Vonage 2010 Annual Report Download - page 86

V
O
NA
G
EH
O
LDIN
GS CO
RP
.
N
OTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(
In thousands, except per share amounts
)
Lawsuits b
y
the Nebraska Public
S
ervice
C
ommission an
d
New Mexico Public Regulatory
C
ommission that were
r
esolved in 2009 are examples of state public utilit
y
commission attem
p
ts to extend traditional state tele
-
communications re
g
ulation to our service. In these cases,
the state public utility commissions sou
g
ht to apply stat
e
universal service fundin
g
requirements to us. The Kansas
C
or
p
oration
C
ommission also has taken the
p
osition that i
t
has jurisdiction to seek state universal service
f
undin
gf
rom
nomadic VoIP providers. Similarly, the Public Utility Com-
mission of Ohio has adopted rules that would apply stat
e
fees for Telephone Relay Service to nomadic VoIP service.
O
n July 16, 2009, the Nebraska Public Service Com
-
mission and the Kansas Cor
p
oration Commission filed
a
p
etition with the FCC seekin
g
a declaratory rulin
g
or, alter-
natively, adoption o
f
a rule declarin
g
that state authoritie
s
may apply universal service fundin
g
(“USF”) requirement
s
to nomadic VoIP
p
roviders. We
p
artici
p
ated in the FC
C
p
roceedin
g
s on the petition. On November 5, 2010, th
e
FCC issued a declaratory rulin
g
that allowed states t
o
assess state USF on nomadic VoIP providers on a
g
oin
g
f
orward basis provided that the states comply with certai
n
conditions to ensure that imposin
g
state USF does no
t
con
f
lict with
f
ederal law or polic
y
. We expect that stat
e
p
u
bli
cut
ili
ty comm
i
ss
i
ons an
d
state
l
eg
i
s
l
ators w
ill
cont
i
nue
t
h
e
i
r attempts to app
l
y state te
l
ecommun
i
cat
i
ons regu-
l
at
i
ons to noma
di
c
V
o
IP
serv
i
ce.
S
tate and Municipal Taxe
s
I
n accor
d
ance w
i
t
h
genera
ll
y accepte
d
account
i
ng
p
rinciples, we make a provision for a liabilit
y
for taxes whe
n
i
t
i
s
b
ot
h
pro
b
a
bl
et
h
at a
li
a
bili
t
yh
as
b
een
i
ncurre
d
an
d
t
he
amount of the loss or range of loss can be reasonabl
y
est
i
mate
d
.
Th
ese prov
i
s
i
ons are rev
i
ewe
d
at
l
east quarter
ly
and adjusted to reflect the impacts of negotiations, settle
-
ments, rulings, advice of legal counsel, and othe
r
i
nformation and events pertaining to a particular case. For
a
p
eriod of time, we did not collect or remit state or municipa
l
t
axes
(
such as sales, excise, utilit
y
, use, and ad valore
m
t
axes
)
, fees or surcharges
(
“Taxes”
)
on the charges to our
customers for our services, except that we historicall
y
comp
li
e
d
w
i
t
h
t
h
e
N
ew
J
erse
y
sa
l
es tax.
W
e
h
ave rece
i
ve
d
i
nquiries or demands from a number of state and municipa
l
t
axing and 911 agencies seeking payment of Taxes that ar
e
a
pp
lied to or collected
f
rom customers o
fp
roviders o
f
tradi
-
t
ional
p
ublic switched tele
p
hone network services
.
Althou
g
h we have consistently maintained that these Taxes
do not apply to our service
f
or a variety o
f
reasons depend-
i
n
g
on the statute or rule that establishes such obli
g
ations,
a number o
f
states have chan
g
ed their statutes to expressl
y
i
nclude VoIP and we are now collectin
g
and remittin
g
sale
s
t
axes in those states. In addition, many states address how
VoIP providers should contribute to support public sa
f
et
y
a
g
encies, and in those states we remit
f
ees to the appro
-
p
riate state a
g
encies. We could also be contacted by state
or municipal taxin
g
and 911 a
g
encies re
g
ardin
g
Taxes tha
t
d
o exp
li
c
i
t
l
y app
l
yto
V
o
IP
an
d
t
h
ese a
g
enc
i
es cou
ld
see
k
r
etroactive payment o
f
Taxes. As such, we have a reserve
of $2
,
803 as of December 31
,
2010 as our best estimate o
f
t
he potential tax exposure
f
or an
y
retroactive assessment
.
We believe the maximum estimated exposure
f
or retro-
active assessments is approximatel
y
$8,000 as o
f
D
ecem
b
er 31
,
2010
.
E
mp
l
oyment
A
greements
O
ur
C
hief Executive
O
fficer and
C
hief Financial
O
fficer
are su
bj
ect to emp
l
o
y
ment contracts w
i
t
h
m
i
n
i
mum sa
l
ar
y
comm
i
tments t
h
at, su
bj
ect to annua
l
rev
i
ew, aggregat
e
$
1,375 per annum. Our Chief Executive Officer and Chie
f
Financial
O
fficer are also eligible for annual performance
b
onuses w
i
t
h
targets
b
ase
d
upon t
h
e
i
rt
h
en annua
l
sa
l
ary
.
T
he initial term of the emplo
y
ment contract with our
C
hie
f
Executive
O
fficer expires in 2011 but is subject to one-
y
ear
r
enewals unless prior notice of 90 da
y
s is provided b
y
eithe
r
p
art
y
. The emplo
y
ment contract with our
C
hief Financia
l
O
fficer ma
y
be terminated b
y
either part
y
upon 30 da
y
s’
notice. In the event of the termination of our
C
hief Executiv
e
O
fficer’s employment, depending upon the circumstances,
h
ew
ill b
e ent
i
t
l
e
d
to severance pa
y
ments up to an amoun
t
equal to a prorated annual bonus for the
y
ear of termi
-
nat
i
on, two
y
ear
’
s
b
ase sa
l
ar
y
,an
d
amounts to cover spec
i-
fied health care coverage premiums and outplacemen
t
s
ervices. In the event of the termination of our
C
hief Finan
-
cial
O
fficer’s employment, dependin
g
upon the circum-
s
tances, he will be entitled to severance payments up to an
amount equal to a prorated annual bonus for the year of
t
ermination and one year’s base salary
.
F
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