Shutterfly 2015 Annual Report Download - page 99

Legal Matters
The Company is subject to the various legal proceedings and claims discussed below as well as certain other
legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of
business. Although adverse decisions (or settlements) may occur in one or more of these cases, it is not possible
to estimate the possible loss or losses from each of these cases. The final resolution of these lawsuits,
individually or in the aggregate, is not expected to have a material adverse effect on the Company’s business,
financial position or results of operations. Cases that previously were disclosed may no longer be described
because of rulings in the case, settlements, changes in our business or other developments rendering them, in our
judgment, no longer material to our business, financial position or results of operations.
The State of Delaware v. Shutterfly, Inc.
On May 1, 2014, the State of Delaware filed a complaint against Shutterfly for alleged violations of the
Delaware False Claims and Reporting Act, 6 Del C. § 1203(b)(2). The complaint asserts that Shutterfly failed to
report and remit to Delaware cash equal to the balances on unused gift cards under the Delaware Escheats Law,
12 Del. C. § 1101 et seq. The Company believes the suit is without merit.
Norberg vs. Shutterfly, Inc. et. al
On June 17, 2015, Brian Norberg on behalf of himself and all others similarly situated, brought a complaint
against us in the U.S. District Court for the Northern District of Illinois. The complaint assets that the Company
violated the Illinois Biometric Information Privacy Act (“IBIPA”) by extracting his and others biometric
identifiers from photographs and seeks statutory damages and an injunction. On December 29, 2015, the court
rejected the Company’s motion to dismiss and allowed the case to proceed, however the Company continues to
strenuously deny this claim.
In all cases, at each reporting period, the Company evaluates whether or not a potential loss amount or a
potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that
addresses accounting for contingencies. In such cases, the Company accrues for the amount, or if a range, the
Company accrues the low end of the range as a component of legal expense. The Company monitors developments
in these legal matters that could affect the estimate the Company had previously accrued. There are no amounts
accrued which the Company believes would be material to its financial position and results of operations.
Note 8 — Stock-Based Compensation
1999 Stock Plan
In September 1999, the Company adopted the 1999 Stock Plan (the “1999 Plan”). Under the 1999 Plan, the
Company issued shares of common stock and options to purchase common stock to employees, directors and
consultants. Options granted under the Plan were incentive stock options or non-qualified stock options.
Incentive stock options (“ISO”) were granted only to Company employees, which includes officers and directors
of the Company. Non-qualified stock options (“NSO”) and stock purchase rights were able to be granted to
employees and consultants. Options under the Plan were to be granted at prices not less than 85% of the deemed
fair value of the shares on the date of the grant as determined by the Company’s Board of Directors (“the
Board”), provided, however, that (i) the exercise price of an ISO and NSO was not less than 100% and 85% of
the deemed fair value of the shares on the date of grant, respectively, and (ii) the exercise price of an ISO and
NSO granted to a 10% stockholder was not less than 110% of the deemed fair value of the shares on the date of
grant. The Board determined the period over which options became exercisable. The term of the options was to
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