NetFlix 2006 Annual Report Download - page 73

NETFLIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands, except share and per share data and percentages)
• such other amount as the Company’s Board of Directors may determine.
Under the 2002 Employee Stock Purchase Plan, shares of the Company’s common stock may be purchased
over an offering period with a duration of 24 months at 85 percent of the lower of the fair market value on the first
day of the applicable offering period or on the last day of the six-month purchase period. In May 2006, the
Company amended its 2002 Employee Stock Purchase Plan so that offering periods under the plan going forward
have a duration of 6 months instead of 24 months. Employees may invest up to 15 percent of their gross
compensation through payroll deductions. In no event shall an employee be permitted to purchase more than 8,334
shares of common stock during any six-month purchase period. During 2005 and 2006, employees purchased
349,229 and 378,361 shares at average prices of $8.09 and $9.84 per share, respectively. As of December 31, 2006,
2,169,681 shares were available for future issuance under the 2002 Employee Stock Purchase Plan.
Stock Option Plans
In December 1997, the Company adopted the 1997 Stock Plan, which was amended and restated in October
2001. The 1997 Stock Plan provides for the issuance of stock purchase rights, incentive stock options or
non-statutory stock options. As of December 31, 2006, 615,024 shares were reserved for future issuance upon the
exercise of outstanding options 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. In May 2006, the 2002 Stock Plan was amended and restated to, among
other things, eliminate the ability to reprice options without stockholder approval, to remove the provisions that
provide for automatic annual increases in the number of shares available, permit the Company to deduct certain
performance-based equity awards for tax purposes and to increase the limitation on the number of options that
can be granted annually to any individual from 1,000,000 to 1,500,000 or in connection with initial service from
333,333 to 500,000.
Options granted under the 2002 Stock Plan 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. Options are granted 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. The Company
issues new shares to satisfy stock option exercises.
The Company initially 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. As of December 31, 2006,
4,990,160 shares were reserved for future issuance under the 2002 Stock Plan.
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