Netgear 2008 Annual Report Download - page 81

Table of Contents
shipment date and 25% of orders are cancelable by giving notice 31 to 45 days prior to the expected shipment date. Orders are non-cancelable
within 30 days prior to the expected shipment date. At December 31, 2008, the Company had $26.8 million in non-cancelable purchase
commitments with suppliers. The Company establishes a loss liability for all products it does not expect to sell for which it has committed
purchases from suppliers. Such losses have not been material to date.
The Company, as permitted under Delaware law and in accordance with its Bylaws, indemnifies its officers and directors for certain events
or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’
s request in such capacity. The term of the
indemnification period is for the officer’s or director’
s lifetime. The maximum amount of potential future indemnification is unlimited; however,
the Company has a Director and Officer Insurance Policy that limits its exposure and enables it to recover a portion of any future amounts paid.
As a result of its insurance policy coverage, the Company believes the fair value of these indemnification agreements is minimal. Accordingly,
the Company has no liabilities recorded for these agreements as of December 31, 2008.
In its sales agreements, the Company typically agrees to indemnify its direct customers, distributors and resellers for any expenses or
liability resulting from claimed infringements of patents, trademarks or copyrights of third parties. The terms of these indemnification
agreements are generally perpetual any time after execution of the agreement. The maximum amount of potential future indemnification is
unlimited. The Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded
for these agreements as of December 31, 2008.
Note 9—Stockholder’s Equity:
At December 31, 2008, the Company had five stock-based employee compensation plans as described below. The total compensation
expense related to these plans was approximately $11.3 million for the year ended December 31, 2008.
The following table sets forth the total stock-based compensation expense resulting from stock options, restricted stock awards, and the
Employee Stock Purchase Plan included in the Company’s Consolidated Statements of Operations (in thousands):
The Company recognizes these compensation costs net of the estimated forfeitures on a straight-line basis over the requisite service period
of the award, which is generally the option vesting term of four years.
Total stock-based compensation cost capitalized in inventory was less than $250,000 in each of the years ended December 31, 2008, 2007,
and 2006.
As of December 31, 2008, the Company has the following share-based compensation plans:
2000 Stock Option Plan
In April 2000, the Company adopted the 2000 Stock Option Plan (the “2000 Plan”). The 2000 Plan provides for the granting of stock
options to employees and consultants of the Company. Options granted under
79
Year Ended December 31,
2008
2007
2006
Cost of revenue
864
633
430
Research and development
3,218
2,391
1,119
Sales and marketing
3,406
3,013
1,405
General and administrative
3,835
2,842
1,551
$
11,323
$
8,879
$
4,505