Vonage 2008 Annual Report Download - page 91

V
O
NA
G
EH
O
LDIN
GS CO
RP
.
N
O
TE
S
T
OCO
N
SO
LIDATED FINAN
C
IAL
S
TATEMENT
S
—
(C
ontinued
)
(
In thousands, except per share amounts
)
T
he employment agreement provides for the accel
-
erated vestin
g
of stock options in certain circumstance
s
upon termination o
f
the a
g
reement or a chan
g
e in control
.
T
he employment agreement provides that Mr. Le
f
ar wil
l
r
eceive an additional payment to reimburse for any excis
e
t
axes imposed pursuant to Section 4999 of the Internal
R
evenue Code, together with reimbursement for any addi
-
t
ional taxes incurred by reason of such payments
.
U
nder the terms o
f
Mr. Le
f
ar’s employment a
g
reement
,
he has agreed not to disclose any con
f
idential in
f
ormation
concerning the
C
ompany’s business. In addition, Mr. Lefa
r
has a
g
reed not to solicit or to interfere with the
C
ompany’
s
r
elationship with an
y
of the Compan
y
’s emplo
y
ees, officers
or representatives or to interfere with the
C
ompany’s rela
-
t
ionship with an
y
of the
C
ompan
y
’s customers, clients
,
suppliers, licensees or other business relations until 12
months following termination of his employment. Fur-
t
hermore, Mr. Lefar has entered into a noncompetitio
n
agreement pursuant to which he has agreed not to provid
e
services to the portion of any entity that sells and markets
r
esidential
/
home broadband connectivit
y
or broadband
voice service as an emplo
y
ee thereo
f
or as a direct
individual consultant thereto
(
or through an entity specifi
-
cally formed for such activity
)
until 12 months followin
g
t
ermination o
f
his emplo
y
ment.
O
n July 29, 2008, the
C
ompany also entered into an
indemnification a
g
reement with Mr. Lefar. Th
e
indemni
f
ication a
g
reement provides indemnity, includin
g
t
he advancement o
f
expenses, to Mr. Le
f
ar against liabilities
incurred in the
p
erformance of his duties to the fulles
t
extent permitted b
y
the General Corporation Law of th
e
S
tate of Delaware
.
S
eparation Agreement with
C
hairman
O
n Jul
y
29, 2008, we entered into a Confidential Sepa
-
r
ation Agreement and General Release (the “Separation
A
g
reement”
)
with Jeffrey
C
itron, our
C
hairman, wh
o
stepped down as Chief Strate
g
ist and Interim Chief Execu-
t
ive Officer effective July 29, 2008.
M
r.
C
itron will continue as non-executive
C
hairman o
f
t
he Board until at least Jul
y
29, 2009, subject to speci
f
ie
d
exceptions, and will have such duties, responsibilities and
authority as determined from time to time by our Board o
f
D
irectors. We have also a
g
reed, subject to specifie
d
exceptions, to recommend to the Board that Mr. Citron b
e
nominated for re-election to the Board of Directors at our
2
009 annual meetin
g
of stockholders
.
As Chairman of the Board
,
Mr. Citron is entitled t
o
(
i
)
an annual retainer of
$
125 in cash
(
in lieu of Board an
d
committee meetin
g
fees
)
,
(
ii
)
annual option
g
rants of
immediatel
y
exercisable, non-quali
f
ied stock options in a
n
amount e
q
ual to one and one-half times the amoun
t
awarded to a non-employee director and
(
iii
)
annual
r
estricted stock
g
rants o
f
shares o
f
Vona
g
e common stoc
k
in an amount e
q
ual to one and one-half times the amoun
t
awar
d
e
d
to a non-emp
l
oyee
di
rector
.
Pursuant to the terms of the Separation Agreement, w
e
ag
reed, in consideration for a
g
eneral release and certai
n
o
ther obli
g
ations, to make a one time payment to
Mr. Citron, which constituted Mr. Citron’s
p
ro-rata bonus
for 2008. Mr.
C
itron was also
g
ranted nonqualified options
to acquire 750 shares of our Common Stock. Under SFA
S
1
23(R), we recorded approximately
$
682 for this grant i
n
2008.
We also entered into a Consulting Agreement with
a
l
imited liability company of which Mr.
C
itron is the president
a
nd mana
g
in
g
member (the “Consultant”). As partia
l
c
onsideration for the consulting services, Mr. Citron wa
s
a
lso
g
ranted nonqualified options to acquire 1,000 shares
o
f our Common Stock. We recorded $910 of expense
related to this grant in the year ended December 31, 200
8
i
n the consolidated statement of operations. During the
term of the Consultin
g
A
g
reement, Mr. Citron is entitled to
p
articipate in all employee healthcare plans, programs an
d
a
rrangements of ours, in accordance with their respective
terms, as ma
y
be amended
f
rom time to time, and on
a
b
asis no less
f
avorable than that made available to senior
e
xecutives of us
.
T
he term of the Consulting Agreement expires July 29
,
2009
,
un
l
ess term
i
nate
d
ear
li
er
i
n accor
d
ance w
i
t
h
t
h
e
C
onsultin
g
A
g
reement. We will pay to the
C
onsultant a
n
a
ggregate consulting fee of
$
250
.
All of Mr.
C
itron’s unvested options and other share
-
b
ased awards granted prior to the Separation Agreement
will
cont
i
nue to vest
i
n accor
d
ance w
i
t
h
t
h
e
i
r res
p
ect
i
ve
terms as lon
g
as Mr.
C
itron continues to serve as a member
o
f our Board of Directors. Upon Mr. Citron’s cessation of
s
ervice as a member of the Board of Directors
,
all unvested
o
pt
i
ons an
d
ot
h
er s
h
are-
b
ase
d
awar
d
st
h
at
h
ave not
o
therwise expired b
y
their terms will become
f
ull
y
veste
d
a
n
d
exerc
i
sa
bl
e, as app
li
ca
bl
e, w
i
t
h
out regar
d
to t
h
e sat
-
i
sfaction of an
y
performance criteria. Under
S
FA
S
123
(
R
)
,
Mr. Citron’s existin
g
unvested options received accelerate
d
v
esting treatment since there was no longer a future service
p
er
i
o
d.
C
hief Financial Officer
Effective August 1, 2005, as amended on January 1
,
2009, we entere
di
nto an emp
l
oyment a
g
reement w
i
t
h
Mr. Re
g
o providin
g
for his employment as our Chief Finan
-
c
ial
O
fficer until August 1, 2009 and will automaticall
y
renew for additional one-year periods, unless either part
y
g
ives notice at least 90 days prior to the end o
f
the then
-
c
urrent term. In the event of a change in control, the ter
m
w
ill also be automatically extended until the first anniversary
of
the chan
g
eo
f
control. Under his employment a
g
reement,
Mr. Rego is entitled to receive an annual base salary o
f
$300, subject to review by our compensation committe
e
a
nd our chie
f
executive o
ff
icer. Mr. Re
g
o also is eli
g
ible to
receive an annual discretionary per
f
ormance-based bonus
i
n accordance with our annual bonus pro
g
ram for senior
e
x
ecu
tiv
es
.
F-
3
1