Document:

Exhibit 10.15

DEMAND
MEDIA INC. 2006 EQUITY INCENTIVE PLAN

RESTRICTED STOCK PURCHASE AGREEMENT

 

This restricted stock purchase agreement (the “Agreement”)
is made between Richard Rosenblatt (together with any permitted transferee, “Purchaser”)
and Demand Media, Inc. (the “Company”), as of April 19, 2007
(the “Grant Date”), pursuant to and subject to the terms and conditions
of the Company’s 2006 Equity Incentive Plan (the “Plan”).

 

RECITALS

 

WHEREAS, the Company maintains the Plan, pursuant to
which the Company desires to issue to Purchaser certain shares of common stock,
par value $.0001 per share, of the Company (the “Restricted Stock”) on
the terms and conditions set forth in this Agreement;

 

NOW, THEREFORE, in consideration of the mutual
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants the Restricted Stock designated in Section 1 below to Purchaser
subject to the terms, conditions and restrictions set forth herein. Capitalized
terms used herein and not defined shall have the meanings provided in the Plan.

 

1.             Grant
of Stock; Lapse of Restrictions.

 

(a)           Subject
to the Repurchase Option (as defined in Section 2 below) and all other
terms, conditions and restrictions contained in this Agreement and the Plan,
the Company hereby grants to Purchaser 2,000,000 shares of Restricted Stock
(the “Shares”). The purchase price to be paid by Purchaser to the
Company for the Shares shall be $.0001 per Share. The Shares shall vest and
cease to be subject to the Repurchase Option in accordance with the provisions
of Section 1(b) below (each such Share, which, from time to time,
continues to be subject to the Repurchase Option, an “Unvested Share”):

 

(b)           The
“Vesting Condition” shall be waived and deemed satisfied as follows:

 

(i)            If
the Company consummates a Liquidity Event (as defined below) on or prior to the
sixth anniversary of the Grant Date, then, upon the first anniversary of the
consummation of such a Liquidity Event, subject to Purchaser’s continued
employment with the Company through such first anniversary, the Vesting
Condition shall be waived and deemed satisfied with respect to all Shares
subject hereto, provided, that
if, within ninety days prior to or within twelve months after the consummation
of such a Liquidity Event. Purchaser’s employment is terminated by the Company
without Cause (as defined in the employment agreement between Purchaser and the
Company, dated April 18, 2006 (the “Employment Agreement”)), by
Purchaser for Good Reason (as defined in the Employment Agreement) or
terminates due to Purchaser’s death or total and permanent disability (within
the meaning of Code Section 22(e)(3)), the Vesting Condition shall be
waived and deemed satisfied with respect to all Shares subject hereto
immediately prior to any such termination;

 

 

(ii)           If
(A) on or prior to the sixth anniversary of the Grant Date, the Company
engages in an initial public offering of its Common Stock pursuant to an
effective registration statement under the Securities Act (an “IPO”),
and (B) either (1) during any Company fiscal quarter beginning after
the expiration of any applicable Market Standoff Period (as defined below) and
ending prior to the sixth anniversary of the Grant Date, or (2) if no such
Company fiscal quarter meets the requirements of the preceding
Section 1(b)(ii)(B)(1), during only the Company fiscal quarter beginning
immediately after the expiration of any applicable Market Stand-Off Period (as
defined below) (any such period, in either case, a “Fiscal Quarter”), the
average of the daily volume weighted average price of the Common Stock for such
Fiscal Quarter (such average, the “VWAP”) equals or exceeds the VWAP
levels set forth in the table below, then the Vesting Condition shall be waived
and deemed satisfied with respect to the number of Shares set forth opposite
the applicable VWAP levels specified in the table below on the date that the
Administrator determines the VWAP for such Fiscal Quarter, but in any event, no
later than five business days after the end of any such Fiscal Quarter (each
such date, a “VWAP Determination Date”), subject to Purchaser’s
continued employment with the Company through such VWAP Determination Date, provided, that if, following an IPO
occurring on or prior to the sixth anniversary of the Grant Date, Purchaser’s
employment is terminated by the Company without Cause or by Purchaser for Good
Reason or terminates due to Purchaser’s death or total and permanent disability
(within the meaning of Code Section 22(e)(3)), the Vesting Condition shall
be waived and deemed satisfied on the first VWAP Determination Date immediately
following such termination of employment with respect to that number of Shares,
if any, with respect to which the Vesting Condition would have been waived and
deemed satisfied on such VWAP Determination Date had Purchaser remained
employed with the Company through such date:

 

	
  If, during a Fiscal Quarter, the

  Common Stock attains VWAP

  of:

  	
   

  	
  Then the
  Vesting Condition shall be

  waived and deemed satisfied, on the

  applicable VWAP Determination Date

  with respect to:

  
	
  $12 or more*

  	
   

  	
  1,500,000 Shares*

  
	
  $13 or more*

  	
   

  	
  500,000 Shares*

  

 

*Without limiting the
generality of Section 14 of the Plan, the amounts set forth in this table
shall be appropriately adjusted to reflect common stock dividends,
combinations, splits, reverse splits and similar transactions.

 

For the avoidance of doubt, if the Company’s Common
Stock attains a VWAP during any Fiscal Quarter that satisfies multiple VWAP
targets (to the extent that any Shares remain as Unvested Shares and Purchaser
remains employed by the Company through the applicable VWAP Determination Date
(except as otherwise provided above)), the Vesting Condition shall be waived
and deemed satisfied with respect to the cumulative Shares subject to the
multiple VWAP targets, but shall not, in any event be waived and deemed
satisfied with respect to the Shares subject to any particular VWAP target more
than once. By way of example and not limitation, if the Common Stock attains
VWAP of $14 during the first Fiscal Quarter, then the Vesting Condition shall
be waived and deemed satisfied with respect to all 2,000,000

 

 

Shares subject hereto on the first VWAP
Determination Date, but if the Common Stock attains VWAP of $12 during each of
the first two Fiscal Quarters and a VWAP of at least $13 during the third
Fiscal Quarter (assuming more than one Fiscal Quarter occurs), the Vesting
Condition shall be waived and deemed satisfied with respect (i) 1,500,000
Shares on the first VWAP Determination Date, (ii) no additional Shares on
the second VWAP Determination Date, and (iii) an additional 500,000 Shares
on the third VWAP Determination Date.

 

For purposes of this
Agreement, “Liquidity Event” shall mean a Change of Control in which
both (A) the total consideration received by the Company’s stockholders
(including by way of distribution in the case of an asset sale transaction) is
no less than $10 per Share of Common Stock (or, if applicable, per Share of Common
Stock underlying any Common Stock equivalents such as convertible preferred
stock) (as adjusted for any Common Stock dividends, combinations, splits,
reverse splits or similar transactions), and (B) the consideration
received by the Company and/or its stockholders in such transaction is in the
form of cash, cash equivalents or freely tradable securities that the Company’s
stockholders are able to transfer or sell without restrictions (other than
restrictions that may be applicable to employees or executive officers of the
Company in their capacities as such and other than restrictions arising under
Rule 145 of the Securities Act).

 

For purposes of this
Agreement, the term “Market Standoff Period” shall mean any period
following the effective date of a registration statement of the Company filed
under the Securities Act during which Purchaser may not sell or otherwise
transfer any Shares or other securities of the Company under Section 3.11
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”)
(or under any similar market standoff provisions relating to an IPO contained
in any amendment or restatement of the Stockholders’ Agreement).

 

2.             Repurchase
Option.

 

(a)           If
(i) Purchaser’s employment with the Company terminates for any reason
prior to such time as the Vesting Condition shall be waived and deemed
satisfied with respect to all Shares (after taking into account any
acceleration of the Vesting Condition with respect to such Shares), or
(ii) the Vesting Condition ceases to be capable of satisfaction with
respect to some or all of the Shares due to the passage of time, in either
case, the Company shall, for a period of ninety (90) days following the date on
which Purchaser’s employment so terminates or the Vesting Condition so ceases
to be capable of satisfaction, as applicable, have the right and option to
purchase from Purchaser, or Purchaser’s personal representative, as the case
may be, any or all Shares that have not satisfied the Vesting Condition as of
such applicable date at a per Share purchase price equal to the original per
Share purchase price paid by Purchaser (collectively, the “Repurchase Option”),
provided, that notwithstanding
the foregoing, if, pursuant to Section 1(b)(i) of this Agreement, it
becomes possible in connection with a termination of Purchaser’s employment for
the Vesting Condition to be waived and deemed satisfied with respect to
additional Shares following Purchaser’s termination of employment in connection
with the occurrence of a Liquidity Event, then the period during which the
Company may exercise its Repurchase Option shall instead begin on the first day
after such Liquidity Event and shall continue for a period of ninety (90) days
following the first day after such

 

 

Liquidity Event, and provided, further, that notwithstanding the foregoing, if,
pursuant to Section 1(b)(ii) of this Agreement, it becomes possible
in connection with a termination of Purchaser’s employment for a VWAP
Determination Date to occur after such termination of employment and for the
Vesting Condition to be waived and deemed satisfied with respect to additional
Shares on such VWAP Determination Date, then the period during which the
Company may exercise its Repurchase Option shall instead begin on the first day
after such post-termination VWAP Determination Date and shall continue for a
period of ninety (90) days following the first day after such post-termination
VWAP Determination Date.

 

(b)           The Company may exercise the Repurchase Option by
delivering personally or by registered mail, to Purchaser (or Purchaser’s legal
representative, as the case may be), a notice in writing indicating the
Company’s intention to exercise the Repurchase Option and setting forth a date
for closing not later than sixty (60) days from the mailing of such notice. The
closing of any purchase pursuant to the Repurchase Option shall take place at
the Company’s office. At such closing, the holder of the certificates of Shares
being transferred pursuant to the exercise of the Repurchase Option shall
deliver the share certificate or certificates evidencing such Shares, and the
Company shall deliver the purchase price specified in Section 2(a),
therefor.

 

(c)           At its option, the Company may elect to make payment for
any Shares it acquires upon exercise of the Repurchase Option at a bank
selected by the Company. The Company shall avail itself of this option by a
notice in writing to Purchaser stating the name and address of the bank, date
of closing, and waiving the closing at the Company’s office.

 

3.             Stockholders’ Agreement; Transfer Restrictions;
Voting Restrictions. Purchaser hereby agrees that, (a) the terms of
the Stockholders’ Agreement (in addition to the terms and conditions of this
Agreement and the Plan) shall apply to the Shares, (b) he shall not, for
as long as the Shares remain Unvested Shares, sell, transfer, dispose of,
hypothecate, pledge or otherwise encumber the Shares, and (c) he shall,
for as long as the Shares remain Unvested Shares, in all matters in which such
Shares are eligible to vote, vote such Shares in accordance with the majority
vote of the outstanding shares of Common Stock held by the Sponsors (as defined
in the Stockholders’ Agreement) at the time of any such vote. The transfer or
sale of any of the Shares shall be subject to the Stockholders’ Agreement and
any restrictions imposed under any applicable state or federal securities laws.
Any permissible transferee shall hold the Shares subject to all the provisions
hereof and shall acknowledge the same by signing a copy of this Agreement.

 

4.           Escrow.

 

(a)           Purchaser
hereby authorizes and directs the Secretary of the Company, or such other person
designated by the Company, to transfer the Shares as to which a Repurchase
Option has been exercised from Purchaser to the Company.

 

(b)           To insure the availability for delivery of the Shares upon
the Company’s exercise of the Repurchase Option, Purchaser hereby appoints the
Secretary of the Company, or any other person designated by the Company as
escrow agent, as its attorney-in-fact to sell, assign and transfer unto the
Company, such shares of Restricted Stock, if any, repurchased by the

 

 

Company pursuant to the Repurchase Option and shall,
upon execution of this Agreement, deliver and deposit with the Secretary of the
Company, or such other person designated by the Company, the share certificates
representing any and all Unvested Shares, together with the stock assignment
duly endorsed in blank. The share certificates representing the Unvested Shares
and the stock assignment shall be held by the Secretary in escrow, pursuant to
the Joint Escrow Instructions of the Company and Purchaser attached as Exhibit A
hereto, until the first to occur of (i) the Company’s exercise of its
Repurchase Option with respect to any such Shares, (ii) the date on which
such Shares cease to be Unvested Shares, or (iii) this Agreement ceasing
to be in effect. Promptly following the date on which any Shares cease to be
Unvested Shares, the escrow agent shall deliver to Purchaser the certificate or
certificates representing such Shares in the escrow agent’s possession
belonging to Purchaser, and the escrow agent shall be discharged of all further
obligations hereunder; provided, that
the escrow agent shall nevertheless retain such certificate or certificates if
so required pursuant to other restrictions imposed pursuant to this Agreement.

 

(c)           The
Company, or its designee, shall not be liable for any act it may do or omit to
do with respect to holding the Shares in escrow and while acting in good faith
and in the exercise of its judgment.

 

5.           Rights as Stockholder. Except as otherwise provided
herein, upon delivery of the Shares to the escrow holder pursuant to
Section 4, Purchaser shall have all the rights of a stockholder with
respect to said Shares, subject to the Repurchase Option and any other
restrictions herein, including the right to vote the Shares and to receive all
dividends or other distributions paid or made with respect to the Shares.

 

6.           No Section 280G Gross-Up. Notwithstanding
anything herein or in the Employment Agreement to the contrary, in no event
shall any value attributable under Code Section 280G to the Shares or the
satisfaction of the Vesting Condition (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 Purchaser that are subject to the Gross-Up
Payment, provided, that
Purchaser’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 Purchaser. For the avoidance of doubt, to the
extent that the Shares or the satisfaction of the Vesting Condition 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). Purchaser 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 (other than for purposes of
determining whether Code Section 280G applies) any value attributable
under Code Section 280G to the Shares or the satisfaction of the Vesting
Condition.

 

7.             Legends.
The share certificate(s) evidencing the Restricted Stock issued hereunder
shall be endorsed with the following legend, or such other legend as the
Company

 

 

may deem necessary or advisable, in its sole
discretion (in addition to any legend required under applicable state
securities laws and/or the Stockholders’ Agreement):

 

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.

 

THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO CERTAIN REPURCHASE RIGHTS, RESTRICTIONS ON TRANSFER
AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER OR ITS
ASSIGNEE(S) AS SET FORTH IN A RESTRICTED STOCK PURCHASE AGREEMENT AND/OR A
STOCKHOLDER AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE
SHARES, COPIES OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
ISSUER. SUCH REPURCHASE RIGHTS, TRANSFER RESTRICTIONS AND RIGHT OF FIRST
REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.

 

8.           Securities Law Representations. Purchaser shall, as
a condition to and concurrently with this grant of Restricted Stock, deliver to
the Company its Investment Representation Statement in the form attached hereto
as Exhibit B.

 

9.           Survival of Terms. This Agreement shall apply to
and bind Purchaser and the Company and their respective permitted assignees and
transferees, heirs, legatees, executors, administrators and legal successors.

 

10.         Tax Representations. Purchaser understands that
Purchaser may suffer adverse tax consequences as a result of Purchaser’s
purchase or disposition of the Shares. Purchaser represents that Purchaser has
consulted with any tax consultants Purchaser deems advisable in connection with
the purchase or disposition of the Shares and that no action or representation
by the Company shall be construed as the giving of tax advice and Purchaser is
not relying on the Company for any tax advice. Purchaser understands that
Purchaser will recognize ordinary income for federal income tax purposes under
Section 83 of the Code as and when the restrictions on the Shares lapse.
In this context, “restriction” includes the Repurchase Option set forth in
Section 2(a) above. Participant understands that Participant may
elect to be taxed for

 

 

federal income tax purposes at the time the Shares
are purchased rather than as and when the Repurchase Option lapses by filing an
election under Section 83(b) of the Code with the Internal Revenue
Service within thirty (30) days from the date of purchase. A form of election
under Section 83(b) of the Code is attached to the Grant Notice as Exhibit C.
PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER’S SOLE RESPONSIBILITY AND NOT THE
COMPANY’S TO TIMELY FILE THE ELECTION UNDER SECTION 83(b), EVEN IF
PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
PARTICIPANT’S BEHALF.

 

11.           Governing
Law; Severability. This Agreement (including any claim or controversy
arising out of or relating to this Agreement) shall be construed, interpreted
and the rights of the parties determined in accordance with the laws of the
State of California without reference to any choice of law provisions thereof
that would result in the application of any law other than the law of the State
of California, 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.

 

12.           No
Right to Continue as Service Provider. Nothing in the Plan or in this
Agreement shall confer upon Purchaser any right to continue as a Service
Provider, or shall interfere with or restrict in any way the rights of the
Company, which are hereby expressly reserved, to discharge Purchaser at any
time for any reason whatsoever, with or without Cause, except to the extent
expressly provided otherwise in a written agreement between Purchaser and the
Company.

 

13.           Conformity
to Securities Laws. Purchaser acknowledges that this Agreement is intended
to conform to the extent necessary with all applicable federal and state
securities laws and regulations. Notwithstanding anything herein to the
contrary, this Agreement shall be administered, and the Shares are to be
issued, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, this Agreement shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.

 

 

Purchaser represents that he has read this Agreement
and the Plan and is familiar with their terms and provisions. Purchaser hereby
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board upon any questions arising under the Plan or this
Agreement.

 

IN WITNESS WHEREOF, this Agreement is deemed made as
of the date first set forth above.

 

	
   

  	
  DEMAND MEDIA, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Shawn Colo 

  
	
   

  	
   

  	
  Name:

  	
  Shawn Colo 

  
	
   

  	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  PURCHASER

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Richard Rosenblatt

  
	
   

  	
   

  	
  Richard Rosenblatt

  

 

 

EXHIBIT A

 

JOINT ESCROW INSTRUCTIONS

 

April 19, 2007

 

Corporate Secretary

Demand Media, Inc.

1454 Third Street Promenade 

Santa Monica, CA 90401

 

Dear Shawn:

 

As Escrow Agent for both Demand Media, Inc.
(together with any assignee of the “Company”) and the undersigned
purchaser of common stock of the Company (“Purchaser”), you are hereby
authorized and directed to hold the documents delivered to you pursuant to the
terms of that certain Restricted Stock Purchase Agreement (the “Agreement”)
between the Company and Purchaser, dated April 19, 2007 in accordance with
the following instructions (all capitalized terms used herein but not defined
shall have the meanings provided in the Agreement):

 

1.             In the event the Company exercises a Repurchase Option
as provided in the Agreement, the Company shall give to you and Purchaser a
written notice specifying the number of Shares to be purchased, the purchase
price, and the time for a closing hereunder at the principal office of the
Company, Purchaser and the Company hereby irrevocably authorize and direct you
to close the transaction contemplated by such notice in accordance with the
terms of said notice.

 

2.             At the closing, you are directed (a) to date the
stock assignments necessary for the transfer in question, (b) to fill in
the number of Shares being transferred, and (c) to deliver the same,
together with the certificate evidencing the Shares of stock to be transferred,
to the Company, against the simultaneous delivery to you of the purchase price
(by cash, a check, or some combination thereof) for the number of Shares being
purchased pursuant to the exercise of the Company’s Repurchase Option.

 

3.             Purchaser irrevocably authorizes the Company to deposit
with you any certificates evidencing Shares to be held by you hereunder and any
additions and substitutions to said Shares. Purchaser does hereby irrevocably
constitute and appoint you as Purchaser’s attorney-in-fact and agent for the
term of this escrow to execute with respect to such securities all documents
necessary or appropriate to make such securities negotiable and to complete any
transaction herein contemplated, including but not limited to the filing with
any applicable state blue sky authority of any required applications for
consent to, or notice of transfer of, the securities. Subject to the provisions
of this Section 3, Purchaser shall exercise all rights and privileges of a
stockholder of the Company while the Shares are held by you.

 

 

4.             Following each date on which any Shares cease to be
Unvested Shares, you will deliver to Purchaser a certificate or certificates
representing the aggregate number of Shares held or issued pursuant to the
Agreement that cease to be subject to a Company Repurchase Option.

 

5.             If at the time of termination of this escrow you should
have in your possession any documents, securities, or other property belonging
to Purchaser, you shall deliver all of the same to Purchaser and shall be
discharged of all further obligations hereunder.

 

6.             Your duties hereunder may be altered, amended, modified
or revoked only by a writing signed by all of the parties hereto.

 

7.             You shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by
you to be genuine and to have been signed or presented by the proper party or
parties. You shall not be personally liable for any act you may do or omit to
do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting
in good faith, and any act done or omitted by you pursuant to the advice of
your own attorneys shall be conclusive evidence of such good faith.

 

8.             You are hereby expressly authorized to disregard any and
all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of
any court. In case you obey or comply with any such order, judgment or decree,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.

 

9.             You shall not be liable in any respect on account of the
identity, authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.

 

10.           You shall not be liable for the expiration of any rights
under any applicable state, federal or local statute of limitations or similar
statute or regulation with respect to these Joint Escrow Instructions or any
documents deposited with you.

 

11.           You shall be entitled to employ such legal counsel and
other experts as you may deem necessary properly to advise you in connection
with your obligations hereunder, may rely upon the advice of such counsel, and
may pay such counsel reasonable compensation therefor.

 

12.           Your responsibilities as Escrow Agent hereunder shall
terminate if you shall cease to be an officer or agent of the Company or if you
shall resign by written notice to each party. In the event of any such
termination, the Company shall appoint a successor Escrow Agent.

 

13.           If you reasonably require other or further instruments in
connection with these

 

 

Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.

 

14.           It is understood and agreed that should any dispute arise
with respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or
defend any such proceedings.

 

15.           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 Post Office, by registered or certified mail with
postage and fees prepaid, addressed to each of the other parties thereunto
entitled at the following addresses or at such other addresses as a party may
designate by ten (10) days’ advance written notice to each of the other
parties hereto.

 

	
  COMPANY:

  	
  Demand Media, Inc.

  
	
   

  	
  1454 Third Street Promenade

  
	
   

  	
  Santa Monica, CA 90401

  
	
   

  	
   

  
	
  PURCHASER:

  	
  Richard Rosenblatt

  
	
   

  	
  1454 Third Street Promenade

  
	
   

  	
  Santa Monica, CA 90401

  
	
   

  	
   

  
	
  ESCROW AGENT:

  	
  Corporate Secretary

  
	
   

  	
  Demand Media, Inc.

  
	
   

  	
  1454 Third Street Promenade

  
	
   

  	
  Santa Monica, CA 90401

  

 

16.           By signing these Joint Escrow Instructions, you become a
party hereto only for the purpose of said Joint Escrow Instructions; you do not
become a party to the Agreement.

 

17.           This instrument shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors and permitted
assigns.

 

 

18.           These Joint Escrow Instructions shall be governed by, and
construed and enforced in accordance with, the laws of the State of California,
excluding that body of law pertaining to conflicts of law.

 

	
   

  	
  DEMAND MEDIA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Shawn Colo

  
	
   

  	
   

  	
  Name: Shawn Colo

  
	
   

  	
   

  	
  Title: Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Richard Rosenblatt

  
	
   

  	
   

  	
  Richard Rosenblatt

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Escrow Agent:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Shawn Colo

  
	
   

  	
   

  	
  Name: Shawn Colo

  
	
   

  	
   

  	
  Title: Secretary

  

 

 

EXHIBIT B

INVESTMENT REPRESENTATION
STATEMENT

 

	
  PURCHASER

  	
  :

  	
  RICHARD ROSENBLATT

  
	
   

  	
   

  	
   

  
	
  COMPANY

  	
  :

  	
  DEMAND MEDIA, INC.

  
	
   

  	
   

  	
   

  
	
  SECURITY

  	
  :

  	
  COMMON STOCK

  
	
   

  	
   

  	
   

  
	
  AMOUNT

  	
  :

  	
  2,000,000 SHARES

  

 

In connection with the purchase of the above-listed
securities (the “Securities”), the undersigned Purchaser represents to
the Company the following:

 

1.               Purchaser 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. Purchaser is acquiring these Securities for
investment for Purchaser’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”).

 

2.               Purchaser 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 Purchaser’s investment intent as
expressed herein. Purchaser further 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. Purchaser further acknowledges
and understands that the Company is under no obligation to register the
Securities. Purchaser 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.

 

3.               Purchaser 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. 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 (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: (1) 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, as amended); and, in the case of an affiliate,
(2) the availability of certain public information about the Company,
(3) the amount of Securities being sold during any three (3) month
period not exceeding the limitations specified in Rule 144 (e), and
(4) the timely filing of a Form 144, if applicable.

 

4.               In the event that the
Company does not qualify under Rule 701 at the time of purchase of the
Securities, then the Securities may be resold in certain limited circumstances
subject to the provisions of Rule 144, which requires the resale to occur
not less than one year 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, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than two (2) years, the satisfaction of the conditions set
forth in sections (1), (2), (3) and (4) of the paragraph immediately
above.

 

5.               Purchaser 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. Purchaser understands that no assurances
can be given that any such other registration exemption will be available in
such event.

 

6.               Purchaser understands and
acknowledges that the Company will rely upon the accuracy and truth of the
foregoing representations and Purchaser hereby consents to such reliance.

 

	
   

  	
  Signature of Purchaser:

  
	
   

  	
   

  
	
   

  	
  /s/ Richard Rosenblatt

  
	
   

  	
  Name: Richard Rosenblatt

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date: April 19, 2007

  	
   

  

 

 

EXHIBIT C

INSTRUCTIONS
FOR SECTION 83(b) ELECTION

 

These instructions provide guidelines for
individuals who wish to make an election under Section 83(b) of the
Internal Revenue Code, as amended (an “Election”), with respect to
restricted shares of Demand Media, Inc. (the “Company”) common
stock, par value $0.0001 (the “Shares”), granted under the Company’s
2006 Equity Incentive Plan (the “Plan”). To make an effective Election,
Participants (as defined in the Plan) must file an executed original of the Election
Form and cover letter (each attached) with the Internal Revenue Service
not later than 30 days after the grant date of any Shares. The steps outlined
below should be followed to ensure that the Election is mailed and filed
correctly and in a timely manner.

 

Please Note:

 

·                 Filing an Election is not required of any Participant and will result in
immediate taxation with respect to any Shares covered by such Election.

 

·                 There is no remedy for failure to file an Election on time.

 

·                 Elections are irrevocable.

 

·                 Any Participant contemplating an Election should consult with a personal
tax advisor as to whether such Election will be in the Participant’s best
interests in light of such Participant’s personal tax situation.

 

In
order to make an Election, Participants must:

 

1.              Complete the Election
Form and make four (4) copies of the signed Election Form. Married
Participants should include the signature of their spouses on the Election
Form as well.

 

2.              Prepare a cover letter to
the Internal Revenue Service.

 

3.              Send the cover letter with
the originally executed Election Form and one (1) copy via certified
mail, return receipt requested to the Internal Revenue Service at the address
where the Participant files personal tax returns. Participants should have the
package date-stamped at the post office. The post office should provide a
certified receipt that includes a dated postmark. Participants should enclose a
self-addressed, stamped envelope with the filing so that the Internal Revenue
Service may return a date-stamped copy of the filing. However, the postmarked
receipt should be sufficient proof of a timely Election if, for any reason, the
Participant does not receive confirmation from the Internal Revenue Service.

 

4.              Send one copy of the
Election Form and cover letter to the Company for its records and attach
one copy to the Participant’s federal income tax return for the applicable
calendar year.

 

5.              Retain the Internal Revenue
Service file stamped copy (when returned) for the Participant’s records.

 

 

ATTACHMENT I

 

ELECTION FORM

 

The undersigned taxpayer hereby elects, pursuant to
Section 83(b) of the Internal Revenue Code of 1986, as amended, to
include in taxpayer’s gross income for the current taxable year the amount of
any compensation taxable to taxpayer in connection with taxpayer’s receipt of
shares (the “Shares”) of Common Stock, par value $0.0001 per share, of
Demand Media, Inc. (the “Company”). A copy of this statement has
been furnished to the Company.

 

1.             The name, address
and taxpayer identification number of the undersigned taxpayer are: 

 

Richard Rosenblatt

 

[Address] 

 

SSN: 
[     ]

 

[The name, address and taxpayer identification
number of the Taxpayer’s spouse are: 

 

[Name]

 

[Address]

 

SSN: 
                           ]

 

2.                                       Description of
the property with respect to which the election is being made:

 

[NUMBER] shares of Common Stock, par value $0.0001
per share, of the Company. The date on which the property was transferred was
April [   ], 2007. The taxable year to which this election
relates is calendar year 2007.

 

3.                                       Nature of
restrictions to which the property is subject:

 

The Shares are subject to repurchase at their
original purchase price if unvested as of the date that taxpayer ceases to be
an employee of the Company or performance targets cease to be attainable by
their terms.

 

4.             Fair market
value of shares:

 

The fair market value at the time of transfer
(determined without regard to any lapse restrictions, as defined in Treasury
Regulation Section 1.83-3(a)) of the Shares was $.0001 per Share. The
taxpayer did not pay any amount for the Shares, rather they were granted in
respect of future services.

 

E-1-16

 

	
   

  	
  Dated: April [   ], 2007

  	
   

  	
  Taxpayer Signature

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Richard Rosenblatt

  

 

	
   

  	
  [The undersigned spouse of
  Taxpayer joins in this election. (Complete if applicable).

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Dated: April [   ],
  2007

  	
   

  	
  Spouse’s Signature

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  ]

  

 

Signature(s) Notarized by:

[                    ]

 

 

ATTACHMENT 2

 

COVER LETTER TO INTERNAL
REVENUE SERVICE

April [   ], 2007

 

VIA CERTIFIED MAIL

RETURN RECEIPT REQUESTED

 

Internal Revenue Service

[Address where taxpayer files returns]

 

	
  Re:

  	
   

  	
  Election under Section 83(b) of the
  Internal Revenue Code of 1986

  
	
   

  	
   

  	
  Taxpayer: Richard Rosenblatt

  
	
   

  	
   

  	
  Taxpayer’s Social Security Number:

  	
   

  
	
   

  	
   

  	
  [Taxpayer’s Spouse:

  	
   

  
	
   

  	
   

  	
  Taxpayer’s Spouse’s Social Security Number:

  	
  ]

  
						

 

Ladies and Gentlemen:

 

Enclosed please find an original and one copy of an
Election under Section 83(b) of the Internal Revenue Code of 1986, as
amended, being made by the taxpayer referenced above. Please acknowledge
receipt of the enclosed materials by stamping the enclosed copy of the Election
and returning it to me in the self-addressed stamped envelope provided
herewith.

 

	
   

  	
  Very Truly Yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Richard Rosenblatt

  
	
   

  	
   

  
	
  Enclosures

  	
   

  
	
   

  	
   

  
	
  cc:      Demand Media, Inc.

  	
   

  

 

 

	
   

  	
   

  	
  Demand
  Media, Inc.

  
	
  Confirmation
  of Exercise

  	
   

  	
  ID: 20-4731239

  
	
   

  	
   

  	
  1333 Second St, Ste 100 

  
	
   

  	
   

  	
  Santa Monica, CA 90401

  

 

	
  Richard Rosenblatt

  	
   

  	
   

  	
   

  	
  Cash

  	
   

  	
   

  	
   

  
	
  15957
  Asilomar Blvd

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pacific
  Palisades, CA 90272

  	
   

  	
   

  	
   

  	
  SSN:
  ###-##-####

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Option
  Number

  	
   

  	
  00000026

  	
   

  	
  Date of Exercise

  	
   

  	
  4/19/2007

  	
   

  
	
  Option
  Date

  	
   

  	
  4/19/2007

  	
   

  	
  Shares Exercised

  	
   

  	
  2,000,000

  	
   

  
	
  Option
  Type

  	
   

  	
  RSP

  	
   

  	
  Market Value per Share

  	
   

  	
  $

  	
  1.0000

  	
   

  
	
  Plan

  	
   

  	
  06-R

  	
   

  	
  Option Price per Share

  	
   

  	
  $

  	
  0.0000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Calculation of Gain

  	
   

  	
   

  	
   

  	
  Calculation
  of  Taxes

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Market Value

  	
  $

  	
  2,000,000.00

  	
   

  	
   

  	
  Taxable Gain $

  	
   

  	
  Rate %

  	
   

  	
  Amount $

  	
   

  
	
  Option Price

  	
  $

  	
  0.00

  	
   

  	
  Medicare

  	
  2,000,000.00

  	
   

  	
  1.450

  	
   

  	
  29,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Gain

  	
  $

  	
  2,000,000.00

  	
   

  	
  Total Tax

  	
   

  	
   

  	
   

  	
   

  	
  29,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Funds
  Required 

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Total Option Price

  	
   

  	
  $

  	
  0.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Total Tax

  	
   

  	
  $

  	
  29,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Total
  Due Company

  	
   

  	
  $

  	
  29,000.00

  	
   

  

 

	
  TRANSFER AGENT INSTRUCTIONS

  Registration: 

  Richard Rosenblatt

  	
   

  	
  APPROVED
  BY:  

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  ACCOUNTING
  USE ONLY 

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Option Check Attached 

  	
   

  
	
  15957 Asilomar Blvd 

  	
   

  	
   

  	
   

  	
  Tax Check Attached 

  	
   

  
	
  Pacific Palisades CA 90272

  	
   

  	
   

  	
   

  	
  Check Issued/Received 

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Forwarded To Cashier 

  	
  /
            /

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Acct. #

  	
   

  	
   

  	
   

  	
  Shares Issued 

  	
   

  
	
  SSN:

  	
   

  	
  ###-##-#### 

  	
   

  	
  Shares Cancelled 

  	
   

  
	
  Cert: 

  	
   

  	
  1 x 2000000  

  	
   

  	
  Adjustment to 

  	
   

  
	
  Deliver:

  	
   

  	
   

  	
   

  	
  Capital Stock 

  	
   

  
	
  Control No:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Confirm Date: 

  	
   

  	
  10/8/2007

  	
   

  	
  PAYROLL USE ONLY 

  	
   

  
	
  Rule 144 Status:

  	
   

  	
   

  	
   

  	
  Voucher Processed

  	
  /
            /

  

 

Date: 12/20/2007 

Time: 6:47:23PM

 

1

 

ELECTION
UNDER INTERNAL REVENUE CODE SECTION 83(b)

 

The undersigned taxpayer hereby elects, pursuant to
Section 83(b) of the Internal Revenue Code of 1986, as amended, to
include in taxpayer’s gross income for the current taxable year the amount of
any compensation taxable to taxpayer in connection with taxpayer’s receipt of
shares (the “Shares”) of Common Stock, par value $0.0001 per share, of
Demand Media, Inc. (the “Company”). A copy of this statement has
been furnished to the Company.

 

1.          The name,
address and taxpayer identification number of the undersigned taxpayer are:

 

RICHARD M. ROSENBLATT 

15957 ASILOMAR BLVD.

PACIFIC PALISADES, CA 90272

 

SSN: ###-##-####

 

The name, address and taxpayer identification number
of the Taxpayer’s spouse are (complete if applicable):

 

LISA ROSENBLATT

15957 ASILOMAR BLVD.

PACIFIC PALISADES, CA 90272

 

SSN: ###-##-####

 

2.          Description of
the property with respect to which the election is being made:

 

Two Million (2,000,000) shares of Common Stock, par
value $0.0001 per share, of the Company. The date on which the property was
transferred was April 19, 2007. The taxable year to which this election
relates is calendar year 2007.

 

3.           Nature of
restrictions to which the property is subject:

 

The Shares are subject to repurchase at their
original purchase price if unvested as of the date that taxpayer ceases to be
an employee of the Company or performance targets cease to be attainable by
their terms.

 

4.           Fair market
value of shares:

 

The fair market value at the
time of transfer (determined without regard to any lapse restrictions, as
defined in Treasury Regulation Section 1.83-3(a)) of the Shares was $1.00 per
Share. The taxpayer did not pay any amount for the Shares, rather they were
granted in respect of future services.

 

	
  RECEIVED

  	
   

  	
   

  	
   

  
	
  1249

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  MAY
  20 2007

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  INTERNAL
  REVENUE SERVICE

  	
   

  	
   

  	
   

  
	
  FRESNO,
  CA

  	
   

  	
   

  	
   

  

 

 

	
  Dated: April 19, 2007

  	
  Taxpayer Signature

  	
  /s/ Richard M. Rosenblatt

  
	
   

  	
   

  	
  RICHARD M. ROSENBLATT

  

 

The undersigned spouse of
Taxpayer joins in this election. (Complete if applicable).

 

	
  Dated: April 19, 2007

  	
  Spouse’s Signature

  	
  /s/Lisa Rosenblatt

  
	
   

  	
   

  	
  LISA ROSENBLATT

  

 

	
  Signature(s) Notarized by:    

  	
  /s/ Sukari Blount

  	
   

  

 

 

 

DEMAND MEDIA, INC.

 

FIRST AMENDMENT TO

ROSENBLATT RESTRICTED STOCK
AGREEMENT

 

APRIL 27, 2007

 

RECITALS

 

Demand Media, Inc. (the “Company”) and
Richard Rosenblatt (the “Executive”) have entered into a Restricted
Stock Purchase Agreement dated as of April 19, 2007 (the “Restricted
Stock Agreement”).

 

WHEREAS, the transferability provisions set forth
in the Restricted Stock Agreement were intended to reflect the provisions set
forth in Section 11 of the Company’s 2006 Equity Incentive Plan (the “Plan”);

 

WHEREAS, the Section 11 of the Plan has been
amended; and

 

WHEREAS, the Company and the Executive desire to
amend the Restricted Stock Agreement pursuant to this First Amendment to the
Restricted Stock Agreement in light of such amendment to the Plan (the “Amendment”).

 

NOW, THEREFORE, for good valuable consideration,
receipt of which is hereby acknowledged by both the Company and the Executive,
the Company and the Executive hereby amend the Restricted Stock Agreement as
follows:

 

AMENDMENT

 

1.               Section 3 of the Restricted Stock Agreement is deleted and replaced
in its entirety with the following:

 

Stockholders’ Agreement; Transfer
Restrictions.  Purchaser
hereby agrees that, (a) the terms of the Stockholders’ Agreement (in
addition to the terms and conditions of this Agreement and the Plan) shall
apply to the Shares, (b) he shall not, for as long as the Shares remain
Unvested Shares, sell, transfer, dispose of, hypothecate, pledge or otherwise
encumber the Shares, and (c) he shall, for as long as the Shares remain
Unvested Shares, in all matters in which such Shares are eligible to vote, vote
such Shares in accordance with the majority vote of the outstanding shares of
Common Stock held by the Sponsors (as defined in the Stockholders’ Agreement)
at the time of any such vote.  The
transfer or sale of any of the Shares shall be subject to the Stockholders’
Agreement and any restrictions imposed under any applicable state or federal
securities laws.  Notwithstanding
the foregoing, Purchaser may transfer any Shares to any one or more Permitted
Transferees (as such term is defined in the Plan), subject to compliance with
and the restrictions set forth in Section 11 of

 

 

the Plan.   Any Permitted Transferee shall hold the Shares
subject to all the provisions hereof and shall acknowledge the same by signing
a copy of this Agreement.

 

Except as expressly provided herein, all terms and
conditions of the Restricted Stock Agreement shall remain in full force and
effect.

 

[SIGNATURE PAGE FOLLOWS]

 

2

 

IN WITNESS WHEREOF, the Executive and the Company have executed this Amendment which shall
be effective as of the date first above written.

 

	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Richard Rosenblatt  

  
	
   

  	
  Richard Rosenblatt  

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEMAND MEDIA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Shawn Colo

  
	
   

  	
   

  	
  Name: Shawn Colo

  
	
   

  	
   

  	
  Its: Secretary

  

 

3

 

SECOND
AMENDMENT TO DEMAND MEDIA, INC.

RESTRICTED STOCK PURCHASE AGREEMENT

 

THIS SECOND AMENDMENT, dated as of
February 10, 2010 (the “Amendment
Effective Date”), is entered into by and between Demand
Media, Inc., a Delaware corporation (the “Company”)
and Richard Rosenblatt (the “Executive”).
All capitalized terms used herein but not defined shall have the
meanings provided in the Restricted Stock Purchase Agreement, dated
April [  ], 2007, by and between the Company and the Executive,
as amended by the first amendment thereto (the “Restricted Stock Agreement”).

 

RECITALS

 

WHEREAS, the Company and
the Executive previously entered into the Restricted Stock Agreement, which
sets forth the terms and conditions of a grant to the Executive of certain
shares of Restricted Stock; and

 

WHEREAS, the Company and
the Executive mutually desire to amend the Restricted Stock Agreement to change
certain vesting terms applicable to the Restricted Stock.

 

NOW, THEREFORE, the Company and
the Executive hereby agree that, effective as of the Amendment Effective Date,
in consideration of the covenants contained herein and other for good and
valuable consideration, the receipt of which is hereby acknowledged, the
Restricted Stock Agreement is hereby amended as follows:

 

1.             Section 1(b)(ii) of
the Restricted Stock Agreement and all paragraphs that
follow Section 1(b)(ii) but precede Section 2 of the Restricted
Stock Agreement are hereby deleted and replaced in their entirety with the
following:

 

“(ii) If, on or prior
to the sixth anniversary of the Grant Date, the Company engages in an initial
public offering of its Common Stock pursuant to an effective registration
statement under the Securities Act (an “IPO”) and, during any period of
thirty consecutive calendar days following the IPO  and preceding the
later to occur of the sixth anniversary of the Grant Date or the first
anniversary of the IPO  (which period may include the date
of the IPO  and/or either such anniversary), the average closing
price of a share of Common Stock on the primary exchange on which such Common
Stock is traded (or, if the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the mean between the
high bid and low asked prices for a share of the Common Stock on each day
during any such thirty-day period) equals or exceeds ten dollars ($10) (as
adjusted for any Common Stock dividends, combinations, splits, reverse splits
and similar transactions), then the Vesting Condition shall be waived and
deemed satisfied with respect to all Shares subject hereto as of the first
calendar day following such thirty-day period, subject to Purchaser’s continued
employment with the Company through such vesting date, provided, that if Purchaser’s employment
is terminated by the Company without Cause or by Purchaser for Good Reason or
terminates due to Purchaser’s death or total and permanent disability (within
the meaning of Code Section 22(e)(3)), the Vesting Condition shall be
waived and

 

 

deemed satisfied on the first date during the
twelve-month period immediately following such termination of employment on
which the Vesting Condition would have been waived and deemed satisfied
pursuant to this clause (ii) had Purchaser remained employed through such
date (if any).

 

For purposes of this
Agreement, “Liquidity Event” shall mean a Change of Control in which
both (A) the total consideration received by the Company’s stockholders
(including by way of distribution in the case of an asset sale transaction) is
no less than $10 per Share of Common Stock (or, if applicable, per Share of
Common Stock underlying any Common Stock equivalents such as convertible
preferred stock) (as adjusted for any Common Stock dividends, combinations,
splits, reverse splits or similar transactions), and (B) the consideration
received by the Company and/or its stockholders in such transaction is in the
form of cash, cash equivalents or freely tradable securities that the Company’s
stockholders are able to transfer or sell without restrictions (other than (i) restrictions
that may be applicable to employees or executive officers of the Company in
their capacities as such, (ii) restrictions arising under Rule 145 of
the Securities Act and (iii) restrictions resulting from a contractual
lock-up not to exceed 180 days if the total market capitalization of the issuer
of the securities to which such lock-up applies exceeds $3.0 billion).”

 

2.             Section 2(a) of
the Restricted Stock Agreement is hereby deleted and
replaced in its entirety with the following:

 

“If (i) Purchaser’s employment with the Company
terminates for any reason prior to such time as the Vesting Condition shall be
waived and deemed satisfied with respect to all Shares (after taking into
account any waiver and satisfaction of the Vesting Condition with respect to
such Shares resulting from such termination), or (ii) the Vesting
Condition ceases to be capable of satisfaction with respect to some or all of
the Shares due to the passage of time, in either case, the Company shall,
during the applicable Repurchase Period (as defined below), have the right and
option to purchase from Purchaser, or Purchaser’s personal representative, as
the case may be, any or all Shares that have not satisfied the Vesting
Condition as of the commencement of the applicable Repurchase Period at a per
Share purchase price equal to the original per Share purchase price paid by
Purchaser (collectively, the “Repurchase Option”). For the avoidance of
doubt, if the Vesting Condition is waived or deemed satisfied prior to the
commencement of the applicable Repurchase Period (including any waiver or
satisfaction of the Vesting Condition that may occur following a termination of
employment under the circumstances set forth in this Agreement), then the
Repurchase Option shall not apply to Shares with respect to which the Vesting
Condition has been waived and deemed satisfied. For purposes of this Agreement,
“Repurchase Period” shall have the following meanings:

 

(A) if Purchaser remains
employed through the sixth anniversary of the Grant Date and no IPO or
Liquidity Event occurs (on or prior to such sixth anniversary), Repurchase
Period means the ninety-day period commencing on such sixth anniversary;

 

(B) if Purchaser terminates
his employment voluntarily without Good Reason or is terminated by the Company
for Cause, Repurchase Period means the ninety-day period commencing on the date
of such termination;

 

 

(C) if Purchaser’s
employment is terminated by the Company without Cause, by Purchaser with Good
Reason or due to Purchaser’s death or Disability, in any case, prior to each of
the occurrence of an IPO, a Liquidity Event and the sixth anniversary of the
Grant Date, Repurchase Period means the ninety-day period commencing on the
first anniversary of the date of such termination (for the avoidance of doubt,
the Vesting Condition shall not be waived and deemed satisfied pursuant to
Section 1(b)(i) above with respect to a Liquidity Event occurring
more than ninety days after such termination);

 

(D) if Purchaser’s
employment is terminated by the Company without Cause, by Purchaser with Good
Reason or due to Purchaser’s death or Disability, in any case, (i) prior
to the occurrence of a Liquidity Event and (ii) after the occurrence of an
IPO, Repurchase Period means the ninety-day period commencing on the first
anniversary of the date of such termination (for the avoidance of doubt, the
Vesting Condition shall not be waived and deemed satisfied pursuant to
Section 1(b)(i) above with respect to a Liquidity Event occurring
more than ninety days after such termination), provided,
that if a termination otherwise described in this clause
(D) occurs after the sixth anniversary of the Grant Date, then Repurchase
Period means the ninety-day period commencing on the first anniversary of the
IPO.

 

Except as expressly modified by the terms of this
Second Amendment to the Restricted Stock Agreement, the terms and conditions of
the Restricted Stock Agreement shall remain in full force and effect.

 

[Signature page follows]

 

 

IN WITNESS WHEREOF, the Company and
the Executive agree to the terms of this Second Amendment to the Restricted
Stock Agreement, effective as of the Amendment Effective Date.

 

 

	
   

  	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  DEMAND
  MEDIA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Charles Hilliard

  
	
   

  	
   

  	
  Name:

  	
  Charles
  Hilliard

  
	
   

  	
   

  	
  Title:

  	
  PRES
  & CFO

  

 

 

	
  AGREED AND ACCEPTED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Richard Rosenblatt

  	
   

  	
  February 10, 2010

  
	
  Richard RosenblattExhibit 10.16

 

DEMAND MEDIA, INC.

 

2006 EQUITY INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

 

Demand Media, Inc. (the “Company”), pursuant to its 2006 Equity
Incentive Plan (the “Plan”), hereby grants to Optionee listed below (“Optionee”),
an option to purchase the number of shares of the Company’s Common Stock set
forth below (the “Option”), 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 1, 2007

  
	
   

  	
   

  
	
  Date of Grant:

  	
  June 1, 2007

  
	
   

  	
   

  
	
  Exercise Price per Share:

  	
  $1.00

  
	
   

  	
   

  
	
  Total Number of Shares Granted:

  	
  750,000 Shares

  
	
   

  	
   

  
	
  Total Exercise Price:

  	
  $ 750,000

  
	
   

  	
   

  
	
  Type of Option:

  	
  Incentive
  Stock Option

  

 

Term/Expiration Date: The Term/Expiration Date of
this Option shall be June 1, 2013,
provided, that (i) if a Liquidity
Event (as defined below) shall occur prior to June 1, 2013, then the
Term/Expiration Date of this Option shall instead be the later of the
thirteen-month anniversary of the consummation of the Liquidity Event or June 1, 2013, and (ii) if an IPO (as
defined below) shall occur prior to June 1, 2013, then the Term/Expiration Date of this Option shall
instead be the later to occur of (A) the thirtieth day following the VWAP
Determination Date (as defined below) applicable to the first Fiscal Quarter
(as defined below) immediately after the expiration of any applicable Market
Standoff Period (as defined in Section 4, below), or (B) June 1, 2013.

 

Vesting Schedule: This Option shall vest and
become exercisable as follows:

 

(i)                If a Liquidity Event occurs prior to June 1, 2013,
subject to Optionee’s continued employment with the Company through the first
anniversary of the consummation of such Liquidity Event, this Option shall vest
and become exercisable with respect to all Shares subject hereto on the first
anniversary of such Liquidity Event, provided,
that if, within ninety days prior to or within twelve months after
the consummation of a Liquidity Event, Optionee’s employment is terminated by
the Company without Cause (as defined in the employment agreement between the
Company and Optionee, dated May 9, 2007 (the “Employment Agreement”)),
by Optionee for Good Reason (as defined in the Employment Agreement) or
terminates due to Optionee’s death or Disability (as

 

 

defined below), this Option
shall vest and become exercisable with respect to all Shares subject hereto
immediately prior to any such termination;

 

(ii)               If (a) prior to June 1, 2013, the Company engages in
an initial public offering of its Common Stock pursuant to an effective
registration statement under the Securities Act (an “IPO”), and (b) either
(1) during any Company fiscal quarter beginning after the expiration of any
applicable Market Stand-Off Period and ending prior to June 1, 2013 or (2) if
no such Company fiscal quarter meets the requirements of the preceding Section
(ii)(b)(1), during only the Company fiscal quarter beginning immediately after
the expiration of any applicable Market Standoff Period (any such period, in
either case, a “Fiscal Quarter”), the average of the daily volume
weighted average price of the Common Stock for such Fiscal Quarter (such
average, the “VWAP”) equals or exceeds the VWAP levels set forth in the
table below, then this Option shall vest and become exercisable with respect to
the number of Shares set forth opposite the applicable VWAP levels specified in
the table below on the date that the Administrator determines the VWAP for such
Fiscal Quarter, but in any event, no later than five business days after the
end of any such Fiscal Quarter (each such date, a “VWAP Determination Date”),
subject to Optionee’s continued employment with the Company through such VWAP
Determination Date, provided, that
if, following an IPO occurring on or prior to June 1, 2013, Optionee’s
employment is terminated by the Company without Cause or by Optionee for Good
Reason or terminates due to Optionee’s death or total and permanent Disability,
this Option shall vest and become exercisable on the first VWAP Determination
Date immediately following such termination of employment, if any, with respect
to that number of Shares, if any, with respect to which this Option would have
vested on such VWAP Determination Date had Optionee remained employed with the
Company through such date:

 

	
  If, during a Fiscal Quarter, the

  Common Stock attains VWAP of:

  	
   

  	
  Then this Option shall vest
  and become

  exercisable, on the applicable VWAP

  Determination Date, with respect to:

  
	
  $ 12 or more*

  	
   

  	
  250,000 Shares*

  
	
  $ 13 or more*

  	
   

  	
  250,000 Shares*

  
	
  $ 14 or more*

  	
   

  	
  250,000 Shares*

  

 

* Without limiting the
generality of Section 14 of the Plan, the amounts set forth in this table shall
be appropriately adjusted to reflect common stock dividends, combinations,
splits, reverse splits and similar transactions.

 

For the avoidance of doubt, if the Company’s Common Stock attains a
VWAP during any Fiscal Quarter that satisfies multiple VWAP targets (to the
extent that this Option remains unvested and Optionee remains employed by the
Company through the applicable VWAP Determination Date (except as otherwise
provided above)), this Option shall vest and become exercisable with respect to
the cumulative Shares subject to the multiple VWAP targets, but shall not, in
any event vest and become exercisable with

 

2

 

respect to the Shares subject to any particular VWAP target more than
once. By way of example and not limitation, if the Common Stock attains VWAP of
$14 during the first Fiscal Quarter, then this Option shall vest and become
exercisable with respect to all 750,000 Shares subject hereto on the first VWAP
Determination Date, but if the Common Stock attains VWAP of $13 during each of
the first two Fiscal Quarters and a VWAP of at least $14 during the third
Fiscal Quarter (assuming more than one Fiscal Quarter occurs), this Option
shall vest and become exercisable with respect to (i) 500,000 Shares on the
first VWAP Determination Date, (ii) no additional Shares on the second VWAP
Determination Date, and (iii) an additional 250,000 Shares on the third VWAP
Determination Date.

 

For purposes of this Stock Option Agreement, “Liquidity Event”
shall mean a Change of Control in which both (A) the total consideration
received by the Company’s stockholders (including by way of distribution in the
case of an asset sale transaction) is no less than $10 per Share of Common
Stock (or, if applicable, per Share of Common Stock underlying any Common Stock
equivalents such as convertible preferred stock) (as adjusted for any Common
Stock dividends, combinations, splits, reverse splits or similar transactions),
and (B) the consideration received by the Company’s stockholders in such
transaction is in the form of cash, cash equivalents or freely tradable
securities that the Company’s stockholders are able to transfer or sell without
restrictions (other than restrictions that may be applicable to employees or
executive officers of the Company in their capacities as such and other than
restrictions arising under Rule 145 of the Securities Act).

 

Termination Period: If Optionee’s employment
terminates for any reason prior to Optionee’s exercise of the Option, in whole
or in part, the exercisability of the Option in connection with and following
Optionee’s termination of employment shall be governed by Sections 7, 8, 9 and 10  of
the Agreement below.

 

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.

 

This Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code; provided,
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 this Option,
become 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, and shall instead 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, except as expressly provided in Section (ii) of the
Vesting Schedule, Shares subject to this Option shall vest based on Optionee’s
continued employment with the Company.

 

(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 employment, the exercisability of the Option is
governed by Sections 7, 8, 9 and 10 below.

 

(iv)          In no event may this Option be exercised after the
Term/Expiration Date set forth in the Notice of Grant.

 

(b)           Method
of Exercise. This Option shall be exercisable by written Notice (substantially
in the form attached hereto as Exhibit A or in such other form as the
Administrator may prescribe). The Notice must state the number of Shares for
which the Option is being exercised, and must contain such other
representations and agreements with respect to such Shares as may be required
by the Company. 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 this 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
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, 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)          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, that payment of such
proceeds is then made to the Company upon settlement of such sale; or

 

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

 

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.             Voluntary Resignation; Good Reason; Termination
Without Cause. If Optionee’s employment with the Company terminates due to
Optionee’s voluntary resignation, resignation for Good Reason or due to a
termination by the Company without Cause (excluding any termination due to
Optionee’s death or Disability), (a) if such termination occurs prior to an IPO

 

5

 

and/or
due to Optionee’s voluntary resignation, the Option shall, to the extent vested
as of the date on which Optionee’s employment so terminates (taking into
consideration any vesting that may occur in connection with such termination),
remain exercisable through and including the thirtieth day after Optionee’s
employment so terminates, (b) if such termination occurs on or after an IPO due
to Optionee’s termination by the Company without Cause or by Optionee for Good
Reason (and not due to Optionee’s voluntary resignation), the Option shall
remain exercisable through and including the thirtieth day after the VWAP
Determination Date immediately following such termination of employment
(including with respect to any portion of the Option that may vest and become
exercisable on such VWAP Determination Date), provided,
that in no event shall any portion of the Option remain exercisable
beyond the Term/Expiration Date set forth in the Notice of Grant. To the extent
that the Option has not vested or if Optionee does not exercise the Option
following a termination of employment described in this Section 7, in either
case, within the timeframe specified in this Section 7, the Option shall
terminate.

 

8.             Termination for Cause. If Optionee’s employment
is terminated by the Company for Cause, the Option shall terminate as of the
start of business on the date of Optionee’s termination, regardless of whether
the Option is then vested and/or exercisable with respect to any Shares, and
shall not in any event vest or be exercisable thereafter.

 

9.             Disability of Optionee. If Optionee’s employment
terminates as a result of Optionee’s total and permanent disability as defined
in Code Section 22(e)(3) (“Disability”), to the extent vested as of the
date on which Optionee’s employment so terminates (taking into consideration
any vesting that may occur in connection with such termination) and to the
extent that the Option may vest and become exercisable on the first VWAP
Determination Date immediately following such a termination of employment (only
if an IPO has occurred prior to such termination), the Option shall remain
exercisable for six months from such date of termination (but in no event later
than the Term/Expiration Date set forth in the Notice of Grant). To the extent
that the Option has not vested or if Optionee does not exercise the Option
following a termination of employment described in this Section 9, in either
case, within the timeframe specified in this Section 9, the Option shall
terminate.

 

10.           Death of Optionee. If Optionee’s employment
terminates as a result of Optionee’s death, to the extent vested as of the date
on which Optionee’s employment so terminates (taking into consideration any
vesting that may occur in connection with such termination) and to the extent
that the Option may vest and become exercisable on the first VWAP Determination
Date immediately following such a termination of employment (only if an IPO has
occurred prior to such termination), the Option shall remain exercisable for
six months following the date of death (but in no event later than the
Term/Expiration Date set forth in the Notice of Grant) by Optionee’s estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance. To the extent that the Option has not vested or if the Option is
not exercised by a permitted transferee following a termination of employment
described in this Section 10, in either case, within the timeframe specified in
this Section 10, the Option shall terminate.

 

11.           No Section 280G Gross-Up. 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

 

6

 

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- I 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 (other
than for purposes of determining whether Code Section 280G applies) any value
attributable under Code Section 280G to the Option or the vesting thereof.

 

12.           Non-Transferability of Option. This Option may not
be transferred in any manner except by will or by the laws of descent or
distribution. The Option 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.

 

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

 

14.           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.

 

15.           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.

 

16.           No Right to Continue as Service Provider. Nothing
in the Plan or in this Stock Option Agreement shall confer upon Optionee any
right to 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:

  	
  Richard
  Rosenblatt

  
	
   

  	
  Title:

  	
  Chairman
  and CEO

  

 

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED, EXCEPT TO THE LIMITED EXTENT EXPRESSLY PROVIDED IN
SECTION (II) OF THE VESTING SCHEDULE, 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 Stock Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Stock
Option Agreement 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:
  June 1, 2006

  	
  By:

  	
  /s/
  Charles Hilliard

  
	
   

  	
  Name:

  	
  Charles
  Hilliard

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  c/o
  Demand Media, Inc. 

  
	
   

  	
  1454
  Third St.

  
	
   

  	
  Santa
  Monica, CA 90401

  

 

8

 

FIRST
AMENDMENT TO DEMAND MEDIA, INC.

STOCK OPTION AGREEMENT

 

THIS FIRST AMENDMENT, dated as of February 9,
2010 (the “Amendment Effective Date”), is
entered into by and between Demand Media, Inc., a Delaware corporation (the “Company”) and Charles Hilliard (the “Executive”).
All capitalized terms used herein but not defined shall have the meanings
provided in the Stock Option Agreement, dated June 1, 2007, by and between the
Company and the Executive (the “Option Agreement”).

 

RECITALS

 

WHEREAS, the Company and the Executive previously entered
into the Option Agreement, which sets forth the terms and conditions of a grant
to the Executive of certain stock options; and

 

WHEREAS, the Company and the Executive mutually desire to
amend the Option Agreement to change certain vesting terms applicable to the
Option.

 

NOW, THEREFORE, the Company and the Executive hereby agree
that, effective as of the Amendment Effective Date, in consideration of the
covenants contained herein and other for good and valuable consideration, the
receipt of which is hereby acknowledged, the Option Agreement is hereby amended
as follows:

 

1.    The “Term/Expiration Date”
set forth in the “Notice of Stock Option Grant” is hereby deleted and replaced
in its entirety with the following:

 

“Term/Expiration Date: The
Term/Expiration Date of this Option shall be June 1, 2013, provided, that (i) if a Liquidity Event
(as defined below) shall occur prior to June 1, 2013, then the Term/Expiration
Date of this Option shall instead be the later of the thirteen-month
anniversary of the consummation of the Liquidity Event or June 1, 2013, and
(ii) if an IPO (as defined below) shall occur prior to June 1, 2013, then the
Term/Expiration Date of this Option shall instead be the later to occur of (A)
the thirteen-month anniversary of the IPO, or (B) June 1, 2013.”

 

2.    Section (ii) of the “Vesting
Schedule” and all paragraphs that follow Section (ii) but precede
the “Termination Period” provisions set
forth in the “Notice of Stock Option Grant” are hereby deleted and replaced in
their entirety with the following:

 

“(ii)                 If
(A) prior to June 1, 2013, the Company engages in an initial public offering of
its Common Stock pursuant to an effective registration statement under the
Securities Act (an “IPO”), and (B) the average closing price of a share
of Common Stock on the primary exchange on which such Common Stock is traded
(or, if the Common Stock is regularly quoted by a recognized securities dealer
but selling prices are not reported, the mean between the high bid and low
asked prices for a share of the Common Stock) during any thirty-calendar-day
period following the IPO (which period may include the date of the IPO) equals

 

 

or exceeds ten dollars ($10) (appropriately adjusted to reflect Common
Stock dividends, combinations, splits, reverse splits and similar
transactions), then the Option shall vest and become exercisable with respect
to all Shares subject hereto on the first calendar day following any such
thirty-day period, subject to Optionee’s continued employment with the Company
through such vesting date, provided, that
if Optionee’s employment is terminated by the Company without Cause or by
Optionee for Good Reason or terminates due to Optionee’s death or total and
permanent Disability, the Option shall vest and become exercisable on the first
date during the twelve-month period immediately following such termination of
employment on which the Option would have vested pursuant to this clause (ii)
had Optionee remained employed through such date (if any).

 

For purposes of this Stock Option Agreement, “Liquidity Event”
shall mean a Change of Control in which both (A) the total consideration
received by the Company’s stockholders (including by way of distribution in the
case of an asset sale transaction) is no less than $10 per Share of Common
Stock (or, if applicable, per Share of Common Stock underlying any Common Stock
equivalents such as convertible preferred stock) (as adjusted for any Common
Stock dividends, combinations, splits, reverse splits or similar transactions),
and (B) the consideration received by the Company’s stockholders in such
transaction is in the form of cash, cash equivalents or freely tradable
securities that the Company’s stockholders are able to transfer or sell without
restrictions (other than (i) restrictions that may be applicable to employees
or executive officers of the Company in their capacities as such, (ii)
restrictions arising under Rule 145 of the Securities Act and (iii)
restrictions resulting from a contractual lock-up not to exceed 180 days if the
total market capitalization of the issuer of the securities to which such
lock-up applies (on a post-transaction basis) exceeds $3.0 billion.”

 

3.    Section 7 of the Option
Agreement is hereby deleted and replaced in its entirety with
the following:

 

“7.           Voluntary Resignation; Good Reason; Termination Without
Cause. If Optionee’s employment with the Company terminates due to Optionee’s
voluntary resignation, resignation for Good Reason or due to a termination by
the Company without Cause (excluding any termination due to Optionee’s death or
Disability), (a) if such termination occurs due to Optionee’s voluntary
resignation, the Option shall, to the extent vested as of the date on which
Optionee’s employment so terminates (taking into consideration any vesting that
may occur in connection with such termination), remain exercisable through and
including the thirtieth day after Optionee’s employment so terminates (but in
no event later than the Term/Expiration Date set forth in the Notice of Grant)
or (b) if such termination occurs due to Optionee’s termination by the Company
without Cause or by Optionee for Good Reason (and not due to Optionee’s
voluntary resignation), the Option shall remain exercisable, to the extent
vested (including with respect to any portion of the Option that may vest and
become exercisable following such termination of employment pursuant to clause
(i) of the Vesting Schedule set forth in the Notice of Grant if a Liquidity
Event occurs or pursuant to clause (ii) of the Vesting Schedule set forth in
the Notice of Grant if an IPO occurs or has occurred), through and including
the thirteen- month anniversary of such date of termination (but in no event
later than the Term/Expiration Date set forth in the Notice of Grant). To the
extent that the Option has

 

 

not vested or if Optionee does not exercise the Option following a
termination of employment described in this Section 7, in either case, within
the timeframe specified in this Section 7, the Option shall terminate.”

 

4.    Section 9 of the Option
Agreement is hereby deleted and replaced in its entirety with
the following:

 

“9.           Disability of Optionee. If Optionee’s employment
terminates as a result of Optionee’s total and permanent disability as defined
in Code Section 22(e)(3) (“Disability”), to the extent vested as of the
date on which Optionee’s employment so terminates (taking into consideration
any vesting that may occur in connection with such termination), the Option
shall remain exercisable for a period of six months from such date of
termination (but in no event later than the Term/Expiration Date set forth in
the Notice of Grant), provided, that
to the extent that the Option has not vested as of the date on which Optionee’s
employment so terminates but may vest and become exercisable following such
termination of employment pursuant to clause (i) of the Vesting Schedule set
forth in the Notice of Grant if a Liquidity Event occurs or pursuant to clause
(ii) of the Vesting Schedule set forth in the Notice of Grant if an IPO occurs
or has occurred, the Option shall remain exercisable (including with respect to
any portion of the Option that may vest and become exercisable following such
termination of employment) through and including the date that is the earlier
to occur of (y) the six month anniversary of the date that the Option vests and
(z) the thirteen-month anniversary of such date of termination (but in no event
later than the Term/Expiration Date set forth in the Notice of Grant). To the
extent that the Option has not vested or if Optionee does not exercise the
Option following a termination of employment described in this Section 9, in
either case, within the timeframe specified in this Section 9, the Option shall
terminate.

 

5.      Section 10 of the Option Agreement is hereby
deleted and replaced in its entirety with the following:

 

“10. Death of Optionee. If Optionee’s employment terminates as a
result of Optionee’s death, to the extent vested as of the date on which
Optionee’s employment so terminates (taking into consideration any vesting that
may occur in connection with such termination) the Option shall remain
exercisable for a period of six months from such date of termination (but in no
event later than the Term/Expiration Date set forth in the Notice of Grant) by
Optionee’s estate or by a person who acquires the right to exercise the Option
by bequest or inheritance; provided, that
to the extent that the Option has not vested as of the date on which Optionee’s
employment so terminates but may vest and become exercisable following such
termination of employment pursuant to clause (i) of the Vesting Schedule set
forth in the Notice of Grant if a Liquidity Event occurs or pursuant to clause
(ii) of the Vesting Schedule set forth in the Notice of Grant if an IPO occurs or has occurred, the Option
shall remain exercisable (including with respect to any portion of the Option
that may vest and become exercisable following such termination of employment)
by Optionee’s estate (or by a person who acquires the right to exercise the
Option by bequest or inheritance) through and including the date that is the
earlier to occur of (y) the six month anniversary of the date that the Option
vests and (z) the thirteen-month anniversary of such date of termination (but
in no event later than the

 

 

Term/Expiration Date set
forth in the Notice of Grant). To the extent that the Option has not vested or
if the Option is not exercised by a permitted transferee following a
termination of employment described in this Section 10, in either case, within
the timeframe specified in this Section 10, the Option shall terminate.

 

Except as expressly modified by the terms of this First Amendment to
the Option Agreement, the terms and conditions of the Option Agreement shall
remain in full force and effect.

 

[Signature page follows]

 

 

IN WITNESS WHEREOF, the Company
and the Executive agree to the terms of this First Amendment to the Option
Agreement, effective as of the Amendment Effective Date.

 

	
   

  	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  DEMAND MEDIA, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard Rosenblatt

  
	
   

  	
   

  	
  Name: Richard Rosenblatt

  
	
   

  	
   

  	
  Title: Chairman, CEO and Co-Founder

  

 

 

	
  AGREED AND ACCEPTED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Charles Hilliard

  	
   

  	
  February 9, 2010

  
	
  Charles Hilliard

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00176-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00176-of-00352.parquet"}]]