**Exhibit 10.4**

 

**FIFTH LOAN MODIFICATION AGREEMENT**

 

This Fifth Loan ModificationAgreement (this “Loan Modification Agreement”) is entered into as of September24 2010, by and among (a) **SILICON VALLEY BANK,**a California corporation, with its principal place of business as 3003 TasmanDrive, Santa Clara, California 95054 (“SVB”), as agent (“Agent”), and the otherLenders that are now or hereafter become a “Lender” under the Loan Agreement(as hereinafter defined), including without limitation, SVB and **GOLD HILL VENTURE LENDING 03, L.P.** (“Gold Hill”) and (b) **A123 SYSTEMS, INC.,** a Delaware corporation with its chiefexecutive office located at 321 Arsenal Street, Watertown, MA 02472 (“Borrower”).

 

1.             DESCRIPTIONOF EXISTING INDEBTEDNESS AND OBLIGATIONS.  Among other indebtedness and obligationswhich may be owing by Borrower to the Lenders, Borrower is indebted to theLenders pursuant to a loan arrangement dated as of August 2, 2006, evidencedby, among other documents, a certain Term Loan and Security Agreement dated asof August 2, 2006, between Borrower and the Lenders, as amended by a certainFirst Loan Modification Agreement dated as of July 10, 2007, between Borrowerand the Lenders, as further amended by a certain Section Loan Modificationdated as of September 24, 2008, between Borrower and the Lenders (the “SecondAmendment”), as amended by a certain Third Loan Modification dated as of March16, 2009, between Borrower and the Lenders (the “Third Amendment”), and asfurther amended by a certain Fourth Loan Modification Agreement dated as ofMarch 31, 2009 (as amended, the “Loan Agreement”).  Capitalized terms used but not otherwisedefined herein shall have the same meaning as in the Loan Agreement.

 

2.             DESCRIPTIONOF COLLATERAL.  Repayment of the Obligations is secured bythe Collateral as described in the Loan Agreement (together with any othercollateral security granted to Agent, for the ratable benefit of the Lenders,the “Security Documents”).  Hereinafter,the Security Documents, together with all other documents evidencing orsecuring the Obligations shall be referred to as the “Existing Loan Documents”.

 

3.             DESCRIPTIONOF CHANGE IN TERMS.

 

A.            Modificationsto Loan Agreement.

 

1.                                       The Loan Agreement shall be amended by deleting thefollowing provision appearing as Section 2.6 thereof:

 

“**2.6****       ****Overadvances. **If, at any time, the sum of(a) the outstanding principal amount of any Revolving Advances (including anyamounts used for Cash Management Services), plus (b) the face amount of anyoutstanding Letters of Credit (including drawn but unreimbursed Letters ofCredit and any Letters of Credit Reserve), plus (c) the FX Reduction Amountexceeds the lesser of either the Revolving Line of the Borrowing Base, Borrowershall immediately pay to SVB in cash such excess.”

 

and inserting in lieu thereof thefollowing:

 

“**2.6****       ****Overadvances**.  If, at any time, the sum of (a) theoutstanding principal amount of any Revolving Advances (including any amountsused for Cash Management Services), plus (b) the face amount of any outstandingLetters of Credit (including drawn but unreimbursed Letters of Credit and anyLetter of 

 

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Credit Reserve), plus (c) the FXReduction Amount exceeds the lesser of either (i) the Revolving Line or (ii)the aggregate of (x) the Borrowing Base, plus (y) the Permitted Overadvance,Borrower shall immediately pay to SVB in cash such excess.”

 

2.                                             The Loan Agreement shall be amended by deleting thefollowing definition, appearing in Section 13.1 thereof:

 

“                  “**Availability Amount**” is (a) the lesser of (i) the RevolvingLine or  (ii) the amount available underthe Borrowing Base minus (b) the amount of all outstanding Letters of Credit(including drawn but unreimbursed Letters of Credit) plus an amount equal toany Letter of Credit Reserve, minus (c) any FX Reduction Amount, minus (d) anyunreimbursed amounts used for Cash Management Services, and minus (e) theoutstanding principal balances of any Revolving Advances

 

“                  “**Revolving Line Maturity Date**” is September 24, 2010.”

 

and inserting in lieu thereof thefollowing:

 

“                  “**Availability Amount**” is (a) the lesser of (i) the RevolvingLine of (ii) the aggregate amount of (x) the amount available under theBorrowing Base, plus (y) the Permitted Overadvance, minus (b) the amount of alloutstanding Letters of Credit (including drawn but unreimbursed Letters ofCredit) plus an amount equal to any Letter of Credit Reserve, minus (c) any FXReduction Amount, minus (d) any unreimbursed amounts used for Cash Management Services,and minus (e) the outstanding principal balance of any Revolving Advances

 

“                  “**Revolving Line Maturity Date**” is December 23, 2010.”

 

3.                                             The Loan Agreement shall be amended by inserting thefollowing new definitions to appear alphabetically in Section 13.1 thereof:

 

“                  “**2010 Effective Date**” is September 24, 2010.”

 

“                  “**Permitted Overadvance**” is an Advance of Advances under theRevolving Line up to (i) Four Million Dollars ($4,000,000.00) from the 2010Effective Date through and including the Revolving Line Maturity Date.”

 

4.             FEES.  Borrower shall payto SVB a modification fee equal to Five Thousand Dollars ($5,000.00), which feeshall be due and payable on the date hereof and shall be deemed fully earned asof the date hereof.  Borrower shall alsoreimburse SVB and Lenders for all legal fees and expenses incurred inconnection with this amendment to the Existing Loan Documents.

 

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5.             CONSISTENTCHANGES.  The Existing Loan Documents are herebyamended wherever necessary to reflect the changes described above.

 

6.             RATIFICATIONOF LOAN DOCUMENTS.  Borrower hereby ratifies, confirms, andreaffirms all terms and conditions of all security or other collateral grantedto the Agent, for the ratable benefit of the Lenders, and confirms that theindebtedness secured thereby includes, without limitation, the Obligations.

 

7.             NODEFENSES OF BORROWER.  Borrower hereby acknowledges and agrees that,as of the Effective Date, Borrower has no offsets, defenses, claims, orcounterclaims against Agent or Lenders with respect to the Obligations, orotherwise, and that if Borrower now has, or ever did have, any offsets,defenses, claims or counterclaims against Agent or Lenders, whether known orunknown, at law or in equity, all of them are hereby expressly WAIVED andBorrower hereby RELEASES Agent and Lenders from any liability thereunder.

 

8.             CONTINUINGVALIDITY.  Borrower understands and agrees that inmodifying the existing Obligations, Agent and Lenders are relying upon Borrower’srepresentations, warranties, and agreements, as set forth in the Existing LoanDocuments.  Except as expressly modifiedpursuant to this Loan Modification Agreement, the terms of the Existing LoanDocuments remain unchanged and in full force and effect.  Lenders’ agreement to modifications to theexisting Obligations pursuant to this Loan Modification Agreement in no wayshall obligate any Lender to make any future modification to theObligations.  Nothing in this Loan ModificationAgreement shall constitute a satisfaction of the Obligations.  It is the intention of Lenders and Borrowerto retain as liable parties all makers of Existing Loan Documents, unless theparty is expressly released by Agent in writing.  No maker will be released by virtue of thisLoan Modification Agreement.

 

9.             COUNTERSIGNATURE.  This LoanModification Agreement shall become effective only when it shall have beenexecuted by Borrower, Agent and Lenders.

 

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This Loan Modification Agreement isexecuted as a sealed instrument under the laws of the Commonwealth ofMassachusetts as of the date first written above.

 

 
| **BORROWER:**          | ** **               | **LENDERS:**                                  |
|------------------------|--------------------------|-----------------------------------------------|
| ** **             | ** **               | ** **                                    |
| **A123 SYSTEMS, INC.** | ** **               | **SILICON  VALLEY BANK, as Agent and Lender** |
|                   |                     |                                          |
| By:                    | /s/  Michael Rubino |                                          | By:   /s/   Robin Gil |
|                   |                     |                                          |   |
| Name:                  | Michael  Rubino          |                                          | Name:  Robin Gill |
|                   |                     |                                          |   |
| Title:                 | CFO                      |                                          | Title:  VP |
|                   |                     |                                          |   |
|                   |                     |                                          | ** ** |
|                   |                     |                                          | **GOLD  HILL VENTURE LENDING 03, L.P., as Lender** |
|                   |                     |                                          |   |
|                   |                     |                                          | By:   /s/   David Fischer |
|                   |                     |                                          |   |
|                   |                     |                                          | Name:  David Fischer |
|                   |                     |                                          |   |
|                   |                     |                                          | Title:  Manager |

 

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