Credit Agreement

December 2017,

the Company entered into an amendment to its Amended and Restated Credit Agreement, as amended (the “Credit Agreement”) which, among other things, extended the maturity of its then existing

$500

million revolving credit facility by

five

years to

December 2022 (

the “Amended Revolving Facility”). The availability of funds under the Amended Revolving Facility includes sublimits for (a) up to

$50

million for the issuance of letters of credit and (b) up to

$25

million for swingline loans. In addition, the Company

may

increase the commitments under the Amended Revolving Facility and/or add

one

or more incremental term loan facilities, provided that such incremental facilities do

not

exceed in the aggregate the sum of (i) the greater of

$120

million and

100%

of Consolidated EBITDA (as defined in the Credit Agreement) and (ii) an additional amount so long as our

first

lien leverage ratio (as defined in the Credit Agreement) on a pro forma basis is

not

greater than

3.00:1.00,

subject to obtaining commitments from lenders therefor and meeting certain other conditions.

As of

March 31, 2019

and

December 31, 2018,

the outstanding principal balance due on the Amended Revolving Facility was

$240.0

million.

principal payments were made against the Amended Revolving Facility during the

three

months ended

March 31, 2019.

Borrowings under the Amended Revolving Facility bear interest at a rate equal to, at the Company’s election (except with respect to swingline borrowings, which will accrue interest based only at the base rate), either:

▪

a base rate determined by reference to the greatest of (a) the prime or base commercial lending rate of the administrative agent as in effect on the relevant date, (b) the federal funds effective rate plus

0.50%

and (c) the

one

-month London Interbank Offered Rate (or any successor rate determined in accordance with the Credit Agreement) (“LIBO Rate”) plus

1.00%,

plus

an interest margin ranging from

0.50%

1.00%

based on the Company’s consolidated leverage ratio for the applicable period; or

▪

an adjusted LIBO Rate, equal to the LIBO Rate for the applicable interest period multiplied by the statutory reserve rate (equal to (

)

one

divided by (y)

one

minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) established by the Board of Governors of the Federal Reserve System of the United States),

plus

an interest margin ranging from

1.50%

2.00%

based on the Company’s consolidated leverage ratio for the applicable period.

In addition to paying interest on the outstanding principal, the Company is required to pay unused commitment fees on the Amended Revolving Facility during the term of the Credit Agreement ranging from

0.375%

0.250%

per annum based on the Company’s consolidated leverage ratio and letter of credit fees equal to

0.125%

per annum on the aggregate face amount of each letter of credit, as well as customary agency fees. As part of a contractual agreement with a customer, the Company has an outstanding irrevocable letter of credit for

$6.5

million, which is issued against its revolving credit facility and expires

June 30, 2019.

The Amended 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 certain subsidiaries of the Company. The Amended Revolving Facility contains certain restrictive covenants, which affect, among other things, the ability of the Company and its subsidiaries to incur indebtedness, create liens, make investments, sell or otherwise dispose of assets, engage in mergers or consolidations with other entities, and pay dividends or repurchase stock. The Company is also required to comply, on a quarterly basis, with

two

financial covenants: (i) a minimum interest coverage ratio of

3:00:1:00,

and (ii) a maximum consolidated leverage ratio of

4.75:1.00

through

December 2019

and

4.25:1.00

from and after

January 2020.

The consolidated leverage ratio is subject to a step-up to

5.25:1.00

for

four

full consecutive fiscal quarters following a permitted acquisition or similar investment. As of

March 31, 2019,

the Company was in compliance with all terms of the Credit Agreement.

Interest expense and the commitment fees on the unused portion of the Company’s revolving credit facility were as follows (

in thousands

	Three Months Ended March 31,
		2019		2018
Interest expense	$	2,526	$	2,070
Commitment fees		156		239

As of

March 31, 2019

and

December 31, 2018,

the unamortized balance of deferred origination fees and debt issuance costs was

$2.1

million and

$2.2

million, respectively. For the

three

month periods ended

March 31, 2019

and

2018,

HMS amortized

$0.1

million and

$0.1

million, respectively, of interest expense related to the Company’s deferred origination fees and debt issue costs.