Netgear 2009 Annual Report Download - page 87

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Table of Contents
operations for the period in which the unfavorable outcome occurs or becomes probable. In addition, the Company is subject to legal
proceedings, claims and litigation arising in the ordinary course of business, including litigation related to intellectual property and employment
matters.
Based on currently available information, the Company does not believe that the ultimate outcomes of any unresolved matters, individually
and in the aggregate, are likely to have a material adverse effect on the Company’
s financial position, liquidity or results of operations within the
next 12 months. However, litigation is subject to inherent uncertainties, and the Company’s view of these matters may change in the future.
Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact on the Company’s financial position and results
of operations or liquidity for the period in which the unfavorable outcome occurs or becomes probable, and potentially in future periods.
Environmental Regulation
The European Union (“EU”) has enacted legislation relating to disposal of certain products. The Waste Electrical and Electronic
Equipment Directive, makes producers of electrical goods, including home and small business networking products, which are placed on the
market after August 1, 2005 financially responsible for specified collection, recycling, treatment and disposal of past and future covered
products. Similar WEEE Legislation has been or may be enacted in other jurisdictions, including in the United States, Canada, Mexico, China
and Japan. The Company adopted the authoritative guidance for asset retirement and environmental obligations in the third quarter of fiscal 2005
and has determined that its effect did not have a material impact on its consolidated results of operations and financial position for fiscal 2007,
2008, or 2009. The Company believes it is meeting the requirements of the WEEE Directive. The Company is continuing to evaluate the impact
of the WEEE Legislation and similar legislation in other jurisdictions as individual countries issue their implementation guidance. In 2006 the
EU also enacted the Battery Directive. Some member states have enacted legislation which require producers of equipment containing certain
types of batteries to be financially responsible for recovery and disposal. The Company believes it meets the requirements of Battery Directive
legislation.
Additionally, the EU has enacted the Restriction of Hazardous Substances Directive (“RoHS Legislation”). The RoHS Legislation, along
with similar legislation in China, prohibits the use of certain substances, including mercury and lead, in certain products put on the market after
July 1, 2006. The EU also enacted the Registration, Evaluation, Authorisation and restriction of CHemicals (REACH) Legislation, which came
into force on December 1, 2008 and also addresses the production and use of chemical substances. The Company believes it has met the
requirements of the RoHS Legislation and the REACH Legislation.
The EU also implemented its Standby Regulations, which is one of a number of measures and initiatives developed to implement the 2005
EU Ecodesign Directive. The Standby Regulation entered into force on January 7, 2009. Generally, the Standby Regulation requires products to
have operating modes with certain limited energy consumption requirements. The Company adopted the authoritative guidance for the Standby
Regulation and has determined that its effect did not have a material impact on its consolidated results of operations and financial position for
fiscal 2009. The Company is continuing to evaluate the impact of the Standby Regulation and similar legislation in other jurisdictions as
individual countries issue their implementation guidance. The Company believes it meets the requirements of the Standby Regulation.
Employment 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 52 weeks (for the Chief
Executive Officer) and up to 26 weeks (for other key executives). Such employees will continue to have stock options vest for up to a one year
period following the termination. If the termination, without cause, occurs within one year of a change in control, such employees are entitled to
up to two years acceleration of any unvested portion of his or her stock options.
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