Exhibit 10.1


 


MEGA TAX CREDIT AGREEMENT:  Cell Manufacturing Credit


 


A123 Systems, Inc.


 


This Agreement is
between the Michigan Economic Growth Authority and A123 Systems, Inc., a
Delaware Corporation.  As used in this
Agreement, the Michigan Economic Growth Authority and A123 Systems, Inc.
are sometimes referred to individually as “Party” and collectively as
“Parties”.


 


The Michigan
Economic Growth Authority Act, 1995 PA 24, as amended, created the MEGA with
the power to provide tax credits to businesses involved in manufacturing,
mining, research and development, wholesale and trade, office operations,
qualified high-technology business, film and digital media production, or
certain tourism attractions;


 


By Public Act 580
of 2008, an amendment to the Michigan Business Tax Act, 2007 PA 36, the
Michigan Legislature determined that it is in the public interest to promote
economic growth and to encourage private investment, job creation and job
upgrading for Michigan residents by providing a credit against the Michigan
Business Tax for a taxpayer that constructs an integrative cell manufacturing
facility that includes anode and cathode manufacturing and cell assembly and
create 300 new jobs in Michigan; and


 


The MEGA and the
Company desire to set forth the terms and conditions of the tax credits that
the MEGA authorized for the Company by Resolution dated April 14, 2009, as
amended on September 22, 2009.


 


The Parties,
therefore, agree as follows:


 


1.0          DEFINITIONS


 


(a)   “Act” means the Michigan Economic Growth Authority
Act, 1995 PA 24, as amended as of the date this MEGA Tax Credit is awarded.


 


(b)   “Agreement” means this written agreement.


 


(c)   “Application” means any information submitted to the
MEGA in support of the Company’s request for the MEGA Tax Credit.


 


(d)   “Business” means a proprietorship, joint venture,
partnership, limited liability partnership, trust, business trust, syndicate,
association, joint stock company, corporation, cooperative, limited liability
company, or any other organization.


 


(e)   “Capital Investment” means expenses incurred during
the tax year and included in this Agreement that are associated with
facilities, equipment, tooling and engineering, and manufacturing, including
salaries, contract services, taxes, utilities, raw materials and supplies.


 


(f)    “Cell Manufacturing Credit” means a credit against the
Michigan Business Tax authorized by Section 434(5) of the Michigan
Business Tax Act, 2007 PA 36, as amended.


 


(g)   “Certificate Application” means the written
information submitted each year in support of the Company’s request for a Tax
Credit Certificate that complies with Section 7.0 of this Agreement.


 


(h)   “Company” means A123 Systems, Inc., with the
federal employer identification number 04-3583876.


 


(i)    “Effective Date” means November 20, 2009.


 


(j)    “Facility” means the Company’s locations in Michigan
identified in Section 2.0(b)(4).


 


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(k)   “MBT Act” means the Michigan Business Tax Act, 2007 PA
36, as amended.


 


(l)    “MEGA” means the Michigan Economic Growth Authority
created by the Act.


 


(m)  “Person” means an individual or business.


 


(n)   “Project” means the project described in Section 2.0(b)(4) of
this Agreement.


 


(o)   “Relocation” means the transfer of 51 percent or more
of the of the 300 jobs related to the Project out of the State of Michigan.


 


(o)   “Tax Credit Certificate” means the certificate
required to be issued by 2007 PA 36, as amended, which states that the Company
is an authorized business, the amount of the MEGA Tax Credit authorized for a
tax year, and the Company’s federal employer identification number or Michigan
Treasury number.


 


(p)   “Term” means the time period beginning with the
Effective Date and ending on the last day of the last tax year in which the
Company is eligible to receive a MEGA Tax Credit under this Agreement.


 


2.0          REPRESENTATIONS


 


(a)   Representation by the MEGA. 
The MEGA makes the following representations and warranties as of the
Effective Date:


 


(1)   Existence and Power.  The MEGA is a
public body established and acting pursuant to the Act.


 


(2)   Authority.  The MEGA had
the necessary authority under the Act to grant Cell Manufacturing Credits as of
the date of adoption of the Resolutions referred to herein and has taken all
action necessary to authorize, execute and deliver this Agreement.


 


(3)   Tax Credit Certificate. 
The MEGA will issue the Company’s initial Tax Credit Certificate, in the
form attached to this Agreement, upon execution of this Agreement.


 


(b)   Representations by the Company. 
The Company makes the following representations and warranties as of the
Effective Date:


 


(1)   Existence and Power.  The Company validly exists and is in good standing
under the laws of the State of Delaware and is qualified to transact business
in Michigan.


 


(2)   Corporate Authority.  The Company’s
execution, deliver and performance of this Agreement is authorized by all
necessary corporate action and will not violate any provision of law or of the
Company’s articles of incorporation or bylaws.


 


(3)   Full Disclosure.  Neither this
Agreement nor the Application contain any untrue statement of or omit a
material fact.


 


(4)   Project.  The Company will construct and equip an
integrative cell manufacturing facility that includes anode and cathode
manufacturing and cell assembly at locations which include 39000 W. Seven Mile
Road in the City of Livonia, Wayne County and in other Wayne County communities
including the City of Romulus, the Charter Township of Brownstown and the City
of Belleville at additional costs to be determined.  The Company will create at least 300 new jobs
in the State of Michigan in connection with the project.


 


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3.0          CELL MANUFACTURING CREDIT


 


For four
consecutive tax years, beginning in the Company’s tax year ending on or after January 1,
2012 and ending before January 1, 2016, the MEGA Board authorizes a Cell
Manufacturing Credit for the Company equal to 50 percent of the Capital
Investment for any tax year for the construction of the Facility, provided
that:


 


(a)   In any tax year in which the Company is eligible to
receive a Cell Manufacturing Credit, the amount of the Cell Manufacturing
Credit received by the Company cannot exceed $25,000,000; and


 


(b)   The total Cell Manufacturing Credit received by the
Company shall not exceed $100,000,000.


 


4.0          CONDITIONS OF THE MEGA TAX CREDIT


 


(a)   Eligibility. 
The
Company shall not be eligible for the MEGA Tax Credit described in Section 3.0
of this Agreement unless:


 


(1)   The Company creates 300 new jobs in the State of Michigan
in connection with the project described in Section 2.0(b)(4) no
later than December 31, 2016; and


 


(2)   The Company obtains a Tax Credit Certificate, as
provided in Section 5.0.


 


(b)   Administrative Fee.  The Company
shall pay a one-time administrative fee of $100,000 upon submission of its
first Certificate Application.


 


5.0          TAX CREDIT CERTIFICATE


 


To obtain a Tax
Credit Certificate in connection with the Cell Manufacturing Credit described
in this Agreement, the Company shall provide a Certificate Application to the
MEGA that satisfies the requirements of Section 7.0 of this Agreement.


 


6.0          AUDIT AND VERIFICATION


 


The information
provided by the Company in connection with the Cell Manufacturing Credit is
subject to audit and verification by the MEGA or its designee.  Upon reasonable advance notice the Company by
the MEGA, the Company shall permit the MEGA or its designee, at the MEGA’s sole
expense and during normal business hours, to inspect the Company’s files solely
for the purpose of verifying eligibility for the Cell Manufacturing Credits
authorized for the Company.


 


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7.0          ANNUAL CERTIFICATE APPLICATION


 


(a)   For each year in which the Company seeks a Cell
Manufacturing Credit under this Agreement, the Company shall complete a
Certificate Application.


 


(b)   The Company shall file the Certificate Application
with the MEGA at least 45 days prior to the day the Company’s Michigan Business
Tax return is due to the Michigan Department of Treasury.  If the Michigan Department of Treasury grants
the Company an extension of the deadline to file its Michigan Business Tax
Return for the applicable tax year, the Company shall notify the MEGA of the
extension and the Certificate Application must be filed with the MEGA at least
45 days prior to the extended deadline.


 


(c)   The form of the Certificate Application
shall be as specified by the MEGA.  The
Certificate Application must contain the following information:


 


(1)   An affidavit by the Company certifying
the amount of Capital Investments in the year for which the Cell Manufacturing
Credit is sought and in each preceding tax year commencing 2009.


 


(2)   A certification by an authorized officer of the
Company that the information provided in the Certificate Application is
accurate; and


 


(3)   Any other information reasonably related to
determining the Cell Manufacturing Credit.


 


(d)   Within 45 days of its receipt of the Certificate
Application, the MEGA shall determine whether the requirements of this
Agreement and the Act have been met and, if so, will calculate the amount of
the MEGA Tax Credit and issue a Tax Credit Certificate to the Company.


 


(e)   For each year for which a Cell Manufacturing Credit is
available under this Agreement, the Company must submit a completed Certificate
Application.  If the Company does not
satisfy the requirements of this Agreement for a particular tax year, the MEGA
will not issue a Tax Credit Certificate for that year and one year of the MEGA
Tax Credit is forfeited.  The Company,
however, will continue to be eligible for the Cell Manufacturing Credit in any
remaining years for which the Cell Manufacturing Credit is available under this
Agreement.


 


8.0          ADJUSTMENT, REDUCTION OR TERMINATION OF CREDITS


 


(a)   In the event that the Company fails to comply with the
requirements of this Agreement, as determined by the MEGA, the Company shall
repay to the State of Michigan an amount of the total Cell Manufacturing
Credits received under this Agreement, as required by Section 9.0.


 


(b)   A Cell Manufacturing Credit is subject to adjustment
in any tax year following the tax year in which a Tax Credit Certificate is
issued if the MEGA finds that the information in which the Tax Credit
Certificate was based was incorrect or cannot be verified.


 


(c)   If the MEGA determines that the Company misrepresented
information in order to qualify for, or increase the amount of, a Cell
Manufacturing Credit, the MEGA may terminate this Agreement and shall notify
the Michigan Department of Treasury of the termination.


 


(d)   Prior to taking any adverse action against the Company
under this Section, the MEGA shall provide the Company with written notice of
its intended action and the basis of that action.  The Company shall have a reasonable
opportunity to respond, as identified in the notice.


 


9.0          REPAYMENT PROVISIONS


 


Should a
Relocation occur, the following shall apply:


 


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(a)   If the Relocation occurs on or  before the end of the last year in which the
Company may receive a MEGA Tax Credit under Section 3.0 of this Agreement,
the company shall repay 100 percent of the total amount of the MEGA Tax Credit
received;


 


(b)   If the Relocation occurs within 3 years after the end
of the last year in which the Company may first receive a MEGA Tax Credit under
Section 3.0 and Schedule A of this Agreement, the Company may repay up to
50 percent of the total amount, as determined by MEGA, of the total amount of
the MEGA Tax Credit received.


 


This Section shall
survive the termination of this Agreement.


 


10.0        MISCELLANEOUS


 


(a)   Carry-Forward/Refundable.  The Cell Manufacturing Credit described in this
Agreement shall be claimed as permitted under the MBT Act.


 


(b)   No Limitation on Other Incentives. 
The Cell Manufacturing Credit described in this Agreement is in addition
to any other incentive authorized for the Company by the MEGA for other related
or unrelated projects.


 


(c)   Reporting.  The Company
shall provide the MEGA with information regarding its Cell Manufacturing Credit
as the MEGA may reasonably require.


 


(d)   Assignment of MEGA Tax Credit. 
The Cell Manufacturing Credit described in this Agreement shall not be
transferred or assigned provided, however, that in the event of a merger or if
a Person acquires all or substantially all of the assets of the Company in
Michigan after the Effective Date, the MEGA shall authorize the transfer of the
Company’s rights under this Agreement to that Person if:


 


(1) The
Person agrees in writing to assume all of the duties and responsibilities of
this Company under this Agreement; and


 


(2) The MEGA
determines that the transfer is consistent with and will serve the purposes of
the Act.


 


(e)   Severability. 
If any
clause, provision, or section of this Agreement is held invalid by any court,
the invalidity of that clause, provision, or section shall not affect the
remaining clauses, provisions, or sections of this Agreement and this Agreement
shall be construed and enforced as if such invalid clause, provision, or
section had not been contained in this Agreement.


 


(f)    Notices.  All notices or
other communication provided in connection with this Agreement shall be deemed
received when delivered, if delivered by registered or certified mail, postage
prepaid, return receipt requested, or by messenger or professional courier
services, addressed as follows:


 


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  TO MEGA:

  	
  Michigan Economic
  Development Corporation

  
	
   

  	
  Michigan Economic
  Growth Authority

  
	
   

  	
  300 North Washington
  Square

  
	
   

  	
  Lansing, Michigan 48913

  
	
   

  	
  ATTN: MEGA Board Secretary

  
	
   

  	
   

  
	
  TO Company:

  	
  A123 Systems, Inc.

  
	
   

  	
  Attn: Eric J. Pyenson,
  Vice President & General Counsel

  
	
   

  	
  Arsenal on the Charles

  
	
   

  	
  321 Arsenal Street

  
	
   

  	
  Watertown, MA 02472

  
	
   

  	
  epyenson@a123systems.com

  



 


(g)   Entire Agreement and Amendment. 
Subject to the Act, this Agreement, including the attached Schedules, is
the entire agreement between the Parties with respect to the subject matter
described herein and supersedes any previous agreements.  This Agreement may not be amended without the
written consent of the Parties.


 


(h)   Captions.  The captions
in this Agreement are for convenience only and in no way define, limit or
describe the scope or intent of any provisions or sections of this Agreement.


 


(i)    Interpretation.  This Agreement
shall be governed and interpreted in accordance with the laws of the State of
Michigan.


 


MICHIGAN
ECONOMIC GROWTH AUTHORITY


 


 


	
  /S/
  Peter Anastor

  	
   

  
	
  Peter Anastor,
  Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  A123 Systems, Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /S/
  Michael Rubino

  	
   

  
	
  Michael Rubino

  	
   

  
	
  Chief Financial Officer

  	
   

  



 


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