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Item 1.01.
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Entry into a Material Definitive Agreement.
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On
August 19, 2020, Cummins Inc. (the “Company”) entered into a Second Amended and Restated 364-Day Credit Agreement
(the “364-Day Credit Agreement”) by and among the Company, certain of its subsidiaries (together with the Company,
the “Borrowers”), the lenders named therein, and JPMorgan Chase Bank, N.A., as administrative agent. Under the 364-Day
Credit Agreement, the Borrowers may obtain revolving and swingline loans, in each case subject to certain amount limitations, in
an amount up to $1.5 billion in the aggregate outstanding at any time prior to August 18, 2021 (the “Commitment Termination
Date”). The 364-Day Credit Agreement amends and restates in its entirety that certain Amended and Restated 364-Day
Credit Agreement, dated as of August 21, 2019, by and among the Company, certain of its subsidiaries party thereto, the lenders
party thereto, and JPMorgan Chase Bank, N.A., as administrative agent.
The borrowings under
the 364-Day Credit Agreement will not be secured with liens on any of the Company’s or its subsidiaries’ assets.
The Company will guarantee all borrowings by the subsidiary Borrowers under the 364-Day Credit Agreement.
The Company may from
time to time request incremental term loans and/or increase the aggregate principal amount
of the revolving commitments under the 364-Day Credit Agreement by up to $750 million if certain conditions are satisfied,
including (i) the absence of any default or event of default under the 364-Day Credit
Agreement, and (ii) the Company obtaining the consent of each lender providing any incremental facility. In
addition, prior to the Commitment Termination Date, the Company may, by notice to the administrative agent and subject to certain
other conditions set forth in the 364-Day Credit Agreement including the absence of any default or event of default thereunder,
elect to convert all or a ratable portion of the outstanding revolving loans under the 364-Day Credit Agreement into term loans
(the “Term-Out Option”) that will mature on the first anniversary of the Commitment Termination Date. The Borrowers
will pay a fee to the lenders equal to 0.5% of the aggregate principal amount of the outstanding revolving loans converted into
term loans pursuant to the Term-Out Option.
Borrowings under the
364-Day Credit Agreement will bear interest at varying rates, depending on the type of loan and, in some cases, the rates of designated
benchmarks and the applicable Borrower’s election. For all borrowings under the 364-Day Credit Agreement, the applicable
Borrower may choose among the following interest rates: (i) solely in the case of U.S. dollar-denominated loans, an
interest rate equal to the highest of (1) the prime rate in effect from time to time, (2) the greater of (A) the
federal funds effective rate in effect from time to time and (B) the overnight bank funding rate in effect from time to time,
in each case plus 0.5% and (3) the Adjusted LIBO Rate for a one month interest period plus 1.00%; (ii) an interest rate
equal to the Adjusted LIBO Rate for the applicable interest period plus a rate ranging from 0.50% to 1.00%, depending on the credit
rating of the Company’s senior unsecured long-term debt; or (iii) solely in the case of swingline loans, another rate
agreed to by the applicable lender and the applicable Borrower. The Adjusted LIBO Rate is a rate determined by reference to the
rate payable on deposits in the relevant currency in the London interbank market. Currently, the Company’s senior unsecured
long-term debt is rated A2 by Moody’s Investors Service, Inc. and A+ by Standard & Poor’s Financial Services
LLC, which would result in a rate of the Adjusted LIBO Rate plus 0.75% under (ii) above. Credit ratings are not recommendations
to buy and are subject to change, and each rating should be evaluated independently of any other rating. In addition, the Company
undertakes no obligation to update disclosures concerning its credit ratings, whether as a result of new information, future events
or otherwise.
The 364-Day Credit Agreement
contains customary events of default and financial and other covenants, including a financial covenant requiring that the ratio
of (i) the consolidated net debt of the Company and its subsidiaries, subject to certain adjustments, to (ii) the consolidated
total capital of the Company and its subsidiaries as of the last day of each fiscal quarter not be greater than 0.65:1.
The description of the
364-Day Credit Agreement set forth above is qualified by reference to the 364-Day Credit Agreement filed herewith as Exhibit 10.1
and incorporated herein by reference.