Vonage 2009 Annual Report Download - page 91

VONAGE HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
ped down as Chief Strategist and Interim Chief Executive
Officer effective July 29, 2008.
Mr. Citron will continue as non-executive Chairman of
the Board and will have such duties, responsibilities and
authority as determined from time to time by our Board of
Directors.
As Chairman of the Board, Mr. Citron is entitled to
(i) an annual retainer of $125 in cash (in lieu of Board and
committee meeting fees), (ii) annual option grants of
immediately exercisable, non-qualified stock options in an
amount equal to one and one-half times the amount
awarded to a non-employee director and (iii) annual
restricted stock grants of shares of Vonage common stock
in an amount equal to one and one-half times the amount
awarded to a non-employee director.
Pursuant to the terms of the Separation Agreement, we
agreed, in consideration for a general release and certain
other obligations, to make a one time payment to
Mr. Citron, which constituted Mr. Citron’s pro-rata bonus
for 2008. Mr. Citron was also granted nonqualified options
to acquire 750 shares of our Common Stock. Under FASB
ASC 718, we recorded approximately $682 for this grant in
2008.
We also entered into a Consulting Agreement with a
limited liability company of which Mr. Citron is the president
and managing member (the “Consultant”). As partial
consideration for the consulting services, Mr. Citron was
also granted nonqualified options to acquire 1,000 shares
of our Common Stock. We recorded $910 of expense
related to this grant in the year ended December 31, 2008
in the consolidated statement of operations. During the
term of the Consulting Agreement, Mr. Citron was entitled
to participate in all employee healthcare plans, programs
and arrangements of ours, in accordance with their
respective terms, as may be amended from time to time,
and on a basis no less favorable than that made available to
senior executives of us.
The term of the Consulting Agreement expired July 29,
2009 and was not renewed. We paid to the Consultant an
aggregate consulting fee of $250.
All of Mr. Citron’s unvested options and other share-
based awards granted prior to the Separation Agreement
will continue to vest in accordance with their respective
terms as long as Mr. Citron continues to serve as a member
of our Board of Directors. Upon Mr. Citron’s cessation of
service as a member of the Board of Directors, all unvested
options and other share-based awards that have not
otherwise expired by their terms will become fully vested
and exercisable, as applicable, without regard to the sat-
isfaction of any performance criteria. Under FASB ASC 718,
Mr. Citron’s existing unvested options received accelerated
vesting treatment since there was no longer a future service
period.
Chief Financial Officer
As announced on January 14, 2009, John S. Rego, the
Company’s Executive Vice President, Chief Financial Officer
and Treasurer, will be leaving the Company later this year.
Mr. Rego’s departure from the Company will occur not later
than May 31, 2010.
Mr. Rego and the Company are party to an employ-
ment agreement that provides, in general, that upon a
termination of Mr. Rego’s employment by the Company
without cause or by Mr. Rego for good reason, he is enti-
tled to his accrued compensation until the date of termi-
nation, one year’s salary and a pro rata portion of his bonus
for the year of termination. The employment agreement has
been modified in certain respects by an Amendment to
Employment Agreement dated as of February 23, 2010 and
a Separation Agreement and General Release dated as of
February 23, 2010 (the “Separation Agreement”).
For his services during the remainder of 2010 Mr. Rego
will receive his salary and the benefits on the same terms as
have been provided by his employment agreement. As
severance benefits, Mr. Rego will receive $300,000 (one
year’s salary), payable in most circumstances six months
after termination of employment, plus a pro rata portion of
his bonus eligibility for 2010 (based on the portion of the
year elapsed up to date of termination of his employment)
to the extent the Company achieves the performance goals
applicable pursuant to the terms of the Company’s annual
bonus program, which amount (if any) shall be paid on
March 15, 2011. In addition, Mr. Rego will receive his
earned but unpaid 2009 target annual bonus, in the amount
of $324,000, which shall be paid on March 15, 2010, and
accrued compensation such as vacation pay. Mr. Rego
shall also receive (i) his out-of-pocket costs for continuation
of medical, dental and vision insurance coverage premiums
for himself and his dependents under the Company’s exist-
ing insurance programs for up to 18 months, subject to
termination in the event he receives comparable coverage
under a subsequent employer’s programs, (ii) reimburse-
ment of up to $50,000 of outplacement fees incurred over
the 12 months following termination of his employment, and
(iii) up to $15,000 in reimbursement of legal fees incurred in
connection with the negotiation of the Separation Agree-
ment.
The unvested stock options and unvested restricted
share awards held by Mr. Rego will continue to vest in
accordance with their terms through the date of termination
of his employment; any then unvested stock options and
restricted share awards shall be forfeited in accordance
with their terms. The Separation Agreement further provides
that, in modification of their terms of grant but as permitted
in the Company’s discretion by the pertinent equity plan,
Mr. Rego’s vested stock options will remain exercisable for
a period of one year following the termination of his
employment (but not beyond ten years after their issuance).
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