Vonage 2009 Annual Report Download - page 79

VONAGE HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
unamortized beneficial conversion related to the Previous
Convertible Notes comprised the $30,570.
For the remaining $46,037 of the Financing, since
many of the purchasers purchased more than one compo-
nent of the Financing, we allocated the net proceeds of
$44,543 (reflecting a reduction of $1,494 for the portion of
$7,167 discount attributed to $46,037) to the First Lien
Senior Facility, Second Lien Senior Facility and Convertible
Notes based upon their relative fair values with $20,138
allocated to the First Lien Senior Facility, $12,652 allocated
to the Second Lien Senior Facility and $11,753 allocated to
the Convertible Notes.
For the First Lien Senior Facility, an aggregate value of
$105,322 or a discount of $24,978 was recorded. This
discount is currently amortized to interest expense over the
life of the loan using the effective interest method. The
accumulated amortization was $5,362 and $766 at
December 31, 2009 and December 31, 2008, respectively.
The amortization for the year ended December 31, 2009
and 2008 was $4,956 and $766, respectively.
For the Second Lien Senior Facility, an aggregate value
of $67,273 or a discount of $4,727 was recorded. This
discount is currently amortized to interest expense over the
life of the loan using the effective interest method. The
accumulated amortization was $766 and $116 at
December 31, 2009 and December 31, 2008, respectively.
The amortization for the year ended December 31, 2009
and 2008 was $650 and $116, respectively.
For the Convertible Notes, an aggregate value of
$55,884 or a premium of $37,884 was recorded. Given the
magnitude of the premium, this amount was recorded as
additional-paid-in capital as prescribed in FASB ASC
470-20-25 “Debt with Conversions and Other Options-
Recognition”.
The following descriptions summarize certain material
terms of the Financing as provided in the Credit
Documentation.
First Lien Senior Facility
The loans under the First Lien Senior Facility will
mature in October 2013. Principal amounts under the First
Lien Senior Facility are repayable in quarterly installments of
$326 for each quarter ending December 31, 2008
through September 30, 2011 and $3,258 for each quarter
ending December 31, 2011 through September 30, 2013,
with the balance due in October 2013. Amounts under the
First Lien Senior Facility, at our option, bear interest at:
>the greater of 4.00% and LIBOR plus, in either case,
12.00%, payable on the last day of each relevant interest
period or, if the interest period is longer than three
months, each day that is three months after the first day
of the interest period and the last day of such interest
period, or
>the greater of 6.75% and the higher of (i) the rate quoted
in The Wall Street Journal, Money Rates Section as the
Prime Rate as in effect from time to time and (ii) the
federal funds effective rate from time to time plus 0.50%
plus, in either case, 11.00%, payable on the last day of
each month in arrears.
Certain events could trigger prepayment obligations
under the First Lien Senior Facility. If we have more than
$75,000 of specified unrestricted cash in any quarter after
January 1, 2009, we may be obligated to prepay without
premium certain amounts. To the extent we obtain pro-
ceeds from asset sales, insurance/condemnation recoveries
or extraordinary receipts, certain prepayments may be
required that will be subject to a premium of 8% in year 1,
7% in year 2, 6% in year 3, 5% in year 4 and 3% in the first
9 months of year 5 and no premium thereafter. In addition,
any voluntary prepayments or any mandatory prepayments
that may be required from proceeds of debt and equity
issuances will be subject to a make-whole during the first
three years, and thereafter a premium of 5% in year 4 and
3% in the first 9 months of year 5, with the First Lien Senior
Facility callable at par thereafter.
Second Lien Senior Facility
The loans under the Second Lien Senior Facility will
mature in October 2015. Principal amounts under the
Second Lien Senior Facility will be repayable in quarterly
installments of $1,800 commencing the later of: (i) the last
day of the fiscal quarter after payment-in-full of amounts
under the First Lien Senior Facility and (ii) December 31,
2012, with the balance due in October 2015. Amounts
under the Second Lien Senior Facility bear interest at 20%
payable quarterly in arrears and payable in-kind, or PIK,
beginning December 31, 2008 until the third anniversary of
the effective date and thereafter 20% payable quarterly in
arrears in cash. If the First Lien Senior Facility has not been
refinanced in full by the third anniversary of the effective
date, then until such refinancing has occurred 70% of the
interest due will be payable in cash with the balance pay-
able in PIK. The amount of PIK interest as of December 31,
2009 and December 31, 2008 was $18,576 and $2,320,
respectively. After payment-in-full of amounts under the
First Lien Senior Facility or in the event mandatory pay-
ments are waived by lenders under the First Lien Senior
Facility, the Second Lien Senior Facility will be subject to
prepayment obligations and premiums consistent with
those for the First Lien Senior Facility. Voluntary prepay-
ments for the Second Lien Senior Facility may be made at
any time subject to a make-whole.
Third Lien Convertible Notes
Subject to conversion, repayment or repurchase of the
Convertible Notes, the Convertible Notes mature in October
2015. Subject to customary anti-dilution adjustments
(including triggers upon the issuance of common stock
below the market price of the common stock or the con-
version price of the Convertible Notes), the Convertible
Notes are convertible into shares of our common stock at a
rate equal to 3,448.2759 shares for each $1,000 principal
amount of Convertible Notes, or approximately $0.29
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