Item 1.01. Entry into a Material Definitive Agreement.
On June 10, 2020, Automatic Data Processing,
Inc., a Delaware corporation (the “Company”), entered into a $3.225 billion 364-Day Credit Agreement (the “364-Day
Facility”) with a group of lenders.
The 364-Day Facility replaced the Company’s
prior $3.80 billion 364-day facility, entered into on June 12, 2019, which was terminated on June 10, 2020. JPMorgan Chase Bank,
N.A. acts as Administrative Agent, and Bank of America, N.A., BNP Paribas, Wells Fargo Bank, N.A. and Deutsche Bank Securities
Inc., as Syndication Agents for the 364-Day Facility. The existing $3.75 billion five-year credit agreement entered into on June
13, 2018 and the existing $2.75 billion five-year credit agreement entered into on June 12, 2019 will each continue in full force
and effect.
Two borrowing options will be available
under the 364-Day Facility: (i) a competitive advance option and (ii) a revolving credit option. The competitive advance option
will be provided on an uncommitted competitive advance basis through an auction mechanism. The revolving credit will be provided
on a committed basis. Under each option, amounts borrowed and repaid may be reborrowed subject to availability under the 364-Day
Facility.
The Lenders’ commitments under
the 364-Day Facility will expire on June 9, 2021 and any borrowings outstanding will mature and be payable on such date (or, at
the option of the Company, subject to the accuracy of all representations and warranties and the absence of any default, on June
9, 2022).
Under the 364-Day Facility, interest
under a competitive advance option will be payable at the rates obtained from bids selected by the Company in accordance with the
competitive auction procedures set forth in the 364-Day Facility.
At the Company’s option, under
the 364-Day Facility, revolving loans denominated in U.S. Dollars will bear interest at a floating rate per annum based on margin
over a LIBOR-based rate for a one, two, three or six month interest period as selected by the Company or a margin over a floating
rate per annum determined by reference to the highest of (i) JPMorgan Chase Bank, N.A.’s prime rate, (ii) the federal funds
effective rate plus 0.50% per annum, and (iii) a LIBOR-based rate for a one month interest period plus 1% per annum.
In
addition, the Company will pay a commitment fee on the aggregate unused commitments under the 364-Day Facility at a rate of 0.0175%
per annum. Also, the Company will pay a term-out fee of 0.75% of the amount of any loans outstanding under the 364-Day Facility
after June 9, 2021.
The
364-Day Facility’s other terms are substantially similar to the terms of the facility it replaced, including customary covenants
that restrict the Company’s and its borrowing subsidiaries’ ability to create liens or other encumbrances, enter
into sale and leaseback transactions and enter into consolidations, mergers and transfers of all or substantially all of their
respective assets. The 364-Day Facility contains customary events of default that would permit the lenders to accelerate the loans,
including the failure to make timely payments under the 364-Day Facility or other material indebtedness, the failure to satisfy
covenants and specified events of bankruptcy and insolvency.
The Company has agreed to guarantee any
obligations of any of its subsidiaries that are entitled to borrow the funds under the 364-Day Facility. Borrowings under the 364-Day
Facility may be used for general corporate purposes.
The 364-Day Facility is led by J.P. Morgan
Chase Bank, N.A., BofA Securities, Inc., BNP Paribas Securities Corp., Wells Fargo Securities, LLC and Deutsche Bank Securities
Inc., as Joint Lead Arrangers and Joint Bookrunners. Barclays Bank PLC and MUFG Bank, Ltd. are Documentation Agents for the 364-Day
Facility.
Certain of the lenders under the 364-Day
Facility, and their respective affiliates, have performed, and may in the future perform for the Company and its subsidiaries,
various commercial banking, investment banking, underwriting and other financial advisory services, for which they have received,
and will receive, customary fees and expenses.
The foregoing description is qualified
in its entirety by reference to the 364-Day Facility, which is filed as Exhibit 10.1 hereto and incorporated herein by reference.