Vonage 2012 Annual Report Download - page 75

F-22 VONAGE ANNUAL REPORT 2012
1.75 to 1.00 subject to adjustment to exclude up to $50,000
in specified restricted payments;
> minimum cash of $25,000 including the unused portion of the
revolving credit facility or $35,000 in the event of certain
specified corporate actions; 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 increases permitted
capital expenditures.
The 2013 Credit Facility contains customary events of default
that may permit acceleration of the debt. During the continuance of a
payment default, interest will accrue 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.
July 2011 Financing
On July 29, 2011, we entered into a credit agreement (the
"2011 Credit Facility") consisting of an $85,000 senior secured term loan
and a $35,000 revolving credit facility. The co-borrowers under the 2011
Credit Facility were us and Vonage America Inc., our wholly owned
subsidiary. Obligations under the 2011 Credit Facility were guaranteed,
fully and unconditionally, by our other United States subsidiaries and
are secured by substantially all of the assets of each borrower and each
of the guarantors.
Use of Proceeds
We used $100,000 of the net available proceeds of the 2011
Credit Facility, plus $31,000 of cash on hand, to retire all of the debt
under the credit facility that we entered into in December 2010 (the
"2010 Credit Facility"), including a $1,000 prepayment fee to holders of
the 2010 Credit Facility. We also incurred $2,697 of fees in connection
with the 2011 Credit Facility, which is amortized to interest expense over
the life of the debt using the effective interest method. The amortization
for the year ended December 31, 2012 and December 31, 2011 was
$1,235 and $690, respectively. The accumulated amortization as of
December 31, 2012 and December 31, 2011 was $1,925 and $690,
respectively.
Repayments
In 2012 and 2011, we made mandatory repayment of $28,333
and $14,166, respectively, under the senior secured term loan. In
addition, we repaid the $15,000 outstanding under the revolving credit
facility in 2011.
2011 Credit Facility Terms
The following description summarizes the material terms of
the 2011 Credit Facility:
The loans under the 2011 Credit Facility mature in July 2014.
Principal amounts under the 2011 Credit Facility are repayable in
installments of $7,083 per quarter for the senior secured term loan. The
unused portion of our revolving credit facility incurs a 0.50% commitment
fee.
Outstanding amounts under each of the senior secured term
loan and the revolving credit facility, at our option, will bear interest at:
> LIBOR (applicable to one-, two-, three- or six-month periods)
plus an applicable margin equal to 3.25% if our consolidated
leverage ratio is less than 0.75 to 1.00, 3.5% 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 3.75% 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,
each day that is three months after the first day of the interest
period, or
> 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
LIBOR rate applicable to one month interest periods plus
1.00%, plus an applicable margin equal to 2.25% if our
consolidated leverage ratio is less than 0.75 to 1.00, 2.5% 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 2.75% 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 2011
Credit Facility.
The 2011 Credit Facility provides greater flexibility to us in
funding acquisitions and restricted payments, such as stock buybacks,
than the 2010 Credit Facility.
We may prepay the 2011 Credit Facility at our option at any
time without premium or penalty. The 2011 Credit Facility is 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 2011 Credit
Facility permits 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, without the consent of the existing lenders under
the 2011 Credit Facility. The 2011 Credit Facility includes customary
representations and warranties and affirmative covenants of the
borrowers. In addition, the 2011 Credit Facility contains 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 must also comply with the following financial
covenants:
> a consolidated leverage ratio of no greater than 2.00 to 1.00;
> a consolidated fixed coverage charge ratio of no less than
1.75 to 1.00;
> 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, plus a portion
of annual excess cash flow up to $8,000.
As of December 31, 2012, we were in compliance with all
covenants, including financial covenants, for the 2011 Credit Facility.
The 2011 Credit Facility contains customary events of default
that may permit acceleration of the debt. During the continuance of a
payment default, interest will accrue at a default interest rate of 2%
above the interest rate which would otherwise be applicable, in the case
VONAGE HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)