Vonage 2008 Annual Report Download - page 77

V
O
NA
G
EH
O
LDIN
GS CO
RP
.
N
O
TE
S
T
OCO
N
SO
LIDATED FINAN
C
IAL
S
TATEMENT
S
—
(C
ontinued
)
(
In thousands, except per share amounts
)
N
o
t
e
7
.
L
ong-Term Debt
A schedule o
f
lon
g
-term debt at December 31, 2008 and 2007 is as
f
ollows:
D
ecem
b
er
3
1,
2
008 200
7
5
%
Previous
C
onvertible Notes—due 201
0
$
–
$
253,320
1
6% First Lien
S
enior Facility—due 2013, net of discount 104,459
–
20%
S
econd Lien
S
enior Facility—due 2015, net of discount 69,708
–
20
%
Third Lien
C
onvertible Notes—due 201
5
18,580
–
At December 31, 2008, future payments under long-term debt obligations over each of the next five years and there-
a
ft
e
r
a
r
eas
f
o
ll
o
w
s
:
Fi
r
s
t
Lien
S
enior
Facilit
y
S
econd Lie
n
S
enior
Facilit
y
Thi
r
d Lien
C
onvertible
No
t
es
2009
$
1,303 $ – $
–
2010
1
,
303
–
–
2011
4
,
23
5–
–
2012
13
,
030
–
–
2013
110
,
103 1
,
800
–
T
h
e
r
eaf
t
e
r–7
0
,
200 18
,
000
M
inimum
f
uture payments o
f
principal 129,974 72,000 18,000
Pl
us acc
r
e
t
ed
int
e
r
es
t –
2
,
320
5
80
L
ess u
n
a
m
o
rtiz
ed d
i
scou
nt
24
,
212 4
,
612
C
urrent
p
ortio
n
1
,
303
–
–
Lon
g
-term portio
n
$
104,459 $69,708 $18,580
December 2005 and January 2006
C
onvertible Note
s
Fi
nanc
i
n
g
I
n
D
ecem
b
er 2005 an
dJ
anuary 2006, we
i
ssue
d
$
249,919 a
gg
re
g
ate principal amount of Previous Con
-
vertible Notes due December 1, 2010. We used the pro
-
ceeds from the offering of the Previous
C
onvertible Note
s
for workin
g
capital and other
g
eneral corporate purpose
s
(includin
g
the fundin
g
of our operatin
g
losses).
S
ince the holders were able to re
q
uire us to
r
epurchase all or an
y
portion of the Previous Convertibl
e
N
otes on December 16, 2008 at a
p
rice in cash e
q
ual t
o
100% of the
p
rinci
p
al amount of the
p
revious convertibl
e
notes plus an
y
accrued and unpaid interest and lat
e
charges, the Previous Convertible Notes were classifie
d
as a current
li
a
bili
ty on t
h
e
D
ecem
b
er 31, 2007
b
a
l
anc
e
s
h
ee
t
.
A
t our opt
i
on, we were a
bl
e to pay
i
nterest on t
he
previous convertible notes in cash or in kind. I
f
we paid in
cash, interest accrued at a rate o
f
5
%p
er annum and was
payable quarterly in arrears. If we paid in kind, the interest
accrued at a rate o
f
7
%
per annum and was pa
y
able
quarterly in arrears. Interest paid in kind will increase th
e
principal amount outstandin
g
and will thereafter accrue
interest durin
g
each period. The
f
irst interest payment
m
ade on March 1, 2006 was
p
aid in kind in the amount o
f
$
3,645. All subsequent interest payments of approx
-
i
mately $3,100 were paid in cash.
W
e evaluated the provisions of the Previous Con-
v
ertible Notes periodically to determine whether any of th
e
p
rov
i
s
i
ons wou
ld b
e cons
id
ere
d
em
b
e
dd
e
dd
er
i
vat
i
ves
t
hat would require bifurcation under
S
tatement of Finan
-
cial Accountin
g
Standards No. 133, (“Accountin
g
for
Derivative Instruments and Hedging Activities”)
(
“SFAS No. 133”
)
. Because the shares of Common Stock
u
nderlying the Previous
C
onvertible Notes had not been
re
g
istered for resale at the time of issuance, they were no
t
rea
dily
convert
ibl
e to cas
h
.
Th
us, t
h
e convers
i
on opt
i
on
did not meet the net settlement requirement of SFA
S
No. 133 and would not be considered a derivative i
ff
ree-
s
tanding. Accordingly, the Previous
C
onvertible Notes did
no
t
co
nt
a
in
a
n
e
m
bedded co
nv
e
r
s
i
o
nf
ea
t
u
r
e
th
a
tm
us
t
be
b
ifurcated. In November 2006, the underlyin
g
shares o
f
Common Stock were re
g
istered, which satisfied the net
s
ettlement required under SFAS No. 133. However, i
n
accordance with FSP EITF 00-19-2, which we ado
p
ted o
n
O
ctober 1, 2006, contingently payable registration pay-
m
ent arran
g
ements are no lon
g
er considered part of the
related
f
inancial instruments and are only reco
g
nize
d
when pa
y
ment is probable and the amount is reasonabl
y
F
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