Document:

Exhibit 10.07

 

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, 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:

  	
  Optionee

  
	
   

  	
   

  
	
  Date of Stock Option Agreement:

  	
  Date of Stock Option Agreement

  
	
   

  	
   

  
	
  Date of Grant:

  	
  Date of Grant

  
	
   

  	
   

  
	
  Vesting Commencement Date:

  	
  Vesting Commencement Date

  
	
   

  	
   

  
	
  Exercise Price per Share:

  	
  $0.00

  
	
   

  	
   

  
	
  Total Number of Shares Granted:

  	
  0

  
	
   

  	
   

  
	
  Total Exercise Price:

  	
  $0.00

  
	
   

  	
   

  
	
  Term/Expiration Date:

  	
  Expiration Date

  

 

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

 

Vesting Schedule:                                            The Shares
subject to this Option shall vest according to the following schedule:

 

[SCHEDULE]

 

Termination Period:                                 Except in  the event of a termination of Optionee’s service by the
Company for Cause, this Option may be exercised, to the extent vested, for
thirty (30) days after Optionee ceases to be a Service Provider, or such longer
period as may be applicable upon the death or disability of Optionee as
provided herein, but in no event later than the Term/Expiration Date as
provided above.

 

II.                                     AGREEMENT

 

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

 

 

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

 

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

 

(a)                                  Right to
Exercise.

 

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

 

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

 

(iii)                               In the event of
Optionee’s death, disability or other termination of Optionee’s status as a
Service Provider, the exercisability of the Option is governed by
Sections 7, 8, 9 and 10 below.

 

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

 

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

 

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

 

2

 

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) (the “Market Standoff Period”) following the
effective date of a registration statement of the Company filed under the
Securities Act; provided, that
such restriction shall apply only to the first registration statement of the
Company to become effective under the Securities Act that includes securities
to be sold on behalf of the Company to the public in an underwritten public
offering under the Securities Act.  The
Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such Market Standoff
Period 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 which (A) in the case of Shares acquired from the Company,
have been owned by Optionee for more than six (6) months on the date
of surrender, and (B) have a Fair Market Value on the date of surrender
equal to the Exercise Price of the Shares as to which the Option is being
exercised;

 

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

 

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

 

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

 

3

 

(vi)                              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.                                       Termination of
Relationship.  If Optionee
ceases to be a Service Provider (other than by reason of a termination by the
Company for Cause or Optionee’s death or the total and permanent disability of
Optionee as defined in Code Section 22(e)(3)), to the extent vested as of
the date on which Optionee ceases to be a Service Provider (taking into
consideration any vesting that may occur in connection with such termination),
the Option shall remain exercisable for thirty (30) days following such date of
termination (but in no event later than the expiration date of the term of the
Option as set forth in the Notice of Grant). 
To the extent that the Option is not vested as of the date on which
Optionee ceases to be a Service Provider, or if Optionee does not exercise the
Option within the time specified herein, the Option shall terminate.

 

8.                                       Termination for Cause.  If Optionee ceases to be a Service Provider
by reason of a termination 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.

 

9.                                       Disability of
Optionee.  If Optionee
ceases to be a Service Provider as a result of his or her total and permanent
disability as defined in Code Section 22(e)(3), the Option, to the extent
vested as of the date on which Optionee ceases to be a Service Provider, shall
remain exercisable for six (6) months from such date (but in no event
later than the expiration date of the term of the Option as set forth in the
Notice of Grant).  To the extent that the
Option is not vested as of the date on which Optionee ceases to be a Service
Provider, or if Optionee does not exercise such Option within the time
specified herein, the Option shall terminate.

 

10.                                 Death of
Optionee.  If Optionee
ceases to be a Service Provider as a result of Optionee’s death, the Option, to
the extent vested as of the date of death, shall remain exercisable for six (6) months
following the date of death (but in no event later than the expiration date of
the term of the Option as 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 is not vested as of the date of Optionee’s death, or if the Option is
not exercised within the time specified herein, the Option shall terminate.

 

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

 

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

 

4

 

13.                                 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.

 

14.                                 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.

 

15.                                 No Right to
Employment.  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)

 

5

 

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:

  	
   

  
	
   

  	
  Name:

  	
  Name

  
	
   

  	
  Title:

  	
  Title

  

 

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

 

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

 

	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Optionee

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address: 

  
 Address  
 City, State, Zip

  

 

6

 

EXHIBIT A

 

DEMAND MEDIA, INC.

 

2006 EQUITY INCENTIVE PLAN

 

EXERCISE NOTICE

 

Demand
Media, Inc.

 

Attention:
[Stock Administration]

 

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

 

	
  Date of Grant:

  	
  Date of Grant

  
	
   

  	
   

  
	
  Number of Shares as to which Option is
  Exercised:

  	
   

  
	
   

  	
   

  
	
  Exercise Price per Share:

  	
  $0.00

  
	
   

  	
   

  
	
  Total Exercise Price:

  	
  $

  
	
   

  	
   

  
	
  Certificate to be issued in name of:

  	
   

  
	
   

  	
   

  
	
  Cash Payment delivered herewith:

  	
  o

  	
  $

  
	
   

  	
   

  	
   

  
	
  Promissory note delivered herewith:

  	
  o

  	
  $

  

 

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

 

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

 

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

 

A-1

 

Right or the Take-Along Right hereunder (each
as defined below).  Upon such exercise,
Optionee shall have no further rights as a holder of the Shares so purchased
except the right to receive payment for the Shares so purchased in accordance
with the provisions of this Exercise Notice, and Optionee shall forthwith cause
the certificate(s) evidencing the Shares so purchased to be surrendered to
the Company for transfer or cancellation.

 

4.             Company’s Right of First Refusal. Before any
Shares held by Optionee (including, for purposes of Sections 4, 5 and 6 hereof,
any permitted transferee holding Shares) may be sold, pledged, assigned,
hypothecated, transferred, or otherwise disposed of (including transfer by gift
or operation of law) (collectively, “Transfer” or “Transferred”),
the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section 4
(the “Right of First Refusal”).

 

(a)           Notice of Proposed
Transfer.  Optionee shall
deliver to the Company a written notice (the “Notice”) stating:  (i)  Optionee’s bona fide intention to
sell or otherwise Transfer such Shares; (ii) the name of each proposed
purchaser or other transferee (“Proposed  Transferee”);
(iii) the number of Shares to be Transferred to each Proposed Transferee;
and (iv) the bona fide cash price or other consideration for which Optionee
proposes to Transfer the Shares (the “Offered Price”), and Optionee
shall offer the Shares at the Offered Price to the Company or its assignee(s).

 

(b)           Exercise of Right of First
Refusal.  Within thirty (30)
days after receipt of the Notice, the Company and/or its assignee(s) may
elect in writing to purchase all, but not less than all, of the Shares proposed
to be Transferred to any one or more of the Proposed Transferees.  The purchase price will be determined in
accordance with subsection (c) below.

 

(c)           Purchase Price.  The purchase price (the “ROFR Purchase
Price”) for the Shares repurchased under this Section shall be the
Offered Price.  If the Offered Price
includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board in good faith.

 

(d)           Payment.  Payment of the ROFR Purchase Price shall be
made, at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of Optionee to
the Company (or, in the case of repurchase by an assignee, to the assignee), or
by any combination thereof within thirty (30) days after receipt of the Notice
or in the manner and at the times set forth in the Notice.

 

(e)           Optionee’s Right to
Transfer.  If all of the
Shares proposed in the Notice to be transferred to a given Proposed Transferee
are not purchased by the Company and/or its assignee(s) as provided in
this Section, then  Optionee may sell or
otherwise Transfer such Shares to that Proposed Transferee at the Offered Price
or at a higher price, provided that such sale or other Transfer is consummated
within one hundred twenty (120) days after the date of the Notice and
provided further that any such sale or other Transfer is effected in accordance
with any applicable securities laws and the Proposed Transferee agrees in
writing that (i) the provisions hereof, including without limitation the
provisions of Sections 4, 5 and 6 hereof, shall continue to apply to the Shares
in the hands of such Proposed Transferee and (ii) that such Proposed
Transferee will not transfer the Shares any other purchaser or transferee
unless such 

 

A-2

 

future purchase or transferee agrees in
writing to be bound by the provisions hereof, including without limitation the
provisions of Sections 4, 5 and 6 hereof. 
If the Shares described in the Notice are not Transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal as provided herein before any Shares held by the Holder may be
sold or otherwise Transferred.

 

(f)            Exception for Certain
Family Transfers.  Anything to
the contrary contained in this Section 4 notwithstanding, the Transfer of
any or all of the Shares during Optionee’s lifetime or on Optionee’s death by
will or intestacy to Optionee’s Immediate Family or a trust for the benefit of
Optionee’s Immediate Family shall be exempt from the Right of First
Refusal.  As used herein, “Immediate
Family” shall mean spouse, lineal descendant or antecedent, father, mother,
brother or sister or stepchild (whether or not adopted).  In such case, the transferee or other
recipient shall receive and hold the Shares so Transferred subject to the
provisions hereof, including without limitation the provisions of Sections 4, 5
and 6 hereof, and there shall be no further Transfer of such Shares except in
accordance with the terms hereof.

 

(g)           Termination of Right of
First Refusal.  The Right of
First Refusal shall terminate as to all Shares upon the Public Trading Date.

 

5.             Company Call Right.

 

(a)         Call Right.  If Optionee ceases to be a Service Provider
for any reason, the Company shall have the right to purchase from Optionee any
or all of the Shares then owned by Optionee (and any or all Shares acquired
upon exercise of the Option after the date on which the Optionee ceases to be a
Service Provider) at a per Share price equal to the Fair Market Value of a
Share on the date on which the Optionee ceases to be a Service Provider (the “Call
Right”).

 

(b)         Exercise of Call Right.  The Company may exercise the Call Right by
delivering personally or by registered mail to Optionee (or his transferee or
legal representative, as the case may be), within ninety (90) days after the
date on which Optionee ceases to be a Service Provider (or, in the case of
Shares which are acquired after the date on which Optionee ceases to be a
Service Provider, then within ninety (90) days after the date on which such
Shares are acquired), a notice in writing indicating the Company’s intention to
exercise the Call Right and setting forth a date for closing not later than
thirty (30) days from the mailing of such notice.

 

(c)         Payment.  Payment in respect of the Call Right shall be
made, at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the
Optionee to the Company, or by any combination thereof within thirty (30) days
after receipt of the Notice or in the manner and at the times set forth in the
Notice.

 

(d)         Closing.  The closing shall take place at the Company’s
office.  At the closing, Optionee shall
deliver the stock certificate or certificates evidencing the Shares, and the
Company shall deliver the purchase price therefor.  At its option, the Company may elect to make
payment for the Shares at a bank selected by the Company.  The Company shall avail itself 

 

A-3

 

of this option by a notice in writing to
Optionee stating the name and address of the bank, date of closing, and waiving
the closing at the Company’s office.

 

(e)         Termination of Company
Call Right.  If the Company
does not elect to exercise the Call Right conferred above by giving the
requisite notice within the time provided in Subsection (b) above, the
Call Right shall terminate.  The Call
Right shall terminate as to all Shares upon the Public Trading Date.

 

6.             Company Take-Along Right.

 

(a)           Approved
Sale.  If the Board shall
deliver a notice to Optionee (a “Sale Event Notice”) stating that the
Board has approved a sale of all or a portion of the Company (an “Approved
Sale”) and specifying the name and address of the proposed parties to such
transaction and the consideration payable in connection therewith, Optionee
shall (i) consent to and raise no objections against the Approved Sale or
the process pursuant to which the Approved Sale was arranged, (ii) waive
any dissenter’s rights and other similar rights, and (iii) if the Approved
Sale is structured as a sale of securities, agree to sell Optionee’s Shares on
the terms and conditions of the Approved Sale which terms and conditions shall
treat all stockholders of the Company equally (on a pro rata basis), except
that shares having a liquidation preference may receive an amount of
consideration equal to such liquidation preference in addition to the
consideration being paid to the holders of shares not having a liquidation
preference.  Notwithstanding the
foregoing, the sale of the Shares in an Approved Sale shall be further subject
to the terms of the Plan, including without limitation Section 14 of the
Plan.  Optionee will take all necessary
and desirable lawful actions as directed by the Board and the stockholders of
the Company approving the Approved Sale in connection with the consummation of
any Approved Sale, including without limitation, the execution of such
agreements and such instruments and other actions reasonably necessary to (A) provide
the representations, warranties, indemnities, covenants, conditions,
non-compete agreements, escrow agreements and other provisions and agreements
relating to such Approved Sale and, (B) effectuate the allocation and
distribution of the aggregate consideration upon the Approved Sale, provided, that this Section 6 shall not require
Optionee to indemnify the purchaser in any Approved  Sale for breaches of the representations,
warranties or covenants of the Company or any other stockholder, except to the
extent (x) Optionee is not required to incur more than its pro rata share
of such indemnity obligation (based on the total consideration to be received
by all stockholders that are similarly situated and hold the same class or
series of capital stock) and (y) such indemnity obligation is provided for
and limited to a post-closing escrow or holdback arrangement of cash or stock
paid in connection with the Approved Sale.

 

(b)           Costs.  Optionee will bear Optionee’s  pro rata share
(based upon the amount of consideration to be received) of the reasonable costs
of any sale of Shares pursuant to an Approved Sale to the extent such costs are
incurred for the benefit of all selling stockholders of the Company and are not
otherwise paid by the Company or the acquiring party.  Costs incurred by Optionee on Optionee’s own
behalf will not be considered costs of the transaction hereunder.

 

A-4

 

(c)           Share
Delivery.  At the consummation
of the Approved Sale, Optionee shall, if applicable, deliver certificates
representing the Shares to be transferred, duly endorsed for transfer and
accompanied by all requisite stock transfer taxes, if any, and the Shares to be
transferred shall be free and clear of any liens, claims or encumbrances (other
than restrictions imposed by this Agreement) and Optionee shall so represent
and warrant.

 

(d)           Termination
of Company Take-Along Right.   The Take-Along Right shall terminate as to
all Shares upon the Public Trading Date.

 

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

 

8.             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)
(the “Market Standoff Period”) following the effective date of a
registration statement of the Company filed under the Securities Act; provided, that such restriction shall
apply only to the first registration statement of the Company to become
effective under the Securities Act that includes securities to be sold on
behalf of the Company to the public in an underwritten public offering under
the Securities Act.  The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.

 

9.             Restrictive Legends and Stop-Transfer Orders.

 

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

 

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

 

A-5

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-6

 

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

 

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

 

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

 

	
  Accepted
  by:

  	
   

  	
  Submitted
  by:

  
	
   

  	
   

  	
   

  
	
  DEMAND MEDIA, INC.

  	
   

  	
  OPTIONEE

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
  Name

  	
   

  	
  Name:

  	
  Optionee

  
	
  Title:

  	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address:

  
 Address  
 City, State, Zip

  

 

A-7

 

EXHIBIT B

 

INVESTMENT REPRESENTATION
STATEMENT

 

	
  OPTIONEE

  	
  :

  	
  Optionee

  
	
   

  	
   

  	
   

  
	
  COMPANY

  	
  :

  	
  Demand
  Media, Inc.

  
	
   

  	
   

  	
   

  
	
  SECURITY

  	
  :

  	
  Common
  Stock

  
	
   

  	
   

  	
   

  
	
  AMOUNT

  	
  :

  	
   

  
	
   

  	
   

  	
   

  
	
  DATE

  	
  :

  	
   

  

 

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

 

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

 

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

 

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

 

B-1

 

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

 

In
the event that the Company does not qualify under Rule 701 at the time of
grant of the Option, then the Securities may be resold 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.

 

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

 

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

 

	
   

  	
  Signature
  of Optionee:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Optionee

  

 

 

Date:
                                              ,     

 

B-2Exhibit 10.08

 

EMPLOYMENT AGREEMENT

 

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

 

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

 

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

 

NOW,
THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

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

 

2.                                       Terms of
Employment.

 

(a)                                  Position and Duties.

 

(i)                                     During the
Employment Period, the Executive shall serve as Chairman (subject to his
election to the Company’s Board of Directors (the “Board”)) and Chief
Executive Officer of the Company, reporting directly to the Board, and shall
perform such duties as are usual and customary for such positions.  During the Employment Period, the Company
shall cause the Executive to be nominated to stand for election to the Board at
any meeting of stockholders of the Company during which any such election is
held and the Executive’s term as director will expire (and his role as Chairman
cease) if he is not reelected; provided, however, that the
Company shall not be obligated to cause such nomination if any of the events
constituting Cause (as defined below) have occurred and not been cured.  At the Company’s request, the Executive shall
serve the Company and/or its subsidiaries and affiliates in other capacities in
addition to the foregoing consistent with the Executive’s role as Chairman and
Chief Executive Officer of the Company. 
In the event that the Executive, during the Employment Period, serves in
any one or more of such additional capacities, the Executive’s compensation
shall not be increased beyond that specified in Section 2(b) hereof.  In addition, in the event the Executive’s
service in one or more of such additional capacities is terminated, the
Executive’s compensation, as specified in Section 2(b) hereof, shall
not be diminished or reduced in any manner as a result of such termination
provided that the Executive otherwise remains employed under the terms of this
Agreement.

 

 

(ii)                                  During the
Employment Period, and excluding any periods of vacation and sick leave to
which the Executive may be entitled, the Executive agrees to devote his full business
time and attention to the business and affairs of the Company.  Notwithstanding the foregoing, during the
Employment Period, it shall not be a violation of this Agreement for the
Executive to engage in any of the following activities: (A) serve on
boards, committees or similar bodies of charitable or nonprofit organizations, (B) fulfill
limited teaching, speaking and writing engagements, (C) continue to serve
as Managing Member of Highview Ventures, as a director of The FRS Company, (D) service
on up to two additional corporate boards of companies (or comparable bodies of
non-corporate entities) that do not compete or conflict with the business of
the Company, subject to the approval of the Board, which approval shall not be
unreasonably withheld, (E) holding economic interests in companies in
which the Executive does not take an operating role and/or (F) the
Executive’s management of current personal investments which do not require the
Executive’s active participation in the management or the operation of the
investments, in each case, so long as such activities do not, individually or
in the aggregate, materially interfere or conflict with the performance of the
Executive’s duties and responsibilities under this Agreement.

 

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

 

(b)                                 Compensation, Benefits, Etc.

 

(i)                                     Base Salary.  During the Employment Period, the Executive
shall receive a base salary initially set at the rate in effect as of the
Effective Date, and increased on January 1, 2011 to a rate of $450,000 per
annum (the “Base Salary”).  The
Base Salary shall be reviewed annually by the Compensation Committee of the
Board (the “Compensation Committee”) and may be increased from time to
time by the Compensation Committee in its sole discretion.  The Base Salary shall be paid in installments
in accordance with the Company’s applicable payroll practices, as in effect
from time to time, but no less often than monthly.  The Base Salary shall not be reduced after
any increase in accordance herewith and the term “Base Salary” as utilized in
this Agreement shall refer to Base Salary as so increased.

 

(ii)                                  Annual Bonus.  In addition to the Base Salary, the Executive
shall be eligible to earn, for each fiscal year of the Company ending during
the Employment Period, a discretionary cash performance bonus (an “Annual
Bonus”) under the Company’s bonus plan or program applicable to senior
executives.  The Executive’s target
Annual Bonus for 2010 shall be set at the level in effect as of the Effective
Date and shall, for fiscal years 2011 and later during the Employment Period,
be set at one hundred percent (100%) of his Base Salary actually paid for such
year, but the actual amount of the Annual Bonus shall be determined on the
basis of the attainment of Company performance metrics and/or individual
performance objectives, in each case, as established and approved by the Board
or the Compensation Committee in its sole discretion. Payment of any Annual
Bonus(es), to the extent any Annual Bonus(es) become payable, will be
contingent upon the Executive’s continued employment through 

 

2

 

the applicable payment date, which shall occur on
the date on which annual bonuses are paid generally to the Company’s senior
executives.

 

(iii)                               Stock Option
Awards.  Subject to adoption by the
Board and approval by the Company’s stockholders of the 2010 Incentive Award Plan (the “Plan”),
the Company shall grant to the Executive, as soon as practicable after the execution
of this Agreement (which grant date, for the avoidance of doubt, may precede
the Effective Date) (the “Grant Date”), the following nonqualified
options to purchase shares of the Company’s common stock (each, a “2010 Stock
Option” and together, the “2010 Stock
Options”):

 

(A)                              An option to purchase two
million three hundred (2,300,000) shares of Common Stock with an exercise price
equal $9.00 (nine dollars) per share;

 

(B)                                An option to
purchase two million three hundred (2,300,000) shares of Common Stock with an
exercise price equal to $12.00 (twelve dollars) 
per share;

 

(C)                                An option to
purchase two million three hundred (2,300,000) shares of Common Stock with an
exercise price equal to $15.00 (fifteen dollars) per share; and

 

(D)                               An option to
purchase two million three hundred (2,300,000) shares of Common Stock with an
exercise price equal to $18.00 (eighteen dollars) per share.

 

Subject to Section 4(a) hereof,
the shares subject to each of the 2010 Stock Options shall vest and become
exercisable in thirty-six (36) substantially equal monthly installments
(rounded up to the nearest whole share), starting on the second (2nd) anniversary of the
Effective Date and on each monthly anniversary of such date over the three
(3)-year period thereafter (for a total vesting period of five (5) years
from the Effective Date), subject to the Executive’s continued employment with
the Company through the applicable vesting date.  If the Effective Date does not occur on or
prior to March 31, 2011 for any reason, then, notwithstanding anything to
the contrary, each of the 2010 Stock Options shall terminate and be forfeited,
and the Company shall have no further obligations with respect thereto.  The terms and conditions of the 2010 Stock
Options shall, in a manner consistent with this Section 2(b)(iii), be set
forth in separate award agreements in a form prescribed by the Company (the “Stock
Option Agreements”), to be entered into by the Company and the Executive,
which shall evidence the grant of the 2010 Stock Options.  The 2010 Stock Options shall be governed in
all respects by the terms and conditions of the Plan.

 

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

 

3

 

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

 

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

 

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

 

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

 

3.                                       Termination of
Employment.

 

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

 

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

 

(i)                                     the Executive’s failure
(other than due to Disability) to materially comply with written Company
policies generally applicable to Company officers or employees or any directive
of the Board that is reasonably achievable, that is not inconsistent with the
Executive’s position as Chairman or Chief Executive Officer or the 

 

4

 

fulfillment
of the Executive’s fiduciary duties and that is not otherwise prohibited by law
or established public policy, subject to the receipt of a Notice of Termination
(as defined below) and thirty (30) day cure period after the Executive’s receipt
of the Notice of Termination, to the extent such circumstances are curable;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)                                     any action by
the Company that results in a demotion or material diminution of the Executive’s
position, authority, duties or responsibilities (other than any insubstantial
action not taken in bad faith and which is promptly remedied by the Company
upon notice by the Executive); provided that “Good Reason” does not include a
change in title, authority, duties and/or responsibilities that occurs within
thirty (30) days following a Change in Control (as defined in the Plan)
if (A) the Executive’s new title is that of an executive officer of
the entity surviving such Change in Control (or, if applicable, its parent
company if such entity has a parent company) reporting directly to the Chief
Executive Officer of the entity surviving such Change in Control (or, if
applicable, its parent company, if such entity has a parent company) and
the Executive’s 

 

5

 

authority, duties and responsibilities are
commensurate with such title or (B) (1) the entity surviving such
Change in Control (or, if applicable, its parent company if such entity has a
parent company) continues to operate the Company’s principal businesses as a
separate unit, division or subsidiary or combines the Company’s principal
businesses with one of its existing units, divisions or subsidiaries and
(2) the Executive’s new title is that of the principal executive
officer of such unit, division or subsidiary and the Executive’s
authority, duties and responsibilities are commensurate with such title and are
similar in scope (with respect to such unit, division or subsidiary) to the
authority, duties and responsibilities of the Executive prior to the Change in
Control;

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

4.                                       Obligations of
the Company upon Termination.

 

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

 

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

 

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

 

(A)                              an amount equal to
one-and-one-half (1.5) (the “Multiplier”) times the sum of (x) the
Base Salary in effect on the Date of Termination (disregarding any reduction in
Base Salary that would give rise to the Executive’s right to terminate for Good
Reason), plus (y) the Annual Bonus earned by the Executive for the
calendar year immediately prior to the calendar year in which the Date of
Termination occurs, payable in substantially equal installments in accordance
with the Company’s normal payroll procedures during the period commencing on
the Date of Termination and ending on the eighteen (18)-month anniversary of
the Date of Termination; provided, however, that no payments
under this Section 4(a)(ii)(A) shall be made prior to the first
payroll date occurring on or after the thirtieth (30th) day following the Date of Termination (such
payroll date, the “First Payroll Date”) (with amounts otherwise payable
prior to the First Payroll Date paid on the First Payroll Date without interest
thereon); provided, further, that if a Change in Control that constitutes a “change in control event”
within the meaning of Section 409A of the Code occurs (I) on or
within ninety (90) days after the Date of Termination, the Multiplier shall be
increased to two (2) and any then-unpaid amounts owing under this Section 4(a)(ii)(A) shall
be paid in a lump-sum upon such Change in Control (or, if later, on the First
Payroll 

 

7

 

Date), or (II) within
one (1) year before the Date of Termination, the Multiplier shall be
increased to two (2) and amounts payable under this Section 4(a)(ii)(A) shall
be paid in a lump-sum on the First Payroll Date  (it being understood that fifty percent (50%) of any
payments made pursuant to Section 4(a)(ii)(A)(I) or 4(a)(ii)(A)(II) are
intended by the parties as, and shall constitute, consideration paid in
exchange for the Executive’s willingness to enter into and comply with a
noncompetition agreement in connection with a Change in Control); and

 

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

 

(iii)                               In addition,
subject to and conditioned upon the Executive’s timely execution and
non-revocation of a Release, all outstanding compensatory equity awards then
held by the Executive that have not yet vested, other than (A) the awards
issued pursuant to the Stock Option Agreement dated April 19, 2007, as
amended, between the Executive and the Company (the “2007 Stock Option
Agreement”) and the Restricted Stock Agreement dated April 19, 2007,
as amended, between the Executive and the Company (the “2007 Restricted
Stock Agreement”) (collectively, the “Performance Awards”)), and (B) the
2010 Stock Options (each addressed separately below), shall conditionally vest
and, as applicable, become exercisable immediately prior to such termination of
employment (and such vesting shall become unconditional upon such execution and
non-revocation of a Release), provided, however, that if the
Executive fails to timely execute or revokes the Release, all such
conditionally vested awards (and any shares received in respect of such awards)
shall be forfeited upon such failure or revocation (subject to repayment by the
Company to the Executive of any amounts (if any) paid by the Executive with
respect to shares underlying such conditionally vested awards). The Performance
Awards, as amended by Section 4(f)(i) of this Agreement, shall be
governed in accordance with the terms (including the vesting terms) of the
applicable award agreements. With respect to the 2010 Stock Options: (x) if
the Executive’s termination of employment under this Section 4(a) is
due to a termination without Cause or for Good Reason, all 2010 Stock Options
shall conditionally vest in full and become exercisable immediately prior to
the Date of Termination, and (y) if the Executive’s termination of
employment under this Section 4(a) is due to the Executive’s death or
Disability, each 2010 Stock Option shall conditionally vest and become
exercisable with respect to 460,000 of the then-unvested shares of Common Stock
subject thereto (or such lesser number of unvested shares as are then covered
by such 2010 Stock Option) immediately prior to the Date of Termination, provided, however, that if a Change in Control has occurred within one (1) year
prior to, or occurs on or within ninety (90) days after, such Date of
Termination, the 2010 Stock Options shall, immediately 

 

8

 

prior to the later to occur of the Change in Control
or the Date of Termination, conditionally vest in full and become exercisable
with respect to all then-unvested shares of Common Stock subject thereto (it
being understood that this proviso shall not reduce or delay any vesting that
would otherwise occur immediately prior to the Date of Termination or change
the conditional nature of any accelerated vesting that occurs pursuant to this
sentence prior to receipt and non-revocation of a Release (including, without
limitation, where a Change in Control occurs during the applicable release
consideration/revocation period that follows a Date of Termination), and such
conditional vesting shall become unconditional upon such execution and
non-revocation of a Release), provided, further, that if the
Executive fails to timely execute or revokes the Release, all conditionally
vested 2010 Stock Options (and any shares received in respect of the 2010 Stock
Options) shall be forfeited upon such failure or revocation (subject to
repayment by the Company to the Executive of any amounts (if any) paid by the
Executive with respect to shares underlying such conditionally vested 2010
Stock Options). In the event the Executive’s employment is terminated by the
Company without Cause or by the Executive for Good Reason, all vested Company
stock options held by the Executive (after taking into consideration any
vesting that may occur in accordance herewith) other than the Performance
Awards shall remain outstanding and exercisable until the earlier of the first
anniversary of the Date of Termination or the stock option’s stated expiration
date.  For the avoidance of doubt, if the
Executive terminates employment due to death or Disability prior to a Change in
Control, all outstanding, unvested 2010 Stock Options that would otherwise
terminate on the Date of Termination shall remain outstanding and eligible to
vest solely upon a Change in Control occurring within ninety (90) days after
the Date of Termination (but shall not otherwise vest following the Date of
Termination) and shall terminate on the ninetieth (90th) day following the Date of
Termination if a Change in Control has not occurred on or prior to such
ninetieth (90th) day (or such
earlier expiration date applicable to such 2010 Stock Option (other than due to
a termination of employment)).

 

(iv)                              In addition,
subject to Section 4(d) hereof and conditioned upon the Executive’s
timely execution and non-revocation of a Release, during the period commencing
on the Date of Termination and ending on the eighteen (18)-month anniversary of
the Date of Termination or, if earlier, the date on which the Executive becomes
eligible for coverage under the group health plan of a subsequent employer (of
which eligibility the Executive hereby agrees to give prompt notice to the
Company) (in any case, the “COBRA Period”), subject to the Executive’s
valid election to continue healthcare coverage under Section 4980B of the
Code and the regulations thereunder, the Company shall continue to provide the
Executive and the Executive’s eligible dependants with coverage under its group
health plans at the same levels and the same cost to the Executive as would
have applied if the Executive’s employment had not been terminated based on the
Executive’s elections in effect on the Date of Termination), provided,
however, that (1) if any plan pursuant to which such
benefits are provided is not, or ceases prior to the expiration of the period
of continuation coverage to be, exempt from the application of Section 409A
of the Code under Treasury Regulation Section 1.409A-1(a)(5), or (2) the
Company is otherwise unable to continue to cover the Executive under its group
health plans, then, in either case, an amount equal to each remaining Company
subsidy shall thereafter be paid to the Executive as currently taxable
compensation in 

 

9

 

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

 

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

 

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

 

(c)                                  Continued Employment Following
a Change in Control.  If the
Company experiences a Change in Control and the Executive remains employed with
the Company (or its successor or an affiliate of the foregoing) through the six
(6)-month anniversary of the consummation of the Change in Control, all Company
stock options and other compensatory equity awards held by the Executive (other
than Performance Awards) on such six (6)-month anniversary shall vest and, as
applicable, become exercisable on such six (6)-month anniversary.  The Performance Awards, as amended by Section 4(f)(i) below,
shall be governed in accordance with the terms (including the vesting terms) of
the applicable award agreements.

 

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

 

10

 

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

 

(f)                                    Equity Award Agreements.

 

(i)                                     From and after the Effective Date, each of the Performance Awards is
hereby amended to change the reference in clause “(i)” of the “Vesting Schedule”
paragraph of the 2007 Stock Option Agreement, and the reference in Section 1(b)(i) of
the 2007 Restricted Stock Agreement, from “first
anniversary of the consummation of such Liquidity Event” to
“six-month anniversary of the Liquidity Event” such that the Executive shall
only be required to remain employed for six (6) months following a Liquidity
Event to vest in the applicable award (and subject to acceleration on
qualifying terminations prior to such six (6)-month anniversary, as set forth
in the applicable award agreement).  In
addition, from and effective as of the Effective Date, the reference to “Employment
Agreement” in each of the Performance Awards and the Stock Option Agreement
dated June 9, 2009 between the Executive and the Company (the “2009
Stock Option Agreement”) shall be deemed a reference to this
Agreement.  Except as set forth in Section 6(a)(i) hereof,
all other provisions of the Performance Awards and the 2009 Stock Option
Agreement shall remain in full force and effect in accordance with the
applicable award agreements.

 

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

 

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

 

6.                                       Excess
Parachute Payments, Limitations on Payments.

 

(a)                                  Notwithstanding anything to
the contrary in any prior award agreement (including the Performance Awards and
the 2009 Stock Option Agreement), in the event that a Change in Control is
consummated on or prior to the fourth (4th) anniversary of the Effective Date, this Section 6(a) shall
apply and Section 6(b) hereof shall not apply.  For the avoidance of doubt, in the event that
a Change in Control is consummated on or prior to the fourth (4th) anniversary of the
Effective Date, this Section 6(a) shall apply to, and supersede any
language to the contrary contained in, any prior award agreement (including,
without limitation, the provisions set forth under the heading “No Section 280G
Gross-Up” contained in each of the Performance Awards and the 2009 Stock Option
Agreement).

 

11

 

(i)                                     In the event it
shall be determined that any payment or distribution in the nature of
compensation (within the meaning of Section 280G(b)(2) of the Code)
(the “Payment”) would be subject to the excise tax imposed under Section 4999
of the Code (the “Excise Tax”) then, subject to Section 6(a)(v) hereof,
the Executive shall be entitled to receive an additional payment (the “Gross-Up
Payment”) in an amount such that, after payment by the Executive of all
taxes (and any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.  The Company’s
obligation to make Gross-Up Payments under this Section 6(a)(i) shall
not be conditioned upon the Executive’s termination of employment.

 

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

 

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

 

12

 

gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due).  If the Company notifies the
Executive in writing prior to the expiration of such period that the Company
desires to contest such claim, the Executive shall:

 

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

 

(B)                                take such action in
connection with contesting such claim as the Company shall reasonably request
in writing from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably selected by
the Company;

 

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

 

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

 

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

 

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

 

13

 

amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto).

 

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

 

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

 

(b)                                 In the event that a Change
in Control is consummated after the fourth (4th) anniversary of the Effective Date, this Section 6(b) shall
apply and Section 6(a) hereof shall not apply.

 

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

 

14

 

order: (A) reduction of any cash severance
payments otherwise payable to the Executive that are exempt from Section 409A
of the Code; (B) reduction of any other cash payments or benefits
otherwise payable to the Executive that are exempt from Section 409A of
the Code, but excluding any payments attributable to any acceleration of
vesting or payments with respect to any equity award that are exempt from Section 409A
of the Code; (C) reduction of any other payments or benefits otherwise payable
to the Executive on a pro-rata basis or such other manner that complies with Section 409A
of the Code, but excluding any payments attributable to any acceleration of
vesting and payments with respect to any equity award that are exempt from Section 409A
of the Code; and (D) reduction of any payments attributable to any
acceleration of vesting or payments with respect to any equity award that are
exempt from Section 409A of the Code, in each case beginning with payments
that would otherwise be made last in time.

 

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

 

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

 

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

 

9.                                       Successors.

 

(a)                                  This Agreement is personal
to the Executive and, without the prior written consent of the Company, shall
not be assignable by the Executive otherwise than by will or the 

 

15

 

laws
of descent and distribution.  This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives.

 

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

 

(c)                                  The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place.  As used in
this Agreement, “Company” shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.

 

10.                                 Miscellaneous.

 

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

 

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

 

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

 

If to the Company:

 

Demand
Media, Inc.

1333
Second Street, Ste. 100

Santa Monica, CA 90401

Attn:
General Counsel

 

with
a copy to:

 

Latham &
Watkins LLP

355 South Grand Ave. 

Los Angeles, CA  90071-1560

Attn: Alex Voxman

 

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

 

(c)                                  Sarbanes-Oxley Act of 2002.  Notwithstanding anything herein to the
contrary, if the Company determines, in its good faith judgment, that any
transfer or deemed 

 

16

 

transfer
of funds hereunder is likely to be construed as a personal loan prohibited by Section 13(k) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and
the rules and regulations promulgated thereunder, then such transfer or
deemed transfer shall not be made to the extent necessary or appropriate so as
not to violate the Exchange Act and the rules and regulations promulgated
thereunder.

 

(d)                                 Section 409A of the
Code.

 

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

 

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

 

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

 

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

 

17

 

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

 

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

 

(h)           Entire
Agreement.  As of the Effective Date,
this Agreement, together with the Confidentiality Agreement, any prior equity
award agreements, and the Stock Option Agreements, constitutes the final,
complete and exclusive agreement between the Executive and the Company with
respect to the subject matter hereof and replaces and supersedes any and all
other agreements, offers or promises, whether oral or written, by any member of
the Company and its subsidiaries and affiliates, or representative
thereof.  The Executive agrees that the
Employment Agreement dated as of April 17, 2006, as amended from time to
time, terminated prior to the date hereof and is of no further force or
effect.  In the event that the Effective
Date does not occur prior to March 31, 2011 (or such later date as
Executive and the Company agree in writing), this Agreement shall have no force
or effect.

 

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

 

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

 

[SIGNATURE PAGE FOLLOWS]

 

18

 

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

 

	
   

  	
  DEMAND
  MEDIA, INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Charles Hilliard

  
	
   

  	
   

  	
  Name:
  Charles Hilliard

  
	
   

  	
   

  	
  Title:
  President and CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “EXECUTIVE”

  
	
   

  	
   

  
	
   

  	
  /s/
  Richard Rosenblatt

  
	
   

  	
   

  	
  Richard
  Rosenblatt

  

 

19

 

EXHIBIT A

 

GENERAL RELEASE

 

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

 

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

 

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

 

A-1

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-2

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