Exhibit 10.1

 

CONFIDENTIAL TREATMENT

EPIX Medical, Inc. has requested that the marked portions of this document be
accorded confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

 

 

FIRST AMENDMENT TO LOAN AGREEMENT

 

 

Dated as of June 1, 2004

 

 

By and Between

 

 

EPIX MEDICAL, INC.

 

AND

 

SCHERING AKTIENGESELLSCHAFT

 

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FIRST AMENDMENT TO LOAN AGREEMENT

 

This FIRST AMENDMENT TO LOAN AGREEMENT dated as of June 1, 2004 by and between
EPIX MEDICAL, INC. (“Epix”) and SCHERING AKTIENGESELLSCHAFT, Berlin Germany
(“Schering”).

 

Recitals

 

Epix and Schering are parties to a certain Loan Agreement dated as of May 26,
2003 (as now or hereafter amended, modified or supplemented from time to time,
the ‘Loan Agreement”).  In connection with a certain proposed senior
subordinated note offering by Epix, Epix has requested certain amendments to the
Loan Agreement, and Schering is willing to agree thereto, but only on the terms
and conditions set forth herein. All capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Loan Agreement.

 

NOW, THEREFORE, Epix and Schering hereby amend the Loan Agreement as follows:

 

Section 1.                                            Section 2.2(c) of the Loan
Agreement is hereby deleted in its entirety and the following new Section 2.2(c)
substituted therefor:

 

Section 2.2(c).  Epix shall be limited to submitting requests for Loans pursuant
to Sections 2.2(a) and (b) and to making repayments of Loans pursuant to
Section 2.4 hereof an aggregate number of [****(**)] times per annum. Each Loan
made by Schering hereunder shall remain outstanding for no less than [****(**)]
days after the date of advance hereunder. Each request for Loans made by Epix
hereunder shall include the anticipated repayment date. Epix shall provide
notice to Schering of any modification to such anticipated repayment date no
less than [****(**)] business days prior to the anticipated repayment date
originally specified by Epix.  Schering shall, subject to the other provisions
of this Agreement, make the Loan requested by Epix within five (5) Business Days
(defined as any day, other than a Saturday or Sunday, on which federally
chartered banks in the United States and Germany are open for business) after
the receipt by Schering of a request for funds meeting the requirements of this
Agreement. Upon disbursements to Epix by Schering of any funds under this
Agreement, Schering may, at its election, present the Note to Epix for notation
on Schedule A attached hereto of any additional principal amount outstanding as
a consequence of the Loan by Schering.

 

Section 2.                                            Article 2 (The Loans;
Payment of Principal and Interest; Related Matters) of the Loan Agreement is
hereby amended by adding the following new Section at the end thereof:

 

Section 2.8                                      Administrative
Fee.                                        In consideration of Schering’s
agreement to make the Loans described herein, Epix agrees to pay Schering an

 

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annual administrative fee. Such fee shall be in the amount of (a) [*******(***)]
for calendar year 2004, and (b) [*******(***)] for each remaining calendar year
of the Loan beginning with calendar year 2005. Such annual fee shall be deemed
earned on the date hereof (as to the fee for calendar year 2004), and shall be
deemed earned on first day of each calendar year (as to the fee for each
remaining calendar year of the Loan beginning with calendar year 2005). The
annual fee shall be payable quarterly in equal installments of [*******(***)]
commencing July 1, 2004.

 

Section 3.                                            Article 5 (Affirmative
Covenants) of the Loan Agreement is hereby amended by adding the following new
Sections at the end thereof:

 

5.9                                 Repurchase of Convertible Notes.  In the
event of the redemption or repurchase for cash at any time of the Convertible
Notes in whole or in part, (whether pursuant to Section 3.13, Article XI or
Article XIII of the Indenture or otherwise) other than a redemption for cash by
Epix, at Epix’s option, of Convertible Notes in a cumulative principal amount of
less than [*******], Epix shall simultaneously with or prior to the consummation
of such redemption or repurchase, repay in full the then outstanding principal
balance of the Loans made by Schering, together with interest accrued and
unpaid, and any other charges due under this Agreement and all obligations of
Schering to make Loans to Epix shall terminate.

 

5.10                           Convertible Notes.  Immediately notify Schering
of the occurrence or existence of any of the following: (i) An Event of Default
shall occur under the Indenture or Convertible Notes, or (ii) any Holder or the
Trustee (as defined in the Indenture) shall send notice of the exercise of the
right to require repurchase or redemption of any of the Convertible Notes,
whether pursuant to an Event of Default, a Designated Event or otherwise.

 

Section 4.                                            Section 6.5 of the Loan
Agreement is hereby deleted In its entirety and the following new Section 6.5
substituted therefor:

 

Section 6.5.                                   Other Liabilities.  Incur,
create, assume or permit to exist any indebtedness or other Liability on account
of borrowed money except (a) Obligations to Schering, (b) loans from third
parties in order to repay the outstanding principal under the Loans and interest
thereof, provided that such third party loan amount (including principal and
interest) shall not exceed the outstanding principal and interest under the
Loans, (c) accounts payable less than ninety (90) days and accrued expenses of
Epix incurred in the ordinary course of business, (d) certain Convertible Senior
Notes due 2024 in the aggregate principal amount of $75,000,000 issued by the
Company to third parties pursuant to a certain draft Indenture dated May 27,
2004 (the “Indenture”), plus such additional Notes as may be issued upon
exercise of the over-allotment option as may be agreed to by Epix in accordance
with the Indenture, but in no event shall the over-

 

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allotment be greater than $25,000,000 (collectively, the “Convertible Notes”),
which notes shall be subordinated in right of payment to the Loans now or
hereafter made by Schering hereunder, and (e) Liabilities that do not exceed,
individually or in the aggregate, Ten Million Dollars ($10,000,000). As a
condition to the effectiveness of exception clause (d) above: (i) the
Convertible Notes shall be substantially identical in form and substance as the
draft sample of a Convertible Note (draft dated June 1, 2004) attached hereto as
Exhibit 6.5-A, and (ii) the Indenture shall be substantially identical in form
and substance as the draft Indenture (draft dated June 1, 2004) attached hereto
as Exhibit 6.5-B; provided, however, as to each, the final forms of Convertible
Notes and the Indenture may vary from the exhibits attached hereto with respect
to any portion thereof which in Schering’s reasonable discretion would not (i)
have an adverse affect on the benefits and rights of Schering under the
subordinated structure of the Convertible Notes and Indenture to the Loans, or
(ii) otherwise adversely affect the rights of Schering under the Loan Agreement
or the priority or perfection of any liens of Schering thereunder.

 

Section 5.                                            Article 6 (Negative
Covenants) of the Loan Agreement is hereby amended further by adding the
following new Sections at the end thereof:

 

6.12                           Indenture and Convertible Notes.  (a) Amend,
supplement, restate or otherwise modify either the Indenture or the Convertible
Notes from the forms attached hereto as Exhibits 6.5-A and 6.5-B, respectively,
with respect to any portion thereof which in Schering’s reasonable discretion
would (i) have an adverse affect on the benefits and rights of Schering under
the subordinated structure of the Convertible Notes and Indenture to the Loans,
or (ii) otherwise adversely affect the rights of Schering under the Loan
Agreement or the priority or perfection of any liens of Schering thereunder, or
(b) prepay any of the Convertible Notes other than as referred to herein.

 

Section 6.                                            Section 7.2 (Failure to
Perform or Observe Covenants) of the Loan Agreement is hereby amended as
follows:

 

(a)                                  By inserting the following parenthetical
phrase following the words “ninety (90) days” in line 8 of Section 7.2: “(except
if at any time during such 90-day period the Trustee or any Holder (each as
defined in the Indenture) shall accelerate any or all of the sums due under the
Convertible Notes, in which case the 90-day cure period shall immediately
terminate without notice by Schering)”, and

 

(b)                                 By inserting the number [*******], after the
number [*******] in line 10 of Section 7.2.

 

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Section 7.                                            Section 7.7 (Default on
Other Debt) of the Loan Agreement is hereby amended by deleting the first word
of Section 7.7, “Any”, and replacing the deleted word with the phrase “Except as
set forth in Sections 7.13 and 7.14 herein, any”.

 

Section 8.                                            Article 7 (Events of
Default) of the Loan Agreement is hereby amended by adding the following new
Sections at the end thereof:

 

7.13                           Subordination.  Epix shall fail to (i) comply
with the subordination provisions set forth in the Loan Agreement and in the
Indenture or (ii) repay the Loans simultaneously with or prior to any repayment
of the Notes except as provided in Section 5.9, in either of which events.

 

7.14                           Convertible Notes.  Any of the following shall
occur: (i) An Event of Default shall occur under the Indenture or Convertible
Notes, or (ii) any Noteholder shall send notice of the exercise of its right to
require redemption or other repurchase of any of the Convertible Notes pursuant
to a Designated Event.

 

Section 9                                               Article 8 (Remedies) of
the Loan Agreement is hereby amended by adding the following new Section:

 

8.8                                 Convertible Notes and Indenture.
Notwithstanding the discretion vested in Schering in Section 8.2 herein, upon
any of the Events of Default set forth in Section 7.13 and 7.14: (a) all
obligations of Schering to make any Loans after the occurrence such an Event of
Default shall terminate, and (b) the principal and interest of the Loans and all
other Obligations shall become and be immediately due and payable, without
presentment, demand, protest, or further notice of any kind or nature
whatsoever, all of which are to the maximum extent permitted by applicable law
hereby expressly waived by Epix provided, however, that upon an Event of Default
or acceleration by Schering of the Loans as a result of the notice given by the
Noteholders as set forth in Section 7.14(ii), Schering shall not be permitted to
exercise its rights for a period of [*******(***)] days following receipt of
such notice. The foregoing remedies are in addition to all other rights or
remedies that Schering may have hereunder or under law.

 

Section 10.                                      Confidential Offering
Circular.   Epix acknowledges that Schering shall not have had opportunity to
review the Confidential Offering Circular being prepared and issued by Epix with
respect to the convertible Notes and the Indenture before its distribution. Epix
agrees that all statements with respect to the Loan Agreement and the
subordination rights and obligations herein and in the Indenture and Convertible
Notes shall be set forth fully and fairly in the Confidential Offering Circular.
Epix agrees that Schering shall have no liability whatsoever with respect to the
Confidential Offering Circular, the Indenture or the Convertible Notes. Epix
agrees that the rights and obligations under Article 9 of the Loan Agreement
shall apply to the Confidential Offering Circular, the Indenture and the
Convertible Notes. Epix agrees to promptly file this Amendment as required by
applicable securities laws.

 

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Section 11.                                      Confirmation.   Epix hereby
certifies to Schering that (a) except as amended hereby, the Loan Agreement and
the other Loan Documents remain in full force and effect, enforceable in
accordance with their respective terms, (b) as of June 1, 2004, the outstanding
Loan balance consists of Zero Dollars ($0.00) of principal plus accrued
interest; (c) Epix has no claims against Schering relating to the Loan
Agreement, this Amendment or the Collaboration Agreement, and (d) Epix has no
defenses, counterclaims or offsets to the repayment of the Obligations.

 

Section 12.                                      Miscellaneous.   This First
Amendment to Loan Agreement shall be governed by and construed and enforced
under the laws of The State of New York and may be signed in counterparts with
the same effect as if the signatures hereto and thereto were upon the same
instrument.

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the undersigned have set their hands and seals or caused
these presents to be executed by their proper officers and sealed with their
seal the day and year first above written.

 

WITNESS:

 

EPIX MEDICAL, INC.

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

WITNESS:

 

SCHERING AKTIENGESELLSCHAFT

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

Frank Alburg

 

 

 

Title:

Finance Department

 

 

 

 

 

 

`

 

By:

 

 

 

 

Name:

Yvonne Winkler von Mohrenfels

 

 

 

Title:

Legal Department

 

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