Vonage 2010 Annual Report Download - page 48

OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
ITEM
7
A.
Q
uantitative and
Q
ualitative Disclosures About Market Ris
k
We are exposed to
f
inancial market risks, including change
s
i
n currency exc
h
ange rates an
di
nterest rates.
Forei
g
n Exchan
g
e
R
is
k
We sell our
p
roducts and services in the United States,
C
anada, and the United Kin
g
dom. Chan
g
es in currenc
y
exchan
g
e rates a
ff
ect the valuation in our
f
inancial statements o
f
t
he assets and liabilities o
f
these o
p
erations. We also have
a
p
ortion of our sales denominated in Euros, the Canadian Dollar
,
and the British Pound, which are also a
ff
ected by chan
g
es i
n
currency exchan
g
e rates. Our financial results could be affecte
d
b
y chan
g
es in
f
orei
g
n currency exchan
g
e rates, althou
g
h
f
orei
gn
exchan
g
e risks have not been material to our
f
inancial positio
n
or results o
f
o
p
erations to date
.
I
nterest
R
ate an
dD
e
b
t
Ri
s
k
O
ur exposure to market risk for changes in interest rates
p
rimarily relates to our lon
g
-term debt
.
O
n December 14, 2010, we entered into a credit agreement
(
the “Credit Facility”) consisting of a
$
200,000 senior secured
t
erm
l
oan.
W
e are expose
d
to
i
nterest rate r
i
s
k
s
i
nce amounts
pa
y
able under the
C
redit Facilit
y
, at our option, bear interest at:
>
t
he greater of 1.75% and LIBOR plus, in either case, an
applicable margin equal to 8.00
%
, payable on the last da
y
o
f
each relevant interest period or, i
f
the interest period is
l
onger t
h
an t
h
ree mont
h
s, eac
hd
ay t
h
at
i
st
h
ree mont
hs
a
f
ter the
f
irst da
y
o
f
the interest period, o
r
>
t
he base rate determined by re
f
erence to the hi
g
hest o
f
(
a
)
the federal funds effective rate from time to time
p
lus 1/
2
of 1%,
(
b
)
the
p
rime rate of Bank of America, N.A., an
d
(
c
)
the LIBOR rate a
pp
licable to one month interest
p
eriods
plus 1.00
%
, plus an applicable mar
g
in equal to 7.00
%,
pa
y
able on the last business da
y
o
f
each March, June
,
September and December and the maturit
y
date of th
e
Credit Facilit
y
.
As o
f
December 31, 2010, i
f
the interest rate on our variabl
e
rate debt chan
g
ed by 1
%
, our annual debt service paymen
t
w
ould chan
g
e by approximately $2,000
.
ITEM 8. Financial Statements and Supplementary Data
T
he in
f
ormation required by this Item is contained on pa
g
es F-
1
throu
g
h F-33 o
f
this Annual Report on Form 10-K an
d
incorporated herein by re
f
erence
.
ITEM 9.
C
han
g
es in and Disa
g
reements with Accountants on
A
ccounting and Financial Disclosure
N
o
n
e.
ITEM
9
A.
C
ontrols and Procedures
Disclosure
C
ontrol
s
O
ur mana
g
ement, with the participation of our Chief Execu
-
t
ive Officer and Chief Financial Officer, evaluated the effective
-
ness o
f
the desi
g
n and operation o
f
our disclosure controls and
p
rocedures as o
f
December 31, 2010. The term “disclosur
e
controls and
p
rocedures,” as defined in Rules 13a-15
(
e
)
and
1
5d-15(e) under the Securities Exchan
g
e Act of 1934 (the
“Exchan
g
e Act”), as amended, means controls and other proce
-
dures o
f
a company that are desi
g
ned to ensure that in
f
ormatio
n
r
equired to be disclosed by a company in the reports that it
f
iles
or submits under the Exchan
g
e Act is recorded, processed
,
s
ummarized, and re
p
orted, within the time
p
eriods s
p
eci
f
ied i
n
t
he Securities and Exchan
g
e Commission’s rules and forms
.
Disclosure controls and
p
rocedures include, without limitation
,
controls and procedures desi
g
ned to ensure that in
f
ormatio
n
r
equired to be disclosed by a company in the reports that it
f
iles
or submits under the Exchan
g
e Act is accumulated an
d
communicated to the company’s mana
g
ement, includin
g
it
s
p
rinci
p
al executive and
p
rinci
p
al
f
inancial o
ff
icers, or
p
erson
s
41