Paycom Software, Inc. 10-Q

Item 5. Other Information 2022 Revolving Credit Agreement On May 4, 2022 (the “Closing Date”), Paycom Payroll, LLC (the “Borrower”), Paycom Software, Inc. (“Software”) and certain other subsidiaries of Software (collectively, the “Guarantors,” and collectively with the Borrower, the “Loan Parties”), entered into the 2022 Revolving Credit Agreement with Bank of America, N.A., as a lender, swingline lender and letters of credit issuer, the lenders from time to time party thereto (collectively with Bank of America, N.A., the “Lenders”), and Bank of America, N.A., as the administrative agent. The 2022 Revolving Credit Agreement provides for a senior secured revolving credit facility (the “2022 Facility”) in the aggregate principal amount of up to $250.0 million, and the ability to request an incremental facility of up to an additional $100.0 million, subject to obtaining additional lender commitments and certain approvals and satisfying certain other conditions. The 2022 Facility includes a $25.0 million sublimit for swingline loans and a $2.5 million sublimit for letters of credit. The 2022 Facility is scheduled to mature on May 4, 2027 (the “Scheduled Maturity Date”). 32 We have the option to borrow under the 2022 Facility in the form of either base rate loans or BSBY rate loans. Each BSBY rate loan bears interest at a rate per annum equal to the BSBY rate plus ( i ) 1.125% if the Company’s consolidated leverage ratio is less than 1.0 to 1.0 or (ii) 1.375% if the Company’s consolidated leverage ratio is greater than or equal to 1.0 to 1.0. Each base rate loan bears interest at a rate per annum equal to (x) a fluctuating rate of interest per annum equal to the highest of ( i ) the federal funds rate plus 0.50%, (ii) the prime rate and (iii) the BSBY rate plus 1.0%, subject to the interest rate floors set forth therein, plus (y) 0.125% if the Company’s consolidated leverage ratio is less than 1.0 to 1.0 , or (ii) 0.375% if the Company’s consolidated leverage ratio is greater than or equal to 1.0 to 1.0. We are required to pay a quarterly commitment fee at a rate of 0.20% per annum on the daily amount of the undrawn portion of the revolving commitments under the 2022 Facility. We are also required to pay customary letter of credit fees upon drawing any letter of credit. The 2022 Facility provides for no scheduled principal amortization prior to the Scheduled Maturity Date. Subject to certain conditions set forth in the 2022 Revolving Credit Agreement, we may borrow, prepay and reborrow under the 2022 Facility and terminate or reduce the Lenders’ commitments at any time prior to the Scheduled Maturity Date. The proceeds of the loans and letters of credit under the 2022 Facility are to be used for ongoing working capital and general corporate purposes and refinancing the Term Loans. On the Closing Date, we borrowed $29.0 million under the 2022 Facility to repay the Term Loans, along with accrued interest, expenses and fees. The loan on the Closing Date bears interest at the BSBY rate plus 1.125%. Under the 2022 Revolving Credit Agreement, we are required to maintain as of the end of each fiscal quarter a consolidated fixed charge coverage ratio of not less than 1.25 to 1.0 and a consolidated leverage ratio of not greater than 2.25 to 1.0. Additionally, the 2022 Revolving Credit Agreement contains customary affirmative and negative covenants, including covenants limiting our ability to, among other things, grant liens, incur debt, effect certain mergers, make investments, dispose of assets, enter into certain transactions, including swap agreements and sale and leaseback transactions, pay dividends or distributions on our capital stock, and enter into transactions with affiliates, in each case subject to customary exceptions for a facility of the size and type of the 2022 Facility. Our obligations under the 2022 Facility are secured by a senior security interest in all personal property of the Loan Parties. The events of default under the 2022 Revolving Credit Agreement include, among others, payment defaults, breaches of covenants, defaults under the related loan documents, material misrepresentations, cross defaults with certain other material indebtedness, bankruptcy and insolvency events, judgment defaults and change in control events. The occurrence of an event of default could result in the acceleration of our obligations under the 2022 Revolving Credit Agreement, the requirement to post cash collateral with respect to letters of credit, the termination of the Lenders’ commitments and a 2.0% increase in the rate of interest. From time to time, the Lenders and certain of their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with the Company or the Company’s affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions. The foregoing description of the 2022 Revolving Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the 2022 Revolving Credit Agreement, a copy of which is filed herewith as Exhibit 10.2 and incorporated herein by reference. Termination of Term Credit Agreement In connection with the repayment of the Term Loans, the Term Credit Agreement was terminated on the Closing Date. The Term Loans under the Term Credit Agreement were secured by a senior security interest in certain real property of the Company. The security interests and liens granted in connection with the Term Loans under the Term Credit Agreement were terminated in connection with the Company’s discharge of indebtedness thereunder. 33 Item 6. Exhibits The following exhibits are incorporated herein by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K): Exhibit No. Description 3.1 Amended and Restated Certificate of Incorporation of Paycom Software, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Amendment No. 1 to the Registration Statement on Form S-1/A dated March 31, 2014, filed with the SEC on March 31, 2014). 3.2 Amended and Restated Bylaws of Paycom Software, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated June 5, 2020, filed with the SEC on June 8, 2020). 4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Amendment No. 1 to the Registration Statement on Form S-1/A dated March 31, 2014, filed with the SEC on March 31, 2014). 10.1 + Severance and Release Agreement, dated April 14, 2022, by and among Paycom Software, Inc., Paycom Payroll, LLC and Jon Evans (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 14, 2022, filed with the SEC on April 15, 2022). 10.2* Credit Agreement, dated May 4, 2022, by and among Paycom Software, Inc., Paycom Payroll, LLC, certain other subsidiaries of the Paycom Software, Inc. as guarantors, Bank of America, N.A., as a lender, swingline lender and letters of credit issuer, the lenders party thereto, and Bank of America, N.A., as the administrative agent. 31.1* Certification of the Chief Executive Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of the Chief Financial Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of the Chief Executive Officer and Chief Financial Officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document. 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). + Management contract or compensatory plan or arrangement. * Filed herewith. ** The certifications attached as Exhibit 32.1 are not deemed “filed” with the SEC and are not to be incorporated by reference into any filing of Paycom Software, Inc. under the Securities Act whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. 34 SIGNAT URES Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PAYCOM SOFTWARE, INC. Date: May 5, 2022 By: /s/ Chad Richison Chad Richison President and Chief Executive Officer (Principal Executive Officer) Date: May 5, 2022 By: /s/ Craig E. Boelte Craig E. Boelte Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer) 35