Under the terms of the settlement, NETGEAR will (i) issue each eligible class member a promotional code which may be used to purchase a new wireless product from NETGEAR's online store, www.buynetgear.com, at a 15% discount during the redemption period; (ii) include a disclaimer regarding wireless signal rates on its wireless products packaging and user's manuals and in its press releases and advertising that reference wireless signal rates; (iii) donate $25,000 worth of its products to a local, not-for-profit charitable organization to be chosen by NETGEAR; and (iv) agree to pay, subject to court approval, up to $700,000 in attorneys' fees and costs. None of the foregoing benefits will be provided unless and until the court grants final approval of the settlement agreement.

The court has scheduled a hearing date of March 21, 2006 for final approval of the settlement.   

While it continues to deny any wrongdoing or violations of law, NETGEAR believes the settlement is in the best interest of NETGEAR and its stockholders to avoid the distraction and expense of continued litigation. During the quarter ended October 2, 2005, NETGEAR recorded a reserve of $600,000 for the estimated costs of settlement of this matter. NETGEAR anticipates that it will increase its litigation reserve by approximately $130,000 in the fourth quarter of 2005 as a result of the proposed settlement.