NetFlix 2012 Annual Report Download - page 22

• limiting our flexibility in planning for, or reacting to, changes in our business and the markets in which
we operate; and
• limiting our ability to borrow additional funds or to borrow funds at rates or on other terms we find
acceptable.
In addition, it is possible that we may need to incur additional indebtedness in the future in the ordinary
course of business. If new debt is added to current debt levels, the risks described above could intensify.
We may lose key employees or may be unable to hire qualified employees.
We rely on the continued service of our senior management, including our Chief Executive Officer and co-
founder Reed Hastings, members of our executive team and other key employees and the hiring of new qualified
employees. In our industry, there is substantial and continuous competition for highly skilled business, product
development, technical and other personnel. We may not be successful in recruiting new personnel and in
retaining and motivating existing personnel, which may be disruptive to our operations.
Risks Related to Our Stock Ownership
Provisions in our charter documents and under Delaware law could discourage a takeover that
stockholders may consider favorable.
Our charter documents may discourage, delay or prevent a merger or acquisition that a stockholder may
consider favorable because they:
• authorize our board of directors, without stockholder approval, to issue up to 9,000,000 shares of
undesignated preferred stock;
• provide for a classified board of directors;
• prohibit our stockholders from acting by written consent;
• establish advance notice requirements for proposing matters to be approved by stockholders at
stockholder meetings; and
• prohibit stockholders from calling a special meeting of stockholders.
As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under
Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its
capital stock unless the holder has held the stock for three years or, among other things, the board of directors has
approved the transaction. Our board of directors could rely on Delaware law to prevent or delay an acquisition of
us.
On November 2, 2012, we implemented a stockholder rights plan, also called a poison pill, which may have
the effect of discouraging or preventing a change of control of us by, among other things, making it
uneconomical for a third-party to acquire us on a hostile basis.
In addition, a merger or acquisition may trigger retention payments to certain executive employees under the
terms of our Executive Severance and Retention Incentive Plan, thereby increasing the cost of such a transaction.
A small number of our stockholders could significantly influence our business.
As of December 31, 2012, we believe that our top five stockholders control approximately 41% of our
common stock. These few significant stockholders, either individually or acting together, may be able to exercise
significant influence over matters requiring stockholder approval, including the election of directors and approval
of significant corporate transactions, such as a merger or other sale of the company or our assets. This
18