Shutterfly 2009 Annual Report Download - page 93

SHUTTERFLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition to the above cases, from time to time, the Company may be involved in various legal proceedings arising in the ordinary course
of business. 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 Statements of Financial Accounting Standards No. 5, Accounting for Contigencies
("FAS 5"). 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.
Note 8 — Common Stock
In October 2006, the Company completed its IPO of common stock in which it sold and issued 5,800,000 shares of common stock, at an
issue price of $15.00 per share. As a result of the IPO, a total of $87.0 million in gross proceeds was raised, with net proceeds to the Company of
$78.5 million after deducting underwriting fees and commissions of $6.1 million and other offering costs of $2.4 million.
Upon the closing of the IPO, all shares of the Company’
s redeemable convertible preferred stock outstanding automatically converted into
13,862,773 shares of common stock.
Warrants for Common Stock
During 2007, two warrant holders exercised their warrants for an aggregate of 27,299 shares of common stock. The transactions were
effected through a net-
exercise, and as a result, no cash proceeds were received by the Company. As of December 31, 2008, there were no
remaining warrants outstanding.
Upon the effective date of the IPO, warrants to purchase 40,816 shares of redeemable convertible preferred stock converted into warrants to
purchase 40,816 shares of common stock, and warrants to purchase 40,816 shares of redeemable convertible preferred stock expired.
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 be no longer than five years for ISOs for which the grantee owns
greater than 10% of the voting power of all classes of stock and no longer than ten years for all other options. Options granted under the 1999
Plan generally vested over four years. The Board of Directors determined that no further grants of awards under the 1999 Plan would be made
after the Company’s IPO.
91