Item 1.01
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Entry into a Material Definitive Agreement.
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On December 19, 2017, HMS Holdings Corp.
(the “Company”) and certain subsidiaries of the Company entered into Amendment No. 2 to Amended and Restated
Credit Agreement (the “Amendment”) to amend the Company’s existing credit agreement (the “Existing
Credit Agreement”), dated May 3, 2013, as amended, by and among the Company, the subsidiary guarantors party thereto,
the lenders party thereto, and Citibank, N.A. as administrative agent. On December 19, 2017, upon the satisfaction of all the
conditions set forth in the Amendment, the Existing Credit Agreement, as amended pursuant to the Amendment (the
“Amended Credit Agreement”), became effective. Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, JPMorgan Chase Bank, N.A. and Wells Fargo Bank acted as joint lead arrangers and joint bookrunners for
the Amendment.
The Amended Credit Agreement, among other things,
provides for a senior secured revolving facility (the “Revolving Facility”) in an aggregate principal amount equal
to $500 million, which includes a $50 million sublimit for the issuance of letters of credit and a $25 million sublimit for swingline
loans. The Amended Credit Agreement also contains an accordion feature that permits the Company to increase the Revolving Facility
up to the sum of (i) the greater of $120 million and 100% of Consolidated EBITDA (as defined in the Amended Credit Agreement) and
(ii) an additional amount, subject to obtaining commitments from lenders therefor and meeting certain other conditions.
In connection with the Amendment, the Company
used the proceeds of its borrowings under the Revolving Facility to repay its existing loans under the Existing Credit Agreement.
Following the effective date of the Amendment, the proceeds of the Revolving Facility may be used to provide working capital from
time to time for the Company, and for other general corporate purposes and any other activities permitted by the Amended Credit
Agreement.
Interest Rates; Fees.
Borrowings under
the Revolving Facility bear interest at a variable interest rate equal to either a (i) base rate or an (ii) adjusted LIBOR rate,
plus an interest margin based on the Company’s Consolidated Leverage Ratio (as defined in the Amended Credit Agreement) for
the applicable period.
Under the Amended Credit Agreement, the Company
will pay an unused commitment fee on the Revolving Facility ranging from 0.375% to 0.25% per annum based on the Company’s
Consolidated Leverage Ratio and a letter of credit fronting fee equal to 0.125% per annum on the aggregate face amount of each
letter of credit.
Maturity Date.
The Revolving Facility
will mature on December 19, 2022.
Representations; Covenants; Events of Default.
The Amended Credit Agreement contains various customary representations and warranties by the Company and its subsidiaries,
which include customary use of materiality, material adverse effect and knowledge qualifiers. The Amended Credit Agreement also
contains (i) certain affirmative covenants that impose certain reporting and/or performance obligations on the Company and its
restricted subsidiaries, (ii) certain negative covenants that generally limit, subject to various exceptions, the Company and its
restricted subsidiaries from taking certain actions, including, without limitation, incurring indebtedness, creating liens, engaging
in mergers and consolidations, disposing of certain assets or property, making certain investments and acquisitions, entering into
certain transactions with affiliates, swap agreements or sale-leasebacks, making certain restricted payments, including dividends
and share repurchases, changing the Company’s fiscal year or the lines of business conducted by the Company or its restricted
subsidiaries to a material extent, and prepaying certain junior indebtedness, (iii) financial covenants consisting of a maximum
Consolidated Leverage Ratio and a minimum Interest Coverage Ratio (as defined in the Amended Credit Agreement), and (iv) customary
events of default for financings of this type.
Under the Amended Credit Agreement, the negative
covenants are subject to carve-outs, such as making investments and restricted equity or debt payments based on an available amount
calculated with a “starter” basket of $50 million, plus (i) an amount equal to 50% of consolidated net income and (ii)
other additional amounts based on returns on investments and equity issuances, in each case, subject to certain additional conditions.
The Company also has the ability to make certain unlimited investments and restricted equity and debt payments, provided that the
Company’s leverage ratio does not exceed certain agreed levels and no event of default shall have occurred and be continuing.
Events of default under the Amended Credit Agreement include,
without limitation: non-payment of principal or reimbursement obligation when due; non-payment of interest, fees and other
amounts for a period of five business days after the due date; material inaccuracies of representations and warranties;
failure to perform or observe covenants, conditions or agreements (subject to any applicable grace periods); cross-defaults
to certain indebtedness; inability to pay debts; certain acts of bankruptcy or insolvency; certain ERISA events; failure to
pay certain material judgments; and a change of control as defined in the Amended Credit Agreement. The obligations of the
Company and certain subsidiaries under the Revolving Facility may be declared due and payable upon the occurrence and during
the continuance of an event of default.
Amended and Restated Security Agreement.
In connection with
the Amendment, the Company, certain subsidiaries of the Company and any other subsidiary who may become a party thereto (the “Subsidiary
Securing Parties”), and Citibank, N.A., as collateral agent for the lenders party from time to time under the Amended Credit
Agreement, entered into the Amended and Restated Security Agreement, dated as of December19, 2017. Pursuant to the Amended and
Restated Security Agreement, the Revolving Facility is secured, subject to certain customary carve-outs and exceptions, by a first
priority lien and security interest in substantially all tangible and intangible assets of the Company and Subsidiary Securing
Parties.
The summary set forth above is not intended to be complete and is
qualified in its entirety by reference to the full text of the Amendment, the Amended Credit Agreement and the Amended and Restated
Security Agreement, attached hereto as Exhibits 10.1, 10.2 and 10.3, respectively.