Document:

Exhibit 10.09

 

EMPLOYMENT AGREEMENT

 

THIS
EMPLOYMENT AGREEMENT (this “Agreement”), dated as of August 5,
2010, is entered into by and between Demand Media, Inc., a Delaware
corporation (the “Company”) and Charles Hilliard (the “Executive”).

 

WHEREAS,
the Company desires to continue to employ the Executive and to enter into an
agreement embodying the terms of such employment; and

 

WHEREAS,
the Executive desires to accept such continuation of employment with the
Company, subject to the terms and conditions of this Agreement.

 

NOW,
THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

1.                                       Employment
Period.  Subject to the provisions for
earlier termination hereinafter provided, the Executive’s employment hereunder
shall be for a term commencing on the Effective Date and ending on the fourth
(4th) anniversary
of the Effective Date (the “Employment Period”).  For purposes of this Agreement, “Effective
Date” shall mean the date of the closing of the Company’s initial public
offering of shares of its common stock. 
The Executive’s employment hereunder is terminable at will by the
Company or by the Executive at any time (for any reason or for no reason),
subject to the provisions of Section 4 hereof.  This Agreement shall become effective on the
Effective Date and, in the event the Effective Date does not occur on or prior
to March 31, 2011 (or such later date as the Company and Executive agree
in writing), then this Agreement shall terminate on such date and shall be of
no force or effect.

 

2.                                       Terms of
Employment.

 

(a)                                  Position and Duties.

 

(i)                                     During the
Employment Period, the Executive shall serve as President and Chief Financial
Officer of the Company, reporting directly to the Chief Executive Officer, and
shall perform such duties as are usual and customary for such positions.  At the Company’s request, the Executive shall
serve the Company and/or its subsidiaries and affiliates in other capacities in
addition to the foregoing consistent with the Executive’s role as President and
Chief Financial Officer of the Company. 
In the event that the Executive, during the Employment Period, serves in
any one or more of such additional capacities, the Executive’s compensation
shall not be increased beyond that specified in Section 2(b) hereof.  In addition, in the event the Executive’s service
in one or more of such additional capacities is terminated, the Executive’s
compensation, as specified in Section 2(b) hereof, shall not be
diminished or reduced in any manner as a result of such termination provided
that the Executive otherwise remains employed under the terms of this
Agreement.

 

(ii)                                  During the
Employment Period, and excluding any periods of vacation and sick leave to
which the Executive may be entitled, the Executive agrees to devote his full
business time and attention to the business and affairs of the Company.  Notwithstanding the foregoing, during the
Employment Period, it shall not be a violation of this Agreement for the
Executive to engage in any of the following activities: (A) 

 

 

serve on boards, committees or similar bodies of
charitable or nonprofit organizations, (B) fulfill limited teaching,
speaking and writing engagements, (C) holding economic interests in
companies in which the Executive does not take an operating role and/or (D) the
Executive’s management of current personal investments which do not require the
Executive’s active participation in the management or the operation of the
investments, in each case, so long as such activities do not, individually or
in the aggregate, materially interfere or conflict with the performance of the
Executive’s duties and responsibilities under this Agreement.

 

(iii)                               During the Employment
Period, the Executive shall perform the services required by this Agreement at
the Company’s principal offices located in Santa Monica, California (the “Principal
Location”), except for travel to other locations as may be necessary to
fulfill the Executive’s duties and responsibilities hereunder.

 

(b)                                 Compensation, Benefits, Etc.

 

(i)                                     Base Salary.  During the Employment Period, the Executive shall
receive a base salary, initially set at the rate in effect as of the Effective
Date, and increased on January 1, 2011 to a rate of $325,000 per annum
(the “Base Salary”).  Thereafter,
the Base Salary shall be reviewed annually by the Compensation Committee (the “Compensation
Committee”) of the Board (the “Board”) and may be increased from
time to time by the Compensation Committee in its sole discretion.  The Base Salary shall be paid in installments
in accordance with the Company’s applicable payroll practices, as in effect
from time to time, but no less often than monthly.  The Base Salary shall not be reduced after
any increase in accordance herewith and the term “Base Salary” as utilized in
this Agreement shall refer to Base Salary as so increased.

 

(ii)                                  Annual Bonus.  In addition to the Base Salary, the Executive
shall be eligible to earn, for each fiscal year of the Company ending during
the Employment Period, a discretionary cash performance bonus (an “Annual
Bonus”) under the Company’s bonus plan or program applicable to senior
executives.  The Executive’s target
Annual Bonus for 2010 shall be set at the level in effect as of the Effective
Date, and shall, for fiscal years 2011 and later during the Employment Period,
be set at sixty percent (60%) of his Base Salary actually paid for such fiscal
year, but the actual amount of any Annual Bonus shall be determined on the
basis of the attainment of Company performance metrics and/or individual
performance objectives, in each case, as established and approved by the Board
or the Compensation Committee in its sole discretion. Payment of any Annual
Bonus(es), to the extent any Annual Bonus(es) become payable, will be
contingent upon the Executive’s continued employment through the applicable
payment date, which shall occur on the date on which annual bonuses are paid
generally to the Company’s senior executives.

 

(iii)                               Stock Option
Award.  Subject to adoption by the
Board and approval by the Company’s stockholders of the 2010 Incentive Award Plan (the “Plan”),
the Company shall grant to the Executive, as soon as practicable after the
execution of this Agreement (which grant date, for the avoidance of doubt, may
precede the Effective Date) (the “Grant Date”), a nonqualified option to
purchase five hundred thousand (500,000) shares of the Company’s common stock
(the “Stock Option”) with
an exercise 

 

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price equal to $9.00 per share.  Subject to Section 4(a) hereof, the
Stock Option shall vest and become exercisable in substantially equal
installments (rounded up to the nearest whole share) on each monthly
anniversary of the Effective Date occurring over the four (4)-year period
immediately following the Effective Date, subject to the Executive’s continued
employment with the Company through such date. 
If the Effective Date does not occur on or prior to March 31, 2011
for any reason, then, notwithstanding anything to the contrary, the Stock
Option shall terminate and be forfeited, and the Company shall have no further
obligations with respect thereto.  The
terms and conditions of the Stock Option shall, in a manner consistent with
this Section 2(b)(iii), be set forth in a separate award agreement in a
form prescribed by the Company (the “Stock Option Agreement”), to be
entered into by the Company and the Executive, which shall evidence the grant
of the Stock Option.  The Stock Option
shall be governed in all respects by the terms and conditions of the Plan.

 

(iv)                              Incentive,
Savings and Retirement Plans.  During the Employment Period, the Executive
shall be eligible to participate in all other incentive plans, practices,
policies and programs, and all savings and retirement plans, practices,
policies and programs, in each case that are available generally to senior
executives of the Company.

 

(v)                                 Welfare Benefit
Plans.  During the Employment Period,
the Executive and the Executive’s dependents shall be eligible to participate
in the welfare benefit plans, practices, policies and programs (including, as
applicable, medical, dental, disability, employee life, group life and
accidental death insurance plans and programs) maintained by the Company for
its senior executives.

 

(vi)                              Expenses.  During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable business
expenses incurred by the Executive in accordance with the policies, practices
and procedures of the Company provided to senior executives of the Company.

 

(vii)                           Fringe Benefits.  During the Employment Period, the Executive
shall be entitled to such fringe benefits and perquisites as are provided by
the Company to its senior executives from time to time, in accordance with the
policies, practices and procedures of the Company, and shall receive such
additional fringe benefits and perquisites as the Company may, in its
discretion, from time-to-time provide. 
Nothing contained in Sections 2(b)(iv)-(v) hereof or this Section 2(b)(vii) shall,
or shall be construed to, obligate the Company to adopt or maintain any
incentive, savings, retirement, welfare, fringe benefit or other plan(s) or
program(s) at any time.

 

(viii)                        Vacation.  During the Employment Period, the Executive
shall not be entitled to a fixed number of paid vacation, personal or sick days
per year.  As a salaried employee, the
Company expects the Executive to use his judgment to take time off from work
for vacation or other personal time in a manner consistent with getting the
Executive’s work done in a timely fashion, providing excellent service to the
Company’s customers and partners and avoiding inconveniencing the Executive’s
co-workers.  To the extent the Executive
has an existing balance of accrued, unused vacation as of the Effective Date,
that time will be applied to the Executive’s absences until it is exhausted.

 

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3.                                       Termination of
Employment.

 

(a)                                  Death or Disability.  The Executive’s employment shall terminate
automatically upon the Executive’s death during the Employment Period.  Either the Company or the Executive may
terminate the Executive’s employment in the event of the Executive’s Disability
during the Employment Period.  For
purposes of this Agreement, “Disability” shall mean a disability as
determined under the Company’s applicable long-term disability plan that
prevents the Executive from performing his duties under this Agreement (even
with a reasonable accommodation by the Company) for a period of six (6) months
or more or, if no such plan applies, as determined in the reasonable discretion
of the Board.

 

(b)                                 Cause.  The Company may terminate the Executive’s
employment during the Employment Period for Cause or without Cause.  For purposes of this Agreement, “Cause”
shall mean the occurrence of any one or more of the following events:

 

(i)                                     the Executive’s
failure (other than due to Disability) to materially comply with written
Company policies generally applicable to Company officers or employees or any
directive of the Board that is reasonably achievable, that is not inconsistent
with the Executive’s position as President and Chief Financial Officer or the
fulfillment of the Executive’s fiduciary duties and that is not otherwise
prohibited by law or established public policy, subject to the receipt of a
Notice of Termination (as defined below) and thirty (30) day cure period after
the Executive’s receipt of the Notice of Termination to the extent such
circumstances are curable;

 

(ii)                                  the Executive’s
engagement in willful misconduct against the Company that is materially
injurious to the Company;

 

(iii)                               the Executive’s
engagement in any activity that is a conflict of interest or competitive with
the Company (other than any action not taken in bad faith and which is promptly
remedied by the Executive upon notice by the Board or the participation in any
activity described in any of Sections 2(a)(ii)(A)-(D) hereof);

 

(iv)                              the Executive’s
engagement in any act of fraud or dishonesty against the Company or any of its
Affiliates or any material breach of federal or state securities or commodities
laws or regulations;

 

(v)                                 the Executive’s
engagement in an act of assault or other act of violence in the workplace; or

 

(vi)                              the Executive’s
conviction, guilty plea or plea of nolo contendre
for any felony charge.

 

For
purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive’s action or omission was in the best interests of the Company.  Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based
upon the advice of counsel for the Company shall be presumed to 

 

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be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company.

 

(c)                                  Good Reason.  The Executive’s employment may be terminated
by the Executive for Good Reason or by the Executive without Good Reason.  For purposes of this Agreement, “Good Reason”
shall mean the occurrence of any one or more of the following events without
the Executive’s prior written consent, unless the Company fully corrects the
circumstances constituting Good Reason (provided such circumstances are capable
of correction) as provided below:

 

(i)                                     any action by
the Company that results in a demotion or material diminution of the
Executive’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 the Executive);
provided that “Good Reason” does not include a change in title,
authority, duties and/or responsibilities that occurs within 30 days following
a Change in Control (as defined in the Plan) if (A) the Executive’s new title is that of an executive officer of the
entity surviving such Change in 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 in Control (or, if applicable, its
parent company, if such entity has a parent company) and the Executive’s authority, duties and responsibilities are
commensurate with such title or (B) (1) the entity surviving such
Change in 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) the Executive’s new title is
that of a senior executive officer of such unit, division or subsidiary
reporting directly to the principal executive officer of such unit, division or
subsidiary (or to an executive officer of the entity surviving the Change in
Control or parent company thereof) and (in either case) the Executive’s authority, duties and responsibilities are
commensurate with such title and are similar in scope (with respect to such
unit, division or subsidiary) to the authority, duties and responsibilities of
the Executive prior to the Change in Control;

 

(ii)                                  a requirement
that the Executive report to work more than twenty (20) miles from the Company’s
Principal Location (not including normal business travel required of the
Executive’s position) or, to the extent such requirement would not constitute a
material change in the geographic location at which the Executive must perform
services under this Agreement within the meaning of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), such higher
number of miles from the Company’s Principal Location as would constitute a
material change in the geographic location at which the Executive must perform
services under this Agreement within the meaning of Section 409A of the
Code;

 

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

 

(iv)                              a material
breach by the Company of its obligations hereunder.

 

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Notwithstanding
the foregoing, the Executive will not be deemed to have resigned for Good
Reason unless (1) the Executive provides the Company with written notice
setting forth in reasonable detail the facts and circumstances claimed by the
Executive to constitute Good Reason within sixty (60) days after the date of the
occurrence of any event that the Executive knows or should reasonably have
known to constitute Good Reason, (2) the Company fails to cure such acts
or omissions within thirty (30) days following its receipt of such notice, and (3) the
effective date of the Executive’s termination for Good Reason occurs no later
than sixty (60) days after the expiration of the Company’s cure period.

 

(d)                                 Notice of Termination.  Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by a Notice of
Termination to the other parties hereto given in accordance with Section 10(b) hereof.  For purposes of this Agreement, a “Notice
of Termination” means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive’s employment under
the provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than sixty (60) days after the
giving of such notice).  The failure by
the Executive or the Company to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason or Cause shall
not waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

(e)                                  Termination of Offices and
Directorships.  Upon
termination of the Executive’s employment for any reason, unless otherwise
specified in a written agreement between the Executive and the Company, the
Executive shall be deemed to have resigned from all offices, directorships, and
other employment positions if any, then held with the Company, and shall take
all actions reasonably requested by the Company to effectuate the foregoing.

 

4.                                       Obligations of
the Company upon Termination.

 

(a)                                  Without Cause, For Good
Reason, Death or Disability.  Subject to Section 4(d) hereof, if
the Executive incurs a “separation from service” from the Company (within the
meaning of Section 409A(a)(2)(A)(i) of the Code, and Treasury
Regulation Section 1.409A-1(h)) (a “Separation from Service”)
during the Employment Period (such date, the “Date of Termination”) by
reason of (1) a termination of the Executive’s employment by the Company
without Cause; (2) a termination of the Executive’s employment by the
Executive for Good Reason; or (3) a termination of the Executive’s
employment by reason of the Executive’s death or Disability (each of (1), (2) and
(3), a “Qualifying Termination”):

 

(i)                                     The Executive
(or the Executive’s estate or beneficiaries, if applicable) shall be paid, in a
single lump-sum payment on the date of the Executive’s termination of
employment, the aggregate amount of the Executive’s earned but unpaid Base
Salary and accrued but unpaid vacation pay (if any) through the date of such
termination (the “Accrued Obligations”), in each case, to the extent not
previously paid.

 

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(ii)                                  In addition,
subject to Section 4(d) hereof and the Executive’s (or the Executive’s
estate’s or beneficiaries’, if applicable) timely execution and non-revocation
of a Release (as described below), the Executive (or the Executive’s estate or
beneficiaries, if applicable) shall be paid:

 

(A)                              an amount equal to one (1) (the
“Multiplier”) times the sum of (x) the Base Salary in effect on the
Date of Termination (disregarding any reduction in Base Salary that would give
rise to the Executive’s right to terminate for Good Reason), plus (y) the
Annual Bonus earned by the Executive for the calendar year immediately prior to
the calendar year in which the Date of Termination occurs, payable in
substantially equal installments (the “Installments”) in accordance with
the Company’s normal payroll procedures during the period commencing on the
Date of Termination and ending on the twelve (12)-month anniversary of the Date
of Termination; provided, however, that no payments under this Section 4(a)(ii)(A) shall
be made prior to the first payroll date occurring on or after the thirtieth (30th) day following the Date of
Termination (such payroll date, the “First Payroll Date”) (with amounts
otherwise payable prior to the First Payroll Date paid on the First Payroll
Date without interest thereon); provided, further, that in no
event shall any of the first four Installments be paid later than March 15th of the year following that in which the Date
of Termination occurs, and any of the first four Installments that would
otherwise be paid after such March 15th shall instead
be paid on such March 15th; provided, further, that if a Change in Control that constitutes a “change in control event”
within the meaning of Section 409A of the Code occurs (I) on or
within ninety (90) days after the Date of Termination, the Multiplier shall be
increased to two (2) and any then-unpaid amounts owing under this Section 4(a)(ii)(A) shall
be paid in a lump-sum upon such Change in Control (or, if later, on the First
Payroll Date), or (II) within one (1) year before the Date of
Termination, the Multiplier shall be increased to two (2) and amounts
payable under this Section 4(a)(ii)(A) shall be paid in a lump-sum on
the First Payroll Date  (it
being understood that fifty percent (50%) of any payments made pursuant to Section 4(a)(ii)(A)(I) or
4(a)(ii)(A)(II) are intended by the parties as, and shall constitute,
consideration paid in exchange for the Executive’s willingness to enter into
and comply with a noncompetition agreement in connection with a Change in
Control); and

 

(B)                                any unpaid Annual Bonus to
which the Executive would have become entitled for any fiscal year of the
Company that ends on or before the Date of Termination had the Executive
remained employed through the payment date, payable in a single lump-sum
payment on the date on which annual bonuses are paid to the Company’s senior
executives generally for such calendar year, but in no event later than March 15th of the calendar year immediately following the
calendar year in which the Date of Termination occurs, with the actual date
within such period determined by the Company in its sole discretion.

 

7

 

(iii)                               In addition,
subject to and conditioned upon the Executive’s timely execution and
non-revocation of a Release, in the event that a Change in Control (A) occurs on or within ninety (90) days
after the Date of Termination or (B) has occurred within one (1) year
before the Date of Termination, all outstanding compensatory equity
awards that have not yet vested (other than the Stock Option Agreement dated June 1,
2007, as amended, between the Executive and the Company (the “Performance
Award”)) shall conditionally vest and, as applicable, become exercisable on
the later of the Date of Termination and the date of such Change in Control
(and such vesting shall become unconditional upon such execution and
non-revocation of a Release); provided, however, that if the
Executive fails to timely execute or revokes the Release, all such
conditionally vested awards (and any shares received in respect of such awards)
shall be forfeited upon such failure or revocation (subject to repayment by the
Company to the Executive of any amounts (if any) paid by the Executive with
respect to shares underlying such conditionally vested awards).  In the event the Executive’s employment is
terminated by the Company without Cause or by the Executive for Good Reason,
all vested Company stock options held by the Executive (after taking into
consideration any vesting that may occur in accordance herewith) other than the
Performance Award shall remain outstanding and exercisable until the earlier of
the first anniversary of the Date of Termination or the stock option’s stated
expiration date.  The Performance Award
shall be governed in accordance with the terms (including the vesting terms) of
the applicable award agreements.  For the
avoidance of doubt, if a Qualifying Termination occurs prior to a Change in
Control, all outstanding, unvested compensatory equity awards that would
otherwise terminate on the Date of Termination shall remain outstanding and
eligible to vest solely upon a Change in Control occurring within ninety (90)
days after the Date of Termination (but shall not otherwise vest following the
Date of Termination) and shall terminate on the ninetieth (90th) day following the Date of
Termination if a Change in Control has not occurred on or prior to such
ninetieth (90th) day (or such
earlier expiration date applicable to the award (other than due to a
termination of employment)).

 

(iv)                              In addition,
subject to Section 4(d) hereof and conditioned upon the Executive’s
timely execution and non-revocation of a Release, during the period commencing
on the Date of Termination and ending on the twelve (12)-month anniversary of
the Date of Termination or, if earlier, the date on which the Executive becomes
eligible for coverage under the group health plan of a subsequent employer (of
which eligibility the Executive hereby agrees to give prompt notice to the
Company) (in any case, the “COBRA Period”), subject to the Executive’s
valid election to continue healthcare coverage under Section 4980B of the
Code and the regulations thereunder, the Company shall continue to provide the
Executive and the Executive’s eligible dependants with coverage under its group
health plans at the same levels and the same cost to the Executive as would
have applied if the Executive’s employment had not been terminated based on the
Executive’s elections in effect on the Date of Termination), provided,
however, that (1) if any plan pursuant to which such
benefits are provided is not, or ceases prior to the expiration of the period
of continuation coverage to be, exempt from the application of Section 409A
of the Code under Treasury Regulation Section 1.409A-1(a)(5), or (2) the
Company is otherwise unable to continue to cover the Executive under its group
health plans, then, in either case, an amount equal to each remaining Company
subsidy shall thereafter be paid to the Executive as currently taxable
compensation in 

 

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substantially equal monthly installments over the
continuation coverage period (or the remaining portion thereof); provided, further, that if a Change in Control has occurred within one (1) year
prior to, or occurs on or within ninety (90) days after, the Date of
Termination, in either case, the COBRA Period shall instead end on the
twenty-four (24)-month anniversary of the Date of Termination (or, if
earlier, the date on which the Executive becomes eligible for coverage under
the group health plan of a subsequent employer).

 

The
payments and benefits described in the preceding Sections 4(a)(ii), (iii) and
(iv) are referred to herein as the “Severance.”  Notwithstanding the foregoing, it shall be a
condition to the Executive’s (or the Executive’s estate’s or beneficiaries’, if
applicable) right to receive the Severance that the Executive (or the Executive’s
estate or beneficiaries, if applicable) execute and deliver to the Company an
effective release of claims in substantially the form attached hereto as Exhibit A
(the “Release”) within twenty-one (21) days (or, to the extent required
by law, forty-five (45) days) following the Date of Termination and that the
Executive (or the Executive’s estate or beneficiaries, if applicable) not
revoke such Release during any applicable revocation period.

 

(b)                                 For Cause, Without Good
Reason or Other Terminations.  If the Company terminates the Executive’s
employment for Cause, the Executive terminates his employment without Good
Reason, or the Executive’s employment terminates for any other reason not
enumerated in this Section 4, in any case, during the Employment Period,
the Company shall pay to the Executive the Accrued Obligations in cash within
thirty (30) days after the Date of Termination (or by such earlier date as may
be required by applicable law).

 

(c)                                  Continued Employment
Following a Change in Control.  If the Company experiences a Change in
Control and the Executive remains employed with the Company (or its successor
or an affiliate of the foregoing) through the one (1) year anniversary of
the consummation of the Change in Control, all Company stock options and other
compensatory equity awards held by the Executive (other than the Performance
Award) on such one (1) year anniversary shall vest and, as applicable,
become exercisable on such one (1) year anniversary.  The Performance Award shall be governed in
accordance with the terms (including the vesting terms) of the applicable award
agreement.

 

(d)                                 Six-Month Delay.  Notwithstanding anything to the contrary in
this Agreement, no compensation or benefits, including without limitation any
severance payments or benefits payable under Section 4 hereof, shall be
paid to the Executive during the six (6)-month period following the Executive’s
“separation from service” (within the meaning of Section 409A(a)(2)(A)(i) of
the Code) if the Company determines that paying such amounts at the time or
times indicated in this Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i) of
the Code.  If the payment of any such
amounts is delayed as a result of the previous sentence, then on the first
business day following the end of such six (6)-month period (or such earlier
date upon which such amount can be paid under Section 409A of the Code
without resulting in a prohibited distribution, including as a result of the
Executive’s death), the Company shall pay the Executive a lump-sum amount equal
to the cumulative amount that would have otherwise been payable to the
Executive during such period.

 

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(e)                                  Exclusive Benefits.  Except as expressly provided in this Section 4
and subject to Section 5 hereof, the Executive shall not be entitled to
any additional payments or benefits upon or in connection with his termination
of employment.

 

(f)                                    Equity Award Agreements.

 

(i)                                     Effective as of the Effective Date, the reference to “Employment
Agreement” in each of the Performance Award and the Stock Option Agreement
dated June 9, 2009 between the Executive and the Company (the “2009
Stock Option Agreement”) shall be deemed a reference to this
Agreement.  Except as set forth in Section 6(a)(i) hereof,
all other provisions of the Performance Award and the 2009 Stock Option
Agreement shall remain in full force and effect in accordance with the
applicable award agreements.

 

(ii)                                  For the avoidance of doubt, nothing contained in this Agreement is
intended to result in any vesting terms that are less favorable to the
Executive than those contained in any applicable equity award agreement and, to
the extent that the vesting terms contained in any such award agreement are
more favorable to the Executive than those provided herein, including, without
limitation, this Section 4, the terms of such award agreement shall
control.

 

5.                                       Non-Exclusivity
of Rights.  Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or
agreement with the Company at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.

 

6.                                       Excess
Parachute Payments, Limitations on Payments.

 

(a)                                  Notwithstanding anything to
the contrary in any prior award agreement (including the Performance Award and
the 2009 Stock Option Agreement), in the event that a Change in Control is
consummated on or prior to the third (3rd) anniversary of the Effective Date, this Section 6(a) shall
apply and Section 6(b) hereof shall not apply.  For the avoidance of doubt, in the event that
a Change in Control is consummated on or prior to the third (3rd) anniversary of the
Effective Date, this Section 6(a) shall apply to, and supersede any
language to the contrary contained in, any prior award agreement (including,
without limitation, the provisions set forth under the heading “No Section 280G
Gross-Up” contained in each of the Performance Award and the 2009 Stock Option
Agreement).

 

(i)                                     In the event it
shall be determined that any payment or distribution in the nature of
compensation (within the meaning of Section 280G(b)(2) of the Code)
(the “Payment”) would be subject to the excise tax imposed under Section 4999
of the Code (the “Excise Tax”) then, subject to Section 6(a)(v) hereof,
the Executive shall be entitled to receive an additional payment (the “Gross-Up
Payment”) in an amount such that, after payment by the Executive of all
taxes (and any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to

 

10

 

the Excise Tax imposed upon the Payments.  The Company’s obligation to make Gross-Up
Payments under this Section 6(a)(i) shall not be conditioned upon the
Executive’s termination of employment.

 

(ii)                                  Subject to the
provisions of Section 6(a)(iii) hereof, all determinations required
to be made under this Section 6(a)(ii), including whether and when a
Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
such nationally recognized accounting firm as may be agreed by the Executive
and the Company (the “Accounting Firm”); provided, however,
that the Accounting Firm’s determination shall be made based upon “substantial
authority” within the meaning of Section 6662 of the Code.  The Accounting Firm shall provide detailed
supporting calculations both to the Company and to the Executive within fifteen
(15) business days of the receipt of notice that there has been a Payment that may
be or become subject to the Excise Tax, or such earlier time as is requested by
the Executive or the Company.  All fees
and expenses of the Accounting Firm shall be borne solely by the Company.  Any Gross-Up Payment, as determined pursuant
to this Section 6(a)(ii), shall be paid by the Company to the Executive
within five (5) days of the receipt of the Accounting Firm’s determination
(and in any event, no later than the end of the Executive’s taxable year next
following the Executive’s taxable year in which the Executive remits the
related taxes).  Any determination by the
Accounting Firm shall be binding upon the Company and the Executive.  As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments will not have been made by the Company that should have been made (the
“Underpayment”), consistent with the calculations required to be made
hereunder.  In the event that, after the
Accounting Firm reaches its determination, the Executive is subsequently
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to the Executive or for the
Executive’s benefit (subject to Section 6(a)(vi) hereof).

 

(iii)                               The Executive
shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require payment by the Company of any
Gross-Up Payment.  Such notification
shall be given as soon as practicable, but no later than ten (10) business
days after the Executive is informed in writing of such claim.  The Executive shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid.  The Executive shall not pay such
claim prior to the expiration of the thirty (30)-day period following the date
on which the Executive gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is
due).  If the Company notifies the
Executive in writing prior to the expiration of such period that the Company
desires to contest such claim, the Executive shall:

 

(A)                               give the Company any
information reasonably requested by the Company relating to such claim;

 

(B)                               take such action in
connection with contesting such claim as the Company shall reasonably request
in writing from time to time, including, 

 

11

 

without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company;

 

(C)                               cooperate with the Company
in good faith in order effectively to contest such claim; and

 

(D)                               permit the Company to
participate in any proceedings relating to such claim;

 

provided, however, that the Company shall bear and
pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest, and shall indemnify and
hold the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties) imposed as a result of such
representation and payment of costs and expenses.  Without limitation on the foregoing provisions
of this Section 6(a)(iii), the Company shall control all proceedings taken
in connection with such contest, and, at its sole discretion, may pursue or
forgo any and all administrative appeals, proceedings, hearings and conferences
with the applicable taxing authority in respect of such claim and may, at its
sole discretion, either direct the Executive to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner, and the Executive
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, further, that,
if the Company directs the Executive to pay such claim and sue for a refund,
the Company shall make such payment on behalf of the Executive and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties) imposed with respect
to such payment; and provided, further, that any extension of the
statute of limitations relating to payment of taxes for the Executive’s taxable
year with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. 
Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder,
and the Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing
authority.

 

(iv)                              If, after the
Executive’s receipt of (or a payment on behalf of the Executive of) a Gross-Up
Payment, the Executive becomes entitled to receive any refund with respect to
the Excise Tax to which such Gross-Up Payment relates or with respect to such
claim, the Executive shall (subject to the Company’s complying with the
requirements of this Section 6(a)(iv), if applicable) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto).

 

(v)                                 Notwithstanding
any other provision of this Section 6(a), the Company may, in its sole
discretion, withhold and pay over to the Internal Revenue Service or any other
applicable taxing authority, for the Executive’s benefit, all or any portion of
any Gross-Up Payment, and the Executive hereby consents to such withholding.

 

12

 

(vi)                              Any other
liability for unpaid or unwithheld Excise Taxes shall be borne exclusively by
the Company.  The foregoing sentence shall
not in any manner relieve the Company of any of its obligations under this
Agreement.  Notwithstanding anything
herein to the contrary, (A) if any Gross-Up Payment(s) become
payable, such Gross-Up Payment(s) shall be paid to the Executive no later
than December 31 of the year following the year in which the underlying
taxes are remitted to the appropriate taxing authority, and (B) if any
expenses associated with any tax contest (including any audit or litigation)
become reimbursable to the Executive under this Section 6(a), such
expenses shall be reimbursed no later than December 31 of the year
following the year in which either the taxes that are subject to such audit or
litigation are remitted to the appropriate taxing authority or, if no taxes are
remitted, the year in which the audit is completed or there is a final and
nonappealable settlement or other resolution of the litigation.

 

(b)                                 In the event that a Change
in Control is consummated after the third (3rd) anniversary of the Effective Date, this Section 6(b) shall
apply and Section 6(a) hereof shall not apply.

 

(i)                                     Notwithstanding
any other provision of this Agreement, in the event that any payment or benefit
received or to be received by the Executive (including any payment or benefit
received in connection with a termination of the Executive’s employment,
whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement) (all such payments and benefits, including the payments and
benefits under Section 4 hereof, being hereinafter referred to as the “Total
Payments”) would be subject (in whole or part), to an Excise Tax (as
defined above), then, after taking into account any reduction in the Total
Payments provided by reason of Section 280G of the Code in such other
plan, arrangement or agreement, the cash severance payments under this
Agreement shall first be reduced, and the noncash severance payments hereunder
shall thereafter be reduced, to the extent necessary so that no portion of the
Total Payments is subject to the Excise Tax but only if (A) the net amount
of such Total Payments, as so reduced (and after subtracting the net amount of
federal, state and local income taxes on such reduced Total Payments and after
taking into account the phase out of itemized deductions and personal
exemptions attributable to such reduced Total Payments) is greater than or
equal to (B) the net amount of such Total Payments without such reduction
(but after subtracting the net amount of federal, state and local income taxes
on such Total Payments and the amount of Excise Tax to which the Executive
would be subject in respect of such unreduced Total Payments and after taking
into account the phase out of itemized deductions and personal exemptions
attributable to such unreduced Total Payments). 
The Total Payments shall be reduced in the following order: (A) reduction
of any cash severance payments otherwise payable to the Executive that are
exempt from Section 409A of the Code; (B) reduction of any other cash
payments or benefits otherwise payable to the Executive that are exempt from Section 409A
of the Code, but excluding any payments attributable to any acceleration of
vesting or payments with respect to any equity award that are exempt from Section 409A
of the Code; (C) reduction of any other payments or benefits otherwise
payable to the Executive on a pro-rata basis or such other manner that complies
with Section 409A of the Code, but excluding any payments attributable to
any acceleration of vesting and payments with 

 

13

 

respect to any equity award that are exempt from Section 409A
of the Code; and (D) reduction of any payments attributable to any
acceleration of vesting or payments with respect to any equity award that are
exempt from Section 409A of the Code, in each case beginning with payments
that would otherwise be made last in time.

 

(ii)                                  For purposes of
determining whether and the extent to which the Total Payments will be subject
to the Excise Tax, (A) no portion of the Total Payments the receipt or
enjoyment of which the Executive shall have waived at such time and in such
manner as not to constitute a “payment” within the meaning of Section 280G(b) of
the Code shall be taken into account; (B) no portion of the Total Payments
shall be taken into account which, in the written opinion of an independent
Accounting Firm (as defined above), does not constitute a “parachute payment”
within the meaning of Section 280G(b)(2) of the Code (including by
reason of Section 280G(b)(4)(A) of the Code) and, in calculating the
Excise Tax, no portion of such Total Payments shall be taken into account
which, in the opinion of the Accounting Firm, constitutes reasonable
compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of
the Code, in excess of the Base Amount (as defined in Section 280G(b)(3) of
the Code) allocable to such reasonable compensation; and (iii) the value
of any non cash benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Accounting Firm in accordance with
the principles of Sections 280G(d)(3) and (4) of the Code.

 

7.                                      Confidential
Information and Non-Solicitation.  The Executive hereby acknowledges that the
Executive has previously entered into an agreement with the Company containing
confidentiality and other protective covenants (the “Confidentiality
Agreement”) and that the Executive remains bound by the terms and
conditions of the Confidentiality Agreement.

 

8.                                      Representations.  The Executive hereby represents and warrants
to the Company that (a) the Executive is entering into this Agreement
voluntarily and that the performance of his obligations hereunder will not
violate any agreement between the Executive and any other person, firm,
organization or other entity, and (b) the Executive is not bound by the
terms of any agreement with any previous employer or other party to refrain
from competing, directly or indirectly, with the business of such previous
employer or other party that would be violated by his entering into this
Agreement and/or providing services to the Company pursuant to the terms of
this Agreement.

 

9.                                      Successors.

 

(a)                                 This Agreement is personal
to the Executive and, without the prior written consent of the Company, shall
not be assignable by the Executive otherwise than by will or the laws of
descent and distribution.  This Agreement
shall inure to the benefit of and be enforceable by the Executive’s legal
representatives.

 

(b)                                 This Agreement shall inure
to the benefit of and be binding upon the Company and its successors and
assigns.

 

(c)                                  The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or 

 

14

 

assets
of the Company to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession had taken place.  As used
in this Agreement, “Company” shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.

 

10.                               Miscellaneous.

 

(a)                                 Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without
reference to principles of conflict of laws. 
The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect.

 

(b)                                 Notices.  All notices and other communications
hereunder shall be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

 

If to the Executive:  at the Executive’s most recent address on the
records of the Company.

 

If to the Company:

 

Demand
Media, Inc.

1333
Second Street, Ste. 100

Santa Monica, CA 90401

Attn:
General Counsel

 

with
a copy to:

 

Latham &
Watkins LLP

355 South Grand Ave. 

Los Angeles, CA  90071-1560

Attn: Alex Voxman

 

or
to such other address as either party shall have furnished to the other in
writing in accordance herewith.  Notice
and communications shall be effective when actually received by the addressee.

 

(c)                                  Sarbanes-Oxley Act of 2002.  Notwithstanding anything herein to the
contrary, if the Company determines, in its good faith judgment, that any
transfer or deemed transfer of funds hereunder is likely to be construed as a
personal loan prohibited by Section 13(k) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) and the rules and
regulations promulgated thereunder, then such transfer or deemed transfer shall
not be made to the extent necessary or appropriate so as not to violate the
Exchange Act and the rules and regulations promulgated thereunder.

 

15

 

(d)                                 Section 409A of the
Code.

 

(i)  To the extent applicable, this Agreement
shall be interpreted in accordance with Section 409A of the Code and
Department of Treasury regulations and other interpretive guidance issued
thereunder.  Notwithstanding any
provision of this Agreement to the contrary, if the Company determines that any
compensation or benefits payable under this Agreement may be subject to Section 409A
of the Code and related Department of Treasury guidance, the Company shall work
in good faith with the Executive to adopt such amendments to this Agreement or
adopt other policies and procedures (including amendments, policies and
procedures with retroactive effect), or take any other actions, that the
Company determines are necessary or appropriate to avoid the imposition of
taxes under Section 409A of the Code, including without limitation,
actions intended to (i) exempt the compensation and benefits payable under
this Agreement from Section 409A of the Code, and/or (ii) comply with
the requirements of Section 409A of the Code and related Department of
Treasury guidance; provided, however, that this Section 10(d) shall not create an
obligation on the part of the Company to adopt any such amendment, policy or
procedure or take any such other action, nor shall the Company have any
liability for failing to do so.

 

(ii)  Any right to a series of installment
payments pursuant to this Agreement is to be treated as a right to a series of
separate payments.  To the extent
permitted under Section 409A of the Code, any separate payment or benefit
under this Agreement or otherwise shall not be deemed “nonqualified deferred
compensation” subject to Section 409A of the Code and Section 4(d) hereof
to the extent provided in the exceptions in Treasury Regulation Section 1.409A-1(b)(4),
Section 1.409A-1(b)(9) or any other applicable exception or provision
of Section 409A of the Code.

 

(iii)  To the extent that any payments or reimbursements
provided to the Executive under this Agreement, including, without limitation,
pursuant to Section 2(b)(vii) hereof, are deemed to constitute
compensation to the Executive to which Treasury Regulation Section 1.409A-3(i)(1)(iv) would
apply, such amounts shall be paid or reimbursed reasonably promptly, but not
later than December 31 of the year following the year in which the expense
was incurred.  The amount of any such
payments eligible for reimbursement in one year shall not affect the payments
or expenses that are eligible for payment or reimbursement in any other taxable
year, and the Executive’s right to such payments or reimbursement of any such
expenses shall not be subject to liquidation or exchange for any other benefit.

 

(e)                                  Severability.  The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.

 

(f)                                   Withholding.  The Company may withhold from any amounts
payable under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.

 

(g)                                  No Waiver.  The Executive’s or the Company’s failure to
insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 3(c) hereof, shall not
be deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.

 

16

 

(h)                                 Entire Agreement.  As of the Effective Date, this Agreement,
together with the Confidentiality Agreement, any prior equity award agreements,
and the Stock Option Agreement, constitutes the final, complete and exclusive
agreement between the Executive and the Company with respect to the subject
matter hereof and replaces and supersedes any and all other agreements, offers
or promises, whether oral or written, by any member of the Company and its
subsidiaries and affiliates, or representative thereof.  The Executive agrees that the Employment
Agreement dated as of May 9, 2007, as amended from time to time, shall
remain in effect until the Effective Date and be terminated and will be of no
further force or effect from and after the Effective Date.  In the event that the Effective Date does not
occur prior to March 31, 2011 (or such later date as Executive and the
Company agree in writing), this Agreement (including, without limitation, the
immediately preceding sentence) shall have no force or effect.

 

(i)                                     Amendment.  No amendment or other modification of this
Agreement shall be effective unless made in writing and signed by the parties
hereto.

 

(j)                                    Counterparts.  This Agreement and any agreement referenced
herein may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original but which together shall constitute one and
the same instrument.

 

[SIGNATURE PAGE FOLLOWS]

 

17

 

IN WITNESS WHEREOF, the Executive has hereunto set
the Executive’s hand and, pursuant to the authorization from the Board, the
Company has caused these presents to be executed in its name on its behalf, all
as of the day and year first above written.

 

	
   

  	
  DEMAND
  MEDIA, INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard Rosenblatt

  
	
   

  	
   

  	
  Name:
  Richard Rosenblatt

  
	
   

  	
   

  	
  Title:
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “EXECUTIVE”

  
	
   

  	
   

  
	
   

  	
  /s/
  Charles Hilliard

  
	
   

  	
   

  	
  Charles
  Hilliard

  

 

18

 

EXHIBIT A

 

GENERAL RELEASE

 

For
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the undersigned does hereby release and forever discharge the “Releasees”
hereunder, consisting of Demand Media, Inc., a Delaware corporation (the “Company”)
and each of its partners, subsidiaries, associates, affiliates, successors,
heirs, assigns, agents, directors, officers, employees, representatives,
lawyers, insurers, and all persons acting by, through, under or in concert with
them, or any of them, of and from any and all manner of action or actions,
cause or causes of action, in law or in equity, suits, debts, liens, contracts,
agreements, promises, liability, claims, demands, damages, losses, costs,
attorneys’ fees or expenses, of any nature whatsoever, known or unknown, fixed
or contingent (hereinafter called “Claims”), which the undersigned now
has or may hereafter have against the Releasees, or any of them, by reason of
any matter, cause, or thing whatsoever from the beginning of time to the date
hereof.  The Claims released herein include, without limiting the
generality of the foregoing, any Claims in any way arising out of, based upon,
or related to the employment or termination of employment of the undersigned by
the Releasees, or any of them; any alleged breach of any express or implied
contract of employment; any alleged torts or other alleged legal restrictions
on Releasees’ right to terminate the employment of the undersigned; and any
alleged violation of any federal, state or local statute or ordinance
including, without limitation, Title VII of the Civil Rights Act of 1964, the
Age Discrimination In Employment Act, the Americans With Disabilities Act, and
the California Fair Employment and Housing Act. 
Notwithstanding the foregoing, this general release (the “Release”)
shall not operate to release any rights or claims of the undersigned (i) to
payments or benefits under Section 4(a) of that certain Employment Agreement,
dated as of
              ,
2010, between Demand Media, Inc. and the undersigned (the “Employment
Agreement”), whichever is applicable to the payments and benefits provided
in exchange for this Release, (ii) to payments or benefits under any equity
award agreement between the undersigned and the Company, (iii) with
respect to Section 2(b)(vi) or 6 of the Employment Agreement, (iv) to
accrued or vested benefits the undersigned may have, if any, as of the date
hereof under any applicable plan, policy, practice, program, contract or
agreement with the Company, or (v) to any Claims, including claims for
indemnification and/or advancement of expenses, arising under any
indemnification agreement between the undersigned and the Company or under the
bylaws, certificate of incorporation of other similar governing document of the
Company.

 

THE
UNDERSIGNED ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY LEGAL COUNSEL AND IS
FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH
PROVIDES AS FOLLOWS:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR.”

 

A-1

 

THE
UNDERSIGNED, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY
RIGHTS HE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR
COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

 

IN
ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990, THE
UNDERSIGNED IS HEREBY ADVISED AS FOLLOWS:

 

(A)                               HE HAS THE
RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS RELEASE;

 

(B)                               HE HAS
TWENTY-ONE (21) DAYS TO CONSIDER THIS RELEASE BEFORE SIGNING IT; AND

 

(C)                               HE HAS SEVEN (7) DAYS
AFTER SIGNING THIS RELEASE TO REVOKE THIS RELEASE, AND THIS RELEASE WILL BECOME
EFFECTIVE UPON THE EXPIRATION OF THAT REVOCATION PERIOD.

 

The
undersigned represents and warrants that there has been no assignment or other
transfer of any interest in any Claim which he may have against Releasees, or
any of them, and the undersigned agrees to indemnify and hold Releasees, and
each of them, harmless from any liability, Claims, demands, damages, costs,
expenses and attorneys’ fees incurred by Releasees, or any of them, as the
result of any such assignment or transfer or any rights or Claims under any
such assignment or transfer.  It is the intention of the parties that this
indemnity does not require payment as a condition precedent to recovery by the
Releasees against the undersigned under this indemnity.

 

The
undersigned agrees that if he hereafter commences any suit arising out of,
based upon, or relating to any of the Claims released hereunder or in any
manner asserts against Releasees, or any of them, any of the Claims released
hereunder, then the undersigned agrees to pay to Releasees, and each of them,
in addition to any other damages caused to Releasees thereby, all attorneys’
fees incurred by Releasees in defending or otherwise responding to said suit or
Claim.

 

The
undersigned further understands and agrees that neither the payment of any sum
of money nor the execution of this Release shall constitute or be construed as
an admission of any liability whatsoever by the Releasees, or any of them, who
have consistently taken the position that they have no liability whatsoever to
the undersigned.

 

IN
WITNESS WHEREOF, the undersigned has executed this Release this
         day of
                      ,
        .

 

A-2Exhibit
10.10

 

DEMAND MEDIA, INC.

 

 

Re:          AT-WILL EMPLOYMENT TERMS

 

Dear
Shawn:

 

In
consideration of the compensation, benefits and promises contained herein and
for other good and valuable consideration, the adequacy of which you and Demand
Media, Inc., a Delaware corporation (the “Company”) hereby acknowledge, you and the Company hereby enter
into this letter agreement (the “Agreement”) as
of April 18, 2006 (the “Execution Date”),
subject to the terms and conditions contained herein, and further subject to and
conditioned upon the consummation of the initial capitalization of and the
acquisitions currently contemplated by the Company (the “Transactions”).  This Agreement shall become effective only
upon the closing of the Transaction last to occur (the “Closing,”
and the date on which such Closing occurs, the “Effective Date”), it being understood that this Agreement
shall be null and void and of no force or effect if any of the Transactions is
not consummated for any reason.

 

1.              POSITION, DUTIES AND RESPONSIBILITIES.  The Company will employ you, and you agree to
be employed by the Company, as an Executive Vice President of the Company and
you shall perform such employment duties as are usual and customary for such
position, as the Company may assign to you from time to time.  While employed by the Company, you agree to
devote your full business time and attention to serving the Company in such
position.  Your duties may be changed from
time to time by the Company.  You will
report to the Chief Executive Officer of the Company (currently Richard
Rosenblatt), and will work full-time at our principal offices, currently
located in Santa Monica, California, except for travel to other locations as
may be necessary to fulfill your responsibilities.  If the Company so requests, you will serve
the Company, its subsidiaries and/or affiliates in other capacities in addition
to the foregoing.  In the event that you serve in any one or more of such
additional capacities, the Company may, in its sole discretion, increase your
compensation on account of such additional service beyond that specified in
this Agreement.

 

2.              BASE COMPENSATION. 
During your employment with the Company, the Company will pay you a base
salary (the “Base Salary”) of two hundred
thousand dollars ($200,000) per year, less payroll deductions and all required
withholdings, payable in accordance with the Company’s normal payroll practices
and pro-rated for any partial period of service.  Your Base Salary may be subject to upward
adjustment, in the sole discretion of the Company, pursuant to the Company’s
policies as in effect from time to time.

 

3.              ANNUAL BONUS.  In addition
to the Base Salary set forth above, you will be eligible to receive an annual
bonus (the “Bonus”) under the Company’s
incentive bonus plan applicable to similarly situated employees of the Company,
as in effect from time to time, in accordance with the terms and conditions of
such bonus plan.  The amount of your
Bonus will be targeted at 40% of your Base Salary, based on the attainment of 

 

 

4.              performance criteria
established and evaluated by the Company in its sole discretion in accordance
with the terms of such bonus plan, provided, that
your actual Bonus for any year may equal more or less than 40% of your Base
Salary (and may equal zero), depending upon whether and to what extent such
criteria are attained.  Payment of your
Bonus(es), to the extent any Bonus(es) become payable to you, will be
contingent upon your continued employment through the date on which bonuses are
paid generally under the applicable bonus plan.

 

5.              RESTRICTED STOCK AWARD.  Subject to adoption by the Board of Directors
of the Company and approval by the Company’s stockholders of the Company’s 2006
Equity Incentive Plan (the “Equity Plan”), the Company agrees to grant
to you three million, hundred fifty thousand (3,150,000) restricted shares of
the Company’s common stock (the “Restricted
Stock”) under the Equity Plan. 
The Restricted Stock shall be subject to such restrictions as the
Company, in its sole discretion, shall determine in accordance with the terms
of the Equity Plan, which may include, without limitation, any reacquisition
and transferability restrictions (the “Restrictions”).  The terms and conditions of the Restricted Stock, including any Restrictions,
shall be set forth in a Restricted Stock agreement to be entered into by the
Company and you which shall evidence the grant of the Restricted Stock (the “Restricted
Stock Agreement”).  The
Restricted Stock shall vest and all Restrictions thereon shall expire (i) as
to seven hundred eighty-seven thousand, five hundred (787,500) shares on the
first anniversary of the date of grant of the Restricted Stock (the “Grant Date”), and (ii) as to an additional sixty-five
thousand, six hundred twenty-five (65,625) shares on each monthly anniversary
of the Grant Date thereafter, subject to your continued employment with the
Company through each such vesting date, such that all shares of Restricted
Stock shall be vested and no longer subject to the Restrictions (subject to
your continued employment) on the fourth anniversary of the Grant Date, provided, that if a Change of Control (as defined in the
Equity Plan) shall occur and either (x) you remain employed by the Company
through the six-month anniversary of such Change of Control, or (y) the
Company terminates your employment other than for Cause (as defined in the
Equity Plan) prior to such six-month anniversary (in either case, an “Acceleration
Event”), then, in either case, the greater of (A) seven hundred
eighty-seven thousand, five hundred (787,500) shares of Restricted Stock or (B) fifty
percent (50%) of the shares of Restricted Stock that remain unvested and
subject to Restrictions upon the Acceleration Event shall vest immediately
prior to such Acceleration Event and all Restrictions thereon expire upon the
Acceleration Event and, provided further,
that if the Company terminates your employment other than for Cause after an
Acceleration Event described in clause (x) above, an additional three
hundred ninety-three thousand, seven hundred fifty (393,750) shares (or such
lesser number of shares as remains unvested and subject to Restrictions) shall
vest immediately prior to such termination and all Restrictions thereon
expire.  The Restricted Stock shall,
subject to the provisions of this Section 4, be governed in all respects
by the terms of the Equity Plan and the applicable Restricted Stock Agreement.

 

6.              BENEFITS AND VACATION.  While employed by the Company, you will be
eligible to participate in all incentive, savings and retirement plans and
programs maintained or sponsored by the Company from time to time which are
applicable to other similarly

 

 

situated employees of the Company, subject to the terms and conditions
thereof.  While employed by the Company,
you will also be eligible for standard benefits, such as medical insurance,
sick leave, vacations and holidays to the extent applicable generally to other
similarly situated employees of the Company, subject to the terms and
conditions of the applicable Company plans or programs.  Nothing in this Agreement shall, or shall be
construed so as to, obligate the Company to adopt or maintain any benefit plan
or program at any time.

 

7.              AT-WILL EMPLOYMENT.  You will be employed by the Company hereunder
as an employee at will.  Your employment
with the Company will not continue for any fixed or guaranteed period of
time.  Accordingly, you may terminate
your employment at any time, for any reason or no reason, with or without
notice.  Likewise, the Company may
terminate your employment at any time, for any reason or no reason, with or
without notice.

 

8.              TERMINATION OF EMPLOYMENT.  In the event that your employment with the
Company terminates for any reason, you shall be entitled to receive any
compensation and benefits that you have accrued, but not received payment for,
through the date of such termination.  In
addition, if your employment is terminated by the Company other than for Cause,
subject to your execution and non-revocation of a binding release and waiver of
claims in a form reasonably prescribed by the Company, you shall be entitled to
continuation payments of your Base Salary at the rate in effect immediately
prior to such termination for four months (the “Severance”),
payable in accordance with the Company’s normal payroll procedure, beginning
after the expiration of any applicable revocation period specified in the
release and subject to Section 13 below. 
The Company shall have no further obligations to you upon your
termination of employment.

 

9.              CONFIDENTIAL INFORMATION AND EMPLOYEE DEVELOPMENT AGREEMENT.  In connection with the
Company’s entering into this Agreement and in further consideration hereof, you
hereby agree to execute, simultaneously with this Agreement or as soon as
practicable thereafter, a Confidential Information and Employee
Development Agreement in the form provided by the Company.

 

10.       COMPANY RULES AND
REGULATIONS.  As an
employee of the Company, you agree to abide by all Company policies,
procedures, rules and regulations as may be set forth in a Company
employee handbook or as otherwise promulgated by the Company.

 

11.       WITHHOLDING.  The Company shall withhold from any amounts
payable under this Agreement such federal, state, local and/or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.

 

12.       ARBITRATION.  Any controversy or claim arising out of or
relating to this Agreement or the breach thereof, or otherwise arising out of
your employment relationship with the Company or the termination thereof,
shall, to the fullest extent permitted by law, be settled by arbitration in any
forum and form agreed upon by you and the Company or, in the absence of such an
agreement, under the auspices of the American Arbitration

 

 

13.       Association (“AAA”)
in Los Angeles, California in accordance with the Employment Dispute Resolution
Rules of AAA, including, but not limited to, the rules and procedures
applicable to the selection of arbitrators. 
Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof.  This Section 11
shall be specifically enforceable. Notwithstanding the foregoing, this Section 11
shall not preclude either party from pursuing a court action for the sole
purpose of obtaining a temporary restraining order or a preliminary injunction
in circumstances in which such relief is appropriate; provided that any other
relief shall be pursued through an arbitration proceeding pursuant to this Section 11.

 

14.       Representations

 

a.               No Violation of Other Agreements.  You hereby represent and warrant to the
Company that (i) you are fully authorized and empowered to enter into this
Agreement and that the performance of your obligations hereunder will not
violate any agreement between you and any other person, firm, organization or
other entity, and (ii) you are not bound by the terms of any agreement
with any previous employer or other party to refrain from competing, directly
or indirectly, with the business of such previous employer or other party that
would be violated by your entering into this Agreement and/or providing
services to the Company pursuant to the terms of this Agreement.

 

b.              No Disclosure of
Confidential Information.  You
hereby represent that your performance of your duties under this Agreement will
not require you to, and you shall not, rely on in the performance of your
duties or disclose to the Company or any other person or entity or induce the
Company in any way to use or rely on any trade secret or other confidential or
proprietary information or material belonging to any of your previous
employers.

 

15.       Code Section 409A

 

a.               Code Section 409A
Exempt.  The compensation and benefits
payable under this Agreement, including without limitation the Severance, are
not intended to constitute “nonqualified deferred compensation” within the
meaning of Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”). 
However, if the Company determines that any compensation or benefits
payable under this Agreement may be subject to Code Section 409A, this
agreement shall incorporate the terms and conditions required by Code Section 409A
and Department of Treasury regulations as determined by the Company.  To the extent applicable, this Agreement
shall be interpreted in accordance with Code Section 409A and Department
of Treasury regulations and other interpretive guidance issued thereunder.  If the Company reasonably determines that any
compensation or benefits payable under this Agreement may be subject to Code Section 409A
and related Department of Treasury guidance, the Company shall adopt such
amendments to this Agreement or adopt other policies or procedures (including
amendments, policies and procedures with retroactive effect), or take such
other actions as the Company deems necessary or

 

 

appropriate to (i) exempt the compensation and benefits payable
under this Agreement from Code Section 409A and/or preserve the intended
tax treatment of the compensation and benefits provided with respect to this
Agreement, or (ii) comply with the requirements of Code Section 409A
and related Department of Treasury guidance.

 

b.              Specified Employees.  Notwithstanding anything to the contrary in
this Agreement, no compensation or benefits, including without limitation any
Severance payments, shall be paid to you during the 6-month period following
your “separation from service” (within the meaning of Code Section 409A(a)(2)(A)(i))
if the Company determines that paying such amounts at the time or times
indicated in this Agreement would cause you to incur additional tax under Code Section 409A.  If the payment of any such amounts is delayed
as a result of the previous sentence, then on the first day following the end
of such 6-month period, the Company will pay you a lump-sum amount equal to the
cumulative amount that would have otherwise been payable to you during such
6-month period.

 

16.       ENTIRE
AGREEMENT.  As of the
Effective Date, this Agreement, together with the Restricted Stock Agreement
and the Confidential Information and Employee Development Agreement, constitutes
the final, complete and exclusive agreement between you and the Company with
respect to the subject matter hereof and replaces and supersedes any and all
other agreements, offers or promises, whether oral or written, made to you by
the Company or any representative or agent thereof.

 

17.       SEVERABILITY. 
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
of this Agreement, but such invalid, illegal or unenforceable provision will be
reformed, construed and enforced so as to render it valid, legal, and
enforceable consistent with the intent of the parties insofar as possible.

 

18.       ACKNOWLEDGEMENT.  You hereby acknowledge (a) that you have
consulted with or have had the opportunity to consult with independent counsel
of your own choice concerning this Agreement, and have been advised to do so by
the Company, and (b) that you have read and understand this Agreement, are
fully aware of its legal effect, and have entered into it freely based on your
own judgment.

 

[SIGNATURE PAGE FOLLOWS]

 

 

Please
confirm your agreement to the foregoing by signing and dating the enclosed
duplicate original of this Agreement in the space provided below for your
signature and returning it to Richard Rosenblatt at 15957 Asilomar Blvd., 
Pacific Palisades, California 90272. 
Please retain one fully-executed original for your files.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  Demand Media, Inc., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Richard Rosenblatt

  
	
   

  	
   

  	
  Name:
  Richard Rosenblatt

  
	
   

  	
   

  	
  Title:
  Chairman and CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
  Accepted
  and Agreed,

  	
   

  
	
  this
  18th day of April, 2006

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Shawn Colo

  	
   

  	
   

  
	
   

  	
  Shawn Colo

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