def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
|
|
|
Filed by the Registrant
þ |
|
Filed by a Party other than the Registrant
o |
|
|
Check the appropriate box: |
|
|
|
o Preliminary Proxy Statement |
|
o
Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
|
þ Definitive Proxy Statement |
|
o Definitive Additional Materials |
|
o
Soliciting Material Pursuant to §240.14a-12 |
NETGEAR, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
|
|
|
þ No fee required. |
|
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11. |
|
|
|
1) Title of each class of securities to which transaction applies: |
|
|
|
2) Aggregate number of securities to which transaction applies: |
|
|
|
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
|
|
|
4) Proposed maximum aggregate value of transaction: |
|
|
|
o Fee paid previously with preliminary materials. |
|
|
|
o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
|
|
|
1) Amount Previously Paid: |
|
|
|
2) Form, Schedule or Registration Statement No.: |
NETGEAR, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Tuesday, May 23, 2006
10:00 a.m. local time
To Our Stockholders:
The 2006 Annual Meeting of Stockholders of NETGEAR, Inc. will be
held on Wednesday, May 23, 2006 at 10:00 a.m. local
time at our executive offices at 4500 Great America Parkway,
Santa Clara, California 95054 for the following purposes:
|
|
|
1. To elect six (6) directors to serve until the next
Annual Meeting of Stockholders; |
|
|
2. To approve the adoption of the new NETGEAR, Inc. 2006
Long Term Incentive Plan; |
|
|
3. To ratify the appointment of PricewaterhouseCoopers LLP
as our independent auditors for the fiscal year ending
December 31, 2006; and |
|
|
4. To transact such other business as may properly come
before the annual meeting, including any motion to adjourn to a
later date to permit further solicitation of proxies, if
necessary, or before any adjournment thereof. |
The foregoing items of business are more fully described in the
Proxy Statement accompanying this Notice. Stockholders who owned
shares of our stock at the close of business on Tuesday,
April 11, 2006 are entitled to attend and vote at the
meeting. A complete list of these stockholders will be available
during normal business hours for 10 days prior to the
meeting at our headquarters located at 4500 Great America
Parkway, Santa Clara, California 95054. A stockholder may
examine the list for any legally valid purpose related to the
meeting. The list also will be available during the annual
meeting for inspection by any stockholder present at the meeting.
Whether or not you plan to attend the annual meeting, please
complete, date, sign and return the enclosed proxy card as
promptly as possible in the accompanying reply envelope. Any
stockholder attending the meeting may vote in person even if he
or she has returned a proxy.
|
|
|
For the Board of Directors of |
|
NETGEAR, INC. |
|
|
|
|
Jonathan R. Mather |
|
Executive Vice President and Chief Financial Officer |
Santa Clara, California
April 21, 2006
YOUR VOTE IS IMPORTANT
PLEASE SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED ENVELOPE.
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
Page | |
|
|
| |
|
|
|
1 |
|
|
|
|
|
1 |
|
|
|
|
|
1 |
|
|
|
|
|
2 |
|
|
|
|
|
2 |
|
|
|
|
|
2 |
|
|
|
|
|
3 |
|
|
|
|
|
3 |
|
|
|
|
|
3 |
|
|
|
|
|
4 |
|
|
|
|
|
4 |
|
|
|
|
|
4 |
|
|
|
|
5 |
|
|
|
|
|
5 |
|
|
|
|
|
5 |
|
|
|
|
|
5 |
|
|
|
|
|
7 |
|
|
|
|
|
8 |
|
|
|
|
|
8 |
|
|
|
|
|
8 |
|
|
|
|
|
9 |
|
|
|
|
|
9 |
|
|
|
|
|
9 |
|
|
|
|
|
10 |
|
|
|
|
|
10 |
|
|
|
|
|
11 |
|
|
|
|
11 |
|
|
|
|
|
11 |
|
|
|
|
|
11 |
|
|
|
|
|
12 |
|
|
|
|
|
12 |
|
|
|
|
|
13 |
|
|
|
|
|
14 |
|
|
|
|
|
14 |
|
|
|
|
|
15 |
|
|
|
|
|
15 |
|
|
|
|
15 |
|
|
|
|
|
15 |
|
|
|
|
|
16 |
|
|
|
|
16 |
|
|
|
|
18 |
|
|
|
|
23 |
|
|
|
|
25 |
|
|
|
|
26 |
|
|
|
|
26 |
|
|
|
|
27 |
|
|
|
|
28 |
|
NETGEAR, INC.
PROXY STATEMENT FOR THE
2006 ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION
The Board of Directors of NETGEAR, Inc., a Delaware corporation,
is soliciting the enclosed proxy from you. The proxy will be
used at our 2006 Annual Meeting of Stockholders to be held at
10:00 a.m. local time on Tuesday, May 23, 2006 at our
executive offices located at 4500 Great America Parkway,
Santa Clara, California 95054.
This proxy statement contains important information regarding
our annual meeting. Specifically, it identifies the proposals on
which you are being asked to vote, provides information you may
find useful in determining how to vote and describes the voting
procedures.
We use several abbreviations in this proxy statement. We may
refer to our Company as NETGEAR, we,
us or our. The term proxy
materials includes this proxy statement, as well as the
enclosed proxy card and our Annual Report on
Form 10-K for the
year ended December 31, 2005.
We are sending the proxy materials on or about April 21,
2006 to all of our stockholders as of the record date,
April 11, 2006. Stockholders who owned NETGEAR common stock
at the close of business on April 11, 2006 are entitled to
attend and vote at the annual meeting. On the record date, we
had approximately 33,090,465 shares of our common stock
issued and outstanding. We had 21 record stockholders as of
the record date and our common stock was held by approximately
8,200 beneficial owners.
Voting Procedures
As a stockholder, you have the right to vote on certain business
matters affecting us. The three proposals that will be presented
at the annual meeting, and upon which you are being asked to
vote, are discussed in the sections entitled
Proposal One, Proposal Two and
Proposal Three. Each share of NETGEAR common
stock you own entitles you to one vote. The enclosed proxy card
indicates the number of shares you own. You can vote by
returning the enclosed proxy card and proxy in the envelope
provided, or by attending the annual meeting and voting in
person at the annual meeting.
Methods of Voting
Voting by Mail. By signing and returning the proxy card
according to the enclosed instructions, you are enabling our
Chairman and Chief Executive Officer, Patrick C.S. Lo, and
our Executive Vice President and Chief Financial Officer,
Jonathan R. Mather, who are named on the proxy card as
proxies and
attorneys-in-fact,
to vote your shares as proxy holders at the meeting in the
manner you indicate. We encourage you to sign and return the
proxy card even if you plan to attend the meeting. In this way,
your shares will be voted even if you are unable to attend the
meeting.
Your shares will be voted in accordance with the instructions
you indicate on the proxy card. If you submit the proxy card,
but do not indicate your voting instructions, your shares will
be voted as follows:
|
|
|
|
|
FOR the election of the director nominees identified in
Proposal One; |
|
|
|
FOR the approval of the adoption of the new NETGEAR, Inc. 2006
Long Term Incentive Plan; and |
|
|
|
FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as our independent auditors for the
fiscal year ending December 31, 2006. |
To reduce the expenses of delivering duplicate voting materials
to our stockholders who may have more than one NETGEAR stock
account, we are delivering only one set of the proxy statement
and the annual report on
Form 10-K for the
year ended December 31, 2005 to certain stockholders who
share an address unless otherwise requested. A separate proxy
card is included in the voting materials for each of these
stockholders. If you share an address with another stockholder
and have received only one set of voting materials, you may
write or call us to request a separate copy of these materials
at no cost to you. For future annual meetings, you may request
separate voting materials, or request that we send only one set
of voting materials to you if you are receiving multiple copies,
by writing our Corporate Secretary at NETGEAR, Inc.,
4500 Great America Parkway, Santa Clara, California
95054, or calling our Corporate Secretary at
(408) 907-8000.
You may receive a copy of the exhibits to NETGEARs
Annual Report on
Form 10-K for the
year ended December 31, 2005 by sending a written request
to NETGEAR, Inc., 4500 Great America Parkway,
Santa Clara, California 95054, Attn: Corporate
Secretary.
Voting in Person at the Meeting. If you plan to attend
the annual meeting and vote in person, we will provide you with
a ballot at the meeting. If your shares are registered directly
in your name, you are considered the stockholder of record and
you have the right to vote in person at the meeting. If your
shares are held in the name of your broker or other nominee, you
are considered the beneficial owner of shares held in your name,
but if you wish to vote at the meeting, you will need to bring
with you to the annual meeting a legal proxy from your broker or
other nominee authorizing you to vote these shares.
Revoking Your Proxy
You may revoke your proxy at any time before it is voted at the
annual meeting. In order to do this, you may either:
|
|
|
|
|
sign and return another proxy bearing a later date; |
|
|
|
provide written notice of the revocation to Albert Y. Liu, our
Corporate Secretary at NETGEAR, Inc., 4500 Great America
Parkway, Santa Clara, California 95054, prior to the time
we take the vote at the annual meeting; or |
|
|
|
attend the meeting and vote in person. |
Quorum Requirement
A quorum, which is a majority of our outstanding shares as of
the record date, must be present in order to hold the meeting
and to conduct business. Your shares will be counted as being
present at the meeting if you appear in person at the meeting or
if you submit a properly executed proxy card.
Votes Required for Each Proposal
The vote required and method of calculation for the proposals to
be considered at the annual meeting are as follows:
|
|
|
Proposal One Election of Directors. The
six director nominees receiving the highest number of votes, in
person or by proxy, will be elected as directors. You may vote
(i) for all nominees,
(ii) withhold for all nominees or
(iii) withhold for certain nominees by striking
a line through the name(s) of such nominees on your proxy card. |
|
|
Proposal Two Approval of the adoption of the
new NETGEAR, Inc. 2006 Long Term Incentive Plan. Approval of
the adoption of the new NETGEAR, Inc. 2006 Long Term Incentive
Plan will require the affirmative vote of a majority of the
shares present at the annual meeting, in person or by proxy. You
may vote for, against, or
abstain from voting on this proposal. |
|
|
Proposal Three Ratification of
PricewaterhouseCoopers LLP as Independent Auditors.
Ratification of PricewaterhouseCoopers LLP as our independent
auditors will require the affirmative vote of a majority of the
shares present at the annual meeting, in person or by proxy. You
may vote for, |
2
|
|
|
against, or abstain from voting on the
proposal to ratify PricewaterhouseCoopers LLP as our independent
auditors. |
Abstentions and Broker Non-Votes
If you return a proxy card that indicates an abstention from
voting on all matters, the shares represented will be counted as
present for the purpose of determining a quorum, but they will
not be voted on any matter at the annual meeting. Consequently,
if you abstain from voting on the proposal to approve the
adoption of the new NETGEAR, Inc. 2006 Long Term Incentive Plan
or the proposal to ratify the appointment of
PricewaterhouseCoopers LLP as our independent accountants, your
abstention will have the same effect as a vote against that
proposal.
Under the rules that govern brokers who have record ownership of
shares that are held in street name for their
clients, who are the beneficial owners of the shares, brokers
have discretion to vote these shares on routine matters but not
on non-routine matters. Thus, if you do not otherwise instruct
your broker, the broker may turn in a proxy card voting your
shares FOR routine matters but expressly instructing
that the broker is NOT voting on non-routine matters. A
broker non-vote occurs when a broker expressly
instructs on a proxy card that it is not voting on a matter,
whether routine or non-routine. Broker non-votes are counted for
the purpose of determining the presence or absence of a quorum
but are not counted for determining the number of votes cast for
or against a proposal. Your broker will have discretionary
authority to vote your shares on Proposals One (Election of
Directors) and Three (Ratification of Appointment of Independent
Auditors), which are routine matters. Absent your instructions,
your broker will not be able to vote your shares on
Proposal Two (Approval of the Adoption of the New NETGEAR,
Inc. 2006 Long Term Incentive Plan).
Proxy Solicitation Costs
We will bear the entire cost of proxy solicitation, including
the preparation, assembly, printing and mailing of proxy
materials. We expect our Vice President, Legal and Corporate
Development and Company Secretary, Albert Y. Liu, to tabulate
the proxies and act as inspector of the election.
Deadline for Receipt of Stockholder Proposals for 2007 Annual
Meeting
As a stockholder, you may be entitled to present proposals for
action at a forthcoming meeting if you comply with the
requirements of the proxy rules established by the Securities
and Exchange Commission. Proposals by our stockholders intended
to be presented for consideration at our 2007 Annual Meeting of
Stockholders must be received by us no later than
December 22, 2006 (120 calendar days prior to the
anniversary of the mailing date of this proxy statement), in
order that they may be included in the proxy statement and form
of proxy related to that meeting. The submission of the
stockholder proposal does not guarantee that it will be included
in our 2007 proxy statement.
The Securities and Exchange Commission rules establish a
different deadline with respect to discretionary voting for
stockholder proposals that are not intended to be included in a
companys proxy statement. The attached proxy card grants
the proxy holders discretionary authority to vote on any matter
raised at the annual meeting. The discretionary vote deadline
for our 2007 annual meeting is March 8, 2007, which is 45
calendar days prior to the anniversary of the mailing date of
this proxy statement. If a stockholder gives notice of a
proposal after the discretionary vote deadline, our proxy
holders will be allowed to use their discretionary voting
authority to vote against the stockholder proposal when and if
the proposal is raised at our 2007 annual meeting.
In addition, our bylaws establish an advance notice procedure
with regard to specified matters, including stockholder
proposals and director nominations, which are proposed to be
properly brought before an Annual Meeting of Stockholders. To be
timely, a stockholders notice shall be delivered no less
than 120 days prior to the date of annual meeting specified
in the proxy statement provided to stockholders in connection
with the preceding years annual meeting, which is
January 23, 2007 in connection with our 2007 Annual Meeting
of Stockholders. In the event that no annual meeting was held in
the previous year or the date of the annual meeting is changed
by more than 30 days from the date contemplated at the time
of the previous years proxy
3
statement, notice by the stockholder must be received not later
than the tenth business day following the day notice of the date
of the meeting was mailed or public disclosure was made,
whichever occurs first. A stockholders notice shall
include: (i) a brief description of the business desired to
be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the
name and address of the stockholder proposing such business,
(iii) the class and number of shares of our stock which are
beneficially owned by the stockholder, (iv) any material
interest of the stockholder in such business and (v) any
other information required by the Securities Exchange Act of
1934, as amended (the 1934 Act). In addition,
if a stockholder wishes to nominate a candidate for director,
the stockholders notice shall also include the following
information for the candidate: (i) name, age, business
address and residence address, (ii) principal occupation or
employment of such nominee, (iii) class and number of
shares of our stock beneficially owned by such nominee,
(iv) description of all arrangements between the
stockholder and the nominee and (v) any other information
required by the 1934 Act (including the candidates
written consent to being named in the proxy statement as a
nominee and to serving as a director if elected). A copy of the
full text of our bylaws is available from our Corporate
Secretary upon written request. Proposals should be sent to our
Corporate Secretary, c/o NETGEAR, Inc., 4500 Great
America Parkway, Santa Clara, California 95054.
Nomination of Director Candidates
The Nominating and Corporate Governance Committee considers
candidates for board membership suggested by members of our
Board of Directors, management and stockholders. It is the
policy of the Nominating and Corporate Governance Committee to
consider recommendations for candidates to our Board of
Directors from stockholders by submitting: the candidates
name; home and business contact information; detailed
biographical data and qualifications; information regarding any
relationships between the candidate and NETGEAR within the last
three years; and evidence of the nominating persons
ownership or beneficial ownership of NETGEAR stock and amount of
stock holdings. The Nominating and Corporate Governance
Committee will consider persons recommended by our stockholders
in the same manner as a nominee recommended by our Board of
Directors, individual board members or management. See
Election of Directors Policy for Director
Recommendations and Nominations for additional information.
In addition, a stockholder may nominate a person directly for
election to our Board of Directors at an annual meeting of our
stockholders provided they meet the requirements set forth in
our bylaws and the rules and regulations of the Securities and
Exchange Commission related to stockholder proposals. The
process for properly submitting a stockholder proposal,
including a proposal to nominate a person for election to our
Board of Directors at an annual meeting, is described above in
the section entitled Deadline for Receipt of Stockholder
Proposals for 2007 Annual Meeting.
Stockholder Communications to Directors
Stockholders may communicate directly with our Board of
Directors by writing to them c/o NETGEAR, Inc., 4500 Great
America Parkway, Santa Clara, California 95054. Unless the
communication is marked confidential, our Corporate
Secretary will monitor these communications and provide
appropriate summaries of all received messages to the
Chairperson of our Nominating and Corporate Governance
Committee. Any stockholder communication marked
confidential will be logged as received,
but will not be reviewed by the Corporate Secretary. Such
confidential correspondence will be immediately forwarded to the
Chairperson of the Nominating and Corporate Governance Committee
for appropriate action. Where the nature of a communication
concerns questionable accounting or auditing matters directed
directly to the Audit Committee, our Corporate Secretary will
log the date of receipt of the communication as well as (for
non-confidential communications) the identity of the
correspondent in the Companys stockholder communications
log.
Other Matters
Other than the proposals listed above, our Board of Directors
does not intend to present any other matters to be voted on at
the meeting. Our Board of Directors is not currently aware of
any other matters that will be presented by others for action at
the meeting. However, if other matters are properly brought
before the
4
stockholders at the meeting and you have signed and returned
your proxy card, the proxy holders will have discretion to vote
your shares on these matters to the extent authorized under the
1934 Act.
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
The nominees for election at the Annual Meeting of Stockholders
are Patrick C.S. Lo, Ralph E. Faison, A. Timothy Godwin, Jef
Graham, Linwood A. Lacy, Jr., and Gregory J. Rossmann. If
elected, they will each serve as a director until the Annual
Meeting of Stockholders in 2007, and until their respective
successors are elected and qualified or until their earlier
resignation or removal. Gerald A. Poch, who has served as a
director since 2000, will not be standing for re-election at
this meeting.
Unless otherwise instructed, the proxy holders will vote the
proxies received by them for election of all of the director
nominees, all of whom currently serve as directors. In the event
the nominees are unable or decline to serve as a director at the
time of the annual meeting, the proxies will be voted for any
nominee who shall be designated by the present Board of
Directors to fill the vacancy. We are not aware that any nominee
will be unable or will decline to serve as a director. In the
event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received
by them in such a manner as to assure the election of the
nominees listed above.
Vote Required
If a quorum is present and voting, the six nominees receiving
the highest number of votes will be elected to our Board of
Directors. Abstentions are not counted in the election of
directors. If you hold your shares through a broker, bank or
other nominee and you do not instruct them how to vote on this
proposal, your broker may have the authority to vote your
shares. Stockholders are not entitled to cumulative voting in
the election of directors.
Information Concerning the Nominees and Incumbent
Directors
The name and age of the nominees and incumbent directors as of
February 28, 2006, the principal occupation of each and the
period during which each has served as our director are set
forth below. Information as to the stock ownership of each of
our directors and all of our current executive officers as a
group is set forth below under Security Ownership of
Certain Beneficial Owners and Management.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director | |
Name |
|
Age | |
|
Office |
|
Since | |
|
|
| |
|
|
|
| |
Patrick C.S. Lo
|
|
|
49 |
|
|
Chairman and Chief Executive Officer/Nominee |
|
|
2000 |
|
Ralph E. Faison
|
|
|
47 |
|
|
Director/Nominee |
|
|
2003 |
|
A. Timothy Godwin
|
|
|
56 |
|
|
Director/Nominee |
|
|
2003 |
|
Jef Graham
|
|
|
50 |
|
|
Director/Nominee |
|
|
2005 |
|
Linwood A. Lacy, Jr.
|
|
|
60 |
|
|
Director/Nominee |
|
|
2002 |
|
Gerald A. Poch
|
|
|
58 |
|
|
Director |
|
|
2000 |
|
Gregory J. Rossmann
|
|
|
44 |
|
|
Director/Nominee |
|
|
2002 |
|
Patrick C.S. Lo has served as Chairman of our
board of directors since March 2002 and our Chief Executive
Officer since March 2000. From September 1999 to March 2002, he
served as our President, and since our inception in 1996 to
September 1999, he served as Vice President and General Manager.
Mr. Lo joined Bay Networks, a networking company, in August
1995 to launch a division targeting the small business and home
markets and established the NETGEAR division in January 1996.
From 1983 until 1995, Mr. Lo worked at Hewlett-Packard
Company, a computer and test equipment company, where he served
in various
5
management positions in software sales, technical support,
network product management, sales support and marketing in the
United States and Asia, most recently as the Asia/ Pacific
marketing director for Unix servers. Mr. Lo received a B.S.
degree in Electrical Engineering from Brown University.
Ralph E. Faison has served as one of our directors
since August 2003. From February 2003 to the present,
Mr. Faison has served as Chief Executive Officer of Andrew
Corporation, a public company and a manufacturer of
communications equipment and systems, and from June 2002 to the
present, Mr. Faison has also served as President and a
director of Andrew Corporation. From June 2002 to February 2003,
Mr. Faison served as Chief Operating Officer of Andrew
Corporation. From June 2001 to June 2002, Mr. Faison served
as President and Chief Executive Officer of Celiant Corporation,
a manufacturer of power amplifiers and wireless radio frequency
systems, which was acquired by Andrew Corporation in June 2002.
From October 1997 to June 2001, Mr. Faison was Vice
President of the New Ventures Group at Lucent Technologies, a
communications service provider, and from 1995 to 1997, he was
Vice President of advertising and brand management at Lucent
Technologies. Prior to joining Lucent, Mr. Faison held
various positions at AT&T, a voice and data communications
company, including as Vice President and General Manager of
AT&Ts wireless business unit and manufacturing Vice
President for its consumer products unit in Bangkok, Thailand.
Mr. Faison received a B.A. degree in marketing from Georgia
State University and a M.S. degree in management as a
Sloan Fellow from Stanford University.
A. Timothy Godwin has served as one of our
directors since August 2003. From July 1989 to January 1997,
Mr. Godwin worked at Tech Data Corporation, an information
technology products distributor, in various capacities including
serving as a member of its Board of Directors, Vice Chairman
focusing on worldwide finance and administration, President and
Chief Operating Officer, Chief Financial Officer and Senior Vice
President of Finance. From 1974 to June 1989, Mr. Godwin
was employed by Price Waterhouse (now part of
PricewaterhouseCoopers LLP), most recently as an audit partner
from July 1987 to June 1989. Mr. Godwin is a Certified
Public Accountant and received a B.S. degree in Accounting from
the University of West Florida.
Jef Graham has served as one of our directors
since July 2005. From January 2006 to the present,
Mr. Graham has served as the Chairman and CEO of RGB
Networks, Inc., a provider of video and bandwidth management
products. From July 2005 through January 2006, Mr. Graham
served as the Executive Vice President, Application Products
Group, of Juniper Networks, Inc., a provider of IP networking
and security products. From October 2001 to July 2005,
Mr. Graham served as the President and CEO of Peribit
Networks Inc., a provider of wide area network optimization
appliances, which was acquired by Juniper Networks. Before
Peribit, Mr. Graham served as the Senior Vice President of
the commercial and consumer business units for 3Com Corporation,
where he managed networking and connectivity product offerings.
From 1993 to 1995, he served as the CEO of Trident Systems, a
document management systems integrator. Mr. Graham has also
worked for Hewlett-Packard Company for 15 years, including
10 years in sales and marketing around the world and as
general manager of both a hardware and a software division.
Mr. Graham holds a B.A. with Honors in Business Studies
from Sheffield Hallam University, United Kingdom.
Linwood A. Lacy, Jr. has served as one of our
directors since September 2002. From July 1998 to July 2001,
Mr. Lacy served as Chairman of 4Sure.com, a direct marketer
of computer and technology products. From October 1996 to
October 1997, Mr. Lacy served as President and Chief
Executive Officer of Micro Warehouse Incorporated, a micro
computer direct-marketing company. From 1985 to May 1996, he
served as the Co-Chairman and Chief Executive Officer of Ingram
Micro, Inc., a microcomputer products distributor and a then
wholly-owned subsidiary of Ingram Industries Inc. From April
1996 to May 1996, Mr. Lacy served as Vice Chairman of
Ingram Industries Inc.; from June 1995 to April 1996, he served
as its President and Chief Executive Officer; and from December
1993 to June 1995, he served as its President. Mr. Lacy is
a director of EarthLink, Inc., a public Internet technology
company, as well as a director of several private companies,
including Ingram Industries Inc. Mr. Lacy received both a
B.S. degree in Chemical Engineering and an M.B.A from the
University of Virginia.
Gerald A. Poch has served as one of our directors
since March 2000. Mr. Poch is not standing for re-election
as a director. From January 2000 to the present, Mr. Poch
has served as a Senior Managing Director
6
of Pequot Capital Management, Inc. and
co-head of Pequot
Ventures. Since August 1998, Mr. Poch has been one of the
leaders of the venture capital team responsible for the growth
and strategic direction of the group. From August 1996 to June
1998, he was the Chairman, President and Chief Executive Officer
of G.E. Capital Information Technology Solutions, Inc., a
technology solutions provider. Prior to that, he served as
co-founder, co-chairman and
co-president of
AmeriData Technologies, Inc. (the predecessor company of G.E.
Capital Information Technology Solutions, Inc.), a value-added
reseller and systems integrator of hardware and software
systems. Mr. Poch is a director of Analex Corporation, an
information technology company, Andrew Corporation, a
manufacturer of communications equipment and systems, and MTM
Technologies, Inc., a network analysis and diagnostics
management company, which are public companies, as well as a
director of several private companies. Mr. Poch received a
B.S. degree from the University of Connecticut and a J.D. degree
cum laude from Boston University Law School.
Gregory J. Rossmann has served as one of our
directors since February 2002. From April 2000 to the present,
Mr. Rossmann has served as a Managing Director of Pequot
Capital Management, Inc. From April 1994 to April 2000,
Mr. Rossmann served as Managing Director and partner at
Broadview International, an investment banking firm. From June
1991 to April 1994, he worked at Dynatech Corporation, a
technology holding company, where he served as manager of new
business development. Prior to that, he was a co-founder of
Telemaster Corporation. Mr. Rossmann is a director of
several private companies. Mr. Rossmann received a B.S.
degree in Electrical Engineering from the University of
Cincinnati and an M.B.A. from Santa Clara University.
There are no family relationships between any director or
executive officer. Our Board of Directors has determined that
Messrs. Faison, Godwin, Graham, Lacy, Jr., Poch and
Rossmann are independent under Rule 4200(a)(15) of the
National Association of Securities Dealers listing
standards. We strongly encourage the attendance of members of
our Board of Directors at the annual meeting. At the 2005 Annual
Meeting of Stockholders, all but one of our directors who was a
director at that time was in attendance.
Vote Required and Board of Directors Recommendation
The nominees receiving the greatest number of votes of the
shares present and entitled to vote at the annual meeting will
be elected as directors. Our Board of Directors has
unanimously approved each of the director nominees listed above
and recommends that stockholders vote FOR the
election of these nominees.
7
Board and Committee Meetings
Our Board of Directors held a total of 10 meetings during
2005. Our Board of Directors has standing Audit, Compensation
and Nominating and Corporate Governance Committees. Each member
of the committees meets the independence standards of
Rule 4200(a)(15) of the Nasdaq National Market and
applicable independence rules of the SEC. All of our directors
attended at least 75% of the meetings of our Board of Directors
and any applicable committee on which they served held while
they were members of our Board of Directors or the applicable
committee.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of |
|
Members at |
|
|
|
Meetings |
Committee |
|
Inception |
|
the End of 2005 |
|
Committee Functions |
|
Held in 2005 |
|
|
|
|
|
|
|
|
|
Audit
|
|
|
2000 |
|
|
A. Timothy Godwin Linwood A. Lacy, Jr. Gerald A. Poch* |
|
Reviews internal accounting Procedures
Appoints independent auditors
Reviews results of independent audit
Determines investment policy and oversees its
implementation |
|
|
10 |
|
Compensation
|
|
|
2000 |
|
|
Ralph E. Faison Jef Graham Gerald A. Poch* Gregory J. Rossmann |
|
Administers our stock option plans
Recommends compensation of executive officers and
directors
Reviews and recommends general policies relating to
compensation and benefits |
|
|
4 |
|
Nominating and Corporate Governance
|
|
|
2004 |
|
|
Gerald A. Poch* A. Timothy Godwin Jef Graham Linwood A. Lacy, Jr. |
|
Recommends nomination of board members
Assists with succession planning for executive
management positions
Oversee and evaluate board performance
Evaluate composition, organization and governance of
board and its committees |
|
No formal meetings of committee separate from meetings of entire board |
|
|
* |
Mr. Poch is not standing for re-election to our Board of
Directors, and therefore will no longer be a member of the Audit
Committee, Compensation Committee and Nominating and Corporate
Governance Committee from and after the Annual Meeting. |
Audit Committee
Our Board of Directors first adopted a written charter for the
Audit Committee in August 2000. A copy of our current amended
and restated Audit Committee charter is available on the
investor relations section of our website at www.netgear.com.
Our Board of Directors has determined that each of
Messrs. Godwin, Lacy, Jr., and Poch is an audit
committee financial expert, as defined in the rules of the
Securities and Exchange Commission. Our Board of Directors has
determined that Messrs. Godwin, Lacy, Jr., and Poch
are independent, as that term is used in
Item 7(d)(3)(iv) of Schedule 14A under the
1934 Act. Mr. Godwin serves as chairman of our Audit
Committee.
Compensation Committee
Our Board of Directors first adopted a written charter for the
Compensation Committee in August 2000. A copy of our current
amended and restated Compensation Committee charter is available
on the investor
8
relations section of our website at www.netgear.com. Our
Compensation Committee currently consists of
Messrs. Faison, Graham, Poch and Rossmann, each of whom is
a non-management member of our Board of Directors.
Mr. Faison serves as chairman of our Compensation Committee.
Nominating and Corporate Governance Committee
Our Board of Directors formed a Nominating and Corporate
Governance Committee and adopted its written charter in April
2004. A copy of our current Nominating and Corporate Governance
Committee charter is available on the investor relations section
of our website at www.netgear.com. Our Nominating and Corporate
Governance Committee currently consists of Messrs. Godwin,
Graham, Lacy, Jr., and Poch. None of the current members of
the Nominating and Corporate Governance Committee is an employee
of NETGEAR and each is independent under the listing
requirements of the Nasdaq National Market. Mr. Poch serves
as chairman of the Nominating and Corporate Governance Committee.
Policy for Director Recommendations and Nominations
The Nominating and Corporate Governance Committee considers
candidates for board membership suggested by members of our
Board of Directors, management and stockholders. It is the
policy of the Nominating and Corporate Governance Committee to
consider recommendations for candidates to our Board of
Directors from stockholders by submitting: the candidates
name; home and business contact information; detailed
biographical data and qualifications; information regarding any
relationships between the candidate and NETGEAR within the last
three years; and evidence of the nominating persons
ownership or beneficial ownership of NETGEAR stock and amount of
stock holdings. The Nominating and Corporate Governance
Committee will consider persons recommended by our stockholders
in the same manner as a nominee recommended by our Board of
Directors, individual board members or management.
In addition, a stockholder may nominate a person directly for
election to our Board of Directors at an annual meeting of our
stockholders provided they meet the requirements set forth in
our bylaws and the rules and regulations of the Securities and
Exchange Commission related to stockholder proposals. The
process for properly submitting a stockholder proposal,
including a proposal to nominate a person for election to our
Board of Directors at an annual meeting, is described above in
the section entitled General Information
Deadline for Receipt of Stockholder Proposals for 2007 Annual
Meeting.
Where the Nominating and Corporate Governance Committee has
either identified a prospective nominee or determines that an
additional or replacement director is required, the Nominating
and Corporate Governance Committee may take such measures that
it considers appropriate in connection with its evaluation of a
director candidate, including candidate interviews, inquiry of
the person or persons making the recommendation or nomination,
engagement of an outside search firm to gather additional
information, or reliance on the knowledge of the members of the
committee, the board or management. In its evaluation of
director candidates, including the members of our Board of
Directors eligible for re-election, the Nominating and Corporate
Governance Committee considers a number of factors, including
the following:
|
|
|
|
|
the current size and composition of the board of directors and
the needs of the board of directors and the respective
committees of the board; and |
|
|
|
such factors as judgment, independence, character and integrity,
age, area of expertise, diversity of experience, length of
service, and potential conflicts of interest. |
In connection with its evaluation, the Nominating and Corporate
Governance Committee determines whether it will interview
potential nominees. After completing the evaluation and review,
the Nominating and Corporate Governance Committee approves the
nominees for election to our Board of Directors.
Corporate Governance Policies and Practices
We maintain a corporate governance page on our company website
at www.netgear.com. This website includes, among other items,
profiles of all of our directors and officers, charters of each
committee of the Board, the NETGEAR Code of Ethics, and
information regarding our whistleblower policy.
9
Our key governance policies and practices include:
|
|
|
|
|
A majority of the members of the Board are independent
directors, as defined by the Nasdaq National Marketplace rules.
Independent directors do not receive consulting, legal or other
fees from us other than Board and Committee compensation. |
|
|
|
The independent directors of the Board meet regularly without
the presence of management. |
|
|
|
Our Board of Directors has adopted a Code of Ethics that is
applicable to all of our employees, officers and directors. This
Code is intended to deter wrongdoing and promote ethical
conduct. Directors, officers and employees are required to
complete annual surveys relating to their knowledge of any
violation of legal requirements or the Code of Ethics. We will
post any amendments to, or waivers from, our Code of Ethics at
that location on our website. |
|
|
|
Directors stand for re-election every year. |
|
|
|
The Audit, Compensation and Nominating and Corporate Governance
Committees each consist entirely of independent directors. |
|
|
|
At least annually, the Board reviews our business initiatives,
capital projects and budget matters. |
|
|
|
The Audit Committee reviews and approves all related party
transactions. |
|
|
|
The Board has implemented a process of periodic self-evaluation
of the Board and its Committees. |
|
|
|
As part of our Whistleblower Policy, we have made a
whistleblower hotline available to all employees for
anonymous reporting of financial or other concerns. The Audit
Committee receives directly, without management participation,
all hotline activity reports, including complaints on
accounting, internal controls or auditing matters. |
|
|
|
Directors are encouraged to attend our annual meeting. While
their attendance is not required, at the 2005 Annual Meeting of
Stockholders, all but one of our directors who was a director at
that time was in attendance. |
Director Compensation
Our non-employee directors receive $1,000 per meeting and
are entitled to reimbursement of business, travel and other
related expenses incurred in connection with their attendance at
meetings of our Board of Directors and committee meetings. The
chairman of our Audit Committee receives an additional
$1,000 per committee meeting or sub-meeting with management
attended, and the chairman of the Compensation Committee and of
the Nominating and Corporate Governance Committee each receives
an additional $500 per meeting attended. The chairman of
our Audit Committee is also paid an annual retainer of $10,000,
and each chairman of our other committees is also paid an annual
retainer of $4,000. In addition, our directors, including
non-employee directors, are eligible to receive stock options
under our 2003 Stock Option Plan. New non-employee directors who
join our Board of Directors are entitled to receive automatic,
non-discretionary initial options to acquire 25,000 shares
of our common stock, subject to three-year vesting. Directors
who have served at least six months with us receive an annual
option of 15,000 shares at each annual meeting, which is
subject to one-year vesting under our 2003 Stock Plan. Pursuant
to the automatic, non-discretionary grant provisions described
above, Jef Graham was granted an initial option to
purchase 25,000 shares of our common stock on
July 1, 2005 and each of our other outside directors,
Messrs. Faison, Godwin, Lacy, Jr., Poch and Rossmann,
was granted an annual option to purchase 15,000 shares
of our common stock on May 18, 2005. The new NETGEAR, Inc.
2006 Long Term Incentive Plan, detailed in Proposal Two,
does not provide for automatic, non-discretionary equity award
grants to our Board of Directors.
Stock Ownership Guidelines
Our Board of Directors adopted stock ownership guidelines for
our directors and executive officers, effective as of
January 1, 2005. The guidelines require our directors to
own a minimum of 5,000 shares of NETGEAR common stock, and
our executive officers to own NETGEAR common stock with a value
equal
10
to a multiple of the officers salary level. Under the
guidelines, our Chief Executive Officer is expected to
eventually own five times his annual base salary. Other
executive officers are expected to achieve ownership levels
equal to one to three times salary. Directors and officers have
a five year period in which to achieve the required compliance
level.
Assuming our stockholders approve the adoption of the new
NETGEAR, Inc. 2006 Long Term Incentive Plan detailed in
Proposal Two, our Board of Directors plan to revise our
stock ownership guidelines to provide that an officer or
director who is not in compliance with the ownership
requirements would be strongly encouraged to restrict his or her
NETGEAR stock sales until he or she becomes compliant with the
guidelines.
Compensation Committee Interlocks and Insider
Participation
During 2005, our Compensation Committee consisted of
Messrs. Faison, Graham, Poch and Rossmann, each of whom is
a non-management member of our Board of Directors. Our
Compensation Committee is responsible for recommending to our
Board of Directors salaries, incentives and other forms of
compensation for officers and other employees. No interlocking
relationship exists between any member of our Compensation
Committee and any other member of our Board of Directors or
Compensation Committee.
PROPOSAL TWO
APPROVAL OF THE ADOPTION OF THE NEW NETGEAR, INC.
2006 LONG TERM INCENTIVE PLAN
The Board of Directors has approved and is recommending to
stockholders the adoption of the new NETGEAR, Inc. 2006 Long
Term Incentive Plan, or the 2006 Plan, to provide certain
employees, consultants and Board members the opportunity to
receive stock-based and other long-term incentives in order to
attract and retain qualified individuals and to align their
interests with those of our stockholders. A full copy of the
2006 Plan is attached to this proxy statement as
Appendix A. The 2006 Plan is intended to be the successor
to our 2003 Stock Option Plan. As of December 31, 2005, the
2003 Stock Option Plan had approximately 109,617 shares
remaining that were available for issuance.
Administration of the 2006 Plan
The 2006 Plan will be administered and interpreted by the
Compensation Committee of our Board of Directors, or such other
committee as designated by our Board of Directors. The Committee
may delegate authority to one or more of our officers to grant
awards to employees who are not members of the Board or officers
for purposes of Section 16 of the Securities Exchange Act
of 1934. The Committee will have the authority to determine the
individuals to whom grants will be made, the time when grants
will be made, and the type, size and terms of each grant. Award
grants to eligible non-employee directors will be determined
solely by non-employee directors, without the participation of
employee directors or management. Awards granted to a
non-employee director will generally be on par with awards
granted to all other similarly situated non-employee directors
of our Board of Directors.
Any material amendment to the 2006 Plan will be subject to
stockholder approval. Material amendments would include any
material increase in the number of shares to be issued under the
plan other than to reflect a merger, reorganization, stock split
or similar corporate event, any material increase in benefits to
participants, any material expansion of the class of
participants eligible to participate in the 2006 Plan and any
expansion in the types of options or awards provided under the
2006 Plan.
Shares Available Under the 2006 Plan
A maximum of 2,500,000 shares of our common stock has been
reserved for issuance under the 2006 Plan.
11
In the event of a merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, reverse stock
split, spin-off, combination repurchase or exchange of shares,
or similar corporate event, the number of shares that can be
issued under the 2006 Plan, the number of shares subject to
outstanding awards, and any exercise price may be adjusted by
the Committee in any manner it deems equitable to prevent
dilution or enlargement of the benefits or potential benefits
intended under the 2006 Plan. Any shares of common stock subject
to an award that is forfeited, settled in cash, expires or is
otherwise settled without the issuance of shares shall again be
available for awards under the 2006 Plan.
Eligibility Under the 2006 Plan
Employees of NETGEAR and its affiliates, consultants who may be
retained by the company, and non-employee members of the Board
are eligible to participate in the 2006 Plan. The Committee will
select the eligible participants who will participate in the
2006 Plan.
Awards Under the 2006 Plan
The Committee may make the following types of awards to eligible
participants under the 2006 Plan, with terms and conditions to
be established by the Committee: stock options, stock
appreciation rights, restricted stock awards, performance awards
and other stock awards.
Stock Options. The Committee will determine the number of
options to be granted and the terms applicable to each award,
subject to the restrictions set forth in the 2006 Plan. The term
of any option may not exceed ten (10) years from the date
of grant. The exercise price generally cannot be less than the
fair market value of NETGEARs common stock on the date the
option is granted. The 2006 Plan generally prohibits the
Committee from reducing the exercise price of any option after
it is granted.
Stock Appreciation Rights. The Committee will determine
the number of stock appreciation rights to be granted and the
terms applicable to each award, subject to the restrictions set
forth in the 2006 Plan. The term of any stock appreciation right
may not exceed ten (10) years from the date of grant. The
exercise price generally cannot be less than the fair market
value of NETGEARs common stock on the date the stock
appreciation right is granted. The 2006 Plan generally prohibits
the Committee from reducing the exercise price of any stock
appreciation right after it is granted.
Restricted Stock Awards. The Committee will determine the
number of shares or units that will be granted and the terms
applicable to each award, provided that the period over which
any restricted stock award may fully vest will be no less than
three (3) years.
Performance Awards. Performance awards can take the form
of performance shares or performance units. A performance share
means an award denominated in shares of NETGEAR common stock and
a performance unit means an award denominated in units having a
dollar value or other currency, as determined by the Committee.
The Committee will determine the number of performance awards
that will be granted and will establish the performance goals
and other conditions for payment of such performance awards. The
period of measuring the achievement of performance goals will be
a minimum of twelve (12) months. The performance goals
established by the Committee for any participant will be based
on one or more of the following criteria: cash flow; cash flow
from operations; total earnings; earnings per share, diluted or
basic; earnings per share from continuing operations, diluted or
basic; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; earnings from
operations; net asset turnover; inventory turnover; capital
expenditures; net earnings; operating earnings; gross or
operating margin; profit margin; debt; working capital; return
on equity; return on net assets; return on total assets; return
on capital; return on investment; return on sales; net or gross
sales; market share; economic value added; cost of capital;
change in assets; expense reduction levels; debt reduction;
productivity; new product introductions; delivery performance;
safety record; stock price; and total stockholder return.
The performance goals may be determined on an absolute basis or
relative to internal goals or to other companies or indices. The
Committee shall adjust the performance goals to the extent
necessary to prevent dilution or enlargement of any award due to
extraordinary events or circumstances or to exclude the effects
of
12
extraordinary, unusual or non-recurring items; changes in
applicable laws, regulations or accounting principles; currency
fluctuations; discontinued operations; non-cash items, such as
amortization, depreciation or reserves; asset impairment; or any
recapitalization, restructuring, reorganization, merger,
acquisition, divestiture, consolidation, spin-off, split-up,
combination, liquidation, dissolution, sale of assets or other
similar corporate transaction.
Other Stock-Based Awards. The Committee will determine
the number of other stock-based awards that will be granted and
the terms applicable to each award. Other stock-based awards may
include dividend equivalents or amounts which are equivalent to
all or a portion of any federal, state, local, domestic or
foreign taxes relating to an award, and may be payable in
shares, cash, other securities or any other form of property as
the Committee may determine.
Awards to Covered Employees
The 2006 Plan contains additional restrictions and limitations
on awards that are intended to satisfy the requirements of
performance-based compensation under Internal Revenue Code
Section 162(m) to participants classified as covered
employees. No participant may receive an award or awards
having an aggregate value of greater than $3,000,000 for any
full fiscal year of NETGEAR, subject to adjustment as described
in the 2006 Plan for overlapping performance periods.
If an award to a covered employee under the 2006 Plan is subject
to the attainment of performance goals, the Committee shall
establish the performance goals within the 90 day period
following the commencement of the applicable performance period.
The Committee may, in its discretion, reduce the amount of any
performance-based award to a covered employee based on any
criteria it shall determine. However, the Committee may not
increase the amounts payable pursuant to any performance-based
award to a covered employee or waive the achievement of the
performance goals, except in certain limited circumstances such
as death, disability or a
change-in-control of
NETGEAR.
Termination of Employment
As discussed above, awards granted under the 2006 Plan generally
expire on the date determined by the Committee at the time of
the award, subject to earlier expiration as specified in the
award agreement, in the event the participant terminates
employment with the company prior to that date. Generally,
unless determined otherwise by the Committee and subject to
certain
change-in-control
provisions, all unvested options, stock appreciation rights and
stock awards, and all unpaid performance shares and performance
units are forfeited upon termination of service for reasons
other than retirement, disability or death.
Upon termination of employment by reason of retirement,
disability or death, all unvested options and stock awards
become fully vested and any performance shares or performance
units become payable to the extent determined by the Committee.
Upon termination by reason of retirement or disability, unless
determined otherwise by the Committee, options will be
exercisable until not later than the earlier of three years
after the termination date or the expiration of their term. Upon
termination by reason of death, while employed or after
terminating employment by reason of retirement or disability,
options will be exercisable by the participants
beneficiary not later than the earliest of one year after the
date of death, three years after the date of termination due to
retirement or disability, or the expiration of their term. All
stock appreciation rights that become vested by reason of
retirement, death or disability shall be exercisable as
determined by the Committee.
Unless determined otherwise by the Committee, upon termination
for any reason other than retirement, disability or death, any
options vested prior to termination may be exercised during the
three-month period commencing on the termination date, but not
later than the expiration of their term. If a participant dies
during the post-employment period, the participants
beneficiary may exercise the options (to the extent they were
vested and exercisable on the date of employment termination),
but not later than the earlier of one year after the date of
death or the expiration of their term.
13
Change-in-Control
In the event of a
change-in-control of
NETGEAR, all awards under the 2006 Plan vest and all outstanding
performance shares and performance units shall be paid out upon
transfer. Options that vest upon a
change-in-control may
be exercised only during the 90 days immediately
thereafter. Stock appreciation rights that become vested upon a
change-in-control shall
be exercisable as determined by the Committee.
Tax Consequences
The following description of the federal income tax consequences
of awards under the 2006 Plan is a general summary. State, local
and other taxes may also be imposed in connection with awards.
This discussion is intended for the information of stockholders
who are considering how to vote on the 2006 Plan at the annual
meeting and not as tax guidance to individuals who participate
in the 2006 Plan.
Nonqualified Stock Options. A participant who receives a
nonqualified stock option will recognize no income at the time
of the grant of the option. Upon exercise of a nonqualified
stock option, a participant will recognize ordinary income in an
amount equal to the excess of the fair market value of the
shares of stock on the date of exercise over the exercise price.
The basis in shares acquired upon exercise of a nonqualified
stock option will equal the fair market value of such shares at
the time of exercise, and the holding period of the shares for
capital gain purposes will begin on the date of exercise. In
general, NETGEAR will be entitled to a tax deduction in the same
amount and at the same time as the participant recognizes
ordinary income.
Incentive Stock Options. A participant who receives an
incentive stock option will not generally recognize income at
the time of grant or upon the exercise of an incentive stock
option. Upon the sale of shares subject to an incentive stock
option, a participant will recognize income in an amount equal
to the excess of the fair market value of the shares on the date
of sale over the exercise price. The income is taxed at
long-term capital gains rates if the participant has not
disposed of the shares within two years after the date of the
grant of the incentive stock option and has held the shares for
at least one year after the date of exercise. NETGEAR is not
entitled to a tax deduction. The exercise of an incentive stock
option may in some cases trigger liability for the alternative
minimum tax.
If a participant sells shares subject to an incentive stock
option before having held them for at least one year after the
date of exercise and two years after the date of grant, the
participant will recognize ordinary income to the extent of the
lesser of: (a) the gain realized upon the sale; or
(b) the excess of the fair market value of the shares on
the date of exercise over the exercise price. Any additional
gain is treated as long-term or short-term capital gain
depending upon how long the participant has held the shares
prior to disposition. In the year of disposition, NETGEAR
receives a federal income tax deduction in an amount equal to
the ordinary income that the participant recognizes as a result
of the disposition.
Stock Appreciation Rights. No income will be recognized
by a participant in connection with the grant of a stock
appreciation right. When the stock appreciation right is
exercised, the participant will generally be required to include
as taxable ordinary income in the year of exercise an amount
equal to the sum of the amount of cash received and the fair
market value of any common stock received upon the exercise. In
general, NETGEAR will be entitled to a tax deduction in the same
amount and at the same time as the participant recognizes
ordinary income.
Restricted Stock Awards. A participant who receives an
award of restricted stock generally will not recognize taxable
income until the stock is transferable by the participant or no
longer subject to a substantial risk of forfeiture, whichever
occurs first. When the stock is either transferable or is no
longer subject to a substantial risk of forfeiture, the
participant will recognize ordinary income in an amount equal to
the fair market value of the shares at that time, less any
amounts paid for the shares. A participant may elect to
recognize ordinary income when restricted stock is granted in an
amount equal to the fair market value of the shares at the date
of grant, determined without regard to the restrictions. NETGEAR
generally will be entitled to a corresponding tax deduction in
the year in which the participant recognizes ordinary income. In
the case of restricted stock units, a participant will recognize
ordinary income at the time actual shares are delivered to
14
the participant in an amount equal to the fair market value of
the shares at that time, assuming the applicable non-qualified
deferred compensation rules are followed, and we will receive a
tax deduction.
Performance Awards. A participant who receives a
performance award will not recognize taxable income until the
award is paid to the participant. When the award is paid, the
participant will recognize ordinary income in an amount equal to
the cash and the fair market value of the stock paid to the
participant. NETGEAR generally will be entitled to a tax
deduction in the same amount and at the same time as the
participant recognizes ordinary income.
Other Stock-Based Awards. A participant will recognize
ordinary income when dividend equivalents and other stock-based
awards are paid to the participant and are transferable by the
participant or no longer subject to a substantial risk of
forfeiture, in an amount equal to the cash and the fair market
value of any shares paid to the participant. NETGEAR generally
will be entitled to a corresponding tax deduction when the
participant recognizes ordinary income.
Section 162(m)
Section 162(m) of the Internal Revenue Code generally
disallows a public companys tax deduction for compensation
paid to the Chief Executive Officer and the four other most
highly compensated executive officers in excess of
$1 million in any year. Compensation that qualifies as
qualified performance-based compensation is excluded
from the $1 million limit, and therefore remains fully
deductible by us. Assuming the 2006 Plan is approved by the
stockholders, awards that satisfy the appropriate provisions of
Section 162(m) will not be subject to the deduction limit.
Other awards under the 2006 Plan may be subject to the deduction
limit.
Vote Required and Board of Directors Recommendation
The affirmative vote by a majority of shares present in person
or by proxy at the annual meeting and entitled to vote is
required to approve this proposal. The Board of Directors
recommends a vote FOR the approval of the adoption of the
new NETGEAR, Inc. 2006 Long Term Incentive Plan.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
In accordance with its charter, the Audit Committee has selected
PricewaterhouseCoopers LLP, independent auditors, to audit our
financial statements for the fiscal year ending
December 31, 2006 and, with the endorsement of our Board of
Directors, recommends to stockholders that they ratify that
appointment. PricewaterhouseCoopers LLP served in this capacity
for the year ended December 31, 2005. A representative of
PricewaterhouseCoopers LLP will be present at the annual meeting
and will have the opportunity to make a statement if he or she
desires to do so and be available to answer any appropriate
questions.
Audit and Related Fees
The following table is a summary of the fees billed to us by
PricewaterhouseCoopers LLP for professional services for the
years ended December 31, 2005 and December 31, 2004:
|
|
|
|
|
|
|
|
|
|
Fee Category |
|
2005 Fees | |
|
2004 Fees | |
|
|
| |
|
| |
Audit Fees
|
|
$ |
1,087,420 |
|
|
$ |
1,208,660 |
|
Audit-Related Fees
|
|
|
|
|
|
|
|
|
Tax Compliance Fees
|
|
|
57,852 |
|
|
|
147,199 |
|
Tax Consulting Fees
|
|
|
135,413 |
|
|
|
158,097 |
|
All Other Fees
|
|
|
1,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$ |
1,282,185 |
|
|
$ |
1,513,956 |
|
|
|
|
|
|
|
|
15
Audit Fees. Consists of fees billed for professional
services rendered for the audit of our consolidated financial
statements and internal control over financial reporting and
review of our quarterly interim consolidated financial
statements, as well as services that are normally provided by
PricewaterhouseCoopers LLP in connection with statutory and
regulatory filings or engagements.
Audit-Related Fees. Consists of fees billed for
consultations in connection with Sarbanes-Oxley compliance,
financial accounting and reporting standards.
Tax Compliance Fees. Consists of fees billed for
professional services including assistance regarding federal,
state and international tax compliance and related services.
Tax Consulting Fees. Consists of fees billed for
professional services for tax advice and tax planning.
All Other Fees. Consists of fees billed for product
provided by PricewaterhouseCoopers LLP.
Before selecting and prior to determining to continue its
engagement for 2006 with PricewaterhouseCoopers LLP, the Audit
Committee carefully considered PricewaterhouseCoopers LLPs
qualifications as independent auditors. This included a review
of the qualifications of the engagement team, the quality
control procedures the firm has established, as well as its
reputation for integrity and competence in the fields of
accounting and auditing. The Audit Committees review also
included matters required to be considered under the Securities
and Exchange Commissions rules on auditor independence,
including the nature and extent of non-audit services, to ensure
that the auditors independence will not be impaired. The
Audit Committee pre-approves all audit and non-audit services
provided by PricewaterhouseCoopers LLP, or subsequently approves
non-audit services in those circumstances where a subsequent
approval is necessary and permissible. All of the services
provided by PricewaterhouseCoopers LLP described under
Audit-Related Fees, Tax Compliance Fees,
Tax Consulting Fees and All Other Fees
were pre-approved by the Audit Committee. The Audit Committee of
our Board of Directors has determined that the provision of
services by PricewaterhouseCoopers LLP other than for audit
related services is compatible with maintaining the independence
of PricewaterhouseCoopers LLP as our independent auditors.
Vote Required and Board of Directors Recommendation
Stockholder ratification of the selection of
PricewaterhouseCoopers LLP as our independent auditors is not
required by our bylaws or other applicable legal requirement.
However, our Board of Directors is submitting the selection of
PricewaterhouseCoopers LLP to the stockholders for ratification
as a matter of good corporate practice. If the stockholders fail
to ratify the selection, our Audit Committee and Board of
Directors will reconsider whether or not to retain that firm.
Even if the selection is ratified, the Audit Committee at its
discretion may direct the appointment of a different independent
accounting firm at any time during the year if it determines
that such a change would be in our best interests and in the
best interests of our stockholders.
The affirmative vote by a majority of shares present in person
or by proxy at the annual meeting and entitled to vote is
required to approve this proposal. Our Board of Directors has
unanimously approved this proposal and recommends that
stockholders vote FOR the ratification of the
selection of PricewaterhouseCoopers LLP as independent
auditors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information with respect
to the beneficial ownership of our common stock as of
February 28, 2006 by:
|
|
|
|
|
each stockholder who we know beneficially owns more than 5% of
our common stock; |
|
|
|
each of our directors |
|
|
|
each of our current named executive officers; and |
|
|
|
all of our directors and executive officers as a group. |
16
Beneficial ownership is determined in accordance with the rules
and regulations of the Securities and Exchange Commission. The
column entitled Number of Shares Beneficially Owned
excludes the number of shares of common stock subject to options
held by that person that are currently exercisable or that will
become exercisable within 60 days after February 28,
2006. The number of shares subject to options that each
beneficial owner has the right to acquire within 60 days of
February 28, 2006 is listed separately under the column
entitled Number of Shares Underlying Options Beneficially
Owned. These shares are not deemed outstanding for
purposes of computing the percentage ownership of any other
person.
Percentage of beneficial ownership is based upon
33,053,883 shares of our common stock outstanding as of
February 28, 2006 and the shares of common stock subject to
options held by the beneficial owner that are currently
exercisable with 60 days of February 28, 2006. The
address for those individuals for which an address is not
otherwise provided is c/o NETGEAR, Inc., 4500 Great America
Parkway, Santa Clara, California 95054. Unless otherwise
indicated, we believe the stockholders listed have sole voting
or investment power with respect to all shares, subject to
applicable community property laws.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
|
|
|
|
|
Shares | |
|
|
|
|
Number of | |
|
Underlying | |
|
Percentage of | |
|
|
Shares | |
|
Options | |
|
Total Shares | |
|
|
Beneficially | |
|
Beneficially | |
|
Beneficially | |
Name and Address |
|
Owned | |
|
Owned | |
|
Owned | |
|
|
| |
|
| |
|
| |
5% Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
FMR Corp.(1)
|
|
|
3,304,900 |
|
|
|
|
|
|
|
10.0 |
% |
Executive Officers and Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick C.S. Lo(2)
|
|
|
238,378 |
|
|
|
699,661 |
|
|
|
2.8 |
% |
Jonathan R. Mather(3)
|
|
|
1,502 |
|
|
|
162,042 |
|
|
|
* |
|
Mark G. Merrill
|
|
|
|
|
|
|
287,707 |
|
|
|
* |
|
Michael F. Falcon(4)
|
|
|
4,953 |
|
|
|
31,667 |
|
|
|
* |
|
Charles T. Olson(5)
|
|
|
3,260 |
|
|
|
43,348 |
|
|
|
* |
|
Ralph E. Faison
|
|
|
2,000 |
|
|
|
31,667 |
|
|
|
* |
|
A. Timothy Godwin(6)
|
|
|
10,415 |
|
|
|
38,333 |
|
|
|
* |
|
Jef Graham
|
|
|
|
|
|
|
|
|
|
|
* |
|
Linwood A. Lacy, Jr.
|
|
|
95,000 |
|
|
|
67,317 |
|
|
|
* |
|
Gerald A. Poch(7)
|
|
|
100,000 |
|
|
|
15,000 |
|
|
|
* |
|
Gregory J. Rossmann(8)
|
|
|
100,000 |
|
|
|
15,000 |
|
|
|
* |
|
All current directors and executive officers as a group
(15 persons)(9)
|
|
|
464,647 |
|
|
|
1,632,910 |
|
|
|
6.0 |
% |
|
|
(1) |
Based on information contained in a Schedule 13G filed with
the Securities and Exchange Commission on January 10, 2006,
by FMR Corp. (FMR), Edward C. Johnson 3rd, Fidelity
Management & Research Company (Fidelity) and
Fidelity Low Priced Stock Fund (Fidelity Fund).
Fidelity is a wholly owned subsidiary of FMR and, as an
investment advisor, is deemed to beneficially own 3,281,596
shares or approximately 9.6% of NETGEARs common stock as a
result of acting as investment advisor to various investment
companies including the Fidelity Fund, which is deemed to
beneficially own 2,400,000 shares or approximately 7.3% of
NETGEARs common stock. Mr. Johnson, along with other
members of the Johnson family, through their ownership of
Series B voting shares of common stock of FMR and the
execution of a shareholders voting agreement, are deemed
to be a controlling group under the Investment Company Act of
1940 with respect to FRM and, this, Mr. Johnson is deemed
to beneficially own 3,281,596 shares or 9.6% of NETGEARs
common stock. The address of the reporting persons is 82
Devonshire Street, Boston, Massachusetts 02109. |
17
|
|
(2) |
Shares beneficially owned by Mr. Lo include
(1) 81,473 shares held of record by The Patrick C. S.
Lo Grantor Retained Annuity Trust, (2) 140,414 shares
held of record by The Patrick and Emily Lo Revocable Living
Trust Dated 4-7-99, (3) 7,204 shares held of record by
The Daphne T. W. Lo 2002 Irrevocable Education Trust,
(3) 7,204 shares held of record by The Kai W. Lo 2002
Irrevocable Education Trust, and (4) 2,083 shares held
of record by Mr. Lo. Shares underlying options beneficially
owned by Mr. Lo include 100,000 shares that are
subject to resale restrictions that expire as to 25% of the
shares each year. |
|
(3) |
Shares underlying options beneficially owned by Mr. Mather
include 50,000 shares that are subject to resale
restrictions that expire as to 25% of the shares each year. |
|
(4) |
Shares underlying options beneficially owned by Mr. Falcon
include 20,000 shares that are subject to resale
restrictions that expire as to 25% of the shares each year. |
|
(5) |
Shares underlying options beneficially owned by Mr. Olson
include 20,000 shares that are subject to resale
restrictions that expire as to 25% of the shares each year. |
|
(6) |
Shares are held of record by the Maureen A. Godwin Family Trust. |
|
(7) |
Shares are held of record by Pequot Private Equity Fund II,
L.P. (the Fund). Mr. Poch is a managing
director of Pequot Capital Management, Inc. (PCM),
which holds voting and dispositive power for all shares held of
record by the Fund. Mr. Poch disclaims beneficial ownership
of the shares held in the Fund, except to the extent of his
pecuniary interest therein. |
|
(8) |
Shares are held of record by Pequot Private Equity Fund II,
L.P. (the Fund). Mr. Rossmann is a managing
director of Pequot Capital Management, Inc. (PCM),
which holds voting and dispositive power for all shares held of
record by the Fund. Mr. Rossmann disclaims beneficial
ownership of the shares held in the Fund, except to the extent
of his pecuniary interest therein. |
|
(9) |
Shares underlying options beneficially owned by all officers and
directors as a group include 285,500 shares that are
subject to resale restrictions that expire as to 25% of the
shares each year. |
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table sets forth certain
information regarding the compensation of our chief executive
officer and our four next most highly compensated executive
officers for 2005 for
18
services rendered in all capacities for the years indicated. No
restricted stock or stock appreciation rights were granted to
any of the persons listed below for the years indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation | |
|
Long-Term | |
|
|
|
|
| |
|
Compensation | |
|
|
|
|
|
|
|
|
Awards: | |
|
|
|
|
Annual Compensation | |
|
|
|
| |
|
|
|
|
| |
|
Other Annual | |
|
Securities | |
|
All Other | |
|
|
Fiscal | |
|
Salary | |
|
Bonus | |
|
Compensation | |
|
Underlying | |
|
Compensation | |
Name and Principal Position |
|
Year | |
|
($) | |
|
($)(1) | |
|
($) | |
|
Options (#) | |
|
($)(2) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Patrick C. S. Lo
|
|
|
2005 |
|
|
|
414,615 |
|
|
|
250,000 |
|
|
|
0 |
|
|
|
100,000 |
|
|
|
1,500 |
|
|
Chairman and Chief |
|
|
2004 |
|
|
|
356,731 |
|
|
|
250,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,500 |
|
|
Executive Officer |
|
|
2003 |
|
|
|
350,000 |
|
|
|
100,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,500 |
|
Jonathan R. Mather(3)
|
|
|
2005 |
|
|
|
264,808 |
|
|
|
88,209 |
|
|
|
0 |
|
|
|
50,000 |
|
|
|
42,075 |
|
|
Executive Vice President and |
|
|
2004 |
|
|
|
254,808 |
|
|
|
65,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
45,332 |
|
|
Chief Financial Officer |
|
|
2003 |
|
|
|
250,000 |
|
|
|
43,750 |
|
|
|
0 |
|
|
|
0 |
|
|
|
39,069 |
|
Michael F. Falcon
|
|
|
2005 |
|
|
|
215,769 |
|
|
|
84,250 |
|
|
|
0 |
|
|
|
20,000 |
|
|
|
1,500 |
|
|
Vice President of |
|
|
2004 |
|
|
|
213,808 |
|
|
|
65,000 |
|
|
|
0 |
|
|
|
20,000 |
|
|
|
1,500 |
|
|
Operations |
|
|
2003 |
|
|
|
190,000 |
|
|
|
14,250 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,500 |
|
Charles T. Olson(4)
|
|
|
2005 |
|
|
|
215,769 |
|
|
|
70,686 |
|
|
|
0 |
|
|
|
20,000 |
|
|
|
25,500 |
|
|
Vice President of |
|
|
2004 |
|
|
|
212,372 |
|
|
|
45,000 |
|
|
|
0 |
|
|
|
10,000 |
|
|
|
27,488 |
|
|
Engineering |
|
|
2003 |
|
|
|
186,346 |
|
|
|
13,976 |
|
|
|
0 |
|
|
|
122,500 |
|
|
|
27,552 |
|
Mark G. Merrill
|
|
|
2005 |
|
|
|
205,961 |
|
|
|
67,756 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,500 |
|
|
Chief Technology
|
|
|
2004 |
|
|
|
206,904 |
|
|
|
32,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,500 |
|
|
Officer |
|
|
2003 |
|
|
|
203,000 |
|
|
|
15,225 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,500 |
|
|
|
(1) |
Represents cash bonuses earned for the indicated fiscal years. |
|
(2) |
All other compensation consists of discretionary matching
contributions to our 401(k) plan on behalf of each named
executive officer, unless otherwise stated. Excludes
prerequisites and personal benefits, securities or property to
the extent such benefits do not exceed the lesser of either
$50,000 or 10% of the total annual salary and bonus for the
named executive officer. |
|
(3) |
Mr. Mather received other compensation consisting of a
$1,500 matching contribution to our 401(k) plan on his behalf
and a tax protected housing allowance of $40,575 in 2005, a
$1,500 matching contribution to our 401(k) plan on his behalf
and a tax protected housing allowance of $43,832 in 2004, and a
$1,500 matching contribution to our 401(k) plan on his behalf
and a tax protected housing allowance of $37,569 in 2003. |
|
(4) |
Mr. Olson received other compensation consisting of a
$1,500 matching contribution to our 401(k) plan on his behalf
and a housing allowance of $24,000 in 2005, a $1,500 matching
contribution to our 401(k) plan on his behalf and a housing
allowance of $25,988 in 2004, and a $1,500 matching contribution
to our 401(k) plan on his behalf and a housing allowance of
$26,052 in 2003. |
Option Grants in Last Fiscal Year
The following table provides certain information relating to
stock options granted to each of our executive officers named in
the summary compensation table above during the fiscal year
ended December 31, 2005. All of these options were granted
under our 2003 Stock Plan and have a term of 10 years,
subject to earlier termination in the event that the
optionees services to us cease.
The exercise prices of the options we grant are generally equal
to the fair market value of our common stock, as determined by
our board of directors, on the date of grant. The exercise price
may be paid by cash or check. In the event of an acquisition of
NETGEAR by merger or asset purchase, if the acquiring
corporation fails to assume or substitute the outstanding
options under our 2003 Stock Plan, then all of the option shares
will become immediately vested and exercisable for a period of
15 days after notice is given, after which the options will
terminate.
19
The potential realizable value is calculated by assuming that
the fair market value of our common stock increases from the
date of grant of the option at assumed rates of stock
appreciation of 5% and 10%, compounded annually over the
10 year term of the option, and subtracting from that
result the total option exercise price. These assumed
appreciation rates comply with the rules of the Securities and
Exchange Commission and do not represent our prediction of the
performance of our stock price.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants | |
|
|
|
|
|
|
| |
|
|
|
|
|
|
% of Total | |
|
|
|
Potential Realizable | |
|
|
Number | |
|
Options | |
|
|
|
Value at Assumed | |
|
|
of | |
|
Granted | |
|
|
|
Annual Rates of Stock | |
|
|
Securities | |
|
to | |
|
|
|
Price Appreciation for | |
|
|
Underlying | |
|
Employees | |
|
Exercise | |
|
|
|
Option Term | |
|
|
Options | |
|
in Fiscal | |
|
Price | |
|
Expiration | |
|
| |
Name |
|
Granted | |
|
Year(1) | |
|
($/Share) | |
|
Date | |
|
5% ($) | |
|
10% ($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Patrick C.S. Lo
|
|
|
100,000 |
|
|
|
8.7 |
% |
|
|
15.35 |
|
|
|
3/11/2015 |
|
|
|
965,352 |
|
|
|
2,446,396 |
|
Jonathan R. Mather
|
|
|
50,000 |
|
|
|
4.4 |
% |
|
|
15.35 |
|
|
|
3/11/2015 |
|
|
|
482,676 |
|
|
|
1,223,196 |
|
Michael F. Falcon
|
|
|
20,000 |
|
|
|
1.7 |
% |
|
|
15.35 |
|
|
|
3/11/2015 |
|
|
|
193,072 |
|
|
|
489,280 |
|
Charles T. Olson
|
|
|
20,000 |
|
|
|
1.7 |
% |
|
|
15.35 |
|
|
|
3/11/2015 |
|
|
|
193,072 |
|
|
|
489,280 |
|
Mark G. Merrill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Based on a total of 1,147,050 options granted to all employees
in the fiscal year ended December 31, 2005. |
Aggregate Option Exercises in Last Year and Year-End Option
Values
The following table provides certain information relating to
option exercises by the executive officers named in the summary
compensation table during the fiscal year ended
December 31, 2005, and the number and value of vested and
unvested options held by those executive officers as of
December 31, 2005.
The Value Realized and the Value of
Unexercised
In-the-Money Options at
December 31, 2005 are based upon the closing price of
our common stock on the date of exercise or at December 31,
2005, as applicable, minus the per share exercise price,
multiplied by the number of shares underlying the option. The
closing price of our common stock on December 31, 2005 was
$19.25 per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Underlying | |
|
Value of Unexercised | |
|
|
Shares | |
|
|
|
Unexercised Options at | |
|
In-The-Money Options at | |
|
|
Acquired on | |
|
Value Realized | |
|
December 31, 2005 | |
|
December 31, 2005 | |
|
|
Exercise of | |
|
for Exercised | |
|
| |
|
| |
Name |
|
Options | |
|
Options | |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Patrick C.S. Lo
|
|
|
397,100 |
|
|
$ |
6,765,204 |
|
|
|
699,661 |
|
|
|
|
|
|
$ |
9,229,003 |
|
|
|
|
|
Jonathan R. Mather
|
|
|
84,000 |
|
|
$ |
1,429,234 |
|
|
|
162,042 |
|
|
|
|
|
|
$ |
2,207,274 |
|
|
|
|
|
Michael F. Falcon
|
|
|
65,894 |
|
|
$ |
805,430 |
|
|
|
25,208 |
|
|
|
34,898 |
|
|
$ |
92,166 |
|
|
$ |
348,316 |
|
Charles T. Olson
|
|
|
58,650 |
|
|
$ |
729,198 |
|
|
|
32,304 |
|
|
|
38,596 |
|
|
$ |
172,926 |
|
|
$ |
369,086 |
|
Mark G. Merrill
|
|
|
60,000 |
|
|
$ |
848,608 |
|
|
|
307,707 |
|
|
|
|
|
|
$ |
4,532,620 |
|
|
|
|
|
20
Equity Compensation Plan Information
The following table provides information as of December 31,
2005 about our common stock that may be issued upon the exercise
of options and rights granted to employees, consultants or
members of our Board of Directors under all existing equity
compensation plans, including the 2000 Stock Option Plan (which
was terminated as to new grants in May 2003), the 2003 Stock
Plan and the 2003 Employee Stock Purchase Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
|
Number of Securities | |
|
|
|
Remaining Available for | |
|
|
to be Issued Upon | |
|
Weighted-Average | |
|
Future Issuance Under | |
|
|
Exercise of | |
|
Exercise Price of | |
|
Equity Compensation Plans | |
|
|
Outstanding Options, | |
|
Outstanding Options, | |
|
(Excluding Securities | |
Plan Category |
|
Warrants and Rights | |
|
Warrants and Rights | |
|
Reflected in Column (a)) | |
|
|
| |
|
| |
|
| |
|
|
(a) | |
|
(b) | |
|
(c) | |
Equity compensation plans approved by securityholders
|
|
|
3,673,687 |
(1) |
|
$ |
10.49 |
|
|
|
483,541 |
(2) |
Equity compensation plans not approved by securityholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,673,687 |
|
|
$ |
10.49 |
|
|
|
483,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes 1,939,224 shares outstanding under the 2000 Stock
Option Plan, 1,734,463 shares outstanding under the 2003
Stock Option Plan, and no outstanding shares under the 2003
Employee Stock Purchase Plan. |
|
(2) |
Includes 109,617 shares available for issuance under the
Companys 2003 Stock Option Plan and 373,924 shares
under the Companys 2003 Employee Stock Purchase Plan. |
Employment Agreements and Change in Control Arrangements
We have entered into employment agreements with the following of
our current executive officers. Each agreement may be terminated
by either us or the executive officer at any time with or
without cause. In addition, the employment agreements provide
for annual salary and bonus amounts and severance benefits, as
may be adjusted from time to time by our Board of Directors.
On December 3, 1999, we entered into an employment
agreement with Patrick C.S. Lo, our Chairman and Chief Executive
Officer. The agreement provides that if within one year
following a change of control of NETGEAR, Mr. Lo is
terminated without cause or resigns for good reason, he is
entitled to full acceleration of any unvested portion of his
stock options, and severance payments at his final base salary
rate for a period of one year after his termination or
resignation. If Mr. Lo is terminated without cause, he is
entitled to receive severance payments at his final base salary
rate for a period of one year and will continue to have his
stock options vest for one year after such termination.
On December 9, 1999, we entered into an employment
agreement with Mark G. Merrill, our Chief Technology Officer.
The agreement provides that if within one year following a
change of control of NETGEAR, Mr. Merrill is terminated
without cause or resigns for good reason, he is entitled to
receive two years acceleration of any unvested portion of his
stock options. If Mr. Merrill is terminated without cause,
he is entitled to receive severance payments at his final base
salary rate for 26 weeks and will continue to have his
stock options vest for one year after such termination.
On August 10, 2001, we entered into an employment agreement
with Jonathan R. Mather, our Executive Vice President and Chief
Financial Officer. The agreement provides that if within one
year following a change of control of NETGEAR, Mr. Mather
is terminated without cause or resigns for good reason, he is
entitled to receive two years acceleration of any unvested
portion of his stock options. If Mr. Mather is terminated
without cause, he is entitled to receive severance payments at
his final base salary rate for a period of 39 weeks and
will continue to have his stock options vest for one year after
such termination.
On November 4, 2002, we entered into an employment
agreement with Michael F. Falcon, our Senior Vice President of
Operations. On January 6, 2003, we entered into an
employment agreement with Charles T.
21
Olson, our Senior Vice President of Engineering. Each of these
agreements provides that if within one year following a change
of control of NETGEAR, the officer is terminated without cause
or resigns for good reason, he is entitled to receive two years
acceleration of any unvested portion of his stock options. If
the officer is terminated without cause, he is entitled to
receive severance payments at his final base salary rate for a
period of 26 weeks and will continue to have his stock
options vest for one year after such termination.
On October 18, 2004, we entered into an employment
agreement with Albert Y. Liu, our Vice President, Legal and
Corporate Development and Company Secretary. On
November 16, 2005, we entered into an employment agreement
with Christine Gorjanc, our Vice President, Finance. Each of
these agreements provides that if within one year following a
change of control of NETGEAR, the officer is terminated without
cause or resigns for good reason, the officer is entitled to
receive two years acceleration of any unvested portion of his or
her stock options. If the officer is terminated without cause,
the officer is entitled to receive severance payments at the
officers final base salary rate for a period of
13 weeks and will continue to have his or her stock options
vest for three months after such termination.
Stock Ownership Guidelines
In 2005, our Board of Directors adopted stock ownership
guidelines for our directors and executive officers. For a
description of these guidelines, please see Stock
Ownership Guidelines under
Proposal One Election of Directors.
22
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS
Notwithstanding any statement to the contrary in any of our
previous or future filings with the Securities and Exchange
Commission, this Report of the Compensation Committee of our
Board of Directors shall not be deemed filed with
the Commission or soliciting material under the
1934 Act, and shall not be incorporated by reference into
any such filings.
During 2005, executive compensation matters were approved by the
Compensation Committee, which currently consists of
Ralph E. Faison, Jef Graham, Gerald A. Poch and
Gregory J. Rossmann. Mr. Poch is not standing for
re-election to our Board of Directors, and therefore will no
longer be a member of the Compensation Committee from and after
the 2006 Annual Meeting. The following is the report of the
Compensation Committee of our Board of Directors with respect to
compensation during 2005. The Compensation Committee operates
under a written charter adopted by our Board of Directors in
August 2000 and most recently amended in January 2005.
General Compensation Philosophy
The primary objectives of the executive compensation policies of
our Board of Directors include the following:
|
|
|
|
|
To attract, motivate, and retain a highly qualified executive
management team; |
|
|
|
To link executive compensation to our financial performance as
well as to define individual management objectives established
by the compensation committee; |
|
|
|
To compensate competitively with the practices of similarly
situated technology companies; and |
|
|
|
To create management incentives designed to enhance stockholder
value. |
NETGEAR competes in an aggressive and dynamic industry and, as a
result, our Board of Directors believes that finding, motivating
and retaining quality employees, particularly senior managers,
sales personnel and technical personnel, are important factors
to NETGEARs future success. The philosophy of the
Compensation Committee seeks to align the interests of
stockholders and management by tying compensation to
NETGEARs financial performance, either directly in the
form of salary and bonuses paid in cash or indirectly in the
form of stock options granted to NETGEARs principal
executive officers.
Cash Compensation
NETGEAR seeks to provide cash compensation to our executive
officers, including base salary and bonus, at levels that are
commensurate with cash compensation of executives with
comparable responsibility at similarly situated technology
companies. Annual increases in base salary are determined on an
individual basis based on market data and a review of the
officers performance and contribution to various
individual, departmental and corporate objectives. Cash bonuses,
if any, are intended to provide additional incentives to achieve
such objectives.
The salaries and cash bonuses of each of NETGEARs
executive officers, other than the chief executive officer, were
determined by the Compensation Committee and ratified by our
Board of Directors. The chief executive officers base
salary was determined by the Compensation Committee and ratified
by our Board of Directors with the abstention by the chief
executive officer. During 2005, the compensation of Patrick C.S.
Lo, NETGEARs chief executive officer, consisted of a base
salary of $414,615 and a cash bonus of $250,000, for total cash
compensation equal to $664,615 for 2005. The Compensation
Committee reviewed the chief executive officers salary at
the beginning of 2005 using the same criteria and policies as
are employed for the other executive officers.
At the beginning of 2006, based on feedback from an outside
compensation consultant and a review of market compensation
trends, our Board of Directors determined that it was
appropriate to increase the cash compensation paid to
NETGEARs executive officers, including the chief executive
officer, in order to be generally consistent with amounts paid
to officers with similar responsibilities at similarly situated
technology
23
companies. As a result, effective for fiscal year 2006, our
Board of Directors increased the base salary of Mr. Lo to
$525,000. We note that competition for qualified management and
technical personnel in NETGEARs industry is intense, and
we expect such competition to remain intense for the foreseeable
future. As a result, in order to insure access to qualified
personnel, our Board of Directors believes that it will continue
to be necessary to provide compensation packages that are at
least competitive with, and in certain instances superior to,
compensation paid by other similarly situated networking
companies.
Equity-Based Compensation
NETGEAR provides long term incentives through its 2003 stock
option plan and anticipates that it will also provide such
incentives through the NETGEAR, Inc. 2006 Long Term Incentive
Plan upon approval from stockholders. Stock options are
periodically granted under NETGEARs stock plans to provide
additional incentive to executives and other employees to
maximize long-term total return to our stockholders. We believe
that stock options are a particularly strong incentive, because
they are valuable to employees only if the fair market value of
our common stock increases above the exercise price, which is
set at the fair market value of NETGEARs common stock on
the date the option is granted. In addition, employees generally
must remain employed with NETGEAR for a fixed period of time in
order for the options to vest fully. Options generally vest over
a four-year period to encourage option holders to remain
employed by NETGEAR. If the NETGEAR, Inc. 2006 Long Term
Incentive Plan is approved by stockholders, we may also provide
other types of equity incentive awards, including stock
appreciation rights, restricted stock awards, performance awards
and other stock awards, to executives and other employees.
With respect to the size of the equity awards granted to
NETGEARs executive officers, the Compensation Committee
considers the executives position, the executives
individual performance, the number of equity awards held (if
any), the extent to which those equity awards are vested and any
other factors that our Board of Directors may deem relevant.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code limits the
federal income tax deductibility of compensation paid to our
chief executive officer and to each of the other four most
highly-compensated executive officers. NETGEAR may deduct such
compensation only to the extent that during any fiscal year the
compensation paid to such individual does not exceed
$1 million or meet certain specified conditions (including
stockholder approval). NETGEAR has adopted a policy that, where
reasonably practicable, NETGEAR will seek to qualify variable
compensation paid to its executive officers for an exemption
from the deductibility limitations of 162(m).
|
|
|
Respectfully submitted by: |
|
|
THE COMPENSATION COMMITTEE |
|
|
RALPH E. FAISON |
|
JEF GRAHAM |
|
GERALD A. POCH |
|
GREGORY J. ROSSMANN |
24
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Notwithstanding any statement to the contrary in any of our
previous or future filings with the Securities and Exchange
Commission, this report of the Audit Committee of our Board of
Directors shall not be deemed filed with the
Commission or soliciting material under the
1934 Act, and shall not be incorporated by reference into
any such filings.
The Audit Committee, which currently consists of A. Timothy
Godwin, Linwood A. Lacy, Jr. and Gerald A. Poch,
evaluates audit performance, manages relations with our
independent auditors and evaluates policies and procedures
relating to internal accounting functions and controls.
Mr. Poch is not standing for re-election to our Board of
Directors, and therefore will no longer be a member of the Audit
Committee from and after the 2006 Annual Meeting. Our Board of
Directors first adopted a written charter for the Audit
Committee in September 2000 and most recently amended it in
February 2004, which details the responsibilities of the Audit
Committee. This report relates to the activities undertaken by
the Audit Committee in fulfilling such responsibilities.
The Audit Committee members are not professional auditors or
auditors, and their functions are not intended to duplicate or
to certify the activities of management and the independent
auditors. The Audit Committee oversees NETGEARs financial
reporting process on behalf of our Board of Directors.
NETGEARs management has the primary responsibility for the
financial statements and reporting process, including
NETGEARs systems of internal controls. In fulfilling its
oversight responsibilities, the Audit Committee reviewed and
discussed with management the audited financial statements
included in the Annual Report on
Form 10-K for the
year ended December 31, 2005. This review included a
discussion of the quality and the acceptability of
NETGEARs financial reporting and controls, including the
clarity of disclosures in the financial statements.
The Audit Committee also reviewed with NETGEARs
independent auditors, who are responsible for expressing an
opinion on the conformity of NETGEARs audited financial
statements with generally accepted accounting principles, their
judgments as to the quality and the acceptability of
NETGEARs financial reporting and such other matters
required to be discussed with the Audit Committee under
generally accepted auditing standards in the United States
including Statement on Auditing Standards No. 61. The Audit
Committee has received the written disclosures and the letter
from the independent auditors required by Independence Standards
Board Statement No. 1. The Audit Committee discussed with
the independent auditors such auditors independence from
management and NETGEAR, including the matters in such
auditors written disclosures required by Independence
Standards Board Statement No. 1.
The Audit Committee further discussed with NETGEARs
independent auditors the overall scope and plans for their
audits. The Audit Committee meets periodically with the
independent auditors, with and without management present, to
discuss the results of the independent auditors
examinations and evaluations of NETGEARs internal
controls, and the overall quality of NETGEARs financial
reporting.
In reliance on the reviews and discussions referred to above,
the Audit Committee recommended to our Board of Directors and
our Board of Directors approved that the audited financial
statements and disclosures under Managements
Discussion and Analysis of Financial Condition and Results of
Operations be included in the Annual Report on
Form 10-K for the
year ended December 31, 2005, as filed with the Securities
and Exchange Commission on March 16, 2006.
|
|
|
Respectfully submitted by: |
|
|
THE AUDIT COMMITTEE |
|
|
A. TIMOTHY GODWIN |
|
LINWOOD A. LACY, JR. |
|
GERALD A. POCH |
25
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the 1934 Act requires our officers
and directors, and persons who own more than 10% of a registered
class of our equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission
and the National Association of Securities Dealers, Inc.
Executive officers, directors and greater than 10% stockholders
are required by Securities and Exchange Commission regulations
to furnish us with copies of all Section 16(a) forms they
file. Based solely on our review of the copies of such forms
that we have received, or written representations from reporting
persons, we believe that during 2005, all Section 16(a)
filing requirements applicable to our officers, directors and
greater than 10% stockholders were met.
RELATED PARTY TRANSACTIONS
We have entered into certain compensation arrangements which are
described under Executive Compensation
Employment Agreements and Change in Control Agreements.
26
COMPANY PERFORMANCE
Notwithstanding any statement to the contrary in any of our
previous or future filings with the Securities and Exchange
Commission, the following information relating to the price
performance of our common stock shall not be deemed
filed with the Commission or soliciting
material under the 1934 Act and shall not be
incorporated by reference into any such filings.
The following graph shows a comparison from July 31, 2003
(the date our common stock commenced trading on the Nasdaq
National Market) through December 31, 2005 of cumulative
total return for our common stock, the Nasdaq Market Index and
the Nasdaq Computer Index. Such returns are based on historical
results and are not intended to suggest future performance. Data
for the Nasdaq Market Index and the Nasdaq Computer Index assume
reinvestment of dividends. We have never paid dividends on our
common stock and have no present plans to do so.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
|
July 31, 2003 |
|
|
December 31, 2003 |
|
|
December 31, 2004 |
|
|
December 31, 2005 |
|
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
NETGEAR, Inc.
|
|
|
$ |
100.00 |
|
|
|
$ |
90.39 |
|
|
|
$ |
102.66 |
|
|
|
$ |
108.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NASDAQ Computer Index
|
|
|
$ |
100.00 |
|
|
|
$ |
116.78 |
|
|
|
$ |
120.58 |
|
|
|
$ |
123.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NASDAQ Market Index
|
|
|
$ |
100.00 |
|
|
|
$ |
115.47 |
|
|
|
$ |
125.38 |
|
|
|
$ |
127.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
OTHER MATTERS
We know of no other matters to be submitted at the annual
meeting. If any other matters properly come before the annual
meeting, it is the intention of the persons named in the
enclosed proxy card to vote the shares they represent as our
Board of Directors may recommend.
It is important that your shares be represented at the annual
meeting, regardless of the number of shares, which you hold. You
are, therefore, urged to mark, sign, date and return the
accompanying proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose.
|
|
|
THE BOARD OF DIRECTORS OF |
|
NETGEAR, INC.: |
|
|
PATRICK C.S. LO |
|
RALPH E. FAISON |
|
JEF GRAHAM |
|
A. TIMOTHY GODWIN |
|
LINWOOD A. LACY, JR. |
|
GERALD A. POCH |
|
GREGORY J. ROSSMANN |
Dated: April 21, 2006
28
APPENDIX A
NETGEAR, INC.
2006 LONG-TERM INCENTIVE PLAN
Section 1.
Purpose: The purpose of the NETGEAR, Inc.
Long-Term Incentive Plan is to provide certain employees and
consultants of NETGEAR, Inc. and its Affiliates (as hereinafter
defined) and members of the Board (as hereinafter defined) with
the opportunity to receive stock-based and other long-term
incentive grants in order to attract and retain qualified
individuals and to align their interests with those of
stockholders.
Section 2.
Effective Date: This Plan will become effective as
of April 14, 2006, subject to the approval of the
stockholders at the Annual Meeting to be held on May 23,
2006. Unless sooner terminated as provided herein, the Plan
shall terminate ten years from April 14, 2006. After the
Plan is terminated, no future Awards may be granted under the
Plan, but Awards previously granted shall remain outstanding in
accordance with their applicable terms and conditions.
Section 3.
Definitions: As used in this Plan, unless the
context otherwise requires, each of the following terms shall
have the meaning set forth below.
|
|
|
(a) Affiliate shall mean any entity that,
directly or indirectly, controls, is controlled by, or is under
common control with, the Company. |
|
|
(b) Award shall mean a grant of an Option, SAR,
Restricted Stock Award, Performance Award, or Other Stock Award
pursuant to the Plan, which may, as determined by the Committee,
be in lieu of other compensation owed to a Participant. |
|
|
(c) Award Agreement shall mean an agreement,
either in written or electronic format, in such form and with
such terms and conditions as may be specified by the Committee,
which evidences the terms and conditions of an Award. |
|
|
(d) Beneficiary means the person or entity
(including a trust or the estate of the Participant) designated
by the Participant to succeed to any rights that he or she may
have in Awards at the time of death. No such designation, or any
revocation or change thereof, shall be effective unless made in
writing by the Participant on a form provided by the Company and
delivered to the Company prior to the Participants death.
If, on the death of a Participant, there is no living person or
entity in existence so designated, the term
Beneficiary shall mean the legal representative of
the Participants estate. |
|
|
(e) Board of Directors or Board
shall mean the board of directors of the Company. |
|
|
(f) Change in Control means the happening of
any of the following events: |
|
|
|
(i) the merger or consolidation of the Company with any
other corporation following which the holders of the
Companys common stock immediately prior thereto hold less
than 60% of the outstanding common stock of the surviving or
resulting entity; |
|
|
(ii) the sale of all or substantially all of the assets of
the Company to any person or entity other than a wholly-owned
subsidiary; |
|
|
(iii) any person or group of persons acting in concert, or
any entity, becomes the beneficial owner, directly or
indirectly, of more than 20% of the Companys outstanding
common stock, other than an acquisition of more than 20%, in one
or more transactions, of the Companys outstanding common
stock by (a) a passive institutional investor where such
investor is eligible pursuant to
Rule 13d-1(b) of
the Securities Exchange Act of 1934 (the Exchange
Act) to, and does, file a report of ownership on
Schedule 13G with the Securities and Exchange Commission,
(b) a trustee or other fiduciary of an employee benefit
plan maintained by the Company, or (c) a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the
Company; |
A-1
|
|
|
(iv) those individuals who, as of the close of the most
recent annual meeting of the Companys stockholders, are
members of the Board (the Existing Directors) cease
for any reason to constitute more than 50% of the Board. For
purposes of the foregoing, a new director will be considered an
Existing Director if the election, or nomination for election by
the Companys stockholders, of such new director was
approved by a vote of a majority of the Existing Directors. No
individual shall be considered an Existing Director if such
individual initially assumed office as a result of either an
actual or threatened election contest subject to
Rule 14a-11 under
the Exchange Act or other actual or threatened solicitation of
proxies by or on behalf of anyone other than the Board of
Directors, including by reason of any agreement intended to
avoid or settle any election proxy contest; or |
|
|
(v) the stockholders of the Company adopt a plan of
liquidation. |
|
|
|
(g) Code shall mean the Internal Revenue Code
of 1986, as amended from time to time, and any references to a
particular section of the Code shall be deemed to include any
successor provision thereto. |
|
|
(h) Committee shall mean the Compensation
Committee of the Board or such other committee of the Board of
Directors, which shall consist solely of two or more
outside directors within the meaning of
Section 162(m) of the Code and non-employee
directors within the meaning of Securities and Exchange
Commission
Rule 16b-3
promulgated under Section 16 of the Securities Exchange Act
of 1934, as amended, or any such successor provision thereto. |
|
|
(i) Company shall mean NETGEAR, Inc., a
Delaware corporation. |
|
|
(j) Consultant shall mean any person engaged by
the Company or an Affiliate to render services to such entity as
a consultant or advisor. |
|
|
(k) Disability shall mean that a Participant is
eligible for Social Security disability benefits or disability
benefits under the Companys long-term disability plan,
based upon a determination by the Committee that the condition
arose prior to termination of employment. |
|
|
(l) Eligible Director shall mean a member of
the Board who is not an officer or employee of the Company or
any of its Affiliates. |
|
|
(m) Eligible Employee shall mean an employee of
the Company or any Affiliate. |
|
|
(n) Exercise Price shall mean an amount, as
determined by the Committee, at which an Option or SAR can be
exercised by a Participant, which amount shall not be less than
the Fair Market Value of a Share on the date such Award is
granted, unless such Option or SAR is granted pursuant to an
assumption or substitution of another option or stock
appreciation right in a manner that satisfies the requirements
of Section 424(a) of the Code. |
|
|
(o) Fair Market Value shall mean, as of any
date, the value of Shares as the Committee may determine in good
faith by reference to the price of such stock on any established
stock exchange or a national market system on the day of
determination if the Shares are so listed on any established
stock exchange or a national market system. If the Shares are
not listed on any established stock exchange or a national
market system, the value of the Shares will be determined by the
Committee in good faith. |
|
|
(p) Incentive Stock Option means an Option that
by its terms qualifies and is otherwise intended to qualify as
an incentive stock option within the meaning of Section 422
of the Code and the regulations promulgated thereunder. |
|
|
(q) Nonqualified Stock Option shall mean an
Option not intended to qualify as an Incentive Stock Option. |
|
|
(r) Option shall mean the right to purchase a
Share granted pursuant to Section 8, which may take the
form of either an Incentive Stock Option or a Nonqualified Stock
Option. |
|
|
(s) Other Stock Award shall mean an Award of
Shares or Awards that are valued in whole or in part, or that
are otherwise based on, Shares, including but not limited to
dividend equivalents or amounts |
A-2
|
|
|
which are equivalent to all or a portion of any federal, state,
local, domestic, or foreign taxes relating to an Award, which
may be payable in Shares, cash, other securities, or any other
form of property as the Committee shall determine, subject to
the terms and conditions set forth by the Committee and granted
pursuant to Section 12. |
|
|
(t) Participant shall mean an Eligible
Employee, Consultant or Eligible Director selected by the
Committee to receive Awards under the Plan. |
|
|
(u) Performance Awards shall mean Awards of
Performance Shares or Performance Units. |
|
|
(v) Performance Goal(s) shall mean the level or
levels of Performance Measures established by the Committee
pursuant to Section 7. |
|
|
(w) Performance Measures shall mean any of the
following performance criteria, either alone or in any
combination, which may be expressed with respect to the Company
or one or more operating units or groups, as the Committee may
determine: cash flow; cash flow from operations; total earnings;
earnings per share, diluted or basic; earnings per share from
continuing operations, diluted or basic; earnings before
interest and taxes; earnings before interest, taxes,
depreciation, and amortization; earnings from operations; net
asset turnover; inventory turnover; capital expenditures; net
earnings; operating earnings; gross or operating margin; profit
margin, debt; working capital; return on equity; return on net
assets; return on total assets; return on capital; return on
investment; return on sales; net or gross sales; market share;
economic value added; cost of capital; change in assets; expense
reduction levels; debt reduction; productivity; new product
introductions; delivery performance; safety record; stock price;
and total stockholder return. Performance Measures may be
determined on an absolute basis or relative to internal goals or
relative to levels attained in prior years or related to other
companies or indices or as ratios expressing relationships
between two or more Performance Measures. The Committee shall
provide how any Performance Measure shall be adjusted to the
extent necessary to prevent dilution or enlargement of any Award
as a result of extraordinary events or circumstances, as
determined by the Committee, or to exclude the effects of
extraordinary, unusual, or non-recurring items; changes in
applicable laws, regulations, or accounting principles; currency
fluctuations; discontinued operations; non-cash items, such as
amortization, depreciation, or reserves; asset impairment; or
any recapitalization, restructuring, reorganization, merger,
acquisition, divestiture, consolidation, spin-off, split-up,
combination, liquidation, dissolution, sale of assets, or other
similar corporate transaction; provided, however, that no such
adjustment will be made if the effect of such adjustment would
cause the Award to fail to qualify as performance based
compensation within the meaning of Section 162(m) of
the Code. |
|
|
(x) Performance Period shall mean a period of
at least 12 months established by the Committee pursuant to
Section 7 at the end of which one or more Performance Goals
are to be measured. |
|
|
(y) Performance Share shall mean an Award
denominated in Shares, which is earned during a specified period
subject to the terms and conditions as determined by the
Committee and granted pursuant to Section 11. |
|
|
(z) Performance Unit shall mean an Award
denominated in units having a value in dollars or such other
currency, as determined by the Committee, which is earned during
a specified period subject to the terms and conditions as
determined by the Committee and granted pursuant to
Section 11. |
|
|
(aa) Plan shall mean the NETGEAR, Inc.
Long-Term Incentive Plan, as amended and restated from time to
time. |
|
|
(bb) Restricted Stock shall mean an Award of
Shares, subject to such terms and conditions as determined by
the Committee and granted pursuant to Section 10. |
|
|
(cc) Restricted Stock Award shall mean an Award
consisting of Restricted Stock or Restricted Stock Units. |
|
|
(dd) Restricted Stock Unit shall mean an Award
consisting of a bookkeeping entry representing an amount
equivalent to the Fair Market Value of one Share, payable in
cash or Shares, and representing |
A-3
|
|
|
an unfunded and unsecured obligation of the Company, subject to
such terms and conditions as determined by the Committee and
granted pursuant to Section 10. |
|
|
(ee) Retirement shall mean termination of an
Eligible Employees employment with the Company and its
Affiliates for retirement purposes if such termination occurs
(1) on or after his or her sixty-fifth birthday; or
(2) on or after his or her fifty-fifth birthday with the
written consent of the Chief Executive Officer of the Company
or, in the case of the Chief Executive Officers
retirement, with the consent of the Committee. In the case of an
Eligible Director, Retirement shall be determined by
the Committee in its discretion. In no event shall termination
of a Consultants services with the Company and Affiliates
be treated as a Retirement under the Plan. |
|
|
(ff) Shares shall mean shares of common stock,
$0.001 par value, of the Company. |
|
|
(gg) Stock Appreciation Right or
SAR shall mean an Award, which represents the right
to receive the difference between the Fair Market Value of a
Share on the date of exercise and an Exercise Price, payable in
cash or Shares, subject to such terms and conditions as
determined by the Committee and granted pursuant to
Section 9. |
Section 4.
Administration:
(a) Subject to the express provisions of this Plan, the
Committee shall have authority to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to
it, to designate Participants, to determine the terms and
conditions of Awards, and to make all other determinations
deemed necessary or advisable for the administration of the
Plan. In exercising its discretion, the Committee may use such
objective or subjective factors as it determines to be
appropriate in its sole discretion. The determinations of the
Committee pursuant to its authority under the Plan shall be
conclusive and binding. The Committee may delegate to one or
more officers of the Company the authority, subject to the terms
and conditions as the Committee shall determine, to grant Awards
to Participants who are not members of the Board or officers
within the meaning of Section 16 of the Securities Exchange
Act of 1934, as amended.
(b) The determination of any Award grants to Eligible
Directors shall be made solely by the Eligible Directors and
without the participation of any non-Eligible Directors or
Eligible Employees. Awards granted to an Eligible Director shall
generally be on par with Awards granted to all other comparable
Eligible Directors.
(c) Notwithstanding the foregoing, any material amendment
to the Plan shall require stockholder approval, which shall
constitute the affirmative approval by a majority of shares
present in person or by proxy and entitled to vote on the
proposed material amendment. For the purposes of this
Section 4(c), a material amendment would
include, among other things, (i) any material increase in
the number of shares to be issued under the Plan (other than to
reflect an event specified in Section 5(f)); (ii) an
material increase in benefits to participants, including any
material change to (a) permit a repricing (or decrease in
exercise price) of outstanding options, (b) reduce the
price at which shares or options to purchase shares may be
offered, or (c) extend the duration of a Plan;
(iii) any material expansion of the class of participants
eligible to participate in the Plan; and (iv) any expansion
in the types of options or awards provided under the Plan.
Section 5.
Shares Available for Awards:
(a) Subject to adjustment as provided in Section 5(f),
the maximum number of Shares available for issuance under the
Plan shall be 2,500,000.
(b) If any Shares are subject to an Award that is
forfeited, is settled in cash, expires, or is otherwise settled
without the issuance of the full number of Shares underlying the
Awards, any such Shares covered by such Award shall again be
available for issuance under the Plan. Any Shares that are
tendered by the Participant or retained by the Company as full
or partial payment to the Company for the purchase of an Award
or to satisfy tax withholding obligations in connection with an
Award shall be available for Awards under the Plan.
A-4
(c) Unless otherwise determined by the Committee, Awards
that are designed to operate in tandem with other Awards shall
not be counted against the maximum number of Shares available
under Section 5(a) in order to avoid double counting.
(d) Notwithstanding the foregoing, and, subject to
adjustment provided in Section 5(f), the maximum number of
Shares that may be issued upon the exercise of Incentive Stock
Options shall equal the aggregate number of Shares stated in
Section 5(a), plus, to the extent allowable under
Section 422 of the Code, any Shares that become available
for issuance under the Plan under this Section 5(b).
(e) Any Shares issued under the Plan shall consist, in
whole or in part, of authorized and unissued Shares, Shares
purchased in the open market or otherwise, Shares in treasury,
or any combination thereof, as the Committee or, as appropriate,
the Board may determine.
(f) In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, stock split,
reverse stock split, spin-off, combination, repurchase or
exchange of Shares or other securities of the Company, or
similar corporate transaction, as determined by the Committee,
the Committee shall, in such manner as it may deem equitable and
to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, adjust
the number and type of Shares available for Awards under the
Plan, the number and type of Shares subject to outstanding
Awards, and the Exercise Price with respect to any Award;
provided, however, that any fractional Share resulting from an
adjustment pursuant to this Section 5(f) shall be rounded
to the nearest whole number.
Section 6.
Eligibility: The Committee from time to time may
designate which Eligible Employees, Eligible Directors and
Consultants shall become Participants under the Plan.
Section 7.
Code Section 162(m) Provisions:
(a) Notwithstanding any other provision of the Plan, if the
Committee determines at the time an Award is made to a
Participant that such Participant is or may be for the tax year
in which the Company would claim a tax deduction in connection
with the Award, a Covered Employee (as that term is defined in
Section 162(m) of the Code), the Committee may provide, in
writing, that this Section 7 is applicable to such Award
under such terms and conditions as the Committee may specify.
(b) Notwithstanding any other provision of the Plan other
than Section 5(f), if the Committee provides that this
Section 7 is applicable to a particular Award, no
Participant shall receive such an Award or Awards having an
aggregate Option/ SAR Value, Performance Share Value, and
Performance Unit Value (as hereinafter defined) of greater than
$3,000,000 for any fiscal year of the Company, where:
(i) the Option/ SAR Value shall mean the Fair Market Value
of the number of Shares underlying an Award of Options in any
fiscal year of the Company or the Fair Market Value of a number
of Shares equal to the number of SARs awarded in any fiscal year
of the Company, with such Fair Market Value determined as of the
date of grant of each Award, multiplied by 50%; (ii) the
Performance Share Value shall mean the Fair Market Value, as of
the date of grant of each such Award, of the maximum number of
Shares that the Participant could receive from an Award of
Performance Shares granted in the fiscal year; provided,
however, that such number of Shares shall be divided by the
number of full or partial fiscal years of the Company contained
in the Performance Period of a particular Award, and provided
further, that if any other Awards of Performance Shares are
outstanding for such Participant for a given fiscal year, the
Performance Share Value shall be increased for each such given
fiscal year by the Fair Market Value of Shares that could be
received by the Participant under all such other Awards
calculated on the date each such Award was granted, divided, for
each such Award, by the number of full or partial fiscal years
of the Company contained in the Performance Period of each such
outstanding Award; or (iii) the Performance Unit Value
shall mean the maximum dollar value that the Participant could
receive from an Award of Performance Units granted in the fiscal
year, provided, however, that such amount shall be divided by
the number of full or partial fiscal years of the Company
contained in the Performance Period of a particular Award, and
provided further, that if any other Awards of Performance Units
are outstanding for such Participant for a given fiscal year,
the Performance Unit Value shall be increased for each such
given fiscal year by the amount that could be received by the
Participant under all such other Awards, divided, for each such
Award, by the number of full or partial fiscal
A-5
years of the Company contained in the Performance Period of each
such outstanding Award; provided, however, that the limitations
set forth in this Section 7(b) shall be subject to
adjustment under Section 5(f) of the Plan only to the
extent that such adjustment does not affect the status of any
Award intended under this Section 7 to qualify as
performance based compensation under
Section 162(m) of the Code. If an Option is granted in
tandem with a SAR, such that exercise of the Option or SAR with
respect to one Share cancels the tandem option or SAR,
respectively, with respect to such Share, the tandem Option and
SAR with respect to such Share shall be counted as covering only
one Share for purposes of applying the limitation set forth in
this Section 7(b).
(c) If an Award is subject to this Section 7, the
grant of any Shares or cash shall be subject to the attainment
of Performance Goals for the Performance Period. The Committee
shall establish the Performance Goals within 90 days
following the commencement of the applicable Performance Period,
or such earlier time as prescribed by Section 162(m) of the
Code or regulations thereunder, and a schedule detailing the
total amount which may be available for payout based upon the
relative level of attainment of the Performance Goals.
(d) The Committee may, in its discretion, reduce the amount
of any Award subject to this Section 7 based on such
criteria as it shall determine. However, the Committee may not
increase the amounts payable pursuant to any Award subject to
this Section 7 or waive the achievement of the applicable
Performance Goals, except as the Committee may provide in a
particular Awards Award Agreement for certain events,
including but not limited to death, disability, or a change in
ownership or control of the Company.
(e) Prior to the payment of any Award subject to this
Section 7, the Committee shall verify in writing as
prescribed by Section 162(m) of the Code or the regulations
thereunder that the applicable Performance Goals were achieved.
(f) The Committee shall have the authority to impose such
other restrictions on Awards subject to this Section 7 as
it may deem necessary or appropriate to ensure that such Awards
meet the requirements for performance based
compensation under Section 162(m) of the Code.
Section 8.
Options: Subject to the terms and conditions of
the Plan and this Section 8, the Committee may grant to
Participants Options on such terms and conditions as the
Committee may prescribe in such Options Award Agreement,
including, but not limited to, the Exercise Price; vesting
schedule; term of the Option; method of payment of the Exercise
Price; treatment upon termination of employment or service of
the Participant; and other terms and conditions that the
Committee may deem appropriate:
|
|
|
(a) Each Option will be designated in the Award Agreement
as either an Incentive Stock Option or a Nonqualified Stock
Option. However, notwithstanding such designation, to the extent
that the aggregate Fair Market Value of the Shares with respect
to which Incentive Stock Options are exercisable for the first
time by the Participant during any calendar year (under all
plans of the Company and any Affiliate) exceeds $100,000, such
Options will be treated as Nonqualified Stock Options. For
purposes of this Section 8(a), Incentive Stock Options will
be taken into account in the order in which they were granted.
The Fair Market Value of the Shares will be determined as of the
time the Option with respect to such Shares is granted. |
|
|
(b) The Committee will determine the term of each Option in
its sole discretion. Any Option granted under the Plan will not
be exercisable after the expiration of ten (10) years from
the date of grant or such shorter term as may be provided in the
Award Agreement. Moreover, in the case of an Incentive Stock
Option granted to a Participant who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten
percent (10%) of the total combined voting power of all classes
of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option will be five (5) years from the
date of grant or such shorter term as may be provided in the
Award Agreement. |
|
|
(c) The per share exercise price for the Shares to be
issued pursuant to exercise of an Option will be determined by
the Committee, but will be no less than 100% of the Fair Market
Value per Share on the date of grant. In addition, in the case
of an Incentive Stock Option granted to an Eligible Employee
who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Affiliate,
the per Share exercise price |
A-6
|
|
|
will be no less than 110% of the Fair Market Value per Share on
the date of grant. Notwithstanding the foregoing provisions of
this Section 8(c), Options may be granted with a per Share
exercise price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a transaction described
in, and in a manner consistent with, Section 424(a) of the
Code. |
|
|
(d) At the time an Option is granted, the Committee will
fix the period within which the Option may be exercised and will
determine any conditions that must be satisfied before the
Option may be exercised. |
|
|
(e) The Committee will determine the acceptable form(s) of
consideration for exercising an Option, including the method of
payment, to the extent permitted by applicable laws. |
Section 9.
Stock Appreciation Right: Subject to the terms and
conditions of the Plan and this Section 9, the Committee
may grant to Participants SARs on such terms and conditions as
the Committee may prescribe in such SARs Award Agreement,
including, but not limited to, the Exercise Price; vesting
schedule; term of the SAR; form of payment; treatment upon
termination of employment or service of the Participant; and
other terms and conditions that the Committee may deem
appropriate:
|
|
|
(a) The Committee, subject to the provisions of the Plan,
will have complete discretion to determine the terms and
conditions of SARs granted under the Plan, provided, however,
that the exercise price will be not less than 100% of the Fair
Market Value of a Share on the date of grant. |
|
|
(b) Each SAR grant will be evidenced by an Award Agreement
that will specify the exercise price, the term of the SAR, the
conditions of exercise, and such other terms and conditions as
the Committee, in its sole discretion, will determine. |
|
|
(c) A SAR granted under the Plan will expire upon the date
determined by the Committee, in its sole discretion, and set
forth in the Award Agreement. Notwithstanding the foregoing, any
SARs granted under the Plan will not be exercisable after the
expiration of ten (10) years from the date of grant or such
shorter term as may be provided in the Award Agreement. |
|
|
(d) Upon exercise of a SAR, a Participant will be entitled
to receive payment from the Company in an amount determined by
multiplying (i) the difference between the Fair Market
Value of a Share on the date of exercise over the exercise
price; times (ii) the number of Shares with respect to
which the SAR is exercised. At the discretion of the Committee,
the payment upon SARs exercise may be in cash, in Shares of
equivalent value, or in some combination thereof. |
Section 10.
Restricted Stock Award: Subject to the terms and
conditions of the Plan, the Committee may grant to Participants
Restricted Stock Awards on such terms and conditions as the
Committee may prescribe in such Restricted Stock Awards
Award Agreement, including, but not limited to, the vesting
schedule; purchase price, if any; deferrals allowed or required;
treatment upon termination of employment or service of the
Participant; and other terms and conditions that the Committee
may deem appropriate. Notwithstanding the foregoing, the period
over which any Restricted Stock Award may fully vest will be no
less than three (3) years.
Section 11.
Performance Awards: Subject to the terms and
conditions of the Plan, the Committee may grant to Participants
Performance Awards on such terms and conditions as the Committee
may prescribe in such Performance Awards Award Agreement,
including, but not limited to, the performance period (which
will be no less than 12 months); performance criteria;
treatment upon termination of employment or service of the
Participant; and other terms and conditions that the Committee
may deem appropriate.
Section 12.
Other Stock Awards: Subject to the terms and
conditions of the Plan, the Committee may grant to Participants
Other Stock Award on such terms and conditions as the Committee
may prescribe in such Other Stock Awards Award Agreement,
including, but not limited to, the vesting schedule, if any;
purchase price, if any; deferrals allowed or required; treatment
upon termination of employment or service of the Participant;
and other terms and conditions that the Committee may deem
appropriate.
A-7
Section 13.
Prohibition on Repricing: The Committee shall not
reduce the Exercise Price of any outstanding Option or SAR,
whether through amendment, cancellation, replacement, or any
other means, without the approval of stockholders. This
Section 13 shall not be construed to apply: (i) to the
Options or SARs granted pursuant to an assumption or
substitution of another option in a manner that satisfies the
requirements of Section 424(a) of the Code; or (ii) to
an adjustment made pursuant to Section 5(f) of the Plan.
Section 14.
Termination of Employment: Unless determined
otherwise by the Committee with respect to any Award granted
under the Plan, the following rules shall apply to Awards
following a Participants termination of employment with
the Company and its Affiliates (or termination of services, in
the case of a Consultant):
|
|
|
(a) All unvested Awards shall be forfeited on the date of a
Participants termination of employment for reasons other
than Retirement, Disability or death. |
|
|
(b) Upon a Participants termination of employment by
reason of Retirement, Disability or death, all unvested Options,
SARs, Restricted Stock Awards and Other Stock Awards shall
become fully vested and any Performance Shares or Performance
Units shall be payable to the extent determined by the Committee. |
|
|
(c) Upon termination of employment by reason of Retirement
or Disability, Options shall be exercisable until not later than
the earlier of three years after the termination date or
expiration of their term. Upon the death of a Participant while
employed by the Company or an Affiliate or after terminating by
reason of Retirement or Disability, Options shall be exercisable
by the Participants Beneficiary not later than the
earliest of one year after the date of death, three years after
the date of termination due to Retirement or Disability, or the
expiration of their term. All SARs that become vested on
termination of employment by reason of Retirement, Disability or
death shall be exercisable as determined by the Committee, which
determination may provide for an automatic exercise date. |
|
|
(d) Upon termination for any reason other than Retirement,
Disability or death, any Options vested prior to such
termination may be exercised during the three-month period (or
such other period as may be set by the Committee) commencing on
the termination date, but not later than the expiration of their
term. If a Participant dies during such post-employment period,
such Participants Beneficiary may exercise the Options (to
the extent they were vested and exercisable on the date of
employment termination), but not later than the earlier of one
year after the date of death or the expiration of their term. |
Section 15.
Withholding: The Committee may make such
provisions and take such steps as it may deem necessary and
appropriate for the withholding of any taxes that the Company is
required by law or regulation of any governmental authority,
whether federal, state, local, domestic, or foreign, to withhold
in connection with the grant, exercise, payment, or removal of
restrictions of an Award, including, but not limited to,
requiring the Participant to remit to the Company an amount
sufficient to satisfy such withholding requirements in cash or
Shares or withholding cash or Shares due or to become due with
respect to the Award at issue.
Section 16.
Change in Control: In the event of a
Change-in-Control, all
Awards shall vest and the value of each Participants
Performance Units and Performance Shares shall immediately be
paid in cash or shares to the Participant in accordance with the
relevant Award Agreement. SARs that become vested upon a
Change-in-Control shall
be exercisable as determined by the Committee, which
determination may provide for an automatic exercise date. The
surviving entity in the event of a
Change-in-Control may
assume such fully vested Awards without the consent of
Participants.
Section 17.
Postponement of Issuance and Delivery: The
issuance and delivery of any Shares under this Plan may be
postponed by the Company for such period as may be required to
comply with any applicable requirements under any applicable
listing requirement of any national securities exchange or any
law or regulation applicable to the issuance and delivery of
Shares, and the Company shall not be obligated to issue
A-8
or deliver any Shares if the issuance or delivery of such Shares
shall constitute a violation of any provision of any law or
regulation of any governmental authority or any national
securities exchange.
Section 18.
No Right to Awards: No employee or Consultant
shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniform treatment of employees,
Consultants or Directors under the Plan. The terms and
conditions of Awards need not be the same with respect to
different Participants.
Section 19.
No Right to Employment or Directorship: The grant
of an Award shall not be construed as giving a Participant the
right to be retained in the employ or as a Consultant of the
Company or an Affiliate or any right to remain as a member of
the Board, as the case may be. The Company may at any time
terminate an employees employment or a Consultants
provision of services free from any liability or any claim under
the Plan, unless otherwise provided in the Plan or an Award
Agreement.
Section 20.
No Rights as a Stockholder: A Participant shall
have no rights as a stockholder with respect to any Shares
covered by an Award until the date of the issuance and delivery
of such Shares.
Section 21.
Severability: If any provision of the Plan or any
Award is, becomes, or is deemed to be invalid, illegal, or
unenforceable in any jurisdiction or would disqualify the Plan
or any Award under any law deemed applicable by the Committee,
such provision shall be construed or deemed amended to conform
to applicable laws, or if it cannot be so construed or deemed
amended without, in the determination of the Committee,
materially altering the purpose or intent of the Plan or the
Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or such Award shall
remain in full force and effect.
Section 22.
No Trust or Fund Created: Neither the Plan nor any
Award shall create or be construed to create a trust or separate
fund of any kind or a fiduciary relationship between the Company
or any Affiliate and a Participant or any other person. To the
extent any person acquires a right to receive payments from the
Company or an Affiliate pursuant to an Award, such right shall
be no greater than the right of any unsecured general creditor
of the Company or any Affiliate.
Section 23.
Headings: Headings are given to the Sections of
the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to
the construction or interpretation of the Plan or any provisions
thereof.
Section 24.
Nonassignability: Unless otherwise determined by
the Committee, no Participant or Beneficiary may sell, assign,
transfer, discount, or pledge as collateral for a loan, or
otherwise anticipate any right to payment under the Plan other
than by will or by the applicable laws of descent and
distribution. Under such procedures as the Committee may
establish, Awards may be transferred by gift to members of a
Participants immediate family (i.e., children,
grandchildren and spouse) or to one or more trusts for their
benefit or to partnerships in which such family members and the
Participant are the only partners, provided that (i) any
agreement governing such Award expressly so permits or is
amended to so permit, (ii) the Participant does not receive
any consideration for such transfer, and (iii) the
Participant provides such documentation or information
concerning any such transfer or transferee as the Committee may
reasonably request. Any transferred Awards shall be subject to
the same terms and conditions that applied immediately prior to
their transfer. In no event shall such transfer rights apply to
any Incentive Stock Option.
Section 25.
Indemnification: In addition to such other rights
of indemnification as members of the Board or the Committee or
officers or employees of the Company or an Affiliate to whom
authority to act for the Board or Committee is delegated may
have, such individuals shall be indemnified by the Company
against all reasonable expenses, including attorneys fees,
incurred in connection with the defense of any action, suit, or
proceeding, or in connection with any appeal thereof, to which
any such individual may be a party by reason of any action taken
or failure to act under or in connection with the Plan or any
right granted hereunder and against all amounts paid by such
individual in a settlement thereof that is approved by the
Companys legal counsel or paid in satisfaction of a
judgment in any such action, suit, or proceeding, except in
relation to matters as to which it shall be adjudged that such
person is liable for gross negligence, bad faith, or intentional
A-9
misconduct; provided, however, that any such individual shall
give the Company an opportunity, at its own expense, to defend
the same before such individual undertakes to defend such
action, suit, or proceeding.
Section 26.
Foreign Jurisdictions: The Committee may adopt,
amend, or terminate arrangements, not inconsistent with the
intent of the Plan, to make available tax or other benefits
under the laws of any foreign jurisdiction to Participants
subject to such laws or to conform with the laws and regulations
of any such foreign jurisdiction.
Section 27.
Termination and Amendment: Subject to the approval
of the Board, where required, the Committee may at any time and
from time to time alter, amend, suspend, or terminate the Plan
in whole or in part; provided, however, that no action shall be
taken by the Board or the Committee without the approval of
stockholders that would:
|
|
|
(a) Increase the maximum number of Shares that may be
issued under the Plan, except as provided in Section 5(f); |
|
|
(b) Increase the limits applicable to Awards under the
plan, except as provided in Sections 5(f) and 7(b); |
|
|
(c) Allow for an Exercise Price below the Fair Market Value
of Shares on the date of grant of an Option or SAR, except as
provided in Section 3(n); |
|
|
(d) Amend Section 13 to permit the repricing of
outstanding Options or SARs; or |
|
|
(e) Require approval of the Companys stockholders
under any applicable law, regulation, or rule. |
Notwithstanding the foregoing, no termination or amendment of
the Plan may, without the consent of the applicable Participant,
terminate or adversely affect any material right or obligation
under an Award previously granted under the Plan; provided,
however, that the Committee may alter, amend, suspend, or
terminate the Plan or an Award in whole or in part, without the
consent of the Participant, to the extent necessary to conform
the provisions of the Plan or an Award with Section 409A of
the Code or regulations thereunder regardless of whether such
alteration, amendment, suspension, or termination adversely
affects the rights or obligations under the Award.
Section 28.
Applicable Law: This Plan shall be governed by and
construed in accordance with the laws of the State of
California, without regard to its principles of conflict of laws.
Section 29.
No Guarantee of Favorable Tax Treatment: Although
the Committee intends to administer the Plan so that Awards will
be exempt from, or will comply with, the requirements of
Section 409A of the Code, the Company does not warrant that
any Award under the Plan will qualify for favorable tax
treatment under Section 409A of the Code or any other
provision of federal, state, local, or foreign law. The Company
shall not be liable to any Participant for any tax the
Participant might owe as a result of the grant, holding,
vesting, exercise, or payment of any Award under the Plan.
A-10
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
NETGEAR, INC.
Proxy for Annual Meeting of Stockholders
The undersigned stockholder of NETGEAR, Inc., a Delaware corporation, hereby acknowledges receipt
of the 2005
Annual Report to Stockholders and the Notice of Annual Meeting of Stockholders and Proxy Statement
for the Annual
Meeting of Stockholders of NETGEAR, Inc. to be held on May 23, 2006, at 10:00 a.m., local time, at
the companys principal executive offices located at 4500 Great America Parkway, Santa Clara, California 95054, and
hereby appoints Patrick
C.S. Lo and Jonathan R. Mather, and each of them, proxies and attorneys-in-fact, with full power to
each of substitution,
on behalf and in the name of the undersigned, to represent the undersigned at such meeting, and at
any adjournment or
adjournments thereof, and to vote all the shares of Common Stock that the undersigned would be
entitled to vote if then
and there personally present on the matters set forth below:
(Continued, and to be marked, dated and signed, on the other side)
Address Change/Comments (Mark the corresponding box on the reverse side)
5 Detach here from proxy voting card. 5
|
|
|
Mark Here
for Address
Change or
Comments
|
|
o |
PLEASE SEE REVERSE SIDE |
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2
and 3 AND IN THE DISCRETION OF THE PROXIES
AND ATTORNEYS-IN-FACT, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, AND ANY
ADJOURNMENT OR ADJOURNMENTS THEREOF.
|
|
|
|
|
|
|
|
|
|
|
FOR all
|
|
WITHHOLD |
1.
|
|
ELECTION OF DIRECTORS
|
|
nominees
|
|
AUTHORITY |
|
|
|
|
listed
|
|
to vote for |
|
|
|
|
below
|
|
all nominees |
|
|
|
|
(except
|
|
listed below |
|
|
|
|
as marked
|
|
|
|
|
|
|
below)
|
|
|
01
02
03
|
|
Patrick C.S. Lo
Ralph E. Faison
A. Timothy Godwin
|
|
o
|
|
o
|
04
|
|
Jef Graham |
|
|
|
|
05
|
|
Linwood A. Lacy, Jr. |
|
|
|
|
06
|
|
Gregory Rossmann |
|
|
|
|
To withhold authority to vote for any nominee, strike a line
through the name of such nominee.
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN |
2.
|
|
PROPOSAL TO APPROVE THE ADOPTION OF THE
NETGEAR, INC. 2006 LONG TERM INCENTIVE PLAN
|
|
o
|
|
o
|
|
o |
|
|
|
|
|
|
|
|
|
3.
|
|
PROPOSAL TO RATIFY THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP
|
|
FOR
o
|
|
AGAINST
o
|
|
ABSTAIN
o |
Either of such proxies and attorneys-in-fact, or their substitutes, as shall be
present and shall act at said meeting or any adjournment or adjournments
thereof shall have and may exercise all the powers of said proxies and attorneys-in-fact hereunder.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder(s).
(This proxy should be marked, dated, signed by the stockholder(s) exactly as the name(s) appear on
the stock certificate(s) and returned promptly in the enclosed envelope. Persons signing in a
fiduciary capacity should so indicate.)
5 Detach here from proxy voting card 5