Netgear 2004 Annual Report Download - page 81

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Table of Contents
NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS— (Continued)
fourth quarter of 2004, the Company and the plaintiff settled the lawsuit which provided for a payment of $17,500 by the Company, and
the Superior Court approved the settlement resulting in the dismissal of the matter.
Employments Agreements
The Company has signed various employment agreements with key executives pursuant to which if their employment is terminated
without cause, the employees are entitled to receive their base salary (and commission or bonus, as applicable) for 52weeks (for the
Chief Executive Officer), 39weeks (for the Chief Financial Officer) and 26weeks (for other key executives), and such employees will
continue to have stock options vest for a one year period following the termination. If the termination, without cause, occurs within
one year of a change in control, the officer is entitled to two years acceleration of any unvested portion of his or her stock options.
Leases
The Company leases office space and equipment under non-cancelable operating leases with various expiration dates through
January 2009. Rent expense in the years ended, December31, 2002, 2003 and 2004 was $959,000, $1.1million and $1.3million,
respectively. The terms of our principal facility lease provides for rental payments on a graduated scale. The Company recognizes rent
expense on a straight-line basis over the lease period, and has accrued for rent expense incurred but not paid.
Future minimum lease payments under non-cancelable operating leases are as follows (in thousands):
Operating
Year Ending December31,
Leases
2005
$
937
2006
653
2007
575
2008
102
2009
8
Total minimum lease payments
$
2,275
Guarantees, Indemnifications
The Company has entered into various inventory related purchase agreements with suppliers. Under these agreements, 50% of orders
are cancelable by giving notice 46 to 60days prior to the expected shipment date and 25% of orders are cancelable by giving notice 31
to 45days prior to the expected shipment date. Orders are noncancelable within 30days prior to the expected shipment date. At
December31, 2004, the Company had $34.8million in noncancelable purchase commitments with suppliers. The Company expects to sell
all products for which it has committed purchases from suppliers.
During 2001, the Company entered into an agreement with a service provider with respect to legal consultative and other services in
international jurisdictions. Under the agreement, the Company agreed to indemnify the service provider to the fullest extent permitted
by law against claims, suits and legal and other expenses incurred by the service provider in the course of providing such services.
The terms of the indemnity agreement remain in effect until modified by the parties to the agreement. The maximum amount of potential
future indemnification is unlimited. To date the Company has not received any claims against this agreement and believes the fair value
of the indemnification agreement is minimal. Accordingly, the Company has no liability recorded for this agreement as at December31,
ď›™
2005. EDGAR Online, Inc.