Enom 2010 Annual Report Download - page 124

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)
Gross revenue generated through the sale and management of the customer's website names revenue was $323, $384 and $335 during the years ended
December 31, 2008, 2009 and 2010 respectively. The remaining Annual Guarantee for the years ended December 31, 2008, 2009 was satisfied through the
purchase of website names for the Company's own use in April 2009 and March 2010, respectively. The Company expects to settle the final Annual
Guarantee of the Amended Domain Agreement for the year ended December 31, 2010 through the purchase of website names in March 2011.
Indemnifications
In its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make
payments in relation to certain transactions. Those indemnities include intellectual property indemnities to the Company's customers, indemnities to directors
and officers of the Company to the maximum extent permitted under the laws of the State of Delaware and indemnifications related to the Company's lease
agreements. In addition, the Company's advertiser and distribution partner agreements contain certain indemnification provisions which are generally
consistent with those prevalent in the Company's industry. The Company has not incurred significant obligations under indemnification provisions historically
and does not expect to incur significant obligations in the future. Accordingly, the Company has not recorded any liability for these indemnities, commitments
and guarantees in the accompanying balance sheets.
9. Notes Payable and Revolving Line of Credit
Revolving Line of Credit Agreements
On May 25, 2007, the Company entered into a five-year $100,000 revolving line of credit agreement (the Credit Agreement) with a commercial bank
syndicate. Under the terms of the Credit Agreement, the Company can borrow up to the lesser of $100,000 or two and a half times trailing four quarters
EBITDA (as defined) prior to March 2011, and two times trailing four quarters EBITDA (as defined) prior to March 2012.
The Company may choose a prime-based interest rate or LIBOR-based borrowings, plus an applicable interest rate margin. The Credit Agreement
provides that the applicable interest margin is based on the level of borrowings relative to the Company's EBITDA (as defined). Principal amounts
outstanding under the Credit Agreement are due on May 25, 2012 and interest is payable in arrears in accordance with the terms of each loan: quarterly for
prime based loans and in one to six-month intervals for LIBOR based loans. The average interest rate during the years ended December 31, 2009 and 2010
was 1.83% and 1.23%, respectively.
The collateral for the Credit Agreement consists of substantially all tangible and intangible assets of the Company, under perfected security interests,
including pledges of the common stock of all subsidiaries of the Company. The Credit Agreement contains customary events of default, material adverse
event clause and certain financial covenants, such as a minimum fixed charge ratio and a maximum leverage ratio. As of December 31, 2009 and 2010, the
Company was in compliance with these covenants.
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