Enom 2010 Annual Report Download - page 142

Table of Contents
Demand Media, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(In thousands, except per share amounts)
18. Business Combinations (Continued)
of $18 (2-year straight-line useful life), customer relationships with a value of $21 (2-year straight-line useful life), non-compete agreements with a value of
$148 (2-year straight-line useful life), content with a value of $1,231 (5-year straight-line useful life), and technology with a value of $208 (5-year straight-
line useful life). The goodwill of $3,411 and the acquired intangibles with a value of $1,600 are deductible over 15 years for federal tax purposes.
Pluck
In March 2008, the Company acquired 100% of the outstanding stock of Pluck. Pluck is a provider of social media tools and technologies which enable
publishers, brands and retailers to grow their audiences by integrating content, community and social media technologies directly into their existing web
properties. The Company accounted for the transaction as a business combination. The purchase consideration of $66,285 consisted of the following: cash and
acquisition costs of $54,421; deferred consideration of $250; repayment of Pluck's existing debt of $1,614; and promissory notes for $10,000 that matured on
April 3, 2009 and bore interest at 7% annually. On April 3, 2009, the Company paid the promissory notes and $772 accrued interest.
The Company agreed to payout certain unvested stock options held by Pluck employees at the time of acquisition (Note 13—Share-based Compensation
Plans and Awards). As a result, the Company was obligated to pay in cash approximately $2,500 over the original vesting period of the stock option awards.
Such amount is recorded as compensation expense contingent on the employee's continued employment with Demand Media. During the years ended
December 31, 2008, 2009 and 2010, $899 and $564 and $360, respectively, of cash related to the vested stock options was paid out to Pluck employees.
In connection with the acquisition, $250 of cash consideration was deferred to secure working capital requirements. The deferred consideration was
released in December 2008 after confirmation that the minimum working capital requirements were satisfied.
In November 2008, $371 related to the final working capital adjustment was paid to the sellers. This working capital adjustment and consequent
adjustments to deferred tax liabilities resulted in changes to the preliminary allocations of assets and liabilities, other than intangible assets.
The acquired intangible assets in the amount of $30,372 have a weighted average useful life of approximately five years. The identifiable intangible
assets are comprised of trade names with a value of $2,029 (5-year straight-line useful life), customer relationships with a value of $2,092 (5-year straight-line
useful life), non-compete agreements with a value of $2,010 (range of useful lives from two years to three years, straight-line), content rights with a value of
$451 (5-year straight-line useful life) and technology with a value of $23,790 (5-year straight-line useful life). The goodwill of $39,129 and the acquired
intangibles with a value of $30,372 are not deductible for federal tax purposes.
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