Preliminary Proxy Statement


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.     )
Filed by the Registrant   þ                             Filed by a Party other than the Registrant   ¨
Check the appropriate box:
þ
Preliminary Proxy Statement
¨
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
¨

Definitive Proxy Statement
¨
Definitive Additional Materials
¨
Soliciting Material Pursuant to Rule 14a-12
VONAGE HOLDINGS CORP.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ
No fee required.
¨
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction applies:
 
(2)
Aggregate number of securities to which transaction applies:
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
(4)
Proposed maximum aggregate value of transaction:
 
(5)
Total fee paid:
¨
Fee paid previously with preliminary materials:
¨
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1)
Amount Previously Paid:
 
(2)
Form, Schedule or Registration Statement No.:
 
(3)
Filing Party:
 
(4)
Date Filed:
 


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VGLOGOA2015A01A03.JPG
 
VONAGE HOLDINGS CORP.
23 MAIN STREET
HOLMDEL, NJ 07733
April 28, 2017
Dear Stockholders,
We are pleased to invite you to attend the annual meeting of stockholders of Vonage Holdings Corp. to be held on Thursday, June 8, 2017 at 10:00 a.m., local time via a live webcast at www.virtualshareholdermeeting.com/VG2017. You will be able to attend our annual meeting, vote your shares and submit questions during the annual meeting via this live webcast. Details regarding access to the meeting and the business to be conducted are provided in the accompanying Notice of 2017 Annual Meeting of Stockholders and Proxy Statement. Included with the Proxy Statement is a copy of our 2016 annual report, including our Form 10-K for the year ended December 31, 2016 (without exhibits). We encourage you to read our 2016 annual report, which includes our audited financial statements and information about our operations, markets, and products.
Your vote is important. Whether or not you plan to attend the annual meeting, we hope you will vote as soon as possible. You may vote over the Internet, as well as by telephone or by mailing a proxy or voting instruction card. Voting over the Internet, by telephone or by mailing a proxy card or by providing voting instructions to your broker, trustee or nominee will ensure your representation at the annual meeting regardless of whether you attend. Please review the instructions on the Notice you received in the mail and the proxy or voting instruction card regarding each of these voting options.
Also, if you plan to attend our annual meeting via the webcast please see the instructions set forth in the Notice of 2017 Annual Meeting of Stockholders.
Thank you for your ongoing support of Vonage. We look forward to your participation in our annual meeting.
Sincerely,
ALANSIGNATURE1A02.JPG
Alan Masarek
Chief Executive Officer


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VONAGE HOLDINGS CORP.
23 MAIN STREET
HOLMDEL, NJ 07733
NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS
 
Time and Date
10:00 a.m., local time, on Thursday, June 8, 2017
Place
via live webcast at www.virtualshareholdermeeting.com/VG2017
Items of Business
At the meeting, we will ask you and our other stockholders to:
 
 
(1
)
elect three Class II directors for a term to expire at the 2020 annual meeting of stockholders;
 
 
(2
)
ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017;
 
 
(3
)
approve our named executive officers' compensation in an advisory vote;
 
 
(4
)
recommend, by a non-binding advisory vote, the frequency of future advisory votes on the executive compensation of our named executive officers; and
 
 
(5
)
ratify the extension of our Tax Benefits Preservation Plan.
 
The stockholders will also act on any other business as may properly come before the meeting or any postponement or adjournment of the meeting. The board of directors has no knowledge of any other business to be transacted at the annual meeting.
Record Date
You may vote if you were a stockholder of record at the close of business on April 13, 2017. A list of these stockholders will be open for examination by any stockholder for any purpose germane to the 2017 annual meeting for a period of 10 days prior to the meeting at our principal executive offices at 23 Main Street, Holmdel, NJ 07733, and electronically during the 2017 annual meeting at www.virtualshareholdermeeting.com/VG2017 when you enter your 12-Digit Control Number.
Proxy Voting
It is important that your shares be represented and voted at the meeting. Whether or not you plan to attend the meeting, we encourage you to read this proxy statement and submit your proxy or voting instructions as soon as possible. For specific instructions on how to vote your shares, please refer to the instructions on the Notice of Internet Availability of Proxy Materials (Notice) you received in the mail, the section titled “Questions and Answers about the Proxy Materials and the Annual Meeting” beginning on page 1 of this Proxy Statement or, if you requested to receive printed proxy materials, your enclosed proxy card.
Attending the Meeting
You are entitled to attend the annual meeting only if you were a Vonage stockholder at the close of business on April 13, 2017, or you hold a valid proxy for the annual meeting. Instructions on how to attend and participate in the 2017 annual meeting live via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/VG2017.
 
By order of the Board of Directors,
RRSIGNATURE.JPG
Randy K. Rutherford, Assistant Corporate Secretary
Holmdel, NJ
April 28, 2017
Important Notice Regarding the Availability of Proxy Materials for Our
Annual Meeting of Stockholders to Be Held on June 8, 2017


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The accompanying proxy statement and our 2016 annual report to stockholders are available at
http://ir.vonage.com/


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VONAGE HOLDINGS CORP.
23 MAIN STREET
HOLMDEL, NJ 07733
PROXY STATEMENT
GENERAL INFORMATION
For Our Annual Meeting of Stockholders to be held on June 8, 2017
Vonage Holdings Corp. (referred to as “we,” “us,” “our,” “the company,” or “Vonage” in this document) has made these materials available to you on the Internet, or, upon your request has delivered the printed proxy materials to you because our board of directors is soliciting your proxy to vote at our 2017 Annual Meeting of Stockholders. The annual meeting will be held on Thursday, June 8, 2017 , at 10:00 a.m., local time, via live webcast at www.virtualshareholdermeeting.com/VG 2017 . If the annual meeting is adjourned or postponed for any reason, the proxies may be used at any adjournments or postponements of the annual meeting. A replay of the webcast will be available on the Investor Relations section of our website through at least July 8, 2017 .
This proxy statement summarizes information about the proposals to be considered at the annual meeting and other information you may find useful in determining how to vote. We have mailed a Notice of Internet Availability of Proxy Materials to stockholders and are posting our proxy statement at http://ir.vonage.com/ or have mailed a printed copy of proxy materials on or about April 28, 2017 . Included with the proxy statement is a copy of our 2016 annual report, including our Form 10-K for the year ended December 31, 2016 (without exhibits). We sometimes refer to the year ended December 31, 2016 as “fiscal year 2016 ” in this proxy statement.
OTHER INFORMATION
Our Form 10-K for fiscal year 2016 , as filed with the Securities and Exchange Commission, or SEC, which includes our audited financial statements, is available free of charge on the Investor Relations section of our website at http://ir.vonage.com/ or through the SEC's electronic data system at www.sec.gov. To request a printed copy of our Form 10-K (without exhibits), which we will provide to you free of charge, you may: write to Vonage's Investor Relations Department at Vonage Holdings Corp., 23 Main Street, Holmdel, NJ 07733 or call us at 732.365.1328 or send an email through the Vonage Investor Relations website at http://ir.vonage.com/ .
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
Q: Why am I receiving these proxy materials?
A: Our board of directors has made these materials available to you on the Internet, or, upon your request, has delivered printed proxy materials to you, in connection with the solicitation of proxies for use at the annual meeting of stockholders of Vonage Holdings Corp. to be held on Thursday, June 8, 2017 at 10:00 a.m., local time.
Q: What is included in the proxy materials?
A: The proxy materials include:
Our proxy statement for our Annual Meeting; and
Our 2016 Annual Report to Stockholders, (“Annual Report”) which consists of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
If you received printed versions of these materials by mail, these materials also include the proxy card or a voting instruction form for the Annual Meeting.

Q: What information is contained in this proxy statement?
A: The information in this proxy statement relates to the proposals to be voted on at the annual meeting, the voting process, the compensation of our directors and most highly paid executive officers in 2016 , and certain other required information.
Q: Why did I receive a notice in the mail regarding Internet availability of proxy materials instead of a full set of printed proxy materials?

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A: In accordance with rules adopted by the U.S. Securities and Exchange Commission (“SEC”), we may furnish proxy materials, including this proxy statement and our Annual Report, to our stockholders by providing access to such documents on the Internet instead of mailing printed copies. Most stockholders will not receive printed copies of the proxy materials unless they request them. Instead the Notice of Internet Availability of Proxy Materials (“Notice”), which we mailed to most of our stockholders, will instruct you as to how you may access and review all of the proxy materials on the Internet. The Notice also instructs you as to how you may submit your proxy on the Internet. If you would like to receive a paper [or email] copy of our proxy materials, you should follow the instructions for requesting such materials on the Notice.

Q: How can I access the proxy materials over the Internet?
A: The Notice will contain instructions on how to:
View our proxy materials for the Annual Meeting on the Internet and vote your shares; and
Request a printed copy of the proxy materials.
Our proxy materials are also available on our Investor Relations website at http://ir.vonage.com/ .
Choosing to take advantage of the availability of proxy materials on the Internet [or by email] will save us the cost of printing and mailing documents to you, and will reduce the impact of printing and mailing these materials on the environment.

Q: What shares can I vote?
A: Each share of Vonage common stock issued and outstanding as of the close of business on April 13, 2017 , which we refer to as the Record Date, is entitled to vote on all items being voted on at the annual meeting. You may vote all shares owned by you as of the Record Date, including (1) shares held directly in your name as the stockholder of record and (2) shares held for you as the beneficial owner in street name through a broker, trustee or other nominee such as a bank. On the Record Date, we had XXX,XXX,XXX shares of common stock issued and outstanding.
Q: How many votes am I entitled to per share?
A: Each holder of shares of common stock is entitled to one vote for each share of common stock held as of the Record Date.

Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?
A: Most Vonage stockholders hold their shares through a broker, trustee or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
Stockholder of Record
If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, you are considered, with respect to those shares, the stockholder of record , and the Notice was sent directly to you by Vonage. As the stockholder of record , you have the right to grant your voting proxy directly to Vonage or to vote in person at the annual meeting. If you requested to receive printed proxy materials, we have enclosed or sent a proxy card for you to use. You may also vote on the Internet or by telephone, as described in the Notice and in the question, “ How can I vote my shares without attending the annual meeting” below.
Beneficial Owner

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If your shares are held in a brokerage account or by a trustee or other nominee, you are considered the beneficial owner of shares held in street name , and the Notice or printed copies of proxy materials was forwarded to you by your broker, trustee or nominee, as the case may be. As the beneficial owner , you have the right to direct your broker, trustee or nominee how to vote, and you are also invited to attend the annual meeting.
Since a beneficial owner is not the stockholder of record, you may not vote your shares in person at the annual meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares giving you the right to vote the shares at the meeting. Your broker, trustee or other nominee can provide you information on how to obtain a “legal proxy.” Your broker, trustee or nominee has enclosed or provided voting instructions for you to use in directing the broker, trustee or other nominee how to vote your shares.
Q: How can I attend and vote at the annual meeting?
A: You are entitled to attend the annual meeting only if you were a Vonage stockholder or joint holder as of the Record Date, the close of business on April 13, 2017 , or you hold a valid legal proxy for the annual meeting. We will be hosting the 2017 annual meeting live via webcast. A summary of the information you need to attend the annual meeting online is provided below:
Any stockholder can attend the 2017 annual meeting live via the Internet at www.virtualshareholdermeeting.com/VG 2017
Webcast starts at 10:00 a.m. local time on Thursday, June 8, 2017
Stockholders may vote and submit questions while attending the annual meeting on the Internet
Please have your 12-Digit Control Number to enter the annual meeting
Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/VG 2017
Assistance with questions regarding how to attend and participate via the Internet will be provided at www.virtualshareholdermeeting.com/VG 2017 on the day of the annual meeting
Webcast replay of the annual meeting will be available at least until July 8, 2017
Even if you plan to attend the annual meeting, we encourage you to vote your shares in advance of the meeting.
Q: How can I vote my shares without attending the annual meeting if I am a stockholder of record?
A: If you are a stockholder of record, you may direct how your shares are voted without attending the annual meeting.
By Internet — If you are a stockholder of record and received a Notice, you may vote by proxy at http://ir.vonage.com/ by following the instructions in the Notice. Stockholders of record of Vonage common stock that received printed proxy materials with Internet access may submit proxies by following the “VOTE BY INTERNET” instructions on their proxy cards until 11:59 p.m., Eastern Time, on June 7, 2017 .
By Telephone — Stockholders of record of Vonage common stock that received printed proxy materials who live in the United States or Canada may submit proxies by following the “VOTE BY TELEPHONE” instructions on their proxy cards until 11:59 p.m., Eastern Time, on June 7, 2017 .
By Mail — Stockholders of record of Vonage common stock that received printed proxy materials may submit proxies by completing, signing and dating their proxy cards and mailing them in the accompanying pre-addressed envelopes. Proxy cards submitted by mail must be received by the time of the meeting in order for your shares to be voted.
Q: How can I vote my shares without attending the annual meeting if I am a beneficial owner of shares held in street name?
A: As the beneficial owner of shares held in street name, you have the right to direct your broker, bank or other holder of record how to vote your shares, and it is required to vote your shares in accordance with your instructions. We recommend that you follow the voting instructions in the materials you receive from your broker, bank or other holder of record to vote via the Internet, by telephone or by mail.

Q: Can I change my vote?

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A: You may change your vote at any time prior to the vote at the annual meeting. If you are the stockholder of record, you may change your vote by granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (and until the applicable deadline for each method), by providing a written notice of revocation to Vonage's Corporate Secretary at Vonage Holdings Corp., 23 Main Street, Holmdel, NJ 07733 prior to your shares being voted, or by attending the annual meeting on the Internet and voting. Attendance at the meeting on the Internet will not cause your previously granted proxy to be revoked unless you specifically so request prior to the vote at the annual meeting. For shares you hold beneficially in street name, you may change your vote by submitting new voting instructions to your broker, trustee or nominee following the instruction it has provided, or, if you have obtained a legal proxy from your broker or nominee giving you the right to vote your shares, by attending the meeting and voting while attending the annual meeting on the Internet.
Q: How many shares must be present or represented to conduct business at the annual meeting?
A: The quorum requirement for holding the annual meeting and transacting business is that holders of a majority of the voting power of the issued and outstanding common stock of Vonage must be present in person or represented by proxy. Broker non-votes (described below) are counted for the purpose of determining the presence of a quorum.

Q: What is the voting requirement to approve each of the proposals?
A: Directors in an uncontested election are elected by the vote of the majority of the votes cast with respect to such director. This means that the number of shares voted “FOR” a Class II candidate for election as director must exceed the number of votes cast “AGAINST” that director. Votes withheld and broker non-votes are not considered votes cast on this proposal and will not have any effect on the election of directors.
We have also implemented a Director Resignation policy, applicable if an incumbent director nominee receives less than a majority of votes cast in an uncontested election. For more information see "Proposal No. 1 - Election of Directors" below. Our board of directors recommends a vote “FOR” all nominees.
The proposal to ratify the appointment of Deloitte and Touche, LLP as our independent registered public accounting firm requires the affirmative “FOR” vote of a majority of those shares present in person or represented by proxy and voting on the proposal at the annual meeting. Abstentions are considered votes cast and, accordingly, will have the same effect as a vote against the proposal. Our board of directors recommends that the stockholders vote FOR the ratification of the appointment of Deloitte and Touche, LLP to serve as Vonage's independent registered public accounting firm for the year ending December 31, 2017 .
The advisory vote to approve executive compensation is not binding. We will consider stockholders to have approved the proposal if there are more votes cast "FOR" the proposal than "AGAINST". Abstentions and broker non-votes will not affect the outcome of the vote. Our board of directors recommends that the stockholders vote FOR the approval of the compensation of our named executive officers, as disclosed in this proxy statement.
The advisory vote to recommend the frequency of future advisory votes on executive compensation is not binding. Approval of the advisory stockholder vote on the frequency of future advisory votes on executive compensation requires the affirmative vote of a majority of those shares present in person or represented by proxy and voting on the proposal at our annual meeting. Abstentions are considered votes cast and will have the same effect as a vote against the proposal. Broker non-votes are not considered votes cast on this proposal and will have no effect on the voting results. Because stockholders have four choices (one year, two years, three years or abstain), it is possible that none of these frequency options will receive a majority vote. If no frequency option receives the affirmative vote of a majority of the votes cast, our board of directors will regard the option receiving the greatest number of votes as the frequency recommended by our stockholders. Although the results of this vote are not binding on us, our board of directors will review the outcome of the voting and take the voting results into account in making future determinations with respect to the frequency with which we submit the compensation of our named executive officers to our stockholders for approval on an advisory basis. Our board of directors recommends that you select “One Year” for the advisory proposal regarding the frequency of the advisory vote by our stockholders on our executive compensation program.
The proposal to ratify the extension of our Tax Benefits Preservation Plan requires the affirmative “FOR” vote of a majority of those shares present in person or represented by proxy and voting on the proposal at the annual meeting. Abstentions are considered votes cast and, accordingly, will have the same effect as a vote against the proposal.
Q: What is the effect of not casting a vote or not providing voting instructions?

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A: If you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may constitute “broker non-votes.” Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. Under New York Stock Exchange rules, brokers would have discretionary voting power with respect to ratification of the appointment of Deloitte and Touche, LLP, but not for the election of directors, the advisory vote to approve executive compensation, the advisory vote on the frequency of future stockholder votes on the compensation of our named executive officers, or the ratification of the extension of our Tax Benefits Preservation Plan. We encourage you to provide instructions to your broker, trustee or other nominee regarding the voting of your shares.
If you are a stockholder of record and do not vote by submitting a proxy, no votes will be cast on your behalf on any of the items of business at the annual meeting. If you are a stockholder of record and return your signed proxy card but it does not indicate any voting instructions, such proxy will be voted FOR the election of all director nominees named in this proxy statement and FOR the ratification of the appointment of Deloitte and Touche, LLP.
Q: What happens if additional matters are presented at the annual meeting?
A: Other than the items of business described in this proxy statement, we are not aware of any other business to be acted upon at the annual meeting. If you grant a proxy, the persons named as proxy holders will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any reason any of our nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by our board of directors.
Q: Who will serve as inspector of elections?
A: The inspector of elections will be a representative from Broadridge Investor Communications Services.
Q: What should I do if I receive more than one set of voting materials?
A: You may receive more than one Notice or proxy materials. For example, if you hold your shares in more than one brokerage account, you may receive a separate Notice or voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than Notice or proxy materials. Please review the instructions and vote your shares on each Notice, proxy card and voting instruction card that you receive.
Q: What is “householding” and how do I revoke my consent to the householding program?
A: Vonage has adopted a procedure called “householding,” which the SEC has approved. Under this procedure we deliver a single copy of the Notice and, if applicable, the proxy materials to multiple stockholders who share the same address unless we received contrary instructions from one or more of the stockholders. Vonage adopted the householding method to reduce the amount of duplicative material that its stockholders receive and to lower printing and mailing costs. Householding is in effect for the 2017 Annual Meeting of Stockholders and will remain in effect for all future annual meetings.
Upon request, we will deliver promptly a separate copy of the copy of the Notice and, if applicable, the proxy materials to any stockholder at a shared address to which we delivered a single copy of any of these documents. You may request separate copies by notifying us in writing or verbally that you wish to opt out of the householding program at:
Vonage Investor Relations
23 Main Street
Holmdel, NJ 07733
732.365.1328
You may opt out of householding at any time 30 days prior to the mailing of proxy materials. If you own our common stock in street name (such as through a broker), please notify your broker if you wish to continue to receive multiple copies of the Notice and, if applicable, the proxy materials.
Stockholders who share an address and receive multiple copies of the Notice and, if applicable, the proxy materials, can request to receive a single copy of these materials by following the instructions above. Stockholders can also revoke their consent and receive separate copies of these documents in the future by following the instructions above.
Q: How may I obtain a copy of our 2016 annual report and proxy materials?

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A: Any stockholder may request copies of our annual report, including our Form 10-K (without exhibits), and proxy materials by sending an e-mail through the Vonage Investor Relations website at http://ir.vonage.com/, calling 732.365.1328 or writing to:
Vonage Investor Relations
23 Main Street
Holmdel, NJ 07733

We will promptly deliver the requested copies. Current and prospective investors can access or order free copies of our annual report, including our Form 10-K (without exhibits) and proxy statement by following these same instructions.
Q: Who will bear the cost of soliciting votes for the annual meeting?
A: Vonage is making this solicitation and will pay the entire cost of preparing, assembling, printing, mailing, and distributing the Notices and proxy materials and soliciting votes. If you choose to access the proxy materials or vote over the Internet, you are responsible for Internet access charges you may incur. If you choose to vote by telephone, you are responsible for telephone charges you may incur. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for such solicitation activities. We have retained Georgeson Inc. at an estimated cost of $7,000, plus expenses, to assist in the solicitation of proxies.
Q: What is the deadline to propose actions for consideration at the 2018 annual meeting of stockholders or to nominate individuals to serve as directors?
A: You may submit proposals, including director nominations, for consideration at future stockholder meetings.
Stockholder Proposals: Any stockholder proposals (other than proposals to nominate directors) intended to be presented at an annual meeting of stockholders called for a date between May 9, 2018 and July 8, 2018 and to be considered for inclusion in our proxy materials must be received by December 26, 2017 and must comply with the procedures of Rule 14a-8 under the Securities Exchange Act of 1934. Stockholder proposals failing to comply with the procedures of Rule 14a-8 will be excluded from our proxy materials. Proposals should be addressed to:
Vonage Holdings Corp.
Attn: Corporate Secretary
23 Main Street
Holmdel, NJ 07733
For a stockholder proposal (other than proposals to nominate directors) intended to be presented at an annual meeting of stockholders that is not intended to be included in Vonage's proxy statement under Rule 14a-8, the stockholder must (1) provide the information required by Section 1.11 of our bylaws and (2) give timely notice to the Corporate Secretary of Vonage in accordance with our bylaws, which, in general, require that the notice be received by the Corporate Secretary of Vonage:

not earlier than February 8, 2018 , and

not later than March 10, 2018 .
Nomination of Director Candidates: You may propose director candidates for consideration by the board of directors' nominating and governance committee. Any such recommendations should include the nominee's name and qualifications for board of directors membership and should be directed to the Corporate Secretary of Vonage at the address of our principal executive offices set forth above. For additional information regarding stockholder recommendations for director candidates, see “Corporate Governance—Director Nomination Process” below in this proxy statement.

In addition, our bylaws permit stockholders to nominate directors for election at an annual stockholder meeting. To nominate a director, the stockholder must provide the information required by Section 1.10 of our bylaws. In addition, the stockholder must give timely notice to our Corporate Secretary in accordance with our bylaws, which, in general, require that the notice be received by our Corporate Secretary within the time period described above under “Stockholder Proposals” for stockholder proposals that are not intended to be included in our proxy statement under Rule 14a-8.

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Copy of Bylaw Provisions: You may contact our Corporate Secretary at Vonage Holdings Corp., Attn: Corporate Secretary, 23 Main Street, Holmdel, NJ 07733 for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.

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PROXY SUMMARY
This summary highlights certain information from our Proxy Statement for the 2017 Annual Meeting. You should read the entire Proxy Statement carefully before voting.
Performance Highlights
Our compensation program measures success against our strategic plan. In 2016 our management team continued to execute on this plan through the optimization of our consumer services business and the successful pivot to the cloud communications for business market. Building on the momentum of previous years, we grew Vonage Business revenues 72% to $376 million, up from $219 million in 2015 and from $8 million when we entered the business market at the end of 2013.
Vonage Business Revenue (in millions)
VBREV.JPG


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These gains have been achieved while growing profitability and lowering our churn metrics over the same 2013-2016 period*.
Vonage GAAP Income from Operations      Consolidated Adjusted OIBDA and Consumer Churn
INCOMEFROMOPERATIONSA01.JPG OIBDACHURNA01.JPG
* Adjusted OIBDA is a non-GAAP financial measure. We define adjusted OIBDA as GAAP income from operations excluding depreciation and amortization, share-based expense, acquisition related transaction and integration costs, acquisition related consideration accounted for as compensation, change in contingent consideration, costs associated with organizational transformation, loss on sublease, loss from discontinued operation excluding income tax, depreciation from discontinued operation, and net loss attributable to non-controlling interest. Please refer to Appendix C for reconciliations of adjusted OIBDA to GAAP income from operations.
Say-on-Pay
At our 2014 annual meeting, stockholders approved our Say-on-Pay vote with 54% support. We were disappointed with this level of support, and undertook an extensive stockholder outreach effort intended to ensure that management, the board, and our compensation committee understood the views of our stockholders regarding our compensation practices. From that outreach, we learned that much of the dissatisfaction was based on historical compensation practices. In addition, many of our stockholders indicated that they viewed the 2014 vote as a referendum on 2013 (and earlier) compensation practices. Taking into account this feedback, the company and its compensation committee undertook a full review of our compensation programs. Based on that review, we modified our compensation programs for 2014 and beyond to further align the interests of our NEOs with our stockholders. We have continued our stockholder outreach efforts since that time, during which management has conducted both in- and off-season discussions with stockholders, at which we identified issues important to our stockholders with respect to our executive compensation and equity programs. The feedback received from our stockholders also significantly influenced the terms of our arrangement with our new Chief Executive Officer in 2015. Since our last Say-on-Pay vote, and in light of the feedback provided by our stockholders, we made a number of improvements and changes to our executive compensation programs, detailed below:

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Implemented Performance-Based RSUs
Beginning in 2014, we began awarding a significant portion of our long-term incentive compensation in the form of performance-based restricted stock units. The number of units actually earned will be determined at the end of the three year performance period based on the achievement of relative stockholder return goals.
Removed Stock Options from Long-Term Incentive Program
Beginning in 2014, we no longer provide long-term incentive compensation in the form of stock options. Stock options are available for purposes of promotion or new hire grants.
Adopted Incentive Compensation Recovery Policy
Our Incentive Compensation Recovery Policy permits the company to recoup excess compensation and to recover improper gains in the event of a material restatement of the company's financial results caused by the misconduct of a covered officer (including our NEOs).
Implemented Anti-Hedging Policy
We adopted revisions to our securities trading compliance policy to prohibit any director, officer or employee from engaging in any strategy or using any product to hedge against potential changes in the value of Vonage securities.
Implemented Anti-Pledging Policy
We adopted revisions to our securities trading compliance policy to prohibit any director, officer or employee, except in limited circumstances, from directly or indirectly pledging a significant amount of Vonage securities.
Revamped our Incentive Compensation Plan

We have revamped our incentive compensation plan to include several provisions that are protective of our stockholders, including annual award limitations and minimum vesting and exercise price provisions.
Reduced Perquisites Available to our Chief Executive Officer

We have reduced the perquisites available to our Chief Executive Officer compared to the perquisites that our former chief executive officer was entitled to receive. For example, we no longer pay excise tax gross-ups and have reduced certain relocation and travel reimbursements.

In addition, in connection with our outreach program, we also discuss matters of corporate governance with our stockholders. In connection with the board's own regular review of our corporate governance practices, and input from stockholders, since our last Say-on-Pay vote, we have taken the following actions that we believe enhance our corporate governance to the benefit of our stockholders:
Adoption of Majority Voting - Our board amended our by-laws to require majority voting in connection with uncontested director elections and also approved amendments to our governance principles to implement a director resignation policy. See "Majority Voting and Director Resignation Policy" for additional information.
Stock Ownership Guidelines - Our board of directors adopted revised stock ownership guidelines that increased the level of ownership required to be held by our named executive officers, and certain other covered executives. Our revised stock ownership guidelines require that our CEO maintain a stock ownership level equal to 5.0x base salary and that our other named executive officers (NEOs) maintain a stock ownership level equal to 3.0x base salary.
Code of Conduct - We implemented a comprehensive new code of conduct applicable to all our directors, officers, and employees. The new code reflects our corporate values, which support our ongoing strategic transformation.
In all, we believe these changes reflect our commitment to the continuous evaluation and improvement of our compensation and governance practices. To further this endeavor, our board is recommending that stockholders select “One Year” for the advisory proposal regarding the frequency of the advisory vote by our stockholders on our executive compensation program.



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CORPORATE GOVERNANCE
Our board of directors believes that good corporate governance is important to ensure that Vonage is managed for the long-term benefit of stockholders. This section describes key corporate governance principles and practices that our board has adopted. Complete copies of our governance principles, committee charters, code of conduct, and finance code of ethics are available on the Corporate Governance section of our website at www.vonage.com/corporate/corp_index.php . Alternatively, you may request a copy of any of these documents by writing to Vonage Holdings Corp., Attn: Corporate Secretary, 23 Main Street, Holmdel, NJ 07733.
We are committed to good corporate governance practices. Our nominating and governance committee and board of directors review our corporate governance practices and market trends on an ongoing basis in order to ensure proper functioning of the board and management. In addition, we act to ensure that our corporate governance practices reflect our mission and values:

Our Mission Statement:
Vonage transforms how people connect
by challenging the status quo and finding a better way
Our Values
One Vonage, Indivisible.
We are a single organization of diverse people and perspectives. We succeed when we embrace debate,
yet we act as one.
Before Us, The Customer.
Our success depends on understanding our customers and making great stuff that they want and value.
Without them, there is no us.
Innovate Relentlessly.
As a technology company, our one constant is change. We embrace change, think big and never settle.
Excellence, Served Daily.
Good simply isn’t good enough. Success tomorrow depends on outstanding execution today.
Do The Right Thing.
Every decision and action is an opportunity to demonstrate our collective integrity. We will not tolerate
unethical behavior. We respect people. We embrace diversity. We give back to the community as
exemplary corporate citizens.
Be Accountable.
Act like a business owner. Do what’s necessary, not what’s asked. Drive the results that matter for
our customers, each other and our shareholders.

Governance Principles
Our board of directors has adopted governance principles to assist in the exercise of its duties and responsibilities and to serve the best interests of Vonage and our stockholders. These principles, which provide a framework for the conduct of the board's business, provide that:
the board's principal responsibility is to oversee the management of Vonage to assure that the best interests of the company and its stockholders are being served;
a majority of the members of our board shall be independent directors;
the non-management directors meet regularly in executive session;

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directors have full and free access to management and, as necessary and appropriate, independent advisors;
new directors participate in an orientation program and all directors are encouraged to participate in continuing director education on an ongoing basis; and
annually our board and its committees will conduct a self-evaluation to assess whether they are functioning effectively and efficiently.
Board Leadership Structure
The following section describes our board leadership structure, the reasons why the structure is in place at this time, the roles of various positions, and related key governance practices.
Our board of directors is currently composed of eight independent directors, and Mr. Masarek, our Chief Executive Officer. Our board of directors has established audit, compensation and nominating and governance committees. Each of the board committees is composed solely of independent directors, each with a different independent director serving as committee chair.
As permitted by our governance principles, our board of directors has designated one of the independent directors as Lead Independent Director. Our Lead Independent Director (i) has the responsibility to schedule and prepare agendas for and to chair meetings of non-management or independent directors, (ii) presides at all meetings of the board at which our Chairman of the Board is not present, (iii) coordinates with our Chairman of the Board and our Chief Executive Officer, and other directors, to determine the frequency and length of board meetings, and coordinates with our Chairman of the Board and our Chief Executive Officer to set the agenda for each board meeting, (iv) facilitates communication between our Chairman of the Board and our Chief Executive Officer and the other directors (however, directors are free to, and do routinely, communicate directly with our Chairman of the Board and our Chief Executive Officer), (v) causes the dissemination of information to the other members of our board, (vi) raises issues on behalf of the non-management or independent directors when appropriate, (vii) has the authority to call meetings of non-management or independent directors, (viii) speaks on behalf of the independent directors when necessary, (ix) discusses board and committee evaluations with the nominating and governance committee, (x) conducts evaluations of our Chief Executive Officer and other executive officers in coordination with the compensation committee, and (xi) coordinates with our Chairman of the Board and our Chief Executive Officer to monitor communications from stockholders and other interested parties. John Roberts, a director since 2004 was appointed as our Lead Independent Director in February 2015.
Our governance principles provide that our board of directors may fill the roles of Chairman of the Board and Chief Executive Officer based upon what is in the best interests of Vonage and its stockholders at any point in time. In July 2008, our board of directors first determined that the positions of Chairman of the Board and Chief Executive Officer should be held by different persons.  With the appointment of Mr. Masarek, our board of directors has elected to continue the separation in order to retain the benefit of Mr. Citron's institutional knowledge as Chairman while retaining our Lead Independent Director to maintain an appropriate level of checks and balances in our governance and allowing our board of directors to function effectively. Our governance principles provide the flexibility for our board of directors to modify our leadership structure in the future as appropriate.
Our nominating and governance committee oversees annually a self-evaluation by our board of directors of its performance during the prior year. As part of this process our nominating and governance committee will conduct an evaluation to review the progress and effectiveness of our board of directors and its committees, and submits comments to the Lead Independent Director. Following discussion with the Lead Independent Director, our nominating and governance committee reports back to our board of directors, and the full board of directors will consider and discuss the committee's report, including assessing whether the current leadership structure continues to be appropriate for Vonage and its stockholders. The board has implemented a director peer review process in order to ensure that we have the right mix of skills and experience on the board, and to ensure the appropriate level of performance.
Risk Management and Role of the Board in Risk Oversight
Our Chief Executive Officer reports directly to our board of directors and is responsible for the day-to-day management of our company, including how the company addresses risk. Our Chief Financial Officer is responsible for day-to-day financial risk management under the direction of our Chief Executive Officer. Management has implemented an enterprise risk management process to identify, assess, and manage the most significant risks facing us and conducts risk assessments of our business periodically. The risk assessment process is global in nature and has been developed to identify and assess our

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risks, including the nature of the risk, as well as to identify steps to mitigate and manage each risk. Our senior leadership team, functional heads, and other managers are surveyed and/or interviewed to develop this information. The enterprise risk management process is led by our Chief Legal Officer, who reports to our Chief Executive Officer, and our Vice President, Internal Audit, who reports directly to our audit committee. In 2016 , our Chief Legal Officer and Vice President, Internal Audit, along with our Senior Vice President Network Operations, provided regular status updates on our enterprise risk management process and related activities to our audit committee.
Our board of directors is involved in oversight of Vonage's risk assessment and monitoring processes, which it achieves primarily through the work of committees of the board. Management reviews significant risks with our board of directors throughout the year, as necessary and/or appropriate, and conducts a formal review of its assessment and management of the most significant risks with our board of directors on a periodic basis. Our audit committee has oversight responsibility to review management's risk assessment and risk management policies, including the policies and guidelines used by management to identify, monitor and manage our exposure to risk. Our audit committee reviews and discusses with our management, our outside auditor and our internal auditors the material risks facing Vonage and our management's plans to manage the risks identified as a result of the enterprise risk management process and reports on its review to the full board of directors. Our compensation committee reviews risks arising from our compensation policies and practices and reports on its review to the full board of directors.
Board Determination of Independence
Under applicable New York Stock Exchange rules, a director will only qualify as “independent” if our board affirmatively determines that he or she has no material relationship with Vonage (either directly or as a partner, stockholder or officer of an organization that has a relationship with us). Our board has established guidelines to assist it in determining whether a director has such a material relationship. The guidelines are included in our governance principles, which are available on our website as discussed above. Under these guidelines, a director is not considered to have a material relationship with Vonage if he or she is independent under Section 303A.02(b) of the New York Stock Exchange Listed Company Manual and provided he or she:
is not an executive officer of another company which is indebted to Vonage, or to which Vonage is indebted, where the total amount of either company's indebtedness to the other is more than 1% of the total consolidated assets of the company for which he or she serves as an executive officer; and
does not serve as an officer, director or trustee of a tax exempt organization, where Vonage's discretionary contributions to such organization are more than the greater of $1 million or 2% of that organization's consolidated gross revenues. Vonage's automatic matching of employee charitable contributions will not be included in the amount of Vonage's contributions for this purpose.
In addition, ownership of a significant amount of our stock, by itself, does not constitute a material relationship.
For relationships not covered by the guidelines set forth above, the determination of whether a material relationship exists is made by the other independent members of our board.
Our board has determined that Jeffrey Citron, Hamid Akhavan, Naveen Chopra, Stephen Fisher, Carolyn Katz, John J. Roberts, Carl Sparks, and Gary Steele meet the categorical standards described above, that none of these directors has a material relationship with Vonage and that each of these directors is “independent” as determined under Section 303A.02(b) of the New York Stock Exchange Listed Company Manual. None of the directors determined to be independent engaged in any related person transactions with the company. In making its determination that Mr. Citron is “independent”, our board considered the fact that the company provided health insurance and medical care payments to Mr. Citron in the amount of $23,647 in 2014, $25,330 in 2015, and $25,836 in 2016 . Our board also determined that David C. Nagel and Margaret Smyth, during their respective tenures as director, met the categorical standards described above, did not have a material relationship with Vonage and was “independent” as determined under Section 303A.02(b) of the New York Stock Exchange Listed Company Manual. Mr. Nagel and Ms. Smyth did not stand for re-election in 2016 and completed their respective terms on June 3, 2016.
In addition, in the case of all members of the compensation committee, our board has considered the independence criteria set forth in the rules of the New York Stock Exchange that are specifically applicable to compensation committee members and determined that each of the members of our compensation committee is independent.


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Board Meetings and Attendance
Our board met 9 times during 2016 . During 2016 , each current director attended at least 75% of the aggregate of the number of board meetings and the number of meetings held by all committees on which he or she then served.
Director Attendance at Annual Meeting of Stockholders
Our governance principles provide that directors are encouraged to attend the annual meeting of stockholders. All of our directors then serving on our board attended the 2016 annual meeting of stockholders.
Director Retirement Age
Our governance principles do not establish an age limit for serving as a director. However, the governance principles provide that upon reaching the age of 72 years, a director must submit to our board of directors a letter of resignation to be effective at the next meeting of stockholders held for the election of directors. In each instance, our board of directors will accept the letter of resignation unless our nominating and governance committee determines otherwise. In making such determination, our nominating and governance committee balances the benefits of a director's contributions and continuity against the benefits of having a fresh viewpoint from a new director and such other factors as our board of directors or the nominating and governance committee may consider appropriate.
Directors Changing Their Present Job Responsibilities
Our governance principles require directors who substantially change their present job responsibilities to tender their resignation to the Chairman of the Board, who must refer it to our nominating and governance committee for review. Our board of directors, upon the recommendation of the nominating and governance committee, determines whether to accept the resignation. In cases in which a director is uncertain as to whether he or she ought to tender his or her resignation, our board of directors expects such director to consult with the chairman of the nominating and governance committee. The nominating and governance committee shall consider a director's other job responsibilities in its deliberations concerning directors' standing for re-election.
Transactions with Related Persons
Policies and Procedures for Related Person Transactions
Our board has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which Vonage is or will be a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees, or 5% stockholders (or their immediate family members), each of whom we refer to as a “related person,” has a direct or indirect material interest.
If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our chief legal officer. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved or ratified by the board's audit committee. Whenever practicable, the reporting, review, and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the audit committee will review, and, in its discretion after considering the factors set forth below, as appropriate, may ratify the related person transaction. The policy also permits the chairman of the audit committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the audit committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.
A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the audit committee after full disclosure of the material terms of the transaction and the related person's interest in the transaction. As appropriate for the circumstances, the audit committee will review and consider:
the related person's interest in the related person transaction;
the approximate dollar value of the amount involved in the related person transaction;
the approximate dollar value of the amount of the related person's interest in the transaction without regard to the amount of any profit or loss;
whether the transaction was undertaken in the ordinary course of our business;

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whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;
the purpose of, and the potential benefits to us of, the transaction; and
any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.
The audit committee may approve or ratify the transaction only if the audit committee determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, our best interests. The audit committee may impose any conditions on the related person transaction it deems appropriate.
In addition to the transactions that are excluded by the instructions to the SEC's related person transaction disclosure rule, the board has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions requiring approval or ratification for purposes of this policy:
interests arising solely from the related person's position as an executive officer of another entity (whether or not the person is also a director of such entity) that is a participant in the transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, (c) the amount involved in the transaction equals less than the greater of $1 million dollars or 2% of the annual gross revenues of the other entity that is a party to the transaction, and (d) the amount involved in the transaction equals less than 2% of Vonage's annual gross revenues; and
a transaction that is specifically contemplated by provisions of Vonage's certificate of incorporation or bylaws.
The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by the compensation committee in the manner specified in its charter.
Related Person Transaction During 2016
The company did not participate in any related persons transactions during 2016.
Board Committees
Our board has established audit, compensation, and nominating and governance committees, each of which operates under a charter that has been approved by our board. Current copies of each committee's charter are posted on the Corporate Governance section of our website at http://ir.vonage.com/ .
Our board has determined that all of the members of each of these committees are independent as defined under the rules of the New York Stock Exchange, including, in the case of all members of the audit committee, the independence requirements contemplated by Rule 10A-3(b)(1) under the Securities Exchange Act of 1934.

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The following table shows the Directors who are currently members or chairperson of each of the standing Board Committees and the number of meetings each committee held in 2016.
Director
 
Audit Committee
Compensation Committee
Nominating and Governance Committee
Hamid Akhavan
I
 
 
 
Naveen Chopra
I
þ
þ
 
Jeffrey Citron
* I
 
 
 
Stephen Fisher
I
 
þ
þ
Carolyn Katz
I
þ

þ C
 
Alan Masarek
 
 
 

John J. Roberts
LD I
þ C
 
 
Carl Sparks
I
 
 
þ C
Gary Steele
I
 
 
þ
Number of Meetings in 2016
 
5
5
5
* - Chairman of the Board
LD - Lead Independent Director
I - Independent
C - Chairperson
þ - Member
Audit Committee
The audit committee's responsibilities include:
appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm;
overseeing the work and evaluating the performance of our independent registered public accounting firm, including through the receipt and consideration of reports from such firm;
reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures;
monitoring our internal controls over financial reporting and disclosure controls and procedures;
overseeing our internal audit function;
reviewing management's risk assessment and risk management policies;
establishing policies regarding hiring employees from our independent registered public accounting firm;
establishing procedures for the receipt, retention, confidential treatment, and investigation of accounting or auditing related complaints and concerns;
meeting independently with our internal auditing staff, independent registered public accounting firm and management;
overseeing compliance by the company with applicable laws and regulations;
reviewing and approving or ratifying any related person transactions; and
preparing the audit committee report required by SEC rules, which is included below in this proxy statement.
The members of our audit committee are Mr. Roberts (Chairman), Ms. Katz, and Mr. Chopra. Each member of our audit committee meets the standards for financial literacy for companies listed on the New York Stock Exchange. In addition, our board of directors has determined that Mr. Roberts, Ms. Katz and Mr. Chopra, each of whom is independent under

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applicable rules governing independence of audit committee members, are each also an “Audit Committee Financial Expert” as defined by applicable SEC rules. No member of our audit committee currently serves on the audit committees of more than three public companies, except for Mr. Roberts, who serves on three audit committees in addition to ours. Our board of directors has determined that Mr. Roberts' service on those other committees does not impair his ability to effectively serve on our audit committee.
Compensation Committee
The compensation committee's responsibilities include:
annually reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer and other executives;
determining, along with our other independent directors, compensation for our chief executive officer;
reviewing and approving the compensation of our other executive officers;
reviewing risks arising from our compensation policies and practices;
overseeing and administering our cash and equity incentive plans;
appointing, approving the compensation of, assessing the independence of, and overseeing the work of any compensation consultant, independent legal counsel or other advisor retained by the compensation committee;
monitoring compliance of executive officers with our stock ownership policy;
reviewing and discussing annually with management our “Compensation Discussion and Analysis,” which is included below in this proxy statement and considering the results of the most recent stockholder advisory vote on executive compensation; and
preparing the compensation committee report required by SEC rules, which is included below in this proxy statement.
Independent Compensation Advisor
The compensation committee has the authority to engage its own independent advisors to assist in carrying out its responsibilities under its charter. The compensation committee has engaged and utilizes the services of an independent compensation consultant, Meridian Compensation Partners, LLC, to advise the committee in connection with its oversight of our compensation program. The compensation consultant attends meetings of the compensation committee as requested and also communicates with the compensation committee outside of meetings. The compensation consultant reports to the compensation committee rather than to management, although the compensation consultant may meet with management from time to time for purposes of gathering information on proposals that management may make to the compensation committee, at the request of the compensation committee. The compensation committee is free to replace the compensation consultant or hire additional consultants at any time. The compensation consultant does not provide services to management. In selecting its compensation consultant, the compensation committee considered factors relevant to the consultant's independence, including the factors set forth in applicable rules of the New York Stock Exchange, and determined that the services provided by Meridian in 2016 did not raise any conflicts of interest. The processes and procedures followed by our compensation committee in considering and determining executive compensation are described below under the heading “Compensation Discussion and Analysis.”
Our management, aided by our human resources and finance departments, and eConsultingNetwork, a compensation consultant retained by management, provided statistical data and survey information to the compensation committee to assist it in determining 2016 compensation levels. The compensation committee considered various factors, including the factors set forth in SEC rules, and determined that the services provided by eConsultingNetwork in 2016 did not raise any conflicts of interest. While the compensation committee utilized this information and valued management's observations with regard to compensation, the ultimate decisions regarding executive compensation were made by the compensation committee in consultation with the committee's own compensation consultant.

Compensation committee meetings typically have included, for all or a portion of each meeting, not only the committee members but also other board members, our chief executive officer, chief financial officer, chief legal officer, and our chief human resources officer. The members of our compensation committee are Ms. Katz (Chairwoman), Mr. Chopra, and Mr. Fisher.

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Nominating and Governance Committee
The nominating and governance committee's responsibilities include:
identifying individuals qualified to become board members;
recommending to our board the persons to be nominated for election as directors and to each of the board's committees;
making recommendations to our board on the size of and criteria for membership on the board and board committees;
reviewing and making recommendations to the board with respect to the compensation of non-executive directors;
developing and recommending governance principles to the board;
reviewing our disclosures regarding the specific experience, qualifications, attributes or skills that led to the conclusion that each director and nominee should serve as a director;
reviewing the board's leadership structure in light of our specific characteristics and circumstances and recommending change, if any, to the board for approval, and reviewing our disclosure regarding board leadership structure; and
overseeing an annual self-evaluation of the board and its committees.
An independent compensation consultant, Meridian Compensation Partners, LLC, advised the committee in connection with reviewing the compensation of non-executive directors during 2016 . The processes and procedures followed by the nominating and governance committee in identifying and evaluating director candidates are described below under the heading “Director Nomination Process.”
The members of our nominating and governance committee are Mr. Sparks (Chairman), Mr. Fisher, and Mr. Steele.
Director Nomination Process
In recruiting and selecting director candidates, our nominating and governance committee considers various factors, including the experience and expertise of existing board members and the alignment of candidates' abilities and qualifications with the long-term strategic direction of the company and the qualities described under the heading “Board Composition and Nominees.” To identify director candidates, our nominating and governance committee makes requests to board members and others for recommendations and uses the services of third-party search firms. The committee meets from time to time to evaluate biographical information and background material relating to potential candidates and sets up interviews of selected candidates by members of the committee and the board.
Stockholders may recommend individuals to our nominating and governance committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common stock for at least a year as of the date such recommendation is made, to our nominating and governance committee, Vonage Holdings Corp., Attn: Corporate Secretary, 23 Main Street, Holmdel, NJ 07733. Assuming that appropriate biographical and background material has been provided on a timely basis, the committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. If the board determines to nominate a stockholder-recommended candidate and recommends his or her election, then his or her name will be included in our proxy card for the annual meeting at which it is proposed that the candidate be elected to the board.

Stockholders also have the right under our bylaws to directly nominate director candidates, without any action or recommendation on the part of the committee or the board, by following the procedures set forth under “ Questions And Answers About The Proxy Materials And The Annual Meeting—What is the deadline to propose actions for consideration at the 2018 annual meeting of stockholders or to nominate individuals to serve as directors? ” Candidates nominated by stockholders in accordance with the procedures set forth in the bylaws will not be included in our proxy card for the next annual meeting.

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Majority Voting and Director Resignation Policy
In 2015 our board approved amendments to our by-laws to implement a majority voting standard. Our by-laws previously had provided for a plurality vote standard in director elections. Beginning with our 2016 annual meeting, directors have been elected by a majority of the votes cast in elections for which the number of nominees for election does not exceed the number of directors to be elected.  A plurality vote standard will continue to apply to contested elections where the number of nominees exceeds the number of directors to be elected.
In connection with the adoption of majority voting, the board also approved amendments to the company’s governance principles to implement a director resignation policy. Under the policy, any incumbent director who does not receive a majority of the votes cast in an uncontested election is required to tender his or her resignation within 10 days of the certification of the relevant election results. The nominating and governance committee will make a recommendation to the board whether to accept or reject the resignation, or whether other action should be taken; the board will act on the nominating and governance committee’s recommendation and will disclose the action it has taken and its rationale within 90 days of the certification of the relevant election results.
Communicating with the Board of Directors or our Independent Directors
Our board will give appropriate attention to written communications that are submitted by stockholders and other interested parties, and will respond if and as appropriate. Communications are forwarded to all directors if they relate to important substantive matters or include suggestions or comments that the Lead Independent Director considers to be important for the directors to know. In general, communications relating to corporate governance and corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances, and matters as to which we receive repetitive or duplicative communications.
Stockholders who wish to send communications to our Lead Independent Director or the independent directors as a group or the board should address such communications to such directors or the board of directors, Vonage Holdings Corp., Attn: Corporate Secretary, 23 Main Street, Holmdel, NJ 07733.
Codes of Conduct
We adopted a comprehensive new code of conduct applicable to all our directors, officers, and employees in 2015 and have a finance code of ethics applicable to our chief financial officer and employees in our finance organization. The code of conduct and the finance code of ethics are posted in the Corporate Governance section of our website, www.vonage.com/corporate/corp_index.php . We will provide you with printed copies of our codes free of charge on written request to Vonage Holdings Corp., Attn: Corporate Secretary, 23 Main Street, Holmdel, NJ 07733. We intend to disclose any waivers from provisions of our codes that apply to our principal executive officer, principal financial officer, principal accounting officer or controller, or any person performing similar functions, as well as amendments to our code(s) that are required to be disclosed under SEC rules, on the Corporate Governance section of our website promptly following the date of such amendment or waiver.
Compensation Committee Interlocks and Insider Participation
During 2016 , the members of our compensation committee were Ms. Katz (Chairwoman), Mr. Chopra, and Mr. Fisher. None of the members of our compensation committee was at any time in 2016 , or formerly, an officer or employee of Vonage, and none of the members of our compensation committee had any relationship with Vonage requiring disclosure as a related person transaction under Item 404 of Regulation S-K. See “Transactions with Related Persons.” During 2016 , none of our executive officers served as a member of the compensation committee or board of directors of any entity that had one or more executive officers that served on our compensation committee or board of directors.
Impact of Compensation Policies on Risk Management
Our compensation committee, with the assistance of its independent compensation consultant, reviewed our compensation policies and practices for our employees, including executive officers, and determined that our compensation policies and practices are not reasonably likely to have a material adverse effect on us. Our compensation committee noted several aspects of the design of our compensation program that reduce the likelihood of excessive risk-taking:
The program provides a balanced mix of cash and equity, and annual and longer-term incentives.

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We set varied performance goals that we believe are reasonable in light of corporate strategy, past performance, future projections, market conditions, analyst expectations, and our debt covenants. These performance goals encourage a balanced emphasis on growth, profitability, and operational performance. If management overemphasized any single metric, possibly increasing risk to our long-term performance, it would likely be at the expense of other metrics resulting in reduced compensation. This balanced approach helps mitigate risk and drive long-term performance.
Performance goals are team oriented rather than individually focused, and tied to measurable factors that are both transparent to stockholders and drivers of their returns.
Assuming we achieve at least a minimum level of performance, payouts under our incentive plans result in some compensation at levels below full target achievement, rather than an “all-or-nothing” approach.
Maximum payout levels for bonuses based upon performance are capped (on each measure and overall).
Our compensation committee has discretion to adjust bonus payouts, including making downward adjustments.
We use a mix of performance-based and time-based restricted stock units. We use restricted stock units for equity awards in part because they retain value even in a depressed market so that executives are less likely to take unreasonable risks to get, or keep, options “in-the-money.” Performance-based restricted stock units also act to better align the interests of our NEOs with those of our stockholders.
Under our Incentive Compensation Recovery Policy the compensation committee may recoup incentive compensation, including improper gains from the sale or disposition of vested equity awards, in the event of a material restatement of the company's financial results (other than as a result of a change in accounting rules, principles or interpretations) caused or substantially caused by the misconduct of a covered officer (including our NEOs).
Multi-year overlapping vesting periods for equity awards limits employee ability to benefit from short-term risky behavior and encourages long-term decision making and value creation.
Under our stock ownership guidelines, each named executive officer is required to own a number of shares of company common stock having a value equal to a multiple of his or her base salary.
Our securities trading compliance policy prohibits all directors and employees from engaging in any strategy or using any product to hedge against potential changes in the value of Vonage securities, including short selling techniques, “sales against the box”, puts, calls and other derivative securities, prepaid variable forwards, equity swaps, collars, exchange funds and forward sale contracts.
Our securities trading compliance policy prohibits all directors and employees from, directly or indirectly, pledging a significant amount of Vonage securities, including the intentional creation of any form of pledge, security interest, deposit, or lien, including the holding of shares in a margin account, that entitles a third-party to foreclose against, or otherwise sell, any shares, whether with or without notice, consent, or default.
COMPENSATION COMMITTEE REPORT
The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth below. Based on the foregoing review and discussion, the compensation committee has recommended to our board of directors that the Compensation Discussion and Analysis be included in this proxy statement for filing with the SEC.
By the Compensation Committee of the Board of Directors of Vonage Holdings Corp.
Carolyn Katz, Chairwoman
Naveen Chopra
Stephen Fisher


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PROPOSAL NO. 1
ELECTION OF DIRECTORS
General
We have a nine-member board of directors, each of whom, other than our CEO, is independent within the meaning of the New York Stock Exchange listing standards. As a group, our directors have a wide range of backgrounds, experience, and expertise relevant to our company. The median tenure of our directors is four years, with four having joined since 2014, including two since our last annual meeting. Together, the members of our board combine deep knowledge of the company with a diversity of perspectives. Our board of directors is divided into three classes. One class is elected each year for a three-year term. The terms of the directors in Class II will expire at the annual meeting of stockholders and each has been nominated for re-election as a Class II director. The terms of the directors in Class I and Class III will expire at the annual meetings of stockholders to be held in 2019 and 2018, respectively.
No director, director nominee, or associate of any director or director nominee, is a party adverse to us or any of our subsidiaries in any material proceeding or has any material interest adverse to us or any of our subsidiaries. No director, director nominee or executive officer is related by blood, marriage or adoption to any other director or executive officer.
Board Composition and Nominees
We believe that each member of our board of directors should possess certain qualities, including ethical character, sound judgment, and demonstrated business acumen. In addition, board members should be familiar with our business and industry, be able to work harmoniously, be free of conflicts of interest, be willing to devote sufficient time to satisfy obligations as a director, and be willing to act in the long-term interests of all stockholders. While we do not have a formal diversity policy, we seek to have directors representing a range of experiences, qualifications, skills, and backgrounds relevant to our activities. Our nominating and governance committee has made board diversity a priority in its evaluation of director candidates, expanding the diversity of our board of directors in recent years.

The persons named in the enclosed proxy card will vote to elect each of the following nominees as a director, unless the proxy is marked otherwise. Each nominee has indicated a willingness to serve as a director, if elected. If any nominee becomes unable or unwilling to serve, the proxies may be voted for substitute nominees selected by our board of directors.
Nominees for Terms Expiring in 2020 (Class II Directors)
Carolyn Katz , age 55, joined our board of directors in January 2014. Ms. Katz is the executive chair of Author & Company, a digital publisher, a role in which she has served since 2012. Previously, from May 2000 to October 2001, Ms. Katz served as a principal of Providence Equity Partners Inc., a private investment firm specializing in equity investments in telecommunications and media companies. From June 1984 to April 2000, Ms. Katz was employed by Goldman, Sachs & Co., most recently as a managing director and co-head of Emerging Communications. Ms. Katz has served on the board of directors of NII Holdings, Inc., a multinational cellular telecommunications company, since 2002.
Ms. Katz brings more than 20 years of experience in technology and telecommunications to the Vonage Board, including deep experience helping communications companies with corporate development, international expansion and emerging technologies. In addition, Ms. Katz has been determined to be an “Audit Committee Financial Expert” under the SEC's rules and regulations, and provides guidance and perspective on financial and strategic matters.
John J. Roberts , age 72, joined our board of directors in August 2004 and has served as our Lead Independent Director since February 2015. Mr. Roberts served as Global Managing Partner for PricewaterhouseCoopers LLP, a provider of assurance, tax, and advisory services, from 1998 until his retirement in June 2002. From 1994 to 1998, Mr. Roberts served as Chief Operating Officer of Coopers & Lybrand, which merged with Price Waterhouse in 1998. He currently serves on the boards of directors and audit committees of Armstrong World Industries, Inc. and Safeguard Scientifics, Inc. and the board of trustees and audit committee of the Pennsylvania Real Estate Investment Trust. He is a Member of the American Institute of Certified Public Accountants.
As a result of his roles at PricewaterhouseCoopers LLP and its predecessors, Mr. Roberts, chairman of our audit committee, has experience in public company accounting, risk management, disclosure, and financial system management and has been determined to be an “Audit Committee Financial Expert” under the SEC's rules and regulations. He also has extensive public company board experience (including specific experience on audit committees). Mr. Roberts brings this experience to his role as our Lead Independent Director.

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Carl Sparks , age 49, joined our board of directors in February 2011. Mr. Sparks is the Chief Executive Officer and a member of the board of directors of Academic Partnerships, a Dallas, Texas based online service provider for higher education globally, a role in which he has served since April 2016. From April 2011 through April 2014, Mr. Sparks served as the Chief Executive Officer of Travelocity Global, a leading company in online travel, and a division of Sabre Inc. Prior to joining Travelocity, he served as President of Gilt Groupe, a members-only online retailer of luxury products and experiences. Mr. Sparks joined Gilt as Chief Marketing Officer in October 2009 and was promoted to President in March 2010, serving in that role until April 2011, when he joined Travelocity. Mr. Sparks also served for five years at Expedia Inc., an online travel company, from June 2004 until October 2009, in a variety of leadership roles, including Senior Vice President, Marketing and Retail Operations at Hotels.com from June 2004 to May 2006, Chief Marketing Officer at Expedia.com from June 2006 to December 2007, and General Manager at Hotels.com USA, Latin America & Canada from January 2008 to October 2009. Earlier in his career, Mr. Sparks served as Vice President of Direct Business and Brand at Capital One Financial Corp., and also served in senior marketing and strategy roles at Guinness & Co., PepsiCo Inc., and The Boston Consulting Group. He currently serves on the board of directors of Dunkin' Brands Group, Inc.
Mr. Sparks has senior leadership, product development, operations, and digital marketing experience in high-growth companies maintaining a strong online sales presence. He also has significant international business and brand marketing expertise in consumer products and services.
Directors Whose Terms Expire in 2018 (Class III Directors)
Jeffrey A. Citron , age 46, has been the Chairman of our board of directors since January 2001. Mr. Citron was also our Chief Executive Officer from January 2001 through February 2006. He served as our Chief Strategist from February 2006 to July 2008 and assumed the additional role of Interim Chief Executive Officer from April 2007, upon the resignation of Vonage's prior Chief Executive Officer, until July 2008. In 1995, Mr. Citron founded The Island ECN, a computerized trading system designed to automate the order execution process. Mr. Citron became the Chairman and CEO of Datek Online Holdings Corp., an online trading firm, in February 1998 and departed The Island ECN and Datek Online Holdings Corp. in October 1999.
As a Founder and former Chief Executive Officer and Chief Strategist of Vonage, Mr. Citron brings deep institutional knowledge and perspective regarding our strengths, challenges, opportunities, and operations to his role as Chairman of our board of directors. Having successfully founded and grown several businesses, Mr. Citron brings entrepreneurial and business-building skills and experience to Vonage. He also brings the perspective of a stockholder with significant stock ownership in us. In addition, Mr. Citron possesses an extensive understanding of telecommunications technologies, including VoIP technology.
Naveen Chopra, age 43, joined our board of directors in July 2014. Mr. Chopra is Chief Financial Officer of Pandora Media, Inc., a leading music discovery platform. Previously, Mr. Chopra served as Interim Chief Executive Officer of TiVo Inc., a leading provider of software, services and technology to enable the distribution and management of video content, from January 2016 until TiVo was acquired by Rovi Corporation in September 2016. Mr. Chopra served as Chief Financial Officer and Senior Vice President, Corporate Development and Strategy of Tivo from December 2012, responsible for overseeing TiVo’s accounting and financial reporting, planning, tax, treasury, corporate development, and strategy functions. Mr. Chopra joined TiVo in 2003 as Director, Business Development, where he later served as Vice President, Business Development, before being promoted to Senior Vice President, Corporate Development and Strategy.
As a c-level executive of a public company, Mr. Chopra brings deep financial and accounting experience in technology companies, as well as seasoned corporate strategy and development, risk management, and compensation experience to the board.
Stephen Fisher, age 52, joined our board of directors in January 2013. Currently, Mr. Fisher serves as Senior Vice President and Chief Technology Officer at eBay Marketplace. Previously, Mr. Fisher served as Executive Vice President of Technology at Salesforce.com, an enterprise cloud computing company. He joined Salesforce.com in 2004 and held several leadership positions including Senior Vice President of Platform Product Management and Vice President, Engineering. Prior to that, Mr. Fisher served as Architect at AT&T Labs, Inc. from 2001 through 2004. Before joining AT&T Labs, he was Founder, President and Chief Executive Officer of NotifyMe Networks, Inc. In addition, he served as Department Manager, Internet Products Group at Apple Computer, Inc. and was a Lecturer at Stanford University. He currently serves on the board of directors of Safeguard Scientifics, Inc.

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Mr. Fisher brings deep technology experience to our board of directors, including expertise in cloud computing, systems architecture, software development, and information, data, and cybersecurity. He is an inventor on 14 U.S. patents and has worked with both start-ups and established technology companies. Mr. Fisher also brings senior leadership and compensation experience to the board.
Directors Whose Terms Expire in 2019 (Class I Directors)
Alan Masarek , age 56, has been our Chief Executive Officer and a director since November 2014. Mr. Masarek joined Vonage from Google, Inc., where he was Director, Chrome & Apps. Prior to joining Google in 2012, Mr. Masarek was the Co-Founder of Quickoffice, Inc. and served as Chief Executive Officer from July 2007 until June 2012, when Quickoffice was acquired by Google. Mr. Masarek also served as Co-Founder, Chairman and Chief Executive Officer of AdOutlet, Inc. from April 1999 to September 2001. Previously, he held senior leadership roles, including President, at Advanced Health Corp. from September 1995 to March 1999. Mr. Masarek is a graduate of the University of Georgia and Harvard Business School.
Mr. Masarek brings to our board of directors extensive business leadership, with more than 20 years of C-level experience at technology-centric companies that span corporate, venture and entrepreneurial settings. He brings to the board strong leadership qualities, corporate development experience, deep experience in technological innovation, and a proven ability to develop breakthrough products and services that drive profitable growth.
Hamid Akhavan , age 55, joined our board of directors in December 2016. Mr. Akhavan is currently a partner in the private equity firm of Long Arc Capital, joining that firm in January 2016. Prior to that, Mr. Akhavan was a Principal at Telecom Ventures LLC from July 2014 to December 2015. Mr. Akhavan served as Chief Executive Officer of Unify Inc. (formerly Siemens Enterprise Communications) from February 2010 to January 2014 and previously served as Chief Operating Officer of Deutsche Telecom and Chief Executive Officer of T-Mobile International. He holds a B.S. degree in electrical engineering from California Institute of Technology and a M.S. degree in electrical engineering from Massachusetts Institute of Technology.
Mr. Akhavan has extensive experience at organizations spanning from large public corporations, to private-equity funded companies, to startups, with expertise in the wireless, hardware and software markets, as well as in enterprise cloud communications. Mr. Akhavan brings deep and versatile technology, enterprise and communications experience, and adds significant strategic insight to our board.
Gary Steele , age 54, joined the Board in July 2016. Mr. Steele is CEO of Proofpoint, a publicly-traded global Security as a Service vendor. Before joining Proofpoint in 2002, Mr. Steele served as the CEO of Portera, an applications company delivering solutions for the professional services industry. Prior to Portera, Mr. Steele served as the Vice President and General Manager of the Middleware and Data Warehousing Product Group at Sybase, Inc. where he initiated and spearheaded many early internet projects. Before joining Sybase, Mr. Steele served in business development, marketing, and engineering roles at Sun Microsystems and Hewlett-Packard. He holds a B.S. degree in computer science from Washington State University.
Mr Steele brings a broad range of enterprise Software as a Service (SaaS) experience to Vonage, as well as deep knowledge of enterprise sales operations and distribution. Mr Steele adds understanding of the evolving enterprise SaaS market and his strategic experience with global B2B service and subscription businesses.


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Board Composition & Skills Matrix

 
Akhavan
Chopra
Citron
Fisher
Katz
Masarek
Roberts
Sparks
Steele
Term Expiration
2019
2018
2018
2018
2017
2019
2017
2017
2019
Vonage Committee Membership
 
A, C
 
C, N
A, C
 
A
N
N
C-Level Public Company Experience
X
X
X
X
 
X
 
X
X
Corporate Governance / Legal / Compensation
X
X
X
X
X
X
X
X
X
Finance and Capital Markets
X
X
X
 
X
X
X
 
 
Financial Literacy
X
X
X
 
X
X
X
X
 
International
X
 
 
 
X
 
X
X
 
M&A/Corporate Development & Strategy
X
X
X
 
X
X
X
 
 
Operational (sales and marketing, network, IT, information security, service delivery etc.)
X
 
X
X
 
X
X
X
X
Product Development/Technology
X
 
X
X
 
X
X
X
X
Risk Management
X
X
 
X
X
 
X
 
X

Recommendation of our Board of Directors
Our board of directors recommends that the stockholders vote FOR the election to our board of directors of Ms. Katz, Mr. Roberts, and Mr. Sparks as Class II directors.

********************************
AUDIT COMMITTEE REPORT
In the performance of its oversight responsibilities, the audit committee has reviewed our audited financial statements for the fiscal year ended December 31, 2016 and the evaluation of our internal control over financial reporting as of that date, and has discussed them with our management and our independent registered public accounting firm.
The audit committee has also received from, and discussed with, our independent registered public accounting firm various matters that are required to be discussed under Public Company Accounting Oversight Board standards.
The audit committee has received the written disclosures and the letter from our independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm's communications with the audit committee concerning independence, and has discussed with our independent registered public accounting firm its independence. The audit committee has concluded that the provision of audit and non-audit services by BDO USA, LLP during the fiscal year ended December 31, 2016 was compatible with BDO USA, LLP's independence.

Based on the review and discussions referred to above, the audit committee recommended to our board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2016 for filing with the SEC.

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During the fiscal year ended December 31, 2016, the audit committee conducted a request for proposal process, which included BDO USA, LLP, to select an independent registered public accounting firm for the fiscal year ending December 31, 2017. As discussed under Proposal No. 2, following this process the audit committee selected Deloitte and Touche LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2017.
By the Audit Committee of the Board of Directors of Vonage Holdings Corp.
John J. Roberts, Chairman
Naveen Chopra
Carolyn Katz

PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
General
We are asking stockholders to ratify the audit committee's appointment of Deloitte and Touche, LLP as Vonage's independent registered public accounting firm for the year ending December 31, 2017 . Although stockholder approval of the audit committee's appointment of Deloitte and Touche, LLP is not required by law or our certificate of incorporation or bylaws, our board of directors and the audit committee believe that it is advisable to give stockholders an opportunity to ratify the appointment. In the event the stockholders fail to ratify the appointment, the audit committee will reconsider this appointment. Even if the appointment is ratified, the audit committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the audit committee determines that such a change would be in Vonage's and its stockholders' best interests.
This will be Deloitte and Touche, LLP's first year auditing our consolidated financial statements. BDO USA, LLP audited Vonage's consolidated financial statements annually from Vonage's 2004 fiscal year through the 2016 fiscal year. The decision to change the Company’s independent registered public accounting firm was the result of a request for proposal process, which included BDO USA, LLP, in which the Audit Committee of the Company’s Board of Directors conducted a comprehensive, competitive process to select an independent registered public accounting firm, and which action was ratified by the Board of Directors.
Representatives of Deloitte and Touche, LLP are expected to be present at the meeting and will have the opportunity to make a statement if they desire to do so. It is also expected that those representatives will be available to respond to appropriate questions.
Auditors' Fees
The following table summarizes the fees BDO USA, LLP billed to us for each of the last two fiscal years.
Fee Category
Fiscal Year 2016
 
Fiscal Year 2015
Audit Fees (1)
$
1,523,039

 
$
1,233,613

Tax Fees (2)
191,739

 
196,255

Audit Related Fees (3)
120,000

 
148,300

Total Fees
$
1,834,778

 
$
1,578,168

 ______________
(1)
Audit fees consist of amounts billed for the audit of our annual financial statements included in our annual report on Form 10-K, the review of the interim financial statements included in our quarterly reports on Form 10-Q, the audit of internal control over financial reporting and other professional services provided in connection with statutory and regulatory filings.

(2)
Tax fees consist of amounts billed for advisory services regarding tax compliance issues and the completion of corporate tax returns. None of our tax fees billed in fiscal year 2016 or 2015 were provided under the de minimis exception to the audit committee pre-approval requirements.

(3)
Audit related fees represent fees for due diligence services and other audit procedures incurred in connection with the acquisition of Nexmo, iCore Networks, Inc. and Simple Signal, Inc

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Pre-Approval Policies and Procedures
Our audit committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. This policy generally provides that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the audit committee or the engagement is entered into pursuant to one of the pre-approval procedures described below.
From time to time, our audit committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount.

Our audit committee has also delegated to the chairman of the audit committee the authority to approve any audit or non-audit services to be provided to us by our independent registered public accounting firm. Any approval of services by the chairman of the audit committee pursuant to this delegated authority is reported on at the next meeting of the audit committee.

The audit committee pre-approved all of the fees billed to us by BDO USA, LLP for 2016 .
Recommendation of our Board of Directors
Our board of directors recommends that the stockholders vote FOR the ratification of the appointment of Deloitte and Touche, LLP to serve as Vonage's independent registered public accounting firm for the year ending December 31, 2017 .

********************************
PROPOSAL NO. 3
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

Background
In accordance with Section 14A of the Securities Exchange Act of 1934, our stockholders are being provided the opportunity to vote to approve, on a nonbinding, advisory basis, the compensation of our named executive officers (NEOs) as disclosed in this proxy statement (a "Say-on-Pay" vote).
As described in detail under the heading “ Compensation Discussion and Analysis, ” we seek to closely align the interests of our NEOs with the interests of our stockholders. Our compensation programs are designed to reward our NEOs for the achievement of short-term and long-term strategic and operational goals and the achievement of increased total stockholder return, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. Our board of directors believes that the compensation of our NEOs, developed in consultation with a leading compensation consultant, is designed to facilitate long-term stockholder value creation, and is important in attracting, motivating and retaining the high caliber of executive talent necessary to drive our business. We believe the program delivers pay which is strongly linked to company performance over time. In order to maintain this link, we review our compensation programs on an ongoing basis. In recent years, we have changed our compensation programs to further align the interests of our NEOs with our stockholders, including by revising our stock ownership guidelines to increase the level of ownership required to be held by our NEOs, awarding a significant portion of our long-term incentive compensation in the form of performance-based restricted stock units, adopting our Incentive Compensation Recovery Policy, and adopting revisions to our securities trading compliance policy to prohibit hedging and pledging of Vonage securities.
This vote on Proposal 3 is not intended to address any specific element of compensation. Rather, the vote relates to the overall compensation of our NEOs and the policies and practices described in this proxy statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission. The Say-on-Pay vote is advisory, which means that the vote is not binding on the Company, our board of directors or the compensation committee. To the extent there is any significant vote against our NEO compensation as disclosed in this proxy statement, the compensation committee will evaluate whether any actions are necessary to address the concerns of stockholders. We currently conduct triennial Say-on-Pay votes. Stockholders have an opportunity to cast an advisory vote on the frequency of say-on-pay votes at least every six years. As

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discussed below, the next advisory vote on the frequency of the Say-on-Pay vote is also occurring at this 2017 Annual Meeting of Stockholders.
The affirmative vote of a majority of the shares present or represented and entitled to vote either in person or by proxy will be viewed as approval of this Proposal 3. Abstentions and broker non-votes have no impact on the results of the vote.
Accordingly, we ask our stockholders to vote on the following resolution at the Annual Meeting:
“RESOLVED, that the compensation paid to the company's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
Recommendation of our Board of Directors
Our board of directors recommends that the stockholders vote FOR the approval of the compensation of our named executive officers, as disclosed in this proxy statement.

PROPOSAL NO. 4
ADVISORY VOTE TO DETERMINE THE FREQUENCY OF OUR SUBMISSION TO OUR STOCKHOLDERS OF A PROPOSAL TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Background
The provisions of the Dodd-Frank Act require that we submit to a non-binding advisory vote of the holders of our common stock no less frequently than every six years a proposal that our stockholders make a determination that is not binding on us as to the frequency with which we provide our stockholders with a Say-on-Pay vote.
The enclosed proxy card provides you with choices on this item. You may vote to have us submit a Say-on-Pay proposal to our stockholders every year, every two years or every three years. You may also abstain from voting on this item. Our board of directors will review the non-binding vote of our stockholders on the frequency of Say-on-Pay votes and take that vote into account.
Our stockholders have expressed the view that an annual Say-on-Pay vote is an important means of engagement on executive compensation matters, and our Board respects this viewpoint.
Recommendation of our Board of Directors
Our board of directors recommends that stockholders select “One Year” for the advisory proposal regarding the frequency of the advisory vote by our stockholders on our executive compensation program.

PROPOSAL NO. 5
RATIFICATION OF THE EXTENSION OF OUR TAX BENEFITS PRESERVATION PLAN
We are asking stockholders to ratify the extension, through June 30, 2019, of our Tax Benefits Preservation Plan (the “Tax Benefits Preservation Plan” or the “Plan”) with American Stock Transfer & Trust Company, LLC, as rights agent. The Plan, which is attached to this proxy statement as Appendix B, is designed to protect our U.S. federal net operating loss carryforwards and certain other tax benefits (collectively, the “Tax Benefits”) from limitations pursuant to Section 382 under the Code.
Background
We believe that our Tax Benefits are valuable assets. Although the actual realization of the Tax Benefits is difficult to predict and depends on future events, we estimate that, as of December 31, 2016, the company had approximately $575 million of U.S. federal net operating losses carryforwards (expiring in varying amounts from 2026 through 2036). Under the Code and applicable Treasury Regulations, we generally may “carry forward” these losses to offset future earnings and thereby reduce our federal income tax liability, subject to certain requirements and restrictions.

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Our ability to use our Tax Benefits would be substantially delayed, and a significant portion of such Tax Benefits may expire unused, if we experience an “ownership change” as determined under Section 382 of the Code and applicable Treasury Regulations (“Section 382”). If an ownership change occurs, our ability to use our net Tax Benefits would be subject to an annual limitation. This could significantly impair the amount of our net deferred tax asset. Under Section 382, an “ownership change” generally occurs if one or more stockholders (including, in certain cases, a group of stockholders) owning at least 5% of our common stock increase their aggregate ownership by more than 50% over their lowest ownership percentage within a rolling three-year period. For this purpose, the less-than-5% stockholders of the corporation are aggregated and treated as single separate stockholders and, under certain circumstances, may be divided into further groupings with each treated as a single separate stockholder. The rules for determining whether an ownership change occurs are complex. Nevertheless, based on our continued monitoring of public filings over time and other information within our knowledge, we do not believe that an ownership change has occurred to date that would impair the availability of our Tax Benefits.
In connection with the release of the valuation allowance, our board of directors carefully considered how to preserve the benefits of our Tax Benefits for long-term stockholder value. After consulting with our tax, financial and legal advisors, our board of directors adopted the Tax Benefits Preservation Plan in furtherance of this objective. Pursuant to the Plan, on June 7, 2012, we declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of common stock. The Rights were distributed to stockholders of record as of June 18, 2012 and will continue to be distributed to holders of our common stock issued after that date unless and until the Distribution Date (defined below) occurs. The Rights have terms that are designed to deter acquisitions of our common stock that could result in an ownership change, as described below.
Although stockholder approval of the Tax Benefits Preservation Plan is not required by applicable law or by our organizational documents, our board of directors determined, as a matter of good corporate governance, that if it were to elect to extend the term of the Plan beyond June 7, 2013, such extension would be submitted to stockholders at the Annual Meeting for ratification. At our 2013 Annual Meeting, stockholders ratified the extension of the Plan through June 7, 2015, and, after further consultation with our advisors, our board of directors determined to extend, and stockholders ratified the extension of, the Tax Benefits Preservation Plan through June 30, 2017. Since the release of the valuation allowance, we have experienced tax savings of approximately $114 million through the utilization of our Tax Benefits. Our board believes that the Plan will continue to serve as a tool to help prevent an ownership change that could substantially reduce the significant long-term potential benefits of the Tax Benefits and, thus, preserve stockholder value. Accordingly, our board of directors recommends that stockholders ratify a further extension of the Plan through June 30, 2019.
It is important to note the Tax Benefits Preservation Plan may deter, but ultimately cannot block, acquisitions of our common stock that might result in an ownership change. The limitations of these measures are described in more detail below. Our board urges stockholders to carefully read the proposal, the items discussed below under the heading “ Certain Considerations Related to the Tax Benefits Preservation Plan ”, and the full terms of the Plan.
Summary of the Tax Benefits Preservation Plan
The following is a summary of the terms of the Plan. It is qualified in its entirety by the full text of the Plan (which includes as Exhibit A the form of Certificate of Designation of the Series A Participating Preferred Stock of Vonage and as Exhibit B the forms of Rights Certificate and Election to Exercise), which is attached as Appendix B hereto and incorporated by reference herein. A copy of the Plan is also available free of charge from us.
Purpose . The Tax Benefits Preservation Plan is intended to preserve the company's ability to fully utilize the Tax Benefits, in the interests of the company and its stockholders, by avoiding an "ownership change." Specifically, the Plan seeks to deter any person, subject to certain exceptions, from (together with all affiliates and associates of such person) acquiring beneficial ownership of 4.9% or more of our outstanding shares of common stock (an “Acquiring Person”), other than with the approval of our board of directors. See " Exceptions to the Definition of Acquiring Person " below for a discussion of persons who are automatically excluded from the definition of Acquiring Person and a recent request for an exemption from the definition of Acquiring Person.
Exercise . The Rights are not currently exercisable. After the “Distribution Date,” each Right is exercisable to purchase, for $10.00 (the “Purchase Price”), one one-thousandth of a share of Series A Participating Preferred Stock, $0.001 par value per share, of Vonage (“Preferred Stock”), subject to adjustment in accordance with the terms of the Plan.

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Distribution Date . Prior to the Distribution Date, the Rights are attached to our common stock, are not represented by separate certificates and any transfer of our common stock shall also constitute a transfer of the Rights associated with such common stock. On or after the Distribution Date, subject to certain exceptions specified in the Plan, the Rights will separate from the common stock. The Distribution Date will occur upon the earlier of (i) ten (10) business days following the date of a public announcement that a person or group of affiliated or associated persons has become an “Acquiring Person” or such earlier date on which a majority of our board of directors becomes aware of the existence of an Acquiring Person (such date being the “Stock Acquisition Date”) or (ii) ten (10) business days (or such later time as our board of directors may determine) following the commencement of a tender offer or exchange offer that would result in a person becoming an Acquiring Person.
Exceptions to the Definition of Acquiring Person. An Acquiring Person would not include, among others: (i) Vonage or any of its subsidiaries; (ii) employee benefit plans of Vonage or its subsidiaries and persons holding shares of common stock on behalf of such plans; (iii) 4.9% stockholders existing at the time the Plan was first adopted (unless they increase their percentage stock ownership with certain exceptions); (iv) persons or groups who, in the board's view, have inadvertently become 4.9% stockholders, unless and until such person or group shall have failed to divest, as soon as practicable, sufficient shares of common stock such that it would no longer be a 4.9% stockholder (upon terms or conditions satisfactory to the board); (v) an “investment advisor” to mutual funds or trustees of certain qualified trusts if immediately after any increase in beneficial ownership of the common stock by such person (A) no single mutual fund or qualified trust advised by such investment advisor or such trustee, respectively, actually owns or beneficially owns 4.9% or more of the shares of common stock then outstanding and (B) such investment advisor or trustee beneficially owns (other than with respect to such mutual funds or such trusts, as applicable) less than 4.9% of the shares of common stock then outstanding; and (vi) new 4.9% stockholders whose acquisitions, as determined by our board of directors in its sole discretion, would not be inconsistent with the purpose of the Plan.
From time to time, we have received requests from stockholders to permit the requesting stockholder to increase its beneficial ownership of our outstanding common stock above 4.9% without becoming an “Acquiring Person.” When we receive such requests, our board of directors considers the Section 382 "ownership change" impact of the requested increases in ownership on a case-by-case basis, taking into account other potential changes in our stock ownership, including the impact of our announced stock buyback program and the potential impact of certain transactions that are outside our control. Based on these considerations, our board determines whether the increased risk of an “ownership change” that would be created by granting a request would be inconsistent with the purpose of the Plan, which is the preservation of our Tax Benefits for the long-term benefit of all stockholders. In 2014 we granted one request for an exemption under the Plan.
Flip-In ”. In the event that any person becomes an Acquiring Person, each holder of a Right will thereafter have the right to receive upon exercise, in lieu of a number of one-thousandth of a share of Preferred Stock, common stock (or, in certain circumstances, cash, property or other securities of Vonage), having a value equal to two times the exercise price of the Right. The exercise price is the Purchase Price times the number of units associated with each Right (initially, one). Notwithstanding any of the foregoing, following the occurrence of an Acquiring Person becoming such, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person or its affiliates and associates and certain transferees thereof will be null and void.
Exchange . At any time after the Stock Acquisition Date but before the time the Acquiring Person becomes the beneficial owner of 50% or more of the outstanding shares of common stock, our board may exchange the Rights (other than Rights beneficially owned by an Acquiring Person or any other Rights that shall be deemed void under the terms of the Rights Agreement), in whole or in part, at an exchange ratio equal to one share of common stock per Right (subject to adjustment).
Redemption . At any time until the close of business on the tenth day following the Stock Acquisition Date, Vonage may redeem the Rights in whole, but not in part, at a price of $0.001 per Right. Immediately upon the action of our board ordering redemption of the Rights (or at the effective time of such redemption designated by the board), the Rights will terminate and the only right of the holders of Rights will be to receive the $0.001 redemption price.
Expiration . The Rights expire on the earliest of (i) the time at which the Rights are redeemed pursuant to the Plan, (ii) the time at which the Rights (other than Rights owned by an Acquiring Person) are exchanged pursuant to the Rights Agreement, (iii) the repeal of Section 382 or any successor statute if our board determines that the Plan is no longer necessary or desirable for the preservation of the Tax Benefits, (iv) the close of business on the first day of a taxable year of Vonage to which our board determines that no Tax Benefits may be carried forward, (v) the close of business on June 30, 2017, provided

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that, prior to such date, our board may determine to extend the Rights Agreement to a date not later than the close of business on the seventh anniversary of the date of the Plan (which, as indicated above, the board has determined to do) as long as such extension is submitted to our stockholders for ratification at the 2017 Annual Meeting of Stockholders, or (vi) the first business day after the date on which the Inspectors of Election for our 2017 Annual Meeting of Stockholders certify that the Plan has not been ratified by stockholders at that meeting.
Amendments . Any of the provisions of the Plan may be amended by our board for so long as the Rights are redeemable (other than changes to the redemption price, which may not be amended). After the Rights are no longer redeemable, the provisions of the Plan may be amended by our board provided that no such amendment may (i) adversely affect the interests of the holders of the Rights, (ii) cause the Rights Agreement to again become amendable or (iii) cause the Rights to again become redeemable.
Stockholder Rights . Until a Right is exercised, the holder thereof, as such, will have no rights with respect thereto as a Vonage stockholder, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to stockholders or to Vonage, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for common stock (or other consideration) as set forth above or in the event the Rights are redeemed.
Antidilution Provisions . The Purchase Price payable, and the number of units of Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Stock, (ii) if holders of the Preferred Stock are granted certain rights or warrants to subscribe for Preferred Stock or convertible securities at less than the current market price of the Preferred Stock, or (iii) upon the distribution to holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above).
Certain Considerations Related to the Tax Benefits Preservation Plan
After careful consideration, our board of directors believes that the continued effectiveness of the Tax Benefits Preservation Plan remains in the best interest of the company and its stockholders to protect our Tax Benefits from limitations pursuant to Section 382. However, we cannot eliminate the possibility that an ownership change will occur even if the Plan is ratified. Please consider the items discussed below in voting on this Proposal.
Continued Risk of Ownership Change . The Plan may not be effective in deterring all acquisitions that could result in an ownership change. For example, persons could decide to purchase our shares and become a “5-percent stockholder” notwithstanding the Plan, either because the purchaser is unaware of the Plan or makes a conscious decision to discount the potential consequences under the Plan of obtaining such status. In addition, the Plan does not preclude dispositions by current 5-percent stockholders, which would also have the effect of increasing our cumulative change in ownership.
Potential Effects on Liquidity . The Plan is intended to deter persons or groups of persons from acquiring beneficial ownership of shares of our common stock in excess of the specified limitations. The Plan may reduce the number of persons willing to acquire our common stock or the amount they are willing to acquire, potentially impacting a stockholder's ability to dispose of our common stock.
Potential Impact on Market Value . Because the Plan may restrict a stockholder's ability to acquire common stock, the market value of the common stock may be affected. The Plan could discourage or prevent accumulations of substantial blocks of shares in which stockholders might receive a substantial premium above market value. However, we believe these disadvantages are outweighed by the importance of maintaining the availability of the Tax Benefits. Our board did not adopt the Plan to discourage stockholders from accumulating common stock; the purpose of the Plan is to reduce the risk that we may be unable to fully utilize our Tax Benefits. We have retained the ability under the Plan for our board to redeem the Rights or cause the Plan to expire if our board determines that the Rights are no longer in the best interests of Vonage or of its stockholders.
Potential Anti-Takeover Effect . The Plan is designed to preserve the long-term value of our Tax Benefits and is not intended to prevent a takeover of Vonage. However, it could be deemed to have an “anti-takeover” effect because, among other things, an Acquiring Person may be diluted upon the occurrence of a triggering event. Accordingly, the overall effects of the Tax Benefits Preservation Plan may be to render more difficult, or discourage, a merger, tender offer, or assumption of

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control by a substantial holder of our securities. The Plan, however, should not interfere with any merger or other business combination approved by our board of directors.
Potential IRS Challenge to the Tax Benefits . The IRS has not audited or otherwise validated the amount of our Tax Benefits. The IRS could challenge the amount of the Tax Benefits, which could result in an increase in our liability in the future for income taxes. The complexity of the Section 382 provisions and the limitations on the timely knowledge that any publicly traded company can have about the ownership of, and transactions in, its securities contribute to significant uncertainty in determining whether an ownership change has occurred. Therefore, we cannot assure you that the IRS or other taxing authority will not claim that we experienced an ownership change and attempt to reduce or eliminate our utilization of Tax Benefits, even if the Plan is in place.
Recommendation of our Board of Directors
Our board of directors recommends that the stockholders vote FOR the ratification of the extension of our Tax Benefits Preservation Plan through June 30, 2019.

********************************

COMPENSATION
Compensation Discussion and Analysis
In this Compensation Discussion and Analysis, we address the compensation provided to our named executive officers (NEOs). We also discuss the goals for our executive compensation program and other important factors underlying our compensation practices and policies.

Stockholder Outreach and Program Changes
In 2016, we continued our outreach to stockholders regarding compensation and governance related matters, building on the success of prior efforts. In 2016, we held discussion with stockholders representing approximately 15% of our outstanding shares. During these discussions, our stockholders provided feedback regarding our compensation programs and corporate governance matters. The company and its compensation committee take stockholder feedback seriously, and incorporate that feedback in its review of our compensation programs. In recent years, stockholder input has influenced our revised compensation programs, further aligning the interests of our NEOs with our stockholders, and also significantly influenced the terms of our arrangement with our new Chief Executive Officer. We also implemented corporate governance changes in response to discussions with stockholders and the review and recommendation of our nominating and governance committee and our Board of Directors. See "Proposal No. 1 - Election of Directors" for additional information.
We encourage you to read this Compensation Discussion and Analysis for a detailed discussion and analysis of our executive compensation program, including information about the fiscal 2016 compensation of our NEOs.
2016 Performance
Our fiscal 2016 financial performance, along with the individual performance of our NEOs, served as key factors in determining compensation for 2016 . Our 2016 compensation program measures results against our strategic plan and rewards exceptional individual performance. In 2016 our management team continued to successfully pivot to the cloud communications for business market and drove business revenues to record levels. The team accomplished these results while also optimizing the profitability of our consumer services business. Building on the momentum of previous years, Vonage delivered strong financial and operational results in 2016 , as follows:

Acquired Nexmo, the world’s second largest Communications Platform-as-a-Service (CPaaS) company, which provides communication Application Program Interfaces (APIs) for SMS and voice communication services. Nexmo accelerates Vonage’s growth strategy, deepens our technology capability and creates powerful combination of Unified Communications as a Service (UCaaS) and CPaaS assets.
Delivered total revenues of $956 million, an increase from $895 million in the prior year, and our third consecutive year of consolidated revenue growth.
Grew Vonage Business revenue 72% to $376 million, up from $219 million in 2015.

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Generated GAAP Net Income of $18 million or $0.08 Per Share on a diluted basis, and Net Income, excluding adjustments*, of $45 million or $0.21 per share.
Achieved Adjusted OIBDA* of $160 million, up 11% from the prior year.
Produced net cash provided by operating activities of $87 million, and Free Cash Flow* of $49 million, our seventh consecutive year of positive Free Cash Flow.
Repurchased 7.4 million shares for $33 million at an average price of $4.43 and a total of 55.6 million shares for $181 million.
Continued the growth of our patent portfolio, which grew from 106 to 146 issued U.S. patents, with nearly 200 pending U.S. patent applications.
Built out our business sales infrastructure and distribution channels, including field sales, where we ended the year in 12 U.S. markets.
Strengthened our Board of Directors by adding two new Directors with substantial B2B experience.
Selected by Gartner, a leading information technology research and advisory company, as a Visionary in its 2016 Magic Quadrant for Unified Communications as a Service, Worldwide, for the second year in a row. In addition, Frost & Sullivan, a global research and consulting organization, awarded us their 2016 North America Award for Product Line Strategy Leadership award. We were selected for our carefully planned acquisition strategy over the last three years to put together a comprehensive line of cloud communications solutions that can address the diverse requirements of companies, from small businesses to large enterprises, to drive growth.
* Adjusted OIBDA, net income excluding adjustments and free cash flow are non-GAAP financial measures. We define adjusted OIBDA as GAAP income from operations excluding depreciation and amortization, share-based expense, acquisition related transaction and integration costs, acquisition related consideration accounted for as compensation, change in contingent consideration, costs associated with organizational transformation, loss on sublease, loss from discontinued operation excluding income tax, depreciation from discontinued operation, and net loss attributable to non-controlling interest. We define adjusted net income, as GAAP net income excluding amortization of acquisition - related intangibles, acquisition related costs, acquisition related consideration accounted for as compensation, change in contingent consideration, organizational transformation, loss on sublease, and tax effect on adjusting items. We define free cash flow as net cash provided by operating activities minus capital expenditures, intangible assets, and acquisition and development of software assets. Please refer to Appendix C for reconciliations of: (1) adjusted OIBDA to GAAP income from operations, (2) net income excluding certain adjustments to GAAP net income, and (3) free cash flow to GAAP cash provided by operating activities.
This strong financial and operational performance led to a significant increase in stockholder value in 2016. The chart below shows the percentage change in the daily closing price of Vonage common stock on the NYSE from January 1, 2016 through December 31, 2016, at which time our stock price was $6.85.

A2016STOCKPRICE.JPG

As det ailed under " Annual Cash Bonuses " below, based on the actual performance for our core metrics, the operational performance detailed above led to annual cash bonus payout to our NEOs at 104.7% of target.  

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Named Executive Officers
Our “Named Executive Officers” are the executive officers who are included in the Summary Compensation Table. They include the following current officers:
• Alan Masarek, Chief Executive Officer, who joined the company in November 2014;
• David T. Pearson, Chief Financial Officer and Treasurer, who joined the company in May 2013;
• Antoine Jamous, President, Nexmo, the Vonage API Platform, who joined the company in June 2016;
• Joseph Redling, Chief Operating Officer, who joined the company in December 2013;
Under applicable SEC rules, our Named Executive Officers for 2016 also include our former chief legal officer and secretary, Kurt M. Rogers, who left the company on November 30, 2016 and our former chief technology officer, Pablo Calamera, who left the company on January 31, 2017.
Compensation Objectives
The 2016 compensation for our executive officers was designed to meet the following objectives:
Provide competitive compensation in order to attract, retain, and motivate highly-skilled executives. We refer to this objective as “competitive compensation.”
Reinforce the importance of meeting and exceeding identifiable and measurable goals, while not encouraging our management to take unreasonable risks. We refer to this objective as “performance incentives.”
Provide opportunities for our executive officers to acquire meaningful equity ownership that will encourage the creation of stockholder value. We refer to this objective as “alignment with stockholder interests.”
Provide an incentive for long-term continued employment with us. We refer to this objective as “retention incentives.”
The principal components of 2016 compensation were as follows:
 
Type of Compensation
  
Objectives Addressed
Salary
  
Competitive Compensation
 
 
Annual Cash Bonus
  
Performance Incentives
Competitive Compensation
 
 
Long-Term Incentives
  
Retention Incentives
Alignment with Stockholder Interests
Performance Incentives
Competitive Compensation

When reviewing the compensation program, our compensation committee, with the assistance of an independent compensation consultant, considers the impact of the compensation program on Vonage's risk profile. Our compensation committee believes that our compensation program has been structured to provide strong incentives for executives to appropriately balance risk and reward. See also “Impact of Compensation Policies on Risk Management” above.
Compensation and Governance Matters
Our compensation committee reviews our compensation programs, competitor company data and best practices in the executive compensation area annually to determine whether changes should be made to address the objectives described above. For example, in recent years we began awarding a significant portion of our long-term incentive compensation in the form of performance-based restricted stock units, which are earned after three years based on relative total stockholder return performance. We continue to believe that this structure helps to align executive and stockholder interests while providing performance and retention incentives in a competitive compensation package.

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We have adopted compensation practices and policies that our board believes advance our compensation objectives, including:
 
Things We Do
Summary
ü
Emphasize Pay for Performance
We link our named executive officers’ incentive compensation to our financial performance and the attainment of specified goals that drive stockholder value.
ü
Retain an Independent Compensation Consultant
Our compensation committee uses an independent compensation consultant to advise the committee on its oversight of our compensation program. The compensation consultant does not provide services to management.
ü

Grant Performance-Based Equity
We award a significant portion of our long-term incentive compensation in the form of performance-based restricted stock units. The number of units actually earned is determined at the end of the three year period based on relative stockholder return performance.
ü
Maintain Robust Stock Ownership Guidelines
Our stock ownership guidelines require that our CEO maintain a stock ownership level equal to 5x base salary and that our other NEOs maintain a stock ownership level equal to 3x base salary.
ü
Maintain Incentive Compensation Recovery Policy
Our Incentive Compensation Recovery Policy permits the company to recoup excess compensation and to recover improper gains in the event of a material restatement of the company's financial results caused by the misconduct of a covered officer (including our NEOs).
ü
Revamped Incentive Compensation Plan

Our 2015 Equity Plan includes several provisions that are protective of our stockholders, including annual award limitations, and minimum vesting and exercise price provisions.
ü

Have "double-trigger" vesting of equity awards upon a change-in-control
Our 2015 Equity Plan includes several provisions that are protective of our stockholders, including "double trigger" vesting upon a change-in-control. Our compensation committee has discretion whether to accelerate vesting upon a change of control.


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Things We Don't Do
Summary
x
Use Stock Options in our Long-Term Incentive Program
We do not provide long-term incentive compensation in the form of stock options. Stock options are available for purposes of promotion or new hire grants.
x
Allow the repricing of options or "evergreen" share counting under our 2015 Equity Plan
Our 2015 Equity Plan contains prohibitions on evergreen provisions, and a prohibition on the repricing of options.
x
Permit Hedging of Company Stock
Our securities trading compliance policy prohibits any director, officer or employee from engaging in any strategy or using any product to hedge against potential changes in the value of Vonage securities.
x
Permit Pledging of Company Stock
Our securities trading compliance policy prohibits any director, officer or employee, except in limited circumstances, from directly or indirectly pledging a significant amount of Vonage securities.
x
Pay Excise Tax Gross-ups Upon Change of Control.
Our 2015 Equity Plan does not allow for the payment of excise tax gross-ups upon a change of control.
x
Provide Material Perquisites to our Chief Executive Officer

We have reduced the perquisites available to our Chief Executive Officer, Alan Masarek, compared to the perquisites that our former chief executive officer was entitled to receive. For example, we no longer have excise tax gross-ups in any of our executive employment arrangments, and substantially reduced certain relocation and travel reimbursements.



Engagement of Compensation Consultant
The compensation committee has the authority to engage its own independent consultants, counsel and other advisors to assist in carrying out its responsibilities under its charter. The compensation committee retained Meridian Compensation Partners, LLC, an independent compensation consultant, as described in further detail under “Compensation Committee” above, to advise the committee in connection with its oversight of our compensation program for 2016 .
Determination of Competitive Compensation
As part of our annual process for assessing the competitiveness of executive compensation, we compare the compensation of our executives to survey data. For 2016 , we used the following data sources:
2015 Radford Global Technology Survey - Communications/Internet/Software (revenue $0.5B - $2.5B).
2015 Equilar Top 25 Survey - Technology, Telecom Technology, and Telecom Services (revenue $0.5B - $2.5B).
Because the compensation committee was seeking survey data covering a broad range of companies meeting the revenue and industry criteria set forth above, the compensation committee did not focus on the individual companies included in the survey data. We refer to the data sources described above as the “market sample.”
We placed equal weight on each survey source. We believe that telecommunications, communications, software, internet companies, and technology companies in general with comparable revenues represent an appropriate comparison group for our executives because they are the companies against which we are most likely to compete for executive talent.
With respect to our annual review of total cash compensation, which is base salary and the target amount of annual cash bonus, we targeted the 50th to 75th percentile range, with payments of up to the 75th percentile contingent on the achievement of strong performance. We also targeted the same 50th to 75th percentile range for total direct compensation,

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which is base salary, the target amount of annual bonus, and equity-based grants. We believe these target levels were appropriate because we wanted the flexibility to reward company and individual performance that met or exceeded our performance goals.
A significant portion of our compensation is performance-based. Therefore, actual incentive compensation paid to our named executive officers may vary from targeted levels based on achievement of performance targets. Moreover, the comparative analysis described above provides only guidelines, and we do not follow them rigidly.
Employment Arrangements with our Named Executive Officers
Our NEOs' 2016 compensation was governed in part by the terms of employment arrangements described in detail below under “Potential Post-Employment Payments - Employment and Related Agreements” and incorporated herein by reference.
Salaries
Several of our NEOs received an increase in salary for 2016. These salary increases reflected personal and company performance, as well as our annual review of competitive salary data described under " Determination of Competitive Compensation " above. The salaries of our named executive officers for 2016 were as follows:
 
Name
2016 Salary
 
2015 Salary
Alan Masarek
$
875,000

 
$
800,000

David T. Pearson
$
530,000

 
$
490,000

Antoine Jamous
$
300,000

 
$

Joseph M. Redling
$
591,000

 
$
580,000

Pablo Calamera
$
450,000

 
$
450,000

Kurt M. Rogers
$
455,000

 
$
455,000

Annual Cash Bonuses
When determining the annual cash bonuses of our executive officers, the compensation committee reviews achievement of objective performance criteria. The compensation committee may also consider discretionary factors relating to the executive's individual performance. For 2016 , the target bonus opportunity percentages for the participating named executive officers were as follows:
 
Name
Target Percentage
of Base Salary
Alan Masarek
125
%
David T. Pearson
100
%
Antoine Jamous
50
%
Joseph M. Redling
100
%
Pablo Calamera
75
%
Kurt M. Rogers
75
%

There were five base metrics applicable to all participants in the 2016 bonus program: Residential Total Revenue, Business Total Revenue, Adjusted EBITDA, Churn - Residential (Account), and Churn - Business (Revenue). The weighting of the metrics utilized under our 2016 bonus program for our named executive officers were as follows:


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Base Metrics
 
Base Metrics
Weighting
Residential Total Revenue
15% of target bonus
Business Total Revenue
35% of target bonus
Adjusted EBITDA
30% of target bonus
Churn - Residential (Account)
10% of target bonus
Churn - Business (Revenue)
10% of target bonus
Residential Total Revenues includes revenues from Vonage’s consumer telephony business, including the United States, Canada, and U.K. offerings.
Business Total Revenues includes revenues from Vonage's Essentials and Premier product lines.
Adjusted EBITDA is GAAP income (loss) from operations excluding certain items including depreciation and amortization and share-based expense.
Churn - Residential relates to the number of customers that terminate during the year divided by the simple average number of customers during the year, and dividing the result by twelve. The simple average number of customers is the number of customers on the first day of the year plus the number of customers on the last day of the year, divided by two.
Churn - Business relates to recurring revenue lost from customers that churn during the year divided by average recurring revenue for the year.
Each metric has a minimum, target, and maximum performance level that would result in certain payments of the weighted target bonus for the metric. No payment is made for performance below the minimum performance level. Our compensation committee has also implemented limitations on the bonus payment to reflect the Company’s focus on revenue growth. Regardless of performance against any of the bonus metrics, no payments above 90% of the target bonus will be made unless a target level of performance for the Business Total Revenue metric is met.
The following table shows the performance levels upon which minimum, target, and maximum bonuses would be paid, the payout percentages associated with those performance levels, and the actual 2016 performance.
 
 
2016
Performance Measure
Weighting
 
Minimum (50%)
 
 Target (100%)
 
Maximum (175%)
 
Performance
 
Weighted Attainment
Residential Total Revenue
15
%
 
$
572,000

 
$
587,000

 
$
602,000

 
$
579,000

 
11.2
%
Business Total Revenue
35
%
 
$
314,000

 
$
329,000

 
$
344,000

 
$
318,000

(1)
22.2
%
Adjusted EBITDA
30
%
 
$
135,000

 
$
150,000

 
$
165,000

 
$
167,000

(1)
52.5
%
Churn - Residential
10
%
 
2.5
%
 
2.3
%
 
2.1
%
 
2.2
%
 
13.8
%
Churn - Business
10
%
 
1.4
%
 
1.2
%
 
1.0
%
 
1.4
%
(1)
5.0
%
Total Bonus Payout
100
%
 
 
 
 
 
 
 
 
 
104.7
%
* Revenue and Adjusted EBITDA amounts in thousands.
(1) Performance amounts exclude Nexmo, which was acquired in 2016.
Rationale and Method for Setting Performance Targets
2016 performance targets reflect the Company's pivot towards the cloud communications for business markets. The weighting of Business Total Revenue now exceeds Residential Total Revenue, and, when Residential Total Revenue and Business Total Revenue targets are combined, the overall revenue target increased over 2015. These changes reflect the continuing decline in domestic premium home phone markets and expected revenue from these markets, offset by our continued execution of our growth strategies in business markets. The compensation committee attributed higher weight and increasing performance targets to the Business Total Revenue metric in order to reflect these market changes. 2016 Adjusted EBITDA performance targets were set higher than 2015 performance, reflecting the company's commitment to profitable growth, and churn metrics were also set at more difficult levels.

37


Calculation of Annual Cash Bonus Awards
The annual cash bonus awards are calculated by multiplying the total bonus achievement percentage by the executive's target bonus. As shown above, the annual cash bonus payout to our NEOs was 104.7%, resulting in the following annual bonus payments:
Annual Cash Bonus Payouts 2016
Name
2016 Bonus
Award
 
2016 Award as
Percentage of
Target Bonus
Alan Masarek
$
1,122,505

 
104.7
%
David T. Pearson
$
544,963

 
104.7
%
Joseph M. Redling
$
615,837

 
104.7
%
Pablo Calamera
$
353,362

 
104.7
%
Antoine Jamous*
$
58,050

 
N/A

Kurt M. Rogers
$
357,255

 
104.7
%
* Cash bonus payments to Mr. Jamous in accordance with the Nexmo bonus plan.

These payments are reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

Long-Term Incentives
2016 LTI Program

We award a significant portion of our long-term incentive compensation in the form of performance-based restricted stock units. The number of units actually earned will be determined at the end of the three-year performance period based on relative total stockholder return performance. By linking a significant portion of our long-term incentives to three-year performance goals, we more closely align our NEOs' incentives with the long-term interests of stockholders.
2015 LTI Program
Award Type
% of Award
Vesting
Performance-based RSUs
50%
3 year cliff
Time-based RSUs
50%
Equal 3 year increments

Performance RSUs are granted subject to the following terms:
The number of performance RSUs granted is based on a target value determined by the compensation committee.
The number of performance RSUs actually earned will be based on Vonage's relative performance measured against a defined performance group consisting of telecom and technology companies we consider to be similar to Vonage, as discussed below.
The performance metric used in our program is “Total Stockholder Return” (TSR). TSR is the percentage growth in stock price over the performance period, plus dividends and adjusted for events such as stock splits. Vonage's TSR performance will be ranked against the other companies in the performance group.
TSR is measured over a three-year performance period.
The actual number of shares received at the end of the performance period can range from 0-200% of the target number of shares, based on the company's TSR performance during the performance period, as follows.

38


Vonage Percentile Rank Against performance group
Percent of Target Number of Shares Issued at End of Performance Period
80th or greater
200%
50th or greater
100%
30th or greater
50%
<30 th  
0%

Payouts are based on ranking results with linear adjustment between percentile ranks in the chart above. For example, achievement of the 65th percentile would result in 150% of the target number of shares being issued at the end of the performance period and achievement of the 40th percentile would result in 75% of the target number of shares being issued at the end of the performance period.
Payouts are capped at 100% (target) if the company's TSR performance is negative at the end of the performance cycle, even if the company's relative TSR performance would have produced a higher payout.
Our performance group for 2016 was based on companies included in the Fidelity MSCI Telecommunication Service ETF, with modifications approved by our compensation committee to improve relevance to our business. These modifications included (1) the removal of companies with cell tower-based business models and (2) the addition of companies in the telecommunications or software-as-a-service sectors not included in the Fidelity MSCI Telecommunication Service ETF. Our performance group for 2016 was set as follows:
8X8 Inc.
Leap Wireless International Inc.
AT&T Inc.
Level 3 Communications Inc.
Atlantic Tele-Network Inc.
Lumos Networks Corp.
CenturyLink Inc.
magicJack VocalTec Ltd.
Cincinnati Bell Inc.
Mitel Networks Corporation
Cogent Communications Group Inc.
NTELOS Holdings Corp.
Comcast Corporation
Ooma, Inc.
Consolidated Communications Holdings Inc.
RingCentral Inc.
EarthLink Inc.
Shenandoah Telecommunications Co.
Fairpoint Communications, Inc.
Shoretel, Inc.
Five9, Inc.
Sprint Corp.
Frontier Communications Corp.
Telephone & Data Systems Inc.
General Communication Inc.
T-Mobile US Inc.
IDT Corp.
USA Mobility Inc.
inContact Inc.
Verizon Communications Inc.
Interactive Intelligence Group, Inc.
West Corporation
Iridium Communications Inc.
Windstream Holdings Inc.

We believe that our long-term compensation program elevates the link between pay and performance for our NEOs and closely aligns the interests of management and our stockholders.
This list of companies differs slightly from the group we used for 2015 grants. For 2016, we removed Premiere Global Services Inc. due to its acquisition, and United States Cellular Corp. and Boingo Wireless Inc. in order to better align our performance group with relevant competitors. For 2016, we have added Ooma, Inc., Interactive Intelligence Group, Inc., and Comcast Corporation to better reflect our current competitive environment.
2016 Annual Equity Grants and Employment Inducement Grants: In 2016, the compensation committee approved performance and time-based restricted stock unit grants to our executive officers based on corporate performance, competitive data for the market sample, the level of the individual's responsibility, and individual contributions to Vonage. The compensation committee also considered the recommendations of our Chief Executive Officer for the other executive

39


officers then employed by us. The number of time-based RSUs was based a target value determined by the compensation committee, divided by the 20-day average price of our common stock leading up to and including the date of grant. The number of performance-based RSUs for each executive was based on a target value determined by the compensation committee, divided by the Monte Carlo value of a performance RSU adjusted to split the excess accounting cost between the company and the executive.
The named executive officers received the following equity awards in March 2016 :
 
Name
 
Number of
Time-based
Restricted Stock
Units
 
Number of
Performance-based
Restricted Stock
Units
Alan Masarek
 
501,968

 
473,421

David Pearson
 
199,311

 
187,976

Antoine Jamous
 

 

Joseph M. Redling
 
199,311

 
187,976

Pablo Calamera
 
88,582

 
83,544

Kurt M. Rogers
 
88,582

 
83,544


Acquisition Consideration Treated as Compensation
 
In connection with our acquisition of Nexmo, Inc. in 2016, 50% of the acquisition consideration payable to Mr. Jamous (the "Holdback Amount") was held back from payout at closing and made contingent upon his continued employment by the Company and participation in the integration and execution of post-closing strategy. 70% of the Holdback Amount is payable on the first anniversary of the June 3, 2016 closing, and the remaining 30% of the Holdback Amount is payable on the second anniversary of closing. Payment is contingent on Mr. Jamous' continued employment on the relevant anniversaries.
Stock Ownership Guidelines for Executives
Our compensation committee and board of directors have adopted stock ownership guidelines setting forth the level of ownership required to be held by our named executive officers, and certain other covered executives. These guidelines were reviewed in April 2015 by our board of directors to increase the level of ownership required to be held by our named executive officers and certain other covered employees. Our compensation committee and board of directors believes that these requirements help to ensure the alignment of executive interests with stockholder interests and promote a focus on long-term growth. The following table reflects the stock ownership levels required for our named executive officers, which are measured on a quarterly basis:
 
Name
Stock Ownership Level
Alan Masarek
5.0x base salary
David Pearson
3.0x base salary
Antoine Jamous
3.0x base salary
Joseph M. Redling
3.0x base salary
Pablo Calamera
3.0x base salary
Kurt M. Rogers
3.0x base salary

Shares counted in assessing compliance with the guidelines include shares owned outright, the value of unvested restricted stock units, and the in-the-money value of vested stock options. Each covered executive must retain 50% of net stock options exercised or stock delivered from vested restricted stock units until the guidelines are met. Executives may be exempted from the guidelines and/or the retention requirement due to financial hardship as determined by the compensation committee in its discretion. There is no specific time period required to achieve the guidelines. Each of our current named executive officers satisfies these guidelines.

40


Benefits and Perquisites
For 2016, Mr. Masarek received a monthly housing and commuting allowance. Our other named executive officers also negotiated for perquisites when hired. During his employment, we agreed to reimburse Mr. Rogers for lodging accommodations near our principal offices and make an additional payment to relieve him of any related tax liability. We have also taken steps to ensure executives’ continued health and ability to render services to the Company through an annual physical program. Our incremental costs for the perquisites described above are shown in note 5 to the Summary Compensation Table.
We also maintain a 401(k) savings plan, which is a tax-qualified defined contribution plan available to all of our employees. Messrs. Masarek, Pearson, Redling, Calamera and Rogers participated in the plan in 2016 . Under the plan, an employee was permitted to contribute, subject to Internal Revenue Code limitations, up to a maximum of $18,000 of his or her annual compensation to the plan in 2016. In 2016 , we provided a matching contribution equal to 50% of each dollar contributed by a participant, up to a maximum contribution of $6,000. The matching contributions vest after one year following the date of employment. Employee and matching contributions are based on compensation up to annual limits established under the Internal Revenue Code (the eligible compensation limit was $260,000 in 2016 ). Our matching contributions for the named executive officers are shown in note 5 to the Summary Compensation Table. We do not provide any supplemental retirement benefits.
The Board of Directors has adopted a travel policy whereby Mr. Masarek is permitted for business travel to fly private or charter aircraft. The policy also permits Mr. Masarek to make personal use of this private air travel where incidental to business travel. To the extent Mr. Masarek makes personal use of this private air travel, this usage is a perk, and any incremental cost to the company is disclosed in our Summary Compensation Table. To the extent practicable, other employees of the company traveled with Mr. Masarek, including Messrs. Redling and Pearson during 2016.
Equity Grant Practices
The compensation committee approves all equity grants to executive officers and to other officers reporting directly to our Chief Executive Officer or our audit committee. The compensation committee delegated to our Chief Executive Officer and our Chief Human Resources Officer the ability to make equity grants aggregating up to 1,000,000 shares of common stock in any calendar year for new hires and promotions, to employees at the Vice President level or below (for the Chief Executive Officer) or the Senior Director level or below (for the Chief Human Resources Officer). These awards may not exceed 125,000 shares in any calendar year to any individual employee. For new hire and promotion equity grants made under this authority, the compensation committee has established equity award value guidelines to which our Chief Executive Officer and our Chief Human Resources Officer must adhere. In addition, the compensation committee delegated to our Chief Executive Officer the ability to make equity grants aggregating up to 200,000 shares of common stock in any calendar year to reward exceptional achievements, address retention issues and support incentive programs, also for employees at the Vice President level or below.
In February of each year, the compensation committee considers annual equity grants. The compensation committee's practice is to approve equity grants effective on the first trading day on or after March 15.
For special grants, equity is granted on the first trading day of the month immediately following the month in which the equity grant is approved. For newly hired or promoted employees, stock options and/or restricted stock units are granted on the first trading day of the month immediately following the month in which the employee commences employment with us or the promotion is effective.
We set the exercise price of stock options based on the closing price of our common stock as reported on the New York Stock Exchange on the date of grant. We do not backdate grants of stock options, nor do we time equity grants to coincide with the release of material non-public information about Vonage.
Post-Employment Compensation
We have benefit plans, employment and letter agreements, and other arrangements for our named executive officers that provide special benefits upon certain types of termination events. The employment agreements and letter agreements provide financial security in the event the executive officer's employment is terminated without cause or his or her responsibilities are significantly diminished. The agreements also provide clear statements of the rights of the executive officers and protect them against an unfavorable change in employment terms. Absent these provisions, there is an increased risk that executive officers may be encouraged to seek other employment opportunities if they became concerned about their

41


employment security as a result of changes to our company or in the event of a change in control. None of our current executives is entitled to an excise tax gross up upon a change in control. In addition, all equity grants made to current executives require a “double trigger” (both a change in control and termination) for payout or vesting to occur.
We believe that our change in control benefits provide appropriate incentives for the executive officers to cooperate in negotiating any change in control of Vonage without regard to the potential effect on their positions. See “Potential Post-Employment Payments” for further information regarding change in control and termination benefits under the arrangements.

Clawback, Hedging and Pledging Policies
Incentive Compensation Recovery Policy
The company has put in place an Incentive Compensation Recovery Policy for incentive awards paid to executive officers. The policy is triggered in the event of a material restatement of the company's financial results (other than as a result of a change in accounting rules, principles or interpretations) caused or substantially caused by the misconduct of a covered officer (including our NEOs). If triggered, the compensation committee may seek to recoup the portion of cash and equity based incentive awards paid or awarded to our executive officers in excess of the awards that would have been paid or awarded based on the restated financial results to the extent permitted by applicable law. In the case of equity awards that vested based on the achievement of financial results that were subsequently modified, the compensation committee and Board may also seek to recover improper gains from the sale or disposition of vested equity awards.
Hedging and Pledging
The company's securities trading compliance policy contains prohibitions against certain types of stock-related transactions. The policy prohibits any director, officer or employee from engaging in any strategy or using any product to hedge against potential changes in the value of Vonage securities, including short selling techniques, “sales against the box”, puts, calls and other derivative securities, prepaid variable forwards, equity swaps, collars, exchange funds and forward sale contracts.
In addition, except in limited circumstances, no director or officer or employee may, directly or indirectly, pledge a significant amount of Vonage securities. The restrictions include the intentional creation of any form of pledge, security interest, deposit, or lien, including the holding of shares in a margin account, that entitles a third-party to foreclose against, or otherwise sell, any shares, whether with or without notice, consent, or default.

Consideration of Say-on-Pay Voting Results

At our 2014 annual meeting, stockholders approved our Say on Pay vote with 54% support. We were disappointed with this level of support, and undertook an extensive shareholder outreach effort intended to ensure that management, the board, and our compensation committee understood the views of our stockholders regarding our compensation practices. From that outreach, we learned that much of the dissatisfaction was based on historical compensation practices. In addition, many of our stockholders indicated that they viewed the 2014 vote as a referendum on 2013 (and earlier) compensation practices. Taking into account this feedback, the company and its compensation committee undertook a full review of our compensation programs. Based on that review, we modified our compensation programs for 2014 and beyond to further align the interests of our NEOs with our stockholders. We have continued our stockholder outreach efforts since that time, during which management has conducted "off-season" discussions with stockholders, at which we identified issues important to our stockholders with respect to our executive compensation and equity programs. The feedback received from our stockholders also significantly influenced the terms of our arrangement with our new Chief Executive Officer. Since our last Say-on-Pay vote, and in light of the feedback provided by our stockholders, we made a number of improvements and changes to our executive compensation programs, detailed above.

We adopted, based on stockholder preferences expressed at our 2011 annual meeting, triennial voting. However, we and our board of directors and compensation committee are committed to an ongoing review of the results of our Say-on-Pay votes and shareholder outreach. To that end, we are recommending, at this annual meeting, that stockholders recommend annual Say-on-Pay votes. To the extent action is taken with respect to our compensation policies in response to those results, we will continue to report those actions in future proxy statements.

* * * * * * * *

42


Section 162(m) and Other Tax Considerations
Section 162(m) of the Code limits to $1 million the deductibility for federal income tax purposes of annual compensation paid by a publicly held company to its chief executive officer and other specified executives, unless certain conditions are met. While we may take actions to preserve deductibility of certain elements of compensation, we retain the flexibility to authorize compensation that may not be deductible if the compensation committee believes doing so is in the best interests of our company and stockholders. While the compensation for Messrs. Masarek, Pearson, and Redling exceeded the $1 million deduction limit in 2016, we determined that this result was appropriate, based on the considerations regarding their compensation discussed above.

Summary Compensation Table  
Name and
Principal Position
Year
 
Salary
 
Bonus (1)
 
Stock
Awards (2)
 
Option
Awards (3)
 
Non-Equity
Incentive Plan
Compensation (4)
 
All Other
Compensation (5)
 
Total
Alan Masarek     Chief Executive  Officer
2016
 
$
857,692

 
 
 
$
4,761,659

 
 
 
$
1,122,505

 
$
72,701

 
$
6,814,557

2015
 
$
800,000

 
 
 
$
3,370,000

 
 
 
$
1,140,000

 
$
99,967

 
$
5,409,967

 
2014
 
$
163,076

 
 
 
$
3,004,999

 
$
7,694,142

 
$
210,000

 
$
16,328

 
$
11,088,545

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

David T. Pearson
    Chief Financial Officer and Treasurer
2016
 
$
520,499

 
 
 
$
1,890,660

 
 
 
$
544,963

 
$
16,000

 
$
2,972,122

2015
 
$
490,431

 
 
 
$
1,421,267

 
 
 
$
559,091

 
$
31,330

 
$
2,502,119

2014
 
$
486,691

 
$
75,000

 
$
1,283,306

 
 
 
$
408,822

 
$
29,647

 
$
2,283,466

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Antoine Jamous
    President, Nexmo
2016
 
$
150,000

 
 
 
$
10,571,633

 
 
 
$
58,050

 
$
10,676,474

 
$
21,456,157

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Joseph M. Redling
    Chief Operating Officer
2016
 
$
588,192

 
 
 
$
1,890,660

 
 
 
$
615,837

 
$
16,000

 
$
3,110,689

2015
 
$
573,462

 
 
 
$
1,421,267

 
 
 
$
653,747

 
$
25,330

 
$
2,673,806

2014
 
$
550,000

 
 
 
$
1,283,306

 
$
4,876,962

 
$
462,000

 
$
23,647

 
$
7,195,915

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pablo Calamera
    Former Chief Technology Officer (6)
2016
 
$
450,000

 
 
 
$
840,286

 
 
 
$
353,362

 
$
16,000

 
$
1,659,648

2015
 
$
450,000

 
 
 
$
409,932

 
 
 
$
384,750

 
$
6,000

 
$
1,250,682

2014
 
$
112,499

 
$
84,375

 
$
1,262,500

 
$
989,522

 
$

 
$
5,884

 
$
2,454,780

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kurt M. Rogers
    Former Chief Legal Officer and Secretary (7)
2016
 
$
454,956

 
 
 
$
840,286

 
 
 
$
357,255

 
$
66,085

 
$
1,718,582

2015
 
$
454,840

 
 
 
$
1,093,281

 
 
 
$
388,888

 
$
60,574

 
$
1,997,583

2014
 
$
451,386

 
 
 
$
1,176,361

 
 
 
$
284,374

 
$
57,389

 
$
1,969,510

 ________________
(1)
Amounts reported for 2014 represent discretionary cash bonuses earned during 2014 , as applicable. The bonuses earned in 2014 , as applicable, were paid in the first quarter of the subsequent year.
(2)
Stock awards consist of performance-based, time-based, and the acquisition related restricted stock units. The dollar amounts for the awards represent the grant-date fair value calculated in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 (“FASB ASC 718”) by multiplying the number of shares of restricted stock awarded by the closing price of our common stock on the date of grant and based upon, where applicable, the probable outcome of performance conditions. Refer to “Compensation Discussion and Analysis—Long-Term Incentives” for additional information. The grant-date fair value of the stock-based awards will likely vary from the actual amount the named executive officer receives. Actual gains, if any, on shares acquired upon vesting of units are dependent on other factors, including the unit holders' continued employment with us through the vesting period, the achievement of any applicable operating and financial performance conditions, the future performance of our common stock, and overall stock market conditions. There can be no assurance that the values reflected in this table will be achieved. Performance-based restricted stock unit values are based upon achievement of target performance levels. If maximum performance were achieved under 2016 performance-based restricted stock awards, the total value of 2016 stock awards for participating executives would be as follows: Mr. Masarek $4,895,173, Mr. Pearson $1,943,672, Mr. Redling $1,943,672, Mr. Calamera $863,845, and Mr. Rogers $863,845. The amount for Mr. Jamous represents stock awards in connection with the acquisition of Nexmo, including $9,514,469 to a trust Mr. Jamous owns and $1,057,163 to Mr. Jamous (the "Holdback Amount"). The Holdback Amount is contingent upon his continued employment by the Company and participation in the integration and execution of post-closing strategy. 70% of the Holdback Amount is payable on the first anniversary of the June 3, 2016 closing, and the

43


remaining 30% of the Holdback Amount is payable on the second anniversary of closing. Payment is contingent on Mr. Jamous' continued employment on the relevant anniversaries.
(3)
The dollar amounts for the awards represent the grant-date fair value calculated in accordance with FASB ASC 718 for each named executive officer. The assumptions used to calculate the value of stock options are set forth under Note 9 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 28, 2017 . The grant-date fair value of the stock option awards will likely vary from the actual value the named executive officer receives. Actual gains, if any, on shares acquired on option exercises are dependent on other factors, including the option holder's continued employment with us through the option exercise period, the future performance of our common stock, and overall stock market conditions. There can be no assurance that the values reflected in this table will be achieved.
(4)
The amounts in this column represent total performance-based bonuses earned for services rendered during 2014 , 2015 , and 2016 . These bonuses were based on our operating and financial performance. The bonuses earned in 2014 , 2015 , and 2016 , as applicable, were paid in the first quarter of the subsequent year. Please see the section titled “Annual Cash Bonuses” in the Compensation Discussion and Analysis for more information regarding our annual cash bonus for 2016 .
(5)
The amounts in this column (grossed-up for any payments to reimburse for related taxes to the extent applicable) consist of the following:
Name
Year
 
401(k)
Match
 
Insurance
and
Medical
Premiums; Executive Physical Program
 
Housing/
Relocation
Expense/
Reimbursement
 
Travel Expense/Reimbursement*
 
Compensation Related to Acquisition **
 
Total
Alan Masarek
2016
 
$
6,000

 
$
10,000

 
$
38,386

 
$
18,315

 
 
 
$
72,701

2015
 
$
6,000

 
$
25,330

 
$
59,720

 
$
8,917

 
 
 
$
99,967

2014
 
 
 
$
3,941

 
$
12,387

 
 
 
 
 
$
16,328

David T. Pearson
2016
 
$
6,000

 
$
10,000

 
 
 
 
 
 
 
$
16,000

2015
 
$
6,000

 
$
25,330

 
 
 
 
 
 
 
$
31,330

2014
 
$
6,000

 
$
23,647

 
 
 
 
 
 
 
$
29,647

Antoine Jamous
2016
 
 
 
$
8,942

 
 
 
 
 
$
10,667,532

 
$
10,676,474

Joseph M. Redling
2016
 
$
6,000

 
$
10,000

 
 
 
 
 
 
 
$
16,000

2015
 
 
 
$
25,330

 
 
 
 
 
 
 
$
25,330

2014
 
 
 
$
23,647

 
 
 
 
 
 
 
$
23,647

Pablo Calamera
2016
 
$
6,000

 
$
10,000

 
 
 
 
 
 
 
$
16,000

2015
 
$
6,000

 
 
 
 
 
 
 
 
 
$
6,000

2014
 
$
5,884

 
 
 
 
 
 
 
 
 
$
5,884

Kurt M. Rogers
2016
 
$
6,000

 
$
10,000

 
$
50,085

 
 
 
 
 
$
66,085

2015
 
$
6,000

 
 
 
$
54,574

 
 
 
 
 
$
60,574

2014
 
$
6,000

 
 
 
$
51,389

 
 
 
 
 
$
57,389

*      Taxable income to Mr. Masarek relating to private travel was determined by using the Internal Revenue Service Standard Industry Fare Level tables, which is less than the amount listed in the table. To the extent practicable, other employees travel with Mr. Masarek; however, there is no additional incremental cost to us.
**      The amount represents cash holdback to Mr. Jamous related to the acquisition of Nexmo which includes $9,600,778 to a trust Mr. Jamous owns and $1,066,754 to Mr. Jamous, subject to certain conditions.

(6)
Mr. Calamera left the Company on January 31, 2017.
(7)
Mr. Rogers left the Company on November 30, 2016.






44


 
Grants of Plan-Based Awards— 2016
Name
Grant
Date
Date of
Corporate
Action
Estimated Potential Payouts
Under Non-Equity
Incentive Plan Awards (1)
 
Estimated Future Payouts
Under Equity
Incentive Plan Awards (2)
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units (3)
Grant Date
Fair Value of
Stock and
Option
Awards (4)

Threshold
Target
Maximum
 
Threshold
Target
Maximum
Alan Masarek
3/15/2016
2/17/2016
 
 
 
 
 
 
 
501,968

$
2,314,072

3/15/2016
2/17/2016
 
 
 
 
236,711

473,421

946,842

 
$
2,447,587

2/17/2016
 
$
546,875

$
1,093,750

$
1,914,063

 
 
 
 
 
 
David T. Pearson
3/15/2016
2/17/2016
 
 
 
 
 
 
 
199,311

$
918,824

3/15/2016
2/17/2016
 
 
 
 
93,988

187,976

375,952

 
$
971,836

2/17/2016
 
$
265,000

$
530,000

$
927,500

 
 
 
 
 
 
Antoine Jamous
5/5/2016
 
$
56,250

$
112,500

$
196,875

 
 
 
 
2,283,290

$
10,571,633

Joseph M Redling
3/15/2016
2/17/2016
 
 
 
 
 
 
 
199,311

$
918,824

3/15/2016
2/17/2016
 
 
 
 
93,988

187,976

375,952

 
$
971,836

2/17/2016
 
$
295,500

$
591,000

$
1,034,250

 
 
 
 
 
 
Pablo Calamera
3/15/2016
2/17/2016
 
 
 
 
 
 
 
88,582

$
408,363

3/15/2016
2/17/2016
 
 
 
 
41,772

83,544

167,088

 
$
431,922

2/17/2016
 
$
168,750

$
337,500

$
590,625

 
 
 
 
 
 
Kurt M. Rogers
3/15/2016
2/17/2016
 
 
 
 
 
 
 
88,582

$
408,363

3/15/2016
2/17/2016
 
 
 
 
41,772

83,544

167,088

 
$
431,922

2/17/2016
 
$
170,625

$
341,250

$
597,188

 
 
 
 
 
 
 
(1)
As discussed in the Compensation Discussion and Analysis, the annual cash bonus awards are attributable to operating and financial performance measures. The amount shown in the “Target” column represents a payout at the target bonus percentage for each named executive officer's base salary. The amount shown in the “Threshold” column represents the amount payable if only the minimum level of company performance was attained for each metric applicable to the executive, which is 50% of the target amount shown above. If performance did not meet the minimum level of performance for any metric, then no bonus would have been paid. The amount shown in the “Maximum” column represents the amount payable if the maximum level of company performance was attained for all metrics applicable to the executive, which is 175% of the target amount shown.
Please see the section titled “Annual Cash Bonuses” in the Compensation Discussion and Analysis for additional information including the minimum threshold, target, and maximum level of performance for each performance measure, the calculation of the award payable based upon actual performance in 2016 , the amount of the award and award as a percentage of the target award opportunity, and adjustments.
The annual cash bonus payments to our NEOs under our bonus plan for 2016 are reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.
(2)
Amounts in this column represent performance-based restricted stock units granted under our 2015 Plan. The performance restricted stock units vest on a three-year cliff basis. The number of units actually earned will be determined after the end of the three-year performance period and can range from 0-200% of the target number of shares, based on the company's TSR performance during the three-year performance period. Please see the section titled “2015 Long-Term Incentives” in the Compensation Discussion and Analysis for additional information.
(3)
Amounts in this column represent restricted stock units granted under our 2015 Plan, except for Mr Jamous. The restricted stock units granted under the 2015 Plan vest in equal annual installments on the first through third anniversaries. Please see the section titled “Potential Post-Employment Payments—Employment and Related Agreements” for a discussion of the acceleration of vesting of our restricted stock units in certain circumstances, including upon a change in control. The amount for Mr. Jamous represents stock awards in connection with the acquisition of Nexmo, including $9,514,469 to a trust Mr. Jamous owns and $1,057,163 to Mr. Jamous (the "Holdback Amount"). The Holdback Amount is contingent upon his continued employment by the Company and participation in

45


the integration and execution of post-closing strategy. 70% of the Holdback Amount is payable on the first anniversary of the June 3, 2016 closing, and the remaining 30% of the Holdback Amount is payable on the second anniversary of closing. Payment is contingent on Mr. Jamous' continued employment on the relevant anniversaries.
(4)
The value of a stock award or option award represents the grant-date fair value calculated in accordance with FASB ASC 718. Stock awards consist only of restricted stock units. Actual gains, if any, on shares acquired upon vesting of restricted stock units or option exercises are dependent on other factors, including the holder's continued employment with us through the vesting period or option exercise period, the outcome of any performance conditions, the future performance of our common stock, and overall market conditions. There can be no assurance that the values reflected in this table will be achieved.


46


Outstanding Equity Awards at Fiscal Year-End— 2016
 
 
Option Awards
Stock Awards
 
 
Name
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
 
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable (1)
 
Option
Exercise
Price
 
Option
Expiration
Date
 
Number of
Shares or
Units of
Stock that
Have Not
Vested (1)
 
Market
Value of
Shares or
Units of
Stock that
Have Not
Vested (2)
 
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not vested
Alan Masarek
1,500,000

 
1,500,000

(3)
$
3.51

 
11/7/2024
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
166,667

(8)
$
1,141,669

 
 
 
 
 
 
 
 
 
 
 
 
 
501,968

(9)
$
3,438,481

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
500,000

(15)
$
3,425,000

 
 
 
 
 
 
 
 
 
 
 
 
 
473,421

(16)
$
3,242,934

David T. Pearson
1,500,000

 
500,000

(4)
$
2.87

 
5/3/2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
44,248

(10)
$
303,099

 
 
 
 
 
 
 
 
 
 
 
 
 
95,234

(11)
$
652,353

 
 
 
 
 
 
 
 
 
 
 
 
 
199,311

(9)
$
1,365,280

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
114,860

(15)
$
786,791

 
 
 
 
 
 
 
 
 
 
 
 
 
187,976

(16)
$
1,287,636

Antoine Jamous
 
 
 
 
 
 
 
 
2,283,290

(12)
$