Enom 2010 Annual Report Download - page 123

Table of Contents
Demand Media, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(In thousands, except per share amounts)
8. Commitments and Contingencies (Continued)
replaced an existing standby letter of credit related to a security agreement under a real estate lease. In each of August 2009 and September 2010, the standby
letter of credit related to a real estate lease was reduced by $300.
Litigation
On August 10, 2010, the Company, Clearspring Technologies, Inc., or Clearspring, and six other defendants were named in a putative class-action
lawsuit filed in the U.S. District Court, Central District of California. The lawsuit alleges a variety of causes of action, including violations of privacy and
consumer rights. The plaintiffs claim that Clearspring worked with the Company and each of the other defendants to circumvent users' privacy expectations
by installing a tracking device and accessing users' computers to obtain user personal information and data. Plaintiffs seek actual and statutory damages,
restitution and to recover their attorney's fees and costs in the litigation. Plaintiffs allege that their aggregate claims exceed the sum of $5,000. The parties to
the litigation entered into an agreement to settle this matter with no monetary liability on the part of the Company. This settlement was submitted to the court
for approval in December 2010 and is pending court approval. The Company has not accrued for any loss contingency relating to this matter as it does not
believe that a loss is probable and if court approval of the settlement is not obtained, it intends to continue to vigorously defend this position.
From time to time, the Company is involved in various claims, lawsuits and pending actions against the Company in the normal course of its business.
The Company believes that the ultimate resolution of such claims, lawsuits and pending actions will not have a material adverse effect on its financial
position, results of operations or cash flows.
Taxes
From time to time, various federal, state and other jurisdictional tax authorities undertake review of the Company and its filings. In evaluating the
exposure associated with various tax filing positions, the Company accrues charges for possible exposures. The Company believes any adjustments that may
ultimately be required as a result of any of these reviews will not be material to its consolidated financial statements.
Expired Domain Name Agreement
On February 14, 2008, the Company entered into a three-year contract with an existing customer to manage certain expired website names owned and
operated by the customer, as amended (the "Amended Domain Agreement"). Under the Amended Domain Agreement: (i) the Company manages its
customer's revenue and sales of its website names in exchange for a revenue share; (ii) the Company committed to provide the customer with a minimum of
$1,750 of revenue per year (the "Annual Guarantee") for a total of $5,250 over the three year contractual period and (iii) in the event annual revenue generated
under the Amended Domain Agreement is less than the Annual Guarantee (as defined), the Company is able to satisfy the difference through the purchase of
the customer's then existing website names (as defined). The Amended Domain Agreement can be terminated without penalty by either the Company or the
customer within 60 days prior to the end of each annual renewal period.
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