Nutrisystem 2005 Annual Report Download - page 55

In the second quarter of 2005, the Company entered into a capital lease agreement for telephone systems.
The lease is a five year lease that expires in the end of 2009 and contains a bargain purchase option. The present
value of the lease payments is $183 based on an annual interest rate of 6%. The lease requires a payment of $4
per month.
8. COMMITMENTS AND CONTINGENCIES
The Company leases its warehouse, corporate headquarters and certain equipment. These leases generally
have initial terms of three to six years. The lease for the corporate headquarters has a renewal option for an
additional two year period. Certain of the leases also contain escalation clauses based upon increases in costs
related to the properties. Lease obligations, with initial or remaining terms of one year or more years, consist of
the following at December 31, 2005:
2006 .............................................................. $1,307
2007 .............................................................. 1,306
2008 .............................................................. 1,341
2009 .............................................................. 1,295
2010 .............................................................. 51
$5,300
Total rent expense for 2005, 2004 and 2003 was $912, $663 and $485, respectively.
The Company is involved in certain various claims and routine litigation matters. In the opinion of
management, after consultation with legal counsel, the outcome of such matters will not have a material adverse
effect on the Company’s consolidated financial position, results of operations or cash flows in future years.
In 2004, the Company entered into two employment agreements. The agreements have terms ranging from
one to two years, with automatic one-year renewal terms. These agreements provide for base compensation of
$225 for each employee per year and other fringe benefits and payments upon termination. In 2005, the Company
entered into an employment agreement.The agreement has a term of two years, with automatic one-year renewal
terms. This agreement provides for base compensation of $200 per year and other fringe benefits and payments
upon termination.
In June 2005, the Company entered into an agreement with a food vendor for a term of three years expiring
June 1, 2008. The agreement requires the Company to make minimum cumulative purchases of $9,000 through
2005, $20,000 through 2006 and $33,000 through 2007. Through December 31, 2005, the Company made
aggregate purchases under this agreement of $23,500. The Company anticipates it will meet the cumulative
requirements through 2007. The agreement also provides for annual pricing updates and rebates if certain volume
thresholds are exceeded, as well as exclusivity in the production of certain products.
9. COMMON STOCK
Common Stock
In 2003, the Company issued 2,300,000 shares of common stock in a private placement and 127,666 shares
upon the exercise of stock options and received proceeds of $2,300 and $25, respectively. The Company also
issued 41,000 shares of common stock as compensation to certain consultants and spokespersons per their
contract and 43,518 shares upon the cashless exercise of warrants.
In 2004, the Company issued 982,159 shares of common stock upon the exercise of stock options and
received proceeds of $587 and 108,500 shares of common stock as compensation to certain consultants and
spokespersons per their contract. The Company also issued 531,180 shares of common stock upon exercise of
common stock warrants and received proceeds of $385.
51