Vonage 2015 Annual Report Download - page 46

40 VONAGE ANNUAL REPORT 2015
N.A. acted as joint lead bookrunners, and J.P. Morgan Securities LLC,
Citizens Bank, N.A., Silicon Valley Bank, and SunTrust Robinson
Humphrey Inc. acted as joint lead arrangers.
Use of Proceeds
We used $90,000 of the net available proceeds of the 2014
Credit Facility to retire all of the debt under our 2013 Credit Facility.
Remaining proceeds from the senior secured term loan and the undrawn
revolving credit facility under the 2014 Credit Facility were to be used
for general corporate purposes. We also incurred $1,910 of fees in
connection with the 2014 Credit Facility, which was amortized, along
with the unamortized fees of $668 in connection with the 2013 Credit
Facility, to interest expense over the life of the debt using the effective
interest method.
2014 Credit Facility Terms
The following description summarizes the material terms of
the 2014 Credit Facility:
The loans under the 2014 Credit Facility were to mature in
August 2018. Principal amounts under the 2014 Credit Facility were
repayable in quarterly installments of $5,000 per quarter for the senior
secured term loan. The unused portion of our revolving credit facility
incurred a 0.40% commitment fee.
Outstanding amounts under the 2014 Credit Facility, at our
option, bore interest at:
>LIBOR (applicable to one-, two-, three-, six-, or twelve-month
periods) plus an applicable margin equal to 2.875% if our
consolidated leverage ratio is less than 0.75 to 1.00, 3.125%
if our consolidated leverage ratio is greater than or equal to
0.75 to 1.00 and less than 1.50 to 1.00, and 3.375% if our
consolidated leverage ratio is greater than or equal to 1.50
to 1.00, payable on the last day of each relevant interest
period or, if the interest period is longer than three months,
>the base rate determined by reference to the highest of (a)
the federal funds effective rate from time to time plus 0.50%,
(b) the prime rate of JPMorgan Chase Bank, N.A., and (c) the
adjusted LIBO rate applicable to one month interest periods
plus 1.00%, plus an applicable margin equal to 1.875% if our
consolidated leverage ratio is less than 0.75 to 1.00, 2.125%
if our consolidated leverage ratio is greater than or equal to
0.75 to 1.00 and less than 1.50 to 1.00, and 2.375% if our
consolidated leverage ratio is greater than or equal to 1.50
to 1.00, payable on the last business day of each March, June,
September, and December and the maturity date of the 2014
Credit Facility.
The 2014 Credit Facility provided greater flexibility to us in
funding acquisitions and restricted payments, such as stock buybacks,
than the 2013 Credit Facility.
We were able to prepay the 2014 Credit Facility at our option
at any time without premium or penalty. The 2014 Credit Facility was
subject to mandatory prepayments in amounts equal to:
>100% of the net cash proceeds from any non-ordinary course
sale or other disposition of our property and assets for
consideration in excess of a certain amount subject to
customary reinvestment provisions and certain other
exceptions, and
>100% of the net cash proceeds received in connection with
other non-ordinary course transactions, including insurance
proceeds not otherwise applied to the relevant insurance loss.
Subject to certain restrictions and exceptions, the 2014 Credit
Facility permitted us to obtain one or more incremental term loans and/
or revolving credit facilities in an aggregate principal amount of up to
$60,000 plus an amount equal to repayments of the senior secured term
loan upon providing documentation reasonably satisfactory to the
administrative agent. The 2014 Credit Facility included customary
representations and warranties and affirmative covenants of the
borrowers. In addition, the 2014 Credit Facility contained customary
negative covenants, including, among other things, restrictions on the
ability of us and our subsidiaries to consolidate or merge, create liens,
incur additional indebtedness, dispose of assets, consummate
acquisitions, make investments, and pay dividends and other
distributions. We were also required to comply with the following
financial covenants:
>a consolidated leverage ratio of no greater than 2.25 to 1.00;
>a consolidated fixed coverage charge ratio of no less than
1.75 to 1.00 subject to adjustment to exclude up to $80,000
in specified restricted payments;
>minimum cash of $25,000 including the unused portion of the
revolving credit facility; and
>maximum capital expenditures not to exceed $55,000 during
any fiscal year, provided that the unused amount of any
permitted capital expenditures in any fiscal year may be
carried forward to the next following fiscal year.
In addition, annual excess cash flow up to $8,000 increased
permitted capital expenditures.
The 2014 Credit Facility contained customary events of
default that may permit acceleration of the debt. During the continuance
of a payment default, interest would have accrued at a default interest
rate of 2% above the interest rate which would otherwise be applicable,
in the case of loans, and at a rate equal to the rate applicable to base
rate loans plus 2%, in the case of all other amounts.
February 2013 Financing
On February 11, 2013 we entered into Amendment No. 1 to
the 2011 Credit Agreement (as further amended by Amendment No. 2
to our 2011 Credit Facility, the "2013 Credit Facility"). The 2013 Credit
Facility consisted of a $70,000 term note and a $75,000 revolving credit
facility. The co-borrowers under the 2013 Credit Facility were us and
Vonage America Inc., our wholly owned subsidiary. Obligations under
the 2013 Credit Facility were guaranteed, fully and unconditionally, by
our other United States subsidiaries and were secured by substantially
all of the assets of each borrower and each of the guarantors. On July
26, 2013 we entered into Amendment No. 2 to our 2011 Credit
Agreement, which amended our financial covenant related to our
consolidated fixed charge coverage ratio by increasing the amount of
restricted payments excluded from such calculation from $50,000 to
$80,000.
Use of Proceeds
We used $42,500 of the net available proceeds of the 2013
Credit Facility to retire all of the debt under our 2011 Credit Facility.
Remaining net proceeds of $27,500 from the term note and the undrawn
revolving credit facility under the 2013 Credit Facility were to be be used
for general corporate purposes. We used $75,000 from the 2013
revolving credit facility in connection with the acquisition of Vocalocity
on November 15, 2013. We also incurred $2,009 of fees in connection
with the 2013 Credit Facility, which was amortized, along with the
unamortized fees of $670 in connection with the 2011 Credit Facility, to
interest expense over the life of the debt using the effective interest
method.
State and Local Sales Taxes
We also have contingent liabilities for state and local sales
taxes. As of December 31, 2015, we had a reserve of $3,903. If our
ultimate liability exceeds this amount, it could affect our liquidity
unfavorably. However, we currently do not believe that these contingent
liabilities will significantly impair our liquidity.
Capital expenditures
For 2015, capital expenditures were primarily for the
implementation of software solutions and purchase of network
equipment as we continue to expand our network. Our capital
expenditures for the year ended 2015 were $34,006, of which $14,183
was for software acquisition and development. The majority of these
expenditures are comprised of investments in information technology
and systems infrastructure, including an electronic data warehouse,