Exhibit 10.4
Execution Copy
SEPARATION AGREEMENT AND
GENERAL RELEASE
This SEPARATION AGREEMENT and
GENERAL RELEASE (hereinafter referred to as this
“Agreement”) is made and entered into by and between
Jeffrey A. Citron (“Executive”) and Vonage Holdings
Corp. (defined herein to include its affiliates, subsidiaries,
predecessors and successors and hereinafter referred to as
“Vonage”), effective as of July 29, 2008 (the
“Effective Date”). Executive and Vonage are hereafter
referred to as the “Parties.”
WHEREAS, Executive has been employed
by Vonage as its Interim Chief Executive Officer and Chief
Strategist;
WHEREAS, Executive and Vonage
entered into an Employment Agreement, amended and restated
effective as of February 8, 2006 (the “Employment
Agreement”);
WHEREAS, Executive is resigning from
his positions as Interim Chief Executive Officer and Chief
Strategist, effective as of the Effective Date, which resignations,
pursuant to Section 4(f) of the Employment Agreement,
constitute Executive’s resignation from any officer or
employee position Executive has with the Company Group (as defined
in the Employment Agreement) and all fiduciary positions (including
as trustee) Executive holds with respect to any employee benefit
plans or trusts established by Vonage, also effective as of the
Effective Date;
WHEREAS, the Parties agree that
Executive is not resigning as a member of the Board of Directors of
Vonage Holdings Corp. (the “Board”) and that Executive
shall serve as non-executive Chairman of the Board of Directors of
Vonage Holdings Corp. (“Chairman of the
Board”);
WHEREAS, Vonage and Executive have
read this Agreement and have had the opportunity to review it with
their respective legal counsel; and
WHEREAS, Vonage and Executive desire
to resolve any and all issues and claims between them, including
without limitation Executive’s employment and his separation
as an employee of Vonage, as well as any and all issues and claims
arising from or relating to the Employment Agreement, and to reach
an amicable accord and settlement concerning their future
relationship.
NOW, THEREFORE, in consideration of
the premises and mutual promises herein contained, it is agreed as
follows:
1. Separation of Employment;
Non-Executive Chairman; Consulting Arrangement .
(a) Effective as of the Effective
Date, Executive hereby resigns from his positions as Interim Chief
Executive Officer and Chief Strategist of Vonage, from all director
(other than as a director of Vonage Holdings Corp.), officer and
employee positions Executive has with the Company Group (as defined
in the Employment Agreement) and from all fiduciary positions
(including as trustee) Executive holds with respect to any employee
benefit plans or trusts established by Vonage. The Parties agree
that Executive is not resigning as a director of the Board and
shall serve as Chairman of the Board (as long as Executive remains
a member of the
Board) for at least one year after the Effective
Date (or such earlier period if the Board in its sole discretion
determines that Executive has breached the duties, responsibilities
and authority of the Chairman of the Board assigned by the Board).
Vonage agrees to recommend to the Board that Executive be nominated
for re-election to the Board at Vonage’s 2009 annual meeting
of stockholders; provided , however , that
Vonage need not make such a recommendation if Vonage in good
faith has determined that Executive has breached the duties,
responsibilities and authority of the Chairman of the Board
assigned by the Board. As Chairman of the Board, Executive shall
have such duties, responsibilities and authority as determined from
time to time by the Board. As Chairman of the Board, Executive
shall be entitled to (i) an annual retainer of $125,000 in
cash (in lieu of Board and committee meeting fees),
(ii) annual option grants of immediately exercisable,
non-qualified stock options (granted quarterly on the first day of
each quarter, beginning October 1, 2008, in accordance with
Vonage’s Revised Non-Executive Director Compensation Program
(the “Non-Executive Director Program”)) 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 (granted quarterly on the first
day of each quarter, beginning October 1, 2008, in accordance
with the Non-Executive Director Program) in an amount equal to one
and one-half times the amount awarded to a non-employee director.
As long as Executive is Chairman of the Board, he shall be entitled
to use of a cubicle in the executive pod area at Vonage’s
corporate headquarters and to use of the helipad at such
headquarters. In addition, as long as Executive is a member of the
Board, he may use his Vonage e-mail address, and Vonage agrees to
forward to Executive any e-mails sent to Executive’s Vonage
e-mail address during the three-year period following
Executive’s cessation of service as a member of the Board
(“Cessation of Service”).
(b) Concurrently with the execution
of this Agreement, KEC Holdings LLC, a Delaware limited liability
company of which Executive is the President (the
“Consultant”), is entering into a consulting agreement
with Vonage (the “Consulting Agreement”) to perform
such consulting, advisory and related services to and for Vonage as
may be reasonably requested from time to time by the Board and the
Chief Executive Officer of Vonage. The Consultant is providing
consulting services to Vonage from the Effective Date through the
first anniversary of the Effective Date (the “Consulting
Term”).
(c) On the Effective Date, and in
partial consideration for the provision of services by the
Consultant, Executive shall be issued an option grant of 1,000,000
nonqualified stock options (the “Consulting Options”)
to purchase shares of Vonage’s common stock at a price per
share equal to the closing price of Vonage’s common stock on
the New York Stock Exchange on the Effective Date. The Consulting
Options shall be granted on the option form attached hereto as
Exhibit A .
(d) During the Consulting Term,
Executive shall be entitled (to the extent reasonably practicable)
to participate in all employee healthcare plans, programs and
arrangements of Vonage, 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
Vonage.
2. Non-Admission . It is
specifically understood and agreed that this Agreement does not
constitute and is not to be construed as an admission or evidence
of (a) any violation by Vonage or Executive, of any federal,
state or municipal law, statute or regulation, or principle of
common law or equity, (b) the commission by Executive or
Vonage of any other actionable wrong, or (c) any wrongdoing of
any kind whatsoever on the part of Executive or Vonage, and shall
not be offered, argued or used for that purpose.
2
3. General Release .
(a) In exchange for the
consideration provided in this Agreement, and as a material
inducement for both Parties entering into this Agreement, Executive
for himself, his heirs, executors, administrators, trustees, legal
representatives, successors and assigns (hereinafter collectively
referred to for purposes of this Paragraph 3 as
“Executive”) hereby irrevocably and unconditionally
waives, releases and forever discharges Vonage and its past,
present and future affiliates and related entities, parent and
subsidiary corporations, divisions, shareholders, predecessors,
future officers, directors, trustees, fiduciaries, administrators,
executives, agents, representatives, successors and assigns
(hereinafter collectively referred to for purposes of this
Paragraph 3 as “Vonage”) for any and all waivable
claims, charges, demands, sums of money, actions, rights, promises,
agreements, causes of action, obligations and liabilities of any
kind or nature whatsoever, at law or in equity, whether known or
unknown, existing or contingent, suspected or unsuspected, apparent
or concealed, foreign or domestic (hereinafter collectively
referred to as “claims”) which he has now or in the
future may claim to have against Vonage based upon or arising out
of any facts, acts, conduct, omissions, transactions, occurrences,
contracts, claims, events, causes, matters or things of any
conceivable kind or character existing or occurring or claimed to
exist or to have occurred prior to the Effective Date in any way
whatsoever relating to or arising out of Executive’s
employment with Vonage. Such claims include, but are not limited
to, claims arising under the Age Discrimination in Employment Act,
29 U.S.C. § 621 et seq .; Title VII of the Civil
Rights Act of 1964, 42 U.S.C. § 2000e et seq .;
the Americans with Disabilities Act of 1990, 42 U.S.C. § 12101
et seq .; the Family and Medical Leave Act of 1993,
29 U.S.C. § 2601 et seq .; the Employee
Retirement Income Security Act of 1974, 29 U.S.C. § 1001
et seq .; the Equal Pay Act of 1963, 29 U.S.C. §
206(d); Section 806 of the Corporate and Criminal Fraud
Accountability Act of 2002, 18 U.S.C. § 1681 et
seq .; the Fair Credit Reporting Act, 15 U.S.C. §1681
et seq .; any other federal, state or local statutory
laws including, but not limited to, the New Jersey Law Against
Discrimination, the Conscientious Employee Protection Act, the New
Jersey Wage Payment Law, the New Jersey Family Leave Act, all as
amended; the common law of the State of New Jersey; any claim under
any local ordinance, including, but not limited to, any ordinance
addressing fair employment practices; any common law claims,
including but not limited to actions in tort, defamation and breach
of contract; any claim or damage arising out of Executive’s
employment with or separation from Vonage (including a claim for
retaliation) under any common law theory or any federal, state or
local statute or ordinance not expressly referenced above; and any
and all claims for counsel fees and costs.
(b) To the fullest extent permitted
by law, and subject to the provisions of Paragraphs 3(d) and 3(e)
below, Executive represents and affirms that he has not filed or
caused to be filed on his behalf any claim for relief against
Vonage or any releasee and, to the best of his knowledge and
belief, no outstanding claims for relief have been filed or
asserted against Vonage or any releasee on his behalf.
(c) In waiving and releasing any and
all waivable claims whether or not now known, Executive understands
that this means that, if he later discovers facts different from or
in addition to those facts currently known by him, or believed by
him to be true, the waivers and releases of this Agreement will
remain effective in all respects — despite such different or
additional facts and his later discovery of such facts, even if he
would not have agreed to this Agreement if he had prior knowledge
of such facts.
3
(d) Nothing in this Paragraph, or
elsewhere in this Agreement, prevents or prohibits Executive from
filing a claim with a government agency, such as the U.S. Equal
Employment Opportunity Commission, that is responsible for
enforcing a law on behalf of the government. However, Executive
understands that, because Executive is waiving and releasing, among
other things, any and all claims for monetary damages and any other
form of personal relief (per Paragraph 3(a) above), Executive may
only seek and receive non-monetary forms of relief through any such
claim.
(e) Nothing in this Paragraph, or
elsewhere in this Agreement, is intended as, or shall be deemed or
operate as, a release by Executive of his rights under the
Parties’ Indemnification Agreement, dated as of May 19,
2006 (which is amended hereby to provide that “Corporate
Status” shall include Executive’s performance of
consulting services to Vonage as a member, manager and officer of
the Consultant; as such agreement is hereby amended, the
“Indemnification Agreement”), or any other rights to
indemnification relating to his performance of services as an
officer and/or director of Vonage, including but not limited to
those rights to indemnification set forth in Vonage’s
Certificate of Incorporation as in effect on the date
hereof.
(f) In exchange for the
consideration provided in this Agreement, and as a material
inducement for both Parties entering into this Agreement, Vonage
hereby irrevocably and unconditionally waives, releases and forever
discharges Executive, his heirs, executors, administrators,
trustees, legal representatives, successors and assigns from any
and all claims, other than claims arising out of any criminal
conduct, breach of fiduciary duty, or willful or intentional
wrongdoing by Executive, which it has now or in the future may
claim to have against Executive based upon or arising out of any
facts, acts, conduct, omissions, transactions, occurrences,
contracts, claims, events, causes, matters or things of any
conceivable kind or character existing or occurring or claimed to
exist or to have occurred prior to the Effective Date in any way
whatsoever relating to or arising out of Executive’s
employment with or separation of employment from Vonage.
4. Consideration and
Post-Employment Benefits .
(a) Vonage, for and in consideration
of the undertakings of Executive set forth herein, and intending to
be legally bound, agrees that Executive is entitled to: (i) a
lump sum cash payment of $350,000, which is equal to the pro rata
portion of Executive’s 2008 target bonus and which shall be
paid within 15 days of the Effective Date; (ii) an option
grant on the Effective Date of 750,000 nonqualified stock options
to purchase shares of Vonage’s common stock at a price per
share equal to the closing price of Vonage’s common stock on
the New York Stock Exchange on the Effective Date (under the form
of option agreement attached hereto as Exhibit A ); and
(iii) payment of any unpaid base salary through and including
the Effective Date and any other amounts or benefits required to be
paid or provided by law or under any plan, program, policy or
practice of Vonage. All of Executive’s unvested options and
other equity-based awards shall continue to vest in accordance with
their respective terms as long as Executive continues to serve as a
member of the Board. Upon Executive’s Cessation of Service,
all unvested options and other equity-based awards that have not
otherwise expired by their terms shall become fully vested and
exercisable, as applicable, without regard to the satisfaction of
any performance
