Carbonite 2011 Annual Report Download - page 68

Table of Contents
Carbonite, Inc.
Prior to the Company’s IPO and the related conversion of all shares of Preferred Stock into shares of common stock, the rights, privileges, and
preferences of the Preferred Stock were as follows:
Dividends
The holders of Preferred Stock were entitled to receive, out of funds lawfully available, dividends, when, as and if they were declared by the
Board, at an annual rate per share, without compounding, equal to 6% of the original purchase price. Dividends accrued, whether or not declared, and
were cumulative and payable upon the occurrence of a liquidation event for all Preferred Stock, as well as upon redemption for Series A-2. Therefore,
dividends were accreted on the Series A-2 such that it was presented at redemption value. No dividends were declared through the date on which the
Preferred Stock was converted into common stock.
Redemption
Holders of Series A-2 could have elected to have their shares redeemed at any time after December 31, 2012, upon written request to the
Company. The redemption amount would have been the original issue price, plus any accrued but unpaid dividends. Dividends were accreted on Series
A-2 such that it was presented at redemption value. Upon conversion of the Series A-2 to common stock, all accrued dividends were reversed through
accumulated deficit.
Additional Rights, Preferences, and Privileges
In addition to those rights described above and the registration rights described below, the holders of the Company’s Preferred Stock had certain
voting rights, liquidation preferences, and conversion privileges. All rights, preferences and privileges associated with the Preferred Stock, other than the
registration rights described below, were terminated at the time of the Company’s IPO in conjunction with the conversion of all outstanding shares of
Preferred Stock into shares of common stock.
Registration Rights
Pursuant to an investors’ rights agreement, the holders of the Company’s common stock that resulted from the conversion of the Preferred Stock
have certain registration rights. The holders have the right to demand that the Company register such shares of common stock pursuant to the Securities
Act of 1933, as amended. Subject to certain limitations, the Company shall bear the fees, costs and expenses of such registration, other than underwriting
discounts and commissions. The Company is not required to settle such registration rights by delivery of registered shares or by a net cash settlement.
Warrants
In October 2006, in connection with a commercial line of credit, the Company issued a warrant to purchase shares of Series A-2, which, at the
time of the Company’s IPO, was converted into a warrant to purchase 11,316 shares of common stock at a price of $2.32 per share (the “Warrant”). The
Warrant is exercisable at any time through expiration in October 2013. The Company valued the Warrant at the date of grant at $18 thousand, and
recorded the fair value of the Warrant as a charge to interest expense. The Company remeasured the fair value of the Warrant each reporting period in
accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity, resulting in a fair value of $82 thousand as of December 31, 2010,
which was recorded in other long-term liabilities. At the time of conversion of the Warrant in connection with the Company’s IPO, the fair value of the
Warrant was $74 thousand, which was reclassified as a component of additional paid-in capital. No portion of the Warrant has been exercised as of
December 31, 2011.
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