Exhibit
10.7


EMPLOYMENT AGREEMENT


EMPLOYMENT AGREEMENT (the “Agreement”), amended
and restated effective as of February 8, 2006, by and between VONAGE HOLDINGS
CORP., a Delaware corporation (the “Company”), and Jeffrey A. Citron
(the “Executive”).


WHEREAS, the Company and the Executive entered into an
employment agreement, dated as of September 1, 2005 (the “Prior Agreement”);
and


WHEREAS, the Company and the Executive desire to
provide for the continued employment of the Executive and to amend and restate the
Prior Agreement with this Agreement;


NOW, THEREFORE, in consideration of the covenants and
agreements hereinafter set forth, the parties agree as follows:


1.             Employment and Duties.  (a)  General.  The Executive shall serve as Chairman of the
Board of Directors of the Company (the “Board”) and Chief Strategist
reporting to the Board.  The Executive
shall have responsibility for the Company’s overall strategy, technology
matters, employee culture and public relations, and such other
responsibilities, powers and authority as may be granted to the Executive by
the Board from time to time, which shall be consistent with the Executive’s
position.  For the purpose of this
Agreement, (i) “overall strategy” means the Company’s entry into significant
new lines of business and withdrawal from existing lines of business, the
Company’s acquisition and/or dispositions of business units or entities,
partnerships or joint ventures of the Company with other companies, the “go to
market” strategy with regard to the Company’s sale and marketing of its
products and services, the Company’s significant shareholder relations, and
positioning the Company with regard to public policy matters, (ii) “technology
matters” means network operations, research and development of new products and
services, and overall integration of the Company’s technology-based activities
into the Company’s strategy, and (iii) “employee culture and public relations”
means communicating internally and externally regarding Company cultural
values, events and activities, as well as its products and services.  The Executive agrees that, to the best of his
ability and experience, he shall at all times conscientiously perform all of
the duties of his position.  The
Executive’s principal place of employment shall be the principal offices of the
Company, which currently are located in the Holmdel, New Jersey area; provided,
however, that the Executive understands and agrees that he shall be
required to travel from time to time for business reasons.


(b)           Exclusive Services.  For so long as the Executive is employed by
the Company, the Executive shall devote his full-time working time to his
duties hereunder, shall faithfully serve the Company, shall in all respects
conform to and comply with the lawful and good faith directions and
instructions given to him by the Board and shall use his best efforts to
promote and serve the interests of the Company. 
Further, the Executive shall not, directly or indirectly, render
services to any other person or organization without the consent of the Company
or otherwise engage in activities that would interfere significantly with the
faithful 


 

















 


performance of his duties
hereunder.  Notwithstanding the
foregoing, the Executive may serve on (i) corporate boards, with the Board’s
prior consent or (ii) civic or charitable boards or engage in charitable
activities without remuneration therefore, provided that such activities
do not contravene the first sentence of this Section 1(b).


2.             Term of Employment.  The Executive’s employment under this
Agreement shall commence as of September 1, 2005 (the “Effective Date”)
and shall terminate on the earlier of (i) December 31, 2008 and (ii) the
termination of the Executive’s employment under this Agreement; provided,
however, that the Term (as defined below) of the Executive’s employment
shall be automatically extended without further action of either party for
additional one-year periods, unless written notice of either party’s intention
not to extend has been given to the other party at least 90 days prior to the
expiration of the then effective Term. 
Notwithstanding anything to the contrary herein, in the event of a
Change in Control of the Company (as such term is defined in the Company’s 2001
Stock Incentive Plan (as amended through April 20, 2005) (the “Stock
Incentive Plan”), as it may be amended from time to time), the Term under
this Agreement shall be automatically extended without further action of either
party for an additional one-year period from the date of such Change in
Control, subject to further automatic renewals as provided above.  The period from the Effective Date until the
termination of the Executive’s employment under this Agreement is referred to
as the “Term”.


3.             Compensation and Other Benefits.  Subject to the provisions of this Agreement,
the Company shall pay and provide the following compensation and other benefits
to the Executive during the Term as compensation for services rendered
hereunder:


(a)           Base Salary.  The Company shall pay to the Executive an
annual base salary (the “Base Salary”) at the rate of $600,000, payable
in substantially equal installments at such intervals as may be determined by
the Company in accordance with its ordinary payroll practices as established
from time to time.  The Base Salary shall
be reviewed by the Compensation Committee of the Board of Directors in good
faith, based upon the Executive’s performance, not less often than annually.


(b)           Annual Cash Bonus.  For each fiscal year during the Term, the
Executive shall be eligible to receive an annual discretionary
performance-based bonus in accordance with the Company’s annual bonus program,
as applicable to senior executives as in effect from time to time, at a target
annual amount equal to one hundred percent (100%) of Base Salary.  The amount, if any, of the Executive’s annual
bonus shall be determined by the Compensation Committee of the Board, based
upon the Executive’s performance as Chairman and Chief Strategist of the
Company and upon the performance of the Company.  The bonus shall be prorated for any year in
which the Executive’s employment is terminated due to (i) the Executive’s
resignation for Good Reason (as defined in Section 4(a)(iii) below); (ii) the
Company’s termination of the Executive’s employment without Cause (as defined
in Section 4(a)(ii) below); or (iii) the Executive’s death or disability (as
defined in Section 4(b)(i) below).  If
the Executive’s employment with the Company is terminated by the Company for
Cause or the Executive resigns from his employment other than for Good Reason
prior to the scheduled payout of the bonus due for a fiscal year, the Executive
shall not receive any portion of such bonus. 
The Executive’s annual bonus shall be paid at the same time as the
Company pays bonuses to its other executives, but in no event later than the
earlier of (i) 90 days following the 


 


2

















 


close of each fiscal year of
the Company and (ii) the latest date on which payment can be made without the
Executive incurring additional tax liability under Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”).


(c)           Equity Incentive Compensation.  During the Term, the Executive shall be
eligible to participate in the Company’s equity compensation plans and programs
generally applicable to senior executives of the Company as in effect from me
to time, including without limitation, the Stock Incentive Plan; provided,
however, that it is the present intention of the Compensation Committee of the
Board, hereby acknowledged and accepted by the Executive, not to consider any
further equity incentives for the Executive prior to the 2007 calendar year.


(d)           Employee Benefit Plans.  The Executive shall be entitled to
participate in all employee welfare, pension and fringe benefit plans, programs
and arrangements of the Company, 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 other senior executives of the Company.  In addition, during the Term (but only
beginning on the date the Executive obtains such a policy) the Company shall
provide the Executive with a term life insurance policy that provides for a
death benefit of at least $1.5 million, with the cost of any premium payments
paid by the Company.


(e)           Expenses.  The Company shall reimburse the Executive for
reasonable travel and other business-related expenses incurred by the Executive
in the fulfillment of his duties hereunder upon presentation of written
documentation thereof, in accordance with the applicable expense reimbursement
policies and procedures of the Company as in effect from time to time.  With respect to reasonable business-related
airline expenses, the Executive shall be eligible for air travel reimbursement
based on the cost of a first-class ticket on a commercial airline to and from
the Executive’s business destination(s). 
Any additional business-related airline expenses incurred, directly or
indirectly, by the Executive with respect to other employees of the Company shall
be paid in accordance with the Company’s travel policy as in effect from time
to time.


(f)            Vacation.  The Executive shall be entitled to 15
vacation days for each fiscal year during the Term.


(g)           Other Benefits and Perquisites.  The Executive shall be entitled to such other
benefits and perquisites as may be available generally to other senior
executives of the Company.


4.             Termination of Employment.  (a)  Termination
for Cause; Resignation Without Good Reason. 
(i)  If, prior to the expiration
of the Term, the Company terminates the Executive’s employment for Cause or if
the Executive resigns from his employment hereunder other than for Good Reason,
the Executive shall only be entitled to payment of any unpaid Base Salary
through and including the date of termination or resignation and any other
amounts or benefits required to be paid or provided by law or under any plan,
program, policy or practice of the Company (the “Other Accrued Compensation
and Benefits”).  The Executive shall
have no further right to receive any other compensation or benefits after such
termination or resignation of employment.


 


3

















 


(ii)           For purposes of this Agreement, “Cause”
shall mean termination of the Executive’s employment due to:  (A) any act or omission that constitutes a
breach by the Executive of any of his obligations under this Agreement; (B) the
willful and continued failure or refusal of the Executive (not as a consequence
of illness, accident or other disability) to satisfactorily perform the duties
reasonably required of him as an employee of the Company; (C) the Executive’s
conviction of, or plea of nolo contendere
to, (x) any felony or (y) another crime involving dishonesty or moral turpitude
or which could reflect negatively upon the Company or otherwise impair or
impede its operations; (D) the Executive’s engaging in any misconduct,
negligence, act of dishonesty, violence or threat of violence (including any
violation of federal securities laws) that is injurious to the Company or any
of its subsidiaries or affiliates (collectively, the “Company Group”);
(E) the Executive’s material breach of a written policy of the Company or the
rules of any governmental or regulatory body applicable to the Company; (F) the
diverting or usurping of a corporate opportunity of the Company Group by the
Executive; (G) the Executive’s refusal to follow the lawful directions of the
Company; or (H) the Executive’s willful failure to comply with any of the
material terms of this Agreement or any other willful misconduct by the
Executive which is materially injurious to the financial condition or business
reputation of the Company Group); provided, however, that no
event or condition described in clauses (A), (B) or (H) shall constitute Cause
unless (i) the Company first gives the Executive written notice of its
intention to terminate his employment for Cause and the grounds for such
termination and (ii) such grounds for termination (if susceptible to
correction) are not corrected by the Executive within 15 days of his receipt of
such notice (or, in the event that such grounds cannot be corrected within such
15-day period, the Executive has not taken all reasonable steps within such
15-day period to correct such grounds as promptly as practicable thereafter).


(iii)          For purposes of this Agreement, “Good
Reason” shall mean termination of employment with the Company by the
Executive because of the occurrence of any of the following events without the
Executive’s prior written consent:  (A) a
decrease in the Executive’s Base Salary or a failure by the Company to pay
material compensation due and payable to the Executive in connection with his
employment; (B) a material diminution of the responsibilities, positions or
titles of the Executive from those set forth in this Agreement, including
without limitation, ceasing to be the most senior officer of a company (whether
the Company or its ultimate parent) following a Change in Control; (C) the
Company requiring the Executive to be based at any office or location more than
50 miles from the Edison, New Jersey area; (D) the Company’s delivery of a
notice of non-renewal of the Term following a Change in Control of the Company;
or (E) a material breach by the Company of any term or provision of this
Agreement; provided, however, that no event or condition
described in clauses (A) through (E) shall constitute Good Reason unless (x)
the Executive gives the Company written notice of his intention to terminate
his employment for Good Reason and the grounds for such termination and (y)
such grounds for termination (if susceptible to correction) are not corrected
by the Company within 15 days of its receipt of such notice (or, in the event
that such grounds cannot be corrected within such 15-day period, the Company has
not taken all reasonable steps within such 15-day period to correct such
grounds as promptly as practicable thereafter).


(b)           Termination without Cause;
Resignation for Good Reason.  (i)  If, prior to the expiration of the Term, the
Executive’s employment is terminated by the Company without Cause, or if the
Executive resigns from his employment hereunder for Good Reason, the 


 


4

















 


Executive shall be entitled
to (A) a lump sum cash payment equal to two times the Executive’s Base Salary
(as in effect on the date of such termination or resignation, as the case may
be) which shall be paid within 15 days of the effective date of the Release (as
defined below); (B) a lump sum cash payment equal to two times the bonus that
the Executive earned in the calendar year prior to the year in which the
termination or resignation occurs (the “Prior Year’s Bonus”); (C) a lump sum
cash payment equal to the pro rata portion of the Executive’s bonus for the
year in which the termination or resignation, as the case may be, occurs based
upon the Prior Year’s Bonus, which shall be paid within 15 days of the
effective date of the Release; (D) continued payment by the Company of the
group medical, dental and vision continuation coverage premiums for the
Executive and the Executive’s eligible dependents under Title X of the
Consolidated Budget Reconciliation Act of 1985, as amended (“COBRA”),
for a period of 18 months following the date of termination or resignation, as
the case may be under the Company’s group health plans, as then in effect; (E)
100% accelerated vesting and exercisability, as applicable, of the unvested
portion of the Executive’s unvested equity-based or other long-term incentive
awards, without regard to the satisfaction of any performance criteria; (F)
exercise the stock options for a period of 12 months following the date of
termination or resignation, as the case may be, (subject to earlier
termination, other than as a result of termination of employment, as may be provided
in the Stock Incentive Plan and any stock option agreements); and (G) the Other
Accrued Compensation and Benefits.  The
Executive shall have no further rights under this Agreement or otherwise to
receive any other compensation or benefits after such termination or
resignation of employment.


(ii)           The Company shall not be required to
make the payments and provide the benefits provided for under Section 4(b)(i),
unless the Executive executes and delivers to the Company, a release (the “Release”)
in a form acceptable to the Company, and the Release has become effective and
irrevocable in its entirety.


(iii)          If, following a termination of
employment without Cause or a resignation for Good Reason, the Executive
breaches the provisions of Section 5 or 7 hereof, the Executive shall not be
eligible, as of the date of such breach, for the payments and benefits
described in Section 4(b)(i), and any and all obligations and agreements of the
Company with respect to such payments shall thereupon cease.


(c)           Termination Due to Disability or
Death.  The Executive’s employment
with the Company shall terminate automatically on the Executive’s disability or
death.  In the event of termination of
the Executive’s employment by reason of the Executive’s disability or death, the
Executive or the Executive’s estate, as the case may be, shall be entitled
to:  (i) a lump sum cash payment equal to
the pro-rata portion of the Executive’s bonus for the year in which the
termination of employment occurs based upon the Prior Year’s Bonus, payable
within 15 days of the Executive’s disability or death; (ii) the Executive’s
Base Salary through and including the date of termination; (iii) a lump sum
cash payment equal to 12 months of the Executive’s Base Salary (at the rate in
effect on the date the Executive’s employment is terminated) payable within 15
days of the Executive’s disability or death; (iv) a lump sum cash payment equal
to the Prior Year’s Bonus; (v) continued payment by the Company of the group
medical, dental and vision continuation coverage premiums for the Executive (if
applicable) and Executive’s eligible dependents under COBRA for a period of 18
months following the date of the Executive’s disability or death under the
Company’s group health plans, as then in effect; (vi) 


 


5

















 


100% accelerated vesting and
exercisability, as applicable, of the unvested portion of the Executive’s
unvested equity-based or other long-term incentive awards, without regard to
the satisfaction of any performance criteria; (vii) exercise the stock options
for a period of 12 months following the Executive’s disability or death; and
(viii) the Other Accrued Compensation and Benefits.  For purposes of this Agreement, “disability”
means that the Executive (i) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, or (ii) is, by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months, receiving income replacement benefit for a period of not less
than three months under an accident and health plan covering employees of the
Executive’s employer.


(d)           Change in Control Benefits.  Immediately prior to a Change in Control 100%
of the any unvested equity-based or other long-term incentive awards shall fully
vest and become exercisable, to the extent applicable, without regard to the
satisfaction of any performance criteria and shall otherwise be subject to the
terms and conditions of the Stock Incentive Plan and any award agreements.


(e)           Notice of Termination.  Any termination of employment by the Company
or the Executive shall be communicated by a written “Notice of Termination”
to the other party hereto given in accordance with Section 23 of this
Agreement.  In the event of a termination
by the Company for Cause, or resignation by the Executive for Good Reason, the
Notice of Termination shall (i) indicate the specific termination provision in
this Agreement relied upon, (ii) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated and (iii) specify the date of
termination, which date shall not be more than 30 days after the giving of such
notice.  The failure by the Executive or
the Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any
right of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive’s or the Company’s rights hereunder.


(f)            Resignation from Directorships
and Officerships.  The termination of
the Executive’s employment for any reason shall constitute the Executive’s
resignation from (i) any director, officer or employee position the Executive
has with the Company Group and (ii) all fiduciary positions (including as a
trustee) the Executive holds with respect to any employee benefit plans or
trusts established by the Company.  The
Executive agrees that this Agreement shall serve as written notice of
resignation in this circumstance.


(g)           Gross-Up Payment.  (i)  In
General.  If, during the term of the
Executive’s employment, there is a change in ownership or control of the Company
that causes any payment or distribution by the Company to or for the benefit of
the Executive (whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise, but determined without regard to
any additional payments required under this Section 4(g)) (a “Payment”)
to be subject to the excise tax imposed by Section 4999 of the Code (such
excise tax, together with any interest or penalties incurred by the Executive
with respect to such excise tax, the “Excise Tax”), 


 


6

















 


then the Executive shall be
entitled to receive an additional payment (a “Gross-Up Payment”) in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive shall retain an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.


(ii)           Determination of the Gross-Up
Payment.  Subject to the provisions
of Section 4(g)(iii), all determinations required to be made under this Section
4(g)(ii), including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be utilized in arriving
at such determination, shall be made by a certified public accounting firm
designated by the Company and reasonably acceptable to the Executive (the “Accounting
Firm”), which shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment with respect to which the Executive
in good faith believes a Gross-Up Payment may be due under this Section
4(g)(ii), or such earlier time as is requested by the Company.  All fees and expenses of the Accounting Firm
shall be borne solely by the Company. 
Any Gross-Up Payment, as determined pursuant to this Section 4(g)(ii), shall
be paid by the Company to the Executive within five days of the later of (A)
the due date for the payment of any Excise Tax and (B) the receipt of the
Accounting Firm’s determination.  Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive.  As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which shall not have been made by the Company should have
been made (“Underpayment”), consistent with the calculations required to
be made hereunder.  In the event that the
Company exhausts its remedies pursuant to Section 4(g)(iii) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to the Executive or for the
Executive’s benefit.  The previous
sentence shall apply mutatis mutandis
to any overpayment of a Gross-Up Payment.


(iii)          Procedures.  The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment.  Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid.  The Executive shall not pay such claim prior
to the expiration of the 30-day period following the date on which it gives
such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due).  If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive shall:  (A) give the
Company any information reasonably requested by the Company relating to such
claim, (B) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company, (C) cooperate with the
Company in good faith in order to effectively contest such claim, and (D)
permit the Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and
expenses 


 


7

















 


(including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of costs and
expenses.  Without limiting the foregoing
provisions of this Section 4(g)(iii), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a refund, to the extent
permitted by law, the Company shall advance the amount of such payment to the
Executive on an interest-free basis (which shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid) and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and provided further that any extension of the
statute of limitations relating to payment of taxes for the Executive’s taxable
year with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. 
Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.


(iv)          Refund.  If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 4(g)(iii), the Executive
becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company complying with the requirements of
Section 4(g)(iii)) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto).  If, after the Executive
receives an amount advanced by the Company pursuant to Section 4(g)(iii), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.


5.             Confidentiality.  The Executive agrees to enter into and be
subject to the Company’s Employee Confidentiality and Innovations Agreement
substantially in the form attached as Exhibit A.


6.             Noncompetition.  The Executive agrees to enter into and be
subject to the Company’s Noncompete Agreement substantially in the form
attached as Exhibit B.


7.             Non-Solicitation.  The Executive agrees that for a period
commencing on the Effective Date and ending three years following the Executive’s
termination of employment with the Company (the “Restricted Period”),
the Executive shall not, directly or indirectly, (a) interfere with or attempt
to interfere with the relationship between any person who is, or was 


 


8

















 


during the then most recent
12-month period, an employee, officer, representative or agent of the Company
Group, or solicit, induce or attempt to solicit or induce any of them to leave
the employ of any member of the Company Group or violate the terms of their
respective contracts, or any employment arrangements, with such entities; or
(b) induce or attempt to induce any customer, client, supplier, licensee or
other business relation of any member of the Company Group to cease doing
business with any member of the Company Group, or in any way interfere with the
relationship between any member of the Company Group and any customer, client,
supplier, licensee or other business relation of any member of the Company
Group.  As used herein, the term “indirectly”
shall include, without limitation, the Executive’s permitting the use of the
Executive’s name by any competitor of any member of the Company Group to induce
or interfere with any employee or business relationship of any member of the
Company Group.


8.             Certain Remedies.  (a)  Injunctive
Relief.  Without intending to limit
the remedies available to the Company Group, including, but not limited to,
those set forth in Section 13 hereof, the Executive agrees that a breach of any
of the covenants contained in Sections 5 through 7 of this Agreement may result
in material and irreparable injury to the Company Group for which there is no
adequate remedy at law, that it shall not be possible to measure damages for
such injuries precisely and that, in the event of such a breach or threat
thereof, any member of the Company Group shall be entitled to seek a temporary
restraining order or a preliminary or permanent injunction, or both, without
bond or other security, restraining the Executive from engaging in activities
prohibited by the covenants contained in Sections 5 through 7 of this Agreement
or such other relief as may be required specifically to enforce any of the
covenants contained in this Agreement. 
Such injunctive relief in any court shall be available to the Company
Group in lieu of, or prior to or pending determination in, any arbitration
proceeding.


(b)           Extension of Restricted Period.  In addition to the remedies the Company may
seek and obtain pursuant to Section 13, the Restricted Period shall be extended
by any and all periods during which the Executive shall be found by a court
possessing personal jurisdiction over him to have been in violation of the
covenants contained in Sections 7 through 9 of this Agreement.


9.             Defense of Claims.  The Executive agrees that, during the Term,
and for a period of six months after termination of the Executive’s employment,
upon request from the Company, the Executive shall cooperate with the Company
in connection with any matters the Executive worked on during his employment
with the Company and any related transitional matters.  In addition, the Executive agrees to
cooperate with the Company in the defense of any claims or actions that may be
made by or against the Company Group that affect the Executive’s prior areas of
responsibility, except if the Executive’s reasonable interests are adverse to
the Company Group in such claim or action. 
The Company agrees to promptly reimburse the Executive for all of the
Executive’s reasonable travel and other direct expenses incurred, or to be
reasonably incurred, to comply with the Executive’s obligations under this
Section 9.


10.           Nondisparagement.  The Executive agrees to refrain from (i)
making, directly or indirectly, any derogatory comments concerning the Company
Group or any current or former officers, directors, employees or shareholders
thereof or (ii) taking any other action with respect to the Company Group which
is reasonably expected to result, or does result in,


 


9

















 


damage to the business or
reputation of the Company Group or any of its current or former officers,
directors, employees or shareholders. 
The foregoing restrictions shall not apply to any statements that are
made truthfully in response to a subpoena or other compulsory legal process.


11.           Sole Right to Severance.  This Agreement is intended to represent the
Executive’s sole entitlement to severance payments and benefits in connection
with the termination of his employment. 
To the extent the Executive is entitled to receive severance or similar
payments and/or benefits under any other Company plan, program, agreement, policy,
practice, or the like, severance payments and benefits due to the Executive
under this Agreement shall be so reduced.


12.           Source of Payments.  All payments provided under this Agreement,
other than payments made pursuant to a plan which provides otherwise, shall be
paid in cash from the general funds of the Company, and no special or separate
fund shall be established, and no other segregation of assets shall be made, to
assure payment.  The Executive shall have
no right, title or interest whatsoever in or to any investments which the
Company may make to aid the Company in meeting its obligations hereunder.  To the extent that any person acquires a
right to receive payments from the Company hereunder, such right shall be no
greater than the right of an unsecured creditor of the Company.


13.           Arbitration.  Any dispute or controversy arising under or
in connection with this Agreement or otherwise in connection with the Executive’s
employment by the Company that cannot be mutually resolved by the parties to
this Agreement and their respective advisors and representatives shall be
settled exclusively by arbitration in New Jersey in accordance with the rules
of the American Arbitration Association before one arbitrator of exemplary
qualifications and stature, who shall be selected jointly by an individual to
be designated by the Company and an individual to be selected by the Executive,
or if such two individuals cannot promptly agree on the selection off the
arbitrator, who shall be selected by the American Arbitration Association.


14.           Nonassignability; Binding
Agreement.  (a)  By the Executive.  This Agreement and any and all rights,
duties, obligations or interests hereunder shall not be assignable or delegable
by the Executive.


(b)           By the Company.  This Agreement and all of the Company’s
rights and obligations hereunder shall not be assignable by the Company except
as incident to a reorganization, merger or consolidation, or transfer of all or
substantially all of the Company’s assets.


(c)           Binding Effect.  This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto, any successors to or assigns of
the Company and the Executives heirs and the personal representatives of the
Executive’s estate.


15.           Indemnification.  The Executive shall be covered under the
Company’s director and officer insurance policies and, subject to applicable
law, shall be provided indemnification to the maximum extent permitted by the
Company’s Bylaws and Certificate of Incorporation, with such insurance coverage
and indemnification to be in accordance with the 


 


10

















 


Company’s standard practices
for senior executive officers but on terms no less favorable than provided to
any other Company senior executive or director.


16.           Withholding.  Any payments made or benefits provided to the
Executive under this Agreement shall be reduced by any applicable withholding
taxes or other amounts required to be withheld by law or contract.


17.           Amendment; Waiver.  This Agreement may not be modified, amended
or waived in any manner, except by an instrument in writing signed by both
parties hereto.  The waiver by either
party of compliance with any provision of this Agreement by the other party shall
not operate or be construed as a waiver of any other provision of this
Agreement, or of any subsequent breach by such party of a provision of this
Agreement.


18.           Governing Law.  All matters affecting this Agreement,
including the validity thereof, are to be governed by, and interpreted and construed
in accordance with, the laws of the State of New Jersey applicable to contracts
executed in and to be performed in that State.


19.           Survival of Certain Provisions.  The rights and obligations set forth in
Sections 5 through 13 hereof shall survive any termination or expiration of
this Agreement.


20.           Entire Agreement; Supersedes
Previous Agreements.  This Agreement,
together with the (i) Employee Confidentiality and Innovations Agreement and
(ii) Noncompete Agreement, contains the entire agreement and understanding of
the parties hereto with respect to the matters covered herein and supersedes
all prior or contemporaneous negotiations, commitments, agreements and writings
with respect to the subject matter hereof, including without limitation, the Prior
Agreement, all such other negotiations, commitments, agreements and writings
shall have no further force or effect, and the parties to any such other
negotiations, commitments, agreements or writings shall have no further rights
or obligations thereunder.


21.           Counterparts.  This Agreement may be executed by either of
the parties hereto in counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.


22.           Headings.  The headings of sections herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.


23.           Notices.  All notices or communications hereunder shall
be in writing, addressed as follows:


To the Company:


2147 Route 27

Edison, N.J. 08817 or


 


11

















 


23 Main Street

Holmdel, N.J. 07722, whichever is the last address on record for the Company

Attention:  General Counsel


With a copy to:


Shearman & Sterling
LLP

599 Lexington Avenue

New York, N.Y. 10022

Attention:  John J. Cannon, III


To the Executive:


818 Linden Lane

Brielle, N.J. 08730 or the Executive’s last address on record with the Company


All such notices shall be
conclusively deemed to be received and shall be effective (i) if sent by hand
delivery, upon receipt or (ii) if sent by electronic mail or facsimile, upon
confirmation of receipt by the sender of such transmission.


IN WITNESS WHEREOF, the
Company has caused this Agreement to be signed by its officer pursuant to the
authority of its Board, and the Executive has executed this Agreement, as of
the day and year first written above.


	
   

  	
  VONAGE HOLDINGS CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Mort David

  
	
   

  	
   

  	
  Name:

  	
  Mort David

  
	
   

  	
   

  	
  Title:

  	
  Chairperson,
  Compensation Committee

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  



 


	
  ACCEPTED AND AGREED

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  /s/ Jeffrey A. Citron

  	
   

  	
   

  	
   

  
	
  Jeffrey A. Citron

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
  February 8, 2006

  	
   

  	
   

  	
   

  
					



 


 


12