Netgear 2011 Annual Report Download - page 91

Table of Contents
Note 9—Commitments and Contingencies
Leases
The Company leases office space, cars and equipment under non-cancelable operating leases with various expiration dates through
December 2026. Rent expense in the years ended, December 31, 2011, 2010 and 2009 was $7.0 million, $6.4 million and $6.2 million,
respectively. The terms of some of the Company’s office leases provide 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):
Employment Agreements
The Company has signed various employment agreements with key executives pursuant to which, if their employment is terminated
without cause, such employees are entitled to receive their base salary (and commission or bonus, as applicable) for 52 weeks (for the Chief
Executive Officer), 39 weeks (for the Senior Vice President of Worldwide Operations and Support) and up to 26 weeks (for other key
executives). Such employees will also continue to have stock options vest for up to a one-year period following such termination without cause.
If a termination without cause or resignation for good reason occurs within one year of a change in control, such employees are entitled to full
acceleration (for the Chief Executive Officer) and up to two years acceleration (for other key executives) of any unvested portion of his or her
stock options.
Purchase Obligations
The Company has entered into various inventory-related purchase agreements with suppliers. Generally, under these agreements, 50% of
orders are cancelable by giving notice 46 to 60 days prior to the expected 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,
2011, the Company had $139.4 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.
Guarantees and Indemnifications
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, 2011.
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
87
Year Ending December 31,
2012
$
6,349
2013
5,268
2014
4,486
2015
3,981
2016
3,558
Thereafter
6,070
Total minimum lease payments
$
29,712