Document:

Exhibit 10.19

 

DEMAND
MEDIA, INC.

 

AMENDED
AND RESTATED 2006 EQUITY INCENTIVE PLAN

 

STOCK
OPTION AGREEMENT

 

Demand Media, Inc. (the
“Company”),  pursuant to the Amended and
Restated Demand Media, Inc. 2006 Equity Incentive Plan (as such plan may
be amended and/or restated, the “Plan”),  hereby
grants to Optionee listed below (“Optionee”),  an option to purchase the number of shares of the
Company’s Common Stock (“Shares”)  set
forth below, subject to the terms and conditions of the Plan and this Stock
Option Agreement. Unless otherwise defined herein, the terms defined in the
Plan shall have the same defined meanings in this Stock Option Agreement.

 

I.                            NOTICE OF
STOCK OPTION GRANT

 

	
  Optionee:

  	
   

  	
  Richard Rosenblatt

  
	
   

  	
   

  	
   

  
	
  Date of
  Stock Option Agreement:

  	
   

  	
  June       ,
  2009

  
	
   

  	
   

  	
   

  
	
  Date of
  Grant:

  	
   

  	
  June 9, 2009

  
	
   

  	
   

  	
   

  
	
  Vesting
  Commencement Date:

  	
   

  	
  April 1, 2009

  
	
   

  	
   

  	
   

  
	
  Exercise
  Price per Share:

  	
   

  	
  $4.75

  
	
   

  	
   

  	
   

  
	
  Total
  Number of Shares Granted:

  	
   

  	
  4,200,000 Shares

  
	
   

  	
   

  	
   

  
	
  Total
  Exercise Price:

  	
   

  	
  $19,950,000

  
	
   

  	
   

  	
   

  
	
  Term/Expiration
  Date:

  	
   

  	
  June 8, 2019

  

 

Type of
Option:        o Incentive
Stock Option    x Non-Qualified Stock Option

 

Vesting
Schedule: This Option shall vest and become exercisable as to
one-forty-eighth (1/48th) of the Shares subject hereto on each monthly
anniversary of the Vesting Commencement Date, subject to Optionee’s continued
status as a Service Provider through each such vesting date, such that all
Shares subject to this Option shall be vested and exercisable (subject to
Optionee’s continued status as a Service Provider) as of the fourth anniversary
of the Vesting Commencement Date, provided,
however, that if a Change of Control shall occur prior to
termination of Optionee’s status as a Service Provider and either (x) Optionee
remains a Service Provider through the three hundred and eightieth (380th) day following the Change
of Control or (y) Optionee’s employment is terminated by the Company
without Cause or by Optionee for Good Reason (as defined below) prior to the
three hundred and eightieth (380 ) day following the Change of Control, then
the Option shall vest in full and become exercisable with respect to all Shares
subject hereto (to the extent not already vested and exercisable) on the first
to occur of the three hundred and eightieth (380th) day following the Change of Control or termination
of Optionee’s employment by the Company without Cause or by Optionee for Good
Reason following consummation of a Change of Control and, provided, further, that if Optionee’s
employment with the Company is terminated by the Company without Cause or by
Optionee for Good Reason upon consummation of or within 90 days prior to the
occurrence of a Change of Control and such termination was at the request of a
third party that has taken steps reasonably

 

 

calculated to effect a
Change of Control or such termination otherwise arose in connection with a
Change of Control, as determined in the reasonable discretion of the
Administrator, then the Option shall vest in full and become exercisable with
respect to all Shares subject hereto upon the consummation of such Change of
Control.

 

Good
Reason. For purposes of this Agreement, “Good
Reason”  shall
mean any one of the following without Optionee’s consent, provided that
Optionee notifies the Company in writing of such occurrence within thirty (30) days
after the first date on which Optionee becomes aware (or should, with
reasonable diligence, have become aware) of such occurrence (but in no event
later than two years after the initial existence of such occurrence):

 

(i)            a demotion or material diminution of Optionee’s position,
authority, duties or responsibilities (other than any insubstantial action not
taken in bad faith and which is promptly remedied by the Company upon notice by
Optionee), but does not include a change in title, authority, duties and/or
responsibilities following a Change of Control if (A) Optionee’s new title
is that of an executive officer of the entity surviving such Change of Control
(or, if applicable, its parent company if such entity has a parent company)
reporting directly to the Chief Executive Officer of the entity surviving such
Change of Control (or, if applicable, its parent company, if such entity has a
parent company) and Optionee’s authority, duties and responsibilities are
commensurate with such title, or (B) (1) the entity surviving such
Change of Control (or, if applicable, its parent company if such entity has a
parent company) continues to operate the Company’s principal businesses as a
separate unit, division or subsidiary or combines the Company’s principal businesses
with one of its existing units, divisions or subsidiaries and (2) Optionee’s
new title is that of the principal executive officer of such unit, division or
subsidiary and Optionee’s authority, duties and responsibilities are
commensurate with such title;

 

(ii)           requirement that Optionee report to work more than 20
miles from the Company’s existing headquarters (not including normal business
travel required of Optionee’s position) or, to the extent such requirement
would not constitute a material change in the geographic location at which
Optionee must perform Optionee’s services under the Employment Agreement
between the Company and Optionee, dated April 16, 2006 (as amended, the “Employment
Agreement”)  within
the meaning of Code Section 409A, such higher number of miles from the
Company’s existing headquarters as would constitute a material change in the
geographic location at which Optionee must perform services under the
Employment Agreement within the meaning of Code Section 409A;

 

(iii)          a material reduction in Optionee’s base salary ; or

 

(iv)          a material breach by the Company of its obligations under
the Employment Agreement,

 

provided, that Optionee
shall not have Good Reason to terminate Optionee’s employment with the Company
unless (i) Optionee provides the Company with written notice of the acts
or omissions constituting the grounds for Good Reason (“Notice”)  within sixty (60) days after
Optionee first becomes aware (or should, with reasonable diligence, have become
aware) of the existence of the grounds for Good Reason, (ii) Optionee
provides the Company a reasonable opportunity to cure the conditions giving
rise to such Good Reason, which shall not be less than

 

2

 

thirty (30) days following the
date Optionee provides Notice to the Company, and (iii) Optionee
terminates Optionee’s employment no later than sixty (60) days after provision
of Notice to the Company.

 

For the avoidance of doubt, “Cause”  shall have the meaning provided in
the Employment Agreement.

 

Termination
Period: Following a termination of Optionee’s status as a
Service Provider, the Option shall remain outstanding and exercisable (to the
extent vested) for a period of thirty (30) days following such termination, provided, that (i) if Optionee’s
employment with the Company is terminated without Cause or for Good Reason, the
Option shall remain outstanding, eligible to vest in accordance with the last
proviso in the Vesting Schedule above (if applicable), and exercisable (to the
extent vested) for a period of twelve months following such termination, (ii) if
Optionee’s status as a Service Provider is terminated for Cause at any time,
the Option shall terminate and be forfeited in full as of the start of business
on the date of Optionee’s termination, without regard to the Option’s vested
status, or (iii) if Optionee’s status as a Service Provider is terminated
due to Optionee’s death or total and permanent disability (within the meaning
of Section 22(3)(3) of the Code) at any time, the Option shall remain
outstanding and exercisable (to the extent vested) for a period of six months
following such termination (and, in the case of Optionee’s death, shall be
exercisable by Optionee’s estate or by a person who acquires the right to
exercise the Option by bequest or inheritance). Notwithstanding the foregoing, (x) except
as expressly provided in the Vesting Schedule above with respect to a Change of
Control following a termination of Optionee’s employment without Cause or for
Good Reason, in no event shall any portion of the Option vest following
termination of Optionee’s status as a Service Provider, and (y) in no
event shall any portion of the Option be exercisable after the Term/Expiration
Date stated above.

 

II.                        AGREEMENT

 

1.             Grant of Option. The Company hereby grants to
Optionee an Option to purchase the number of Shares set forth in the Notice of
Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise
Price”).  Notwithstanding
anything to the contrary anywhere else in this Stock Option Agreement, the
Option is subject to the terms, definitions and provisions of the Plan adopted
by the Company, which is incorporated herein by reference.

 

If designated in the Notice
of Grant as an Incentive Stock Option, this Option is intended to qualify as an
Incentive Stock Option as defined in Section 422 of the Code; provided, however, that to the extent that
the aggregate Fair Market Value of stock with respect to which Incentive Stock
Options (within the meaning of Code Section 422, but without regard to
Code Section 422(d)), including the Option, are exercisable for the first
time by Optionee during any calendar year, exceeds $100,000, such options shall
be treated as not qualifying under Code Section 422, but rather shall be
treated as Non-Qualified Stock Options to the extent required by Code Section 422.
The rule set forth in the preceding sentence shall be applied by taking
options into account in the order in which they were granted. For purposes of
these rules, the Fair Market Value of stock shall be determined as of the time
the option with respect to such stock is granted.

 

3

 

2.             Exercise of Option. This Option is exercisable as
follows:

 

(a)           Right to Exercise.

 

(i)            This Option shall be exercisable cumulatively according
to the Vesting Schedule set forth in the Notice of Grant. For purposes of this
Stock Option Agreement, Shares subject to this Option shall vest based on
Optionee’s continued status as a Service Provider, except as otherwise
expressly provided in the Vesting Schedule set forth in the Notice of Grant.

 

(ii)           This Option may not be exercised for a fraction of a
Share.

 

(iii)          In the event of Optionee’s death, disability or other
termination of Optionee’s status as a Service Provider, the exercisability of
the Option is governed by Section 7 below and the Termination Provisions
set forth in the Notice of Grant.

 

(iv)          In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.

 

(b)           Method of Exercise. This Option shall be
exercisable by written Notice (substantially in the form attached as Exhibit A).
The Notice must state the number of Shares for which the Option is being
exercised, and such other representations and agreements with respect to such
Shares as may be required by the Company pursuant to the provisions of the
Plan. The Notice must be signed by Optionee and shall be delivered in person or
by certified mail to the Secretary of the Company. The Notice must be
accompanied by payment of the Exercise Price plus payment of any
applicable withholding tax. This Option shall be deemed to be exercised upon
receipt by the Company of such written Notice accompanied by the Exercise Price
and payment of any applicable withholding tax. No Shares shall be issued
pursuant to the exercise of an Option unless such issuance and such exercise
comply with all relevant provisions of law and the requirements of any stock
exchange upon which the Shares may then be listed. Assuming such compliance,
for income tax purposes the Shares shall be considered transferred to Optionee
on the date on which the Option is exercised with respect to such Shares.

 

3.             Optionee’s Representations. If the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act or any applicable state laws at the time this Option
is exercised, Optionee shall, if required by the Company, concurrently with the
exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit B
and shall make such other written representations as are deemed necessary or
appropriate by the Company and/or its counsel.

 

4.             Lock-Up Period. Optionee hereby agrees that, if
so requested by the Company or any representative of the underwriters (the “Managing
Underwriter”)  in
connection with any registration of the offering of any securities of the
Company under the Securities Act or any applicable state laws, Optionee shall
not sell or otherwise transfer any Shares or other securities of the Company
during the 180-day period (or such longer period as may be requested in writing
by the Managing Underwriter and agreed to in writing by the Company, but which
period shall not, in any event, exceed 270 days) (the “Market Standoff Period”)  following the effective date

 

4

 

of a registration statement
of the Company filed under the Securities Act; provided,
however, that such restriction shall apply only to the first
registration statement of the Company to become effective under the Securities
Act that includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Securities Act. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period and these
restrictions shall be binding on any transferee of such Shares.

 

5.             Method of Payment. Payment of the Exercise Price
shall be by any of the following, or a combination thereof, at the election of
Optionee:

 

(a)           cash;

 

(b)           check; or

 

(c)           with the consent of the Administrator,

 

(i)            a full recourse promissory note bearing interest (at no
less than such rate as is a market rate of interest and which then precludes
the imputation of interest under the Code), payable upon such terms as may be
prescribed by the Administrator and structured to comply with Applicable Laws;

 

(ii)           surrender of other Shares owned by Optionee which have a
Fair Market Value on the date of surrender equal to the Exercise Price of the
Shares as to which the Option is being exercised;

 

(iii)          surrendered Shares then issuable upon the exercise of the
Option having a Fair Market Value on the date of exercise equal to the
aggregate Exercise Price of the Option or exercised portion thereof;

 

(iv)          property of any kind which constitutes good and valuable
consideration;

 

(v)           delivery of a notice that Optionee has placed a market
sell order with a broker with respect to Shares then issuable upon exercise of
the Option and that the broker has been directed to pay a sufficient portion of
the net proceeds of the sale to the Company in satisfaction of the aggregate
Exercise Price; provided, however, that
payment of such proceeds is then made to the Company upon settlement of such
sale; or

 

(vi)          any combination of the foregoing methods of payment.

 

5

 

6.             Restrictions on Exercise. If the issuance of
Shares upon such exercise or if the method of payment for such shares would
constitute a violation of any applicable federal or state securities or other
law or regulation, then the Option may not be exercised. The Company may
require Optionee to make any representation and warranty to the Company as may
be required by any applicable law or regulation before allowing the Option to
be exercised.

 

7.             Termination of Relationship. If Optionee ceases
to be a Service Provider, the exercisability of the Option following
termination of Optionee’s status as a Service Provider shall be governed by the
Termination Period provisions set forth in the Notice of Grant. To the extent
that the Option is not vested as of the date on which Optionee’s status as a
Service Provider terminates (except as otherwise expressly provided in the
Termination Period provisions set forth in the Notice of Grant), or if Optionee
does not exercise the Option within the time specified in the Termination Period
Provisions set forth in the Notice of Grant, the Option shall terminate.

 

8.             No Section 280G Gross-Up; Cutback.

 

(a)           Notwithstanding anything herein or in the Employment
Agreement to the contrary, in no event shall any value attributable under Code Section 280G
to this Option or the vesting thereof (a) obligate the Company to make a
Gross-Up Payment (as defined in the Employment Agreement) with respect to any
value so attributable, or (b) be included in the denominator for purposes
of calculating the “base amount” (within the meaning of Treas. Reg. 1.280G-1
Q&A 34) that is allocable (in accordance with Treas. Reg. 1.280G-1 Q&A
38) to any other payments to Optionee that are subject to the Gross-Up Payment,
provided, that Optionee’s base amount shall be allocated in accordance with
Treas. Reg. 1.280G-1 for all purposes other than the calculation of any
Gross-Up Payment, including without limitation, for purposes of determining any
excise taxes actually payable in respect of payments to Optionee. For the avoidance
of doubt, to the extent that the Option or the vesting thereof cause any other
payments or benefits provided to Purchaser to become subject to Code Section 280G
(due to an increase in the total value of payments made to Purchaser in
connection with a transaction), Optionee shall become eligible to receive a
Gross-Up Payment with respect to such other payments in accordance with the
terms of the Employment Agreement, but the value of the Gross-Up Payment shall
not take into consideration any value attributable under Code Section 280G
to the Option or the vesting thereof (other than for purposes of determining
whether Code Section 280G applies, for which purposes, any value
attributable to the Option shall be taken into account after giving effect to
any reduction elected by Optionee in accordance with Section 8(b) below,
if any).

 

(b)           Any payment or benefit received or to be received by
Optionee in respect of this Option in connection with a Change of Control that
would constitute a “parachute payment” within the meaning of Section 280G
of the Code shall, if Optionee so elects in Optionee’s sole discretion, be
reduced and forfeited to the minimum extent necessary so that no portion
thereof shall be subject to the excise tax imposed by Section 4999 of the
Code if by reason of such reduction, the Net After-Tax Benefit received by
Optionee with respect to this Option will exceed the Net After-Tax Benefit
received by Optionee with respect to the Option if no such reduction was made.
For purposes of this Section 8(b), “Net After-Tax Benefit”  means (i) the value of the
Option that would constitute a “parachute payment” within the meaning of

 

6

 

Section 280G of the
Code, less (ii) the amount of all federal, state and local income taxes
payable with respect to this Option, calculated at the maximum marginal income
tax rate for each year in which the foregoing shall be paid to Optionee (based
on the rate in effect for such year as set forth in the Code as in effect at
the time of the first payment of the foregoing), less (iii) the amount of
excise taxes imposed with respect to this Option by Section 4999 of the
Code. The foregoing determination will be made by the Accounting Firm (as
defined in the Employment Agreement). The Accounting Firm shall provide
detailed supporting calculations both to the Company and to Optionee at such
time or times as the Accounting Firm is required to provide calculations under Section 3(f)((3)(ii) of
the Employment Agreement with regard to any Gross-Up Payment calculation. All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
The Company and Optionee will each provide the Accounting Firm access to and
copies of any books, records, and documents in their possession if reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determinations and
calculations contemplated by this Section 8(b).

 

9.             Non-Transferability of Option. This Option may
not be transferred in any manner except by will or by the laws of descent or
distribution. It may be exercised during the lifetime of Optionee only by
Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of Optionee.

 

10.           Term of Option. This Option may be exercised only
within the term set forth in the Notice of Grant.

 

11.           Restrictions on Shares. Optionee hereby agrees that
Shares purchased upon the exercise of the Option shall be subject to such terms
and conditions as the Administrator shall determine in its sole discretion,
including, without limitation, restrictions on the transferability of Shares,
the right of the Company to repurchase Shares, the right of the Company to
require that Shares be transferred in the event of certain transactions, a
right of first refusal in favor of the Company with respect to permitted
transfers of Shares, tag-along rights and take-along rights. Such terms and
conditions may, in the Administrator’s sole discretion, be contained in the
Exercise Notice with respect to the Option or in such other agreement as the
Administrator shall determine and which Optionee hereby agrees to enter into at
the request of the Company.

 

12.           Code Section 409A. Without limiting the
generality of any other provision of this Agreement, Section 23 of the
Plan pertaining to Code Section 409A is hereby explicitly incorporated
into this Agreement.

 

13.           No Right to Employment. Nothing in the Plan or in
this Stock Option Agreement shall confer upon Optionee any right to serve or
continue as an Employee, Director or Consultant of the Company or any Parent or
Subsidiary, or shall interfere with or restrict in any way the rights of the
Company or any Parent or Subsidiary, which are hereby expressly reserved, to
discharge Optionee at any time for any reason whatsoever, with or without
Cause, except to the extent expressly provided otherwise in a written
employment agreement between Optionee and the Company or any Parent or Subsidiary.

 

(Signature
Page Follows)

 

7

 

This Stock Option Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original and all of which shall constitute one document.

 

	
   

  	
  DEMAND
  MEDIA, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Charles Hilliard

  
	
   

  	
  Name:

  	
  Name

  	
  Charles Hilliard

  
	
   

  	
  Title:

  	
  Title

  	
  Chief Financial Officer

  

 

OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY
BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS STOCK OPTION
AGREEMENT, NOR IN THE COMPANY’S 2006 EQUITY INCENTIVE PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION AS A SERVICE PROVIDER OF THE COMPANY OR ANY PARENT OR
SUBSIDIARY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE
COMPANY’S RIGHT TO TERMINATE OPTIONEE’S SERVICE PROVIDER RELATIONSHIP AT ANY
TIME, WITH OR WITHOUT CAUSE AND WITH OR WITHOUT PRIOR NOTICE.

 

Optionee acknowledges
receipt of a copy of the Plan and represents that he is familiar with the terms
and provisions thereof. Optionee hereby accepts this Option subject to all of
the terms and provisions hereof. Optionee has reviewed the Plan and this Option
in their entirety, has had an opportunity to obtain the advice of counsel prior
to executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions arising under the
Plan or this Option. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.

 

	
  Dated:

  	
  6/15/09

  	
   

  	
  By:

  	
  /s/ Richard Rosenblatt

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Richard Rosenblatt

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address:

  

 

8

 

 

EXHIBIT A

 

DEMAND
MEDIA, INC.

 

AMENDED
AND RESTATED 2006 EQUITY INCENTIVE PLAN

 

EXERCISE
NOTICE

 

Demand Media, Inc.

Attention: Legal Department

 

1.             Exercise of Option. Effective as of today,
                          ,
                            ,
the undersigned (“Optionee”)
hereby elects to exercise Optionee’s option to purchase
                          
shares of the Common Stock (the “Shares”)
of Demand Media, Inc. (the “Company”)
under and pursuant to the Amended and Restated Demand Media, Inc. 2006
Equity Incentive Plan (as such plan may be amended and/or restated, the “Plan”) and the Stock Option Agreement dated
                                      
(the “Option Agreement”).
Capitalized terms used herein without definition shall have the meanings given
in the Option Agreement.

 

	
  Date of
  Grant:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Number of
  Shares as to which Option is Exercised:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exercise
  Price per Share:

  	
   

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  Total
  Exercise Price:

  	
   

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  Certificate
  to be issued in name of:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Cash
  Payment delivered herewith:

  	
   

  	
  o

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  Promissory
  note delivered herewith:

  	
   

  	
  o

  	
  $

  

 

Type of
Option:          o Incentive
Stock Option   o Non-Qualified Stock Option

 

2.             Representations of Optionee. Optionee
acknowledges that Optionee has received, read and understood the Plan and the
Option Agreement. Optionee agrees to abide by and be bound by their terms and
conditions.

 

3.             Rights as Stockholder. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to Shares subject to the Option,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in Section 14
of the Plan. Optionee shall enjoy rights as a stockholder until such time as
Optionee disposes of the Shares. All shares issued pursuant to any exercise of
the Option shall be subject to the terms

 

A-1

 

and conditions of the
Amended and Restated Stockholders’ Agreement among the Company and certain of
its stockholders, dated as of September 27, 2006 (as such agreement may be
further amended and restated, the “Stockholders’ Agreement”).  Upon such exercise, Optionee shall
have no further rights as a holder of the Shares so purchased except the right
to receive payment for the Shares so purchased in accordance with the
provisions of this Exercise Notice, and Optionee shall forthwith cause the
certificate(s) evidencing the Shares so purchased to be surrendered to the
Company for transfer or cancellation.

 

4.             Tax Consultation. Optionee understands that
Optionee may suffer adverse tax consequences as a result of Optionee’s purchase
or disposition of the Shares. Optionee represents that Optionee has consulted
with any tax consultants Optionee deems advisable in connection with the
purchase or disposition of the Shares and that Optionee is not relying on the
Company for any tax advice.

 

5.             Lock-Up Period. Optionee hereby agrees that if so
requested by the Company or any representative of the underwriters (the “Managing
Underwriter”)  in
connection with any registration of the offering of any securities of the
Company under the Securities Act or any applicable state laws, Optionee shall
not sell or otherwise transfer any Shares or other securities of the Company
during the 180-day period (or such longer period as may be requested in writing
by the Managing Underwriter and agreed to in writing by the Company, but which
period shall not, in any event, exceed 270 days) (the “Market Standoff Period”)  following the effective date of a
registration statement of the Company filed under the Securities Act; provided, that such restriction shall
apply only to the first registration statement of the Company to become
effective under the Securities Act that includes securities to be sold on
behalf of the Company to the public in an underwritten public offering under
the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such Market Standoff Period.

 

6.             Restrictive Legends and Stop-Transfer Orders.

 

(a)           Legends. Optionee understands and agrees that the
Company shall cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s) evidencing
ownership of the Shares together with any other legends that may be required
under the Stockholders’ Agreement and/or by state or federal securities laws:

 

THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) OR
ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT AND SUCH LAWS OR, IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

 

A-2

 

(b)           Stop-Transfer Notices. Optionee agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate “stop transfer” instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.

 

(c)           Refusal to Transfer. The Company shall not be
required (i) to transfer on its books any Shares that have been sold or
otherwise transferred in violation of any of the provisions of this Agreement
or (ii) to treat as owner of such Shares or to accord the right to vote or
pay dividends to any purchaser or other transferee to whom such Shares shall
have been so transferred.

 

7.             Successors and Assigns. The Company may assign
any of its rights under this Agreement to single or multiple assignees, and
this Agreement shall inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer herein set forth, this
Agreement shall be binding upon Optionee and his or her heirs, executors,
administrators, successors and assigns.

 

8.             Interpretation. Any dispute regarding the
interpretation of this Agreement shall be submitted by Optionee or by the
Company forthwith to the Administrator, which shall review such dispute at its
next regular meeting. The resolution of such a dispute by the Administrator
shall be final and binding on the Company and on Optionee.

 

9.             Governing Law; Severability. This Agreement shall
be governed by and construed in accordance with the laws of the State of
California excluding that body of law pertaining to conflicts of law. Should
any provision of this Agreement be determined by a court of law to be illegal
or unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.

 

10.           Notices. Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery or upon deposit in the United States mail by certified mail, with postage
and fees prepaid, addressed to the other party at its address as shown below
beneath its signature, or to such other address as such party may designate in
writing from time to time to the other party.

 

11.           Further Instruments. The parties agree to execute
such further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement.

 

12.           Delivery of Payment. Optionee herewith delivers to
the Company the full Exercise Price for the Shares, as well as any applicable
withholding tax.

 

A-3

 

13.           Entire Agreement. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof.

 

	
  Accepted by:

  	
   

  	
  Submitted by:

  
	
   

  	
   

  	
   

  
	
  DEMAND
  MEDIA, INC.

  	
   

  	
  OPTIONEE

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
  Name:

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  
					

 

A-4

 

EXHIBIT B

 

INVESTMENT
REPRESENTATION STATEMENT

 

	
  OPTIONEE

  	
  :

  	
   

  
	
   

  	
   

  	
   

  
	
  COMPANY

  	
  :

  	
  Demand Media, Inc.

  
	
   

  	
   

  	
   

  
	
  SECURITY

  	
  :

  	
  Common Stock

  
	
   

  	
   

  	
   

  
	
  AMOUNT

  	
  :

  	
   

  
	
   

  	
   

  	
   

  
	
  DATE

  	
  :

  	
   

  

 

In connection with the
purchase of the above-listed shares of Common Stock (the “Securities”)  of Demand Media, Inc. (the “Company”), the undersigned (the “Optionee”)  represents to the Company the
following:

 

(a)           Optionee is aware of the Company’s business affairs and
financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities.
Optionee is acquiring these Securities for investment for Optionee’s own
account only and not with a view to, or for resale in connection with, any “distribution”
thereof within the meaning of the Securities Act of 1933, as amended (the “Securities
Act”).

 

(b)           Optionee acknowledges and understands that the Securities
constitute “restricted securities” under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee’s investment intent as expressed herein. Optionee
understands that the Securities must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the Securities. Optionee
understands that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company and any other legend required under applicable
state securities laws.

 

(c)           Optionee is familiar with the provisions of Rule 701
and Rule 144, each promulgated under the Securities Act, which, in
substance, permit limited public resale of “restricted securities” acquired,
directly or indirectly from the issuer thereof, in a non-public offering
subject to the satisfaction of certain conditions. Rule 701 provides that
if the issuer qualifies under Rule 701 at the time of the grant of the
Option to Optionee, the exercise will be exempt from registration under the
Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, ninety

 

B-1

 

(90) days thereafter (or
such longer period as any market stand-off agreement may require) the
Securities exempt under Rule 701 may be resold, subject to the satisfaction
of certain of the conditions specified by Rule 144, including, in the case
of an affiliate, (i) the resale being made through a broker in an
unsolicited “broker’s transaction” or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934), (ii) the
availability of certain public information about the Company, (iii) the
amount of Securities being sold during any three (3) month period not
exceeding the limitations specified in Rule 144(e), and (iv) the
timely filing of a Form 144, if applicable.

 

In the event that the
Company does not qualify under Rule 701 at the time of grant of the
Option, then the Securities may be resold beginning ninety (90) days after the
Company becomes subject to the reporting requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934 in certain limited circumstances subject to
the provisions of Rule 144, which requires the resale to occur not less
than six months after the later of the date the Securities were sold by the
Company or the date the Securities were sold by an affiliate of the Company,
within the meaning of Rule 144 and the availability of certain public
information about the Company (subject to certain exceptions); and, in the case
of a sale of the Securities by an affiliate, the satisfaction of the conditions
set forth in sections (i), (ii), (iii) and (iv) of the paragraph
immediately above.

 

(d)           Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the fact
that Rules 144 and 701 are not exclusive, the Staff of the Securities and
Exchange Commission has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rules 144 or 701 will have a substantial burden of proof
in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk. Optionee understands
that no assurances can be given that any such other registration exemption will
be available in such event.

 

(e)           Optionee understands and acknowledges that the Company
will rely upon the accuracy and truth of the foregoing representations and
Optionee hereby consents to such reliance.

 

	
   

  	
   

  	
   

  	
  Signature of Optionee:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
						

 

B-2Exhibit
10.20

 

DEMAND MEDIA, INC.

 

AMENDED AND RESTATED 2006 EQUITY INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

 

Demand Media, Inc. (the “Company”),  pursuant to the Amended and
Restated Demand Media, Inc. 2006 Equity Incentive Plan (as such plan may be
amended and/or restated, the “Plan”),  hereby
grants to Optionee listed below (“Optionee”),  an option to purchase the number of shares of the
Company’s Common Stock (“Shares”)  set
forth below, subject to the terms and conditions of the Plan and this Stock
Option Agreement. Unless otherwise defined herein, the terms defined in the
Plan shall have the same defined meanings in this Stock Option Agreement.

 

I.              NOTICE OF STOCK OPTION GRANT

 

	
  Optionee:

  	
  Charles Hilliard

  
	
   

  	
   

  
	
  Date of
  Stock Option Agreement:

  	
  June
        , 2009

  
	
   

  	
   

  
	
  Date of
  Grant:

  	
  June 9, 2009

  
	
   

  	
   

  
	
  Vesting
  Commencement Date:

  	
  April 1, 2009

  
	
   

  	
   

  
	
  Exercise
  Price per Share:

  	
  $4.75

  
	
   

  	
   

  
	
  Total
  Number of Shares Granted:

  	
  800,000 Shares

  
	
   

  	
   

  
	
  Total
  Exercise Price:

  	
  $3,800,000

  
	
   

  	
   

  
	
  Term/Expiration
  Date:

  	
  June 8, 2019

  

 

	
  Type of
  Option:      o Incentive
  Stock Option

  	
  x
  Non-Qualified Stock Option

  

 

Vesting
Schedule:               This Option
shall vest and become exercisable as to an one-forty-eighth (1/48th) of the Shares subject hereto on each monthly anniversary of the
Vesting Commencement Date, subject to Optionee’s continued status as a Service
Provider through each such vesting date, such that all Shares subject to this
Option shall be vested and exercisable (subject to Optionee’s continued status
as a Service Provider) as of the fourth anniversary of the Vesting Commencement
Date, provided, however, that if
a Change of Control shall occur prior to termination of Optionee’s status as a
Service Provider and either (x) Optionee remains a Service Provider through the
three hundred and eightieth (380th) day following the Change of Control or (y)
Optionee’s employment is terminated by the Company without Cause or by Optionee
for Good Reason (as defined below) prior to the three hundred and eightieth
(380th) day following the Change of Control, then the Option shall vest in full
and become exercisable with respect to all Shares subject hereto (to the extent
not already vested and exercisable) on the first to occur of the three hundred
and eightieth (380th) day following the Change of Control or termination of
Optionee’s employment by the Company without Cause or by Optionee for Good
Reason following consummation of a Change of Control and, provided, further, that if Optionee’s
employment with the Company is terminated by the Company without Cause or by
Optionee for Good Reason upon consummation of or within 90 days prior to the
occurrence of a Change of Control and such termination was at the request of a
third party that has taken steps reasonably

 

 

calculated to effect a
Change of Control or such termination otherwise arose in connection with a
Change of Control, as determined in the reasonable discretion of the
Administrator, then the Option shall vest in full and become exercisable with
respect to all Shares subject hereto upon the consummation of such Change of
Control.

 

Good
Reason. For purposes of this Agreement, “Good
Reason”  shall
mean any one of the following without Optionee’s consent, provided that
Optionee notifies the Company in writing of such occurrence within thirty (30)
days after the first date on which Optionee becomes aware (or should, with
reasonable diligence, have become aware) of such occurrence (but in no event
later than two years after the initial existence of such occurrence):

 

(i)            a demotion or material diminution of Optionee’s position,
authority, duties or responsibilities (other than any insubstantial action not
taken in bad faith and which is promptly remedied by the Company upon notice by
Optionee), but does not include a change in title, authority, duties and/or
responsibilities following a Change of Control if (A) Optionee’s new title is
that of an executive officer of the entity surviving such Change of Control
(or, if applicable, its parent company if such entity has a parent company)
reporting directly to the Chief Executive Officer of the entity surviving such
Change of Control (or, if applicable, its parent company, if such entity has a
parent company) and Optionee’s authority, duties and responsibilities are
commensurate with such title or (B) (1) the entity surviving such Change of
Control (or, if applicable, its parent company if such entity has a parent
company) continues to operate the Company’s principal businesses as a separate
unit, division or subsidiary or combines the Company’s principal businesses
with one of its existing units, divisions or subsidiaries and (2) Optionee’s
new title is that of the principal executive officer of such unit, division or
subsidiary or that of an executive officer of such unit, division or subsidiary
reporting directly to the principal executive officer of such unit, division or
subsidiary and (in either case) Optionee’s authority, duties and
responsibilities are commensurate with such title;

 

(ii)           requirement that Optionee report to work more than 20
miles from the Company’s existing headquarters (not including normal business
travel required of Optionee’s position) or, to the extent such requirement
would not constitute a material change in the geographic location at which
Optionee must perform Optionee’s services under the Employment Agreement
between the Company and Optionee, dated May 9, 2007 (as amended, the “Employment
Agreement”)  within
the meaning of Code Section 409A, such higher number of miles from the Company’s
existing headquarters as would constitute a material change in the geographic
location at which Optionee must perform services under the Employment Agreement
within the meaning of Code Section 409A;

 

(iii)          a material reduction in Optionee’s base salary; or

 

(iv)          a material breach by the Company of its obligations under
the Employment Agreement,

 

provided, that Optionee
shall not have Good Reason to terminate Optionee’s employment with the Company
unless (i) Optionee provides the Company with written notice of the acts or
omissions constituting the grounds for Good Reason (“Notice”)  within sixty (60) days after
Optionee first becomes aware (or should, with reasonable diligence, have become
aware) of the

 

2

 

existence of the grounds for
Good Reason, (ii) Optionee provides the Company a reasonable opportunity to
cure the conditions giving rise to such Good Reason, which shall not be less
than thirty (30) days following the date Optionee provides Notice to the
Company, and (iii) Optionee terminates Optionee’s employment no later than
sixty (60) days after provision of Notice to the Company.

 

For the avoidance of doubt, “Cause”  shall have the meaning provided in
the Employment Agreement.

 

Termination
Period: Following a termination of Optionee’s status as a
Service Provider, the Option shall remain outstanding and exercisable (to the
extent vested) for a period of thirty (30) days following such termination, provided that (i) if Optionee’s employment
with the Company is terminated without Cause or for Good Reason, the Option shall
remain outstanding, eligible to vest in accordance with the last proviso in the
Vesting Schedule above (if applicable), and exercisable (to the extent vested)
for a period of twelve months following such termination, (ii) if Optionee’s
status as a Service Provider is terminated for Cause at any time, the Option
shall terminate and be forfeited in full as of the start of business on the
date of Optionee’s termination, without regard to the Option’s vested status,
or (iii) if Optionee’s status as a Service Provider is terminated due to
Optionee’s death or total and permanent disability (within the meaning of
Section 22(3)(3) of the Code) at any time, the Option shall remain outstanding
and exercisable (to the extent vested) for a period of six months following
such termination (and, in the case of Optionee’s death, shall be exercisable by
Optionee’s estate or by a person who acquires the right to exercise the Option
by bequest or inheritance). Notwithstanding the foregoing, (x) except as
expressly provided in the Vesting Schedule above with respect to a Change of
Control following a termination of Optionee’s employment without Cause or for
Good Reason, in no event shall any portion of the Option vest following
termination of Optionee’s status as a Service Provider, and (y) in no event
shall any portion of the Option be exercisable after the Term/Expiration Date
stated above.

 

II.            AGREEMENT

 

1.             Grant of Option. The Company hereby grants to
Optionee an Option to purchase the number of Shares set forth in the Notice of
Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise
Price”).  Notwithstanding
anything to the contrary anywhere else in this Stock Option Agreement, the
Option is subject to the terms, definitions and provisions of the Plan adopted
by the Company, which is incorporated herein by reference.

 

If designated in the Notice
of Grant as an Incentive Stock Option, this Option is intended to qualify as an
Incentive Stock Option as defined in Section 422 of the Code; provided, however, that to the extent that
the aggregate Fair Market Value of stock with respect to which Incentive Stock
Options (within the meaning of Code Section 422, but without regard to Code
Section 422(d)), including the Option, are exercisable for the first time by
Optionee during any calendar year, exceeds $ 100,000, such options shall be
treated as not qualifying under Code Section 422, but rather shall be treated
as Non-Qualified Stock Options to the extent required by Code Section 422. The
rule set forth in the preceding sentence shall be applied by taking options
into account in the order in which they were granted. For purposes of these
rules, the Fair

 

3

 

Market Value of stock shall
be determined as of the time the option with respect to such stock is granted.

 

2.             Exercise of Option. This Option is exercisable as
follows:

 

(a)           Right to Exercise.

 

(i)            This Option shall be exercisable cumulatively according
to the Vesting Schedule set forth in the Notice of Grant. For purposes of this
Stock Option Agreement, Shares subject to this Option shall vest based on
Optionee’s continued status as a Service Provider, except as otherwise
expressly provided in the Vesting Schedule set forth in the Notice of Grant.

 

(ii)           This Option may not be exercised for a fraction of a
Share.

 

(iii)          In the event of Optionee’s death, disability or other
termination of Optionee’s status as a Service Provider, the exercisability of
the Option is governed by Section 7 below and the Termination Provisions set
forth in the Notice of Grant.

 

(iv)          In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.

 

(b)           Method of Exercise. This Option shall be
exercisable by written Notice (substantially in the form attached as Exhibit
A). The Notice must state the number of Shares for which the Option is
being exercised, and such other representations and agreements with respect to
such Shares as may be required by the Company pursuant to the provisions of the
Plan. The Notice must be signed by Optionee and shall be delivered in person or
by certified mail to the Secretary of the Company. The Notice must be
accompanied by payment of the Exercise Price plus payment of any applicable
withholding tax. This Option shall be deemed to be exercised upon receipt by
the Company of such written Notice accompanied by the Exercise Price and
payment of any applicable withholding tax. No Shares shall be issued pursuant
to the exercise of an Option unless such issuance and such exercise comply with
all relevant provisions of law and the requirements of any stock exchange upon
which the Shares may then be listed. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to Optionee on the date on
which the Option is exercised with respect to such Shares.

 

3.             Optionee’s Representations. If the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act or any applicable state laws at the time this Option
is exercised, Optionee shall, if required by the Company, concurrently with the
exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B and shall make such other written representations as are deemed necessary
or appropriate by the Company and/or its counsel.

 

4.             Lock-Up Period. Optionee hereby agrees that, if
so requested by the Company or any representative of the underwriters (the “Managing
Underwriter”)  in
connection with any registration of the offering of any securities of the
Company under the Securities Act or any applicable state laws, Optionee shall
not sell or otherwise transfer any Shares or other securities

 

4

 

of the Company during the
180-day period (or such longer period as may be requested in writing by the
Managing Underwriter and agreed to in writing by the Company, but which period
shall not, in any event, exceed 270 days) (the “Market Standoff Period”)  following the effective date of a
registration statement of the Company filed under the Securities Act; provided, however, that such restriction
shall apply only to the first registration statement of the Company to become
effective under the Securities Act that includes securities to be sold on
behalf of the Company to the public in an underwritten public offering under
the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such Market Standoff Period and these restrictions shall be binding on any
transferee of such Shares.

 

5.             Method of Payment. Payment of the Exercise Price
shall be by any of the following, or a combination thereof, at the election of
Optionee:

 

(a)           cash;

 

(b)           check; or

 

(c)           with the consent of the Administrator,

 

(i)            a full recourse promissory note bearing interest (at no
less than such rate as is a market rate of interest and which then precludes
the imputation of interest under the Code), payable upon such terms as may be
prescribed by the Administrator and structured to comply with Applicable Laws;

 

(ii)           surrender of other Shares owned by Optionee which have a
Fair Market Value on the date of surrender equal to the Exercise Price of the
Shares as to which the Option is being exercised;

 

(iii)          surrendered Shares then issuable upon the exercise of the
Option having a Fair Market Value on the date of exercise equal to the
aggregate Exercise Price of the Option or exercised portion thereof;

 

(iv)          property of any kind which constitutes good and valuable
consideration;

 

(v)           delivery of a notice that Optionee has placed a market
sell order with a broker with respect to Shares then issuable upon exercise of
the Option and that the broker has been directed to pay a sufficient portion of
the net proceeds of the sale to the Company in satisfaction of the aggregate
Exercise Price; provided, however, that
payment of such proceeds is then made to the Company upon settlement of such
sale; or

 

(vi)          any combination of the foregoing methods of payment.

 

5

 

6.             Restrictions on Exercise. If the issuance of
Shares upon such exercise or if the method of payment for such shares would
constitute a violation of any applicable federal or state securities or other
law or regulation, then the Option may not be exercised. The Company may
require Optionee to make any representation and warranty to the Company as may
be required by any applicable law or regulation before allowing the Option to
be exercised.

 

7.             Termination of Relationship. If Optionee ceases
to be a Service Provider, the exercisability of the Option following
termination of Optionee’s status as a Service Provider shall be governed by the
Termination Period provisions set forth in the Notice of Grant. To the extent
that the Option is not vested as of the date on which Optionee’s status as a
Service Provider terminates (except as otherwise expressly provided in the Termination
Period provisions set forth in the Notice of Grant), or if Optionee does not
exercise the Option within the time specified in the Termination Period
Provisions set forth in the Notice of Grant, the Option shall terminate.

 

8.             No Section 280G Gross-Up; Cutback.

 

(a)           Notwithstanding anything herein or in the Employment
Agreement to the contrary, in no event shall any value attributable under Code
Section 280G to this Option or the vesting thereof (a) obligate the Company to
make a Gross-Up Payment (as defined in the Employment Agreement) with respect
to any value so attributable, or (b) be included in the denominator for
purposes of calculating the “base amount” (within the meaning of Treas. Reg.
1.280G-1 Q&A 34) that is allocable (in accordance with Treas.
Reg. 1.280G-1 Q&A 38) to any other payments to Optionee that are
subject to the Gross-Up Payment, provided, that Optionee’s base amount shall be
allocated in accordance with Treas. Reg. 1.280G-1 for all purposes other than
the calculation of any Gross-Up Payment, including without limitation, for
purposes of determining any excise taxes actually payable in respect of
payments to Optionee. For the avoidance of doubt, to the extent that the Option
or the vesting thereof cause any other payments or benefits provided to
Purchaser to become subject to Code Section 280G (due to an increase in the
total value of payments made to Purchaser in connection with a transaction),
Optionee shall become eligible to receive a Gross-Up Payment with respect to
such other payments in accordance with the terms of the Employment Agreement,
but the value of the Gross-Up Payment shall not take into consideration any
value attributable under Code Section 280G to the Option or the vesting thereof
(other than for purposes of determining whether Code Section 280G applies, for
which purposes, any value attributable to the Option shall be taken into
account after giving effect to any reduction elected by Optionee in accordance
with Section 8(b) below, if any).

 

(b)           Any payment or benefit received or to be received by
Optionee in respect of this Option in connection with a Change of Control that
would constitute a “parachute payment” within the meaning of Section 280G of
the Code shall, if Optionee so elects in Optionee’s sole discretion, be reduced
and forfeited to the minimum extent necessary so that no portion thereof shall
be subject to the excise tax imposed by Section 4999 of the Code if by reason
of such reduction, the Net After-Tax Benefit received by Optionee with respect to
this Option will exceed the Net After-Tax Benefit received by Optionee with
respect to the Option if no such reduction was made. For purposes of this
Section 8(b), “Net After-Tax Benefit”  means (i) the value of the Option
that would constitute a “parachute payment” within the meaning of

 

6

 

Section 280G of the Code,
less (ii) the amount of all federal, state and local income taxes payable with
respect to this Option, calculated at the maximum marginal income tax rate for
each year in which the foregoing shall be paid to Optionee (based on the rate
in effect for such year as set forth in the Code as in effect at the time of
the first payment of the foregoing), less (iii) the amount of excise taxes
imposed with respect to this Option by Section 4999 of the Code. The foregoing
determination will be made by the Accounting Firm (as defined in the Employment
Agreement). The Accounting Firm shall provide detailed supporting calculations
both to the Company and to Optionee at such time or times as the Accounting
Firm is required to provide calculations under Section 3(f)((3)(ii) of the
Employment Agreement with regard to any Gross-Up Payment calculation. All fees
and expenses of the Accounting Firm shall be borne solely by the Company. The
Company and Optionee will each provide the Accounting Firm access to and copies
of any books, records, and documents in their possession if reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determinations and
calculations contemplated by this Section 8(b).

 

9.             Non-Transferability of Option. This Option may
not be transferred in any manner except by will or by the laws of descent or
distribution. It may be exercised during the lifetime of Optionee only by
Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of Optionee.

 

10.           Term of Option. This Option may be exercised only
within the term set forth in the Notice of Grant.

 

11.           Restrictions on Shares. Optionee hereby agrees that
Shares purchased upon the exercise of the Option shall be subject to such terms
and conditions as the Administrator shall determine in its sole discretion,
including, without limitation, restrictions on the transferability of Shares,
the right of the Company to repurchase Shares, the right of the Company to
require that Shares be transferred in the event of certain transactions, a
right of first refusal in favor of the Company with respect to permitted
transfers of Shares, tag-along rights and take-along rights. Such terms and
conditions may, in the Administrator’s sole discretion, be contained in the
Exercise Notice with respect to the Option or in such other agreement as the
Administrator shall determine and which Optionee hereby agrees to enter into at
the request of the Company.

 

12.           Code Section 409A. Without limiting the generality
of any other provision of this Agreement, Section 23 of the Plan pertaining to
Code Section 409A is hereby explicitly incorporated into this Agreement.

 

13.           No Right to Employment. Nothing in the Plan or in
this Stock Option Agreement shall confer upon Optionee any right to serve or
continue as an Employee, Director or Consultant of the Company or any Parent or
Subsidiary, or shall interfere with or restrict in any way the rights of the
Company or any Parent or Subsidiary, which are hereby expressly reserved, to
discharge Optionee at any time for any reason whatsoever, with or without
Cause, except to the extent expressly provided otherwise in a written
employment agreement between Optionee and the Company or any Parent or
Subsidiary.

 

(Signature
Page Follows)

 

7

 

This Stock Option Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original and all of which shall constitute one document.

 

	
   

  	
  DEMAND
  MEDIA, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard Rosenblatt

  
	
   

  	
  Name:

  	
  Name Richard Rosenblatt

  
	
   

  	
  Title:

  	
  Title Chief Executive
  Officer

  

 

OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY
BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS STOCK OPTION
AGREEMENT, NOR IN THE COMPANY’S 2006 EQUITY INCENTIVE PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION AS A SERVICE PROVIDER OF THE COMPANY OR ANY PARENT OR
SUBSIDIARY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE
COMPANY’S RIGHT TO TERMINATE OPTIONEE’S SERVICE PROVIDER RELATIONSHIP AT ANY
TIME, WITH OR WITHOUT CAUSE AND WITH OR WITHOUT PRIOR NOTICE.

 

Optionee acknowledges
receipt of a copy of the Plan and represents that he is familiar with the terms
and provisions thereof. Optionee hereby accepts this Option subject to all of
the terms and provisions hereof. Optionee has reviewed the Plan and this Option
in their entirety, has had an opportunity to obtain the advice of counsel prior
to executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions arising under the
Plan or this Option. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.

 

	
  Dated:

  	
  6/19/09

  	
   

  	
  By:

  	
  /s/ Charles Hilliard

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Charles Hilliard

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address:

  

 

8

 

EXHIBIT A

 

DEMAND MEDIA, INC.

 

2006 EQUITY INCENTIVE PLAN

 

EXERCISE NOTICE

 

Demand Media, Inc. 

Attention: Legal Department

 

1.             Exercise of Option. Effective as of today,
                          ,
                            ,
the undersigned (“Optionee”)
hereby elects to exercise Optionee’s option to purchase
                          
shares of the Common Stock (the “Shares”)
of Demand Media, Inc. (the “Company”)
under and pursuant to the Amended and Restated Demand Media, Inc. 2006 Equity
Incentive Plan (as such plan may be amended and/or restated, the “Plan”) and the Stock Option Agreement
dated
                                      
(the “Option Agreement”).
Capitalized terms used herein without definition shall have the meanings given
in the Option Agreement.

 

	
  Date of
  Grant:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of
  Shares as to which Option is Exercised:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise
  Price per Share:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Total
  Exercise Price:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Certificate
  to be issued in name of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cash
  Payment delivered herewith:

  	
  o

  	
  $

  
	
   

  	
   

  	
   

  
	
  Promissory
  note delivered herewith:

  	
  o

  	
  $

  

 

	
  Type of
  Option:       o Incentive
  Stock Option

  	
  o Non-Qualified Stock
  Option

  

 

2.             Representations of Optionee. Optionee
acknowledges that Optionee has received, read and understood the Plan and the
Option Agreement. Optionee agrees to abide by and be bound by their terms and
conditions.

 

3.             Rights as Stockholder. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to Shares subject to the Option,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 14 of the Plan. Optionee shall enjoy rights as a stockholder until such
time as Optionee disposes of the Shares. All shares issued pursuant to any
exercise of the Option shall be subject to the terms

 

A-1

 

and conditions of the
Amended and Restated Stockholders’ Agreement among the Company and certain of
its stockholders, dated as of September 27, 2006 (as such agreement may be
further amended and restated, the “Stockholders’ Agreement”).  Upon such exercise, Optionee shall
have no further rights as a holder of the Shares so purchased except the right
to receive payment for the Shares so purchased in accordance with the
provisions of this Exercise Notice, and Optionee shall forthwith cause the
certificate(s) evidencing the Shares so purchased to be surrendered to the
Company for transfer or cancellation.

 

4.             Tax Consultation. Optionee understands that
Optionee may suffer adverse tax consequences as a result of Optionee’s purchase
or disposition of the Shares. Optionee represents that Optionee has consulted
with any tax consultants Optionee deems advisable in connection with the
purchase or disposition of the Shares and that Optionee is not relying on the
Company for any tax advice.

 

5.             Lock-Up Period. Optionee hereby agrees that if so
requested by the Company or any representative of the underwriters (the “Managing
Underwriter”)  in
connection with any registration of the offering of any securities of the
Company under the Securities Act or any applicable state laws, Optionee shall
not sell or otherwise transfer any Shares or other securities of the Company
during the 180-day period (or such longer period as may be requested in writing
by the Managing Underwriter and agreed to in writing by the Company, but which
period shall not, in any event, exceed 270 days) (the “Market Standoff Period”)  following the effective date of a
registration statement of the Company filed under the Securities Act; provided, that such restriction shall
apply only to the first registration statement of the Company to become effective
under the Securities Act that includes securities to be sold on behalf of the
Company to the public in an underwritten public offering under the Securities
Act. The Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such Market
Standoff Period.

 

6.             Restrictive Legends and Stop-Transfer Orders.

 

(a)           Legends. Optionee understands and agrees that the
Company shall cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership
of the Shares together with any other legends that may be required under the
Stockholders’ Agreement and/or by state or federal securities laws:

 

THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) OR
ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
AND SUCH LAWS OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.

 

A-2

 

(b)           Stop-Transfer Notices. Optionee agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate “stop transfer” instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.

 

(c)           Refusal to Transfer. The Company shall not be
required (i) to transfer on its books any Shares that have been sold or
otherwise transferred in violation of any of the provisions of this Agreement
or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have
been so transferred.

 

7.             Successors and Assigns. The Company may assign
any of its rights under this Agreement to single or multiple assignees, and
this Agreement shall inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer herein set forth, this
Agreement shall be binding upon Optionee and his or her heirs, executors,
administrators, successors and assigns.

 

8.             Interpretation. Any dispute regarding the
interpretation of this Agreement shall be submitted by Optionee or by the
Company forthwith to the Administrator, which shall review such dispute at its
next regular meeting. The resolution of such a dispute by the Administrator
shall be final and binding on the Company and on Optionee.

 

9.             Governing Law; Severability. This Agreement shall
be governed by and construed in accordance with the laws of the State of
California excluding that body of law pertaining to conflicts of law. Should
any provision of this Agreement be determined by a court of law to be illegal
or unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.

 

10.           Notices. Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery or upon deposit in the United States mail by certified mail, with
postage and fees prepaid, addressed to the other party at its address as shown
below beneath its signature, or to such other address as such party may
designate in writing from time to time to the other party.

 

11.           Further Instruments. The parties agree to execute
such further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement.

 

12.           Delivery of Payment. Optionee herewith delivers to
the Company the full Exercise Price for the Shares, as well as any applicable
withholding tax.

 

A-3

 

13.           Entire Agreement. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof.

 

	
  Accepted
  by:

  	
   

  	
  Submitted by:

  
	
   

  	
   

  	
   

  
	
  DEMAND MEDIA, INC.

  	
   

  	
  OPTIONEE

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address:

  

 

A-4

 

EXHIBIT B

 

INVESTMENT REPRESENTATION STATEMENT

 

	
  OPTIONEE

  	
  :

  	
   

  
	
   

  	
   

  	
   

  
	
  COMPANY

  	
  :

  	
  Demand Media, Inc.

  
	
   

  	
   

  	
   

  
	
  SECURITY

  	
  :

  	
  Common Stock

  
	
   

  	
   

  	
   

  
	
  AMOUNT

  	
  :

  	
   

  
	
   

  	
   

  	
   

  
	
  DATE

  	
  :

  	
   

  

 

In connection with the
purchase of the above-listed shares of Common Stock (the “Securities”)  of Demand Media, Inc. (the “Company”),  the undersigned (the “Optionee”)  represents to the Company the
following:

 

(a)           Optionee is aware of the Company’s business affairs and
financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities.
Optionee is acquiring these Securities for investment for Optionee’s own
account only and not with a view to, or for resale in connection with, any “distribution”
thereof within the meaning of the Securities Act of 1933, as amended (the “Securities
Act”).

 

(b)           Optionee acknowledges and understands that the Securities
constitute “restricted securities” under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption there
from, which exemption depends upon, among other things, the bona fide nature of
Optionee’s investment intent as expressed herein. Optionee understands that the
Securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available.
Optionee further acknowledges and understands that the Company is under no obligation
to register the Securities. Optionee understands that the certificate
evidencing the Securities will be imprinted with a legend which prohibits the
transfer of the Securities unless they are registered or such registration is
not required in the opinion of counsel satisfactory to the Company and any
other legend required under applicable state securities laws.

 

(c)           Optionee is familiar with the provisions of Rule 701 and
Rule 144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of “restricted securities” acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, ninety

 

B-1

 

(90) days thereafter (or
such longer period as any market stand-off agreement may require) the
Securities exempt under Rule 701 may be resold, subject to the satisfaction of
certain of the conditions specified by Rule 144, including, in the case of an
affiliate, (i) the resale being made through a broker in an unsolicited “broker’s
transaction” or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934), (ii) the availability of
certain public information about the Company, (iii) the amount of Securities
being sold during any three (3) month period not exceeding the limitations
specified in Rule 144(e), and (iv) the timely filing of a Form 144, if
applicable.

 

In the event that the
Company does not qualify under Rule 701 at the time of grant of the Option,
then the Securities may be resold beginning ninety (90) days after the Company
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934 in certain limited circumstances subject to the
provisions of Rule 144, which requires the resale to occur not less than six
months after the later of the date the Securities were sold by the Company or
the date the Securities were sold by an affiliate of the Company, within the
meaning of Rule 144 and the availability of certain public information about
the Company (subject to certain exceptions); and, in the case of a sale of the
Securities by an affiliate, the satisfaction of the conditions set forth in
sections (i), (ii), (iii) and (iv) of the paragraph immediately above.

 

(d)           Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that
an exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk. Optionee understands that no assurances can be given
that any such other registration exemption will be available in such event.

 

(e)           Optionee understands and acknowledges that the Company
will rely upon the accuracy and truth of the foregoing representations and
Optionee hereby consents to such reliance.

 

	
   

  	
   

  	
  Signature of Optionee:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  	
   

  
							

 

B-2

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