Item 1.01 Entry into a Material Definitive Agreement.
On March 23, 2021, Performant Business Services, Inc., a wholly-owned subsidiary of Performant Financial Corporation, and Premiere Credit of North America, LLC, a wholly-owned subsidiary of Performant Business Services, Inc. (collectively, the “Borrower”), which collectively are a ‘borrower’ under that certain Credit Agreement, dated as of August 7, 2017 with ECMC Group, Inc. (“ECMC”) (as amended, the “Credit Agreement”), entered into that certain Amendment No. 5 to the Credit Agreement (the “Fifth Amendment”).
Upon the effectiveness of the Fifth Amendment, Borrower and ECMC have agreed as follows:
1.ECMC will release its security interests and liens on certain assets to be sold in exchange for a mandatory prepayment of $6,000,000 which will lower Borrower’s quarterly principal payments to $787,500.
2.The maturity of the loans under the Credit Agreement will be extended for one additional one-year period through August 2022. In connection with such extension, Performant Financial Corporation will be required to issue to ECMC additional warrants to purchase up to an aggregate of 515,110 additional shares of common stock of Performant Financial Corporation at an exercise price of $0.96 per share.
3.The “Exercise Price” for a portion of the existing warrants issued to ECMC to purchase 1,931,663 shares of common stock of Performant Financial Corporation will be reduced from $1.92 to $0.96 per share.
4.The expiration date for all outstanding warrants to purchase 5,794,990 shares of common stock of Performant Financial Corporation held by ECMC or an affiliate thereof will be extended to August 11, 2023 unless the currently applicable expiration date is a later date,.
5.The financial covenants in the Credit Agreement will be modified as follows:
•As of June 30, 2020, a minimum fixed charge coverage ratio of 1.0 to 1.0 through December 31, 2020, .75 to 1.0 through December 31, 2021, 1.0 to 1.0 through June 30, 2022, and 1.25 to 1.0 through August 2022; and
•As of June 30, 2020, a maximum total debt to EBITDA ratio of 6.00 to 1.00 through December 31, 2020, 8.00 to 1.00 through June 30, 2021, 7.00 to 1.00 through September 30, 2021, and 6.00 to 1.00 through August 2022.
The foregoing summary of the Fifth Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of such Fifth Amendment, a copy of which is filed as Exhibit 10.1 and incorporated herein by reference.