Vonage 2009 Annual Report Download - page 25

Our certificate of incorporation and bylaws, the agree-
ments governing our indebtedness and the terms of cer-
tain settlement agreements to which we are a party
contain provisions that could delay or discourage a take-
over attempt, which could prevent the completion of a
transaction in which our stockholders could receive a
substantial premium over the then-current market price
for their shares.
Certain provisions of our restated certificate of incorporation
and our second amended and restated bylaws may make it more
difficult for, or have the effect of discouraging, a third party from
acquiring control of us or changing our board of directors and
management. These provisions:
>permit our board of directors to issue additional shares of
common stock and preferred stock and to establish the
number of shares, series designation, voting powers (if any),
preferences, other special rights, qualifications, limitations or
restrictions of any series of preferred stock;
>limit the ability of stockholders to amend our restated certifi-
cate of incorporation and second amended and restated
bylaws, including supermajority requirements;
>allow only our board of directors, Chairman of the board of
directors or Chief Executive Officer to call special meetings of
our stockholders;
>eliminate the ability of stockholders to act by written consent;
>require advance notice for stockholder proposals and director
nominations;
>limit the removal of directors and the filling of director vacan-
cies; and
>establish a classified board of directors with staggered three-
year terms.
In addition, a change of control would constitute an event of
default under our Financing agreements. Upon the occurrence of
an event of default, the lenders and the note holders could elect
to declare due and payable immediately all amounts due under
the Financing agreements, including principal, accrued interest, a
“make-whole” premium and, in the case of the Convertible Notes,
liquidated damages, and may take action to foreclose upon the
collateral securing the indebtedness.
Under our Financing agreements, a “change of control”
would result from the occurrence of, among other things:
>the disposition by Jeffrey A. Citron, our Chairman, or certain
of his affiliates of shares of common stock in excess of cer-
tain specified amounts;
>the acquisition by any person or group (other than Mr. Citron
and his majority-controlled affiliates or certain investment
funds related to New Enterprise Associates) of at least 30%
of the voting and/or economic interest of our outstanding
common stock on a fully-diluted basis or of the power to
elect a majority of our board of directors, if such acquiror also
has a greater voting and/or economic interest in our company
than Mr. Citron and his majority-owned affiliates;
>a change in our Chief Executive Officer, unless an interim
successor and permanent successor reasonably acceptable
to the administrative agent and note agent is appointed
within specified time periods; or
>the acquisition by Silver Point Finance, LLC and its affiliates
and related funds of at least 50% of the voting and/or eco-
nomic interest of our outstanding common stock on a fully-
diluted basis or those entities obtaining the power to elect a
majority of our board of directors.
We encourage you to read the agreements in full, including
the definition of “change of control” therein. These Financing
agreements have been previously filed with the Securities and
Exchange Commission as exhibits to Amendment No. 8 to our
Schedule TO, which was filed on October 22, 2008.
Further, we were named as a defendant in several suits that
related to patent infringement and entered into agreements to
settle certain of the suits in 2007. Certain terms of those agree-
ments, including licenses and covenants not to sue, will be
restricted upon a change of control, which may discourage certain
potential purchasers from acquiring us.
Such provisions could have the effect of depriving stock-
holders of an opportunity to sell their shares at a premium over
prevailing market prices. Any delay or prevention of, or significant
payments required to be made upon, a change of control trans-
action or changes in our board of directors or management could
deter potential acquirors or prevent the completion of a trans-
action in which our stockholders could receive a substantial pre-
mium over the then-current market price for their shares.
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