ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On February 6, 2020, Paychex Advance LLC, a New York limited liability company
(the "Company"), and Paychex, Inc., a Delaware corporation (the "Parent"),
entered into a credit agreement with a lender which establishes a new
three-year, unsecured, revolving credit facility (the "Three-Year Facility") in
favor of the Company in the original aggregate principal amount of up to $250
million. PNC Bank, N.A. acts as Administrative Agent for the Three-Year
Facility. The Three-Year Facility replaces the Company's $150 million
three-year, unsecured, revolving credit facility which the Company and the
Parent entered into on March 17, 2016 and which was terminated on February 6,
2020 (the "Replaced 2016 Facility").
The existing $1.0 billion five-year unsecured credit facility which Paychex of
New York LLC ("PoNY"), a subsidiary of the Parent, entered into on July 31,
2019, the existing $500 million five-year unsecured credit facility which PoNY
entered into on August 17, 2017, the existing $400 million of 4.07% Senior
Notes, Series A and the existing $400 million of 4.25% Senior Notes, Series B,
which PoNY issued all pursuant to a note purchase and guarantee agreement, dated
as of January 9, 2019, will continue to remain in full force and effect.
Amounts borrowed and repaid may be re-borrowed subject to availability under the
Three-Year Facility. The Three-Year Facility matures on February 6, 2023 at
which time all borrowings thereunder will terminate.
Any loan comprising an alternate base rate ("ABR") borrowing under the
Three-Year Facility will bear interest at the ABR plus the applicable rate. Any
loan comprising an Eurocurrency borrowing under the Three-Year Facility shall
bear interest at the adjusted LIBO rate for the interest period in effect for
such borrowing plus the applicable rate. If any principal of or interest on any
loan or any fee or other amount payable by the Company is not paid when due,
whether at stated maturity, upon acceleration or otherwise, such overdue amount
shall bear interest at a rate per annum equal to (i) in the case of overdue
principal of any loan, 2% plus the rate otherwise applicable to such loan as
provided or (ii) in the case of any other amount, 2% plus the rate applicable to
the ABR loans. Accrued interest on each revolving loan shall be payable in
arrears on each interest payment date and upon termination of the commitment.
In addition, the Company will pay a commitment fee, payable quarterly in
arrears, and calculated at an applicable rate based upon the daily unused amount
of the Three-Year Facility during the period from and including the effective
date of the Three-Year Facility to but excluding the date on which the
commitments for the Three-Year Facility terminate.
The other terms of the Three-Year Facility are substantially similar to the
terms of the Replaced 2016 Facility, including customary covenants which, among
other things, include certain restrictions on the Parent's and its subsidiaries
ability to borrow, to grant liens or other encumbrances, to enter into sale and
leaseback transactions and to enter into consolidations, mergers and transfers
of all or substantially all of their respective assets.
The Three-Year Facility contains customary events of default that would permit
the lender to accelerate the loans, which events of defaults include, among
other things, the failure to make timely payments under the Three-Year Facility
or other material indebtedness, the failure to satisfy covenants and specified
events of bankruptcy and insolvency.
The Parent and certain of its subsidiaries have guaranteed the payment by the
Company of all indebtedness and obligations of the Company under the Three-Year
Facility. Borrowings under the Three-Year Facility may be used to finance the
working capital needs and for general corporate purposes.
The lender under this credit facility, and their respective affiliates, have
performed, and may in the future perform for us, various commercial banking,
investment banking, underwriting, and other financial advisory services, for
which they have received, and will continue to receive in the future, customary
fees and expenses.
Terms used herein and not otherwise defined have the meanings given to them in
the credit agreement which evidences the Three-Year Facility. The foregoing
description of the terms and conditions of the Three-Year Facility do not
purport to be complete and are qualified in their entirety by reference to the
full text of the Three-Year Facility filed as Exhibit 10.1 to this Current
Report on Form 8-K, which is incorporated herein by reference.
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 above under Item 1.01 is hereby incorporated by
reference into this Item 2.03.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 10.1 Three-Year Credit Agreement, dated as of February 6, 2020, by and
among the Company, the Parent, and the lender party thereto.
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