Enom 2010 Annual Report Download - page 134

Table of Contents
Demand Media, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(In thousands, except per share amounts)
13. Share-based Compensation Plans and Awards (Continued)
non-profit organization dedicated to uniting people to fight cancer and Lance Armstrong ("Mr. Armstrong") is a seven-time winner of the Tour de France and
an advocate for cancer patients.
The License Agreement grants the Company a perpetual, worldwide, exclusive license to use the LIVESTRONG.com brand, trademark and certain
website names associated therewith, including LIVESTRONG.com. The Company used the license to build the LIVESTRONG.com website as the
Company's anchor health and wellness media property. In consideration for the license, the Company agreed to pay LAF a one-time, upfront royalty in the
form of ten-year warrants to purchase 625 shares of the Company's common stock at an exercise price of $12.00 per share (the "LAF Warrant"). The LAF
Warrant is classified as an intangible asset and is being amortized over its estimated life, which is ten years. The aggregate value of the LAF Warrant was
$1,738, of which $167, $174 and $174 of amortization expense was recorded during the years ended December 31, 2008, 2009 and 2010, respectively. The
LAF warrant terminated on the the closing date of the Company's IPO (Note 21—Subsequent Events) and the Company issued 184 shares of common stock
upon the net exercise of the LAF Warrant in January 2011.
During the term of the Endorsement Agreement ending on December 31, 2011, Lance Armstrong ("Armstrong") will provide certain services and
endorsement rights to the Company. In consideration of Mr. Armstrong's services, the Company issued a one-time upfront consideration in the form of a ten-
year warrant to purchase 625 shares of the Company's common stock at an exercise price of $12.00 per share (the "Livestrong Warrant"). The warrants are
non-forfeitable, fully vested and are exercisable immediately upon execution of the agreement. No royalties or other consideration are immediately payable to
Armstrong under this agreement. The Livestrong Warrant is being recognized as expense over the requisite service period, which is four years, on a straight-
line basis. The aggregate value of the Livestrong Warrant was $1,738, of which $420, $439 and $439 of stock-based compensation expense was recorded
during the years ended December 31, 2008, 2009 and 2010, respectively. As of December 31, 2010, $440 is included in Prepaid expenses and other assets in
the accompanying balance sheet.
The Livestrong Warrant terminated on the closing date of the Company's IPO (Note 21—Subsequent Events) and the Company issued 184 shares of
common stock upon the net exercise of the Livestrong Warrant in January 2011.
The per share fair value of the LAF Warrant and the Livestrong Warrant was determined using the Black-Scholes option pricing model considering the
contractual life of 10 years; expected volatility of 91.3%; and risk-free interest rate of 3.7%.
BEI Warrant
In June 2010, the Company entered into a website development, endorsement and license agreement with Bankable Enterprises, Inc. ("BEI") (the "BEI
Agreement"). BEI is wholly owned by Tyra Banks ("Ms. Banks"), a business woman and celebrity.
During the term of the BEI Agreement, which commences on July 1, 2010 and ends on July 1, 2014, Ms. Banks will provide certain services and
endorsement rights to the Company, and will license to the Company certain intellectual property. The Company will use this intellectual property to build an
owned and operated website on beauty and fashion. As consideration for Ms. Banks' services, the
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