LifeLock 2013 Annual Report Download - page 79

We also will pay a letter of credit fee to the administrative agent for the account of each lender in accordance with its applicable percentage of a letter of
credit for each letter of credit, which fee will be equal to the applicable rate then in effect, multiplied by the daily maximum amount available to be drawn
under the letter of credit. The initial applicable rate for the letter of credit is 1.50%, subject to adjustment from time to time based upon our achievement of a
specified consolidated leverage ratio.
We have the right to prepay our borrowings under the Senior Credit Facility from time to time in whole or in part, without premium or penalty, subject
to the procedures set forth in the Senior Credit Facility.
All of our obligations under the Senior Credit Facility are unconditionally and jointly and severally guaranteed by each of our existing and future, direct
or indirect, domestic subsidiaries, subject to certain exceptions. In addition, all of our obligations under the Senior Credit Facility, and the guarantees of those
obligations, are secured, subject to permitted liens and certain other exceptions, by a first-priority lien on our and our subsidiaries’ tangible and intangible
personal property, including a pledge of all of the capital stock of our subsidiaries.
The Senior Credit Facility requires us to maintain certain financial covenants. In addition, the Senior Credit Facility requires us to maintain all material
proprietary databases and software with a third-party escrow agent in accordance with an escrow agreement that we reaffirmed in connection with the Senior
Credit Facility. The Senior Credit Facility also contains certain affirmative and negative covenants limiting, among other things, additional liens and
indebtedness, investments and distributions, mergers and acquisitions, liquidations, dissolutions, sales of assets, prepayments and modification of debt
instruments, transactions with affiliates, and other matters customarily restricted in such agreements. The Senior Credit Facility also contains customary
events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross defaults to other contractual agreements,
events of bankruptcy and insolvency, and a change of control. As of December 31, 2013, we were in compliance with all covenants.
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On February 7, 2012, we entered into a $70,000 credit agreement (“prior credit agreement”), which we amended on March 14, 2012, April 30, 2012,
and May 29, 2012. The prior credit agreement consisted of a term loan of $68,000 and a revolving line of credit of $2,000. The prio r credit agreement had a
maturity date of February 7, 2016.
The outstanding balance under the term loan carried an interest rate ranging from LIBOR plus 3.75% to 4.75% depending on our consolidated leverage
ratio. The outstanding balance under the line of credit bore an interest rate ranging from LIBOR to LIBOR plus 0.125% depending on our consolidated leverage
ratio.
On October 12, 2012, we repaid the outstanding balance of the term loan with proceeds from our IPO. Amortization of debt issuance costs for the year
ended December 31, 2012 totaled $1,760, including $1,443 of debt issuance costs written off at the date of repayment, and is included in interest expense in
the accompanying consolidated statements of operations.
The prior credit agreement contained certain covenants. The covenants included, among others, restrictions with respect to payment of cash dividends,
mergers or consolidations, changes in nature of business, disposal of assets, and obtaining additional loans. The prior credit agreement a lso required us to
comply with certain financial covenants.
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During 2012, we cancelled three standby letters of credit and replaced them with $1,300 in letters of credit issued against the $2,000 revolving line of
credit provided under the prior credit agreement. The restrictions on the cash used to fully collateralize the standby letters of credit were released in July 2012.
In August 2013, a letter of credit in the amount of $1,200 was released by the counterparty in connection with the execution of the amendment to our office
lease with respect to our headquarters. As such, we had an outstanding letter of credit in the amount of $100 as of December 31, 2013.
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We have a number of lease agreements covering office space and certain equipment that we account for as operating leases. A majority of the lease
agreements for office space have rent escalations that increase monthly rent payments over the lease terms and provide for a renewal option under negotiated
terms and conditions upon expiration. We record rental expense on a straight-line basis over the base, non-cancelable lease terms. We recognize any difference
between the calculated expense and amount actually paid as accrued rent. We reflect accrued rent as a current or non-current liability, depending on its expected
date of reversal.
Rent expense incurred under operating leases for the years ended December 31, 2013, 2012, and 2011 was $3,5 46, $2,758, and $1,764, respectively.
Associated with operating leases, we have received tenant improvement allowances from lessors. We record the value of these improvements as fixed
assets when acquired and amortize the assets over the term of the lease. We record an offsetting obligation as deferred rent and amortize it as a reduction to lease
expense on a straight-line basis over the lease term.
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