Debt Instrument, Covenant Compliance, Leverage Ratio Following Material Acquisition(s)

[Table of Contents](#i3788981a52d64e719f4aa81d6ab63fcb_7)Other InvestmentsAs of September 30, 2022 and December 31, 2021, we had equity method investments of $66 million and $63 million, respectively, primarily related to an investment in the technology sector. As of September 30, 2022 and December 31, 2021, we had equity securities without a readily determinable fair value of $2 million and $3 million, respectively.  


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| Note 4 — Accrued Expenses and Other Current Liabilities |

  
Accrued expenses and other current liabilities were as follows: 

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| (in millions) | September 30, 2022 |  | December 31, 2021 |
| Compensation and benefits | $ | 1,392  |  |  | $ | 1,601  |  |
| Customer volume and other incentives | 279  |  |  | 242  |  |
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| Income taxes | 143  |  |  | 74  |  |
| Professional fees | 162  |  |  | 220  |  |
| Other | 362  |  |  | 395  |  |
| Total accrued expenses and other current liabilities | $ | 2,338  |  |  | $ | 2,532  |  |

  


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| Note 5 — Debt |

  
In 2018, we entered into the Credit Agreement providing for the $750 million Term Loan and a $1,750 million unsecured revolving credit facility, which were due to mature in November 2023. In October 2022, we completed a debt refinancing and entered into a new credit agreement with a commercial bank syndicate ("New Credit Agreement") providing for a $650 million unsecured term loan ("New Term Loan") and a $1,850 million unsecured revolving credit facility, which are due to mature in October 2027. The Credit Agreement was terminated upon the closing of the New Credit Agreement and the proceeds from the New Term Loan were used primarily to repay our outstanding Term Loan balance.  
The Credit Agreement required interest to be paid, at our option, at either the ABR, the Eurocurrency Rate or the Daily Simple RFR (each as defined in the Credit Agreement), plus, in each case, an Applicable Margin (as defined in the Credit Agreement). The Applicable Margin was 0.875% with respect to Eurocurrency Rate and Daily Simple RFR and 0.00% with respect to ABR loans. The Term Loan was a Eurocurrency Rate Loan.   
The Credit Agreement contained customary affirmative and negative covenants as well as a financial covenant. We were in compliance with all debt covenants and representations of the Credit Agreement as of September 30, 2022.   
The New Credit Agreement requires interest to be paid, at our option, at either the Term Benchmark, Adjusted Daily Simple RFR or the ABR Rate (each as defined in the New Credit Agreement), plus, in each case, an Applicable Margin (as defined in the New Credit Agreement). Initially, the Applicable Margin is 0.875% with respect to Term Benchmark loans and RFR loans and 0.00% with respect to ABR loans. Subsequently, the Applicable Margin with respect to Term Benchmark loans and RFR loans will be determined quarterly and may range from 0.75% to 1.125%, depending on our public debt ratings or, if we have not received public debt ratings, from 0.875% to 1.125%, depending on our Leverage Ratio, which is the ratio of indebtedness for borrowed money to Consolidated EBITDA, as defined in the New Credit Agreement. Initially, the New Term Loan is a Term Benchmark loan.   
We are required under the New Credit Agreement to make scheduled quarterly principal payments on the New Term Loan beginning in December 2023. The New Credit Agreement contains customary affirmative and negative covenants as well as a financial covenant. The financial covenant is tested at the end of each fiscal quarter and requires us to maintain a Leverage Ratio not in excess of 3.50:1.00, or for a period of up to four quarters following certain material acquisitions, 3.75:1.00.In March 2022, our India subsidiary renewed its 13 billion Indian rupee ($159 million at the September 30, 2022 exchange rate) working capital facility, which requires us to repay any balances within 90 days from the date of disbursement. There is a 1.0% prepayment penalty applicable to payments made within 30 days of disbursement. This working capital facility contains affirmative and negative covenants and may be renewed annually. As of September 30, 2022, we have not borrowed funds under this facility.  
  
  
  
  


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| Cognizant Technology Solutions | 12 | September 30, 2022 Form 10-Q |

                         
