Enom 2010 Annual Report Download - page 138

Table of Contents
Demand Media, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(In thousands, except per share amounts)
15. Convertible Preferred Stock (Continued)
available for distribution were to be distributed with equal priority and pro rata among the holders of the Convertible Series D Preferred Stock.
Notwithstanding the provisions above, in the event preferred stock holders would have received more proceeds from a liquidation on an as converted to
common stock basis, then such holders (referred to below as holders of converted preferred stock) were entitled to such greater amount in lieu of the
preferential payments described above.
After payment to the holders of the preferred stock of the full preferential amounts, the remaining assets were to be distributed on a pro rata basis to the
holders of common stock and, if applicable, the converted preferred stock.
Conversion rights—Each share of preferred stock was convertible at the option of the holder in accordance with the conversion ratio applicable for each
class of stock, which as of December 31, 2010 was one share of common stock for two shares of preferred stock. This conversion ratio was subject to
adjustment in the event that the offering price in an initial public offering did not exceed certain thresholds. The offering price in the Company's initial public
offering in January 2011 exceeded these thresholds and accordingly, no incremental shares were issued under the adjustment mechanism. In January 2011 all
shares of preferred stock automatically converted into 61,672 shares of common stock.
Redemption rights—The Company's preferred stock was not redeemable at the option of the holder or at a fixed or determinable date. Because the terms
of the preferred stock contained the deemed liquidation provision on a change-in-control, however remote in likelihood, this deemed liquidation provision was
considered a contingent redemption feature that was not solely within the control of the Company. As such, the Company has presented the preferred stock
outside of stockholders' deficit in the mezzanine section of the December 31, 2009 and 2010 consolidated balance sheets.
Voting rights—Except in the case of certain protective provisions applicable to holders of preferred stock (or one or more specific series thereof)
summarized below, the preferred stock and the common stock will vote together and not as separate classes. Certain actions, including amendment of the
Articles of Incorporation, increase in the number of authorized shares, declaration of dividends, the repurchase the Company's stock, an increase the number
of shares reserved for issuance under stock plan approved by the Board of Directors, authorization of a liquidation of the Company or change the authorized
number of directors, require the approval of holders of fifty five percent of the preferred stock voting as a single class.
In addition, certain actions, such as adverse changes to the rights, preferences or privileges of a series of preferred stock, may require the consent of
holders of a specified percentage of shares of such series.
Each holder of shares of preferred stock is entitled to the number of votes equal to the number of shares of common stock into which such shares of
preferred stock held by such holder of preferred stock could then be converted.
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