Exhibit 10.1

 

EXECUTION COPY

 

 

U.S. $150,000,000

 

LETTER OF CREDIT AGREEMENT

 

Dated as of August 24, 2012

 

Among

 

3M COMPANY,
as Borrower,

 

HSBC BANK USA, NATIONAL ASSOCIATION,
as Bank

 

 

 

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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 SUBSIDIARY OBLIGATIONS

 

6

 

3.1

Guaranty

 

6

 

3.2

Nature

 

6

 

3.3

Waiver of Accommodation Party Defenses

 

6

 

3.4

Waiver of Subsidiary Defenses

 

7

 

3.5

Recourse to Subsidiary

 

7

 

3.6

Application of Payments

 

7

 

3.7

Continuing Guaranty

 

8

 

 

 

 

 

4.

FEES AND EXPENSES

 

8

 

4.1

Letter of Credit Fees

 

8

 

4.2

Expenses

 

8

 

 

 

 

 

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

 

-i-

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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

 

19

 

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

 

21

 

11.12

Execution in Counterparts

 

22

 

11.13

Waiver of Jury Trial

 

22

 

11.14

Jurisdiction

 

22

 

11.16

No Fiduciary Relationship

 

22

 

-ii-

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Letter of Credit Agreement

Dated as of August 24, 2012

 

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, 2013 or, if earlier, the date on
which the Bank’s Commitment is terminated pursuant to Section 10 or by agreement
of the parties.

 

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“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.

 

“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.

 

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“Letter of Credit” means (i) the Letters of Credit issued pursuant to this
Agreement by the Bank for the benefit of the Borrower or a 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.

 

“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).

 

“Subsidiaries” means Seaside, Two Harbors and any other subsidiary of the
Borrower authorized by the Borrower to request a Letter of Credit to be issued
hereunder.

 

“Subsidiary Obligations” means all obligations of each Subsidiary to the Bank
arising under or related to any Letter of Credit or any Reimbursement Agreement,
including but not limited to such 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 Subsidiary’s obligation to pay fees in connection with any Letter
of Credit, and any indemnification obligations of such Subsidiary relating to
any Letter of Credit, in each case whether such obligation arises under this
Agreement

 

 

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or under a Reimbursement Agreement, and including but not limited to any notes
issued in substitution for all or any portion of such obligations.

 

“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 a 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 a 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 a 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

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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

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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 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 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 Subsidiary Obligations,
and/or the running of the statute of limitations) relating to the 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 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 Subsidiary
Obligations; (ii) any extensions or renewal of any Subsidiary Obligations
(whether or not for longer than the original period) or any modification of the
interest rate, maturity or other terms of any Subsidiary Obligations; (iii) any
waiver or indulgence granted to a Subsidiary, and any delay or lack of diligence
in the enforcement of any Subsidiary Obligations; (iv) any full or partial
release of, compromise or settlement with, or agreement not to sue, any
Subsidiary or any other guarantor or other person liable on any Subsidiary
Obligations; (v) any release, surrender, cancellation or other discharge of any
Subsidiary Obligations or the acceptance of any instrument in renewal or
substitution for any instrument evidencing any Subsidiary Obligations; (vi) any
failure to obtain collateral security (including rights of setoff) for any
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
Subsidiary Obligations; (vii) any modification, alteration, substitution,
exchange, surrender, cancellation, termination, release or other change,
impairment, limitation, loss or

 

 

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discharge of any collateral security for any Subsidiary Obligations; (viii) any
assignment, sale, pledge or other transfer of any Subsidiary Obligations; or
(ix) any manner, order or method of application of any payments or credits on
any 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 Subsidiary Defenses.

 

The Borrower waives any and all defenses, claims, setoffs and discharges of each
Subsidiary, or any other obligor, pertaining to the 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 unenforceability which may be available to a Subsidiary in
respect of the Subsidiary Obligations, or any setoff available against the Bank
to any Subsidiary, whether or not on account of a related transaction.  The
liability of the Borrower shall not be affected or impaired by any voluntary or
involuntary liquidation, dissolution, sale or other disposition of all or
substantially all the assets, marshaling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of, or other similar
event or proceeding affecting, any Subsidiary or any of such Subsidiary’s
assets.  The Borrower will not assert against the Bank any claim, defense or
setoff available to the Borrower against any Subsidiary.  The Borrower also
hereby waives: (i) presentment, demand for payment, notice of dishonor or
nonpayment, and protest of the Subsidiary Obligations; (ii) notice of the
acceptance hereof by the Bank and of the creation and existence of all
Subsidiary Obligations; and (iii) notice of any amendment to or modification of
any of the terms and provisions of the Subsidiary Obligations, the Credit
Agreement or any other agreement evidencing or securing any Subsidiary
Obligations.  The Bank shall not be required to first resort for payment of the
Subsidiary Obligations to any Subsidiary or any other persons or corporations,
their properties or estates, or to any collateral, property, liens or other
rights or remedies whatsoever.

 

3.5                               Recourse to Subsidiary.

 

No payment by the Borrower pursuant to any provision hereof shall entitle the
Borrower, by subrogation to the rights of the Bank or otherwise, to any payment
by a Subsidiary or out of the property of such Subsidiary until all of the
Subsidiary Obligations (including interest) and all costs, expenses and
attorneys’ fees paid or incurred by the Bank in endeavoring to collect the
Subsidiary Obligations and enforcing the Guaranty established under this
Section 3 have been fully paid.  The Borrower will not exercise or enforce any
right of contribution, reimbursement, recourse or subrogation available to the
Borrower as to any Subsidiary Obligations, or against any person liable
therefor, or as to any collateral security therefor, unless and until all such
Subsidiary Obligations shall have been fully paid and discharged.

 

3.6                               Application of Payments.

 

Whenever, at any time or from time to time, the Borrower shall make any payment
to the Bank under the Guaranty established under this Section 3, the Borrower
shall notify the Bank in

 

 

7

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writing that such payment is made for such purpose.  If any payment applied by
the Bank to the Subsidiary Obligations is thereafter set aside, recovered,
rescinded or required to be returned for any reason (including, without
limitation, the bankruptcy, insolvency or reorganization of any Subsidiary or
any other obligor), the Subsidiary Obligations to which such payment was applied
shall for the purposes of this Section 3 be deemed to have continued in
existence, notwithstanding such application, and this Section 3 shall be
enforceable as to such Subsidiary Obligations as fully as if such application
had never been made.

 

3.7                               Continuing Guaranty.

 

The Guaranty established under this Section 3 shall constitute a continuing and
irrevocable guaranty, and the Bank may continue, without notice to or consent by
the Borrower, to issue Letters of Credit for the account of a Subsidiary in
reliance upon the Guaranty established under this Section 3 until written notice
of revocation of the Guaranty established under this Section 3 shall have been
received by the Bank from the Borrower.  Any such notice of revocation shall not
affect the Guaranty established under this Section 3 in relation to any
Subsidiary Obligations then existing or created thereafter pursuant to this
Agreement, or any extensions or renewals of any such Subsidiary Obligations, and
as to all such Subsidiary Obligations and extensions or renewals thereof, such
Guaranty shall continue effective until the same have been fully paid with
interest.

 

4.                                      FEES AND EXPENSES

 

4.1                               Letter of Credit Fees.

 

(a)                                  Commission.  A fee shall be due and payable
to the Bank upon issuance of each Letter of Credit, computed at an annual rate
equal to the Letter of Credit Fee Percentage applied to the face amount of that
Letter of Credit outstanding from time to time, from and including the date of
issuance of that Letter of Credit until the expiration thereof, payable in
arrears on (i) the last day of each March, June, September and
December (including, as applicable, each such day falling before or after the
Commitment Termination Date), and (ii) the Commitment Termination Date.

 

(b)                                 Additional Fees.  An additional examination
fee shall be due and payable to the Bank upon any draw under any Letter of
Credit.  In addition, the Borrower shall pay to the Bank, on demand any and all
of the Bank’s standard fees in connection with the issuance of and any drawings
under any Letters of Credit, which fees shall be subject to review and
adjustment by the Bank in its sole discretion at any time and from time to time.

 

4.2                               Expenses.

 

The Borrower shall pay (i) all reasonable attorneys’ fees and out-of-pocket
expenses of such attorneys incurred by the Bank in connection with the
preparation, negotiation, execution and amendment of this Agreement and related
documents and (ii) all costs and expenses (including

 

 

8

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but not limited to reasonable attorneys’ fees and out-of-pocket expenses)
incurred by the Bank in connection with the enforcement of this Agreement and
related documents (including but not limited to reasonable attorneys’ fees and
out-of-pocket expenses of the Bank, whether paid to outside counsel or allocated
to in-house counsel).

 

5.                                      INTEREST

 

5.1                               Default Rate.

 

Upon the occurrence of an Event of Default, and so long as such Event of Default
continues without written waiver thereof by the Bank, in the sole discretion of
the Bank and without waiving any of its other rights and remedies, the
outstanding principal balance of the Unreimbursed L/C Obligations shall bear
interest at an annual rate which shall be equal to two percent (2.00%) over the
annual rate or rates that would otherwise be in effect with respect to such
Unreimbursed L/C Obligations had there been no occurrence of such Event of
Default.

 

5.2                               Capital Adequacy; Indemnity.

 

In addition to any interest payable on Unreimbursed L/C Obligations and any fees
or other amounts payable hereunder, the Borrower agrees:

 

(a)                                  Capital Adequacy.  If the Bank determines
at any time that its Return has been reduced as a result of any Capital Adequacy
Rule Change, the Bank may require the Borrower to pay it the amount necessary to
restore the Bank’s Return to what it would have been had there been no Capital
Adequacy Rule Change.  For purposes of this paragraph (a), the following
definitions shall apply:

 

(i)                                     “Return”, for any calendar quarter or
shorter period, means the percentage determined by dividing (A) the sum of
interest and ongoing fees earned by the Bank under this Agreement during such
period by (B) the average capital the Bank is required to maintain during such
period as a result of its being a party to this Agreement, as determined by the
Bank based upon its total capital requirements and a reasonable attribution
formula that takes account of the Capital Adequacy Rules then in effect. Return
may be calculated for each calendar quarter and for the shorter period between
the end of a calendar quarter and the date of termination in whole of this
Agreement.

 

(ii)                                  “Capital Adequacy Rule” means any law,
rule, regulation or guideline regarding capital adequacy that applies to the
Bank, or the interpretation thereof by any governmental or regulatory authority
including, without limitation, any agency of the European Union or similar
monetary or multinational authority.  Capital Adequacy Rules include
rules requiring financial institutions to maintain total capital in amounts
based upon percentages of outstanding loans, binding loan commitments and
letters of credit.

 

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(iii)                               “Capital Adequacy Rule Change” means any
change in any Capital Adequacy Rule occurring after the date of this Agreement,
but does not include any changes in applicable requirements that at the date
hereof are scheduled to take place under the existing Capital Adequacy Rules or
any increases in the capital that the Bank is required to maintain to the extent
that the increases are required due to a regulatory authority’s assessment of
the Bank’s financial condition.  For the avoidance of doubt, any changes
resulting from requests, rules, guidelines or directives concerning capital
adequacy (x) issued in connection with the Dodd-Frank Wall Street Reform and
Consumer Protection Act or (y) promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States or foreign regulatory authorities, in
each case pursuant to Basel III, shall be deemed to occur after the date of this
Agreement, regardless of the date enacted, adopted or issued.

 

(iv)                              “Bank” includes (but is not limited to) the
Bank, as defined elsewhere in this Agreement, any assignee of any interest of
the Bank hereunder, any participant in the loans made hereunder and any holding
company of any of the foregoing.

 

The initial notice sent by the Bank shall be sent as promptly as practicable
after the Bank learns that its Return has been reduced, shall include a demand
for payment of the amount necessary to restore the Bank’s Return for the quarter
in which the notice is sent, shall state in reasonable detail the cause for the
reduction in the Bank’s Return and the Bank’s calculation of the amount of such
reduction, and shall include the Bank’s representation that it has made similar
demand on one or more other commercial borrowers with revolving or term loans in
excess of $500,000. Thereafter, the Bank may send a new notice during each
calendar quarter setting forth the calculation of the reduced Return for that
quarter and including a demand for payment of the amount necessary to restore
the Bank’s Return for that quarter.  The Bank’s calculation in any such notice
shall be conclusive and binding absent demonstrable error.

 

5.3                               Mitigation of Yield Protection.

 

The Bank hereby agrees that, commencing as promptly as practicable after it
becomes aware of the occurrence of any event giving rise to the operation of
Section 5.2 or 6.4, the Bank will give notice thereof to the Borrower.  The
Borrower may at any time, by notice to the Bank, request that the Bank change
its lending office as to any Unreimbursed L/C Obligations or that it specify a
new lending office with respect to its Commitment and any Letters of Credit or
that it rebook any Letter of Credit with a view to avoiding or mitigating the
consequences of an occurrence such as described in the preceding sentence, and
the Bank will use reasonable efforts to comply with such request unless, in the
opinion of the Bank, such change or specification or rebooking is inadvisable or
might have an adverse effect,

 

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economic or otherwise, upon it, including its reputation.  In addition, the Bank
agrees that, except for changes or specifications or rebookings required by law
or effected pursuant to the preceding sentence, if the result of any change or
change of specification of lending office or rebooking would, but for this
sentence, be to impose additional costs or requirements upon the Borrower
pursuant to Section 5.2 or Section 6.4 (which would not be imposed absent such
change or change of specification or rebooking) by reason of legal or regulatory
requirements in effect at the time thereof and of which the Bank is aware at
such time, then such costs or requirements shall not be imposed upon the
Borrower but shall be borne by the Bank.  All expenses incurred by the Bank in
changing a lending office or specifying another lending office of the Bank or
rebooking any Letter of Credit in response to a request from the Borrower shall
be paid by the Borrower.  Nothing in this Section 5.3 (including, without
limitation, any failure by the Bank to give any notice contemplated in the first
sentence hereof) shall limit, reduce or postpone any obligations of the Borrower
under Section 5.2 or Section 6.4, including any obligations payable in respect
of any period prior to the date of any change or specification of a new lending
office or any rebooking of any Letter of Credit.

 

6.                                      DISBURSEMENTS AND PAYMENTS

 

6.1                               Payments.

 

(a)                                 Generally.  The Borrower shall initiate all
payments of principal, interest, fees and other payments due under the Notes or
this Agreement (including but not limited to all payments due under
Section 2.1(d), Section 3 or any Reimbursement Agreement) and all prepayments
with respect to the Notes or this Agreement to the Bank by means of payment made
by the Borrower to the Bank in Dollars not later than 12:00 noon in same day
funds for the account of the Bank.  All such payments shall be made in
immediately available funds.  Any payment due on a day on which the Bank is not
open for substantially all of its business shall be due on the next day on which
the Bank is so open.  Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or fee or commission,
as the case may be.  Absent obvious error, the records of the Bank will be
conclusive evidence of the principal and accrued interest owing with respect to
all Unreimbursed L/C Obligations.

 

(b)                                 Interest Payments.  Interest accruing on the
Unreimbursed L/C Obligations shall be payable quarterly in arrears on the last
day of each March, June, September and December and at maturity.

 

(c)                                  Principal Payment. The entire principal
balance of the Unreimbursed L/C Obligations shall, if not sooner demanded, be
due and payable in full on the Commitment Termination Date.

 

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6.2                               Prepayments.

 

The Borrower may prepay the Unreimbursed L/C Obligations in whole at any time or
from time to time in part, without penalty or premium.

 

6.3                               Termination or Reduction of the Commitment.

 

The Borrower may from time to time on at least ten calendar days’ prior notice
received by the Bank terminate the Commitment in whole or permanently reduce the
Commitment in part, provided that (i) the Commitment may not be terminated in
whole at any time that any Letter of Credit or Unreimbursed L/C Obligation
remains outstanding, (ii) each partial reduction of the Commitment shall be in
the minimum amount of $10,000,000 or in a multiple of $10,000,000 in excess
thereof and (iii) no partial reduction of the Commitment shall reduce the
aggregate amount of the Commitment to an amount less than the L/C Amount.

 

6.4                               Taxes.

 

(a)                                 All payments made by the Borrower to the
Bank under or in connection with this Agreement or the Notes shall be made
without any setoff or other counterclaim, and free and clear of and without
deduction for or on account of any present or future taxes now or hereafter
imposed by any governmental or other authority, except to the extent that such
deduction or withholding is compelled by law.  As used herein, the term “Taxes”
shall include all income, excise and other taxes of whatever nature (other than
taxes generally assessed on the overall net income of the Bank by the government
or other authority of the country, state or political subdivision in which the
Bank is incorporated or in which the office through which the Bank is acting is
located) as well as all levies, imposts, duties, charges, or fees of whatever
nature.  If the Borrower is compelled by law to make any such deductions or
withholdings it will:

 

(i)                                     pay to the relevant authorities the full
amount required to be so withheld or deducted;

 

(ii)                                  except to the extent that such deduction
or withholding results from a breach by the Bank of the representations
contained in Section 6.4(b), pay such additional amounts (including, without
limitation, any penalties, interest or expenses) as may be necessary in order
that the net amount received by the Bank after such deductions or withholdings
(including any required deduction or withholding on such additional amounts)
shall equal the amount the Bank would have received had no such deductions or
withholdings been made; and

 

(iii)                               promptly forward to the Bank an official
receipt or other documentation satisfactory to the Bank evidencing such payment
to such authorities.

 

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(b)                                 If any Taxes otherwise payable by the
Borrower pursuant to the foregoing paragraph are directly asserted against the
Bank, the Bank may pay such Taxes and the Borrower promptly shall reimburse the
Bank to the full extent otherwise required by such paragraph.  The obligations
of the Borrower under this Section 6.4 shall survive any termination of this
Agreement.  The Bank by its execution of this Agreement does hereby represent to
the Borrower that if the Bank is organized under the laws of any jurisdiction
other than the United States or any state thereof, the Bank has furnished to the
Borrower either U.S. Internal Revenue Service Form W-8BEN, or U.S. Internal
Revenue Service Form W-8ECI, as applicable (wherein the Bank claims entitlement
to complete exemption from U.S. Federal withholding tax on all interest payments
hereunder).

 

(c)                                  If the Borrower makes an increased tax
payment to the Bank under the foregoing clause (a)(ii) and the Bank determines
in its absolute discretion that (a) a tax credit is attributable to that tax
payment, and (b) the Bank has obtained, utilized and fully retained that tax
credit on an affiliated group basis, then the Bank shall pay an amount to the
Borrower which the Bank determines in its absolute discretion will leave it
(after that payment) in the same after-tax position as it would have been in had
the payment under clause (a)(ii) not been required to be made by the Borrower;
provided, however, that (i) the Bank shall be the sole judge of the amount of
such tax credit and the date on which it is received, (ii) the Bank shall not be
obliged to disclose information regarding its tax affairs or tax computations,
(iii) nothing herein shall interfere with the Bank’s right to manage its tax
affairs in whatever manner it sees fit, and (iv) if the Bank shall subsequently
determine that it has lost the credit of all or a portion of such tax credit,
the Borrower shall promptly remit to the Bank the amount certified by the Bank
to be the amount necessary to restore the Bank to the position it would have
been in if no payment had been made pursuant to this sentence.

 

6.4                               Judgment Currency.

 

If, for the purpose of obtaining judgment in any court, it is necessary to
convert a sum due under this Agreement in Dollars or any alternative currency
(the “Specified Currency”) into another currency (the “Judgment Currency”), the
rate of exchange which shall be applied shall be that at which, in accordance
with normal banking procedures, the Bank could purchase the Specified Currency
with the amount of the Judgment Currency on the Business Day next preceding the
day on which such judgment is rendered.  The obligation of the Borrower with
respect to any such sum due from it to the Bank shall, notwithstanding the rate
of exchange actually applied in rendering such judgment, be discharged only to
the extent that on the Business Day following receipt by the Bank of any sum
adjudged to be due under this Agreement in the Judgment Currency, the Bank may,
in accordance with normal banking procedures, purchase and transfer to the
required location of payment the Specified Currency with the amount of the
Judgment Currency so adjudged to be due; and the Borrower hereby, as a separate
obligation and notwithstanding any such judgment, agrees to indemnify the Bank
against, and to pay the Bank on demand, in the applicable Specified

 

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Currency, any difference between the sum originally due to the Bank in the
Specified Currency and the amount of the Specified Currency so purchased and
transferred on that Business Day.

 

7.                                      CONDITIONS PRECEDENT

 

On or before the date hereof, the Borrower shall deliver to the Bank the
documents detailed in Exhibit A, properly executed and in form and content
acceptable to the Bank.

 

8.                                      REPRESENTATIONS AND WARRANTIES

 

To induce the Bank to enter into this Agreement, the Borrower makes the
representations and warranties contained in Exhibit B.  Each request for a
Letter of Credit under this Agreement constitutes a reaffirmation of these
representations and warranties (other than the representations and warranties
listed as “Material Adverse Effect”, “Litigation” and “Environmental Matters” on
Exhibit B) as of the date of such Letter of Credit.

 

9.                                      COVENANTS.

 

From the date hereof through the Commitment Termination Date, and thereafter
until the Unreimbursed L/C Obligations are paid in full and no Letter of Credit
remains outstanding, unless the Bank shall otherwise agree in writing, the
Borrower shall do the following:

 

9.1                               Financial Information

 

The Borrower shall deliver to the Bank:

 

(a)                                 Annual Financial Statements.  Within 100
days of the Borrower’s fiscal year end, the Borrower’s consolidated annual
financial statements.  The statements must be audited with an unqualified
opinion by a certified public accountant acceptable to the Bank.

 

(b)                                 Interim Financial Statements.  Within 60
days of each Fiscal Quarter, the Borrower’s interim financial statements.  These
statements will be prepared on a consolidated basis and in accordance with
GAAP.  These statements will include a statement of cash flows.

 

(c)                                  Compliance Certificate.  Concurrent with
the financial statements required above, a compliance certificate, in the form
of Exhibit E, signed by an officer of the Borrower, attesting to the accuracy of
the financial statements, and demonstrating in form acceptable to the Bank that
the Borrower remains in compliance with the covenants detailed in this
Agreement.

 

(d)                                 Notices.  Promptly upon becoming aware of
the same, written notice of any Default or Event of Default.

 

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(e)                                  Additional Information.  Upon request of
the Bank, such other information as it may reasonably request.

 

The Borrower shall deliver the statements required under paragraphs (a) and
(b) to the Bank by e-mail containing either the body of such statements or a
hyperlink to the location of such statements on the World Wide Web.

 

9.2                               Covenants

 

The Borrower shall:

 

(a)                                 Negative Pledge.  Not create, incur or
suffer to exist any pledge, lien, security interest, assignment or transfer upon
or of any of the Borrower’s accounts receivable or other rights to payment,
whether now existing or hereafter created or existing; provided, however,
nothing in this Section 9.2(a) shall prohibit the Borrower from (i) assigning or
transferring certain of its accounts receivable in connection with a sale of the
part of its business from which such accounts receivable have arisen, or
(ii) transferring not more than 25% of its accounts receivable (with such
percentage determined by face amount of the accounts receivable as of the time
immediately before such transfer) to a Securitization Entity in connection with
a Securitization Transaction, so long as the Borrower receives reasonably
equivalent value on account of such transfer.

 

(b)                                 Taxes.  Pay, when due, all taxes,
assessments and governmental charges levied or imposed upon the Borrower;
provided, however, the Borrower shall not be required to pay any such tax,
assessment or governmental charge whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which adequate
reserves have been established by the Borrower in accordance with generally
accepted accounting principles.

 

(c)                                  Insurance.  Cause its properties to be
adequately insured against loss or damage and to carry such other insurance as
is usually carried by persons engaged in the same or similar business.  Such
insurance shall either be maintained by the Borrower through self-insurance
through captive insurance companies or by insurance issued by reputable and
solvent insurance companies.

 

(d)                                 Merger.  Refrain from being acquired by any
other entity and refrain from transferring all or substantially all of its
assets to, or consolidating, merging or otherwise combining with, any other
entity where the Borrower is not the surviving entity; provided, however, the
Borrower’s failure to comply with the requirements of this Section 9.2(d) shall
not constitute an Event of Default under Section 10.1(f) of this Agreement, but
instead shall give the Bank the right, by written notice to the Borrower, to
demand payment of unpaid principal, accrued interest and all other amounts
payable under the Notes and this Agreement and to terminate the Commitment, with
such demand and termination to be effective

 

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thirty calendar days’ following such written notice from the Bank to the
Borrower.

 

(e)                                  Maintenance of Properties.  Make all
repairs, renewals or replacements necessary to keep its plant, properties and
equipment in good working condition; provided, however, that nothing in this
Section 9.2(e) shall prevent the Borrower from discontinuing the operation or
maintenance of such plant, properties or equipment if such discontinuance is, in
the judgment of the Borrower, desirable in the conduct of its business.

 

(f)                                   Books and Records.  Maintain adequate
books and records in accordance with generally accepted accounting principles.

 

(g)                                  Compliance with Laws.  Comply with all
material laws and regulations applicable to its business.

 

(h)                                 Preservation of Rights.  Maintain and
preserve its corporate existence and all material rights, privileges, charters
and franchises it now has; provided, however, that the Borrower shall not be
required to preserve any such right, privilege, charter or franchise if the
Board of Directors of the Borrower shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Borrower.

 

(i)                                     Inspection.  Upon reasonable notice by
the Bank to the Borrower, permit the Bank to visit and inspect the Borrower’s
properties and examine its books and records to the extent the Bank determines
such inspection and examination is necessary for the Bank to observe and monitor
the Borrower’s financial performance and financial condition and to assure the
Borrower’s compliance with its obligations under this Agreement.

 

(j)                                    Use of Proceeds.  Use the proceeds of the
Letters of Credit solely for the Borrower’s general corporate purposes;
provided, however, the proceeds of the Letters of Credit shall not be used by
the Borrower (i) in connection with any acquisition by the Borrower of other
businesses, whether through merger, consolidation, acquisition of assets,
acquisition of stock or other ownership interests or otherwise; or (ii) in
connection with or preparation for any case or proceeding contemplated by
Section 10.1(j) hereof.

 

(k)                                 Foreign Assets Control.  Ensure that neither
the Borrower nor any subsidiary of the Borrower nor any Person who owns a
controlling interest in or otherwise controls the Borrower is or shall be listed
on (i) the lists of Specially Designated Nationals and Blocked Persons
maintained by the Department of the Treasury’s Office of Foreign Assets Control,
or (ii) the list of persons whose property or interests in property are blocked
or subject to blocking pursuant to section 1 of Executive Order 13224 of
September 23, 2001.

 

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(l)                                     Ratio of EBITDA to Interest.  Maintain
its EBITDA to Interest Ratio as of the end of each fiscal quarter of the
Borrower at not less than 3.0 to 1.

 

These covenants were negotiated by the Bank and the Borrower based on
information provided to the Bank by the Borrower.  A breach of a covenant is an
indication that the risk of the transaction has increased.  In consideration for
any waiver or modification of these covenants, the Bank may require: collateral
or other credit support; higher fees or interest rates; and/or revised loan
documentation or monitoring.  Any covenant waiver or modification will be made
in the sole discretion of the Bank.  The foregoing in no way limits the rights
of the Bank under Section 10 of this Agreement.

 

10.                               EVENTS OF DEFAULT AND REMEDIES.

 

10.1                        Default

 

As used herein, “Event of Default” means any of the following:

 

(a)                                 Default in the payment when due of any
principal due with respect to any of the Unreimbursed L/C Obligations and the
continuance of such default for one (1) calendar day.

 

(b)                                 Default in the payment when due of any
interest, fees, costs, expenses or other payments required to be paid by the
Borrower under this Agreement and the continuance of such default for five
(5) calendar days.

 

(c)                                  Default in the payment of unpaid principal,
interest and other payments under this Agreement (other than as set forth in
subsections (a) and (b) above) following the Borrower’s receipt of written
notice from the Bank demanding payment thereof as permitted in Section 9.2(d) of
this Agreement and the passage of thirty calendar days following such written
notice.

 

(d)                                 Default in the observance or performance of
any covenant or agreement contained in Section 9.2(a) or 9.2(l) of this
Agreement.

 

(e)                                  Default in the observance or performance of
any covenant or agreement contained in Section 9.1 of this Agreement and
continuance of such default for twenty (20) calendar days.

 

(f)                                   Default in the observance or performance
of any covenant or agreement contained in this Agreement or related documents
(other than a covenant or agreement a default in whose performance is elsewhere
in this Section 10.1 specifically dealt with) and continuance for more than
thirty (30) calendar days.

 

(g)                                  Default in the payment of any indebtedness
of the Borrower or a Subsidiary when due or, if payable on demand, on demand, or
any other default by the Borrower or a Subsidiary in any agreement relating to
indebtedness or contingent liabilities that would allow the maturity of such
indebtedness to be accelerated, in each case

 

17

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if the outstanding balance (including principal, interest, and any other sums)
of all such indebtedness or liabilities in default at any one time exceeds
$200,000,000.

 

(h)                                 Any representation or warranty made by the
Borrower to the Bank proves to be untrue in any material respect.

 

(i)                                     The rendering against the Borrower of
any final judgment, decree or order for the payment of money in excess of
$500,000,000 (excluding any portion of such judgment, decree or order which is
insured by an unrelated third-party insurer which has not objected to or denied
coverage), and the continuance of such judgment, decree or order unsatisfied and
in effect for any period of ninety (90) calendar days without a stay of
execution.

 

(j)                                    With or without the Borrower’s consent, a
custodian, trustee or receiver shall be appointed for the majority of the
properties of the Borrower or a Subsidiary, or a petition shall be filed by or
against the Borrower or a Subsidiary under the United States Bankruptcy Code or
any similar comprehensive bankruptcy or insolvency law, whether domestic or
foreign.

 

(k)                                 The Borrower shall fail to pay the amount of
any drawing under any Letter of Credit to the Bank on demand, or shall otherwise
fail to perform any of its obligations under Section 2.1(d); or the Borrower or
a Subsidiary shall fail to perform any of its or their obligations under any
Reimbursement Agreement.

 

(l)                                     The Borrower shall repudiate, purport to
revoke, assert the invalidity or unenforceability of, or fail to perform any
obligation under the guaranty set forth in Section 3, or such guaranty shall for
any reason be determined by the Bank in good faith to be invalid or
unenforceable.

 

10.2                        Remedies.

 

Upon the occurrence of any one or more Events of Default, or at any time
thereafter, the Bank may:

 

(a)           terminate the Commitment;

 

(b)                                 declare the unpaid principal, accrued
interest and all other amounts payable under the Notes and this Agreement to be
immediately due and payable;

 

(c)                                  if any Letter of Credit remains
outstanding, require the Borrower to deposit in the Special Deposit Account
immediately available funds equal to the aggregate face amount of all such
outstanding Letters of Credit; and/or

 

(d)                                 exercise any or all remedies available to
the Bank under the other Loan Documents or otherwise available by law or
agreement.

 

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Notwithstanding the foregoing, upon the occurrence of an Event of Default under
paragraph 10.1(j), the Commitment shall immediately terminate and the unpaid
principal, accrued interest and all other amounts payable under the Notes and
this Agreement will become immediately due and payable, and the Borrower shall
immediately be obligated to deposit in the Special Deposit Account immediately
available funds equal to the then-outstanding L/C Amount.

 

10.3                        Setoff

 

The Bank may, upon the occurrence of an Event of Default or at any time
thereafter, without prior notice to the Borrower, set off and apply any and all
deposits held by, and other indebtedness owing by, the Bank to or for the credit
or the account of the Borrower against any and all obligations owing to the Bank
hereunder, whether now or hereafter existing, whether or not the Bank has made
demand under this Agreement or any Loan Document and whether such obligations
may be contingent or unmatured.  Such right shall be in addition to and not in
lieu of any other rights and remedies available to the Bank under the other Loan
Documents or otherwise available by law or agreement.  The Bank will endeavor to
notify the Borrower promptly after any such setoff made by the Bank; provided,
however, that the failure to give such notice shall not affect the validity of
such setoff or any application of funds realized by such setoff.

 

10.4                        Pledge of Special Deposit Account.

 

The Borrower hereby pledges, and grants the Bank a security interest in, all
sums held in the Special Deposit Account from time to time and all proceeds
thereof as security for the payment of all amounts due and to become due from
the Borrower to the Bank pursuant to this Agreement, including but not limited
to the Borrower’s obligations under Section 3, and the Borrower’s obligation to
reimburse the Bank for any amount drawn under any Letter of Credit, whether such
reimbursement obligation arises directly under this Agreement or under a
separate Reimbursement Agreement.  The Bank shall have full ownership and
control of the Special Deposit Account, and the Borrower shall have no right to
withdraw the funds maintained in the Special Deposit Account.

 

11.                               MISCELLANEOUS.

 

11.1                        360-Day Year.

 

All interest on Unreimbursed L/C Obligations and all fees due under this
Agreement will be calculated based on the actual days elapsed in a 360-day year.

 

11.2                        GAAP.

 

Except as otherwise stated in this Agreement, all financial information provided
to the Bank and all calculations for compliance with financial covenants will be
made using generally accepted accounting principles consistently applied
(“GAAP”).

 

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11.3                        No Waiver; Cumulative Remedies.

 

No failure or delay by the Bank in exercising any rights under this Agreement
shall be deemed a waiver of those rights.  The remedies provided for in the
Agreement are cumulative and not exclusive of any remedies provided by law.

 

11.4                        Amendments, Etc.

 

Any amendment, modification, termination, or waiver of any provision of this
Agreement must be in writing and signed by the Bank.

 

11.5                        Binding Effect: Assignment.

 

This Agreement is binding on the Borrower and the Bank and their successors and
assigns.  The Borrower may not assign its rights hereunder without the prior
written consent of the Bank.

 

11.6                        New York Law.

 

This Agreement is governed by the substantive laws of the State of New York.

 

11.7                        Severability of Provisions.

 

If any part of this Agreement is unenforceable, the rest of the Agreement may
still be enforced.

 

11.8                        Integration.

 

This Agreement contains the entire understanding between the parties and
supersedes all other oral or written agreements between the Borrower and the
Bank.

 

11.9                        Notice.

 

Except as otherwise specified herein, all notices and other communications
hereunder shall be in writing and shall be (i) personally delivered, (ii) sent
by registered mail, postage prepaid, or (iii) transmitted by telecopy, in each
case addressed to the party to whom notice is being given at its address set
forth by its signature below or if telecopied, transmitted to that party at its
telecopier number set forth by its signature below; or, as to each party, at
such other address or telecopier number as may hereafter be designated in a
notice by that party to the other party complying with the terms of this
Section.  All such notices or other communications shall be deemed to have been
given on (i) the date received if delivered personally, (ii) the date of posting
if delivered by mail, or (iii) the date of transmission if delivered by
telecopy.  All communications required hereunder to be delivered by e-mail shall
be transmitted to the e-mail address set forth by the applicable party’s
signature below, or, as to each party, at such other e-mail address as may
hereafter be designated in a notice by that party to the other party complying
with the terms of this Section.

 

If the Bank issues, or takes any action respecting, a Letter of Credit pursuant
to any communication of any kind from the Borrower or a Subsidiary, including,
without limitation:  (i)

 

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the Borrower’s or a Subsidiary’s written request other than on the Bank’s
standard application, (ii) the Bank’s prescribed computerized entry format, or
(iii) any written or oral telecommunication, then the provisions of this
Agreement shall apply to such Letter of Credit or such action, notwithstanding
any lack of reference to this Agreement in such communication.  In furtherance
of the foregoing, and without limitation thereof:  the Borrower or a Subsidiary
may be entitled to apply for the issuance and amendment, as well as potentially
other letter of credit services, pursuant to HSBCnet and any successor thereto. 
The Bank and the Borrower acknowledge and agree that, unless and solely to the
extent otherwise agreed by both parties hereto, any application or other letter
of credit transaction effected pursuant to HSBCnet or any successor shall create
a legal, valid and binding obligation of each party hereto, governed by and
enforceable against it in accordance with the terms of this Agreement.

 

11.10                 Indemnification by the Borrower.

 

The Borrower hereby agrees to indemnify and hold harmless the Bank, as well as
its agents, employees, officers and directors (collectively, the “Indemnified
Parties” and individually an “Indemnified Party”) from and against any and all
losses, liabilities (including liabilities for penalties), actions, suits,
judgments, demands, damages, costs, disbursements, or expenses (including
reasonable attorneys’ fees and expenses) of any kind or nature whatsoever, which
are imposed on, incurred by, or asserted against an Indemnified Party in any way
relating to or arising out of this Agreement or the other Loan Documents;
provided, however, that the Borrower shall not be liable for any portion of any
such losses, liabilities (including liabilities for penalties), actions, suits,
judgments, demands, damages, costs, disbursements, or expenses to the extent
resulting from (i) an Indemnified Party’s failure to perform its obligations
under this Agreement, or (ii) any negligence, gross negligence or willful
misconduct of an Indemnified Party.  In the case of an investigation, litigation
or other proceeding to which the indemnity in this paragraph applies, such
indemnity shall be effective whether or not such investigation, litigation or
proceeding is brought by the Borrower, any of its directors, security holders or
creditors, an Indemnified Party or any other person or an Indemnified Party is
otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated.

 

No Indemnified Party shall have any liability (whether in contract, tort or
otherwise) to the Borrower or any of its security holders or creditors for or in
connection with the transactions contemplated hereby, except to the extent such
liability is determined in a final non-appealable judgment by a court of
competent jurisdiction to have resulted from such Indemnified Party’s
negligence, gross negligence or willful misconduct.  In no event, however, shall
any Indemnified Party be liable on any theory of liability for any special,
indirect, consequential or punitive damages (including, without limitation, any
loss of profits, business or anticipated savings).

 

11.11                 Customer Identification - USA Patriot Act Notice.

 

The Bank hereby notifies the Borrower that, pursuant to the requirements of the
USA Patriot Act, Title III of Pub. L. 107-56, signed into law October 26, 2001
(the “Act”), it is required to obtain, verify and record information that
identifies the Borrower, which information includes the name and address of the
Borrower and other information that will allow the Bank to identify

 

21

--------------------------------------------------------------------------------

 

the Borrower in accordance with the Act.  The Borrower agrees to promptly
provide such information upon request.

 

11.12                 Execution in Counterparts.

 

This Agreement and the other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts of this Agreement or such other Loan
Document, as the case may be, taken together, shall constitute but one and the
same instrument.

 

11.13                 Waiver of Jury Trial.

 

THE BORROWER AND THE BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT AND THE NOTES OR THE RELATIONSHIPS ESTABLISHED HEREUNDER.

 

11.14                 Jurisdiction.

 

The Borrower hereby irrevocably and unconditionally submits to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or any
of the other Loan Documents, and the Borrower hereby irrevocably and
unconditionally agrees that all claims in respect of such action or proceeding
may be heard and determined in such state or federal court.  The Borrower hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense
of an inconvenient forum to the maintenance of such action or proceeding.  The
Borrower irrevocably consents to the service of copies of the summons and
complaint and any other process which may be served in any such action or
proceeding by the mailing of copies of such process to the Borrower at its
address referred to in Section 11.9.  The Borrower agrees that a final judgment
in any such action or proceeding may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law.  Nothing in this
Section 11.14 shall affect the right of the Bank to serve legal process in any
other manner permitted by law or affect the right of the Bank to bring any
action or proceeding against the Borrower or its property in the courts of other
jurisdictions.

 

11.16 No Fiduciary Relationship.

 

The Borrower acknowledges that the Bank has no fiduciary relationship with, or
fiduciary duty to, the Borrower arising out of or in connection with this
Agreement or the other Loan Documents, and the relationship between the Bank and
the Borrower is solely that of creditor and debtor.  This Agreement and the
other Loan Documents do not create a joint venture among the parties hereto.

 

22

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day
and year first above written.

 

Address:

3M COMPANY

Building 224-5S-26, 3M Center

 

 

St. Paul, MN 55144-1000

 

 

Attention: Scott d. Krohn

 

 

E-Mail: sdkrohn@mmm.com

By

/s/ Scott D. Krohn

Telecopier (651) 737-0010

 

Scott D. Krohn, Its Vice President, Treasurer

 

--------------------------------------------------------------------------------

 

Commitment: $150,000,000

HSBC BANK USA, NATIONAL ASSOCIATION

 

 

 

Address:

By

/s/ Patrick D. Mueller

452 Fifth Avenue

 

Name:  Patrick D. Mueller

New York, NY 10018

 

Title:  Director

Attention:  Seema Sodha

 

 

E-Mail:

 

 

Telecopier:  917-229-0973

 

 

 

--------------------------------------------------------------------------------

 

 

EXHIBITS

 

 

Exhibit A

 

Conditions Precedent

 

 

 

 

 

Exhibit B

 

Representations and Warranties

 

 

 

 

 

Exhibit C

 

Form of Note

 

 

 

 

 

Exhibit D

 

Telephone/Facsimile/E-Mail Indemnity Letter

 

 

 

 

 

Exhibit E

 

Form of Compliance Certificate

 

 

 

 

 

Exhibit F

 

Existing Letters of Credit

 

--------------------------------------------------------------------------------

 

Exhibit A

 

CONDITIONS PRECEDENT

 

1.             A Note to the order of the Bank to the extent requested by the
Bank pursuant to Section 2.3.

 

2.             Authorization

 

(a)                                 A certified copy of resolutions of the
Borrower’s board of directors authorizing the execution of this Agreement and
all related documents.

 

(b)                                 A certificate of the Borrower’s corporate
secretary as to the incumbency and signatures of the officers of the Borrower
signing this Agreement.

 

3.             Organization

 

(a)                                 A certified copy of the Borrower’s Articles
of Incorporation and By-Laws.

 

(b)                                 A Certificate of Good Standing issued by the
Secretary of the State of the state of the Borrower’s incorporation dated not
more than 30 days prior to the date hereof.

 

4.                                      An opinion of counsel to the Borrower,
opining as to the due authorization, execution, delivery and enforceability of
the Loan Documents and such other matters as the Bank may require.

 

5.                                      A Telephone/Facsimile/E-Mail Indemnity
Letter in the form of Exhibit D.

 

A-1

--------------------------------------------------------------------------------

 

Exhibit B

 

REPRESENTATIONS AND WARRANTIES

 

Corporate Status.  The Borrower is a corporation duly formed and in good
standing under the laws of the State of Delaware.

 

Authorization.  The execution, delivery and performance of this Agreement are
within the Borrower’s powers, have been duly authorized, and do not conflict
with the articles or bylaws of the Borrower, any agreement by which the Borrower
is bound or any court, administrative or other ruling by which the Borrower is
bound.

 

Financial Reports.  The Borrower has provided the Banks with its annual audited
financial statement as of December 31, 2011 and its quarterly unaudited
financial statement as of June 30, 2012.  These statements fairly represent the
financial condition of the Borrower as of their respective dates and were
prepared in accordance with GAAP.  There has been no material adverse change in
the consolidated financial condition of the Borrower after the date of those
statements.

 

Material Adverse Change.  Since December 31, 2011, except as disclosed in the
quarterly unaudited financial statement as of June 30, 2012, there has been
occurred no event or circumstance that would individually or in the aggregate
have a material adverse effect on the consolidated financial condition or
operations of the Borrower.

 

Litigation.  Except as disclosed in the Borrower’s Annual Report on Form 10-K
for the year ended December 31, 2011 and in the Borrower’s Quarterly Report on
Form 10-Q for the period ended June 30, 2012, each as filed with the Securities
and Exchange Commission (“SEC”), there are no legal or governmental proceedings
pending or, to the best of the Borrower’s knowledge, threatened by governmental
authorities or others, by which the Borrower is or may be bound, which, if
determined adversely to the Borrower, would individually or in the aggregate
have a material adverse effect on the consolidated financial condition or
operations of the Borrower.

 

Taxes.  The Borrower has filed when due all federal, state and local tax returns
and paid all amounts shown as due thereon, except for such amounts which are
being contested in good faith by appropriate proceedings.

 

No Default.  There is no Default or Event of Default under this Agreement.

 

ERISA.  The Borrower is in compliance in all material respects with ERISA and
has received no notice to the contrary from the PBGC or other governmental area.

 

Environmental Matters.  Except as disclosed in the Borrower’s Annual Report on
Form 10-K for the year ended December 31, 2011 and in the Borrower’s Quarterly
Report on Form 10-Q for the period ended June 30, 2012, each as filed with the
SEC, to the best of the Borrower’s knowledge, the Borrower has not incurred,
directly or indirectly, any material contingent liability in

 

B-1

--------------------------------------------------------------------------------

 

connection with (i) the release of any toxic or hazardous waste or substance
into the environment or (ii) noncompliance with applicable environmental, health
and safety statutes and regulations.

 

Insurance.  The Borrower is maintaining the insurance required by
Section 9.2(c).

 

Legal Agreements.  This Agreement and the other Loan Documents constitute the
legal, valid and binding obligations and agreements of the Borrower, enforceable
against the Borrower in accordance with their respective terms, including
against claims of usury, except to the extent that enforcement thereof may be
limited by any applicable bankruptcy, insolvency or similar laws now or
hereafter in effect affecting creditors’ rights generally.

 

Regulation U.  The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System), and no
part of the proceeds of any Letter of Credit will be used to purchase or carry
any margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock.  After application of the proceeds of each Letter of
Credit, not more than 25 percent of the value (as determined by any reasonable
method) of the assets of the Borrower subject to any provision of this Agreement
under which the sale, pledge or disposition of assets is restricted will consist
of margin stock.

 

--------------------------------------------------------------------------------

 

Exhibit C

 

NOTE

 

$                              

 

                         , 201    

 

FOR VALUE RECEIVED, 3M Company, a Delaware corporation (the “Borrower”),
promises to pay immediately on demand to the order of HSBC Bank USA, National
Association (the “Bank”), at such place as the Bank may from time to time
designate in writing, the principal sum of
                                                               Dollars
($                              ), or, if less, the aggregate unpaid principal
amount of all Unreimbursed L/C Obligations owing to the Bank by the Borrower
pursuant to Section 2.1 of the Letter of Credit Agreement dated August 24, 2012
between the Borrower and the Bank (the “Credit Agreement”), and to pay interest
on the principal balance of this Note outstanding from time to time at the rate
or rates determined pursuant to the Credit Agreement.

 

This Note is issued pursuant to, and is subject to, the Credit Agreement, which
provides (among other things) for the amount and date of payments of principal
and interest hereunder, for the acceleration of this Note upon an Event of
Default and for the voluntary prepayment of this Note.  This Note is a “Note,”
as defined in the Credit Agreement.

 

The Borrower shall pay all costs of collection, including reasonable attorneys’
fees and legal expenses, if this Note is not paid when due, whether or not legal
proceedings are commenced.

 

Presentment or other demand for payment, notice of dishonor and protest are
expressly waived.

 

 

3M COMPANY

 

 

 

 

 

 

 

 

 

 

By

 

 

 

Its

 

 

--------------------------------------------------------------------------------

 

Exhibit D

 

[Separately provided]

 

D-1

--------------------------------------------------------------------------------

 

[g193611ka07i001.jpg]

 

TELEPHONE/FACSIMILE/E-MAIL INDEMNITY LETTER

 

HSBC Bank USA National Association
Trade and Supply Chain
2 Hanson Place, 14th Floor
Brooklyn, NY 11217

 

ATTN: Trade and Supply Chain

 

In order to induce HSBC Bank USA National Association (the “Bank”) to accept
instructions from the undersigned (the “Customer”) by telephone, facsimile, or
e-mail in connection with (i) letters of credit which may be issued from time to
time at the request or for the account of the Customer, and/or (ii) any other
trade services provided by the Bank for the benefit or account of the Customer
as set forth on the second page of this Letter collectively, (the
“Transactions”), without requiring the Customer to deliver an executed written
original of the instruction document(s)(the “Instruction Document”) prior to the
Bank taking action with respect to such telephone, facsimile-transmitted, or
e-mail transmitted instructions, the Customer agrees that:

 

1. The Bank is authorized to rely on and to act on any telephone, any
facsimile-transmitted, or any e-mail transmitted instructions concerning the
Transactions which the Bank believes in good faith, without any need to inquire
or investigate as to, or verify, the genuineness or authenticity of the
instructions, to be from the Customer, and the Bank shall not be liable to the
Customer or any third party for so acting or refraining from acting, except in
the case of negligence, gross negligence or willful misconduct by the Bank.

 

2. The Bank shall in particular not be under any duty to make any inquiry or
investigation with respect to, or verification of, the telephone,
facsimile-transmitted, or e-mail transmitted instructions, except to confirm
that its records show that the person purporting to be issuing the instructions
on behalf of the Customer has authority to do so; provided, however, that with
respect to telephone instructions, the Bank shall have no duty or obligation to
inquire, investigate or verify that the person issuing such telephone
instructions and identifying himself/herself as an authorized person of the
Customer is who he/she purports to be.  Any action or omission taken by the Bank
pursuant to telephone, facsimile-transmitted, or e-mail transmitted
instructions, in a manner consistent with this letter, shall be binding upon the
Customer, its heirs, successors, legal representatives, beneficiaries, trustees,
assigns and anyone else claiming through or on behalf of the Customer, whether
ultimately made with or without the authority, knowledge or consent of the
Customer.

 

3. The Customer shall at all times indemnify, defend and hold the Bank, and the
officers, directors, employees, agents and affiliates of the Bank
(“Indemnitees”) harmless from and against all actions, liabilities, proceedings,
claims, losses, damages, costs, fees (including reasonable attorney’s fees) and
expenses arising in connection with the Bank’s or any Indemnitees’ action or
failure to act with respect to telephone, facsimile-transmitted, or e-mail
transmitted instructions, in a manner consistent with this Letter, except in the
case of negligence, gross negligence or willful misconduct by the Bank or such
Indemnitee.

 

--------------------------------------------------------------------------------

 

4. The Bank shall be under no duty or obligation to accept any telephone,
facsimile, or e-mail instructions from the Customer, and the Bank may accept or
refuse to accept, at any time and from time to time, any such instructions in
its sole and absolute discretion, without giving the Customer prior notice of
its refusal to accept any such telephone, facsimile, or e-mail instructions.

 

The following list of individuals are authorized to instruct Bank Personnel, by
telephone, and/or facsimile or e-mail to execute the following transactions (the
“Transactions”):

·                  Issuance of a DC, amendment or shipping guarantee.

·                  Approval of discrepancies.

·                  Authority to pay at sight against DC or Collection documents.

·                  Authority to refinance against DC or Collection documents.

·                  Instructions to modify DC, amendment or Collection
instructions after physical request has been received.

·                  Acceptance of commitment confirmations with respect to DCs to
be negotiated by the Bank

·                  Approval of charges

·                  Instructions to assign proceeds

 

PRINT NAME

 

TITLE

 

SIGNATURE

 

EMAIL ADDRESS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporation or Partnership Name

 

 

 

 

 

 

 

By:

 

 

 

Name

Title

 

 

 

 

 

 

Individual Signature

 

 

 

 

 

 

Date

 

--------------------------------------------------------------------------------

 

Exhibit E

 

CERTIFICATE OF COMPLIANCE

 

In accordance with the Letter of Credit Agreement dated as of August 24, 2012,
by and between 3M Company (the “Borrower”) and HSBC Bank USA, National
Association, as such Credit Agreement has been or may hereafter be amended from
time to time, attached are the consolidated financial statements for the
Borrower for the period ending                               , 201_ (the
“Effective Date”).

 

I certify that the financial statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
those applied in the annual financial statements.  I also certify that as of the
Effective Date, the Borrower is in compliance with the covenants stated in the
Credit Agreement.

 

I further certify that the Borrower’s EBITDA to Interest Ratio, as defined in
the Credit Agreement, as of the Effective Date is as set forth below:

 

 

(a)

EBITDA

$

 

 

 

 

(b)

Interest

$

 

 

 

 

EBITDA to Interest Ratio [(a)/(b)]

 

 

to 1

 

Minimum Permitted EBITDA to Interest Ratio

 

 

3.0 to 1

 

Furthermore, I have no knowledge of the occurrence of an Event of Default under
the Credit Agreement or of any event which with notice of lapse of time would
constitute an Event of Default, except those specifically stated below.

 

 

3M COMPANY

 

 

 

 

 

 

 

 

 

 

By

 

 

 

Its

 

 

E-1

--------------------------------------------------------------------------------

 

Exhibit F

 

Existing Letters of Credit

 

Account Party

 

Letter of Credit No.

 

Current Face Amount

 

Beneficiary

 

Automatic Renewal

Seaside Insurance Limited

 

SDCMTN559942

 

44,765,000

 

National Union Fire Insurance

 

yes

Seaside Insurance Limited

 

SDCMTN560209

 

71,283,319

 

Old Republic Insurance Company

 

yes

Seaside Insurance Limited

 

SDCMTN560200

 

2,137,573

 

Northwestern National Insurance

 

yes

Seaside Insurance Limited

 

SDCMTN560406

 

350,000

 

Chartis Property Casual Company

 

yes

3M Company

 

SDCMTN560325

 

378,000

 

Decatur Utilities

 

yes

 

F-1

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