10.	Credit Agreement

December 2017,

the Company entered into an amendment to its 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

June 30, 2018

and

December 31, 2017,

the outstanding principal balance due on the Amended Revolving Facility was

$240.0

million.

principal payments were made against the Company’s Amended Revolving Facility during the

six

months ended

June 30, 2018.

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 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.

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

June 30, 2018,

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 June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Interest expense	$	2,627	$	1,469	$	4,697	$	2,843
Commitment fees		239		333		477		711

As of

June 30, 2018

and

December 31, 2017,

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

$2.5

million and

$2.8

million, respectively. For the

six

month periods ended

June 30, 2018

and

2017,

HMS amortized

$0.3

million and

$1.0

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

Although HMS expects that operating cash flows will continue to be a primary source of liquidity for the Company’s operating needs, the Amended Revolving Facility

may

be used for general corporate purposes, including, but

not

limited to acquisitions, if necessary.