Document:

EXHIBIT 10.72

 

NOTE PURCHASE AGREEMENT

 

This NOTE PURCHASE AGREEMENT (this “Agreement”) dated as of January 28, 2011, is by and among ANIP ACQUISITION COMPANY, a Delaware corporation doing business as ANI Pharmaceuticals, Inc. (the “Company”) and MERIDIAN VENTURE PARTNERS II, L.P., a Delaware limited partnership (“MVP II” or the “Agent”) and the other parties executing signature pages hereto or who become a party hereto pursuant to the provisions of Sections 1.3(a)(iii) or 1.3(c)(iii) below (collectively with the Agent, the “Lenders”).

 

WHEREAS, the Company has entered into a certain credit facility (as amended. the “Senior Debt”) with Bank of America, N.A. (the “Senior Lender”), as evidenced by a Loan and Security Agreement, dated as of July 3, 2007, and the Senior Loan Documents (as defined herein), between the Company and the Senior Lender;

 

WHEREAS, the Exchanging Lenders have previously purchased subordinated secured convertible notes (the “Existing Notes”) from the Company in the respective principal amounts set forth on Schedule 1.2(a), pursuant to that certain Note and Warrant Purchase Agreement, dated as of September 30, 2009, that certain Note and Warrant Purchase Agreement, dated as of February 18, 2010 and that certain Note Purchase Agreement, dated as of May 5, 2010, each by and among the Company, MVP II, as agent, and the other parties executing signature pages thereto as lenders (collectively, the “Existing Agreements”);

 

WHEREAS, the Exchanging Lenders and the Senior Lender are party to that certain Subordination Agreement, dated as of September 30, 2009, as previously amended (as amended, the “Subordination Agreement”), pursuant to which each of the loans represented by the Existing Notes was subordinated to the Senior Debt;

 

WHEREAS, upon and subject to the terms and conditions hereinafter set forth, the Company desires to cause the Existing Notes to be amended and restated in their entirety to reflect the terms of the senior subordinated secured convertible notes in the form attached hereto as Exhibit A (the “Notes”) and that such amendment shall be reflected by exchanging the Existing Notes for Notes an aggregate amount equal to all outstanding principal and accrued interest under the Existing Notes (the “Existing Amount”);

 

WHEREAS, prior to the date hereof, certain Participating Lenders advanced funds to the Company in the respective amounts set forth on Schedule 1.2 (the “Advances”), pending completion of the Transaction Documents (as defined herein);

 

WHEREAS, upon and subject to the terms and conditions hereinafter set forth, the Company desires to issue and sell to the Participating Lenders and the Participating Lenders desire to purchase from the Company, newly issued Notes in an aggregate maximum principal amount of up to $4,500,000 (the “New Loan Amount”) plus the amount of interest accrued (at a rate of 14% per annum) on the Advances through the Initial Closing Date (the “Advance Interest Amount”);

 

WHEREAS, the parties hereto desire to further amend the Subordination Agreement in order to subordinate the Loan made hereunder to the Senior Debt; and

 

 

WHEREAS, concurrently herewith, the Company is effecting a 10 to 1 reverse stock split of all of the series of its stock (the “Reverse Split”).

 

NOW, THEREFORE, in consideration of the promises and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

 

1.             Purchase of Company Securities.

 

1.1.         Note Purchase Commitments.

 

(a)           First Loan Commitment. The Participating Lenders have committed to purchase, on the terms and subject to the conditions set forth herein, the respective portions of the initial $2,000,000 of Notes being issued hereunder for cash (the “First Loan Amount”), as set forth opposite their respective names on Schedule 1.2 (the “First Loan Commitment Amounts”). For the avoidance of doubt, the Notes issued in respect of the Advance Interest Amount shall be in addition to the First Loan Amount.

 

(b)           MVP II Commitment. MVP II, as a Participating Lender, has committed to purchase, on the terms and subject to the conditions set forth herein, an additional $1,600,000 of the Additional Loan Amount (the “Additional Loan Commitment Amount”).

 

(c)           Commitment Amount. As used herein, the term “Commitment Amount” shall mean, as to any Participating Lender, the sum of the First Loan Commitment Amount and the Additional Loan Commitment Amount in respect of each such Participating Lender.

 

1.2.         Purchase and Sale of the Notes.

 

(a)           Authority. The Company has authorized (i) the issuance and sale, in accordance with the terms hereof, of Notes in the original aggregate principal amount of up to the New Loan Amount plus an amount equal to the Advance Interest Amount and (ii) the issuance, in accordance with the terms hereof, of Notes in an amount equal to the Existing Amount, which will be exchanged for Existing Notes at the Initial Closing (as defined herein).

 

(b)           Participating Lenders. On the terms and subject to the conditions set forth in this Agreement, the Company agrees to sell to the Participating Lenders, and each of the Participating Lenders agrees to purchase from the Company, Notes in the principal amounts equal to their respective First Loan Commitment Amounts, with a portion of such First Loan Commitment Amount to be funded at each of the First Closing and the Second Closing (as defined herein).

 

(c)           Exchanging Lenders. On the terms and subject to the conditions set forth in this Agreement, the Company agrees to issue to each of the Exchanging Lenders, and each of the Exchanging Lenders agrees to amend and restate its Existing Notes through an exchange into, Notes in the Existing Amount set forth opposite its name on Schedule 1.2 hereto.

 

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1.3.         Closings.

 

(a)           Initial Closing. (i) The initial closing of the issuance of the Notes shall take place at the offices of SNR Denton US LLP, located at Two World Financial Center, New York, New York, 10281.  Such closing (the “Initial Closing”) will take place at 10:00 A.M., local time, on such date as may be mutually agreed upon by the Company and the Lenders.  The date of the Initial Closing is referred to herein as the “Initial Closing Date.”

 

(ii)           At the Initial Closing, the Company shall sell Notes to each of the Participating Lenders in an aggregate principal amount equal to $1,122,000, plus the Advance Interest Amount, by delivering to each Participating Lender a Note in an amount equal to 56.14% of its First Loan Commitment Amount plus any Advance Interest Amount on Advances made by it, together with the other documents referenced in Section 2 hereof, and in exchange therefor, each Participating Lender shall make a payment at that time, by wire transfer payable to the Company of such portion of its First Loan Commitment Amount less the Advances funded by it, as set forth on Schedule 1.2.  The Notes shall be registered in each Participating Lender’s name or the name of its nominee(s) in such denominations as such Participating Lender shall request pursuant to instructions delivered to the Company not less than two (2) days prior to the Initial Closing Date.

 

(iii)          In accordance with the terms of the Third Amended and Restated Stockholders’ Agreement, the Company will offer each existing holder of its Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (other than the Lenders initially signatories hereto) the right to purchase Notes equal to a fraction of the First Loan Amount (its “Pro Rata Portion”), the numerator of which shall be equal to the sum of the number of shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock held by such holder or issuable to such holder upon the exercise of any outstanding options or warrants exercisable therefore, and the denominator of which shall be equal to the sum of the number of shares of all issued and outstanding Series A Preferred Stock, Series B Preferred Stock and Series C Preferred and the number of shares of any such stock issuable upon the exercise of all outstanding options and warrants exercisable therefore. In the event a stockholder wishes to acquire its Pro Rata Portion (a “Participating Stockholder”), such Participating Stockholders shall provide the Company with written notice thereof, together with a counterpart signature page to this Agreement (pursuant to which it will become a Participating Lender for all purposes from and after its execution thereof) and each of the Transaction Documents and will fund 56.14% of its Pro Rata Portion no later than five (5) days following its notice to the Company that it intends to acquire Notes, and will be issued a Note in the amount so funded. Each Participating Stockholder will be obligated to fund the balance of its Pro Rata Portion at the Second Closing.

 

(iv)          At the Initial Closing, the Exchanging Lenders will exchange all of the Existing Notes together with all accrued interest thereon for Notes, in the amounts set forth on Schedule 1.2, as detailed on Schedule 1.2(a). The Notes shall be registered in each Exchanging Lender’s name or the name of its nominee(s) in such denominations as such Exchanging Lender shall request pursuant to instructions delivered to the Company not less than two (2) days prior to the Initial Closing Date. Each of the Exchanging Lenders hereby acknowledges and agrees as follows: (a) the principal amount of the Note to be issued in exchange for its Existing Notes as set forth on Schedules 1.2 and 1.2(a), represents the entire

 

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amount owed to such Exchanging Lender in respect of its Existing Notes, (b) except for Article 8 (Collateral) and Section 12.12 (MVP II as Agent) of each of the Note and Warrant Purchase Agreements dated as of September 30, 2009 and February 18, 2010 and Article 10 (Collateral) and Section 15.12 (MVP II as Agent) of the Note Purchase Agreement dated May 5, 2010, each of the Existing Agreements is hereby terminated and of no further force or effect and (c) MVP II, acting as Agent under the Existing Agreements and Existing Notes, is hereby authorized to assign all of the Exchanging Lender’s rights in and to the security interests granted to MVP II, as Agent for the Exchanging Lenders under the Existing Agreements, to MVP II, as Agent under the Notes, including without limitation, pursuant to any outstanding Mortgage, Security Agreement, Assignment of Leases and Fixture Financing Statement and Assignment of Leases and Rents relating the Company’s Baudette, MN facility as well as any outstanding UCC-1 financing statement.

 

(b)           Second Closing.  The purchase and sale of Notes equal to the remaining portion of the Initial Loan Commitment Amounts and Pro Rata Portions, shall take place at the offices of SNR Denton US LLP, located at Two World Financial Center, New York, New York, 10281.  Such closing (the “Second Closing”), will take place no earlier than March 31, 2011, on not less than 10 days written notice from the Company of its intent to draw such funds.  The date of the Second Closing is referred to herein as the “Second Closing Date.”  At the Second Closing the Company shall sell Notes to each (i) Participating Lender in an aggregate principal amount equal to the remaining portion of such Participating Lender’s First Loan Commitment Amount and (ii) Participating Stockholder in an aggregate principal amount equal to the remaining portion of such Participating Stockholder’s Pro Rata Portion, by delivering to each Participating Lender (including each Participating Stockholder) a Note in the face amount indicated next to such Participating Lender’s (and Participating Stockholders’) name on Schedule 1.2 (as amended) together with the other documents referenced in Section 4.1 hereof, and in exchange therefor such Participating Lender or Participating Stockholder shall make a payment at that time, by wire transfer payable to the Company of the principal amount of the Notes purchased by it at the Second Closing. The Notes shall be registered in each Participating Lender’s or Participating Stockholder’s name or the name of its nominee(s) in such denominations as such Participating Lender or Participating Stockholder shall request pursuant to instructions delivered to the Company not less than two (2) days prior to the Second Closing Date.

 

(c)           Additional Closings. (i) The purchase and sale of the Additional Loan Amount shall take place at the offices of SNR Denton US LLP, located at Two World Financial Center, New York, New York, 10281.  Such closing, or closings (each an “Additional  Closing,” and collectively with the Initial Closing and the Second Closing, the “Closings,” and individually, a “Closing”), will take place no earlier than thirty (30) days following the Second Closing Date and no later than June 30, 2012, on not less than 20 days written notice from the Company of its intent to draw such funds. The date of any Additional Closing is referred to herein as an “Additional Closing Date.”

 

(ii)           The Company will offer each of the Participating Lenders the right to purchase its pro rata portion of the Notes being issued in respect of the Additional Loan Amount, based on the amount of the First Loan funded by it. For purposes of this Section 1.2(c), the term “Participating Lenders” includes Participating Stockholders and the term “First Loan” includes the Pro Rata Portion of Notes acquired by such Participating Stockholders.

 

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(iii)          In the event that the portion of the Additional Loan Amount to be acquired by Participating Lenders other than MVP II under clause (ii) above is greater than the portion of the Additional Loan Amount remaining in excess of the Additional Loan Commitment Amount, then at the option of MVP II, the Additional Loan Commitment Amount shall be reduced by such excess. In the event MVP II does not elect to reduce its Additional Loan Commitment Amount, then the portion of the Notes to be issued to each of the Participating Lenders other than MVP II will be reduced on a pro rata basis.  For the avoidance of doubt, MVP II may not acquire more than its pro rata portion of the Additional Loan Amount (as determined under clause (ii) above) to the extent that as a result of such acquisition MVP II would, by itself, to constitute the Majority Lenders, unless such acquisition is approved by the Majority Lenders (without giving effect to such acquisition).  At an Additional Closing the Company shall sell Notes in the aggregate principal amount of the Additional Loan Amount to be drawn by delivering to each Participating Lender a Note in the face amount indicated as relating to the Additional Loan Amount next to such Lender’s name on Schedule 1.2 (as amended) together with the other documents referenced in Section 4.2 hereof, and in exchange therefor, such Participating Lender shall make a payment at that time, by wire transfer payable to the Company of the principal amount of the Notes purchased by it at the Additional Closing.  The Notes shall be registered in each Participating Lender’s name or the name of its nominee(s) in such denominations as such Participating Lender shall request pursuant to instructions delivered to the Company not less than two (2) days prior to the Additional Closing Date. No Lender shall be obligated to purchase any Notes at an Additional Closing, other than MVP II, who agrees to purchase up to the Additional Loan Commitment Amount, subject to the conditions set forth in Section 4.2 below.

 

1.4.         Conversion.  Each Note shall be convertible in accordance with the terms of Article 3 thereof.

 

1.5.         Overallotment.  In the event any Participating Lender either fails to fund its Committed Amount or determines not to purchase its pro rata share of the Additional Loan Amount, as set forth on Schedule 1.2 hereto, then that portion of the New Loan Amount shall be offered to all of the Lenders who are purchasing their full pro rata share of the New Loan Amount at such Closing, on a pro rata basis, based on the amounts being so funded; provided, that, MVP II may not acquire the New Loan Amount offered pursuant to this Section 1.5 to the extent that as a result of such acquisition MVP II would, by itself, constitute the Majority Lenders, unless such acquisition is approved by the Majority Lenders (without giving effect to such acquisition); provided, however, that MVP II may acquire any portion of the New Loan Amount that is not subscribed for by the other Lenders at such Closing.  In the event not all of the New Loan Amount is subscribed for by the Participating Lenders, the Company shall be entitled to sell Notes representing such amount to any Person acceptable to the Board of Directors of the Company.

 

2.             Conditions to the Obligations of Lenders at the Initial Closing.  The obligation of each Participating Lender to purchase and pay for the Notes comprising the First Loan Amount and the obligation of each Exchanging Lender to exchange its Existing Notes for Notes, is subject to the satisfaction (or waiver by the Majority Lenders) on or prior to the Initial Closing Date of the following conditions:

 

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2.1.         Representations and Warranties.  All of the representations and warranties of the Company contained in Section 6 shall be true and correct at and as of the Initial Closing Date, except for changes caused by the transactions contemplated hereby.

 

2.2.         Performance of Covenants.  All of the covenants and agreements of the Company contained in this Agreement and required to be performed on or prior to the Initial Closing Date shall have been performed in a manner satisfactory in all respects to the Lenders.

 

2.3.         Legal Action.  No injunction, order, investigation, claim, action or proceeding before any court or governmental body shall be pending or threatened wherein an unfavorable judgment, decree or order would restrain, impair or prevent the carrying out of this Agreement or any of the transactions contemplated hereby, declare unlawful the transactions contemplated by this Agreement or cause any such transaction to be rescinded.

 

2.4.         Searches.   Lenders shall have received the results of UCC, tax and other public records and judgment searches against the Company in those offices and jurisdictions, including, without limitation, the Patent and Trademark Office, as the Lenders shall reasonably request.

 

2.5.         Insurance Certificates.  Lenders shall have received certificates of insurance and evidence of lender loss payee endorsements in favor of the Lenders or of the Lenders’ status as an additional insured, as the case may be, with respect to all of the Company’s current insurance policies as of Closing.

 

2.6.         SBA Forms.  Small Business Administration Forms 480, 652 and 1031, duly completed at or promptly following the Initial Closing Date, upon the consent of MVP II.

 

2.7.         Consents.

 

(a)           The Company shall have obtained in writing or made all consents, waivers, approvals, orders, permits, licenses and authorizations of, and registrations, declarations, notices to and filings and applications with, any governmental authority or any other person or entity (including, without limitation, security holders and creditors of the Company) required to be obtained or made in order to enable the Company to observe and comply with all its obligations under this Agreement and to consummate the transactions contemplated hereby.

 

(b)           The Company shall have obtained (i) the consent of the applicable stockholders of the Company and the applicable Exchanging Lenders under the Existing Agreements and Existing Notes to (i) the issuance of the Notes and the Series D Convertible Preferred Stock (the “Series D Preferred Stock”) upon conversion thereof, as provided in this Agreement and the Notes and (ii) the filing of the Fourth Amended and Restated Certificate of Incorporation of the Company, in the form attached as Exhibit B hereto (the “Restated Certificate”) which sets forth the terms of the Series D Preferred Stock and the Reverse Split, and (ii) the waiver of all stockholders of the Company of all antidilution adjustments resulting from the issuance of the Notes and the Series D Preferred Stock.

 

(c)           The Restated Certificate shall have been filed with the Secretary of State of the State of Delaware.

 

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(d)           The Senior Lender shall have extended the existing forbearance in a manner and on terms acceptable to the Majority Lenders to a date not earlier than June 30, 2011.

 

(e)           The Company, MVP II, as Agent for the Lenders and the Senior Lender shall have executed Amendment No. 6 to the Subordination Agreement, in the form attached hereto as Exhibit C (the “Amendment”), pursuant to which all the Indebtedness issued hereunder shall be made subordinate to the Senior Debt.

 

(f)            The Board of Directors of the Company shall have consented to the issuance of (i) the Notes and (ii) the Series D Preferred Stock issuable in connection with any conversion thereof.

 

2.8.         Exchange of Existing Notes. Each of the Existing Notes shall have been exchanged for Notes and the liens securing such Indebtedness shall have been assigned to MVP as Agent hereunder.

 

2.9.         Legal and Other Fees.  All legal and other fees due hereunder and pursuant to Section 15.2 shall be paid in full.

 

2.10.       Closing Documents.  The Company shall have delivered to the Lenders the following documents executed by the Company:

 

(a)           the Notes comprising the First Loan;

 

(b)           each of the mortgages and other security documents set forth on Schedule 2.10;

 

(c)           a certificate executed by the Chief Executive Officer or Chief Financial Officer of the Company, dated the Initial Closing Date, stating that the conditions set forth in Sections 2.2 through 2.9 have been satisfied;

 

(d)           an incumbency certificate, dated the Initial Closing Date, for the officers of the Company executing this Agreement, the Notes being issued at the Initial Closing, and any other Transactions Documents delivered in connection with this Agreement at the Initial Closing;

 

(e)           a certificate of the Secretary or Assistant Secretary of the Company, dated the Initial Closing Date, as to the continued and valid existence of the Company, certifying the attached copy of the Restated Certificate, the attached copy of the by-laws of the Company, the authorization of the execution, delivery and performance of this Agreement, and the resolutions adopted by the Board of Directors and stockholders of the Company authorizing the actions to be taken by the Company under this Agreement;

 

(f)            a certified copy of the Restated Certificate of the Company as filed with the Secretary of State of Delaware and any amendments thereto;

 

(g)           a signed forbearance letter from the Senior Lender, in form and on terms satisfactory to the Majority Lenders, under which there is no default;

 

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(h)           the Third Amended and Restated Stockholders’ Agreement, executed by such stockholders as are necessary to amend the Second Amended and Restated Stockholders’ Agreement of the Company dated as of February 1, 2008, in the form attached hereto as Exhibit D;

 

(i)            the Third Amended and Restated Registration Rights Agreement, executed by such stockholders as are necessary to amend the Second Amended and Restated Registration Rights Agreement of the Company, in the form attached hereto as Exhibit E;

 

(j)            such certificates, other documents and instruments as any Lender and its counsel may reasonably request in connection with, and to effect, the transactions contemplated by this Agreement.

 

3.             Conditions to Obligations of the Company at the Initial Closing.  The obligation of the Company to issue and sell the Notes comprising the First Loan Amount to the Participating Lenders and to exchange the Existing Notes for Notes pursuant to this Agreement is subject to the satisfaction on or prior to the Initial Closing Date of the following conditions, any of which may be waived by the Company:

 

3.1.         Purchase Price. Receipt of the First Loan Amount.

 

3.2.         Representations and Warranties.  The Lenders shall have executed and delivered this Agreement and the representations and warranties of the Lenders contained in Section 7 shall be true and correct at and as of the Initial Closing Date.

 

3.3.         Legal Action.  No injunction, order, investigation, claim, action or proceeding before any court or governmental body shall be pending or threatened wherein an unfavorable judgment, decree or order would restrain, impair or prevent the carrying out of this Agreement or any of the transactions contemplated hereby, declare unlawful the transactions contemplated by this Agreement or cause any such transaction to be rescinded.

 

4.             Conditions to the Obligations of Participating Lenders at the Second Closing and any Additional Closing.

 

4.1.         Second Closing. The obligation of each Participating Lender to purchase and pay for the Notes comprising the remaining portion of its First Loan Commitment Amount at the Second Closing is subject to the satisfaction (or waiver by the Majority Lenders) on or prior to the Second Closing Date of the following conditions:

 

(a)           Initial Closing. The Initial Closing shall have occurred.

 

(b)           Representations and Warranties.  The representations of the Company in Section 6 shall be, in the aggregate, true and correct in all material respects.

 

(c)           No Event of Default.  No Event of Default shall have occurred and be continuing.

 

(d)           Legal Action.  No injunction, order, investigation, claim, action or proceeding before any court or governmental body shall be pending or threatened wherein an

 

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unfavorable judgment, decree or order would restrain, impair or prevent the carrying out of this Agreement or any of the transactions contemplated hereby, declare unlawful the transactions contemplated by this Agreement or cause any such transaction to be rescinded.

 

(e)           SBA Forms.  Small Business Administration Forms 480, 652 and 1031, duly completed at or promptly following the Second Closing Date, with the consent of MVP II.

 

(f)            Legal and Other Fees.  All legal and other fees due hereunder and pursuant to Section 15.2 shall be paid in full.

 

(g)           Closing Documents.  The Company shall have delivered to the Participating Lenders the following:

 

(i)            the Notes comprising the remaining portion of each First Loan Commitment Amount;

 

(ii)           a certificate executed by the President or Chief Executive Officer of the Company, dated the Second Closing Date stating that the conditions set forth in Sections 4.1(a) through 4.1(f) have been satisfied and stating that no change to the Company’s Restated Certificate or by-laws has been made since the Initial Closing Date;

 

(iii)          an incumbency certificate, dated the Second Closing Date for the officers of the Company executing this Agreement, the Notes comprising the remaining portion of the total First Loan Commitment Amount, and any other Transactions Documents delivered in connection with this Agreement at the Second Closing; and

 

(iv)          evidence that the Senior Lender has signed a forbearance agreement, on terms and in a form satisfactory to the Majority Lenders, which provides for a maturity date for the Senior Loan no less than ninety (90) days after the Second Closing Date and that there is no default thereunder.

 

4.2          Additional Closing. The obligation of each Participating Lender to purchase and pay for the Notes comprising the Additional Loan Amount at an Additional Closing is subject to the satisfaction (or waiver by the Participating Lenders who are acquiring at least 65% of the Notes to be issued at such Additional Closing) on or prior to the Additional Closing Date of the following conditions:

 

(a)           Second Closing. The Second Closing shall have occurred.

 

(b)           Representations and Warranties.  The representations of the Company in Section 6 shall be, in the aggregate, true and correct in all material respects.

 

(c)           No Event of Default.  No Event of Default shall have occurred and be continuing.

 

(d)           Legal Action.  No injunction, order, investigation, claim, action or proceeding before any court or governmental body shall be pending or threatened wherein an

 

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unfavorable judgment, decree or order would restrain, impair or prevent the carrying out of this Agreement or any of the transactions contemplated hereby, declare unlawful the transactions contemplated by this Agreement or cause any such transaction to be rescinded.

 

(e)           SBA Forms.  Small Business Administration Forms 480, 652 and 1031, duly completed at or promptly following the Additional Closing Date, with the consent of MVP II.

 

(f)            Legal and Other Fees.  All legal and other fees due hereunder and pursuant to Section 15.2 shall be paid in full.

 

(g)           Closing Documents.  The Company shall have delivered to the Participating Lenders the following:

 

(i)            the Notes comprising the Additional Loan Amount to be funded;

 

(ii)           a certificate executed by the President or Chief Executive Officer of the Company, dated the Additional Closing Date stating that the conditions set forth in Sections 4.2(a) through 4.2(f) have been satisfied and stating that no change to the Company’s Restated Certificate or by-laws has been made since the Second Closing Date or the prior Additional Closing Date, as applicable;

 

(iii)          an incumbency certificate, dated the Additional Closing Date for the officers of the Company executing this Agreement, the Notes comprising the Additional Loan Amount to be funded, and any other Transactions Documents delivered in connection with this Agreement at the Additional Closing; and

 

(iv)          an amended Schedule 1.2 to this Agreement indicating the respective principal amounts of the Notes to be purchased by the Participating Lenders at the Additional Closing.

 

(v)           evidence that the Senior Lender has signed a forbearance agreement, on terms and in a form satisfactory to the Majority Lenders, which provides for a maturity date for the Senior Loan no less than ninety (90) days after the Additional Closing Date and that there is no default thereunder.

 

5.             Conditions to Obligations of the Company at the Second Closing and any Additional Closing.  The obligation of the Company to issue and sell Notes at the Second Closing or any Additional Closing, as applicable to the Participating Lenders pursuant to this Agreement is subject to the satisfaction on or prior to the Second Closing Date or Additional Closing Date, as applicable, of the following conditions, any of which may be waived by the Company:

 

5.1.         Purchase Price. Receipt of the remaining portion of the aggregate First Loan Commitment Amounts or the portion of the Additional Loan Amount being funded, as applicable.

 

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5.2.         Representations and Warranties.  The representations and warranties of the Lenders in Section 7, in the aggregate, true and correct in all material respects at and as of the Second Closing Date or the Additional Closing Date, as applicable.

 

5.3.         Legal Action.  No injunction, order, investigation, claim, action or proceeding before any court or governmental body shall be pending or threatened wherein an unfavorable judgment, decree or order would restrain, impair or prevent the carrying out of this Agreement or any of the transactions contemplated hereby, declare unlawful the transactions contemplated by this Agreement or cause any such transaction to be rescinded.

 

6.             Representations and Warranties of the Company.  The Company hereby represents and warrants to the Lenders that except as set forth on the relevant disclosure schedules attached hereto:

 

6.1.         Organization and Good Standing.  The Company is a corporation duly formed and validly existing under the laws of the state of Delaware.  The Company has the power and authority to carry on its business as now conducted, and, except where failure to qualify could not reasonably be deemed to have a material adverse effect on the Company, the Company is qualified to do business and in good standing in each jurisdiction wherein the character of its properties or the nature of the activities conducted by it makes such qualification or licensing necessary.

 

6.2.         Power and Authority; Validity of Agreement.  The Company has the power and authority under applicable law and under its Certificate of Incorporation and by-laws to enter into and perform this Agreement and any other Transaction Documents to the extent that the Company is a party thereto; and all actions necessary or appropriate for the Company’s execution and performance of this Agreement and such other Transaction Documents have been taken, and, upon their execution, the same will constitute the valid and binding obligations of the Company enforceable in accordance with their terms to applicable bankruptcy, insolvency, reorganization or moratorium and other similar laws affecting creditor’s rights generally, and the application of general principles of equity (whether consider in an action at law or in equity).

 

6.3.         No Violation of Law or Agreements.  The Company’s making and performance of this Agreement and any other documents and instruments delivered in connection with this Agreement will not (a) violate any provisions of law, rule or regulation, federal, state or local, the Company’s Certificate of Incorporation and by-laws, including, without limitation, any such law, rule or regulation relating to the Company’s Intellectual Property, or (b) upon receipt of the consents as described in Section 2.7 hereof, all of which consents have been obtained, result in any breach or violation of, or constitute a default under, any material agreement or instrument by which the Company or the property of the Company may be bound.

 

6.4.         Compliance.

 

(a)           The Company is in compliance in all material respects with all applicable laws and regulations, federal, state and local (including, without limitation, those administered by the relevant governmental authorities and administrative agencies which govern the business, commercial activities or facilities owned or operated by the Company), applicable to the conduct of its business and operations.

 

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(b)           The Company possesses all franchises, permits, licenses, certificates of compliance and approval and grants of authority, necessary or required in the conduct of its business where failure so to possess the same is reasonably likely to have a material adverse effect on the Company; and all such franchises, permits, licenses, certificates and grants are valid, enforceable and subsisting without any defaults there under and are not subject to any proceedings or claims opposing the issuance, development or use thereof or contesting the validity thereof, which, if enforced or adversely decided, are reasonably likely to have a material adverse effect on the Company.

 

(c)           No authorization, consent, approval, waiver, license or formal exemptions from, nor any filing, declaration or registration with, any court, governmental agency or regulatory authority (federal, state or local) or non-governmental entity, under the terms of contracts or otherwise, is required by reasons of or in connection with the Company’s execution and performance of this Agreement or any of the Transaction Documents, except for (i) those which have been obtained, and (ii) those the absence of which would not individually or in the aggregate have a material adverse effect on the Company.

 

6.5.         Litigation.  Other than as listed on Schedule 6.5, there are no actions, suits, proceedings or claims which are pending or, to the Company’s knowledge, threatened against the Company or relating to or affecting the Company’s business, the adverse determination of which is reasonably likely to have a material adverse effect on the Company.

 

6.6.         Title to Assets; Material Contracts.  The Company has good and marketable title to all of its properties and assets material to the conduct of its business (subject to the licenses and leases, as applicable, for any licensed or leased properties and assets), free and clear of any liens and encumbrances except for Permitted Encumbrances.  All such assets are covered by adequate insurance.

 

6.7.         Accuracy of Information; Full Disclosure.

 

(a)           The unaudited balance sheet and income statement of the Company for the fiscal year ended December 31, 2009 and the unaudited balance sheet and income statement of the Company for the nine (9) month period ended September 30, 2010, furnished to the Lenders have been prepared in accordance with GAAP (with respect to the September 30, 2010 balance sheet and income statement, subject to the absence of footnotes and immaterial quarter end adjustments) and such financial statements fairly present in all material respects the financial condition, results of operations and retained earnings of the Company required to be disclosed in accordance with GAAP and there has been no material adverse change in the financial condition or business of the Company from the date of such statements to the date hereof.

 

(b)           Neither the representations and warranties contained in this Agreement nor any financial statement, certificate or other written information previously furnished or to be furnished to the Lenders hereunder, other than projections, contains or will contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements contained herein or therein not misleading.

 

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(c)           Since September 30, 2010, there has been no change in the business, operations, property or financial or other conditions of the Company which has had a material adverse effect on the Company.

 

6.8.         Taxes and Assessments.  Except as otherwise set forth on Schedule 6.8, the Company has filed all required tax returns, and has paid all applicable federal, state and local taxes, other than taxes not yet due or which may be paid hereafter without penalty and other than taxes that are currently being contested in good faith by appropriate proceedings, diligently prosecuted or covered by appropriate reserves maintained in accordance with GAAP, and the Company has no knowledge of any deficiency or additional assessment in connection therewith not provided for in the financial statement required hereunder.

 

6.9.         Indebtedness.  The Company has no presently outstanding Indebtedness, except the Indebtedness described in Schedule 6.9 (clearly separating Indebtedness and other obligations).

 

6.10.       ERISA and the Code.  With respect to any Plan, the Company and all of its ERISA Affiliates have maintained, operated and administered each Plan in compliance in all material respects with its terms and any related documents or agreements and each Plan is in compliance in all material respects with all applicable provisions of ERISA, the Code and the regulations promulgated thereunder; and

 

(a)           Neither the Company nor any of its ERISA Affiliates maintains or contributes to or has maintained or contributed to any multiemployer plan (as defined in Section 4001(a)(3) of ERISA);

 

(b)           There is no lien under Section 412 of the Code with respect to any Plan of the Company or any of its ERISA Affiliates.  All contributions to any Plan which may have been required pursuant to Section 302 of ERISA or Section 412 of the Code have been timely made.  All such contributions to any Plan that are not yet, but will be, required to be made are properly accrued and reflected on the copy of the financial statements of the Company dated March 30, 2009 provided to the Lenders.  No Plan has incurred any “accumulated funding deficiency” within the meaning of Section 302 of ERISA or Section 412 of the Code, nor has any waiver of the minimum funding standards of Section 302 of ERISA or Section 412 of the Code been required or granted with respect to any Plan.  The funding method used in connection with each Plan which is subject to minimum funding requirements of ERISA and the Code is acceptable under current Internal Revenue Service guidelines, and the actuarial assumptions used in connection with funding each such Plan are reasonable.  All unfunded liabilities of each Plan have been properly accrued in accordance with GAAP;

 

(c)           Neither the Company nor any of its ERISA Affiliates has any liability, and no condition exists that could subject the Company or any of its ERISA Affiliates to any liability, arising out of or relating to a failure of any Plan to comply with the terms of such Plan (and any related documents) or the provisions of ERISA or the Code, which liability is reasonably likely to have a material adverse effect on the Company; and

 

(d)           Neither the Company nor any of its ERISA Affiliates maintains or contributes to any Plan providing post-retirement life or health benefits.

 

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6.11.       Fees and Commissions.  The Company does not owe any brokers’ or finders’ fees or commissions of any kind, and knows of no claim for any brokers’ or finders’ fees or commissions, in connection with the Company consummating the transactions contemplated by this Agreement or any of the Transaction Documents.

 

6.12.       No Extension of Credit for Securities.  The Company is not now, nor at any time has been, engaged principally in the business of extending or arranging for the extension of credit for the purpose of purchasing or carrying any margin stock or margin securities and the Company will not use the Loan directly or indirectly for such purposes.

 

6.13.       Hazardous Wastes, Substances and Petroleum Products.

 

(a)           The Company (i) has received all material permits and filed all notifications required by the Environmental Control Statutes to carry on its business; and (ii) is in material compliance with all Environmental Control Statues.

 

(b)           The Company has not given any written or oral notice to the United States Environmental Protection Agency, or any successor thereto, or any state or local agency with regard to any actual or imminently threatened Release of Hazardous Substances on properties owned, leased or operated by the Company or used in connection with the conduct of its business or operations which is reasonably likely to have a material adverse effect on the Company.

 

(c)           The Company has not received any written or oral notice that the Company is potentially responsible for clean-up, remediation, costs of clean-up or remediation, fines or penalties with respect to any actual or imminently threatened Release of Hazardous Substances pursuant to any Environmental Control Statue which is reasonably likely to have a material adverse effect on the Company.

 

6.14.       Solvency.  The Company is, and after the consummation of the transactions contemplated by this Agreement will be, solvent such that the fair value of its assets (including without limitation the fair saleable value of the goodwill and other intangible property) is greater than the total amount of its liabilities, including without limitation, contingent liabilities and other commitments as they mature in the normal course of business.  The Company does not intend to, nor believes that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature, and the Company is not engaged in a business or transaction, or about to engage in a business or transaction, for which its property would constitute unreasonably small capital after giving due consideration to the prevailing practice and industry in which it is engaged.  For purposes of this Section 6.14, in computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that reasonably can be expected to become an actual matured liability of the Company.

 

6.15.       Employee Controversies.  There are no controversies pending or, to the Company’s knowledge, threatened or anticipated between the Company and any of the Company’s employees, and there are no labor disputes, grievances, arbitration proceedings or any strikes, work stoppages or slowdowns pending, or, to the Company’s knowledge, threatened between the Company and the Company’s employees and representatives, which in either event could materially impair the ability of the Company to perform its obligations hereunder or under 

 

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the Notes, or which might reasonably be expected to have a material adverse effect on the Company.

 

6.16.       Small Business Concern.  The Company with its “affiliates” (as that term is defined in Section 121.103 of Title 13 of the Code of Federal Regulations) is a “small business concern” within the meaning of the Small Business Act and Section 121.802 of said Regulations.  The information pertaining to the Company set forth in Small Business Administration Forms 480, 652 and 1031 is accurate and complete.

 

6.17.       Capitalization.

 

(a)           The authorized issued and outstanding stock of the Company immediately upon the consummation of the Closing (and after giving effect to the Reverse Split) is as shown on Schedule 6.17(a).  All issued shares of Common Stock and Preferred Stock of the Company have been duly and validly issued and are fully paid and nonassessable.  Except as disclosed on Schedule 6.17(a), there are no outstanding options, warrants, rights, puts, calls, commitments, conversion rights, plans or other agreements of any character to which the Company is a party or is otherwise bound which provide for the acquisition, disposition or issuance of any issued but not outstanding, issued and outstanding or authorized and unissued shares of stock of the Company.  All of such options, warrants, rights, puts, call, commitments and conversion rights were duly authorized.

 

(b)           The Company has no Subsidiaries.

 

6.18.       Intellectual Property.  Set forth in the Schedule 6.18 is a list and brief description of all domestic and foreign patents, patent rights, patent applications, trademarks, trademark applications, service marks, service mark applications, trade names, copyrights, web addresses, sites and domain names and all applications for such which are in the process of being prepared, owned by or registered in the name of the Company, or of which the Company is a licensor or licensee or in which the Company has any right, and in each case a brief description of the nature of such right.  The Company owns, or is licensed or otherwise has the right to use, all the patents, trademarks, service marks, names (trade, fictitious or otherwise), processes, data bases and other rights (collectively, “Intellectual Property”), necessary to own and operate its properties and to carry on its business as it is presently conducted without conflict with the rights of others.  No claim is pending or, to the Company’s knowledge, threatened to the effect that any such Intellectual Property owned or licensed by the Company, or which the Company otherwise has the right to, is invalid or unenforceable by the Company, and the Company is not aware of any basis for any such claim (whether or not pending or threatened).

 

6.19.       Interest. No provision contained herein or in the Notes requires the payment or permits the collection of any interest in excess of the maximum amount of interest permitted by applicable law.

 

7.             Representations and Warranties of the Lenders.

 

7.1.         Authorization.   Each of the Lenders has the power and authority to execute and deliver this Agreement and the Transactions Documents to which it is a party and to perform its obligations hereunder and thereunder, having obtained all required consents, if any, 

 

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and each of this Agreement and the Transaction Documents to which each Lender is a party will constitute a legal, valid and binding obligation of each such Lender.

 

8.             Covenants of the Company.  The Company covenants and agrees that so long as the Loan remains outstanding, the Company shall:

 

8.1.         Existence and Good Standing.   Preserve and maintain its existence as a corporation and its good standing in all states in which it conducts its business and the validity of all its franchises, licenses, permits, certifications of compliance and grants of authority that are required in the conduct of its business, except where the failure to do so is not reasonably likely to have a material adverse effect on the Company.

 

8.2.         Books and Accounts.  Make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflect its transactions, including without limitation, dispositions of its assets, in accordance with GAAP, and make or cause the same to be made available to the Lenders or their agents or nominees (including examiners of the SBA) at any reasonable time upon reasonable notice for inspection up to three (3) times during any Fiscal Year, unless there shall have occurred a Default whereupon there shall be no such limit, and to make extracts thereof and permit the Lenders to discuss the contents of same with senior officers of the Company and also with the outside auditor and accountant of the Company.

 

8.3.         Use of Proceeds; Restriction on Payments.   Use the Loan for general working capital purposes. The Company covenants and agrees that it will not directly or indirectly use any of the Loan to redeem, repurchase or otherwise acquire any equity securities of the Company.

 

8.4.         Other Material Obligations.   Comply with (a) all material obligations to which it is subject, or to which it becomes subject, pursuant to any contract or agreement, whether oral or written, as such obligations are required to be observed or performed, unless and to the extent that the same are being contested in good faith and by appropriate proceedings, and the Company has set aside on its books adequate reserves with respect thereto, and (b) all applicable laws, rules and regulations of all governmental authorities, the violation of which could have a material adverse effect on the Company and the business of the Company.

 

8.5.         Certificate of Incorporation and By-laws.  Perform and be in compliance with and observe all of the provisions set forth in the Amended Charter and by-laws, to the extent that the performance of such obligations is legally permissible; provided that the fact that performance is not legally permissible will not prevent such nonperformance from constituting an Event of Default.

 

8.6.         Taxes and Liens.  Duly pay and discharge when payable, all taxes, assessments and governmental charges imposed upon or against the Company or its properties, or any part thereof or upon the income or profits therefrom, in each case before the same become delinquent and before penalties accrue thereon, as well as all claims from labor, materials or supplies, which, if unpaid, might by law become a lien upon any of its property, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and the Company has set aside on its books adequate reserves with respect thereto.

 

8.7.         Financial Statements, etc.  Furnish to the Lenders:

 

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(a)           within ninety (90) days after the end of each Fiscal Year of the Company, a balance sheet of the Company as of the end of the Fiscal Year and the related statements of income, members’ equity and cash flows for the Fiscal Year then ended, prepared in accordance with GAAP;

 

(b)           within thirty (30) Business Days after the end of each month in each Fiscal Year (other than the last month in each Fiscal Year), unaudited balance sheets of the Company and the related statements of income, members’ equity and cash flows, prepared in accordance with GAAP consistently applied and certified by the chief financial officer or chief executive officer of the Company, such balance sheets to be as of the end of such month and such statements of income, members’ equity and cash flows to be for such month and for such period from the beginning of the Fiscal Year to the end of such month, in each case with comparative statements for the prior Fiscal Year and comparisons with the budget prepared in accordance with subsection (e) below;

 

(c)           at the time of delivery of each annual financial statement pursuant to Section 8.7(a), a certificate executed by the chief financial officer or chief executive officer of the Company stating that such officer has caused this Agreement to be reviewed and has no knowledge of any Default by the Company in the performance or observance of any of the provisions of this Agreement, or if such officer has such knowledge, specifying such Default and the nature thereof;

 

(d)           at the time of delivery of each monthly statement pursuant to Section 8.7(b), a management narrative report in reasonable detail explaining all significant variances from forecasts and all significant current developments in staffing, marketing, sales and operations;

 

(e)           no later than ten (10) days prior to the start of each Fiscal Year, commencing with the Fiscal Year ending on or about December 31, 2010, capital and operating expense budgets, cash flow projections and income and loss projections for the Company in respect of such Fiscal Year, all itemized in reasonable detail and prepared on a monthly basis, including narrative information and, promptly after preparation, any revisions to any of the foregoing;

 

(f)            promptly following receipt by the Company, each audit response letter, accountant’s management letter and other written report submitted to the Company by its independent public accountants in connection with an annual or interim audit of the books of the Company;

 

(g)           promptly upon sending, making available or filing of same, all press releases, reports and financial statements that the Company sends or makes available to its directors and stockholders (other than any such reports that are sent or made available only to the Company’s directors); and

 

(h)           promptly, from time to time, such other information and reports regarding the business, prospects, financial condition, operations, property or affairs of the Company as the Lenders reasonably request.

 

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8.8.         SBA Compliance.   Provide the Lenders with all information, data and other material needed by the Lenders for the annual filing of Small Business Administration Form 468; permit representatives of the SBA access to the Company’s records to confirm the Company’s use of proceeds as specified herein; promptly, after request made by the Lenders, provide such information as the Lenders may reasonably request or that is necessary to enable the Lenders to comply with its record keeping, reporting or other obligations under the Small Business Act and under the regulations thereunder, provided that the Lenders shall, if permitted under applicable law, request that the SBA treat any material nonpublic information supplied by the Lenders as confidential; and furnish or cause to be furnished to the Lenders such information or forms as are required by the SBA concerning the economic impact of the investment by the Lenders including, but not limited to, information concerning taxes paid and number of employees.

 

9.             Negative Covenants.   The Company covenants and agrees that, for so long as the Loan remains outstanding, without the Majority Lenders’ prior written consent, the Company shall not:

 

9.1.         Indebtedness.  Create, incur, assume or suffer to exist any Indebtedness except (a) borrowings from the Lenders hereunder; (b) Indebtedness to the Senior Lender pursuant to the Senior Loan Documents not in excess of $7,500,000 in principal amount at any one time outstanding; and (c) existing Indebtedness identified on Schedule 6.9 (excluding any extensions or renewals thereof).

 

9.2.         Guarantees.  Guarantee or assume or agree to become liable in any way, either directly or indirectly, for any additional Indebtedness or liability of others except by the endorsement of checks or drafts in the ordinary course of business.

 

9.3.         Loans.  Make any loans or advances to others except loans to employees of the Company made to finance the acquisition of the Company’s equity by such employees in connection with an employee unit purchase program adopted by the Board of Directors of the Company not to exceed $150,000 in aggregate principal amount at any one time outstanding.

 

9.4.         Distributions.  Make any distributions with respect to equity interests in the Company, whether now or hereafter outstanding, or purchase, acquire, redeem or retire any equity interests in the Company, provided, however, the foregoing shall not prohibit the Company from issuing any of its equity interests in exchange for extinguishing debt owed to any Person, or from repurchasing its equity interests from any present or former officer, manager or employee of the Company, or from repurchasing any outstanding warrants.

 

9.5.         Liens and Encumbrances.  Create, permit or suffer the creation of any liens, security interests or any other encumbrances on any of its property, real or personal, including, without limitation, liens and security interest in favor of holders of any class or designation of equity interests in the Company, except (a) in favor of the Senior Lender under the Senior Loan Documents securing Indebtedness not in excess of $7,500,000; (b) liens, security interest in or any other encumbrances on its property to the Lenders under this Agreement; (c) liens arising in favor of sellers or lessors for indebtedness and obligations incurred to purchase or lease fixed or capital assets, provided, however, that such liens secure only the indebtedness and obligations created thereunder and are limited to the assets purchased 

 

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or leased pursuant thereto and the proceeds thereof; (d) mechanic’s and workman’s liens, statutory warehouseman’s liens, lines for taxes, assessments or other governmental charges, federal, state or local, which are not then due or are then being currently contested in good faith by appropriate proceedings and are covered by appropriate reserves maintained in cash or cash equivalents and in accordance with GAAP; (e) pledges or deposits to secure obligations under workmen’s compensation, unemployment insurance or social security laws or similar legislation; (f) deposits to secure performance or payment bonds, bids, tenders, contracts, leases, franchises or public and statutory obligations required in the ordinary course of business; (g) deposits to secure surety, appeal or custom bonds required in the ordinary course of business; (h) statutory landlord liens provided that the applicable landlords have not sought to exercise distraint; (i) liens in connection with any judgment, which would not, either individually or in the aggregate, result in or constitute an Event of Default pursuant to Section 11.1(h); and (j) liens existing on the date hereof and set forth on Schedule 9.5 (such enumerated exceptions collectively, the “Permitted Encumbrances”).

 

9.6.         Additional Negative Pledge.   Agree or covenant with or promise any Person other than the Lenders in connection with this Agreement or the Senior Lender that it will not pledge its assets or properties or otherwise grant any liens, security interests or encumbrances on its property (provided that any such agreement permits the liens created in favor of the Lenders pursuant to this Agreement and the other Transaction Documents).

 

9.7.         Transfer of Assets; Liquidation.

 

(a)           Sell, lease, transfer or otherwise dispose of all or any material portion of its assets, real or personal, other than the sale or lease of Inventory or the sale of obsolete Equipment in the normal and ordinary course of business for real value received; or

 

(b)           Discontinue, liquidate or change in any material respect any substantial part of the Company’s business.

 

9.8.         Acquisitions and Investments.

 

(a)           Purchase or otherwise acquire (including without limitation by way of share exchange) any part or amount of the capital stock, partnership interests, membership interests or assets of, or make any investments in, any other Person except for acquisitions approved in advance by the Majority Lenders in writing;

 

(b)           Enter into any new business activities outside the scope of the business currently conducted by it and business activities reasonably incidental thereto;

 

(c)           Enter into any new business venture;

 

(d)           Merger or consolidate with or into any other entity;

 

(e)           Create or acquire any Subsidiary, unless (1) such Subsidiary (A) executes a joinder agreement in form and substance reasonably satisfactory to the Majority Lenders pursuant to which such Subsidiary shall become a party hereto, become jointly and severally liable for all Liabilities, past, present and future, and be bound by this Agreement, and (B) grants to the Lenders a lien on and security interest in and to all assets of such Subsidiary; 

 

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and (2) with respect to each such new Subsidiary, 100% of the capital stock, membership interests, partnership interests or other equity ownership interests in such Subsidiary is pledged as collateral to secure the Liabilities; or

 

(f)            Make any investment other than in certificates of deposit issued by a commercial bank having a capital and surplus of at least $2,000,000,000 and which is a member of the Federal Reserve System.

 

9.9.         Payments to Affiliates.  Pay any salaries, compensation, management fees, consulting fees, service fees, licensing fees, or other similar payment to any Affiliates of the Company other than on an arms-length basis for value, and on terms and conditions as are customer in the industry between and among unrelated entities.

 

9.10.       Margin Loans.   Use any of the Loan, directly or indirectly, to purchase or carry margin securities within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, or engage as its principal business in the extension of credit for purchasing or carrying such securities.

 

9.11.       Restricted Payments. Declare or make any Restricted Payment or agree, become or remain liable (contingently or otherwise) to do any of the foregoing.

 

9.12.       Maintenance of Insurance Policies.  Permit the lapse of, or an amendment to any insurance policy without the written approval of the Majority Lenders, unless any such amendment is in the ordinary course of business and does not result in a material reduction in coverage.

 

9.13.       Restated Certificate; Third Amended and Restated Stockholders’ Agreement.  Make any change in the terms of the Restated Certificate or Third Amended and Restated Stockholders’ Agreement, as in effect on the date hereof.

 

9.14.       Limitation on Capital Expenditures.  Permit its Capital Expenditures (excluding the portion thereof financed with the proceeds from any equity issuances or Indebtedness permitted hereunder) to exceed $200,000 in the aggregate in any Fiscal Year.

 

9.15.       Restrictive Agreement. Subsequent to the Closing, be a party to any agreement or instrument which by its terms would restrict the Company’s performance of its obligations pursuant to this Agreement or any of the other Transaction Documents, the Company’s Restated Certificate, by-laws or Third Amended and Restated Stockholders’ Agreement.

 

10.          Collateral.

 

10.1.       Security Interests.  As security for the performance of the Company’s obligations under this Agreement and the other Transaction Documents, the payment of principal and interest under the Notes and the payment of all other liabilities of the Company to the Lenders, whether absolute or contingent, matured or unmatured, direct or indirect, similar or dissimilar, due or to become due or heretofore or hereafter contracted or acquired, however and wherever arising and whether or not arising hereunder, under any of the other Transaction Documents or in connection with any of the transactions described herein or therein (collectively

 

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the “Liabilities”), the Company hereby grants, pledges and assigns to the Agent and the Lenders, a senior subordinated security interest, in (a) all of its: (i) Accounts, (ii) Inventory, (iii) Chattel Paper, Documents and Instruments, (iv) General Intangibles, (v) Equipment, whether or not constituting fixtures, (vi) Investment Property, (vii) Deposit Accounts, (viii) Letter-of-Credit Rights, (ix) Supporting Obligations, and (x) books, record, tapes, information, data, stored material, computer media, passwords, access codes arising in connection with or related to any of the Collateral, now existing or hereafter acquired, whether or not included in the Collateral identified in Section 10.1(a)(iv) (collectively, “Books and Records”), (b) any account maintained by the Company with the Senior Lender or the Lenders and all cash held therein, and (c) all proceeds and products of the foregoing, including insurance thereon, whether the property identified in (a) through (c) is now owned or hereafter acquired by the Company (collectively, the “Collateral”).  The Lenders hereby agree that their security interests and the right of payment hereunder are subordinate to the security interests and right of payment of the Senior Lender under the Senior Loan Documents, as provided (but only to the extent so provided) in the Subordination Agreement.

 

10.2.       Financing Statements.  The Company hereby authorizes the Agent to file one or more financing or continuation statements, and amendments and supplements thereto, relative to all or any part of the Collateral (including, without limitation, an “all assets” filing) without the signature of the Company where permitted by law.  The Company shall also take whatever additional steps the Agent and the Majority Lenders reasonably determine are necessary to perfect and protect the Lenders’ rights in the Collateral and shall pay the reasonable costs and expenses thereof.

 

10.3.       Landlord’s and Warehouseman’s Waivers.  The Company represents that as of the date hereof, there are no leased locations and warehouse locations where any Collateral is located.  The Company shall cause the owners of any leased locations established after the Initial Closing Date to execute and deliver to the Lenders an instrument (in form satisfactory to the Majority Lenders) by which each such owner waives its right to distrain on any of the Collateral, and by which each such owner grants to the Lenders the right (but not the obligation) to cure any default by the Company under the applicable lease (each, a “Landlord’s Waiver”), and the Company shall be required to deliver duly executed Landlord’s Waivers in form and substance satisfactory to the Majority Lenders with respect to any such location, upon the renewal, extension, modification or other amendment of such lease.  In addition, the Company shall use commercially reasonable efforts to cause the owners of any warehouse locations which the Company establishes after the Initial Closing Date to execute and deliver to the Lenders an instrument (in form satisfactory to the Majority Lenders) by which each such owner waives its right to distrain on any of the Collateral (the “Warehouseman’s Waiver”).  For purposes of this Section 10.3, the term “warehouse locations” shall exclude any customer or airport location where the Company maintains product with a fair market value of less than $5,000 so long as the aggregate fair market value of all products maintained by the Company at all such locations does not exceed $75,000.

 

10.4.       Places of Business; Collateral Locations; Search and Filing Information.

 

(a)           The Company represents that its chief executive office is located at 210 Main Street, Baudette, Minnesota 56623; and, except as set forth on Schedule 10.4(a), the Company has no other place of business or office where it keeps its Books and Records and the 

 

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Company has no other place where it keeps the Inventory and Equipment serving as Collateral hereunder.

 

(b)           The Company shall notify the Lenders in writing at least thirty (30) days prior to (i) any change in location of its chief place of business or chief executive office, (ii) any change in the place where it keeps its Books and Records, Equipment or Inventory, (iii) the establishment of a new or the discontinuance of any existing place of business, and (iv) the reformation, redomestication or reorganization of the Company in a jurisdiction other than the jurisdiction in which it is presently formed.

 

(c)           The Company shall not permit any of its Inventory or Equipment to be removed from its current location without the Lenders’ prior written consent, except that the Company may sell or lease Inventory or sell obsolete Equipment in the normal and ordinary course of business for value received and in accordance with this Agreement.

 

(d)           The Company’s exact legal name and jurisdiction of formation is as set forth as indicated in the heading of this Agreement.  Except as set forth on Schedule 10.4(d), the Company has no trade names and has not used any other name other than its actual name for the five (5) years preceding the date hereof.  The federal tax identification number and state organizational identification number, if any, of the Company are as set forth on Schedule 10.4(d).  The Company shall notify the Lenders in writing at least thirty (30) days prior to any change to its legal name or its state organizational identification number (if it has one).

 

10.5.       Accounts.

 

(a)           With respect to each of its Accounts, the Company represents that: (i) such Account is not evidenced by a judgment, an Instrument or Chattel Paper or secured by a Letter of Credit (except (A) such judgment as has been assigned to the Lenders, or (B) such Instrument and Chattel Paper as has been endorsed and delivered to the Lenders, or (C) such Letter of Credit as has been assigned and delivered to Lenders and represents a bona fide completed transaction); (ii) the amount thereof shown on the Company’s Books and Records and on any list, invoice or statement furnished to the Lenders is owing to the Company; (iii) the title of the Company to such Account, and except as against the Purchaser to any goods represented thereby, is absolute; (iv) such Account has not been transferred to any other Person, and no Person except the Company has any claim thereto or, with the sole exception of the Purchaser therefor, to the goods represented thereby; (v) no partial payment against such Account has been made by any Person except as reflected in the Company’s Books and Records; and (vi) to the Company’s knowledge, no set-off or counter-claim to such Account exists, and no agreement has been made with any Person under which any deduction or discount may be claimed.

 

(b)           The Company shall immediately notify the Lenders if any of its Accounts arises out of contracts with the United States or any department, agency or instrumentality thereof and, if requested by the Lenders, shall furnish the Lenders with copies of each such contract and execute any instruments and take any steps reasonably required by the Lenders in order that all moneys due and to become due under any such contract shall be assigned to the Lenders and notice shall be given under the Federal Assignment of Claims Act.

 

(c)           The Company shall, if requested by the Lenders, (i) furnish to the Lenders copies, with such duplicate copies as the Lenders may request, of any invoice applicable 

 

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to any of its Accounts, (ii) inform the Lenders immediately of the rejection of any goods represented by any of its Accounts, or any material delay in delivery or performance by the Company or claims made in regard to any of its Accounts; (iii) outside the ordinary course of business, make no change in the payment terms of any of its Accounts without notifying the Lenders of the change in writing; (iv) furnish the Lenders upon the Lenders’ request with all information received by the Company affecting the financial standing of any Purchaser; (v) mark the Company’s records concerning each of its Accounts in a manner satisfactory to the Lenders so as to show that each such Account has been assigned to the Lenders; and (vi) if requested by the Lenders, furnish the Lenders with evidence satisfactory to the Lenders of the shipment and receipt of any goods and the performance of any services represented by any of its Accounts.

 

10.6.       Letters of Credit; Chattel Paper and Instruments.  Subject to the terms of the Subordination Agreement, the Company represents and warrants to the Lenders that it has delivered to the Lenders and covenants that it shall deliver to the Lenders promptly on receipt of all counterparts designated as “originals” of (a) Letters of Credit securing any of its Accounts, (b) any of its Chattel Paper, and (c) any of its Instruments now in its possession or hereafter acquired, each properly assigned and/or endorsed over to Lenders, which Letters of Credit, Chattel Paper and Instruments shall be held by the Lenders as security hereunder, or, at the Lenders’ option, endorsed for payment (except such Letters of Credit, Chattel Paper and/or Instruments which are delivered to the Senior Lender pursuant to the Senior Loan Documents, provided that the Lenders otherwise have a perfected security interest in such Letters of Credit, Chattel Paper and/or Instruments and provided further that the Company delivers such Letters of Credit, Chattel Paper and/or Instruments to the Lenders upon the Senior Lender’s release of its interest therein pursuant to the Senior Loan Documents).  The Company shall remain solely responsible for the observance and performance of all of the Company’s covenants and obligations under all of its Letters of Credit, Chattel Paper and Instruments, and the Lenders shall not be required to observe or perform any such covenants or obligations.

 

10.7.       Deposit Accounts and Investment Property.   Subject to the terms of the Subordination Agreement, if there are any Deposit Accounts or Investment Property of the Company that can be perfected by control through an account control agreement, the Company shall cause such an account control agreement, in form and substance satisfactory to the Lenders, to be entered into and delivered to the Lenders.

 

10.8.       Equipment and Inventory.   The Company represents, warrants and agrees that (a) the Company is the absolute owner of its Inventory and Equipment reflected as owned by it on the Company’s books and records (and the Documents representing any such Inventory and Equipment), subject only to the security interests created hereby and other Permitted Encumbrances; (b) the Company shall sell its Inventory only in the normal and ordinary course of business for value received; (c) after the occurrence of an Event of Default and so long as the same continues, the Lenders shall have the right to take possession of the Company’s Inventory subject only to the rights of the Senior Lender in accordance with the Senior Loan Documents; the Company shall repay the Lenders promptly for all reasonable costs of transportation, packing, storage and insurance of any such possession, together with interest at the highest rate payable hereunder, at the time the Lenders pay such costs; and the Company’s liability to the Lenders for such repayment, together with such interest, shall be included in the Liabilities; (d) all of the Company’s Equipment is of a type in which a security interest is to be perfected solely by filing a financing statement under the Uniform Commercial Code, as adopted by the various 

 

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states (the “UCC”), except for motor vehicles, aircraft, ships and boats now owned by the Company, and if in the future the Company acquires any motor vehicles, aircraft, ships or boats or other Equipment of a type in which a security interest is to be perfected in a manner other than by or in addition to filing a financing statement under the UCC, the Company shall promptly notify the Lenders thereof and take such steps as are necessary to perfect the Lenders’ security interest therein if so requested by the Lenders; (e) at the request of the Lenders, after the occurrence of an Event of Default, the Company shall provide the Lenders with appraisals of the Company’s Equipment by appraisers satisfactory to the Lenders; and (f) if any of the Company’s Inventory is or becomes represented by a Document, the Lenders may require that such Document be in such form as to permit the Lenders or any Person to whom the Lenders may negotiate the same to obtain delivery to it of the Inventory represented thereby.

 

10.9.       Conditions of Inventory and Equipment.   The Company shall keep and maintain all of its Inventory and Equipment in good order and repair, ordinary wear and tear excepted, and shall promptly notify the Lenders of any casualty or similar event which results in a material decline in the value of any substantial portion of its Inventory and Equipment and the estimated amount of such decline in value.

 

10.10.     Notices.  If notice of sale, disposition or other intended action by the Lenders with respect to the Collateral is required by the UCC or other applicable law, any notice thereof shall be sent to the Company at the address listed in Section 15.5 or such other address of the Company as the Company may from time to time notify the Lenders to be its address for notices hereunder, but only after such notice is acknowledged in writing by the Lenders at least five (5) Business Days prior to such action, shall constitute reasonable notice to the Company.

 

10.11.     Insurance, Discharge of Taxes, Etc.  The Lenders shall have the right, at any time and from time to time, without notice to the Company to (a) obtain insurance covering any of the Collateral if the Company fails to do so, (b) discharge taxes, liens, security interests or other encumbrances at any time levied or placed on any of the Collateral, other than Permitted Encumbrances, and (c) pay for the maintenance and preservation of any of the Collateral to the extent the Company fails to do so in accordance with this Agreement.  The Company shall reimburse the Lenders, on demand, with interest thereon at the highest rate payable hereunder for any payment the Lenders make or any expense the Lenders incur under this authorization.

 

10.12.     Waiver and Release by the Company.  The Company (a) waives protest of all commercial paper at any time held by the Lenders on which the Company is in any way liable, notice of nonpayment at maturity of any and all of its Accounts, Instruments, Chattel Paper or General Intangibles, and, except where required hereby or by law, notice of action taken by the Lenders, and (b) releases Lenders from all claims for loss or damage caused by any failure to collect on any such Account, Instrument, Chattel Paper or General Intangible or by any act or omission on the part of the Lenders or their officers, agents, and employees, except for gross negligence and willful misconduct.

 

10.13.     Custody of Inventory and Equipment.   Subject to terms of the Subordination Agreement, upon demand by the Lenders after the occurrence of an Event of Default and so long as such continues, the Company shall assemble its Inventory and Equipment and make it available to the Lenders at the Company’s offices.  At the request of the Lenders, after the occurrence of an Event of Default and so long as such continues, the Company shall 

 

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provide warehousing space in its own premises to the Lenders for the purpose of taking the Company’s Inventory and Equipment into the custody of the Lenders without removal thereof from such premises and shall erect such structures and post signs as the Lenders may reasonably require in order to place such Inventory and Equipment under the exclusive control of the Lenders.

 

10.14.     Records and Reports.   The Company shall keep accurate and complete records in all respects of its Accounts (and the collection thereof), Chattel Paper, Instruments, Documents, Equipment, Inventory, General Intangibles, and furnish the Lenders such information about the Accounts, Chattel Paper, Instruments, Documents, Equipment, Inventory and General Intangibles as the Lenders may reasonably request.

 

10.15.     Further Assurances.

 

(a)           From time to time, the Company shall execute and deliver to the Lenders such additional instruments as the Majority Lenders may reasonably request to effectuate the purposes of this Agreement and to assure the Lenders, as secured parties, a security interest in the Collateral with priority subject only the Permitted Encumbrances, subordinate only to the liens of the Senior Lender under the Senior Loan Documents.

 

(b)           Subject to the terms of the Subordination Agreement, the Company hereby irrevocably appoints the Agent as its attorney-in-fact, upon direction of the Majority Lenders, (i) to take any action the Lenders deem necessary to perfect or maintain perfection of any security interest granted to the Lenders herein or in connection herewith, including the execution of any document on the Company’s behalf, (ii) after an Event of Default and so long as such continues, to sign and endorse the name of the Company on any invoice, bill of lading, storage or warehouse receipt, assignment, verification and notice, in connection with any Collateral; and (iii) to give written notices in connection with any Collateral, which power of attorney is coupled with an interest and is irrevocable until all of the Liabilities are paid in full.  Until all of the Liabilities are paid in full, the Majority Lenders may, at any time and from time to time after the occurrence of an Event of Default and so long as such Event of Default continues, direct the Agent to send such verification forms or make such calls to, or otherwise make such contacts with, Purchasers as are necessary or desirable to verify any Accounts, Instruments, Chattel Paper and/or General Intangibles that are Collateral and the balance due.

 

10.16.     Application of Proceeds of Collateral.   After an Event of Default and so long as such continues, all proceeds of any Collateral shall be applied, subject to the rights of the Senior Lender under the Senior Loan Documents, (a) to the reasonable costs of preservation and liquidation of such Collateral and the Lenders’ exercise of their rights hereunder, then (b) to principal, interest and other amounts owing hereunder or in connection herewith in such order as the Lenders shall determine, then (c) to the Company.

 

10.17.     Continuing Collateral.  The Agent and the Lenders shall be under no obligation to proceed first against any part of the Collateral before proceeding against any other part of the Collateral.  It is expressly agreed that all of the Collateral stands as equal security for all of the Liabilities and the Agent and the Lenders shall have the right to proceed against or sell any and/or all of the Collateral in any order, or simultaneously, as the Majority Lenders shall determine.

 

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10.18.     Set-Off.  The Company agrees that the Lenders shall have, and the Company hereby grants to the Lenders, a right of set-off against, a lien upon and a security interest in, all property of the Company now or at any time in the Lenders’ possession in any capacity whatsoever.

 

10.19.     Inspection by the Lenders.  Subject to the limitations set forth in Section 8.2, the Company shall permit representatives of the Lenders (including examiners of the SBA) to inspect, examine and/or audit the Collateral, any of its other properties or assets, real or personal, now owned or hereafter acquired, and/or its Books and Records (and, with respect to such Books and Records, to make extracts therefrom and to discuss the contents of the same with senior officers of the Company and also with the outside auditor and accountants of the Company) upon reasonable notice and at all reasonable times for purposes of examination, verification, inspection and appraisal thereof.   The Company shall permit one (1) representative of the Lenders to conduct field examinations of the Collateral up to three (3) times per calendar year, provided that if an Event of Default shall occur and be continuing, the Lenders may conduct such field examinations at any time and from time to time.  The Company agrees to reimburse the Lenders for the costs of such inspections, examinations and/or audits within fifteen (15) Business Days of the date of the Lenders’ invoice for such costs, but only with respect to up to three (3) such inspections, examinations and audits during any Fiscal Year, unless there shall have occurred a Default whereupon there shall be no such limit.

 

10.20.     Commercial Tort Claims.  If the Company shall at any time hold or acquire a Commercial Tort Claim, the Company shall promptly notify the Lenders in a writing signed by the Company of the particulars thereof and grant to the Agent and the Lenders in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Lenders.

 

10.21.     Senior Loan Documents.  Notwithstanding anything contained herein, for so long as the Subordination Agreement is in effect: (a) the rights, remedies and obligations with respect to the Collateral shall be subordinate to the rights, remedies and obligations with respect thereto of the Senior Lender under the Senior Loan Documents as provided (but only to the extent so provided) in the Subordination Agreement, and (b) to the extent there is a delivery requirement hereunder, such obligation will not be breached if delivery to the Senior Lender is required under the Senior Loan Documents,  and such delivery is duly made.

 

11.          Default.

 

11.1.       Events of Default.   Each of the following events shall be an Event of Default hereunder:

 

(a)           the failure of the Company to make any payment of principal of or interest on the Notes when due;

 

(b)           If any representation or warranty made herein or in connection herewith or in any statement, certificate or other document furnished hereunder or in connection herewith, is false or misleading in any material respect when made;

 

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(c)           the failure of the Company to observe or perform any covenant in this Agreement or in the Notes, and such failure shall have continued unremedied for a period of twenty (20) days after receipt by the Company of written notice thereof;

 

(d)           if the Company shall:

 

(i)            admit in writing its inability to pay its debts generally as they become due,

 

(ii)           file a petition in bankruptcy or a petition to take advantage of any insolvency act,

 

(iii)          make an assignment for the benefit of its creditors,

 

(iv)          consent to the appointment of a receiver of itself or of the whole or any substantial part of its property,

 

(v)           on a petition in bankruptcy filed against, be adjudicated a bankrupt, or

 

(vi)          file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof;

 

(e)           if a court of competent jurisdiction shall enter an order, judgment or decree appointing, without the consent of the Company, a receiver of the Company or of the whole or any substantial part of its property, or approving a petition filed against it seeking reorganization or arrangement of the Company under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any State thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within forty five (45) days from the date of entry thereof;

 

(f)            if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Company or the whole or any substantial part of its property and such custody or control shall not be terminated or stayed within forty five (45) days from the date of assumption of such custody or control; or

 

(g)           a final judgment or judgments for the payment of money in excess of $250,000 in the aggregate shall be rendered by one or more courts, administrative or arbitral tribunals or other bodies having jurisdiction against the Company and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and the Company shall not, within such 30-day period, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal.

 

11.2.       Remedies.   Upon the happening of any Event of Default and at any time thereafter, and by notice by the Majority Lenders to the Company (except if an Event of Default described in Section 11.1(d) shall occur, in which case acceleration shall occur automatically 

 

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without notice), the Majority Lenders may declare the entire unpaid principal balance of all Indebtedness of the Company to the Lenders, hereunder or otherwise, to be immediately due and payable, together with interest thereon through the date of payment and all costs incurred by an payable to the Lenders hereunder.  Subject to the Subordination Agreement, upon such declaration, the Lenders shall have the immediate right to enforce or realize on any Collateral granted therefor in accordance with the terms of the collateral security documents in any manner or order it deems expedient without regard to any equitable principles of marshalling or otherwise.  In addition to any rights granted hereunder, the Lenders shall have all the rights and remedies granted by any applicable law, all of which shall be cumulative in nature.

 

12.          Right of First Refusal.  If at any time any Lender (a “Selling Lender”) proposes to effect a voluntary Transfer of any portion of the Notes held by such Lender (the “Offered Notes”) to any Person other than a Permitted Transferee (the “Proposed Transaction”), then the Selling Lender may not Transfer any such Offered Notes other than in compliance with this Section 12.

 

(a)           The Selling Lender shall deliver a written notice (the “ROFR Notice”) to each other Lenders of its right to purchase all, and only all, of its pro rata portion of the Offered Notes at a purchase price and on the terms and conditions equal to those of the Proposed Transaction (the “Right of First Refusal”), which ROFR Notice shall state (i) the Selling Lender’s bona fide intention to effect a voluntary Transfer of such Offered Notes, (ii) the price and terms for which the Selling Lender proposes to Transfer such Offered Notes, and (iii) the name and address of the proposed transferee and that such proposed transferee is committed to acquire the number of Offered Notes on the stated price and terms.

 

(b)           Each other Lender shall have the right to exercise its Right of First Refusal by giving written notice of such intent to participate (the “Acceptance Notice”) to the Selling Lender within fifteen (15) Business Days after receipt of the ROFR Notice; provided, that MVP II may not acquire any of the Offered Notes to the extent that as a result of such acquisition MVP II would, by itself, constitute the Majority Lenders, unless such acquisition is approved by the Majority Lenders (without giving effect to such acquisition).

 

(c)           If all of the Offered Notes offered to the other Lenders pursuant to Section 12(a) are not fully subscribed for by the other Lenders within the time period set forth therein, then the remaining Offered Notes will be reoffered, in writing, to each other Lender purchasing its full allotment of the Offered Notes pursuant to Section 12(b) (the “Re-Offer Notice”).  Such other Lenders will then be entitled to purchase the remaining Offered Notes on a pro rata basis or in such other amounts as such Lenders may agree.  Each such Lender must exercise such purchase right within ten (10) Business Days after receipt of the Re-Offer Notice (the “Re-Offer Period”); provided, that MVP II may not acquire any of the Offered Notes to the extent that as a result of such acquisition MVP II would, by itself, constitute the Majority Lenders, unless such acquisition is approved by the Majority Lenders (without giving effect to such acquisition).

 

(d)           To the extent the other Lenders do not purchase all the Offered Notes, the Selling Lender shall offer to sell the remaining Offered Notes to MVP II (for the avoidance of doubt, MVP II may become the sole Majority Lender as a result of any such acquisition) and, if MVP II does not purchase the remaining Offered Notes the Selling Lender may sell such 

 

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remaining Offered Notes to a third party purchaser on the terms and conditions of the Proposed Transaction.

 

13.          Certain Definitions.  For the purposes of this Agreement, the following terms have the respective meanings set forth below:

 

13.1.       “Accounts” has the meaning given to such term in the UCC.

 

13.2.       “Additional Loan Amount” means the New Loan Amount, less the First Loan Amount and less the aggregate principal amount of Notes purchased or agreed to be purchased by Participating Stockholders at the First Closing and Second Closing.

 

13.3.       “Affiliate” of any Person means any other Person who controls, is controlled by or is under common control with such Person.

 

13.4.       “Agreement”  has the meaning given to such term in the Introduction, and in addition means all exhibits and schedules hereto, as each may be amended, modified, extended, consolidated or restated from time to time.

 

13.5.       “Business Day” means any day other than Saturday, Sunday, or any other day on which national banking associations in the State of Minnesota generally are closed for commercial banking business.

 

13.6.       “Capital Expenditures” means, with respect to any Person, all expenditures (by the expenditure of cash or the incurrence of Indebtedness) by such Person during any measuring period for any fixed or capital assets or improvements or for replacements, substitutions or additions thereto, that are required to be capitalized under GAAP.

 

13.7.       “Code” means the Internal Revenue Code of 1986, as amended from time to time, and regulations with respect thereto in effect from time to time.

 

13.8.       “Common Stock” means shares of the common stock, par value $.01 per share of the Company.

 

13.9.       “Default” means an event, condition or circumstance the occurrence of which would, with the giving of notice or the passage of time or both, constitute an Event of Default.

 

13.10.     “Deposit Accounts” has the meaning given to such term in the UCC.

 

13.11.     “Document” has the meaning given to such term in the UCC.

 

13.12.     “Environmental Control Statutes”  shall mean any and all applicable federal, state, local, municipal and foreign statutes, regulations, ordinances and similar provisions having the force or effect of law, all judicial and administrative orders and determinations relating to the pollution or protection of the environment and natural resources, or to the generation, use, handling, storage, transportation, disposal, remediation or Release of, or exposure to, Hazardous Substances in the existence as of or prior to the Initial Closing Date, including without limitation the laws under CERCLA (42 U.S.C. Section 9601 et seq.).

 

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13.13.     “Equipment” has the meaning given to such term in the UCC.

 

13.14.     “ERISA”  means the Employee Retirement Income Security Act of 1974, all amendments thereto and all rules and regulations in effect at any time there under.

 

13.15.     “ERISA Affiliate”  means, when used with respect to any Plan, ERISA, the Pension Benefit Guaranty Corporation, or any successor thereto, or a provision of the pertaining to employee benefit plans, any person that is a member of any group or organization within the meaning of Code Sections 414(b), (c), (m) or (o) of which the Company is a member.

 

13.16.     “Event of Default” means an event described in Section 11.1.

 

13.17.     “Exchanging Lender” means each Lender that is exchanging one or more Existing Notes for Notes.

 

13.18.     “Fiscal Year” means a twelve (12) month period ending on or about December 31.

 

13.19.     “GAAP”  means generally accepted accounting principles consistently applied.

 

13.20.     “General Intangible” has the meaning given to such term in the UCC.

 

13.21.     “Hazardous Substance”  means petroleum products and items defined in the Environmental Control Statues as “hazardous substances,” “hazardous wastes,” “pollutants,” or “contaminants” and any other toxic, reactive, corrosive, carcinogenic, flammable or hazardous substance or pollutant.

 

13.22.     “Indebtedness” of any Person means and includes, without duplication, all (i) obligations of such Person for borrowed money or which have been incurred in connection with the acquisition of property or assets, (ii) obligations secured by any lien upon property or assets owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligations, (iii) obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, whether or not the rights and remedies of the seller, lender or lessor under such agreement in the event of default are limited to repossession or sale of the property, (iv) capital leases, (v) guarantees; (vi) reimbursement obligations in respect of letters of credit; and (vii) all obligations in respect of disqualified stock, which obligations shall be valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividend and, in the case of other such obligations, at the amount that, in light of all the facts and circumstances existing at the time of determination, can reasonably be expected to become payable.  “Indebtedness” does not include accrued expenses or accounts payable.

 

13.23.     “Instrument” has the meaning given to such term in the UCC.

 

13.24.     “Interest Expense”  means all obligations of the Company for accrued and payable interest outstanding during the relevant period, which shall include, without duplication, (i) all interest accrued and payable, (ii) all but the principle component of payments in respect of conditional sales contracts, capital leases and other similar arrangements, (iii) commissions,

 

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discounts and other fees and charges with respect to letters of credit and bankers’ acceptance financings, (iv) net costs under interest rate protection agreements, and (v) amortization of debt issuance costs and original issuance discount.

 

13.25.     “Inventory” has the meaning given to such term in the UCC.

 

13.26.     “Letter of Credit” has the meaning given to such term in the UCC.

 

13.27.     “Letter-of-Credit Rights” has the meaning given to such term in the UCC.

 

13.28.     “Loan” shall mean the aggregate Indebtedness outstanding under this Agreement and the Notes.

 

13.29.     “Majority Lenders” means the holders of at least 65% of the sum of (i) the issued and outstanding shares of Series D Preferred Stock and (ii) the shares of Series D Preferred Stock issuable upon conversion of the then outstanding Notes.

 

13.30.     “Participating Lender” means each Lender who is acquiring a Note for cash, pursuant to Section 1.3, hereof.

 

13.31.     “Permitted Transferee” means, with respect to any Lender, (i) an entity wholly owned by the Lender all times following such transfer (provided, however, that if such entity ceases to be wholly owned by him or her at all times following such transfer, such transfer will be void ab initio), (ii) members of a Lender’s immediate family pursuant to applicable laws of descent and distribution, (iii) the Lender’s spouse or adult children or to a trust whose beneficiaries are members of such Lender, (iv) any Person that is a direct or indirect partner of the Lender, if it is a partnership, (v) any Person that is a direct or indirect member of the Lender if it is a limited liability company, (vi) any Person that is a stockholder of any Lender if it is a corporation and (vii) any Affiliate of any thereof.

 

13.32.     “Person” means an individual, corporation, partnership, limited liability company, trust or any other entity.

 

13.33.     “Plan”  means any employee pension benefit or employee welfare benefit plan as defined in Sections 3(1) or (2) of ERISA maintained or sponsored by, contributed to by, or covering employees of the Company or any ERISA Affiliate.

 

13.34.     “Preferred Stock”  means any series of stock of the Company designated as preferred or any other ownership interests of the Company into which such units are reclassified, reconstituted or exchanged.

 

13.35.     “Pro Rata Share” means, with respect to a Lender, the percentage obtained by dividing (a) the aggregate face value of the Notes held by that Lender by (b) the aggregate face value of all Notes issued hereunder.

 

13.36.     “Purchaser” means a buyer of goods from the Company or a customer for whom services have been rendered or materials furnished by the Company or any other debtor or

 

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lessee obligated to the Company under any Chattel Paper, Document, Instrument or General Intangible.

 

13.37.     “Release”  means any spill, leak, emission, discharge or the pumping, pouring, emptying, disposing, injecting, escaping, leaching or dumping of a Hazardous Substance.

 

13.38.     “Restricted Payment” means (i) any dividend, distribution or payment of any nature (whether in cash, securities, or other property) on account of or in respect of any unit of membership interest in the Company (or warrants, options or rights therefor), including but not limited to any payment on account of the purchase, redemption, put, retirement, defeasance or acquisition of any unit of membership interest in the Company (or warrants, options or rights therefor), in each case regardless of whether required under the terms of such unit of membership interest in the Company (or warrants, options or rights therefor) or any other agreement or instrument or (ii) any payment of interest on or principal of any subordinated Indebtedness other than scheduled payments of principal and interest with respect to any Indebtedness of the Company to any other Person subordinated on terms and conditions acceptable to the Lenders.

 

13.39.     “SBA” means the United States Small Business Administration established pursuant to the Small Business Act, and any public or private successor thereto.

 

13.40.     “Third Amended and Restated Registration Rights Agreement” means the Third Amended and Restated Registration Rights Agreement dated as of the date hereof, by and among the Company and its stockholders.

 

13.41.     “Third Amended and Restated Stockholders’ Agreement” means the Third Amended and Restated Stockholders’ Agreement dated as of the date hereof, by and among the Company and its stockholders.

 

13.42.     “Senior Loan Documents” means all documents between the Company and the Senior Lender or any replacement Senior Lender which are entered into in respect of the Senior Debt.

 

13.43.     “Small Business Act” means the Small Business Investment Act of 1958, as amended, and the regulations promulgated thereunder.

 

13.44.     “Subsidiary”  means any corporation, partnership, trust, limited liability company or other business entity of which the Company, directly or indirectly, owns more than fifty percent (50%) of any class or classes of securities, partnership interests or membership interests.

 

13.45.     “Supporting Obligations” has the meaning given to such term in the UCC.

 

13.46.     “Transaction Documents”  means this Agreement, the Notes, the Subordination Agreement, the Third Amended and Restated Stockholders Agreement, the Third Amended and Restated Registration Rights Agreement and the Restated Certificate, each as amended, restated, supplemented and/or modified from time to time in accordance with the terms

 

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thereof, and all of the schedules, exhibits, written statements, documents or certificates prepared or supplied by the parties hereto with respect to the transactions contemplated hereby.

 

13.47.     “Transfer”  means any sale, transfer, conveyance, exchange, pledge, gift, donation, assignment, or other disposition of Notes, whether voluntary or involuntary, director or by operation of law, and whether during the lifetime of the Person involved or upon or after his death, including, but not limited to, any disposition by operation of law, by court order, by judicial process, or by foreclosure, levy, or attachment.

 

13.48.     “Unqualifiedly Certified,” when used in connection with audited financial statements, means the certification thereof without any qualification, limitation, exception or explanatory material that would (i) call into question or express substantial doubt about the ability of the Company to continue as a going concern, as discussed in the American Institute of Certified Public Accounting’s Statement on Auditing Standard Number 59, (ii) relate to the limited scope of examination of matters relevant to such financial statements or (iii) relate to the treatment or classification of any item in such financial statements and, which as a condition of its removal would require an adjustment to such item the effect of which would be to cause the occurrence of a Default or Event of Default.

 

14.          Indemnity and Waiver.

 

14.1.       The Company agrees to indemnify, defend and hold each of the Lenders and their officers, directors, members, managers, partners, stockholders, employees, consultants and agents, including without limitation, their designees to the Company’s Board of Directors (the “Lenders’ Indemnitees”) harmless from and against any and all losses, liabilities, obligations, claims, costs, judgments, damages or expenses (including reasonable legal fees and expenses) incurred or suffered by the Lenders’ Indemnitees as a result of or arising out of or in connection with the Company’s breach of any representation, warranty, covenant or agreement of the Company contained herein, its security interest in the Collateral, the issuance of the Notes, the use of proceeds of the Loan, or the issuance of the Warrants.

 

14.2.       The Company hereby releases and waives all claims, rights and actions, in law or equity, that the Company has against the Lender’s Indemnitees for any loss, damage, liability or injury arising from, on in any way relating to, any clam, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, arising from any omissions, acts or facts that have occurred from the beginning of time up until the date hereof.

 

15.          Miscellaneous.

 

15.1.       Termination; Survival of Representations, Warranties and Covenants.   Except as otherwise provided for in this Agreement all representations, warranties, covenants and agreements contained in this Agreement, or in any of the Transaction Documents shall survive the execution and delivery of this Agreement and the Closings and the consummation of the transactions contemplated hereby, regardless of any investigation made by the Lender or on their behalf.

 

15.2.       Expenses.  The Company shall pay all its own expenses in connection with this Agreement and the transactions contemplated herein and up to $          of the out-of-

 

33

 

pockets expenses incurred by the Lenders in connection with the preparation of the Transaction Documents.  The Company shall reimburse the Lenders on demand for all reasonable fees and expenses (including the reasonable fees and expenses of legal counsel for the Lenders incurred by the Lenders) in connection with the enforcement of the Lenders’ rights to take possession of the Collateral and proceeds thereof and to hold, collect, render in compliance with applicable laws and regulations, including without limitation, Environmental Control Statutes, prepare for sale, sell and dispose of the Collateral.  All obligations provided for in this Section 15.2 shall survive any termination of this Agreement and the repayment of the Loan.

 

15.3.       Commitment Fee. Each Participating Lender shall be entitled to a commitment fee equal to two (2%) of its aggregate Commitment Amount on the date hereof, which shall be deemed earned in full upon execution hereof (the “Commitment Fee”). The Commitment Fee will be paid pro rata as each portion of the New Loan Amount is drawn. Whether or not the Company has previously issued Notes equal to the aggregate Commitment Amount, the remaining unpaid Commitment Fee shall be paid upon the earliest to occur of (a) the repayment or conversion into Series D Preferred Stock of the outstanding principal balance of the Notes in full, (b) the Maturity Date, (c) a Change of Control or (d) the repayment of the Senior Debt.

 

15.4.       Monitoring and Advisory Fees. The Company shall pay to MVP Management Company an annual monitoring and advisory fee equal to $160,000, and shall pay to Healthcare Value Capital LLC an annual advisory fee equal to $40,000.  Such fees shall be payable in quarterly installments in advance on the first business day of each calendar quarter, commencing January 1, 2011, until the earlier of a Change of Control or liquidation of the Company. Such fee shall be subordinated to the senior debt pursuant to the terms of the existing subordination agreement with the senior lender and the quarterly installments thereof shall accrue (without interest) and such accrued fees shall be paid in cash upon the repayment of the Senior Debt or out of the proceeds from Notes issued in Closings after the Initial Closing or other future financings. From and after repayment of the Senior Debt, such quarterly installments shall be paid currently no later than the tenth (10th) day of each calendar quarter.

 

15.5.       Amendments and Waivers.   This Agreement and all exhibits and schedules hereto set forth the entire agreement and understanding among the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.  This Agreement may be amended only by mutual written agreement of the Company and the Majority Lenders, except that any amendment or waiver of this Section 15.5 shall require the written consent of Lenders holding 90% of the Notes issued under this Agreement, and any amendment or waiver of any provision of Section 1 hereof that aversely affects the rights of a Participating Lender thereunder or effects any increase in any Participating Lender’s Committed Amount shall only be effective as to any adversely affected Participating Lender that consents thereto in writing; provided that no amendment or waiver that materially adversely affects the rights or obligations of a Lender in a manner different than the manner in which it affects the rights or obligations of another Lender shall be effective as against such adversely affected Lender unless approved by such Lender.  The Company may take any action herein prohibited or omit to take any action herein required to be performed by it, and any breach of any covenant, agreement, warranty or representation may be waived, only if the Company has obtained the written consent or waiver of the Majority Lenders.  No course of dealing between or among any persons having any interest in this Agreement will

 

34

 

be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person under or by reasons of this Agreement.

 

15.6.       Successors and Assigns.  This Agreement may not be assigned by the Company except with the prior written consent of the Majority Lenders.  This Agreement shall be binding upon and inure to the benefit of the Company and its permitted successors and assigns and the Lenders and their permitted successors and assigns.  The provisions hereof which are for the Lenders’ benefit as purchasers or holders of the Notes are also for the enforceable by any subsequent holder of such Notes.

 

15.7.       Notices.  All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given personally or when mailed by certified or registered mail, return receipt requested and postage prepaid, and addressed to the addressee of the respective parties set forth below or to such changed addresses as such parties may have fixed by notice; provided, however, that any notice of change of address shall be effective only upon receipt:

 

If to the Company:

 

ANIP Acquisition Company
 210 Main Street 
 Baudette, Minnesota 56623
 Attention:
 Facsimile:

 

with copies to:

 

SNR Denton US LLP
 Two World Financial Center
 New York, NY 10281
 Attention: Jane A. Meyer, Esq.
 Facsimile:  (212) 768-6800

 

If to the Lenders:

 

At the address specified on their signature page hereto.

 

If to the Agent:

 

Meridian Venture Partners II, L.P.
 201 King of Prussia Road, Suite 240
 Radnor, PA 19087
 Attention:  Robert E. Brown
 Facsimile:  (610) 254-2996

 

with copies to:

 

SNR Denton US LLP
 Two World Financial Center

 

35

 

New York, NY 10281
 Attention:  Paul A. Gajer, Esq.
 Facsimile:  (212) 768-6800

 

15.8.       Governing Law.  The validity, performance, construction and effect of this Agreement shall be governed by the internal laws of the State of Delaware without giving effect to such State’s principles of conflict of laws.

 

15.9.       Counterparts. This Agreement may be executed in any number of counterparts and, notwithstanding that any of the parties did not execute the same counterpart, each of such counterparts shall, for all purposes, be deemed an original, and all such counterparts shall constitute one and the same instrument binding on all of the parties thereto.  Any signature received by facsimile transmission shall, for all purposes, be deemed an original signature.

 

15.10.     Headings.  The headings of the Sections hereof are inserted as a matter of convenience and for reference only and in no way define, limit or describe the scope of this Agreement or the meaning of any provision hereof.

 

15.11.     Severability.  In the event that any provision of this Agreement or the application of any provision hereof is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall not be affected except to the extent necessary to delete such illegal, invalid or unenforceable provision unless the provision held invalid shall substantially impair the benefit of the remaining portions of this Agreement.

 

15.12.     Exculpation Among Lenders.  Each Lender acknowledges and agrees that its is not relying on any other Lenders, or any officer, director or employee partner or affiliate of any such other Lender, in making its investment or decision to invest in the Company or in monitoring such investment.  Each Lender agrees that no Lender nor any controlling person, officer, director or shareholder, partner, agent or employee of any Lender shall be liable for any action heretofore or hereafter taken or omitted to be taken by an of them relating to or in connection with the Company or the securities, or both.

 

15.13.     Actions by Lenders.  Any actions permitted to be taken by the Lenders, and any consents required to be obtained from the same under this Agreement, may be taken or given only by the Majority Lenders.  Any action or consent granted by the Majority Lenders shall be deemed given or taken by all Lenders, all of whom shall be bound by the decision or action taken by the Majority Lenders without any liability on the part of the Majority Lenders to any other Lender.

 

15.14.     MVP II as Agent.

 

(a)           Appointment.

 

(i)            Each Lender hereby designates and appoints the Agent as its agent under this Agreement and the other Transaction Documents, and each Lender hereby irrevocably authorizes the Agent to execute and deliver the Transaction Documents and to take such action or to refrain from taking such action on its behalf under the provisions of this Agreement and the other Transaction Documents and to exercise such powers as are set forth

 

36

 

herein or therein, together with such other powers as are reasonably incidental thereto.  The Agent (x) may be removed with or without cause by the written consent of the Majority Lenders and (ii) may, at any time and in its sole discretion, determine not to continue to serve as the Agent.  In either such case the Majority Lenders may appoint a successor Agent by written notice to the Company and the other Lenders, which notice shall be countersigned by the successor Agent to acknowledge its appointment.

 

(ii)           The Agent is authorized and empowered to amend, modify, or waive any provisions of this Agreement or the other Transaction Documents on behalf of the Lenders with the prior written consent of the Majority Lenders (or all the Lenders with respect to those provisions of this Agreement or the other Transaction Documents, as applicable, explicitly requiring the consent all the Lenders).  In performing its functions and duties under this Agreement, the Agent shall act solely as agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for the Company.  The Agent may perform any of its duties hereunder or under the other Transaction Documents, by or through its agents or employees.

 

(iii)          Each Lender agrees to be bound by all notices and consents received or given by, and all agreements and determinations made by, and all documents executed and delivered by the Agent at the direction of the Majority Lenders, or otherwise in accordance with this Agreement or the Transaction Documents after the date hereof.  The Agent agrees to forward on a prompt basis to the Lenders copies of any and all notices received by it in its capacity as agent hereunder.

 

(b)           Acceptance.  By executing this Agreement, the Agent hereby (i) accepts its appointment and authorization to act as the Agent and as attorney-in-fact and agent in accordance with the terms hereof and (ii) agrees to perform its obligations hereunder in good faith.

 

(c)           Nature of Duties.  The duties of the Agent shall be mechanical and administrative in nature.  The Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender.  Nothing in this Agreement or any of the other Transaction Documents, express or implied, is intended to or shall be construed to impose upon the Agent any obligations in respect of this Agreement or any of the other Transaction Documents except as expressly set forth herein or therein.  If the Agent seeks the consent or approval of any Lenders to the taking or refraining from taking any action hereunder, then the Agent shall send notice thereof to each Lender.  The Agent shall promptly notify each Lender any time that the Majority Lenders have instructed the Agent to act or refrain from acting pursuant hereto.

 

(d)           Rights, Exculpation, Etc.  Neither the Agent nor any of its officers, director, employees or agents shall be liable to any Lender for any action taken or omitted by them hereunder or under any of the Transaction Documents, or in connection herewith or therewith, except that the Agent shall be liable to the extent of its own gross negligence or willful misconduct as determined by a final non-appealable order by a court of competent jurisdiction.  In no event shall the Agent be liable for punitive, special, consequential, incidental, exemplary or other similar damages.  The Agent shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any of the Transaction Documents or the financial condition of any party thereto, or the existence

 

37

 

of or possible existence of any Default or Event of Default.  The Agent may at any time request instructions from the Majority Lenders with respect to any actions or approvals that by the terms of this Agreement or any of the Transaction Documents the Agent is permitted or required to take or to grant.  The Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any of the Transaction Documents until it shall have received such instructions from the Majority Lenders.  Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting under this Agreement or any of the other Transaction Documents in accordance with the instructions of the Majority Lenders; and notwithstanding the instructions of the Majority Lenders, the Agent shall have no obligation to take any action if it believes, in good faith, that such action is deemed to be illegal by the Agent or exposes the Agent to any liability for which it has not received satisfactory indemnification in accordance with Section 15.14(f).

 

(e)           Reliance.

 

(i)             The Agent shall be entitled to rely, and shall be fully protected in relying, upon any written or oral notices, statements, certificates, orders or other documents or any telephone message or other communication (including any writing, email, fax or telegram) believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the Transaction Documents and its duties hereunder or thereunder.  The Agent shall be entitled to rely upon the advice of legal counsel, independent accountants and other experts selected by the Agent in its sole discretion.

 

(ii)            The Lenders shall be entitled to rely on any and all actions taken by or the authority of the Agent under this Agreement and the other Transaction Documents without any liability to, or obligation to inquire of, any of the Lenders.  The Lenders are hereby expressly authorized to rely on the genuineness of the signature of the Agent, and upon receipt of any writing which reasonably appears to have been signed by the Agent.  The Lenders may act upon the same without any further duty of inquiry as to the genuineness of the writing.

 

(f)            Indemnification.   The Company and the Lenders will reimburse and indemnify the Agent for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including reasonably attorneys’ fees and expenses), advances or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any of the Transaction Documents or any action taken or omitted by the Agent under this Agreement or any of the Transaction Documents, in the case of the Lenders, in proportion to the Lender’s Pro Rata Share, but only to the extent that any of the foregoing is not first reimbursed by the Company; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, advances or disbursements to the extent resulting from the Agent’s gross negligence or willful misconduct.  If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against even if so directed by the Majority

 

38

 

Lenders, or such other portion of the Lenders as applicable until such additional indemnity is furnished.  The obligations of the Company and the Lenders under this Section 15.14(f) shall survive the payment in full of the Liabilities and the termination of this Agreement for a period not to exceed eighteen (18) months thereafter.

 

(g)           MVP II Individually.   With respect to its commitments hereunder, MVP II shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender as if it were not acting as Agent.

 

(h)           Collateral Matters.

 

(i)           Release of Collateral.   Upon receipt by the Agent of any written confirmation from the Majority Lenders of its authority to release any particular item or types of Collateral, and upon at least ten (10) Business Days’ prior written request by the Company, the Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release of the liens granted to the Agent upon the special items or types of Collateral referred to in the confirmation; provided, however, that (A) the Agent shall not be required to execute any such document on that, in the Agent’s opinion, would expose the Agent to liability or create any obligation or entail any consequence other than the release of such liens without recourse or warranty, and (B) such release shall not in any manner discharge, affect or impair the Liabilities or any liens upon (or obligations of the Company, in respect of), all interests retained by the Company, including the proceeds of any sale, all of which shall continue to constitute part of the Collateral.

 

(ii)          Absence of Duty.  The Agent shall have no obligation whatsoever to any Lender or any other Person to assure that the property covered by the security interests granted herein exists or is owned by the Company or is cared for, protected or insured or has been encumbered or that the liens granted herein have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority.  It is understood and agreed that the Agent may act in any manner it may deem appropriate, in its sole discretion, and that the Agent shall have no duty or liability whatsoever to any of the Lenders in respect of any such action, except to the extent applicable to all Lenders or as otherwise expressly set forth herein.

 

(i)            Agency for Perfection.  The Agent and each Lender hereby appoint each other Lender and the Agent as agent for the purpose of perfecting the security interests granted herein with respect to which, in accordance with the Code in any applicable jurisdiction, such security interest may be perfected by possession or control.  Should any Lender (other than the Agent) obtain possession or control of any assets secured by such security interest, such Lender shall notify the Agent thereof, and, promptly upon the Agent’s request therefor, shall deliver such assets to the Agent in accordance with the Agent’s instructions or transfer control to the Agent in accordance with the Agent’s instructions.  Each Lender agrees that it will not have any right individually to enforce or seek to enforce any of the security interests granted herein or to realize upon any collateral security for the Liabilities unless instructed to do so by the Agent in writing, it being understood and agreed that such rights and remedies may be exercised only by the Agent.

 

39

 

(j)            Notice of Default.  The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Lenders, unless the Agent shall have received written notice from a Lender or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default.”  The Agent will promptly notify each Lender of its receipt of any such notice, provided, that the Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to the Agent’s gross negligence or willful misconduct.  The Agent shall take such action with respect to such Default or Event of Default as directed by the Majority Lenders in accordance with this Agreement.  Unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interests of the Lenders, but solely to the extent it reasonably believes the failure to take such action could materially and adversely affect the interests of the Lenders.

 

(k)           Lender Actions Against Collateral.  Each Lender agrees that it will not take any action, nor institute any actions or proceedings, with respect to the Liabilities, against the Company hereunder or under the other Transaction Documents without the consent of the Agent and the Majority Lenders.  With respect to any action by the Agent to enforce the rights and remedies of the Agent and the Lenders under this Agreement and the other Transaction Documents, each Lender agrees to deliver its Notes and/or Warrants to the Agent to the extent necessary to enforce the rights and remedies of the Agent for the benefit of the Lenders in accordance with the provisions hereof.

 

(l)            Advisors.  The Agent may engage the services of attorneys, accountants and others as it may consider appropriate in carrying out its duties, and the Agent may expend funds out of any reserve fund it establishes for this purpose.  The Agent may consult with legal counsel, auditors or other experts and may rely on the advice or opinion of such experts in performing its obligations hereunder.

 

(m)          Capacity of Agent.  Any and all rights granted to, and obligations of, the Agent under this Agreement or any other Transaction Documents are to be held and exercised by the Agent solely in its capacity as administrative agent for the benefit of the Lenders pursuant to the provisions of this Agreement.

 

15.15.     Consent to Jurisdiction.  The parties hereto irrevocably consent to the jurisdiction of the courts of the State of New York and of any federal court located in such State in connection with any action or proceeding arising out of or related to this Agreement, the Transaction Documents, any other document or instrument delivered pursuant thereto, in connection with or simultaneously with this Agreement, or a breach of this Agreement or any such document or instrument.  In any such action or proceeding, each party hereto waives personal service of any summons, complain or other process and agrees that service thereof may be made in accordance with Section 15.7.  Within thirty (30) days after such service, or such other time as may be mutually agreed upon in writing by the attorneys for the parties to such action or proceeding, the party so served shall appear or answer such summons, complain or other process.

 

40

 

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

 

 

	
 
    	
ANIP ACQUISITION COMPANY
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Charlotte C. Arnold
    
	
 
    	
 
    	
Name: Charlotte C. Arnold
    
	
 
    	
 
    	
Title: Chief Financial Officer
    

 

 

[Investor Signature Pages]

 

LENDERS SIGNATURE PAGE

 

	
 
    	
MERIDIAN   VENTURE PARTNERS II, L.P.
    
	
 
    	
Address:   

 

201   King of Prussia Road, Suite 240 

Radnor,   PA 19087 

Attention:   Robert E. Brown
    
	
 
    	
 
    
	
 
    	
By:          MERIDIAN VENTURE PARTNERS II CO.,   its General Partner 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Thomas A. Penn
    
	
 
    	
 
    	
 
    
	
 
    	
Name:   
    	
Thomas   A. Penn 
    
	
 
    	
 
    	
Title:    Vice President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
FA   PRIVATE EQUITY FUND IV, L.P.
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:         FA PRIVATE   EQUITY MANAGEMENT IV, L.L.C., its general partner 
    
	
 
    	
 
    
	
 
    	
By:          FIRST ANALYSIS PRIVATE EQUITY   MANAGEMENT COMPANY IV, L.L.C., its managing member 
    
	
 
    	
 
    
	
 
    	
By:          FIRST ANALYSIS VENTURE OPERATIONS   AND RESEARCH, L.L.C., its managing member 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:          FIRST ANALYSIS CORPORATION, its   manager 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/
    
	
 
    	
 
    	
Name: 
    
	
 
    	
 
    	
Title:
    
				

 

42

 

	
 
    	
FA   PRIVATE EQUITY FUND IV GMBH & CO. BETEILIGUNGS KG
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:         FA PRIVATE EQUITY MANAGEMENT IV, L.L.C.,   its managing limited partner 
    
	
 
    	
 
    
	
 
    	
By:         FIRST ANALYSIS PRIVATE EQUITY MANAGEMENT   COMPANY IV, L.L.C., its managing member 
    
	
 
    	
 
    
	
 
    	
By:         FIRST ANALYSIS VENTURE OPERATIONS AND   RESEARCH, L.L.C., its managing member 
    
	
 
    	
 
    
	
 
    	
By:       FIRST   ANALYSIS CORPORATION, its manager 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/
    
	
 
    	
 
    	
Name:   
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
THE   PRODUCTIVITY FUND IV, L.P.
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:          FIRST ANALYSIS MANAGEMENT COMPANY   IV, L.L.C., its general partner 
    
	
 
    	
 
    
	
 
    	
By:          FIRST ANALYSIS VENTURE OPERATIONS   AND RESEARCH, L.L.C., a member 
    
	
 
    	
 
    
	
 
    	
By:          FIRST ANALYSIS CORPORATION, its   manager 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   
    
	
 
    	
 
    	
Name: 
    
	
 
    	
 
    	
Title:
    
				

 

43

 

	
 
    	
THE   PRODUCTIVITY FUND IV ADVISORS FUND, L.P.
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:       FIRST   ANALYSIS MANAGEMENT COMPANY IV, L.L.C., its general partner 
    
	
 
    	
 
    
	
 
    	
By:         FIRST ANALYSIS VENTURE OPERATIONS AND   RESEARCH, L.L.C., a member 
    
	
 
    	
 
    
	
 
    	
By:         FIRST ANALYSIS CORPORATION, its manager 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/
    
	
 
    	
 
    	
Name:   
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ARGENTUM   CAPITAL PARTNERS II, L.P.
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:         ARGENTUM PARTNERS II, L.L.C., its General   Partner 
    
	
 
    	
 
    
	
 
    	
By:         ARGENTUM INVESTMENTS, L.L.C., its   Managing Member 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Daniel Raynor 
    
	
 
    	
 
    	
     Name:   Daniel Raynor 
    
	
 
    	
 
    	
     Title:     Managing Member
    

 

44

 

	
 
    	
LIBERTY ADVISORS, INC.
    
	
 
    	
Address:   
    	
2001   Market Street 

Philadelphia,   PA 19103
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Thomas R. Morse
    
	
 
    	
Name:   
    	
Thomas   R. Morse 
    
	
 
    	
Title:   
    	
President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
LIBERTY VENTURES II, L.P.
    
	
 
    	
Address:   
    	
2001   Market Street 
    
	
 
    	
 
    	
Philadelphia,   PA 19103
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:          LIBERTY VENTURE PARTNERS II, LLC,   its General Partner 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Thomas R. Morse
    
	
 
    	
 
    	
Name: Thomas R. Morse
    
	
 
    	
 
    	
Title:   Managing Director
    
				

 

45

 

	
 
    	
HEALTHCARE   VALUE MASTER FUND LTD.
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/
    
	
 
    	
 
    	
Name:   
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MEDINVESTORS   I LLC
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   Mississippi Angel Fund, L.P., Managing Member 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   
    	
MAF   of Mississippi, Inc., General Partner 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:   
    	
/s/   Ben Walton
    
	
 
    	
 
    	
 
    	
 
    	
Name:   Ben Walton 
    
	
 
    	
 
    	
 
    	
 
    	
Title:   President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Sam Toscano
    
	
 
    	
SAM   TOSCANO
    
	
 
    	
Address:
    
	
 
    	
 
    
							

 

46ex10_1.htm

EXHIBIT 10.1

 

Confidential information has been omitted in places marked “*****” and has been filed separately with the Securities and Exchange Commission.  Confidential treatment has been requested with respect to this omitted information.

AGREEMENT

between

ENERGY NORTHWEST

and

UNITED STATES ENRICHMENT CORPORATION

USEC CONTRACT NO. EC-SC01-12UE03133

ENERGY NORTHWEST CONTRACT NO. 335900

  

  

  

Table of Contents

ARTICLE 1 – DEFINITIONS 

ARTICLE 2 – TERM 

ARTICLE 3 – SCOPE

ARTICLE 4 – DELIVERY OF DU AND INSPECTION OF CYLINDERS

ARTICLE 5 – ENRICHMENT OF DU AND DELIVERY OF ENRICHED DU

ARTICLE 6 – ADDITIONAL PURCHASE OF SWU

ARTICLE 7 – TITLE AND RISK OF LOSS; OBLIGATION CODES

ARTICLE 8 – PRICES AND TERMS OF PAYMENT

ARTICLE 9 – TAXES AND OTHER GOVERNMENTAL IMPOSITIONS

ARTICLE 10 – REPRESENTATIONS, WARRANTIES AND INDEMNIFICATIONS

ARTICLE 11 - FORCE MAJEURE

ARTICLE 12 – NUCLEAR LIABILITY

ARTICLE 13 – OTHER LIABILITY

ARTICLE 14 – GOVERNMENTAL AUTHORIZATIONS AND REQUIREMENTS

ARTICLE 15 – ENTIRE AGREEMENT; TERMINATION OF PRIOR AGREEMENTS

ARTICLE 16 – TERMINATION

ARTICLE 17 – ASSIGNMENT AND TRANSFER OF INTEREST

ARTICLE 18 – CONFIDENTIALITY 

ARTICLE 19 – DISPUTE RESOLUTION 

ARTICLE 20 – NOTICES AND ADDRESSES 

ARTICLE 21 – GENERAL 

APPENDIX A:  EQUATIONS USED TO CALCULATE COMPONENTS OF ENRICHED URANIUM PRODUCT PRODUCED FROM FEED MATERIAL OR FROM DEPLETED URANIUM

APPENDIX B:  PROVISIONS FOR PHYSICAL DELIVERY 

APPENDIX C:  CYLINDERS OF DU TO BE PROVIDED 

APPENDIX D:  CYLINDERS OF REPLACEMENT DU TO BE PROVIDED

APPENDIX E:  USEC SERVICE CHARGES – AS OF THE EFFECTIVE DATE 

APPENDIX F:  FORM OF QUALITY CONFIRMATION 

  

  

  

BUSINESS PROPRIETARY INFORMATION

USEC CONTRACT NO. EC-SC01-12UE03133

ENERGY NORTHWEST CONTRACT NO. 335900

AGREEMENT

 

This Agreement (“Agreement”) is entered into as of this 16th day of May, 2012 (the “Effective Date”) by and between Energy Northwest (“Customer”), a joint operating agency and municipal corporation of the State of Washington, and United States Enrichment Corporation (“USEC”), a corporation organized under the laws of Delaware (Customer and USEC being sometimes referred to herein individually as a “Party” and collectively as the “Parties”).

 

W I T N E S S E T H:

 

WHEREAS, USEC leases the PGDP (as defined below) to conduct its business of Enrichment (as defined below) at the PGDP;

 

WHEREAS, the United States Department of Energy (“DOE”) holds title to certain quantities of Depleted Uranium (as defined below) located on the reservation where the PGDP is situated;

 

WHEREAS, DOE is making certain quantities of Depleted Uranium available that Customer will deliver to USEC for processing by USEC under this Agreement;

 

WHEREAS, Customer will obtain title from DOE to such Depleted Uranium and to the cylinders holding such Depleted Uranium and will deliver them to USEC for Enrichment pursuant to the terms of this Agreement;

 

WHEREAS, in return, Customer will receive Enriched DU (as defined below) from USEC, subject to the terms of this Agreement;

 

WHEREAS, Customer is concerned about paying for a substantial amount of purchases under this Agreement from current revenues and intends to issue debt to obtain proceeds to enable it to have sufficient funds to fund its purchases under this Agreement;

 

WHEREAS, Customer is not willing to issue debt to enable it to have sufficient funds to make a substantial amount of purchases under this Agreement unless such financing is available on terms, in amounts, and at times acceptable to Customer;

 

WHEREAS, Customer is not willing to subject its credit rating to a downgrade by virtue of this Agreement or any financing to enable it to have sufficient funds to fund its purchases under this Agreement; and

 

WHEREAS, Customer expects to issue a short-term note to finance the initial four months of expected purchases under the Agreement and thereafter expects to issue bonds (“Bonds”) to pay off the short-term note, and to obtain proceeds to enable it to have sufficient funds to fund the remainder of the expected purchases under this Agreement.

 

NOW, THEREFORE, the Parties hereby agree as follows:

 

ARTICLE 1 – DEFINITIONS

 

When used herein with initial capitalization, the following terms shall have the following definitions:

 

1.1           “Act” means the Atomic Energy Act of 1954, as amended.

 

1.2           “Article 5 SWU” means the 4,000,000 SWU to be purchased pursuant to Article 3 and delivered as the DU SWU Component of Enriched DU under Article 5 of this Agreement.

 

1.3           “Article 6 SWU” means the 440,000 SWU to be purchased pursuant to Article 3 and delivered as the LEU SWU Component of Enriched Product under Article 6 of this Agreement.

 

1.4           “Assay” means the total weight of 235U per kilogram of Material divided by the total weight of all uranium isotopes per kilogram of Material, the quotient of which is multiplied by 100 and expressed as a weight percent, which may be indicated by the symbol “w/o.”

 

1.5           “Book Transfer” or “Book Transferred” means the transfer of credits for a given quantity of Material between accounts within USEC’s material accounting system, or the accounts of a commercial nuclear fuel fabricator in the United States.

 

1.6           “Business Day” means a day that is not a Saturday, Sunday or United States Legal Holiday (which is a day for which employees of the United States Federal government are excused from work with pay pursuant to a Federal statute or executive order).  Unless qualified by the term “Business,” references in this Agreement to “day” or “days” refer to a calendar day or days, respectively.

 

1.7           “Calendar Year,” “CY” or “Year” means a period of twelve (12) months from January 1 through December 31.

 

1.8           “Cascade” has the meaning ascribed to that term in Section 4.2(c).

 

1.9           “Conforming Cylinder” means a cylinder meeting the regulatory requirements and industry standards including ANSI 14.1 and USEC-651 (Rev. 9) (The UF6 Manual:  Good Handling Practices for Uranium Hexafluoride) applicable on the date of Physical Delivery, that is suitable for feeding into the Cascade.

 

1.10           “Customer’s Truck” shall have the meaning ascribed to that term in Section 1.27.

 

1.11           “Delivery Period” means (a) with regard to deliveries pursuant to Article 5, a monthly schedule for Physical Delivery of Enriched DU; and (b) with regard to deliveries pursuant to Article 6, means a fourteen (14) day period following the stated delivery dates in Section 6.1.

 

1.12           “Depleted Uranium” or “DU” means depleted uranium in the form of UF6 with an Assay between 0.39 and 0.710.  All DU must be derived from the Enrichment of natural uranium in the form of UF6 which has not been previously irradiated, and was not the result of the enrichment of reprocessed uranium, shall conform to Section 7.3(a), and shall be capable of Enrichment in the Cascade to meet the specification in Section 1.15.

 

1.13           “DU Account” means an account maintained by USEC to record the amount of Depleted Uranium (in KgU as UF6) credited to Customer.

 

1.14           “DU SWU Component” means, with respect to a given quantity and Assay of Enriched DU, the amount of SWU required to produce such Enriched DU from a given quantity and Assay of DU, as measured using the formula in Appendix A, as applied to the Enrichment of DU.

 

1.15           “Enriched DU” or “Enriched Depleted Uranium” means Depleted Uranium in the form of UF6 which has been Enriched to an Assay of at least 0.711 and that conforms to American Society for Testing and Materials’ (“ASTM”) specification, “Standard Specification for Uranium Hexafluoride Enriched to less than 5 % 235U,” applicable to “Enriched Commercial Grade UF6” (as defined in paragraphs 4 and 5 of the specification), as in effect on the date of delivery (currently C-996-10).

 

1.16           “Enriched Product” shall have the meaning ascribed to that term in Section 1.22.

 

1.17           “Enrichment” or “Enrich” means the process, measured in Separative Work Units, by which the Assay of uranium is increased.

 

1.18           “Facility” means the USEC-leased premises at the Paducah Gaseous Diffusion Plant located in Paducah, Kentucky operated by or for USEC; also referred to as the PGDP.

 

1.19           “Feed Account” means an account maintained by USEC to record the amount of Natural Uranium (in KgU as UF6) credited to Customer.

 

1.20           “F.O.B. Facility” means (a) if the origin of a shipment is the Facility, Customer shall, at its own risk and expense, transport from such Facility an item (e.g., Material or a cylinder) Physically Delivered to Customer at such Facility; and (b) if the destination of a shipment is the Facility, Customer shall, at its own risk and expense, transport the item to the Facility for Physical Delivery to USEC.  No other definition of “F.O.B.” or “Free on Board,” including any definition found in INCOTERMS, shall apply.

 

1.21           “Heavy Heel” means Enriched DU or Enriched Product residue remaining in a parent cylinder of approximately 1,000 pounds after liquid transfer of the Enriched DU or Enriched Product from the 48 inch cylinder to the 30B cylinders.

 

1.22           “LEU Feed Component” means with respect to a given quantity and Assay of enriched uranium hexafluoride (“Enriched Product”), the amount of Natural Uranium that would have been required to produce such Enriched Product, at a specified Assay and Tails Assay, if it were produced using Natural Uranium in lieu of DU, as calculated by the formula in Appendix A as applicable to the Enrichment of Natural Uranium.

 

1.23           “LEU SWU Component” means with respect to a given quantity and Assay of Enriched Product the amount of SWU that would have been required to produce such Enriched Product, at a specified Assay and Tails Assay, if it were produced using Natural Uranium in lieu of DU, as calculated by the formula in Appendix A as applicable to the Enrichment of Natural Uranium.

 

1.24           “Material” means, as the context requires, DU, Enriched DU, Residual Tails, Enriched Product, or Interim Enriched Product (as defined in Section 7.3(b)) or, in the case of Enriched DU,  Interim Enriched Product or Enriched Product, the components of such Material including SWU. Where the specific types of Material are listed separately, a reference to “Enriched DU” or “Enriched Product” shall, where consistent with the context, also be deemed to include Interim Enriched Product.

 

1.25           “Natural Uranium” means natural uranium in the form of UF6, which has not been irradiated, enriched or depleted, with an approximate Assay of 0.711, and which conforms to the provisions of the American Society for Testing and Materials’ (“ASTM”) “Standard Specification for Uranium Hexafluoride for Enrichment” as in effect on the date of delivery, applicable to “Commercial Natural UF6” (as defined in the specification) (currently C-787-11).

 

1.26           “Obligation Code” means (a) the code assigned to Material under the Nuclear Material Management & Safeguards System to indicate the foreign obligation(s) applicable to such Material; or (b) the code assigned by USEC to Material to indicate the unobligated status of such Material.

 

1.27           “Physical Delivery,” “Physically Deliver,” and “Physically Delivered” mean (a) with respect to the delivery by USEC of a cylinder of Enriched DU, Enriched Product or DU (e.g., rejected DU) to Customer, the loading by USEC of such item onto a truck or other conveyance provided by or on behalf of Customer at the Facility (“Customer’s Truck”); (b) with respect to Residual Tails, when the cylinder is set on the saddles in USEC’s storage yard inside the security perimeter of the PGDP; and (c) with respect to the delivery of a cylinder of DU to USEC, the unloading by USEC of such item off Customer’s Truck.  Loading of Customer’s Truck shall be deemed completed when (x) the item is physically on Customer’s Truck; (y) USEC’s loading equipment, if any, is detached from the item; and (z) in the case of Material, any overpack required for transportation of a cylinder containing such Material is sealed by USEC.  Unloading of an item shall be deemed to be completed when the item is removed by USEC from Customer’s Truck.  Unless the context clearly indicates that another meaning was intended, where the term “delivery” is used without initial capitalization, it means collectively, either constructive delivery under Section 5.2(e) or Appendix B, or Physical Delivery.

1.28           “Prime Rate” means the prime rate as published by the Wall Street Journal, or in the event the Wall Street Journal ceases to publish a prime rate, the Parties shall negotiate in good faith to select a substitute publication and pending agreement on such substitute publication shall use the last prime rate published by the Wall Street Journal.

 

1.29           “Residual Tails” shall have the meaning ascribed to that term in Section 4.6.

 

1.30           “Separative Work Unit” or “SWU” means the measure of work required for Enrichment.

 

1.31           “Tails” means the Depleted Uranium residue, the Assay of which has been depleted in the process of providing Enrichment.

 

1.32           “Total Program Price”                                            shall have the meaning ascribed to that term in Article 8.

 

1.33           “Uranium Hexafluoride” or “UF6” means a chemical compound of uranium and fluorine.

 

1.34           “235U” means the fissionable uranium isotope with mass number 235.

 

1.35           “USEC Service Charges” means USEC’s standard charges for services such as handling, sampling, storage, delivery, transfer, packaging or receipt of Material.  A copy of USEC Service Charges is attached as Appendix E.

 

ARTICLE 2 – TERM

 

This Agreement shall be effective as of the Effective Date and, unless earlier terminated in accordance with the terms hereof, shall remain in force until December 31, 2013, or the date on which all purchase and payment obligations of Customer and supply obligations of USEC hereunder are fulfilled.

 

ARTICLE 3 – SCOPE

 

3.1           Purchase and Delivery Obligations.  Subject to Section 3.2 below, between June 1, 2012 and May 31, 2013, inclusive, Customer shall purchase from USEC, and USEC shall sell and deliver to Customer, (a) 4,000,000 SWU contained in Enriched DU with an average Assay of 4.40 delivered to Customer by USEC in accordance with Article 5 and (b) an additional quantity of Enriched Product containing 440,000 SWU delivered to Customer under Article 6.  The quantity of Enriched DU containing the 4,000,000 SWU delivered by USEC will vary depending upon the Assay and quantity of DU Physically Delivered to USEC.  For example, if Customer Physically Delivers 9,082,000 KgU of DU, at an average Assay of 0.44, USEC shall deliver approximately ***** KgU of Enriched DU with an average Assay of 4.40 to Customer. In no event, however, shall USEC be obligated to provide Enriched DU containing greater than 4,000,000 SWU, as measured using the formula in Appendix A, according to the transactional Assay of Tails on which the preceding example is based.  For the absence of doubt, Customer’s purchase obligation for any of the foregoing 4,000,000 SWU contained in Enriched DU with an average Assay of 4.40 and the Enriched Product containing 440,000 SWU shall arise upon Physical Delivery to Customer or, as the case may be, constructive delivery to Customer in accordance with Article 5, Article 6 or Appendix B, and, Customer shall have no purchase obligation until the time of such Physical Delivery or constructive delivery.

 

3.2           The Parties acknowledge and agree that:

 

(a)           Power Requirements.  USEC will require a significant amount of electricity to perform its obligations under this Agreement.  The Parties shall be released from their obligations under this Agreement (other than the obligations in Article 18) and the Agreement shall be terminated without further liability of either of the Parties in the event that by May 31, 2012, the necessary Tennessee Valley Authority (“TVA”) power purchase agreement, on terms and conditions acceptable to USEC in its sole discretion, for the supply of sufficient power for USEC to Enrich all the DU contemplated to be supplied to USEC hereunder by May 31, 2013, has not been executed.

 

(b)           DU Assurances.  Customer shall secure an agreement with DOE that DOE will use reasonable efforts to (i) supply to Customer at least 9,082,000 KgU of DU, including any Replacement DU pursuant to Section 4.3; and (ii) promptly replace the DU contained in each cylinder rejected by USEC pursuant to Article 4 (“Rejected DU”) with an equal or greater quantity of DU available to DOE from its inventory of DU in Paducah, Kentucky (“Substitute DU”); and the agreement shall provide that Customer will transfer title of the Residual Tails (as defined below) and the cylinders containing the Residual Tails to DOE (“DOE Agreement”).  The Parties shall be released from their obligations under this Agreement (other than the obligations in Article 18) and the Agreement shall be terminated without further liability of either of the Parties in the event that by May 31, 2012, Customer has not secured an agreement with DOE to provide all the DU contemplated to be supplied to USEC hereunder, including an obligation by DOE to replace any DU rejected by USEC with Substitute DU, and to take title to Residual Tails.

 

(c)           Customer’s Contingencies.

 

(i)           Customer may effect the termination of this Agreement, subject to the terms of this Section 3.2(c), upon occurrence of any of the following, each an “Event”:

 

	
·  

	
Event Number 1.  Customer determines that long term financing to enable it to have sufficient funds to pay for the expected purchases to be made by Customer under this Agreement is not available on terms, in amounts, and/or at times acceptable to Customer;

 

	
·  

	
Event Number 2. Customer receives an indicative rating below Aa1 by Moody’s Investors Service, below AA by Fitch Ratings Service, and/or below AA- by Standard and Poor’s Ratings Services, on proposed Bonds that it expects to issue to obtain proceeds to enable it to have sufficient funds to make expected purchases under this Agreement;

 

	
·  

	
Event Number 3.  Customer is permanently enjoined or otherwise permanently precluded by a court of law with jurisdiction over Customer from further performance under this Agreement;

 

	
·  

	
Event Number 4.  Customer or DOE terminates the DOE Agreement according to its terms for reasons other than Customer’s breach or non-performance of the DOE Agreement or Customer’s exercise of a right of termination for convenience; and

 

	
·  

	
Event Number 5. USEC terminates its power purchase agreement referred to in Section 21.13(b)(ii) or TVA ceases to supply electrical power to USEC for production of the Enriched Product under the Depleted Uranium Enrichment Program, except where such termination is a response to Customer’s termination or potential termination with respect to Event Number 1, 2, 3 or 4.

 

(ii)           Upon the occurrence of any one or more of the foregoing Events, Customer shall notify USEC promptly of such Event (the “Event Notice”); provided, that, in the case of the Event Notice for Event Number 1 or 2, Customer shall provide such Event Notice at least five (5) days prior to giving any termination notice which termination notice shall in no event be given earlier than August 1, 2012.  With regard to the possible occurrence of Event Number 3, Customer shall promptly provide notice to USEC of the filing of any litigation involving Customer which could lead to an order or other adjudication enjoining or otherwise precluding Customer from further performance under this Agreement and Customer shall not unreasonably object to USEC’s intervention in any such litigation. With regard Event Number 4 and 5, Customer shall provide the Event Notice at least five (5) days prior to any termination notice.

 

(iii)           Following receipt of an Event Notice, the Parties shall promptly discuss the matter to determine if modifications can be made to the Agreement, or other measures taken, that will permit performance of all or part of the Agreement, notwithstanding the occurrence of the Event or the underlying reason for the occurrence of the Event.  In the case of an Event Notice for Event 1 or Event 2, the Parties will consider as a modification or measure hereunder, reducing the purchases by EN hereunder of SWU contained in Enriched DU under Article 5 of this Agreement and/or Enriched Product containing SWU under Article 6 of this Agreement to an amount that is less than was originally contemplated, which reduced purchases will conform to the amount of Bonds that Customer can issue on terms, in amounts, and/or at times acceptable to Customer in its sole discretion.  If the Parties fail to reach agreement on such modifications or measures, or Customer determines, in its sole discretion, that it does not wish to engage in further discussions or seek to implement any proposed modifications or measures, Customer may effect the termination of this Agreement by providing notice of such termination to USEC, with termination effective at the time date specified in its termination notice, provided that:

 

(A)           In the case of Event Number 1, Event Number 2 or Event Number 4, the termination notice may not provide for an effective date of termination fewer than sixty (60) calendar days after receipt by USEC of notice of termination. Notwithstanding any such notice of termination or proposed date of termination, this Agreement shall remain in effect in all respects until the termination date.  Absent mutual agreement, in addition to any Article 6 SWU deliveries that are to be made pursuant to Section 6.1 of the Agreement prior to the effective date of termination, USEC shall not deliver more than the maximum amounts of Article 5 SWU permitted by Section 5.2 in the period between the date it receives the termination notice and the effective date of termination.  USEC shall not feed into the Cascade more DU than is required to produce the Enriched DU required to meet USEC’s delivery obligations prior to termination or to replace Material delivered to Customer in lieu of Enriched DU prior to termination.  Subject to the first sentence of this Section 3.2(c)(iv)(A), Customer shall be obligated to purchase and pay for, and USEC shall be obligated to deliver, all the Enriched DU and Enriched Product delivered under Article 5 and Article 6, respectively, prior to the effective date of the termination.

 

(B)           In the case of Event Number 3, Customer shall provide the termination notice not earlier than the issuance of the injunction or other order precluding performance by Customer.

 

(iv)           A termination under this Section 3.2 shall be made in accordance with Article 16 without further liability of either of the Parties except as provided in Article 16 and Section 21.7. Upon termination of this Agreement under this Section 3.2(c), the Parties shall be released from their respective obligations under this Agreement except as provided in Article 16 and  Section 21.7.

 

(v)           USEC may mitigate economic losses to it, and USEC shall be excused from any delay in its performance, arising from measures taken by it after notice to Customer, pending the outcome of discussions under this Section 3.2(c).

 

(vi)           If Customer elects to terminate under this Section 3.2(c), the Parties shall, if requested by USEC, adjust delivery schedules to minimize the adverse economic impact upon USEC resulting from the termination of Enrichment of DU at the PGDP.

 

 

ARTICLE 4 – DELIVERY OF DU AND INSPECTION OF CYLINDERS

 

4.1           Delivery of DU.

 

(a) Beginning on the Effective Date of this Agreement, and continuing through April 30, 2013, inclusive, in accordance with the schedule noted in Section 4.1(b), Customer shall Physically Deliver to USEC Conforming Cylinders containing at least 9,082,000 KgU of DU meeting the requirements of Section 1.12 and Section 7.3(a).

 

(b) Beginning on the Effective Date of this Agreement, and continuing through October 31, 2012, inclusive, Customer shall Physically Deliver to USEC by the end of each month, no fewer than 150 full 48 inch cylinders of DU meeting the requirements of Section 1.12.  The total amount of KgU of DU to be delivered by Customer or Customer’s designee by October 31, 2012 shall be at least 6,375,000 KgU of DU.  Beginning November 30, 2012 through April 30, 2013, Customer shall Physically Deliver to USEC by the end of each month, no fewer than 50 full 48 inch cylinders of DU meeting the requirements of Section 1.12; provided, however, that the number of 48 inch cylinders of DU Physically Delivered to USEC may be less than 50 in the final month of delivery.  By April 30, 2013, all KgU of DU required to be delivered to USEC under this Agreement shall have been Physically Delivered.  The Physical Deliveries of the cylinders in accordance with this Section shall be coordinated between Customer and USEC and shall be determined by mutual agreement in advance.

 

(c) Within five (5) Business Days after the date on which DU is Physically Delivered to USEC, USEC shall credit such DU to the DU Account.

 

	
4.2

	
Inspection of Cylinders of DU.

 

(a)           Within three (3) Business Days after the Effective Date of this Agreement, Customer shall make available to USEC all DOE records, including electronic records, made available to Customer by DOE, covering the Conforming Cylinders of DU to be Physically Delivered by Customer as listed in Appendix C and pursuant to Section 4.1 to assist USEC in determining preliminarily whether those cylinders are Conforming Cylinders and contain DU meeting the requirements of Section 1.12.  Such records shall include at a minimum:  (i) if requested by USEC, a cylinder history card for each such cylinder, if available; (ii) authorization for USEC to have access to the Nuclear Material Control and Accountability records of such cylinders and the DU they contain; and (iii) all available information about the source of the DU contained in the cylinders.  Where feasible, USEC may be given an opportunity to visually inspect the cylinders prior to delivery and to propose specific cylinders to be delivered or the order in which cylinders will be Physically Delivered from the list in Appendix C.

 

(b)           After receipt of the information provided in Section 4.2(a), but prior to an actual scheduled Physically Delivery of such cylinder, USEC may reject any cylinder by written notice to Customer if it determines that the records of such cylinder indicate that it may not be a Conforming Cylinder and/or that it may not contain DU meeting the requirements of Section 1.12.  Non-conforming cylinders shall be replaced in accordance with Section 4.3.

 

(c)           Customer shall make arrangements to Physically Deliver the cylinders identified pursuant to Section 4.2(a), and not rejected by USEC pursuant to Section 4.2(b), to USEC at Customer’s expense at the Facility to which the Parties mutually agree.  The delivery schedule noted in Section 4.1(b) is intended to provide for a flow of DU that at least matches USEC’s ability to feed the cylinders into the commercial Enrichment cascade operated by USEC at the Facility (the “Cascade”).  All cylinders of DU Physically Delivered to USEC shall be accompanied by the DU Documentation required under Appendix B.

 

(d)           USEC shall conduct an examination of each cylinder, and its DU Documentation, before feeding it into the Cascade to determine whether such cylinder is a Conforming Cylinder and whether any such cylinder has been overfilled with DU.  USEC shall inspect and document in writing the condition of the cylinders and may reject any cylinder by written notice to Customer that it determines is not a Conforming Cylinder or that it determines may have been overfilled with DU, or if it otherwise determines that the cylinder, or the Material it contains, is not suitable for feeding into the Cascade, including due to a discrepancy in the DU Documentation. Non-conforming cylinders shall be replaced in accordance with Section 4.3. In the event a cylinder is returned as non-conforming, USEC shall supply Customer with a copy of the written inspection report.

 

(e)           The expense of returning Rejected DU to Customer, DOE or another entity or person in the United States designated by Customer and authorized to possess a rejected cylinder and its contents, shall be borne in all cases by Customer.

 

(f)           USEC’s rejection of DU under this Section 4.2 shall not be subject to dispute.

 

(g)           In the event cylinders containing DU are not Physically Delivered to USEC on the date scheduled for Physically Delivery of such DU by the Parties, USEC shall provide notice to Customer of the failure to deliver.  Customer shall Physically Deliver the late cylinder of DU within three (3) Business Days after such notice.

 

(h)           Pending Physical Delivery of the late cylinder of DU, USEC’s obligation to provide Enriched DU pursuant to Section 5.2(a) shall be subject to adjustment in accordance with the reduced quantity of DU provided.

 

4.3           Replacement of Cylinders of DU.

 

(a) The following shall apply to the replacement of Rejected DU:

 

(i)           In all cases, within seven (7) Business Days, Customer shall replace, by Physical Delivery to USEC, the Rejected DU with a Conforming Cylinder of DU conforming to Section 1.12 (the “Replacement DU”).  USEC’s inspection and rejection rights in Section 4.2 shall also apply to any cylinder of Replacement DU provided hereunder.

 

(ii)           As soon as possible so as to avoid interference in USEC’s anticipated rate of production, Customer shall proceed to secure from DOE all additional Conforming Cylinders of DU meeting the requirements of Section 1.12, needed to replace the Rejected DU from the list attached in Appendix D and pursuant to the DOE Agreement described in Section 3.2(b).

 

(iii)           Customer acknowledges that operation of the Cascade during the term of this Agreement is dependent on (A) the timely supply to USEC of Conforming Cylinders of DU meeting the requirements of Section 1.12, and this Article 4; and (b) timely payments by Customer.  Therefore, to ensure a steady flow of DU into the Cascade and payments to USEC, any disagreement between the Parties regarding the performance or interpretation of this Agreement shall not be cause for delay in the immediate provision of Replacement DU under Section 4.3(a)(i) or payments under Article 8.

 

(b)           USEC’s right of rejection with respect to a cylinder shall no longer apply once the cylinder has been connected to the Cascade and DU has begun to flow from the cylinder to the Cascade.

 

4.4           Utilization of DU.  Although USEC intends to Enrich all DU supplied by Customer under this Agreement, the operation of the PGDP shall at all times remain within USEC’s sole control.  Accordingly, while USEC may allocate one or more cylinders of DU to the quantities of Enriched DU delivered to Customer, USEC is not obligated to demonstrate that the DU in those cylinders was used to produce the Enriched DU delivered to Customer.  Further, recognizing that all enriched UF6 conforming to the specification in Section 1.15 is fungible,  USEC shall not be obligated to demonstrate that enriched UF6 supplied as Enriched DU under this Agreement actually is, in fact, Enriched DU so long as such enriched UF6 meets the specification in Section 1.15 and Section 7.3(b).

 

4.5           Transfer of Cylinders and Residue in Cylinders.  After the DU in a cylinder has been fed into the Cascade, the cylinder shall be disconnected from the Cascade and title to the cylinder and any DU left in such cylinder shall pass to USEC.

 

4.6           Residual Tails.  Customer shall retain title to the DU (except what remains in the cylinder as provided in Section 4.5), Rejected DU and Replacement DU supplied under this Article 4 throughout Enrichment, except as follows: Customer represents that, pursuant to the DOE Agreement, Customer will transfer and DOE will take title to all Tails resulting from the Enrichment of DU (“Residual Tails”) upon Physical Delivery to DOE.  DOE will take Physical Delivery of the Residual Tails and the 48G, 48H, or 48Y ANSI compliant cylinders (or such other ANSI compliant cylinders agreed by the Parties) containing such Residual Tails by no later than December 31, 2013.  These Residual Tails shall be provided to DOE in the cylinders used by USEC for withdrawal of such Residual Tails, which USEC shall supply as part of the Total Program Price. For the avoidance of doubt, it is understood that prior to delivery to DOE, Customer, and not USEC, holds title to the Residual Tails.

 

ARTICLE 5 – ENRICHMENT OF DU AND DELIVERY OF ENRICHED DU

 

5.1           Enrichment of DU.  Between June 1, 2012 and May 31, 2013, inclusive, and subject to the delivery of DU under Article 4 and the delivery of power under the power purchase agreement(s) described in Section 3.2(a), USEC shall Enrich in the Cascade the DU delivered by Customer pursuant to Article 4 to produce Enriched DU containing the Article 5 SWU.

 

5.2           Delivery of Enriched DU.

 

(a)           Pursuant to the Enrichment of DU under Section 5.1, USEC shall deliver to Customer between June 1, 2012 and May 31, 2013, inclusive, unless otherwise agreed to by the Parties, Enriched DU with an average Assay of 4.40.  Except for Material delivered by constructive delivery as provided in Section 5.2(e) and Appendix B, Enriched DU shall be Physically Delivered, F.O.B. Facility, on a schedule established pursuant to Appendix B, which shall provide for, to the extent feasible, the delivery of Enriched DU containing at least 200,000 Article 5 SWU in each month but, absent mutual agreement, in no event more than 450,000 Article 5 SWU per month. For the avoidance of doubt, the minimum amount may not be met where USEC’s failure to meet such minimum is excused under Article 11, and the maximum amounts may be exceeded where USEC needs to make up deliveries that were delayed due to Force Majeure. The exact quantity of Enriched DU to be delivered by the end of this Agreement shall be determined by (i) the quantity and Assay of DU supplied to USEC and (ii) the quantity of Article 5 SWU to be purchased pursuant to Article 3, as determined using the formula in Appendix A.

 

(b)           USEC shall supply to Customer the 30B cylinders necessary to provide Customer Enriched DU in accordance with the provisions in Appendix B, Paragraph 4.  Physical Delivery of Enriched DU shall be subject to availability of USEC-supplied 30B cylinders.

 

(c)           USEC shall provide the documentation required by Appendices B and F for each delivery of Enriched DU hereunder.

 

(d)           Customer shall pay for services provided by USEC in connection with Physical Delivery in accordance with the USEC Service Charge listed in Appendix E and as noted in Article 8.

 

(e)           If, in any month, Enriched DU containing Article 5 SWU that is ready for Physical Delivery on the date scheduled is not taken by Customer for any reason and also is not taken by Customer by Physical Delivery prior to the end of such month, USEC may treat such Enriched DU as having been constructively delivered as of the last day of the month in which it was scheduled to be delivered and may include the Article 5 SWU of such Enriched DU in the invoice. USEC shall inform Customer of the constructive delivery in the applicable invoice and shall continue to hold the Enriched DU for Physical Delivery to Customer, which shall occur on a date to be agreed by the Parties.  Customer shall take Physical Delivery of all constructively delivered Enriched DU held in storage by USEC by December 31, 2013.

 

(f)           USEC shall not make any constructive delivery of Enriched Product or Enriched DU under Section 5.2(e), and Customer shall not be obligated to accept or pay for such constructively delivered Material, unless USEC first delivers to Customer written acknowledgement by JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative and collateral agent under the Fourth Amended and Restated Omnibus Pledge and Security Agreement, dated as of March 13, 2012, by and among JPMorgan and USEC Inc., United States Enrichment Corporation and NAC International, Inc. that JPMorgan does not and will not claim a security interest in any such constructively delivered Enriched Product or Enriched DU owned by Customer and physically held by USEC for Customer at the Facility.  In addition, USEC shall identify and document in its records and accounts, Customer’s ownership of such constructively delivered cylinder(s) of Enriched DU or Enriched Product, including the identification number of the cylinder(s) containing such Material.  Further, USEC shall visually identify the constructively delivered cylinder(s) as containing Customer’s Material by placing a magnet, sticker or tag on the cylinder and segregating the constructively delivered cylinder(s) from USEC’s other inventories.

 

(g)           In order to give USEC time to obtain the acknowledgment from JPMorgan described in Section 5.2(f) before USEC makes any constructive delivery, Customer shall use its reasonable efforts to notify USEC in the event that it anticipates that DOE or DOE’s contractor will not take Physical Delivery of filled cylinders in a timely manner.

 

ARTICLE 6 – ADDITIONAL PURCHASE OF SWU

 

6.1           Purchase of SWU by Customer.  In addition to the delivery of Enriched DU, USEC shall sell Customer 440,000 SWU and will deliver to Customer ***** KgU of Enriched Product with an average Assay of 4.40 containing the Article 6 SWU.  Customer shall take four (4) deliveries of the Enriched Product, with each delivery having an aggregate of 110,000 Article 6 SWU.  The Enriched Product shall be Physically Delivered during the Delivery Period beginning on August 15, 2012, November 15, 2012, February 15, 2013 and April 15, 2013, respectively (the “SWU Deliveries”).

 

6.2           Delivery to Customer of Enriched Product Containing the Article 6 SWU.  USEC shall deliver the Enriched Product containing the Article 6 SWU by Physical Delivery in USEC-supplied 30B cylinders, pursuant to the delivery terms of provisions of Article 5 (other than Section 5.2(a)) and Appendix B, or, where applicable, by constructive delivery under Section 5.2(e) or Appendix B, Paragraph 4.

 

6.3           Delivery of Feed Material to USEC.

 

(a)           At the time of each of the four SWU deliveries described in Section 6.1, USEC shall loan to Customer ***** KgU of Natural Uranium (the “Feed Material”) as the Feed Component of the Enriched Product Physically Delivered to Customer pursuant to Section 6.2.  As repayment for the Feed Material loaned, Customer or its designee shall, within five (5) Business Days after USEC delivers the Enriched Product containing the Article 6 SWU, repay such loan by delivering ***** KgU of Feed Material to USEC by Book Transfer to an account designated by USEC (such fifth day, the “Feed Delivery Date”).  Customer also shall pay USEC a loan charge which shall be calculated by multiplying the Spot Market Feed Value (as defined below) on the Feed Delivery Date by ***** (“Loan Charge”)

 

(b)           If, on the Feed Delivery Date, there is an insufficient quantity of Feed Material delivered by Customer to USEC as repayment of the feed loan (“Feed Shortfall”), Customer shall pay USEC, in addition to the Loan Charge, a fee (the “Late Feed Fee”) for each day the Feed Shortfall continues.  The Late Feed Fee shall be determined by multiplying: (i) a daily interest rate based upon the most recent (as of Feed Delivery Date) interest rate established by *****and published in *****; by (ii) *****as of the Feed Delivery Date; by (iii) the Feed Shortfall.  (As an example, if the Feed Delivery Date fell within the first six months of 2012, the interest rate referred to in item (i) would be *****.)  The Late Feed Fee shall be payable for the period from the Feed Delivery Date through the date on which all the Feed Material required to eliminate the Feed Shortfall is provided to USEC.

 

(c)           For these purposes, the term “Spot Market Feed Value” means the average of: (A) the most current month-end price indicator per KgU of natural UF6 published by The Ux Consulting Company LLC in Ux Weekly (as referenced in the “NA Value” line of the Ux Price Indicators chart) and (B) the most current month-end price indicator per KgU of natural UF6 (the “UF6 Value”) published by TradeTech, LLC in the month-end issue of Nuclear Market Review.  If a current price indicator is not published by one of these sources, an equivalent published spot market price shall be selected by good faith negotiation between the Parties.  If any of the sources to be used pursuant to this Section 6.3(c) publishes a range of prices, the midpoint of the range shall be used as the price.

 

ARTICLE 7 – TITLE AND RISK OF LOSS; OBLIGATION CODES

 

7.1           Title to and Risk of Loss of Depleted Uranium.

 

(a)           Customer shall hold title to all DU delivered to USEC and credited to the DU Account and shall transfer title to the Residual Tails to DOE.  USEC shall bear risk of loss of the DU held in Customer’s DU Account upon its Physical Delivery to USEC until such DU is incorporated into Enriched DU, at which point USEC shall bear risk of loss for the portion of the DU attributed to such Enriched DU, and also for the portion attributed to Residual Tails until (i) in the case of the Enriched DU, the Enriched DU is Physically Delivered to Customer and (ii) in the case of Residual Tails, the Residual Tails are Physically Delivered to DOE (or, if earlier, such Material is transferred to DOE in connection with the termination of USEC’s lease of the PGDP).  USEC also shall bear risk of loss with respect to any DU remaining in an emptied cylinder of DU to which USEC takes title pursuant to Section 4.5.

 

(b)           At the time that Enriched DU containing the Article 5 SWU is delivered to Customer, the balance in the DU Account shall be reduced by the quantity of DU deemed to have been used in the production of such Enriched DU. The delivery of Enriched DU to Customer shall be deemed to be a delivery to Customer of the portion of the DU attributable to (and deemed to be incorporated in) the Enriched DU, with title to all remaining portions of such DU (i.e., constituting the Residual Tails) held by DOE pursuant to Section 4.6 or USEC pursuant to Section 4.5.

 

7.2           Title to and Risk of Loss of the Enriched DU Containing Article 5 SWU and Enriched Product Containing Article 6 SWU.  Title to and risk of loss for the Enriched DU, including the cylinders containing the Enriched DU, delivered under Article 5 and the Enriched Product delivered under Article 6, including the cylinders containing such Enriched Product shall pass to Customer upon Physical Delivery to Customer.  In the case of constructive delivery pursuant to Section 5.2(e) of Enriched DU containing Article 5 SWU or Enriched Product containing Article 6 SWU, title to the Enriched DU or Enriched Product, and the cylinders containing the Enriched DU or Enriched Product, shall pass to Customer upon constructive delivery and USEC shall maintain the risk of loss until such time as the Physical Delivery of the Enriched DU or Enriched Product has been completed.

 

7.3           Country of Origin/Obligation Codes.

 

(a) Subject to the DOE Agreement, the DU delivered to USEC by Customer shall be unobligated and bear the country of origin code of the United States.

 

(b) Subject to delivery by Customer of unobligated U.S. origin DU, Enriched DU delivered by USEC pursuant to Article 5, and Enriched Product delivered by USEC pursuant to Article 6, shall be unobligated and bear the country of origin code of the United States.  If necessary to facilitate timely delivery to Customer under Article 5, including in connection with the supply of filled USEC-supplied 30B cylinders under Section 5.2(b), USEC may deliver up to 46.5 metric tons of enriched uranium conforming to the specification in Section 1.15 (the “Interim Enriched Product”), which may be obligated or have a non-U.S. origin (or include components that are obligated or have a non-U.S. origin) but only if swaps of origins and obligation codes are implemented prior to delivery so that no later than 90 (ninety) days after delivery of Interim Enriched Product or October 31, 2012, whichever is earlier, all Enriched DU delivered to Customer under Article 5, and the Enriched Product delivered to Customer under Article 6, has an origin and obligation code conforming to the first sentence of this Section 7.3(b).  Customer shall use its reasonable efforts to facilitate the implementation of such swaps if requested by USEC. Further, in the event such a swap requires Physical Delivery of replacement enriched uranium conforming to the specification in Section 1.15 that has a U.S. origin code, USEC shall be solely responsible for all costs including costs payable to third parties for such Physical Delivery, including, but not limited to, the Physical Delivery of Interim Enriched Product.

 

7.4           Customer Liability for DU in Cascade.  Pursuant to the terms of Section 3107 of the USEC Privatization Act, 42 U.S. Code § 2297h-5(d), DOE and not Customer is responsible for environmental and decontamination and decommissioning liabilities at the PGDP as a result of the introduction of DU supplied by Customer into the Cascade.

 

ARTICLE 8 – PRICES AND TERMS OF PAYMENT

 

8.1           Price.

 

(a) Customer shall pay a price of $***** per SWU (the “SWU Price”) for the Article 5 SWU contained in Enriched DU delivered pursuant to Article 5 of this Agreement and the Article 6 SWU contained in Enriched Product delivered under Article 6 of this Agreement, exclusive of packaging and handling charges, which shall be fixed at $*****.

 

(b)           The total price for the 4,440,000 SWU purchased under Article 3, regardless of any adjustment in quantities of Enriched DU or Enriched Product due to variation in Assay or quantity of DU, plus the applicable packaging and handling charges under Section 8.1(a), during the period June 2012 through May 2013, inclusive, shall not be less than $***** (“Total Program Price”). If necessary, the invoice for deliveries in May 2013 shall be adjusted such that the amount of that invoice attributable to the Article 5 SWU contained in Enriched DU and the Article 6 SWU contained in Enriched Product, plus all prior invoices issued under this Agreement for deliveries of SWU contained in Enriched DU and Enriched Product, shall at least equal the Total Program Price so that USEC shall have received the Total Program Price once such May 2013 invoice is paid in full provided that USEC has delivered 4,440,000 SWU to Customer under this Agreement by May 31, 2013.

 

(c)           For the purposes of clarity, the Total Program Price is the total price paid by Customer for SWU delivered under Article 3 and for the packaging and handling charges.  It does not include other USEC Service Charges in Appendix E or other fees and costs defined within this Agreement, including the FCA charges under Section 8.2.  Accordingly, in addition to amounts invoiced toward payment of the Total Program Price, an invoice may also include other expenses, fees or charges not yet invoiced pursuant to the terms of this Agreement which are in addition to the Total Program Price; provided that in no event shall the Total Program Price, plus other USEC Service Charges in Appendix E and the other fees and costs defined within this Agreement, including the FCA charges under Section 8.2, exceed $***** without written Customer approval.

 

USEC shall provide to the Customer written notice when USEC reaches eighty percent (80%) of $*****.  Unless and until Customer’s approval to exceed the foregoing $***** cap is granted, nothing herein shall require USEC to supply Material or incur fees or costs defined within this Agreement (including having to bear any FCA costs) if (i) USEC is otherwise entitled to be paid or reimbursed for such Material, fees, or costs and (ii) USEC would not be able to be paid or reimbursed for such Material, fees, or costs (including FCA) as a result of the application the foregoing cap.

 

8.2           Fuel Cost Adjustment.  In addition to the SWU Price, and other expenses, fees or charges that USEC may invoice under Sections 6.3, 8.1, 8.3, 8.4, 8.5 and 8.6 and the other Articles of this Agreement (such as Article 13), Customer shall also pay the following:

 

(a)           Fuel Cost Adjustment Estimate.  On the first invoice for each month, Customer shall be billed for any amount payable during that month to TVA under any power purchase agreement(s) entered into by USEC with TVA (or any amendment to an existing power purchase agreement with TVA) pursuant to Section 3.2(a), for power to Enrich DU delivered by Customer, with respect to estimated Fuel Cost Adjustment (“FCA”) charges to be paid during that month by USEC.  For example, the estimated FCA charges for June 2012 will be included in the invoice issued on June 5, 2012.  FCA is the amount by which the price of energy supplied by TVA to USEC under such power purchase agreement(s) (or amendments) is increased to reflect TVA’s fuel costs, purchased power costs and related costs.

 

(b)           Fuel Cost Adjustment True-Up.  In addition to Section 8.2(a), Customer’s invoice shall include an adjustment for any amounts subsequently billed or credited to USEC to account for changes in the FCA charges billed to Customer pursuant to Section 8.2(a) once actual costs are known (“True Up Charges”).  Where a credit is owed to Customer, including where a True Up Charge by TVA actually results in a credit owed to USEC by TVA with respect to FCA charges previously paid by USEC, such credit shall be applied to the next invoice issued to Customer under this Agreement; provided, however, that the Parties shall work cooperatively to ensure that all credits given or anticipated to be given to Customer in connection with this Agreement that have not been used by March 31, 2013, are fully applied in invoices issued under this Agreement in the last months of the term of the Agreement so as to avoid or minimize any outstanding credit owed by USEC to Customer at the end of the Agreement’s term.  Where there is an unused credit at the end of the Agreement’s term, the Parties shall agree upon a means to compensate Customer, which may include the delivery of additional Material or the refund of monies paid.

 

(c)           This Section 8.2 shall result in all amounts payable to TVA for FCA with respect to the power purchased by USEC to Enrich DU supplied by Customer being passed through to Customer, including any True-Up Charges.

 

8.3           Cylinder Charges.  For each 30B filled cylinder Physically Delivered to Customer during the period of the invoice, Customer shall pay $***** per cylinder and USEC shall provide cylinder manufacturing certification records for each cylinder supplied.  The aforementioned charge and records requirement shall apply to both new and used cylinders supplied by USEC.

 

8.4           Sampling and Related Charges.  Customer shall pay all costs of sampling and analyses by the independent laboratory in accordance with this Article 8 and also with the provisions of Appendix B, Paragraph 10 as well as the associated cost for long-term storage of samples, and the purchase of 1S or 2S cylinders for Official Samples, under Appendix B, Paragraph 10.  Customer shall pay $***** for each such 1S or 2S cylinder.

 

8.5           Terms of Payment.

 

(a)           On June 5, 2012, USEC shall issue to Customer an invoice for the Article 5 SWU contained in Enriched DU Physically Delivered under Article 5 on or before June 5, 2012 and such invoice shall be paid by Customer to USEC within ***** and on June 20, 2012 USEC shall issue to Customer an invoice for the Article 5 SWU contained in Enriched DU Physically Delivered under Article 5 after June 5, 2012 but on or before June 20, 2012, and such invoice shall be paid by Customer to USEC within *****.  Further, beginning on July 15, 2012, on the 15th day of every month, or the next Business Day thereafter, and the last Business Day of every month, USEC shall issue Customer an invoice for the Article 5 SWU contained in Enriched DU delivered under Article 5 and, if applicable, the Article 6 SWU contained in Enriched Product delivered under Article 6,  since the previous USEC invoice, plus other expenses, fees or charges incurred during the period since the previous USEC invoice and payable to USEC and not yet invoiced.  All such invoices shall be paid no later than ***** Business Days after the receipt of the invoice by Customer.  Customer shall pay any invoice not covered by the preceding sentences of this Section 8.5(a) (including any invoice for late payment interest charges) not later than thirty (30) days after the receipt of such invoice.

 

(b)           Customer shall pay USEC’s invoices by wire transfer of immediately available funds in accordance with USEC’s invoice instructions (and without deduction for any amounts owed by USEC with respect to goods and services not covered by the invoice or for any bank fees or any other charges) no later than the “Due Date” which shall be the date such invoice is due under Section 8.5(a).

 

(c)           The interest rate on late invoices shall be a per annum rate equal to the Prime Rate in effect on the Due Date plus four (4) percentage points (400 basis points), such interest to be calculated from the day following the Due Date until the date of payment.

 

(d)           For invoices that are due in ***** Business Days (“***** Invoice”), the invoice shall not be late, and no interest thereon shall be owed, if paid by the earlier of:

 

(i)           ***** after the Due Date of such invoice; or

 

(ii)           the date the next ***** Invoice is issued.

 

If, however, the invoice is not paid in full by the earlier of (i) or (ii) (other than amounts on the invoice that are disputed in good faith), the interest charges shall apply from the day after the original Due Date of such invoice.

 

(e)           For invoices that are due in *****, the invoice shall be paid by such ***** day, and if not paid by that date, interest shall apply on the amounts invoiced from the ***** day (i.e., the day after the Due Date of such invoice).

 

(f)           In the event the Due Date does not fall on a Business Day, then payment shall be due as follows:

 

(i)           If the Due Date falls on a Saturday, payment shall be due on the preceding Business Day.

 

(ii)           If the Due Date falls on a Sunday, payment shall be due on the following Business Day.

 

(iii)           If the Due Date falls on a United States Legal Holiday (as defined in Section 1.6), payment shall be due on the preceding Business Day, unless such United States Legal Holiday falls on a Monday, in which case payment shall be due on the first Business Day following such United States Legal Holiday.

 

(g)           All invoices submitted by USEC shall include documentation to support the charges invoiced, including documentation to demonstrate the quantity of cylinders delivered, the quantity of Enriched Product or Enriched DU they contain, and, in the case of charges for FCA, to verify that TVA is seeking the amount invoiced for such FCA charges.  In addition, USEC shall use its commercially reasonable efforts to ensure that the invoice is accompanied by an independent laboratory analysis of a sample taken from the Enriched DU or Enriched Product in each 30B cylinder covered by the invoice, or from the parent cylinder from which that 30B cylinder has been or will be filled.  The independent laboratory may be a U.S. or foreign laboratory. Customer shall bear the cost of such analysis except where USEC has secured such analysis at no additional cost to USEC.  Recognizing that such independent laboratory analysis may not be available at the time of invoicing, Customer shall pay any invoice for Enriched DU or Enriched Product where the independent laboratory analysis is provided for at least 75% of the cylinders of Enriched DU or Enriched Product covered by the invoice. If analysis for less than 75% of the cylinders is provided, Customer shall pay only for those cylinders supported by such analysis and shall pay for the remaining cylinders when the analysis for those cylinders is provided.  Nothing contained herein shall relieve USEC of its obligation to provide independent laboratory results on all Enriched DU or Enriched Product, even if such results are not received until after Enriched DU and Enriched Product is delivered.

 

(h)           For purposes of invoicing for deliveries of Article 5 SWU contained in Enriched DU or Article 6 SWU contained in Enriched Product, a ***** tails Assay of ***** shall apply.

 

8.6           Surcharge for Rejected Cylinders.  In addition to the payments above, Customer shall pay USEC a surcharge of $3,000 for each cylinder in excess of thirty (30) cylinders rejected by USEC pursuant to Section 4.2(d) and not replaced within seven (7) Business Days except as a result of a Force Majeure under Section 11.1(d).

 

8.7           Non-Payment of Invoices.  Customer’s failure to timely pay in full all undisputed amounts in two or more invoices by the date by which payment is due shall be considered a material breach of this Agreement for which USEC may pursue its remedies under applicable law.  Further, without limiting any other remedies of USEC under this Agreement or applicable law, if, after demand for payment, all such invoices are not paid in full within five (5) days after the latest Due Date applicable to any of such invoices, USEC may terminate this Agreement by written notice to Customer effective as of a date set by USEC in the termination notice.

 

8.8           Failure to Issue an Invoice.  Notwithstanding any other provision of this Agreement USEC’s failure to issue an invoice in accordance with this Section shall not be deemed to be a waiver by USEC of its right to receive payment pursuant to this Agreement but Customer shall not be obligated to make such payment until an invoice therefor is issued by USEC to Customer.

 

ARTICLE 9 – TAXES AND OTHER GOVERNMENTAL IMPOSITIONS

 

(a)           All prices, fees, and charges under this Agreement exclude all U.S. federal, state or local sales, use, excise, property or other taxes or governmental impositions, or payments in lieu of such taxes or impositions, including interest and penalties thereon (collectively, “Taxes”) levied upon, or measured by, the value, the sale or the sale price of Material, SWU, depleted uranium resulting from the Enrichment of DU, cylinders supplied by or for Customer, or USEC services, all of which shall be borne or reimbursed by Customer without regard to any contrary definition of “F.O.B.” under applicable law, custom or trade practice, and without regard to which Party may have responsibility under applicable laws and regulations to collect such Taxes.

 

(b)           Each Party agrees that it will cooperate with, and take reasonable efforts requested by, the other Party, to lawfully minimize Taxes on or connected with any transaction under this Agreement and that it will not unreasonably withhold its consent when requested to produce, execute, or file any documents required to reduce, secure exemption from, obtain refund of, or eliminate Taxes of any kind whatsoever.

 

(c)           Nothing herein shall require USEC to manage its inventories or modify its operations except as it deems appropriate in its sole discretion.

 

ARTICLE 10 – REPRESENTATIONS, WARRANTIES AND INDEMNIFICATIONS

 

	
10.1

	
USEC Representations.  USEC represents to Customer as follows:

 

(a)           This Agreement is a valid and binding obligation of USEC.

 

(b)           USEC has, or will have at the time required, all necessary licenses and governmental approvals required to engage in the transactions contemplated by this Agreement.

 

(c)           All Material furnished to Customer hereunder shall be delivered free and clear of all liens, pledges, encumbrances, security interests or title claims created by USEC, its agents or others acting on its behalf and to the maximum extent permitted by applicable law, USEC shall indemnify, hold harmless and, at Customer’s option, defend Customer from any claim contrary to the representations in this Section 10.1(c).

 

10.2           Customer Representations.  Customer represents to USEC as follows:

 

(a)           This Agreement is a valid and binding obligation of Customer.

 

(b)           Customer has, or will have at the time required, all necessary licenses and governmental approvals required to engage in the transactions contemplated by this Agreement.

 

(c)           All Material to which Customer has title, including Depleted Uranium and Feed Material delivered by Customer and Enriched DU and Enriched Product in USEC’s possession, shall, at all times while in USEC’s possession or control, be free and clear of any lien, pledge, encumbrance, security interest or other claim that could impair USEC’s exclusive use of such Material or impair USEC’s ability to perform this Agreement and to the maximum extent permitted by applicable law, Customer shall indemnify, hold harmless and, at USEC’s option, defend USEC from any claim contrary to the representations in this Section 10.2(c).

 

10.3           Customer Warranties. Customer warrants to USEC that DU delivered by Customer to USEC shall conform to Section 1.12 and to the quantity, Assay and Obligation Code provided herein.

 

 

10.4           USEC Warranties. USEC warrants to Customer that Enriched DU and Enriched Product delivered by USEC to Customer shall conform to the ASTM specification in Section 1.15 and to the quantity, Assay and Obligation Code provided herein.  Replacement by USEC of Enriched DU or Enriched Product in accordance with the terms of this Agreement that fails to meet this warranty pursuant to Paragraph 14 of Appendix B shall be Customer’s exclusive remedy for (a) any breach of this warranty by USEC; or (b) USEC’s failure to deliver Enriched DU or Enriched Product in accordance with the terms of this Agreement.

 

10.5           Disclaimer.  THE PARTIES’ EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT ARE EXCLUSIVE AND THE PARTIES MAKE NO OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING ANY REPRESENTATION AND WARRANTY (A) OF MERCHANTABILITY; (B) OF FITNESS FOR ANY PARTICULAR PURPOSE; OR (C) THAT MATERIAL DELIVERED BY EACH PARTY WILL NOT RESULT IN INJURY OR DAMAGE WHEN USED FOR ANY PURPOSE.

 

10.6           Recourse.  Nothing in this Agreement shall be construed to create a right of recourse by USEC against DOE with respect to Customer’s payment obligations hereunder.

 

ARTICLE 11 - FORCE MAJEURE

 

11.1           Excused Delays.

 

(a)           A Party shall not be liable for any expense, loss or damage resulting from delay in, or prevention of, performance of its obligations under this Agreement to the extent due to a cause (a “Force Majeure”) beyond the reasonable control of that Party (the “Affected Party”) including, but not limited to, fires, floods, explosions, earthquakes, hurricanes or other natural elements, acts of God, strikes, labor disputes, work stoppages or walkouts, acts of public enemies, war (declared or undeclared), show of force, revolution, insurrection or riots, civil commotion, sabotage, acts or threatened act of terrorism, transportation delays, perils of the sea, port congestion, drought, acts or failures to act of governmental authorities, third parties, or the other Party (irrespective of whether excused), epidemic, quarantine restrictions, embargos, or inability to secure labor, materials, equipment or utilities; provided, however, that strikes, labor disputes, work stoppages or walkouts resulting from a breach of USEC’s obligation to pay workers’ wages that USEC has not disputed shall not be considered a Force Majeure. In the event of any delay or prevention of performance arising by reason of a Force Majeure, the time for performance shall be extended by a period of time equal to the time lost by reason of such delay or prevention of performance.  Notwithstanding the above, in no event shall a Force Majeure excuse either Party from the obligation to pay money when due under this Agreement, or require the Affected Party to settle any labor difficulty except as the Affected Party, in its sole discretion, determines appropriate.

 

(b)           USEC shall not be obligated to meet its delivery obligations under this Agreement through sources other than Enriched DU produced from DU delivered by Customer and shall not be obligated to: (i) procure depleted uranium, natural uranium or enriched uranium from any source, including its own inventory; (ii) procure additional power; or (iii) operate the Facility beyond May 31, 2013. This does not limit USEC’s obligation to complete, and Customer’s obligations to take, deliveries of Enriched DU actually produced under this Agreement prior to May 31, 2013 even if USEC is not producing Enriched DU after that date.

 

(c)           Given that the power supplied to the Facility during the term of this Agreement is primarily for performance of this Agreement and USEC does not generate power or supply power, any disruption in power supplied for any reason other than the failure by USEC to comply with the terms of its power purchase agreements with power suppliers and any equipment failures caused by such power disruption shall also be a Force Majeure.

 

(d)           Given that Customer’s ability to deliver DU and Replacement DU under this Agreement is subject to and solely dependent on DOE’s performance under the DOE Agreement, any failure by Customer to deliver DU and Replacement DU shall be a Force Majeure; provided Customer has complied with the terms of the DOE Agreement and has not solicited or consented to DOE’s nonperformance of the DOE Agreement.

 

(e)           To the extent that an Affected Party determines in good faith that a Force Majeure event (other than the event covered by Section 11.1(d) and Section 13.3) declared by the Affected Party could have an operational impact upon the Affected Party’s ability to perform this Agreement according to its terms, then the Affected Party shall notify the other Party of such impact, including the basis for its determination, and each Party may propose measures that would mitigate the impact.  Without limiting the foregoing, such measures may include, but are not limited to, adjustment of quantities and schedules under this Agreement to permit full or partial performance thereof by the end of the term of this Agreement in a manner that the Parties determine to be economic.  All mitigating measures proposed by a Party shall be subject to mutual agreement of the Parties.  If USEC notifies Customer that it will cease Enrichment operations as the result of the Force Majeure, either Party may terminate this Agreement with notice to the other Party and the obligations of each Party shall be in accordance with Section 16.2.

 

(f)           An inability to perform, or a delay in performance, caused or resulting from an equipment failure at the PGDP that is not due to a negligent failure to perform maintenance scheduled by USEC during the term of this Agreement, also shall be treated as a Force Majeure.

 

11.2           Notification.  The Affected Party shall notify the other Party in writing of the Force Majeure for which excuse is claimed under Section 11.1 and the expected duration of the resultant delay within a reasonable period of time after it appears that the Force Majeure is likely to prevent or delay the performance of the Affected Party’s obligation under this Agreement, and the Affected Party shall keep the other Party informed of any material change in the facts set forth in the notice.

 

ARTICLE 12 – NUCLEAR LIABILITY

 

12.1         Required Indemnification and Coverage in the United States.

 

(a)           Pursuant to Section 3107(f) of the USEC Privatization Act, the lease between USEC and DOE for the Facility includes a nuclear hazards indemnification agreement (“DOE Nuclear Hazards Indemnification Agreement”) entered into under Sections 170d of the Act.  While Material delivered by either Party hereunder remains at the Facility and for so long as the DOE Nuclear Hazards Indemnification Agreement remains in effect, the Parties shall rely upon the DOE Nuclear Hazards Indemnification Agreement for protection against public liability (as defined in the Act) arising from a nuclear incident (as defined in the Act) involving such Material at the Facility.

 

(b)           With respect to each facility (other than the Facility) in the United States at which Material delivered to Customer under this Agreement is to be used or stored, Customer, without expense to USEC, shall, so long as such Material remains in residence at or is in transit to or from such plant or facility:

 

(i)           if the facility is operated by DOE or its contractor, ensure that such facility is subject to an agreement of indemnification under Section 170d. of the Act, and that USEC is a “person indemnified” (as defined in Section 11t of the Act) under such agreement of indemnification; or

 

(ii)           obtain and, except as provided in Section 12.4, maintain in effect an agreement of indemnification contemplated by Section 170 of the Act, and nuclear liability insurance, or other financial protection, in such form and in such amount as will meet the financial protection requirements of the Nuclear Regulatory Commission (“NRC”) pursuant to Section 170 of the Act; or

 

(iii)           if there is no agreement of indemnification under Section 170 or Section 170d of the Act covering Nuclear Incidents at such facility (such as a fabricator’s plant or facility) and during any portion of the transportation of the Material to or from such plant or facility, ensure that nuclear liability insurance is obtained and maintained in effect that provides for at least $100,000,000 per occurrence for property damage and bodily injury arising from a nuclear incident as defined in the Act that is not subject to an indemnification agreement under Section 170 of the Act and USEC is included within the scope of the insured parties under such nuclear liability insurance to the extent permitted by applicable law or the applicable insurance policy.

 

12.2           A “Nuclear Incident” means:

 

(a)           with respect to the application of U.S. law, the term “nuclear incident” as defined in the Act; and

 

(b)           with respect to the application of the law of any country other than the United States, the term “nuclear incident” as defined in the law or treaty applicable to the place where the incident occurred, or if no such law or treaty applies, the definition in the Paris Convention on Third Party Liability in the Field of Nuclear Energy of 29 July 1960.

 

12.3           Substitute Financial Protection.

 

(a)           For purposes of this Section 12.3, USEC shall be the “Responsible Party” with respect to Section 12.1(a) and the “Protected Party” with respect to Section 12.1(b); and Customer shall be the “Protected Party” with respect to Section 12.1(a) and the “Responsible Party” with respect to Section 12.1(b).

 

(b)           If the nuclear liability protection system provided by the Act is repealed, materially decreased in coverage, modified or expires, the Responsible Party shall, without expense to the Protected Party, use its reasonable efforts to obtain and maintain in effect substitute liability protection in order to avoid a material impairment of the protection afforded the Protected Party and its employees and suppliers prior to such repeal, decrease in coverage, modification or expiration under that portion of Section 12.1 for which it is the Protected Party.  Such substitute protection may include, at the Responsible Party’s option, (i) government indemnity or limitation of liability; or (ii) commercial liability insurance.  The Protected Party may suspend its obligations under this Agreement for up to 180 days in order to permit the Responsible Party to implement substitute protection.  Additionally, at the end of such suspension period, the Protected Party may terminate this Agreement, in whole or in part, without liability to the Responsible Party if the Protected Party, in its sole discretion, determines that the actions taken by the Responsible Party pursuant to this Section 12.3(b) are not sufficient to avoid such a material impairment of the protection afforded to the Protected Party.  The Protected Party shall lose its termination right if, after suspending its obligations hereunder, the Protected Party takes delivery of Enriched DU or Enriched Product (if the Protected Party is Customer) or delivers Enriched DU or Enriched Product (if the Protected Party is USEC).  Any suspension by a Party shall be subject to prior agreement on terms for payment of any power purchase agreement entered into by USEC that ensure that the financial burden or expense for USEC under such agreements will not prevent resumption of performance if and when the suspension is lifted, and termination shall be subject to mutually agreed terms to protect USEC from bearing continuing payment obligations for power after termination.

 

12.4           Insurance.  Any insurance required under this Article 12 shall either include USEC and its suppliers as a named insured or include a waiver of all rights of recourse and subrogation by the insured and insurer against USEC and its suppliers.

 

12.5           Required Assurances for Transfer of Material.  Prior to the export of any Material delivered to Customer under this Agreement, or the transfer by Customer to another person of any interest in Material, Customer shall provide USEC with written assurances, in a mutually acceptable form, that the limitation of, and protection against, liability following the proposed transfer will be at least equivalent to that afforded the Parties, their employees and suppliers under the provisions of this Agreement.  This Section 12.5 shall not apply to transfers solely incident to mortgages or other documents creating liens or security interests in effect as of the Effective Date (including liens or security interests arising after the Effective Date under such mortgages or other documents).  The provisions of this Section 12.5 shall also not limit Customer’s right to dispose of spent nuclear fuel containing Material in accordance with applicable legal requirements after such fuel is finally discharged from its reactor(s).

 

12.6           Property Damage Waiver.  Notwithstanding any other provision in this Agreement, in no event shall a Party (the “Supplying Party”) or its suppliers be liable to the other Party for loss, damage or loss of use, of any property resulting from a Nuclear Incident involving Material delivered by the Supplying Party hereunder, and the other Party shall use its commercially reasonable efforts to obtain a waiver of such liability running in favor of the Supplying Party and its suppliers, from any person or entity to which the other Party may give an interest in, or the right to possess, such Material.  The waiver provided under this Section 12.6 shall apply to the maximum extent permitted by law and without regard to the fault or negligence of either Party.

 

12.7           Definition of Material.  For purposes of this Article, “Material” shall be deemed to include Material delivered to a Party, any cylinders or storage or transportation equipment provided by either Party in connection with such a delivery, nuclear fuel or other products fabricated from, or containing, the Material delivered to Customer, and the services provided by USEC in connection with Material delivered hereunder.

 

12.8           Suppliers.  References in this Article to suppliers of USEC shall be deemed to include any vendor, contractor, subcontractor or other entity, regardless of tier, who supplies equipment, services, material, information or financing to USEC in conjunction with the Material.

 

ARTICLE 13 – OTHER LIABILITY

 

13.1           Limitation of Liability. 

 

(a)           Neither Party shall be liable to the other Party for any incidental, consequential, special, exemplary, penal, indirect or punitive damages of any nature arising out of or relating to the performance, non-performance, or breach of this Agreement including, but not limited to, replacement power costs, loss of revenue, loss of business opportunities, loss of anticipated profits or loss of use of, or damage to, plant or other property; provided, however, that fees, expenses, penalties or other charges incurred by a Party that are expressly due and owing or reimbursable hereunder by the other Party shall not be considered “damages” for purposes of this Section 13.1(a).

 

(b)           The maximum aggregate liability of either Party to the other Party for any and all claims arising out of or relating to the performance, non-performance, or breach of this Agreement (including, without limitation, claims under Appendix B), whether based upon contract, tort (regardless of degree of fault or negligence), strict liability, warranty, or otherwise, shall in no event exceed $20,000,000.  This Section 13.1(b) shall not limit the liability of a Party (the “Liable Party”) to the other Party (i) to replace Material for which the Liable Party bears the risk of loss under this Agreement, which shall be capped at the value of the Material at issue at the time of loss, (ii) for any failure of the Liable Party to comply with its obligations under Article 12; (iii)  for amounts due for Article 5 SWU and the Article 6 SWU delivered (or to be delivered by USEC pursuant to Section 16.2 in the event of a termination or expiration of this Agreement) (including associated packaging and handling charges) hereunder; or (iv) to pay any fee, expense or charge that is specifically payable by the Liable Party under this Article or Articles 4, 5, 6, 8, 9 or 16 or Appendix B of  this Agreement.

 

(c)           All claims that a Party (the “Claiming Party”) may have against the other Party, whether based upon contract, tort (regardless of degree of fault or negligence), strict liability, warranty, or otherwise, for any losses or damages arising out of, connected with, or resulting from the performance, non-performance or breach of this Agreement shall be limited to specifically identified written claims submitted by the Claiming Party to the other Party prior to the expiration of one (1) year after the Claiming Party knows or should have known of the occurrence of the event or the first of a series of events which gives rise to the claim; provided, however, that this one (1) year limit shall neither (i) bar any counterclaim, setoff or similar cause of action asserted subsequent to the expiration of such one (1) year limit in response to any written claim submitted prior thereto; nor (ii) be construed as extending or waiving any shorter statute of limitations applicable to any claim, counterclaim, or setoff.

 

(d)           Nothing in this Agreement shall be interpreted to limit the rights, obligations or liability of either Party under Article 12.

 

13.2           Remedies Regarding Payments.  Without limiting Customer’s obligation to pay interest on late payments, the Parties agree that interest payments are not an adequate remedy for a failure by Customer to make timely payment to USEC for deliveries of Article 5 SWU contained in Enriched DU or Article 6 SWU contained in Enriched Product, and that USEC may pursue any other remedies available under this Agreement or applicable law to assure Customer’s timely performance.

 

13.3           Remedies Regarding Deliveries of DU or Interruptions of Power.

 

(a)           The Parties recognize that Customer’s delivery of DU to USEC under this Agreement assumes timely performance of the DOE Agreement and USEC’s Enrichment of DU and delivery of Enriched DU and Enriched Product under this Agreement assumes timely delivery to USEC of both DU from Customer and power from TVA.

 

(b) If due to a Force Majeure under Section 11.1(d), Customer determines that it cannot deliver all the DU (including Replacement DU, where applicable) that Customer is required to deliver under Section 4.1 (or Section 4.3 in the case of Replacement DU), by the date required in Section 4.1(b) (or Section 4.3(b) in the case of Replacement DU), Customer shall notify USEC of such Force Majeure pursuant to Section 11.2 and shall afford USEC the opportunity to propose measures that would mitigate the impact of such Force Majeure so as to permit the Agreement to be performed to the maximum extent practical.

 

(c) If:

 

(i)           either (A) for any reason whether or not excused under Article 11 (other than a Force Majeure under Section 11.1(d)), or a termination under Section 3.2, Customer does not deliver all the DU (including Replacement DU, where applicable) that Customer is required to deliver under Section 4.1 (or Section 4.3 in the case of Replacement DU), by the date required in Section 4.1(b) (or Section 4.3(a) in the case of Replacement DU); or (B) any of the power to be supplied to USEC for performance of this Agreement is interrupted or curtailed by TVA, through no fault of USEC; and

 

(ii)           USEC determines in good faith that the failure to make timely delivery of DU or the interruption of power supplied to USEC, as the case may be, could have an operational impact upon USEC’s ability to perform this Agreement according to its terms (including the monthly schedules agreed by the Parties),

 

then USEC shall notify Customer of such impact, including the basis for its determination, and may propose measures that would mitigate the impact of such failure.  Without limiting the foregoing, such measures may include, but are not limited to, adjustment of quantities and schedules under this Agreement to permit full or partial performance thereof by the end of the term of this Agreement in a manner that USEC proposes would be economic.

 

(d) All mitigating measures proposed by USEC under this Section 13.3 shall be subject to mutual agreement of the Parties, but if the Parties have not agreed on mitigating measures within seven (7) Business Days after notice is given under Section 13.3(b) or Section 13.3(c), as applicable, then:

 

(i)           In the case of a determination by Customer under Section 13.3(b), each Party shall have the option, at its sole discretion, to terminate this Agreement and Enrichment of DU under this Agreement as of a date specified by the terminating Party; provided, that, in selecting a termination date, Customer shall select a termination date that shall permit USEC to complete, prior to such termination date, Enrichment and delivery of all Enriched DU that USEC can produce with the DU already delivered to USEC as of the date of the notice of Force Majeure; and

 

(ii)           In the case of a determination by USEC under Section 13.3(c), USEC shall have the option, at its sole discretion, to either (1) terminate this Agreement and Enrichment of DU under this Agreement as of a date specified by USEC or (2) reduce the scope or term of this Agreement so that Customer receives a reduced amount of Article 5 SWU and Article 6 SWU but at the same unit prices set forth in Section 8.1 of this Agreement. USEC shall exercise this option by giving written notice to Customer, and in the case of a termination of this Agreement, such notice shall indicate the date on which such termination shall take effect.

 

If both USEC and Customer elect to terminate this Agreement under Section 13.3(d)(i), the effective date of termination shall be determined by mutual agreement, but in no event shall it be outside the period bounded by the dates selected by the Parties.

 

(e) In the event USEC terminates this Agreement and further Enrichment of DU under Section 13.3(c)(i) due to Customer’s material breach of its obligation to deliver all required DU, Customer shall pay USEC a termination fee as follows:

 

(i)           $20 million if, at the time deliveries of DU cease, USEC has on hand at the PGDP less than 75 unemptied filled cylinders of DU;

 

(ii)           $10 million, if at the time deliveries of DU cease, USEC has on hand at the PGDP at least 75, but less than 150, unemptied filled cylinders of DU; and

 

(iii)           zero, if at the time deliveries of DU cease, USEC has on hand at the PGDP at least 150 unemptied filled cylinders of DU.

 

In no event, however, shall such termination fee, when added to the amounts paid or to be paid to USEC for Article 5 SWU and Article 6 SWU delivered prior to the effective date of termination, exceed the Total Program Price.  Payment by Customer of the termination charges under this Section 13.3 (e), plus payment for Article 5 SWU and Article 6 SWU delivered prior to the effective date of termination (or after termination to the extent permitted pursuant to Section 16.2) and amounts owed pursuant to Section 16.2, shall represent full satisfaction of all charges owing to USEC hereunder.

 

(f) Determinations by Customer under Section 13.3(b) and by USEC under Section 13.3(c), and any failure to agree by either Party under Section 13.3(d), shall not be subject to dispute.

 

(g) The availability of the remedies in this Section 13.3 does not limit either Party’s ability to invoke its right to excuse performance under Article 11.

 

13.4           Failure to Take Delivery by December 31, 2013.  If Customer fails to take Physical Delivery of all Enriched DU and/or Enriched Product in storage at USEC, as well as all cylinders containing Rejected DU and any unused filled cylinders of DU, and DOE fails to take Physical Delivery of all Residual Tails in storage at USEC and all cylinders of DU in storage at USEC (collectively, the “Stored Items”) by December 31, 2013, Customer shall pay a storage fee thereafter in accordance with the USEC Service Charges in Appendix E until such time as USEC determines that it will de-lease the Facility.  USEC’s decision to de-lease the Facility shall remain in USEC’s sole discretion and shall be made based on its own operational and financial interests and without regard to any obligations to provide storage of the Stored Items.  If USEC notifies DOE of its decision to de-lease the portion of the Facility on which the Stored Items are located, Customer shall within sixty (60) days prior to the proposed date of de-lease take Physical Delivery of the Stored Items or agree with DOE on terms for the continued storage by DOE of the Stored Items after the Facility is de-leased so that USEC may relinquish control of the Stored Items to DOE on its proposed date of de-lease.  If, for any reason, (a) Customer fails to comply with the preceding sentence or (b) USEC is unable to de-lease on the date it proposed to DOE due, in whole or in part, to the continued presence of the Stored Items on the facilities, USEC shall, at its sole option:

 

(i)           at Customer's expense, remove the Stored Items to another facility licensed to accept and store the Stored Items there; or

 

(ii)           continue to lease and operate the Facility to the extent necessary to store the Stored Items for Customer and Customer shall pay 100% of USEC‘s direct and indirect costs of maintaining its lease of the portion of the Facility where the Stored Items are located from the date of the proposed de-lease until the actual de-lease of such portion of the Facility by USEC.

 

Notwithstanding the foregoing, if USEC determines, at its sole option, that the cylinders containing the Residual Tails shall remain at the PGDP for some period of time beyond December 31, 2013, the storage fees described herein shall not apply during this additional time period.

 

13.5           Effect of Delivery. Upon completion of a Physical Delivery of Material (including, but not limited to Enriched DU and Enriched Product) to Customer, USEC shall have no responsibility for damages or other claims arising from such Material, Enriched DU or Enriched Product.  The foregoing shall not limit  Customer’s rights with respect to rejection of Enriched DU or Enriched Product prior to Acceptance (as defined in Appendix B), the check weighing procedure in Appendix B prior to Acceptance, the terms provided in Paragraphs 15 and 16 of Appendix B with respect to resolution of disputes regarding rejected Enriched DU or Enriched Product and in Paragraph 16 of Appendix B with respect to the resolution of disputes regarding the weight of Enriched DU or Enriched Product.

 

13.6           No Effect on Indemnification Agreements under the Act.  Nothing contained in this Agreement shall deprive USEC or Customer of any rights under indemnification agreements entered into pursuant to the Act.

 

13.7           Scope of Protection.  The provisions of this Article and of the other Articles of this Agreement that provide for limitation or protection against liability of, or indemnification of, or a waiver of claims against, a Party shall (a) also protect such Party’s employees and agents, and, to the extent they are acting on behalf of such Party, such Party’s affiliates, contractors, subcontractors, suppliers and vendors of every tier; (b) apply regardless of fault or negligence to the full extent permitted by law; and (c) survive termination of this Agreement, as well as the fulfillment of the obligations of the Parties hereunder.

 

ARTICLE 14 – GOVERNMENTAL AUTHORIZATIONS AND REQUIREMENTS

 

Each Party shall (a) obtain (or cause its agents to obtain) all permits, licenses or approvals required for performance of its obligations under this Agreement, including any special nuclear material licenses and those required for the possession, storage and/or transportation by it of Material; and (b) comply with all applicable treaties, conventions and similar international agreements to which the United States is a party.

 

ARTICLE 15 – ENTIRE AGREEMENT; TERMINATION OF PRIOR AGREEMENTS

 

The terms and conditions set forth herein are intended by Customer and USEC to constitute the final, complete and exclusive statement of their agreement, and all prior proposals, communications, negotiations, understandings, representations, contracts and agreements (the “Prior Agreements”), whether oral or written, relating to the subject matter of this Agreement (but without regard to whether the term of this Agreement is equivalent to the term of any such Prior Agreement), are hereby terminated and superseded and the Parties hereby mutually release each other from any claim, liability or obligation under or arising from such Prior Agreements.  Except as otherwise stated in this Agreement, such termination or release shall not affect any obligation of Customer to pay for Material delivered or services furnished to Customer under a Prior Agreement for which Customer has not previously paid, nor shall such termination or release affect any limitation of liability, or confidentiality obligation, of either Party under any Prior Agreement.  Customer expressly waives any claim it may have against USEC with respect to the propriety of prices charged for Enrichment or services furnished under any Prior Agreement.

 

ARTICLE 16 – TERMINATION

 

16.1           Right to Terminate.  In addition to any other rights it may have under this Agreement, and subject to applicable law, a Party shall have the right, at no fee or liability to such Party, to terminate this Agreement in whole or in part, by written notice to the other Party, in the event the other Party enters into any voluntary or involuntary receivership, bankruptcy or insolvency proceeding, with the exception of reorganization under Chapter 11 of the Federal Bankruptcy Act; provided, however, that in the case of an involuntary proceeding, the right to terminate shall arise only if the proceeding has not been dismissed within sixty (60) days of the initiation thereof.

 

16.2           Obligations upon Termination or Expiration.  USEC shall not be required to Enrich or deliver Enriched DU under Article 5 or Enriched Product under Article 6 on or after the effective date of any termination or expiration of this Agreement, but may complete the Enrichment of any DU previously supplied to USEC and fed into the Cascade prior to the effective date of termination or expiration (as well as Enrichment of any additional amounts of DU permitted by the next sentence of this Section 16.2). USEC shall not continue to feed DU into the Cascade after the effective date of termination or expiration of this Agreement except to the extent necessary to produce Material to replace Material that USEC delivered from its inventory to Customer prior to the effective date of termination or expiration. Customer shall pay USEC for SWU, Enrichment, FCA, FCA True-Up, Loan Charges, Late Feed Fee or services (as listed in USEC’s standard service charges list) furnished in connection with deliveries of Enriched DU and/or Enriched Product in accordance with the terms of this Agreement  (which, in the case of a termination under Section 3.2(c)(iii)(A), shall be subject to the limitation on deliveries stated therein) completed before such date or commenced before such date using DU previously supplied to USEC and subsequently completed and shall repay all outstanding Feed Material loans under Article 6. Customer shall also pay for ongoing services (e.g., storage services), and for any services required to return Material to Customer pursuant to Section 16.3.   USEC shall pay Customer all amounts of FCA previously paid to USEC that cannot, due to termination, be properly associated with enrichment of product delivered to Customer.  Notwithstanding termination or expiration of this Agreement, USEC shall pay Customer any amounts of FCA True-Up overpaid by Customer and properly associated with power used for Enrichment of DU delivered by Customer.

 

16.3           Return of Material.  Upon termination or expiration of this Agreement, the Parties shall agree upon a schedule for the delivery to Customer of any Stored Items (as defined in Section 13.4) still in USEC’s possession on the effective date of such termination or expiration (which delivery shall be completed no later than December 31, 2013).  Nothing herein shall require USEC to continue to lease the Facility for any longer than it determines is in its own operational and financial interest, in order to keep or protect such Stored Items for Customer.

 

ARTICLE 17 – ASSIGNMENT AND TRANSFER OF INTEREST

 

17.1           General.  Except as provided in this Article 17, this Agreement shall not be assigned by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld.   Any purported assignment that does not comply with the terms of Sections 17.1 and 17.2 shall be void ab initio.  As used in this Article 17, the terms “assign” or “assignment,” in reference to this Agreement, shall include any transfer, sale, pledge, encumbrance or assignment of this Agreement or any rights or obligations hereunder.

 

17.2           Permitted Assignments.

 

(a)           Neither Party’s consent shall be required for an assignment of the right to receive any payment owed to the assigning Party hereunder, or any further assignment thereof; provided that the assignee receives no greater rights under this Agreement than the assignor.

 

(b)           Neither Party’s consent shall be required for an assignment (in whole or in part) to an affiliate or entity that succeeds to substantially all of the assets or business of the assigning Party; provided that (i) the assignor notifies the non-assigning Party in writing that this Agreement has been assigned; (ii) the assignee notifies the non-assigning Party in writing that it agrees to be bound by this Agreement; (iii) the assignee’s rights and obligations hereunder shall be subject to any defenses or claims of the non-assigning Party under this Agreement; (iv) the assignment does not reduce the amount of SWU purchased from USEC under this Agreement; and (v) the assigning Party shall not be released from its obligations under this Agreement.  For purposes of this Section 17.2, “affiliate” of a Party means an entity that, through one or more intermediaries, controls, is controlled by, or is under common control with, such Party.  Assignments solely for financing purposes of the right to receive, or take title to, Enriched DU or Enriched Product is not subject to this Section 17.2(b).

 

(c)           Any assignment to an affiliate, successor or other person or entity permitted under this Section 17.2 shall include the right for that permitted assignee to further assign the Agreement, and all rights and obligations received by such permitted assignee as a result of a permitted assignment, to an affiliate or successor under Section 17.2(b).

 

(d)           Neither the disposition of a Party’s stock by merger or otherwise shall be construed as an assignment or otherwise require consent of the other Party.

 

17.3           Successors.  Subject to Sections 17.1 and 17.2, this Agreement shall be binding upon and shall inure to the benefit of the legal representatives, successors and permitted assigns of the Parties hereto.  Any person or entity that succeeds to all of the rights and obligations of a Party under this Agreement, whether by operation of law or by permitted assignment and assumption of all such rights and obligations, shall replace such Party for all purposes hereunder, and all references herein to such Party shall thereafter be deemed to refer to such successor.

 

17.4           Transfer of Interest.  Customer’s purchase obligations under this Agreement shall not be affected by any transfer of Customer’s interests in or operating licenses for its reactor.

 

ARTICLE 18 – CONFIDENTIALITY

 

18.1           Business Proprietary Information.

 

(a)           USEC and Customer shall treat this Agreement, its terms and conditions, and appendices, including all modifications, and all related communications as “Business Proprietary Information.”

 

(b)           Except as provided in Section 18.1(c) or as required by law, a Party shall not disclose any part of such Business Proprietary Information to any other person or entity other than officers, directors, or employees of a Party, and accountants and legal counsel acting on behalf of such Party, (provided such accountants and legal counsel have agreed in writing to maintain such Business Proprietary Information in confidence or are otherwise subject to an obligation of confidentiality that will provide at least the level of protection afforded by this Article 18), without the prior written consent of an authorized representative of the other Party (which consent shall not be unreasonably withheld), except as such disclosure may be required (i) by court order, subpoena, or other appropriate governmental authority; (ii) to fulfill obligations under this Agreement (including communications by either Party with fabricators, contractors, transporters or others concerning matters necessary to effect a delivery of, or payment for, Material) or obligations under a Party’s agreements with financial institutions; (iii) to secure or maintain financing (including guarantees) for the Parties,  their affiliates, or to implement Article 17; or (iv) to enforce either Party’s rights hereunder.  In all cases under this Section 18.1(b), the disclosing Party shall take reasonable precautions to protect the confidentiality of the disclosed Business Proprietary Information.  Further, if disclosure of Business Proprietary Information is required under item (i) above, the disclosing Party shall promptly notify the other Party of the requirement, and shall take such further measures as necessary to minimize or oppose the disclosure, if requested by the other Party.

 

(c)           The fact that the Parties have entered into this Agreement and the term of this Agreement shall not be treated as Business Proprietary Information. Further, the Parties recognize that USEC shall be required to disclose this Agreement in its public filings with the Securities and Exchange Commission and that, while USEC will seek to protect from disclosure provisions of the Agreement where disclosure could cause competitive harm to USEC, the SEC may not permit USEC to withhold disclosure of all provisions requested by USEC.  The Parties agree that those provisions of the Agreement that USEC determines it is permitted to withhold from disclosure shall be maintained in confidence as Business Proprietary Information, and those provisions of the Agreement that USEC determines it must disclose in its SEC filings shall be considered public information that is not subject to protection under Section 18.1(b) or the Confidentiality Agreement between Customer, USEC, Bonneville Power Administration and TVA.  For purposes of this Section 18.1(c), the “Agreement” shall include any future amendment, modification or supplement of the Agreement, or other documents or information related to the Agreement, that USEC determines must be disclosed in its SEC filings.

 

(d)           The Parties recognize that Customer may receive a request for Business Proprietary Information pursuant to the Washington State Public Records Act.  To the extent Customer receives such a request, Customer shall provide USEC with timely written notice of such request, and its intent to disclose the Business Proprietary Information.  Customer and USEC shall cooperate with each other to prevent the public disclosure of Business Proprietary Information to minimize the effect of such disclosure, to the extent legally allowed.  However, if it is determined by Customer’s legal counsel that a disclosure is legally required in response to a public request, then Customer shall promptly notify USEC and Customer may choose to approve the release of the Business Proprietary Information, negotiate protection for the Business Proprietary Information or seek injunctive or other relief, at its sole expense, to prevent disclosure of the Business Proprietary Information proposed to be released.

 

(e)           Customer is authorized and may provide a copy of this Agreement to DOE which shall be marked as “Business Proprietary Information to DOE/United States Enrichment Corporation and Energy Northwest request that this document not be released to persons outside the U.S. Government.”

 

18.2           Applicability.  The provisions of this Article are applicable to all officers, directors, employees, and agents of each Party.  Each Party shall be responsible for ensuring the compliance with the terms hereof by all such officers, directors, employees, and agents.

 

ARTICLE 19 – DISPUTE RESOLUTION

 

19.1           Disputes.

 

(a)           Except for disputes and disagreements that may be resolved under Section 4.3 and under the provisions of Paragraphs 15 and 16 of Appendix B (which procedures shall, to the fullest extent possible, be the sole means of resolving such disputes and disagreements), this Article 19 shall provide the exclusive means of resolving any other dispute, claim, controversy or failure to agree arising out of, relating to, or connected with this Agreement or the breach, termination, or validity thereof (a “Dispute”).

 

(b)           Either Party may invoke the provisions of this Article by giving written notice thereof to the other Party with a detailed description of the matters involved in the Dispute.  The Parties shall attempt to resolve such Dispute through good faith negotiations, including one or more meetings between senior executive representatives of the Parties, during the thirty (30) days following such notice.  The thirty (30) day period for negotiation may be shortened or lengthened by mutual agreement.  The failure to conduct such negotiations for any reason shall not bar the referral of the Dispute to arbitration pursuant to the remaining provisions of this Article.

 

(c)           If, as a result of the resolution of such dispute, it is determined that Customer failed to pay USEC any amount that was owed (“Underpayment”) or paid USEC any amount that was not owed (“Overpayment”),  then an appropriate payment adjustment shall be made within thirty (30) days of final resolution of such dispute.  At the same time as such payment adjustment is made, interest shall be paid on any Underpayment from the date that such Underpayment was originally due or, as the case may be, from the date such Overpayment was originally due, to the date of the adjustment payment, using a daily interest rate based upon the annual interest rate used for calculating late payment charges under Section 8.5.

 

19.2           Arbitration Rules.  If the Parties have not resolved such Dispute within the aforesaid thirty (30) day period, either Party may submit the Dispute to final and binding arbitration.  Arbitration shall be governed by the American Arbitration Association (“AAA”) under its Commercial Arbitration Rules (the “Rules”), as modified by this Article 19, and by the United States Arbitration Act, 9 U.S.C. §§ 1 et seq. (the “Arbitration Act”).  The Parties agree that time is of the essence in resolving any Dispute arising under this Article and the Parties agree to use any practice or procedure available pursuant to the Rules providing for the swiftest resolution available; provided, however, to the extent the arbitrator permits pre-hearing discovery, the arbitrator shall be guided by a conservative interpretation of the Federal Rules of Civil Procedure and, in particular, the limitations imposed on discovery as provided in those rules.  Judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof in accordance with Section 19.4 below.  The place of the arbitration shall be New York, New York.  There shall be a single arbitrator selected in accordance with the Rules.  The Parties shall select an arbitrator who has experience in complex commercial matters involving the application of New York law.

 

19.3           Hearings and Award.  All hearings shall be held, if possible, within ninety (90) days following the appointment of the arbitrator.  At a time designated by the arbitrator, each Party shall simultaneously submit to the arbitrator and exchange with each other its final proposed award; provided, however, that in no event shall the arbitrator award any damages prohibited under Article 13 hereof, or make any award that is otherwise inconsistent with the terms and conditions of this Agreement or exceeds the dollar caps on liability imposed hereunder.  Unless the arbitrator determines that extraordinary circumstances require additional time or both Parties jointly request an extension in writing, the arbitrator shall issue the final and binding award, which shall not be subject to appeal, no later than thirty (30) days after completion of the hearings, and judgment on any award may be entered in any court having jurisdiction thereof.  Nothing herein shall limit the rights of either Party under the Arbitration Act.

 

19.4           Jurisdiction and Venue.  To the extent that the Parties are permitted under this Article 19 or the Rules to pursue a judicial remedy, each Party consents and submits to (and waives any objection to) the personal and subject matter jurisdiction of and venue in the federal courts located in New York, New York (or, in case the federal court does not have jurisdiction, the state courts located in New York, New York).  Such jurisdiction and venue shall be exclusive except as to an action brought solely for the purpose of enforcing an order of a New York federal or state court obtained pursuant to the preceding sentence, or enforcing an award of the arbitrator.  Each Party consents to service of the notice of arbitration, and any other paper in the arbitration or in any proceeding brought pursuant to this Agreement, by registered mail or personal delivery at its address specified in Article 20.

 

19.5           Confidentiality.  The fact that either Party has invoked the provisions of this Article 19, the arbitration proceedings and related communications or disclosures, and the decision of the arbitrator, shall all be considered Business Propriety Information under Article 18, and the Parties shall ensure that the arbitrator agrees not to make disclosure of any Business Proprietary Information that would not be permitted to be disclosed by a Party under the terms of Article 18.

 

19.6           Binding upon Successors.  This agreement to arbitrate and any award made hereunder shall be binding upon the successors and assigns and any trustee or receiver of each Party.

 

19.7           Effect of Arbitration on Performance.  The fact that either Party has invoked the provisions of this Article 19 shall not relieve either Party of any obligations it may otherwise have to continue performance in accordance with the provisions of the Agreement.

 

19.8           Waiver.  To the extent either Party has or hereafter may acquire any immunity (including sovereign immunity) from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, such Party hereby irrevocably waives such immunity in respect of its obligations and liabilities under, or in connection with, this Agreement.

 

19.9           Fees.  Each Party shall pay its own fees and charges of arbitration, including the fees for its legal representation and assistance and costs of any experts or other witnesses utilized by such Party, and shall share equally the common fees and charges for the arbitration, including any fees of the arbitrator.

 

ARTICLE 20 – NOTICES AND ADDRESSES

 

20.1           Notices.

 

(a)           Any notice, request, demand, claim or other communication related to this Agreement must be in writing and delivered by hand, registered mail (return receipt requested), overnight courier, sent in .pdf format by electronic mail, or transmitted by facsimile.  Any notice given by electronic mail or facsimile shall only be effective  if a confirming copy is promptly delivered to the other Party by one of the other foregoing methods (or by first class mail) at the following addresses and numbers:

 

Customer:

Energy Northwest

Fuel Procurement Program Manager

Mail Drop PE10

P.O. Box 968

Richland, Washington 99352-0968

Email:  smpraetorius@energy-northwest.com

Facsimile No:  (509) 377-4303

 

USEC:

United States Enrichment Corporation

6903 Rockledge Drive, Suite 400

Bethesda, Maryland 20817

ATTENTION:  Vice President, Sales, Marketing and Power

Facsimile No:  (301) 564-3207

Email:  donelsonj@usec.com

 

Either Party may change its address, email address, or facsimile number for receiving notices by giving written notice of such change to the other Party no later than ten (10) Business Days prior thereto.

 

(b)           All notices, requests, demands, claims and other communications hereunder shall be deemed given upon actual receipt thereof.

 

20.2           Designated Facilities.  The Facility shall be the delivery point for all Physical Deliveries of cylinders and Material.

 

ARTICLE 21 – GENERAL

 

21.1           Reports and Documentation.  During the term of this Agreement, USEC shall periodically provide Customer with reports which summarize deliveries hereunder and the amounts credited to the DU Account, and transactions regarding such accounts made on Customer’s behalf pursuant to this Agreement.

 

21.2           Governing Law.  The validity, performance, and all matters relating to interpretation and effect of this Agreement and any amendment hereto shall be governed by the laws of the State of New York, including Articles 1 and 2 of New York’s Uniform Commercial Code, except to the extent superseded by federal law; provided, however, that, in the event the Parties’ choice of New York law is deemed ineffective by a court or arbitrator, Maryland law, including Maryland Commercial Law Titles 1 and 2, shall apply in place of New York law.

 

Notwithstanding the foregoing, in the event Customer receives a request for Business Proprietary Information pursuant to the Washington Public Records Act, Washington law shall govern such request and corresponding response to the request, including any request for redaction or confidential treatment required to comply with Article 18.  Any action under the Washington State Public Records Act shall be brought in the appropriate venue in accordance with Washington law.

 

21.3           Captions and Headings of No Effect.  The captions and headings in this Agreement are inserted for convenience only and shall not affect the interpretation or construction of this Agreement or any provision hereof.

 

21.4           Invalid or Unenforceable Provisions.  If any provision of this Agreement is or becomes invalid or unenforceable, the remainder of this Agreement shall not be affected.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, only as to such jurisdiction, be ineffective only to the extent of the prohibition or unenforceability.  The Parties shall cooperate to negotiate mutually acceptable terms to replace any invalid or unenforceable provision.

 

21.5           No Waiver.  The failure of either Party to enforce any of the provisions of this Agreement, or to require at any time strict performance by the other Party of any of the provisions hereof, shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any part hereof, or the right of such Party thereafter to enforce each and every such provision.

 

21.6           Contractors.

 

(a)           USEC may fulfill its obligations under this Agreement through one or more contractors.  No such contractor and/or subcontractor is authorized to modify the terms of this Agreement, waive any requirement hereof, or settle any claim or dispute arising hereunder.

 

(b)           References in this Agreement to the liability of a Party for its negligence or intentional acts shall be deemed to include the negligence or intentional acts or omissions of the Party’s contractors, subcontractors, employees or agents if, under applicable law, the Party would be vicariously liable for such acts or omissions.

 

21.7           Survival.  This Article and the provisions relating to definitions, title and risk of loss and obligation codes, prices and terms of payment, taxes, Parties’ representations, liability (including nuclear liability), government authorizations, termination or suspension provisions, confidentiality, dispute resolution (including governing law, interpretation, agents, no third party beneficiaries), and notice provisions shall survive termination or expiration of this Agreement.

 

21.8           Amendment.  No modification or amendment of this Agreement shall be effective unless it is in writing and signed by both Parties.

 

21.9           No Third Party Beneficiaries.  With the exceptions of Sections 12.8 and 13.7, nothing in this Agreement shall be interpreted as creating any right of enforcement of any provision herein by any person or entity that is not a Party to this Agreement.

 

21.10           Consent to be Reasonably Given.  Where a Party must give its consent under this Agreement, such consent may not be unreasonably withheld or delayed unless the Agreement provides that such consent is at the sole discretion of such Party.

 

21.11           Characterization for U.S. International Trade Law Purposes.  The Parties are entering into this Agreement for their mutual benefit and not for use as evidence in any pending or future proceeding under the U.S. antidumping or countervailing duty laws.  Accordingly, neither Party shall seek to characterize this Agreement as a contract for the sale of services or merchandise for purposes of those laws without the consent of the other Party.

 

21.12           Reasonable Efforts.  When used in this Agreement (including in any amendment, supplemental agreement or correspondence between the Parties related to this Agreement) and unless specifically defined in another provision of this Agreement, terms such as “best efforts,” “reasonable efforts,” and “commercially reasonable efforts” shall be deemed to mean efforts that are considered to be commercially reasonable under the circumstances prevailing at the time, taking into account the economic condition of the Party making such efforts, the information actually available to such Party at the time the efforts are made, the economic, legal and political circumstances prevailing in the country where the efforts are to made, and the internal resources and employees available to such Party to make such efforts. In no event shall it require a Party to undertake measures, which in its reasonable judgment, could materially jeopardize its ability to perform its other legal or contractual obligations to others (including to the other Party) or to comply with applicable law or regulations.

 

21.13           Execution and Counterparts; Effectiveness.

 

(a)           This Agreement may be executed in multiple counterparts, which taken together shall constitute an original without the necessity of all Parties signing the same page or the same documents, and may be executed by signatures to electronically or telephonically transmitted counterparts in lieu of original printed or photocopied documents.  Signatures transmitted by facsimile shall be considered original signatures.

 

(b)            Notwithstanding any other provision of this Agreement, the execution and delivery of all of the following agreements, on or before May 16, 2012, shall be a condition precedent to the obligations of the Parties under this Agreement:

 

(i)           Agreement between Customer and the Department of Energy, titled “Agreement Between the U.S. Department of Energy and Energy Northwest For the Transfer of Depleted Uranium Hexafluoride and the Storage of Low Enriched Uranium,” EN Contract number 335903;

 

(ii)           Agreement between Customer and TVA, titled “Enriched Product and UF6 Supply Agreement,” EN Contract number 335901; and

 

(iii)           Letter agreement between TVA and USEC for the purchase and sale of power used to produce the Enriched DU.

 

If such agreements have not been executed and delivered by each and all of the parties thereto on or before May 16, 2012, this Agreement shall, without any further action of the Parties, terminate automatically effective as of 12:00 midnight, Eastern Time, on May 16, 2012.  In the event of any such termination of this Agreement, this Agreement shall be null and void and without any further force or effect whatsoever, other than the confidentiality obligations of the Parties under Article 18, and no Party shall have any obligation or liability whatsoever to any other Party under or in connection with this Agreement other than the aforementioned confidentiality obligations.

 

(c) Customer shall promptly notify USEC when all parties to the agreements in Section 21.13(b)(i) and (ii) have executed and delivered such agreements and USEC shall promptly notify Customer when all parties to the agreement in Section 21.13(b)(iii) have executed and delivered such agreement. Upon receipt by each Party of the notice from the other Party under the preceding sentence, the condition precedent in Section 21.13(b) shall be fulfilled.

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be signed in two (2) originals by their duly authorized officers as of the Effective Date.

 

ENERGY NORTHWEST                                                                      UNITED STATES ENRICHMENT

CORPORATION

 

By:      /s/ Dale K. Atkinson                                                          By:       /s/ Robert Van Namen                                                         

 

Name:  Dale K. Atkinson                                                              Name:   Robert Van Namen                                                            

 

Title:    V.P. Corp. Dev./ Empl. Services                                                      Title:     Senior VP Uranium Enrichment                                                           

 

  

  

  

BUSINESS PROPRIETARY INFORMATION

USEC CONTRACT NO. EC-SC01-12UE03133

ENERGY NORTHWEST CONTRACT NO. 335900

APPENDIX A:  EQUATIONS USED TO CALCULATE COMPONENTS OF ENRICHED URANIUM PRODUCT PRODUCED FROM FEED MATERIAL OR FROM DEPLETED URANIUM

 

1.           Feed Material, or Depleted Uranium, per unit of product (feed factor):

 

F = (XP - Xw) / (Xf - XW)

 

where F = Feed Material or DU quantity per unit of resulting Enriched Uranium or Enriched DU

 

Xp = Product Assay (in weight % 235U)

 

Xw = Tails Assay (in weight % 235U)

 

Xf = Feed Material/DU Assay (in weight % 235U)

 

2.           Separative work per unit of product (SWU factor):

 

SWU = [V(Xp) – V(Xw)] – F[V(Xf) – V(Xw)]

 

Where V(Xp) = [2 (Xp) – 1] [1n [(Xp) / (1-Xp)]]

 

V(Xw) = [2 (Xw) - 1] [1n [(Xw) / (1-Xw)]]

 

V(Xf) = [2 (Xf) – 1] [1n [(Xf) / (1-Xf)]]

 

where (Xp), (Xw), and (Xf) are defined above and 1n = natural logarithm (base e)

 

	
3.

	
The weight percents (“weight %”) must be converted to decimal fractions for use in the separative work equations.  These formulas can be generalized to multiple Feed Material Assays and Product Assays.

 

4.           For the application of the above formulas:

 

-Uranium quantity is expressed in kilograms of UF6, rounded to the gram (third decimal place).

 

-Assay expressed in % is rounded to the fourth significant figure.

 

-Intermediate calculations are carried to at least eight significant figures.

 

-Feed and SWU factors are rounded to the third decimal place.

 

-Separative work, expressed in kilograms SWU, is rounded to the third decimal place (1/1000 Kg SWU).

 

-Rounding is done by the standard rounding procedure.

 

A-

  

  

  

APPENDIX B:  PROVISIONS FOR PHYSICAL DELIVERY

 

This Appendix B shall apply to Physical Deliveries of Enriched DU and the Enriched Product, of cylinders for filling with Enriched DU and Enriched Product and, unless otherwise agreed, of other Material or equipment under this Agreement.

 

1.           Designated Facilities.  The Facility at PGDP shall be the delivery point for all Physical Deliveries of cylinders and Material by either Party.

 

2.           Delivery Schedule.  The schedule for deliveries during which Physical Delivery will occur shall be established by mutual agreement.  For Physical Delivery of Enriched DU and Enriched Product, USEC shall submit a delivery schedule to Customer on the 15th of the month prior to the month of delivery (“Delivery Schedule”).  The Delivery Schedule shall take into account the following:

 

(a)           the nominal quantities and Assays of Enriched DU that USEC has available to deliver to Customer from among standard Assays of 4.00, 4.40 or 4.95 and the nominal quantity and Assay of Enriched Product that USEC shall deliver to Customer will be the standard Assay of 4.40;

 

(b)           whether the Enriched DU or Enriched Product are already in a 30B cylinder and, if not, USEC’s proposal for the supply of 30B cylinders to effect the delivery;

 

(c)           the destination for any shipment by Customer of the Enriched DU or Enriched Product from the Facility, which shall be provided by Customer to USEC prior to the 15th day of the month prior to the month of delivery;

 

(d)           the proposed schedule for arrival of Customer’s overpacks (if needed by Customer to ship the Enriched DU or Enriched Product from the Facility) and trucks;

 

(e)           potential conflicts with USEC’s need to fill orders from other customers; and

 

(f)           other factors affecting the availability of manpower, equipment and other requirements to implement the proposed delivery.

 

The actual quantity and Assay of Enriched DU or Enriched Product delivered to Customer may differ from the quantity and Assay listed in the Delivery Schedule.

 

3.           Routine Variances.  Enriched DU and Enriched Product delivered by Physical Delivery pursuant to this Agreement shall conform to the Assay and quantity recorded in the documentation accompanying such Enriched DU and Enriched Product when it is Physically Delivered to Customer (the “Delivery Documentation”), subject to the variations set out below.

 

(a)           The Assay of the Enriched DU or Enriched Product in each cylinder Physically Delivered to Customer may differ from the Assay in the Delivery Documentation by no more than plus or minus five one-hundredths (±0.05) (“routine variation”).

 

(b)           The quantity of Enriched DU or Enriched Product in a cylinder Physically Delivered to Customer by USEC shall not differ from the quantity as recorded in the Delivery Documentation for that cylinder by more than plus or minus one-half of one percent (±0.50%).

 

4.           Obligation to Provide Cylinders.

 

(a)           USEC shall supply to Customer the 30B cylinders necessary to provide Customer Enriched DU and Enriched Product on a schedule mutually agreed by the Parties.  USEC’s ability to make Physical Deliveries in accordance with the Delivery Schedule under Paragraph 2 depends upon timely availability of 30B cylinders.  The Parties acknowledge that there is currently a shortage of the needed 30B cylinders used to fulfill USEC’s obligations under this Agreement.  USEC shall undertake reasonable efforts to procure the necessary 30B cylinders not already in its possession as soon as practical.  To the extent that USEC’s supplier of 30B cylinders has not delivered 30B cylinders to the PGDP in time for USEC to fill the 30B cylinders with Enriched DU or Enriched Product under the Agreement, USEC shall deliver Enriched DU or Enriched Product (i) in 30B cylinders in USEC’s possession at the PGDP that are not otherwise needed to make or take deliveries of Enriched Product under USEC’s existing commitments to third parties; or (ii) subject to Paragraph 4(c) below, by constructive delivery of the Enriched DU and/or Enriched Product in parent cylinders containing the Enriched DU and/or the Enriched Product for which 30B cylinders were not available pursuant to Section 5.2(b) and shall have the right to include the Article 5 SWU and Article 6 SWU in the invoice for the month in which delivery was made.  For this purpose, constructive delivery shall be made by notifying Customer of the quantity of Enriched DU or Enriched Product being delivered, which shall be the amount of Enriched DU or Enriched Product in the parent cylinder minus the Heavy Heel, and identifying the parent cylinder in which it is held.  In addition to identifying the cylinder identification number and documenting Customer’s ownership of the constructively delivered Enriched DU or Enriched Product in USEC’s records and accounts, USEC shall visually identify constructively delivered cylinders as containing Customer’s Material by placing a magnet, sticker or tag on the cylinder and segregating constructively delivered cylinders from USEC’s other inventories.  USEC shall also produce an initial Enriched Documentation (as defined in Appendix B, Paragraph 9) based upon the quantities, specifications and purities contained within the parent cylinder.  USEC shall not make any constructive delivery of Enriched Product or Enriched DU under this Paragraph 4, and Customer shall not be obligated to accept or pay for such constructively delivered Material, unless USEC first delivers to Customer the written acknowledgement from JPMorgan described in Section 5.2(f).

 

(b)           USEC shall fill such constructively delivered Enriched DU or Enriched Product in 30B cylinders as quickly as commercially reasonable after 30B cylinders become available but in no event longer than 90 days after the 30B cylinders become available.  Until that time, USEC shall maintain records of the cylinders in which Enriched DU or Enriched Product is held so as to identify the Enriched DU or Enriched Product as Customer’s property.  The date of delivery of the constructive delivery shall be the last day of the month in which constructive delivery was made.  At the time of Physical Delivery of the Enriched DU or Enriched Product in 30B cylinders, a new, final Enriched Documentation shall be provided to Customer in accordance with Appendix B, Paragraph 9 based on the quantities, specifications and purities of the Enriched DU or Enriched Product contained within the 30B cylinders.  This final Enriched Documentation shall be the same as the initial Enriched Documentation in all respects except for weight (given the movement of the Material from a parent cylinder to a 30B cylinder) and purities.  Enriched DU or Enriched Product delivered in 30B cylinders hereunder shall not be subject to rejection due to the differences in weight or purities between the initial and final Enriched Documentation.

 

(c)           It is the Parties’ intention not to have any Enriched Product or Enriched DU constructively delivered under this Paragraph 4. Accordingly, USEC shall notify Customer if at any time USEC anticipates that due to delays in deliveries of 30B cylinders, Customer will hold title to Enriched Product or Enriched DU in one or more parent cylinders pursuant to a single or multiple constructive deliveries under Paragraph 4(a). Following such notice, the Parties shall work cooperatively to implement measures to secure the necessary 30B cylinders in order to fill such 30B cylinders from parent cylinders and to eliminate future constructive deliveries due to lack of 30B cylinders without reducing the amount of SWU to be delivered and taken by USEC and Customer, respectively, during this Agreement. If Customer reasonably concludes that the delay in delivery of 30B cylinders will not be resolved in time to ensure that all Enriched DU and Enriched Product delivered to Customer under this Agreement is in 30B cylinders not later than May 31, 2013 or other date agreed by the Parties, and no other sources of 30B cylinders are secured by Customer to make up for any shortfalls in 30B cylinders despite its commercially reasonable efforts to secure such sources, Customer shall have the right to terminate this Agreement effective on the date specified in a notice thereof to USEC.

 

(i)           The effective date of termination pursuant to a notice of termination provided under paragraph (c) above, shall not be effective earlier than forty-five (45) days after submission of the termination notice to USEC. The 45 day period shall be used to allow time to reduce to zero USEC’s power takings under its power purchase agreements, and USEC shall have an additional 45 days after the date of termination (for a total of 90 days) to continue filling 30B cylinders and delivering them to Customer to the extent such cylinders are available.

 

(ii)           Enriched DU and Enriched Product may be constructively delivered during the foregoing 45-day period to the extent 30B cylinders are not timely available for use in making Physical Delivery to Customer.

 

(d) USEC shall supply 1S and 2S cylinders, as required for Officials Samples under Paragraph 10 below, subject to payment by Customer for such cylinders under Section 8.4.

 

(e)           As used in this Agreement, the term “cylinder” shall be deemed to include any overpack or other packaging equipment and materials required for the transportation of such cylinder or any Material which it contains. Customer shall provide all overpacks and equipment other than 30B cylinders required for Physical Delivery of Enriched DU or Enriched Product.

 

5.           Return/Removal of DU Cylinders.  Filled cylinders of DU rejected by USEC under Article 4, and unemptied cylinders of DU not needed for Enrichment and cylinders containing Enriched DU or Enriched Product to which Customer has title that are constructively delivered and were not Physically Delivered to Customer prior to May 31, 2013, shall be Physically Delivered to Customer at the Facility at a time and in a manner to be mutually agreed but no later than December 31, 2013.  USEC may charge storage fees with respect to any Stored Items that are not removed by Customer or DOE by December 31, 2013 pursuant to Section 13.4; provided, however, if, at any time, USEC de-leases the area of the Facility where cylinders of Material to which Customer or DOE has title are located, USEC may elect to leave those cylinders on the de-leased area and USEC shall thereafter have no further responsibility for such cylinders or any Material they contain.  Nothing herein shall require USEC to continue to lease space for storage of the Stored Items beyond May 31, 2013.

 

6.           Specifications.  All cylinders and equipment supplied by either Party shall meet all applicable regulatory specifications and requirements as to safety, design criteria, cleanliness and freedom from contamination in effect at the time furnished, utilized or returned, as the case may be, and shall conform to the requirements described in USEC-651(Rev. 9) (The UF6 Manual:  Good Handling Practices for Uranium Hexafluoride) or any successor publication or revision thereof provided to Customer.

 

7.           Responsibility for Loss or Damage.  The Party receiving a cylinder or other equipment (the “Receiver”) from the other Party (the “Shipper”) shall bear the risk of loss of, or damage to, such cylinders or other equipment for so long as such cylinders or equipment are in the possession of the Receiver or Receiver’s agent or representative.

 

8.           Reserved.

 

9.           Documentation.

 

(a)           With each Physical Delivery of Enriched DU by USEC pursuant to Article 5 and Enriched Product pursuant to Article 6, USEC shall furnish (a) a statement of the quantities, properties, and country of origin and Obligation Code(s) of the Enriched DU and Enriched Product in the form of the DOE/NRC Form 741 or any successor thereto and (b) the Certificate of Quality and Quantity for Enriched Uranium Hexafluoride in the form set forth in Appendix F (collectively, the “Enriched Documentation”) subject, in the case of a constructive delivery and subsequent Physical Delivery of constructively-delivered Enriched DU or Enriched Product, to the provisions of Appendix B, Paragraph 4.

 

(b)           With each Physical Delivery of DU by Customer, Customer shall supply any documentation required by Article 4 plus a DOE/NRC Form 741 or any successor thereto information regarding the DU (the “DU Documentation”).  USEC shall be obligated to provide any such DU Documentation upon the return of any unemptied cylinder of DU, or any cylinder of Residual Tails, as may be required by applicable law and regulations. In the case of an unemptied cylinder, USEC may fulfill this obligation with the DU Documentation originally provided by DOE or Customer.

 

(c)           The fact that a Party supplied documentation under this Paragraph 9 does not modify or extend any warranty given under this Agreement by such Party regarding the Material delivered nor increase such Party’s obligations or liability, or the other Party’s rights, with respect to such Material beyond the obligations, liability and rights that would apply under this Agreement in the absence of such documentation.

 

10.           Official Samples.

 

(a)           USEC shall sample Enriched DU and Enriched Product Physically Delivered in accordance with USEC’s procedures as described in USEC-651 (Rev.9) (The UF6 Manual:  Good Handling Practices for Uranium Hexafluoride) or any successor publication or revision thereof provided to Customer.  USEC shall also perform any reasonable, additional sampling services on Enriched DU and Enriched Product to be Physically Delivered pursuant to Article 5 and 6, respectively, that may be requested by Customer, subject to reimbursement by Customer for any fees incurred by USEC in performing such additional services.

 

(b)           Samples of Enriched DU or Enriched Product taken by USEC in accordance with USEC’s procedures shall be the official samples (the “Official Samples”) and shall be binding upon USEC, Customer, and any umpire selected by the Parties pursuant to Paragraph 15 of this Appendix B, except as stated in Paragraphs 10(c) and 10(d) below.  As requested by Customer, P-10 subsamples from the Official Sample for each parent cylinder shall initially be sent to an independent laboratory (to be designated by USEC) that is under contract to USEC.  These subsamples shall be sent to the independent laboratory before the corresponding Enriched DU or Enriched Product is delivered, by Physical Delivery or constructive delivery, to Customer pursuant to Article 5 and Article 6. The exception to this will be the June 2012 delivery for which other independent analyses will be provided.  ASTM 996-10 analyses shall be requested and performed for all P-10 subsamples provided pursuant to this Paragraph 10 and a report of such analysis shall be provided to Customer with a copy to USEC before the Due Date of the invoice for such Enriched Product or Enriched DU to the extent possible. Any discrepancy between the Enriched Documentation and the independent laboratory’s analysis shall be resolved under Paragraphs 15 and 16 of this Appendix B.

 

(c)           For all deliveries made under this Agreement, independent P-10 subsamples and analyses will be completed for 100% of the delivered Enriched DU and Enriched Product delivered by USEC.  The June 2012 independent sample results will be provided subsequent to Physical Delivery of the Material to Customer.  Customer shall bear the cost of the P-10 subsample containers, the cost of subsampling, shipping of such subsamples, and all independent analyses required hereunder.

 

(d)           Official Samples will be held by USEC in 1S or 2S cylinders indefinitely, subject to the following conditions: (i)  USEC shall only maintain custody of these 1S or 2S Official Samples during the duration of USEC’s lease of the laboratory located at the PGDP; (ii) it shall be Customer’s responsibility to arrange for storage or disposal of the Official Samples thereafter and to pay USEC for the 1S or 2S Official Samples pursuant to Section 8.4 ; and (iii)  it shall be Customer’s responsibility to arrange for storage or disposal of the Official Samples thereafter.

 

11.           Weight.

 

(a)           USEC shall determine the gross weight of all filled cylinders, the empty gross weight of all empty cylinders, and the net weight of all Material or Residual Tails Physically Delivered by or to USEC using USEC’s weighing procedures and equipment.  For purposes of this Appendix, “net weight” shall mean the difference between the gross weight of a cylinder filled with Material and the empty gross weight of such cylinder.  The empty gross weight shall mean the weight of the cylinder after it has been emptied, including any heels remaining in a cylinder after emptying.  USEC’s gross weight determination shall be final except in the case of Enriched DU and Enriched Product, in cases where the gross weight determined by Customer (or fabricator, if USEC Physically Delivers such cylinder to a fabricator) differs from USEC’s gross weight determination by more than the “Applicable Dispute Limit,” which shall mean, in the case of a 30 inch cylinder, a difference of greater than + 2.0 Kg from the gross weight determined by USEC; and, in the case of a 48 inch cylinder, a difference of greater than + 5.3 Kg; provided, that Customer notifies USEC of such discrepancy prior to Acceptance of the Enriched DU or Enriched Product.

 

(b)           The Parties shall follow the check-weight procedures in Paragraph 16 of this Appendix B in resolving disputes regarding the weight of Enriched DU or Enriched Product, and the resolution of such disputes in accordance with Paragraph 16 of this Appendix B shall be final and binding on the Parties.  Notwithstanding the existence of a discrepancy in gross weight or a dispute concerning such discrepancy, USEC’s gross weight determination shall be final and binding on the Parties if Customer or its agent (including a fabricator) breaks the seal on, or evacuates any of the Material from, the disputed cylinder prior to resolution of the discrepancy or USEC’s agreement to accept Customer’s (or a fabricator’s) gross weight determination.

 

12.           Observation of Weighing and Sampling.  If requested by Customer at the time a Delivery Schedule is submitted to Customer under Paragraph 2 of this Appendix B, Customer and/or its designee shall be given an opportunity to observe, at Customer’s expense and to the extent such sampling has not already occurred, (a) the weighing of any cylinder pursuant to Paragraph 11 of this Appendix B; and (b) the taking of Official Samples (if any) by USEC pursuant to Paragraph 10 of this Appendix B.  USEC shall notify Customer of the date(s) and place(s) for observing such events.

 

13.           Acceptance of Enriched DU and Enriched Product.

 

(a)           “Acceptance” or “Accepted” of Enriched DU and Enriched Product shall mean agreement by Customer that (i) the Enriched Documentation is correct; and (ii) the Enriched DU and Enriched Product received conforms to the applicable ASTM specification and the applicable quantity and Assay recorded for such Enriched DU and Enriched Product in the Enriched Documentation, subject to the variations permitted in this Appendix (“Conforming Material”).  Acceptance shall be deemed to have occurred in the event:

 

(i)           Customer fails to notify USEC of its disagreement with the Enriched Documentation, or that the Enriched DU and Enriched Product is not Conforming Material, within forty-five (45) days after the later of (A) Physical Delivery of the Material; (B) receipt of the Enriched Documentation; and (C) receipt of the independent laboratory report pursuant to Paragraph 10(b); or

 

(ii)           Customer uses, commingles or otherwise disposes of such Enriched DU and Enriched Product, except to the extent necessary for storage or protection against health and safety hazards; or

 

(iii)           an umpire determines (or the Parties agree) that the Parties must accept that the Statement is correct and that the Enriched DU or Enriched Product is Conforming Material.

 

(b)           Customer’s right to reject the Enriched DU and Enriched Product shall terminate upon Acceptance of such Enriched DU.

 

14.           Rejection of Enriched DU and Enriched Product.

 

(a)           If pursuant to Paragraph 13 of this Appendix, Customer disagrees with the Enriched  Documentation, as applicable, including, because of a discrepancy between the independent laboratory’s report and the Enriched Documentation (and the disagreement is other than as to net weight, which shall be finally determined by USEC under Paragraph 11 (and, if applicable, Paragraph 16) of this Appendix B) or determines that the Enriched DU or Enriched Product is not Conforming Material or the cylinders containing the Enriched DU or Enriched Product do not meet the specifications in Paragraph 6 of this Appendix due to the fault of USEC, Customer may, prior to Acceptance, notify USEC of its disagreement, including the measurements and analytical data supporting Customer’s position (Customer’s notice being referred to herein as a “Rejection Notification”), and, subject to resolution of such disagreement, USEC shall, at its option, (i) take possession of the non-Conforming Enriched DU or Enriched Product and rework it so that it is Conforming Material; (ii) replace the rejected Enriched DU or Enriched Product with Conforming Material, or in the case of an alleged shortage in quantity, deliver (if available) an amount of Enriched DU or Enriched Product equal to the shortfall or in the case of a cylinder that does not meet the specifications in Paragraph 6 due to the fault of USEC, replace the cylinder with a cylinder that conforms to Paragraph 6; or (iii) credit Customer for the difference between the price paid by Customer for the Enriched DU or Enriched Product it rejected and the value of the rejected non-conforming Enriched DU or Enriched Product.  To the extent USEC chooses option (i) or (ii), USEC shall rework or replace the rejected Enriched DU and Enriched Product and/or cylinder, or supply the additional Enriched DU or Enriched Product, as soon as operationally practicable, but in no event later than ninety (90) days after the later of (x) the date on which USEC receives the Rejection Notification; or (y) final resolution of any dispute of the Rejection Notification under Paragraph 15 of this Appendix B.

 

(b)           No later than ten (10) Business Days after receipt of the Rejection Notification, USEC shall elect to either (i) exercise one of the options in Paragraph 14(a); or (ii) notify Customer that it chooses to dispute the Rejection Notification.  If USEC disputes the Rejection Notification, and such dispute is resolved in favor of Customer, USEC shall elect among the options in Paragraph 14(a) no later than ten (10) Business Days after final resolution of such dispute.  Customer shall assist USEC in effecting such removal or other disposition, including Physically Delivering the Enriched DU or Enriched Product to USEC, F.O.B. Facility, at USEC’s expense.

 

(c)           Title to, and risk of loss of, Enriched DU or Enriched Product, and the cylinders in which it is contained, that is rejected by Customer pursuant to this Paragraph 14 and to be returned to USEC pursuant to an election of an option in Paragraph 14(a) shall pass to USEC upon the later of (i) ten (10) Business Days after USEC’s receipt of Customer’s Rejection Notification; or (ii) if USEC disputes such Rejection Notification hereunder, a final resolution of such dispute that requires USEC to accept the measurements that are the basis for such Rejection Notification.  Title to, and risk of loss of, reworked, replacement or additional Enriched DU or Enriched Product and the cylinders that contain such Material, which is delivered pursuant to this Paragraph shall pass to Customer upon completion of Physical Delivery of such Enriched DU or Enriched Product and cylinders.

 

(d)           If necessary to meet the requirements of this Paragraph 14, USEC shall be permitted to use substitute cylinders.  If the defect in the Material can be corrected through a means other than replacement of the defective Material, USEC may utilize such means.

 

15.           Resolution of Disputed Rejection of Enriched DU and Enriched Product.

 

(a)           After receipt of a Rejection Notification, the Parties shall attempt to resolve the Rejection Notification through good faith negotiations during the ten (10) Business Days following submission of such Rejection Notification.  If a mutual agreement resolving the Rejection Notification is not reached within ten (10) Business Days following submission of such Rejection Notification, the applicable Official Sample(s) shall be submitted to a mutually agreed-upon umpire for analysis.  The umpire’s results shall be conclusive on both Parties if such results are within the range determined by both Parties’ results.  If the umpire’s results are outside the range determined by the Parties’ results, the Parties shall accept the results of the Party that are nearest to the umpire’s results.

 

(b)           USEC shall pay the umpire fees if the umpire’s result upholds the Rejection Notification; otherwise, Customer shall pay the umpire fees.  As used in this Paragraph 15, the phrase “umpire fees” means the umpire’s charges, plus the additional fee, if any, of the packaging, handling, and transporting of the Official Sample to and from the umpire.

 

16.           Resolution of Weight Disputes.

 

(a)           If, in accordance with Paragraph 11 of this Appendix B, Customer notifies USEC that the gross weight of a filled cylinder containing Enriched DU or Enriched Product Physically Delivered by USEC differs by more than the Applicable Dispute Limit (as defined in Paragraph 11(a) of this Appendix B) from the gross weight determined by USEC, then, if the discrepancy cannot be resolved by mutual agreement, after good faith negotiations, within fifteen (15) days after USEC receives Customer’s notification, Customer shall arrange for a separate check weighing to determine the gross weight of the filled cylinder containing Enriched DU or Enriched Product.  USEC shall have the right to witness the check weighing.  Customer shall give USEC at least one (1) week’s notice of the time and place for the check weighing.

 

(b)           The check weighing shall be conducted on calibrated scales and weighing machines properly certified for such purpose.  The check weighing procedure shall be as follows:

 

(i)           All cylinders and/or weights shall be first removed from the scales, and the scales shall be zero-checked.

 

(ii)           A mutually agreed standard weight shall then be placed on the scales in order to verify their accuracy.  If the indicated weight of the standard weight differs from its known weight by more than + 1 Kg, the scales shall be recalibrated.

 

(iii)           The cylinder to be check-weighed shall be examined to ensure that the valve protector and other removable items have been removed and then it shall be reweighed.  The results of the reweighing shall be defined as the “Check Weight.”

 

(iv)           If the Check Weight and USEC’s gross weight determination differ by an amount equal to or less than the Applicable Dispute Limit, USEC’s gross weight determination shall be binding.

 

(v)           If the Check Weight and USEC’s original gross weight differ by more than the Applicable Dispute Limit, the Check Weight shall be binding.

 

(vi)           Any fees incurred in connection with this check weighing procedure shall be borne by (A) Customer if USEC’s gross weight determination is binding, and (B) USEC in all other cases.

 

(vii)           If, as a result of the check weighing, it is determined that there is a shortfall in quantity delivered by USEC, USEC may elect to resolve the matter by:

 

(A)           giving Customer a credit against any pending invoice that includes charges for the undelivered Enriched DU or Enriched Product; or

 

(B)           giving Customer a credit against the next invoice issued by USEC to Customer; or

 

(C)           pursuing such alternative measures as the Parties may agree.

 

Neither Customer nor any party acting on its behalf shall evacuate or break the seal of a cylinder that is the subject of a dispute concerning gross weight until all discrepancies concerning weight are resolved.

 

NOTE:  The procedures set forth in Paragraph 15 are the exclusive means to resolve a dispute regarding a Rejection Notification with respect to Enriched DU or Enriched Product.  The procedures in Paragraph 16 are the exclusive means to resolve a dispute regarding weight with respect to Enriched DU or Enriched Product.  All other disputes shall be subject to Article 19; provided, however, that neither Customer nor DOE nor any other person shall have the right to dispute USEC’s determinations with respect to the quality, quantity or weight of DU, or the cylinders filled with DU or Residual Tails.

 

  

  

  

 

  

  

  

 

 

  

  

  

 

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

 

 

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

  

  

  

 

 

  

  

  

 

 

  

  

  

BUSINESS PROPRIETARY INFORMATION

USEC CONTRACT NO. EC-SC01-12UE03133

ENERGY NORTHWEST CONTRACT NO. 335900

APPENDIX E:  USEC SERVICE CHARGES – AS OF THE EFFECTIVE DATE

 

	
A.  Packaging and Handling Charges

	  	
Price

	  
	
(Doesn’t include supply of cylinder)

 

(30-inch Cylinders)

	  	  	  
	
Enriched UF6 (routine variation)

Enriched UF6 (special variation)

	  	
1

	  
	
Natural UF6

	  	
$*****

	
/KgU

	
Depleted UF6

 

(48-inch Cylinders)

	  	
$*****

	
/KgU

	
Natural UF6 Vapor Transfer to 48 Y Cylinder

	  	
$*****

	
/KgU

	  	  	  	  
	
B.  Cylinder & PSP Shipping and Receiving Charges

	  	  	  
	
(Not for utility customer orders - For return of equipment to suppliers beyond routine feed or product deliveries)

	  	  	  
	  	  	  	  
	
Individual 30B cylinder not in PSP

	  	
$*****

	
/Cylinder

	
Individual PSP without cylinder

	  	
$*****

	
/PSP

	
Loading/Unloading empty cylinder and PSP

	  	
$*****

	
/Set

	
Receipt or Shipment of 48-inch cylinder

	  	
$*****

	
/Cylinder

	
Cold-Pressure Check (30-inch or 48-inch cylinder)

	  	
$*****

	
/Cylinder

	  	  	  	  
	
C.  Physical Storage

	  	  	  
	  	  	  	  
	
Weekly Storage Fees

	  	  	  
	
30-inch or 48-inch Cylinder

	  	
$*****

	
/Each

	
PSP

	  	
$*****

	
/Each

	
Flat Rack

	  	
$*****

	
/Each

	
   Removing Flat Rack from trailer and placing in storage

	  	
$*****

	
/Move

	
   Retrieving Flat Rack from storage and mounting on trailer

	  	
$*****

	
/Move

	  	  	  	  
	
D.  Special Sampling Charges

	  	  	  
	
 (Prices upon request for other sampling requirements)

	  	  	  
	  	  	  	  
	
P-10

	
(1st sample)

	
$*****

	
/Sample

	
P-10

	
(more samples)

	
$*****

	
/Sample

	
Liquid sample 30 or 48-inch cylinder

	  	
$*****

	
/Sample

	  	  	  
	
E.  Analytical Services Charges

	  	  	  
	
 (Prices upon request for other sampling requirements)

	  	  	  
	  	  	  	  
	
Uranium Purity Determination

	  	
$*****

	
/Analysis

	
U-234, U-235 and U-236 Determination

	  	
$*****

	
/Analysis

	
U-232 Determination

	  	
$*****

	
/Analysis

	
Technetium-99 Determination

	  	
$*****

	
/Analysis

	
Boron and Silicon Determination

	  	
$*****

	
/Analysis

	
Hydrocarbons Determination

	  	
$*****

	
/Analysis

	
Non-volatile Fluorides

	  	
$*****

	
/Analysis

	
Volatile Elements

 

F.  Cylinders

	  	
$*****

	
/Analysis

	  	  	  	  
	
Valve Change on Cylinder (excludes cost of new valve)

	  	
$*****

	
/Cylinder

	
Replacement of End-Plug on clean-washed cylinder (30-inch or 48-inch cylinder including new end-plug)

	  	
$*****

	
/Plug

	
Engaging valve or plug to correct number of threads (30-inch or 48-inch cylinders)

Surveillance of Customer Cylinder

	  	
$*****

 

$*****

	
/Valve

 

/Cylinder

	
Reducing High Pressure before Feeding or Filling (Visual Inspection required)

Reducing High Pressure before Feeding or Filling (Visual Inspection not required)

Drill 48 inch cylinder for VPA Installation

	  	
$*****

 

$*****

 

$*****

	
/Cylinder

 

/Cylinder

 

/Cylinder

	  	  	  	  
	
G.  PSP (Protective Structural Packages)

	  	  	  
	  	  	  	  
	
Weighing a Customer’s PSP

	  	
$*****

	
/PSP

	
Re-marking and Re-labeling a Customer’s PSP

Gasket Replacement on Customer’s PSP

Surveillance of Customer PSP

PSP Certificate Compliance Inspection (UX-30)

PSP Health Physics Release Survey

	  	
$*****

$*****

$*****

$*****

$*****

	
/PSP

/PSP

/PSP

/PSP

/PSP

	  	  	  	  
	
H.  Rental Charges

	  	  	  
	
 (Charges Per Week or Fraction Thereof)

	  	  	  
	  	  	  	  
	
30-inch Cylinder

	  	
$*****

	
/Cylinder

	
PSP – 30 inch

	  	
$*****

	
/PSP

	
PSP – P-48 Overpack

	  	
$*****

	
/PSP

	
P-10 Sample Container

	  	
$*****

	
/Container

  

1 Not applicable; charges for packaging and handling are covered by Article 8.

E-

  

  

  

BUSINESS PROPRIETARY INFORMATION

USEC CONTRACT NO. EC-SC01-12UE03133

ENERGY NORTHWEST CONTRACT NO. 335900

APPENDIX F:  FORM OF QUALITY CONFIRMATION

 

Certificate of

Quality and Quantity

For Enriched Uranium Hexafluoride

	
Customer:

 

	
Contract No:

 

	
Receiver:

 

	
Order No.:

 

	
UF6 Cylinder No:

 

	
Assay (wt%)

 

	
Gross Weight:                  pounds

	
Uranium Mass:                                        kg

	
Tare Weight:                    pounds

	
Isotope Mass (235U):                                kg

	
Net Weight:                      pounds

	  
	
Isotopic Composition

 

	
ASTM C996-10

Specification Value

	
Analyzed Values

 

	
U-235

	
Less than or equal to:  5.0%

	  
	
U-232

	
Less than or equal to:  0.0001 micrograms/gU or U236 less than 125  micrograms/gU235, then N/A

	  
	
U-234

	
Less than or equal to:  11.0 x 103 micrograms/gU235

	  
	
U-236

	
Less than or equal to: 250micrograms/gU235

	  

	
Impurity Elements

	  
	
Boron                           Less than or equal to 4 micrograms /gU

	  
	
Silicon                           Less than or equal to 250 micrograms/gU

	  
	
Tc-99                           Less than or equal to 0.01 micrograms/gU

	  

	
Purity (U content %)

	  
	
UF6 Concentration

	  
	
Molar content of hydrocarbons, chlorocarbons and partially substituted Halohydrocarbons

	  

The samples for analysis were obtained during filling while the UF6 was in liquid phase.

Date:                                                     Signature:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00210-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00210-of-00352.parquet"}]]