Vonage 2010 Annual Report Download - page 83

V
O
NA
G
EH
O
LDIN
GS CO
RP
.
N
OTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(
In thousands, except per share amounts
)
Rent expense was
$
4,552 for 2010,
$
5,449 for 2009
,
and
$
7
,
507 for 2008.
S
tand-by Letters of
C
redit
We have stand-by letters of credit totaling
$
7,885 an
d
$
18,000, as of December 31, 2010 and 2009, respectivel
y
.
End-
U
ser
C
ommitments
We are obli
g
ated to provide telephone services to ou
r
r
e
g
istered end-users. The costs related to the potential uti
-
l
ization of minutes sold are ex
p
ensed as incurred. Our obli
-
g
ation to provide this service is dependent on the proper
f
unctionin
g
o
f
systems controlled by third-party service
p
roviders. We do not have a contractual service relationshi
p
with some o
f
these
p
roviders
.
Vendor
C
ommitments
We have engaged a vendor to provide tele-
communication services. We have committed to pa
y
this
v
endor
$
6,000 in 2011 and
$
4,500 in 2012; however, w
e
may terminate the contract sooner subject to a minimum
p
ayment of
$
1,000
.
We have en
g
a
g
ed a vendor to provide voicemail to tex
t
t
ranscription services. We have committed to pay thi
s
v
endor approximately $1,124 in 2011, $1,524 in 2012, an
d
$
1,197 in 2013
.
We have en
g
a
g
ed a vendor to assist with local number
p
ortability, which allows customers to keep their existin
g
p
hone number when switchin
g
to our service. We hav
e
committed to pay this vendor a minimum of $1,200 in 2011.
We have en
g
a
g
ed a vendor to provide local inbound
s
ervices. We have committed to pay this vendor $1,759 i
n
2011 and $1,466 in 2012
.
W
e
h
ave en
g
a
g
e
d
a cre
di
t car
d
processor to proces
s
our
billi
ngs.
W
e
h
ave comm
i
tte
d
to pay t
hi
s ven
d
or approx-
i
mately $3,700 each year through 2015
.
We have engaged a vendor who will
(
i
)
license to u
s
b
illing and ordering software,
(
ii
)
provide professional serv-
i
ces re
l
at
i
ng to t
h
e
i
mp
l
ementat
i
on, operat
i
on, support, an
d
maintenance of the licensed s
y
stem, and
(
iii
)
transitio
n
s
upport serv
i
ces
i
n connect
i
on w
i
t
h
m
i
grat
i
on to t
he
li
cense
d
s
y
stems.
W
e
h
ave comm
i
tte
d
to pa
y
t
hi
s ven
d
o
r
$
3
,
740 in 2011
,$
3
,
920 in 2012
,$
3
,
980 in 2013 and 2014
,
and
$
2,240 in 2015. We ma
y
terminate the contract soone
r
s
ubject to payment of early termination fees which rang
e
from
$
5,500 for termination in the first
y
ear to
$
1,500 fo
r
t
ermination in the fifth
y
ear.
Li
t
i
gat
i
o
n
C
onsumer
C
lass Action Litigations
.
W
e were name
din
s
everal purported class actions venued in
C
alifornia, Ne
w
Jersey, and Washington alleging a wide variety of deficien-
c
i
es w
i
t
h
respect to our
b
us
i
ness pract
i
ces an
d
mar
k
et
i
n
g
di
sc
l
osures
.
T
hese class actions
,
on behalf of both nationwide an
d
s
tate classes, generally alleged that we delayed and
/
or
r
efused to allow consumers to cancel their Vonage service
;
failed to disclose
p
rocedural im
p
ediments to cancellation
;
failed to adequately disclose that their 30 or 60-day mone
y
b
ack
g
uarantee did not
g
ive consumers 30 to 60 days to try
out our services; su
pp
ressed and concealed the true natur
e
o
f
our services and disseminated
f
alse advertisin
g
abou
t
t
he quality, nature and terms o
f
our services; imposed an
unlaw
f
ul early termination
f
ee; and invoked unconscionable
p
rovisions of our Terms of Service to the detriment of cus-
t
omers. On May 11, 2007, plaintiffs in one action petitione
d
t
he Judicial Panel on Multidistrict Liti
g
ation (the “Panel”)
s
eekin
g
trans
f
er and consolidation o
f
the pendin
g
actions to
a sin
g
le court
f
or coordinated pretrial proceedin
g
s. In an
O
rder dated Au
g
ust 15, 2007, the Panel transferred th
e
p
endin
g
actions to the United States Court for the Distric
t
of New Jersey, captioned In re Vona
g
e Marketin
g
and Sale
s
Practices Liti
g
ation, MDL No. 1862, Master Docket
No. 07-CV-3906
(
USDC, D.N.J.
)
. On October 1, 2007
,
counsel for one
g
roup of plaintiffs moved before the Court
for Consolidation and A
pp
ointment of Co-Lead Counsel o
f
t
he actions, and re
q
uested time to file an Amended Con-
s
olidated Com
p
laint. On November 6, 2008, the Court
entered an Order Grantin
g
Consolidation and Appointmen
t
of Co-Lead Counsel, and ordered that a consolidated
C
omplaint be filed within 45 da
y
s, which Complaint wa
s
filed on December 19, 2008. On Februar
y
6, 2009, we filed
a Motion to Compel Arbitration. On September 1, 2009, th
e
C
ourt denied without prejudice the Motion to Compel Arbi-
t
ration. On December 2
,
2009
,
we filed a Renewed Motio
n
t
o Compel Arbitration. Briefing on the motion was com-
pl
ete
di
n
F
e
b
ruary 2010.
Th
e part
i
es engage
di
n
li
m
i
te
d
discover
y
.
O
n Jul
y
8, 2010, the
C
ourt requested that th
e
p
arties submit supplemental letters to the
C
ourt on o
r
b
efore July 30, 2010, addressing the relevance of recent
decisions b
y
the United
S
tates
S
upreme
C
ourt and th
e
U
nited
S
tates
C
ourt of Appeals for the 3rd
C
ircuit regardin
g
arbitration provisions and the parties filed those sub
-
m
i
ss
i
ons
.
O
n
S
eptember 23, 2010, the parties reached a pro
-
p
ose
d
sett
l
ement t
h
at
i
nc
l
u
d
es a re
l
ease an
ddi
sm
i
ssa
l
w
i
t
h
p
rejudice of all consumer claims against us and will provide
a settlement benefit of
$
4
,
750 into a common fund for the
b
enefit of class members. The common fund will include al
l
awarded fees, costs, and expenses
(
including attorneys’
fees and costs
)
, certain costs to provide notice of settle
-
ment, administrative expenses, and incentive awards, i
f
an
y
, with the remainder of the common fund to be dis
-
t
ributed to members of the class pursuant to a plan of allo
-
cation among class members.
O
n
S
eptember 28, 2010, the
C
ourt entered a Joint
S
tipulation stayin
g
the proceedin
gs
and terminatin
g
the pendin
g
Renewed Motion to
C
ompel
Arbitration.
O
n December 23, 2010, the
p
arties filed th
e
p
roposed
S
ettlement A
g
reement with the
C
ourt.
O
n Jan-
F-2
8
VO
NA
G
E ANN
U
AL REP
O
RT 2010