6. Credit Facility

June 2013 Amended Credit Facility

On June 13, 2013, the Company entered into a second amended and restated loan and security agreement (“Second Amended Credit Facility”) with a financial institution with which the Company had previous credit arrangements. The Second Amended Credit Facility provided for advances under a formula-based revolving line of credit and pledged substantially all of the Company’s assets as collateral. The revolving line of credit provided advances equal to 80% of eligible accounts receivable and was subject to sub-limits, as defined, for letters of credit, foreign exchange, and cash management services provided by the financial institution. The credit facility restricted the Company’s ability to pay dividends. In addition, the Company entered into a warrant agreement that allowed the financial institution to purchase 26,666 shares of the Company’s common stock at an exercise price of $7.92 per share if the Company drew on the credit facility at any time after the issuance date. If at any time, the advances to the Company in aggregate principal amount were greater than $4.0 million, the number of shares would increase to 66,666. On August 29, 2013, the Company drew down $5.0 million on the credit facility, triggering warrants to purchase up to 66,666 shares of TrueCar’s common stock at an exercise of $7.92 per share to be issued to the financial institution. For the year ended December 31, 2013, the Company recorded a debt discount of $0.4 million related to the warrants issued.

The revolving line bore interest at a floating per annum rate equal to the bank's prime rate plus an applicable margin based on the Company's liquidity defined as unrestricted cash plus amounts available under the credit facility. If the Company's liquidity was i) less than $10 million, the applicable margin was 1.75%, ii) if the Company's liquidity was equal to or greater than $10 million but less than $20 million, the applicable margin was 0.5%, iii) if the Company's liquidity was greater than or equal to $20 million, the applicable margin is 0.0%. The line of credit agreement required the Company to make monthly interest payments on the outstanding principal. The credit facility contained acceleration clauses that could accelerate any borrowings in the event of default. All unpaid principal was due at maturity, which was June 13, 2014.

The maximum amount available under the line of credit was $12.0 million, of which $6.9 million was available at December 31, 2013. The Company repaid all amounts outstanding in May 2014.

The carrying value of the Company’s debt, before discount, approximated fair value. The carrying amount of the Company’s outstanding debt at December 31, 2013 is summarized as follows (in thousands):


	December 31,
	2013
Revolving line of credit	$	5,000
Debt discount, net of accumulated accretion		(236)
Total carrying value	$	4,764

August 2014 Amendment to the Second Amended Credit Facility

In August 2014, the Company entered into a third amendment to the Second Amended Credit Facility with the same financial institution, effective as of June 13, 2014, that provided for advances of up to $25.0 million under a formula-based revolving line of credit that expires on June 13, 2016.

This amended credit facility bore interest at either (i) the London Interbank Offered Rate (“LIBOR”) plus 2.25% if net cash, as defined, was greater than or equal to $1.00 (ii) LIBOR plus 3.75% if net cash, as defined, was less than $1.00, (iii) the bank’s prime rate if net cash was greater than or equal to $1.00, or (iv) the bank’s prime rate plus 1.5% if net cash was less than $1.00. The Company could select whether its borrowings would fall under a LIBOR or prime rate interest rate and also committed to pay an annual commitment fee of $50,000 to the financial institution.

This amended credit facility also required the Company to maintain an adjusted quick ratio of at least 1.5 to 1 on the last day of each month during periods when the Company had drawn down at least 75% of the lesser of the Borrowing Base or $25.0 million. The credit facility required the Company to pledge substantially all of its assets as collateral and contained acceleration clauses that could accelerate any borrowings in the event of default. The credit facility restricted the Company’s ability to pay dividends. At December 31, 2014, the Company was in compliance with the financial covenants.

In September 2014, the Company borrowed $5.0 million under this amended credit facility. In December 2014, the Company repaid all amounts then outstanding. At December 31, 2014, the Company had no outstanding amounts under the credit facility and the amount available was $15.1 million.

February 2015 Amended Credit Facility

In February 2015, the Company further amended its credit facility and entered into a third amended and restated loan and security agreement (“Third Amended Credit Facility”) with the same financial institution, effective as of February 18, 2015, for a $35.0 million secured revolving credit facility that expires on February 18, 2018. The Third Amended Credit Facility provides a $10.0 million subfacility for the issuance of letters of credit and contains an increase option permitting the Company, subject to the lenders consent, to increase the revolving credit facility by up to $15.0 million, to an aggregate maximum of $50 million.

This amended credit facility bears interest, at the Company’s option, at either (i) the prime rate published by The Wall Street Journal, plus a spread of -0.25% to 0.50%, or (ii) a LIBOR rate determined in accordance with the terms of the credit facility, plus a spread of 1.75% to 2.50%. In each case, the spread is based on the Company’s adjusted quick ratio, which is a ratio of the Company’s cash and cash equivalents plus net billed accounts receivable to current liabilities plus all borrowings under the credit facility.

Interest is due and payable quarterly in arrears for prime rate loans and on the earlier of the last day of each quarter or the end of an interest period, as defined in the Third Amended Credit Facility, for LIBOR rate loans. The Company is also obligated to pay an unused revolving line facility fee of 0.0% to 0.20% per annum based on the Company’s adjusted quick ratio.

This amended credit facility requires the Company to maintain an adjusted quick ratio of at least 1.5 to 1 on the last day of each quarter. If this adjusted quick ratio is not maintained, then the facility requires the Company to maintain, as measured at each quarter end, a maximum consolidated leverage ratio 3.00 or 2.50 to 1.00, and a fixed charge coverage ratio of at least 1.25 to 1.00.

Consolidated leverage ratio is a ratio of all funded indebtedness, including all capital lease obligations, plus all letters of credit under the facility to the Company’s Adjusted EBITDA for the trailing twelve months. Fixed charge coverage ratio is the ratio of our Adjusted EBITDA minus cash income taxes to our cash interest payments plus capital expenditures for the trailing twelve months. This credit facility also limits the Company’s ability to pay dividends.

The Company’s future material domestic subsidiaries are required, upon the lender’s request, to become co-borrowers under the credit facility. The credit facility contains acceleration clauses that accelerate any borrowings in the event of default. The obligations of the Company and its future material domestic subsidiaries are collateralized by substantially all of their respective assets, subject to certain exceptions and limitations.