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Exhibit 10.1

 

EXECUTION COPY

 

 

U.S. $200,000,000

 

LETTER OF CREDIT AGREEMENT

 

Dated as of August 24, 2011

 

Among

 

3M COMPANY,
as Borrower,

 

HSBC BANK USA, NATIONAL ASSOCIATION,
as Bank

 

 



 

Table of Contents

 

 

 

 

Page

1.

DEFINITIONS

1

 

1.1

Generally

1

 

1.2

Times

4

 

 

 

 

2.

LINE OF CREDIT

4

 

2.1

Letters of Credit

4

 

2.2

Conditions Precedent to Each Letter of Credit

5

 

2.3

Evidence of Debt

5

 

 

 

 

3.

GUARANTY OF INSURANCE SUBSIDIARY OBLIGATIONS

6

 

3.1

Guaranty

6

 

3.2

Nature

6

 

3.3

Waiver of Accommodation Party Defenses

6

 

3.4

Waiver of Insurance Subsidiary Defenses

7

 

3.5

Recourse to Insurance Subsidiary

7

 

3.6

Application of Payments

8

 

3.7

Continuing Guaranty

8

 

 

 

 

4.

FEES AND EXPENSES

8

 

4.1

Letter of Credit Fees

8

 

4.2

Expenses

9

 

 

 

 

5.

INTEREST

9

 

5.1

Default Rate

9

 

5.2

Capital Adequacy; Indemnity

9

 

5.3

Mitigation of Yield Protection

10

 

 

 

 

6.

DISBURSEMENTS AND PAYMENTS

11

 

6.1

Payments

11

 

6.2

Prepayments

12

 

6.3

Termination or Reduction of the Commitment

12

 

6.4

Taxes

12

 

6.4

Judgment Currency

13

 

 

 

 

7.

CONDITIONS PRECEDENT

14

 

 

 

8.

REPRESENTATIONS AND WARRANTIES

14

 

 

 

9.

COVENANTS

14

 

9.1

Financial Information

14

 

9.2

Covenants

15

 

 

 

 

10.

EVENTS OF DEFAULT AND REMEDIES

17

 

10.1

Default

17

 

10.2

Remedies

18

 

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10.3

Setoff

19

 

10.4

Pledge of Special Deposit Account

19

 

 

 

 

11.

MISCELLANEOUS

19

 

11.1

360-Day Year

19

 

11.2

GAAP

20

 

11.3

No Waiver; Cumulative Remedies

20

 

11.4

Amendments, Etc.

20

 

11.5

Binding Effect: Assignment

20

 

11.6

New York Law

20

 

11.7

Severability of Provisions

20

 

11.8

Integration

20

 

11.9

Notice

20

 

11.10

Indemnification by the Borrower

21

 

11.11

Customer Identification - USA Patriot Act Notice

22

 

11.12

Execution in Counterparts

22

 

11.13

Waiver of Jury Trial

22

 

11.14

Jurisdiction

22

 

11.16

No Fiduciary Relationship

23

 

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Letter of Credit Agreement

Dated as of August 24, 2011

 

3M Company, a Delaware corporation, and HSBC Bank USA, National Association, a national banking association, hereby agree as follows:

 

1.                                       DEFINITIONS

 

1.1                                Generally.

 

“Affiliate”, as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person.  For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

 

“Agreement” means this Letter of Credit Agreement.

 

“Bank” means HSBC, acting on its own behalf.

 

“Bank’s Account” means such account of the Bank as is designated in writing from time to time by the Bank to the Borrower the purposes of this Agreement.

 

“Base Rate” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of (i) the rate of interest publicly announced by the Bank in New York, New York from time to time as its “prime” rate of interest, (ii) the Federal Funds Rate plus one-half of one percent (.50%) or (iii) the British Bankers Association Interest Settlement Rate applicable to Dollars for a period of one month (“One Month LIBOR”) plus 1.00% (for the avoidance of doubt, the One Month LIBOR for any day shall be based on the rate appearing on Reuters LIBOR01 Page (or other commercially available source providing such quotations as designated by the Bank from time to time) at approximately 11:00 a.m. London time on such day).

 

“Borrower” means 3M Company, a Delaware corporation.

 

“Business Day” means a day other than a Saturday, Sunday, United States national holiday or other day on which banks in New York are permitted or required by law to close.

 

“Commitment” means (a) the Dollar amount set forth opposite the Bank’s name on the signature pages hereof, or (b) the commitment of the Bank to issue Letters of Credit hereunder, as the context may require.

 

“Commitment Termination Date” means August 24, 2012 or, if earlier, the date on which the Bank’s Commitment is terminated pursuant to Section 10 or by agreement of the parties.

 



 

“Default” means an event that, with the giving of notice, the passage of time or both, would constitute an Event of Default.

 

“Dollars” and the “$” sign each means lawful currency of the United States of America.

 

“EBITDA” means, for any period, net income (or net loss) plus the sum of (a) interest expense, (b) income tax expense, (c) depreciation expense and (d) amortization expense, in each case determined in accordance with GAAP for such period.

 

“EBITDA to Interest Ratio” means, as of the last day of any Fiscal Quarter, the ratio of (i) consolidated EBITDA of the Borrower and its subsidiaries for the period of four consecutive Fiscal Quarters then ended to (ii) interest payable on, and amortization of debt discount in respect of, all Funded Debt of the Borrower and its subsidiaries during such period of four Fiscal Quarters.

 

“ERISA” means the Employment Retirement Security Act of 1974, as amended from time to time, and the regulations and rulings issued thereunder.

 

“Event of Default” means an event specified in Section 10.1.

 

“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Bank from three federal funds brokers of recognized standing selected by it.

 

“Fiscal Quarter” means any of the four periods, each approximately three calendar months in length, comprising the Borrower’s fiscal year.

 

“Funded Debt” means the sum of (i) all obligations of the Borrower and its subsidiaries for borrowed money, including but not limited to principal and interest with respect to all indebtedness hereunder and all other senior or subordinated debt for borrowed money, (ii) all purchase money obligations of the Borrower and its subsidiaries, including obligations under any capitalized lease, (iii) the face amount of all letters of credit issued for the account of the Borrower and its subsidiaries, including but not limited to any Letters of Credit (as defined herein), and (iv) all other interest-bearing obligations of the Borrower and its subsidiaries that are required to be listed as a liability on a balance sheet under GAAP. All determinations under this definition shall be made with respect to the Borrower and its subsidiaries on a consolidated basis.

 

“GAAP” has the meaning set forth in Section 11.2.

 

“HSBC” means HSBC Bank USA, National Association.

 

“Insurance Subsidiaries” means Seaside and Two Harbors.

 

2



 

“Insurance Subsidiary Obligations” means all obligations of each Insurance Subsidiary to the Bank arising under or related to any Letter of Credit or any Reimbursement Agreement, including but not limited to such Insurance Subsidiary’s obligations to reimburse the Bank for any amount drawn under any Letter of Credit and to pay interest on any such amount, such Insurance Subsidiary’s obligation to pay fees in connection with any Letter of Credit, and any indemnification obligations of such Insurance Subsidiary relating to any Letter of Credit, in each case whether such obligation arises under this Agreement or under a Reimbursement Agreement, and including but not limited to any notes issued in substitution for all or any portion of such obligations.

 

“L/C Amount” means the sum of (i) the aggregate face amount of all issued and outstanding Letters of Credit, plus (ii) Unreimbursed L/C Obligations.

 

“Letter of Credit” means (i) the Letters of Credit issued pursuant to this Agreement by the Bank for the benefit of the Borrower or an Insurance Subsidiary and described in Exhibit F hereto, and (ii) any other Letter of Credit, as defined in Section 2.1.

 

“Letter of Credit Fee Percentage” means 0.19% per annum.

 

“Loan Documents” means this Agreement, the Notes, any Reimbursement Agreements and any other document related hereto, together with all amendments, modifications and restatements thereof.

 

“Note” means a note in substantially the form of Exhibit C hereto with all blanks appropriately completed, together with any modifications and extensions thereof and any note or notes issues in renewal thereof or substitution or replacement therefor.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

 

“Reimbursement Agreement” means any letter of credit application and reimbursement agreement required by the Bank as a condition to issuance of any Letter of Credit.

 

“Seaside” means Seaside Insurance Limited, a Bermuda corporation.

 

“Securitization Entity” means a corporation, partnership, trust, limited liability company or other entity that is formed for the purpose of effecting or facilitating a Securitization Transaction and which engages in no business and incurs no indebtedness or other liabilities other than those related to or incidental to a Securitization Transaction.

 

“Securitization Transaction” means a transaction or series of related transactions pursuant to which a corporation, partnership, trust, limited liability company or other entity incurs obligations or issues interests, the proceeds of which are used to finance a discrete pool (which may be fixed or revolving) of receivables or other financial assets.

 

3



 

“Special Deposit Account” means an account maintained with the Bank in which funds are deposited pursuant to Section 2.1(e) or Section 10.2(c).

 

“Two Harbors” means Two Harbors Insurance Company, a South Carolina corporation.

 

“Unreimbursed L/C Obligations” means, at any time, the aggregate amount drawn under Letters of Credit for which the Bank has not been reimbursed.

 

1.2                                Times

 

All references to times of day in this Agreement shall be references to New York, New York time unless otherwise specifically provided.

 

2.                                       LINE OF CREDIT

 

2.1                                Letters of Credit.

 

(a)                                  Generally.   The Borrower may from time to time on or before the Commitment Termination Date request that the Bank issue one or more irrevocable standby letters of credit denominated in Dollars (each, a “Letter of Credit”) for the account of the Borrower or an Insurance Subsidiary.  The Bank shall not be obligated to issue such Letter(s) of Credit if (i) immediately following such issuance, the L/C Amount would exceed the Commitment or (ii) the Bank either determines or has received written notice from the Borrower, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Section 2.2 shall not be satisfied.  Each Letter of Credit shall be used for the general corporate purposes of the Borrower or an Insurance Subsidiary.  The parties agree to begin negotiate in good faith 60 days prior to the Commitment Termination Date to renew the Commitment for an additional year on terms acceptable to all parties.

 

(b)                                  Application.   At least five days prior to the issuance of each Letter of Credit, the Borrower or an Insurance Subsidiary, as the case may be, shall execute a Reimbursement Agreement in the Bank’s standard form or in such other form as the Bank may reasonably require.  In the event of any conflict between the terms hereof and the terms of any Reimbursement Agreement, the terms hereof shall control.

 

(c)                                   Form.   Each Letter of Credit shall be issued in a form acceptable to the Bank.  Each Letter of Credit shall be denominated in Dollars.  No Letter of Credit shall have an initial or any renewal term of more than one year.

 

(d)                                  Payment of Drafts.   The Borrower shall pay the amount of each drawing under any Letter of Credit to the Bank on demand, together with interest at the Base Rate from the date that such drawing is paid by the Bank until payment of such amount in full.  The Bank may (at its option) charge any deposit account

 

4



 

maintained by the Borrower with the Bank for the amount of any drawing under a Letter of Credit.

 

(e)                                   Special Deposit Account.   Unless otherwise agreed by the Bank in writing, the Borrower shall deposit in the Special Deposit Account, on the day that is five Business Days prior to the Commitment Termination Date, an amount equal to the aggregate face amount of all Letters of Credit then outstanding, less the balance (if any) then outstanding in the Special Deposit Account.

 

2.2                                Conditions Precedent to Each Letter of Credit.

 

The obligation of the Bank to issue any Letter of Credit hereunder shall be subject to the satisfaction of the following conditions precedent (and any request a Letter of Credit shall be deemed a representation and warranty by the Borrower that each of the following conditions precedent have been satisfied):

 

(a)                                  the Borrower has delivered to the Bank each of the items required to be delivered pursuant to Section 7;

 

(b)                                  the representations and warranties of the Borrower contained in this Agreement (other than the representations and warranties listed as “Material Adverse Effect”, “Litigation” and “Environmental Matters” on Exhibit B) shall be true and correct on the date of such Letter of Credit, as applicable, as though made on and as of such date (except to the extent that any such representation or warranty is expressly stated to have been made as of a specific date, then such representation or warranty shall be true and correct as of such specific date); and

 

(c)                                   no Default or Event of Default exists.

 

2.3                                Evidence of Debt.

 

(a)                                  The Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to the Bank resulting from Unreimbursed L/C Obligations owing to the Bank from time to time, including the amounts of principal and interest payable and paid to the Bank from time to time hereunder in respect thereof.  The Borrower agrees that upon notice by the Bank to the Borrower to the effect that a Note is required or appropriate in order for the Bank to evidence (whether for purposes of pledge, enforcement or otherwise) the obligations owing to the Bank, the Borrower shall promptly execute and deliver to the Bank a Note payable to the order of the Bank in a principal amount up to the Commitment, provided, however, failure to execute such Note(s) shall not limit or otherwise affect the obligations of the Borrower under this Agreement.

 

(b)                                  Entries made in good faith and in conformity with sound industry standards by the Bank in the control account pursuant to subsection (a) above shall be prima facie

 

5



 

evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to the Bank under this Agreement, absent manifest error; provided , however , that the Borrower shall have the right to inspect such entries and the failure of the Bank to make an entry, or any finding that an entry is incorrect, in such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement.

 

3.                                       GUARANTY OF INSURANCE SUBSIDIARY OBLIGATIONS

 

3.1                                Guaranty.

 

The Borrower hereby absolutely and unconditionally guarantees to the Bank the full and prompt payment when due, whether at maturity or earlier by reason of acceleration or otherwise, of the Insurance Subsidiary Obligations.

 

3.2                                Nature.

 

No act or thing need occur to establish the liability of the Borrower under this Section 3, and with the exception of full payment, no act or thing (including, but not limited to, a discharge in bankruptcy of the Insurance Subsidiary Obligations, and/or the running of the statute of limitations) relating to the Insurance Subsidiary Obligations which but for this provision could act as a release of the liabilities of the Borrower under this Section 3, shall in any way exonerate the Borrower, or affect, impair, reduce or release the Guaranty established under this Section 3 and the liability of the Borrower under this Section 3; and this shall be a continuing, absolute and unconditional guaranty and shall be in force and be binding upon the Borrower until the Insurance Subsidiary Obligations are fully paid.

 

3.3                                Waiver of Accommodation Party Defenses.

 

The liability of the Borrower under this Section 3 shall not be affected or impaired in any way by any of the following acts or things (which the Bank is hereby expressly authorized to do, omit or suffer from time to time without notice to or consent of anyone): (i) any acceptance of collateral security, guarantors, accommodation parties or sureties for any or all of the Insurance Subsidiary Obligations; (ii) any extensions or renewal of any Insurance Subsidiary Obligations (whether or not for longer than the original period) or any modification of the interest rate, maturity or other terms of any Insurance Subsidiary Obligations; (iii) any waiver or indulgence granted to an Insurance Subsidiary, and any delay or lack of diligence in the enforcement of any Insurance Subsidiary Obligations; (iv) any full or partial release of, compromise or settlement with, or agreement not to sue, any Insurance Subsidiary or any other guarantor or other person liable on any Insurance Subsidiary Obligations; (v) any release, surrender, cancellation or other discharge of any Insurance Subsidiary Obligations or the acceptance of any instrument in renewal or substitution for any instrument evidencing any Insurance Subsidiary Obligations; (vi) any failure to obtain collateral security (including rights of setoff) for any Insurance Subsidiary Obligations, or to see to the proper or sufficient creation and perfection thereof, or to establish the priority thereof, or to preserve, protect, insure, care for, exercise or enforce any collateral security for any Insurance Subsidiary Obligations; (vii) any modification, alteration, substitution, exchange,

 

6



 

surrender, cancellation, termination, release or other change, impairment, limitation, loss or discharge of any collateral security for any Insurance Subsidiary Obligations; (viii) any assignment, sale, pledge or other transfer of any Insurance Subsidiary Obligations; or (ix) any manner, order or method of application of any payments or credits on any Insurance Subsidiary Obligations.  The Borrower waives any and all defenses and discharges available to a surety, guarantor, or accommodation co-obligor, dependent on its character as such.

 

3.4                                Waiver of Insurance Subsidiary Defenses.

 

The Borrower waives any and all defenses, claims, setoffs and discharges of each Insurance Subsidiary, or any other obligor, pertaining to the Insurance Subsidiary Obligations, except the defense of discharge by payment in full.  Without limiting the generality of the foregoing, the Borrower will not assert against the Bank any defense of waiver, release, discharge in bankruptcy, statute of limitations, res judicata, statute of frauds, anti-deficiency statute, fraud, ultra vires acts, usury, illegality or u


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