NetFlix 2003 Annual Report Download - page 76

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NETFLIX, INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(in thousands, except share, per share and per DVD data)
statutory stock options. 643,884 remaining shares reserved but not yet issued under the 1997 Stock Plan as of the
effective date of the Company’s initial public offering were added to the total reserved shares under the 2002
Stock Plan and deducted from the total reserved shares under the 1997 Stock Plan. As of December 31, 2003,
487,430 shares were reserved for future issuance under the 1997 Stock Plan.
In February 2002, the Company adopted the 2002 Stock Plan. The 2002 Stock Plan provides for the grant of
incentive stock options to employees and for the grant of non-statutory stock options and stock purchase rights to
employees, directors and consultants. The Company reserved a total of 1,333,334 shares of common stock for
issuance under the 2002 Stock Plan. 643,884 remaining shares reserved but not yet issued under the 1997 Stock
Plan as of the effective date of the Company’s initial public offering were added to the total reserved shares of
1,333,334 under the 2002 Stock Plan and deducted from the total reserved shares under the 1997 Stock Plan. In
addition, the Company’s 2002 Stock Plan provides for annual increases in the number of shares available for
issuance on the first day of each year, beginning with 2003, equal to the lesser of:
• 5 percent of the outstanding shares of common stock on the first day of the applicable year;
• 1,000,000 shares; and
• such other amount as the Company’s Board of Directors may determine.
As of December 31, 2003, 2,981,058 shares were reserved for future issuance under the 2002 Stock Plan.
Options generally expire in 10 years, however, they may be limited to five years if the optionee owns stock
representing more than 10 percent of the Company. Generally, the Company’s Board of Directors grants options
at an exercise price of not less than the fair value of the Company’s common stock at the date of grant. Prior to
the third quarter of 2003, the vesting periods generally provided for options to vest over three to four years.
During the third quarter of 2003, the Company began granting fully vested options on a monthly basis.
In 2001, the Company offered its employees the right to exchange certain employee stock options. The
exchange resulted in the cancellation of employee stock options to purchase 1.8 million shares of common stock
with varying exercise prices in exchange for options to purchase 1.8 million shares of common stock with an
exercise price of $1.50 per share.
F-18