.  Any notice to be given under the terms of the
Plan to the Company shall be addressed to the Company in care of its Stock Plan
Administrator and any notice to be given to any Participant shall be addressed
to such Participant at such Participant’s last address as reflected in the
Company’s records.  Alternatively, notice
may be given by such as other means as may be specified by the recipient
(including without limitation, by email or facsimile).  By a notice given pursuant to this Section 19,
either party may designate a different address for notices to be given to it,
him or her.  Any notice which is required
to be given to a Participant shall, if the Participant is then deceased, be
given to the Participant’s personal representative if such representative has
previously informed the Company of his status and address by written notice
under this Section 19.  Any notice
shall have been deemed duly given on the date given if provided through an
electronic means such as email or facsimile or on the date following its
deposit with any reputable overnight carrier for next day delivery.


 


20.          ADDITIONAL RESTRICTIONS OF
RULE 16B-3.  The terms and
conditions of options granted hereunder to, and the purchase of shares by,
persons subject to Section 16 of the Exchange Act will comply with the
applicable provisions of Rule 16b-3. 
This Plan will be deemed to contain, and such Options will contain, and
the shares issued upon exercise thereof will be subject to, such additional
conditions and restrictions as may be required by Rule 16b-3 to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect
to Plan transactions.


 


21.          EQUAL RIGHTS AND
PRIVILEGES.  Except with
respect to sub-plans designed to be outside the scope of Code Section 423,
all Eligible Employees of the Company (or of any Designated Subsidiary) will
have equal rights and privileges under this Plan to the extent required under
Code Section 423 or the regulations promulgated thereunder so that this
Plan qualifies as an “employee stock purchase plan” within the meaning of Code Section 423
or the regulations promulgated thereunder. 
Any provision of this Plan that is inconsistent with Code Section 423
or the regulations promulgated thereunder will, without further act or
amendment by the Company or the Board, be reformed to comply with the equal
rights and privileges requirement of Code Section 423 or the regulations
promulgated thereunder.


 


22.          ELECTRONIC FORMS.  To the extent permitted by applicable state
law and in the discretion of the Committee, an Eligible Employee may submit any
form or notice as set forth herein by means of an electronic form approved by the
Committee (“Electronic Form”).  Before the commencement of an Offering
Period, the Committee shall prescribe the time limits 


 


15

















 


within which any such Electronic Form shall be
submitted to the Committee with respect to such Offering Period in order to be
a valid election.


 


23.          HEADINGS.  Headings are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of the
Plan.


 


* * * * * *


 


I
hereby certify that the Demand Media, Inc. 2010 Employee Stock Purchase
Plan was adopted by the Board of Directors of Demand Media, Inc. on September 27,
2010.


 


I
hereby certify that the Demand Media, Inc. 2010 Employee Stock Purchase
Plan was duly approved by the stockholders of Demand Media, Inc. on October    , 2010.


 


Executed
on this 28th day of October, 2010.


 


 


	
   

  	
  /s/
  Matthew P. Polesetsky

  
	
   

  	
   

  
	
   

  	
  Matthew
  P. Polesetsky, Secretary

  



 


16

















 


ATTACHMENT 1


 


Designated Subsidiaries


 


Pluck
UK Limited