| Item 1.01 | Entry into a Material Definitive Agreement |
Director Nomination Agreement
On January 17, 2024, concurrently with the closing of the previously announced acquisition of the revenue cycle management business (“Acclara”) of Providence Health & Services – Washington (“Providence”) and certain of its affiliates, R1 RCM Inc. (the “Company”) entered into the Director Nomination Agreement, by and between the Company and Providence (the “Nomination Agreement”). Pursuant to the Nomination Agreement, Providence will be entitled to nominate one individual to the Company’s board of directors (the “Board”) for the earlier of three consecutive one-year terms following the closing of the acquisition or the termination of either of the Commercial Agreements (as defined below). Thereafter, Providence will have certain Board observer rights, subject to limitations.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Nomination Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated by reference herein.
Joinder to Registration Rights Agreement
On January 17, 2024, concurrently with the closing of the acquisition, Providence executed a joinder to the Company’s Second Amended and Restated Registration Rights Agreement, dated as of June 21, 2022, to provide Providence with unlimited piggyback registration rights with respect to the shares of common stock issuable upon the conversion or exercise of the Warrant (as defined below), subject to certain limitations as it relates to primary issuances.
Second Amendment to the Credit Agreement
On January 17, 2024, the Company entered into Amendment No. 2 (the “Second Amendment”) to the Second Amended and Restated Credit Agreement, dated as of June 21, 2022 (as amended by that certain Amendment No. 1 and Waiver, dated as of November 17, 2023, and as further amended, restated, amended and restated, supplemented or otherwise modified, the “Credit Agreement”), by and among the Company and certain of its subsidiaries, Bank of America, N.A., as administrative agent, and the lenders named therein. Pursuant to the Second Amendment, among certain other amendments, the lenders named in the Second Amendment agreed, severally and not jointly, to extend additional Initial Term B Loans (as defined in the Credit Agreement) (the “Incremental Term B Loans”) to the Company under the Credit Agreement in an aggregate principal amount equal to $575,000,000. The Company used the proceeds of the Incremental Term B Loans, together with cash on hand and Revolving Loans (as defined in the Credit Agreement) borrowed under the Credit Agreement, to finance (i) the cash consideration for the acquisition of Acclara and (ii) fees and costs incurred in connection with the acquisition and related transactions.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Second Amendment, a copy of which is attached hereto as Exhibit 10.2 and is incorporated by reference herein.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant |
The information set forth in Item 1.01 under the heading “Second Amendment to the Credit Agreement” of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.
| Item 3.02 | Unregistered Sales of Equity Securities |
On January 17, 2024, concurrently with the closing of the acquisition and as part of the consideration thereof, the Company issued a warrant to acquire up to 12,192,000 shares of common stock, par value $0.01 per share, of the Company to Providence (the “Warrant”). The offer and issuance of the Warrant are exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act. Providence has represented to the Company that it is an “accredited investor” as defined in Rule 501 of the Securities Act and that the Warrant is being acquired for investment purposes and not with a view to, or for sale in connection with, any distribution thereof. Pursuant to the Warrant, Providence may not directly or indirectly sell, transfer, pledge, encumber, assign or otherwise dispose of the Warrant or the shares of common stock issuable upon the conversion or exercise thereof without the prior written consent of the Company, other than in certain limited customary circumstances, for a period of three years following the closing of the acquisition.
