Document:

Exhibit 10.3

 

EXECUTION VERSION

 

 SECOND AMENDMENT TO CREDIT AGREEMENT

 

This Second Amendment to Credit Agreement (this “Second Amendment”) is made as of this 11th day of May, 2012 by and among A123 SYSTEMS, INC., a Delaware corporation (“A123”) and A123  SECURITIES CORPORATION, a Massachusetts corporation (“A123 Securities”, and together with A123, individually and collectively, jointly and severally, the “Borrowers” and each a “Borrower”), the several banks and other financial institutions or entities from time to time parties to the Credit Agreement (as defined herein) (each a “Lender” and, collectively, the “Lenders”), SILICON VALLEY BANK (“SVB”), a California corporation, as the Issuing Lender, and SVB, as administrative agent for the Lenders (in such capacity, the “Administrative Agent”).

 

W I T N E S S E T H:

 

WHEREAS, the Borrowers, the Lenders and the Administrative Agent are party to that certain Credit Agreement dated as of September 30, 2011, as amended by a certain First Amendment to Credit Agreement dated as of March 6, 2012 (as further amended, modified, supplemented or restated and in effect from time to time, the “Credit Agreement”); and

 

WHEREAS, the Borrowers, the Lenders and the Administrative Agent have agreed to modify and amend certain terms and conditions of the Credit Agreement, subject to the terms and conditions contained herein.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Administrative Agent, the Lenders and the Borrowers agree as follows:

 

1.             Capitalized Terms.  All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.

 

2.             Amendment to Recitals of the Credit Agreement.  The third “Whereas” paragraph of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

“WHEREAS, the Lenders have agreed to extend a loan facility to the Borrowers, upon the terms and conditions specified in this Agreement, in an aggregate principal amount of up to Fifteen Million Dollars ($15,000,000), comprised exclusively of a letter of credit facility in the aggregate availability amount of up to Fifteen Million Dollars ($15,000,000) (as a sublimit of the loan facility), subject to the terms herein; and”

 

3.             Termination of Commitment to Make Revolving Loans.               Notwithstanding anything to the contrary contained in the Credit Agreement, the Borrowers acknowledge and agree that:

 

(a)                                  The Revolving Facility is hereby, and shall be irrevocably terminated with respect to Commitments to make Revolving Loans;

 

 

(b)                                 The Borrowers may not borrow under the Revolving Commitments at any time after the Second Amendment Effective Date during the remainder of the Revolving Commitment Period;

 

(c)                                  The Borrowers shall not submit any further Notice of Borrowing to the Administrative Agent; and

 

(d)                                 From and after the Second Amendment Effective Date, the only available extension of credit under the Revolving Commitment shall be Letters of Credit issued under the L/C Commitment.  Requests for the issuance of a Letter of Credit shall be made in accordance with Section 3 of the Credit Agreement.

 

4.             Deletion of Certain Provisions in the Credit Agreement.  The following provisions are hereby deleted from the Credit Agreement:

 

(a)                                  The following definitions in the Credit Agreement are hereby deleted: Additional Revolving Commitment Lender, Borrowing Base, Consolidated Tangible Net Worth, Consolidated Liquidity Ratio, Eligible Accounts, Eligible Foreign Accounts, Eligible Inventory, Overadvance, Reserves, Revolving Commitment Increase, Revolving Commitment Increase Effective Date, Refunded Swingline Loans, Swingline Commitment, Swingline Lender, Swingline Loan Note, Swingline Loans, and Swingline Participation Amount.

 

(b)                                 The provisions of the following Sections of the Credit Agreement are hereby deleted: 2.3, 2.4, 2.5, 2.6, 2.9, 2.10, 2.11, 2.24, 3.11, and 4.25, 5.2(c), and the following is inserted in their place in each instance: “[Reserved]”.

 

5.             Amendments to Section 1.1 (Defined Terms) of the Credit Agreement.  Section 1.1 of the Credit Agreement is hereby amended as follows:

 

(a)                                  The definition of “L/C Commitment” is hereby amended and restated in its entirety as follows:

 

““L/C Commitment”: as to any L/C Lender, the obligation of such L/C Lender, if any, to purchase an undivided interest in the Issuing Lenders’ obligations and rights under and in respect of each Letter of Credit (including to make payments with respect to draws made under any Letter of Credit pursuant to Section 3.5(b)) in an aggregate principal amount not to exceed the amount set forth under the heading “L/C Commitment” opposite such L/C Lender’s name on Schedule 1.1A or in the Assignment and Assumption pursuant to which such L/C Lender becomes a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The L/C Commitment is a sublimit of the Revolving Commitment and the aggregate L/C Commitment shall not exceed Fifteen Million Dollars ($15,000,000) at any time.”

 

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(b)                                 The definition of “Liquidity” is hereby amended and restated in its entirety as follows:

 

““Liquidity”: at any time, the aggregate amount of Qualified Cash held at such time by the Borrowers.”

 

(c)                                  The definition of “Liquidity Event” is hereby amended by deleting the figure “$75,000,000” contained therein, and substituting the figure “$60,000,000” in its place.

 

(d)                                 The definition of “Revolving Commitments”  is hereby amended and restated in its entirety as follows:

 

“Revolving Commitment”: as to any Lender, the obligation of such Lender, if any, to issue Letters of Credit in an aggregate principal amount not to exceed the amount set forth under the heading “Revolving Commitment” opposite such Lender’s name on Schedule 1.1A or in the Assignment and Assumption pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof (including in connection with assignments permitted hereunder).  The L/C Commitment is a sublimit of the Total Revolving Commitments.

 

(e)                                  The definition of “Total L/C Commitments” is hereby amended and restated in its entirety as follows:

 

““Total L/C Commitments”: at any time, the sum of all L/C Commitments at such time, as the same may be reduced from time to time pursuant to Section 2.8 or 3.5(b).  The amount of the Total L/C Commitments on the Second Amendment Effective Date is Fifteen Million Dollars ($15,000,000).”

 

(f)                                    The definition of “Total Revolving Commitments” is hereby amended and restated in its entirety as follows:

 

““Total Revolving Commitments”: at any time, the aggregate amount of the Revolving Commitments then in effect. The L/C Commitment is a sublimit of the Total Revolving Commitments.”

 

(g)                                 The definition of “Second Amendment Effective Date” is hereby inserted in its appropriate alphabetical order as follows:

 

““Second Amendment Effective Date”: is May    , 2012”

 

6.             Amendments to Section 2.2(a) (Amount and Terms of Commitments) of the Credit Agreement.  Section 2.2(a) is hereby amended and restated in its entirety as follows:

 

(a)           Subject to the terms and conditions hereof, the Issuing Lender agrees to issue

 

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Letters of Credit in accordance with Section 3.

 

7.             Amendment to Section 3.10(a) (Cash Collateral) of the Credit Agreement.  Section 3.10 of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

“(a)         Certain Credit Support Events.  Upon (i) the Second Amendment Effective Date, with respect to all outstanding Letters of Credit and L/C Exposure outstanding as of that date, and (ii) the date of submission by the Borrowers of any Application for the issuance of a Letter of Credit in accordance with Section 3.2 above, with respect to Letters of Credit to be issued after that date, and as a condition precedent to the issuance of any additional Letters of Credit, the Borrowers shall Cash Collateralize the then effective amount of all L/C Exposure, including the amount of any L/C Exposure related to the Letters of Credit included in the Application.  Immediately upon the Issuing Lender honoring any full or partial drawing request under any Letter of Credit, the Administrative Agent and the Issuing Lender may offset and apply from the Cash Collateral an amount necessary to satisfy all resulting L/C Disbursements, Issuing Lender Fees, and all costs, expenses, and other Obligations incidental thereto.”

 

8.             Amendment to Section 5.2(b) (Transaction Report) of the Credit Agreement.  Section 5.2(b) of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

“(b)         [Reserved].”

 

9.             Amendment to Section 6.2(g).  Section 6.2(g) is hereby amended and restated in its entirety as follows:

 

“(g)         on the Second Amendment Effective Date, and bi-weekly thereafter, on the last Business Day of each such bi-weekly period, a Liquidity Report, accompanied by such supporting detail and documentation as shall be requested by the Administrative Agent in its reasonable discretion, including, without limitation, a cash flow report in form and substance acceptable to Bank, in its reasonably discretion; provided  that, upon the occurrence and during the continuance of any Liquidity Event, such Liquidity Report and cash flow report shall be delivered weekly, on the last Business Day of each week;”

 

10.           Amendment to Section 6.7.  Section 6.7 is hereby amended and restated in its entirety as follows:

 

“6.7        Inspection of Property; Books and Records; Discussions.  Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities consistent with past practice, and (b) permit representatives and independent contractors of the Administrative Agent, in Administrative Agent’s sole discretion, to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable

 

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time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Group Members with officers, directors and employees of the Group Members and with their independent certified public accountants.”

 

11.           Amendment to Section 6.12(e) of the Credit Agreement.  Section 6.12(e) of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

“(e)         At the request of the Administrative Agent, each Loan Party shall use commercially reasonable efforts to obtain a landlord’s agreement or bailee letter, as applicable, from the lessor of each leased property or bailee with respect to any warehouse, processor or converter facility or other location where Collateral in excess of $500,000 is stored or located, which agreement or letter shall contain a waiver or subordination of all Liens or claims that the landlord or bailee may assert against the Collateral at that location, and shall otherwise be reasonably satisfactory in form and substance to the Administrative Agent.  After the Closing Date, no real property or warehouse space shall be leased by any Loan Party and no Inventory shall be shipped to a processor or converter under arrangements established after the Closing Date, without the prior written consent of the Administrative Agent (which consent, in the Administrative Agent’s discretion, may be conditioned upon the exclusion from the Borrowing Base of Inventory at that location or the establishment of Reserves acceptable to the Administrative Agent) or unless and until a reasonably satisfactory landlord agreement or bailee letter, as appropriate, shall first have been obtained with respect to such location.  Each Loan Party shall pay and perform its material obligations under all leases and other agreements with respect to each leased location or public warehouse where any Collateral is or may be located.”

 

12.           Amendment to Section 7.1 (Financial Condition Covenants) of the Credit Agreement.  Section 7.1 of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

“7.1        Financial Condition Covenant.  Consolidated Liquidity.  At any time during any fiscal month of the Borrowers permit the Borrowers’ Liquidity to be less than $40,000,000.”

 

13.           Amendments to Schedules of the Credit Agreement. Schedule 1.1A (Commitments and Aggregate Exposure Percentages) to the Credit Agreement is hereby deleted in its entirety and replaced by Schedule 1.1A attached hereto as Exhibit A:

 

14.           Creation of Non-Loan Party Subsidiary.  Borrower has advised Administrative Agent that A123 has created a wholly-owned Subsidiary, Grid Storage Holdings LLC, a Delaware limited liability company (“Gridstorage”).  As of the date hereof, Administrative Agent will not require Gridstorage to become party to the Collateral Agreement as a guarantor of the Borrower’s Obligations.  Notwithstanding the forgoing or any other terms of the Credit

 

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Agreement, Borrowers hereby represent, warrant and covenant to the Administrative Agent and the Lenders that Borrower shall not, without the prior written consent of the Administrative Agent, (i) incur, create, assume or suffer to exist any additional Indebtedness or other liabilities or financial obligations with respect to Gridstorage, (ii) make any additional Investments in Gridstorage, (iii) transfer any assets to Gridstorage, including, without limitation, any Intellectual Property; or (iv) permit Gridstorage to conduct, transact or otherwise engage in, or commit to conduct, transact or otherwise engage in, any business or operations other than those permitted under the Credit Agreement or own, lease, manage or otherwise operate any properties or assets.

 

15.           Consent to Additional Subordinated Indebtedness.  Borrowers have advised the Administrative Agent that A123 intends to obtain additional Subordinated Indebtedness in an aggregate amount of up to $50,000,000, substantially on the terms and conditions previously disclosed to Administrative Agent in writing (the “2012 Sub Debt Terms”).  The Administrative Agent hereby consents to the incurrence by A123 of the additional Subordinated Indebtedness so long as the final terms and conditions of such Subordinated Indebtedness conform in all material respects to the terms and conditions of the 2012 Sub Debt Terms.

 

16.           Conditions Precedent to Effectiveness.  This Second Amendment shall not be effective until each of the following conditions precedent has been fulfilled prior to or concurrently herewith, each to the satisfaction of the Administrative Agent (such date, the “Second Amendment Effective Date”):

 

(a)                                  The Administrative Agent shall have received a counterpart of this Second Amendment and the Disbursement Authorization Letter signed by each party hereto or written evidence satisfactory to the Administrative Agent (including by telecopy or other electronic transmission of a signed signature page) that each party has signed a counterpart of this Second Amendment and the Disbursement Authorization Letter.

 

(b)                                 The Administrative Agent shall have received a Liquidity Report, accompanied by such supporting detail and documentation as shall be requested by the Administrative Agent in its reasonable discretion, including, without limitation, a cash flow report in form and substance acceptable to the Administrative Agent, in its reasonable discretion.

 

(c)                                  The Administrative Agent shall have received a fully executed Secretary’s Certificate from each Borrower, in substantially the form of Exhibit C attached hereto.

 

(d)                                 All obligations of Borrowers owed to the Administrative Agent and the Lenders shall be cash-collateralized as may be required by, and to the satisfaction of, the Administrative Agent.

 

(e)                                  All necessary consents and approvals to this Second Amendment shall have been obtained.

 

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(f)                                    Updated evidence of insurance from each Borrower, in form and substance acceptable to the Administrative Agent.

 

(g)                                 After giving effect to this Second Amendment, no Default or Event of Default shall have occurred and be continuing.

 

(h)                                 After giving effect to this Second Amendment, the representations and warranties herein and in the Credit Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date hereof, as though made on such date (except to the extent that such representations and warranties (i) relate solely to an earlier date, in which case they shall be true and correct as of such date or (ii) are qualified by materiality in the text thereof, in which case they shall be true and correct in all respects).

 

(i)                                     The Loan Parties shall have paid all fees and expenses required to be paid in connection with this Second Amendment to the Administrative Agent to the extent invoiced on or prior to the Second Amendment Effective Date.

 

17.           Representations and Warranties. Each Loan Party hereby represents and warrants to the Administrative Agent and the Lenders as follows:

 

(a)                                  It has all requisite power and authority to enter into this Second Amendment and to carry out the transactions contemplated hereby.

 

(b)                                 The execution, delivery, and performance of this Second Amendment (i) have been duly authorized by all necessary action, and (ii) do not and will not (A) violate any material Requirement of Law binding on it or its Subsidiaries, (B) violate any material Contractual Obligation of it or its Subsidiaries, except to the extent that any such violation could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect on Borrowers or their business, (C) result in or require the creation or imposition of any Lien upon any properties or assets of any Group Member pursuant to any Requirement of Law or any such Contractual Obligation, other than Liens created by the Security Documents, or (D) require any approval of any Group Member’s interestholders or any approval or consent of any Person under any material Contractual Obligation of any Group Member, other than consents or approvals that have been obtained or made and that are still in force and effect and except, in the case of material Contractual Obligations, for consents or approvals, the failure of which to obtain could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect on Borrower or its business.

 

(c)                                  No material authorization or material approval by, and no notice to or filing with, a Governmental Authority is required in connection with the due execution, delivery and performance by it of this Second Amendment, other than authorizations or approvals that have been obtained or made and that are still in force and effect.

 

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(d)                                 This Second Amendment has been duly executed and delivered by it and is a legally valid and binding obligation of it, enforceable against it in accordance with its terms, except as enforcement may be limited by equitable principles (whether enforcement is sought by proceedings in equity or law) or by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally.

 

(e)                                  No injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the consummation of the transactions contemplated herein has been issued and remains in force by any Governmental Authority against any Group Member.

 

(f)                                    No Default or Event of Default has occurred and is continuing as of the date of the effectiveness of this Second Amendment.

 

(g)                                 The representations and warranties set forth in this Second Amendment, the Credit Agreement (as amended by this Second Amendment) and the transactions contemplated hereby and set forth in the other Loan Documents to which it is a party, are true and correct in all material respects on and as of the date hereof, as though made on such date (except to the extent that such representations and warranties (i) relate solely to an earlier date, in which case they shall be true and correct in all material respects as of such date or (ii) are qualified by materiality in the text thereof, in which case they shall be true and correct in all respects).

 

18.           Fees.  In addition and supplemental to any fees that may be due and payable under the Credit Agreement, Borrower shall pay to Administrative Agent an amendment fee of Fifty Thousand Dollars ($50,000.00), which fee shall be due on the date hereof and shall be deemed fully earned as of the date hereof.  Borrower shall also reimburse Administrative Agent for all reasonable outstanding legal fees and expenses incurred to date, whether incurred in connection with this Second Amendment or otherwise under the Loan Documents.

 

19.           Collateral Information Certificate.  Other than as provided in this Second Amendment, each Loan Party hereby acknowledges, confirms and agrees the disclosures and information provided to the Administrative Agent in each Collateral Information Certificate delivered on the Closing Date have not changed, as of the date hereof.

 

20.           Payment of Costs and Expenses. Borrower shall pay to the Administrative Agent all costs and all reasonable out-of-pocket expenses in connection with the preparation, negotiation, execution and delivery of this Second Amendment and any documents and instruments relating hereto (which costs include, without limitation, the reasonable fees and expenses of outside counsel retained by Administrative Agent, in each case, as set forth in Section 10.5 of the Credit Agreement).

 

21.           Choice of Law.  This Second Amendment and the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the laws of the State of New York.

 

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22.           Counterpart Execution.  This Second Amendment may be executed in any number of counterparts, all of which when taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Second Amendment by signing any such counterpart.  Delivery of an executed counterpart of this Second Amendment by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Second Amendment.  Any party delivering an executed counterpart of this Second Amendment by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Second Amendment, but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Second Amendment.

 

23.           Effect on Loan Documents.

 

(a)                                  The Credit Agreement, as amended hereby, and each of the other Loan Documents shall be and remain in full force and effect in accordance with their respective terms and hereby are ratified and confirmed in all respects.  The execution, delivery, and performance of this Second Amendment shall not operate, except as expressly set forth herein, as a modification or waiver of any right, power, or remedy of the Administrative Agent or any Lender under the Credit Agreement or any other Loan Document.  The consents, modifications and other agreements herein are limited to the specifics hereof (including facts or occurrences on which the same are based), shall not apply with respect to any facts or occurrences other than those on which the same are based, shall not excuse any non-compliance with the Loan Documents, and shall not operate as a consent or waiver to any matter under the Loan Documents.  Except for the amendments to the Credit Agreement expressly set forth herein, the Credit Agreement and other Loan Documents shall remain unchanged and in full force and effect.  To the extent any terms or provisions of this Second Amendment conflict with those of the Credit Agreement or other Loan Documents, the terms and provisions of this Second Amendment shall control.

 

(b)                                 Upon and after the Second Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “herein”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement”, “thereunder”, “therein”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby.

 

(c)                                  To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Second Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby.

 

(d)                                 This Second Amendment is a Loan Document.

 

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(e)                                  Unless the context of this Second Amendment clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms “includes” and “including” are not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or”.

 

24.           Entire Agreement.  This Second Amendment, and terms and provisions hereof, the Credit Agreement and the other Loan Documents constitute the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes any and all prior or contemporaneous amendments or understandings with respect to the subject matter hereof, whether express or implied, oral or written.

 

25.           Integration.  This Second Amendment, together with the other Loan Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof.

 

26.           Reaffirmation of Obligations.  Each Loan Party hereby reaffirms its obligations under each Loan Document to which it is a party.  Each Loan Party hereby further ratifies and reaffirms the validity and enforceability of all of the Liens heretofore granted, pursuant to and in connection with the Collateral Agreement or any other Loan Document to the Administrative Agent on behalf and for the benefit of the Lenders and the Issuing Lender, as collateral security for the obligations under the Loan Documents in accordance with their respective terms, and acknowledges that all of such Liens, and all collateral heretofore pledged as security for such obligations, continues to be and remain collateral for such obligations from and after the date hereof.

 

27.           Ratification.  Each Loan Party hereby restates, ratifies and reaffirms each and every term and condition set forth in the Credit Agreement and the Loan Documents effective as of the date hereof and as amended hereby.

 

28.           Severability.  In case any provision in this Second Amendment shall be invalid, illegal or unenforceable, such provision shall be severable from the remainder of this Second Amendment and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

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IN WITNESS WHEREOF, the parties have executed this Second Amendment by their respective duly authorized officers.

 

 

	
 
    	
BORROWERS:
    
	
 
    	
 
    
	
 
    	
A123   SYSTEMS, INC.
    
	
 
    	
as   a Borrower
    
	
 
    	
 
    
	
 
    	
By:   
    	
 
    
	
 
    	
Name:   
    	
 
    
	
 
    	
Title:   
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
A123   SECURITIES CORPORATION
    
	
 
    	
as   a Borrower
    
	
 
    	
 
    
	
 
    	
By:   
    	
 
    
	
 
    	
Name:   
    	
 
    
	
 
    	
Title:   
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ADMINISTRATIVE   AGENT and LENDER, constituting   all Lenders
    
	
 
    	
 
    
	
 
    	
SILICON   VALLEY BANK
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
 
    
	
 
    	
Name:   
    	
 
    
	
 
    	
Title:   
    	
 
    

 

[Signature Page to Second Amendment to Credit Agreement]

 

 

EXHIBIT A

 

SCHEDULE 1.1A

 

COMMITMENTS
 AND AGGREGATE EXPOSURE PERCENTAGES

 

REVOLVING COMMITMENTS

 

	
Lender
    	
 
    	
Revolving Commitment
   (consisting of solely the L/C
   Commitment)
    	
 
    	
Revolving Percentage
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Silicon Valley Bank
    	
 
    	
$
    	
15,000,000
    	
 
    	
100
    	
%
    
							

 

L/C COMMITMENT

 

	
Lender
    	
 
    	
L/C Commitment
    	
 
    	
L/C Percentage
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Silicon Valley Bank
    	
 
    	
$
    	
15,000,000
    	
 
    	
100
    	
%Exhibit 10.1

 

CONFIDENTIAL TREATMENT REQUESTED

 

INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND NOTED WITH “****”. AN UNREDACTED VERSION OF THIS DOCUMENT HAS ALSO BEEN PROVIDED TO THE SECURITIES AND EXCHANGE COMMISSION.

 

SECOND AMENDMENT TO DISTRIBUTION AGREEMENT

 

This Second Amendment to Distribution Agreement (this “Amendment”) is made by and between Lantheus Medical Imaging, Inc., formerly known as Bristol-Myers Squibb Medical Imaging, Inc. (“LMI”), and Medi-Physics, Inc., doing business as G.E. Healthcare Inc. (“G.E. Healthcare”) (referred to individually as “Party” and collectively as “Parties”), and shall be effective as of  January 1, 2012.

 

WITNESSETH:

 

WHEREAS, LMI and G.E. Healthcare are Parties to that certain Distribution Agreement dated as of October 31, 2001, as amended by the First Amendment to Distribution Agreement effective as of January 1, 2005 (as amended, the “Agreement”);

 

WHEREAS, the Parties desire to amend the Agreement all in accordance with, and subject to the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the Parties agree as follows:

 

1.             Defined Terms.  Capitalized terms used, but not defined, herein shall have the meanings ascribed to them in the Agreement.  All references to “NA” in the Agreement shall be read to mean “G.E. Healthcare.”  All references to BMS in the Agreement shall be read to mean “Lantheus Medical Imaging, Inc. (“LMI”).”

 

2.             Amendments.  Subject to the terms and conditions of this Amendment, the Agreement is hereby amended as follows:

 

(a)           Article 1.  Article 1, Appointment as Distributor, is hereby deleted in its entirety with the following substituted therefor:

 

ARTICLE 1.  Appointment as Distributor

 

LMI hereby grants to G.E. Healthcare, under the terms and conditions of this Agreement, the non-exclusive right to market, distribute and sell the terminally sterilized Technetium (Tc-99m) generators (brand name “TechneLite®”), Gallium Citrate Ga-67 Injection and Xe-I33 gas products and accessory products hereinafter identified on Exhibit A attached hereto  (“Products “) in the **** to the list of unaffiliated customers currently being supplied by G.E. Healthcare, a copy of which has been provided to

 

 

Execution version 

Confidential

 

LMI and which may be modified from time to time by mutual consent of the Parties.  In addition, LMI agrees to supply to G.E. Healthcare Radiopharmacies in the Territory, solely for unit dose preparation in the Territory, the TechneLite®, Ga-67 and Xe-133 Products listed on Exhibit A.  G.E. Healthcare Radiopharmacies in the Territory are defined as those free-standing radiopharmacies in which G.E. Healthcare has at least a **** percent (****%) ownership interest.  Hereinafter, the term “Territory” shall refer to both **** and ****, including all **** and ****, and specifically excluding ****.

 

(b)           Section 2.1.  Section 2.1(a) and (b) are hereby deleted in their entirety with the following substituted therefor:

 

2.1          G.E. Healthcare guarantees, subject to LMI’s ability to supply, a minimum purchase requirement of Products as set forth in this Section 2.1.  LMI agrees to use commercially reasonable efforts to manufacture and sell to G.E. Healthcare, and G.E. Healthcare agrees to purchase from LMI, the following requirements (collectively, the “Minimum Purchase Requirements”):

 

(a)          **** percent (****%) of G.E. Healthcare’s requirements for Gallium Citrate Ga-67 Injection and Xe-I33 gas Products from the Effective Date through ****;

 

(b)          **** percent (****%) of G.E. Healthcare’s requirements for TechneLite® Products from the Effective Date through ****;

 

(c)           **** percent (****%) of G.E. Healthcare’s requirements for TechneLite® Products during the period from **** through ****;

 

(d)          **** percent (****%) of G.E. Healthcare’s requirements for TechneLite® Products from the period of **** through ****; and

 

(e)           **** percent (****%) of G.E. Healthcare’s requirements for TechneLite® Products during the period from **** through ****.

 

Compliance with the Minimum Purchase Requirements set forth in this Section 2.1 will be determined as of **** and as of the end of each **** thereafter (as evidenced by reasonable documentation made available to LMI or its representatives).  Not later than five (5) days after the end of each ****, G.E. Healthcare shall provide to LMI a timely and accurate report that sets forth G.E. Healthcare’s total requirements for each Product and certifies that G.E. Healthcare has complied or failed to comply with its obligation to purchase the Minimum Purchase Requirements for such period.  In any **** in which G.E. Healthcare does not purchase at least the applicable Minimum Purchase Requirements

 

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from LMI, G.E. Healthcare shall promptly pay to LMI the Shortfall Payment (as hereinafter defined).  For purposes of calculating such payments, G.E. Healthcare will make a good faith estimate of the Product orders for the final **** (****) weeks of each **** and will use commercially reasonable efforts to place purchase orders for such additional amounts or make any necessary payments prior to the end of such ****.  By the end of the **** week of the month immediately succeeding such ****, G.E. Healthcare shall make any necessary true-up payments to comply with the requirements of this Section 2.1.

 

“Shortfall Payment” shall mean the **** payment for any portion of the Minimum Purchase Requirements not purchased by G.E. Healthcare from LMI during such **** (subject to LMI’s ability to supply).  Such payments will be calculated using the shortfall in the Minimum Purchase Requirements for such **** (i.e., the remaining portion of the applicable Minimum Purchase Requirements for which purchase orders were not received) multiplied by the price of the applicable Products hereunder (based on the average per curie price for such Products during the period).

 

For purposes of clarity, the Parties acknowledge and agree that the Minimum Purchase Requirements set forth herein shall include all of G.E. Healthcare’s requirements for similar products.  For example, the Minimum Purchase Requirements for TechneLite® Products shall include all of G.E. Healthcare’s requirements for Technetium-99m products.

 

(c)           Section 2.6.  Section 2.6 is hereby deleted in its entirety with the following substituted therefor:

 

2.6          LMI shall use commercially reasonable efforts to ship Products pursuant to G.E. Healthcare’s Firm Orders.  Tc-99m generators shall be made available for shipment **** each day of manufacture.  Days of manufacture of Tc-99m generators are currently **** and ****.  Xe-133 gas products shall be made available for shipment **** each **** calibrated for the following ****.  Gallium Citrate Ga-67 Injection products shall be made available ****, calibrated for the following ****.  LMI will provide G.E. Healthcare with **** (****) days prior notice of any LMI initiated, permanent changes in the manufacturing schedule for the Products, provided, however, that LMI will make a **** that, based on G.E. Healthcare’s standing orders at the time of any such change, are adversely affected by the new manufacturing schedule.  Any **** to G.E. Healthcare that can reasonably be linked to the LMI manufacturing schedule change will be reimbursed by LMI to G.E. Healthcare via a corresponding ****.  For purposes of the foregoing, G.E. Healthcare’s **** will be measured by the **** that LMI is required to provide G.E. Healthcare on **** as a direct result of the change to the manufacturing

 

3

 

schedule (e.g.,****).  In the event LMI is unable to deliver all product requirements on a given day, LMI will make a fair allocation of the available Product, such fair allocation to be determined by LMI in its sole discretion acting reasonably after due consideration of ****, other percentage supply requirements, and the available amount of Product for LMI’s customers, including G.E. Healthcare, affected by such supply disruption.  In the event that delivery of a Product is delayed more than **** hours past the agreed upon local delivery time, LMI will reduce the price G.E. Healthcare pays for such Product up to ****%.  However, after **** (****) hours delay, G.E. Healthcare shall not be required to accept such Product and may make arrangements with LMI to return unopened Product for **** credit.  The foregoing shall not apply to delays caused by force majeure events such as weather conditions, effecting transportation of components or Products, for which there will be no price reduction.  Following the **** hour period outlined above, in the event that G.E. Healthcare is required to find an alternate source of Product, LMI shall pay the difference between LMI’s price under this Agreement and the price G.E. Healthcare is required to pay to obtain such Product, up to a limit of ****% of LMI’s then current price, provided that such obligation shall only apply if G.E. Healthcare has purchased all of its Minimum Purchase Requirements hereunder and G.E. Healthcare has used its reasonable best efforts to avoid or mitigate any such payments.

 

(d)           Section 2.9.  Section 2.9 is hereby deleted in its entirety with the following substituted therefor:

 

2.9          All payments for Products ordered by G.E. Healthcare prior to **** shall be made within **** (****) days after receipt of invoice.  All payment for Products ordered by G.E. Healthcare from and after **** during the term of this Agreement shall be made within **** (****) days after receipt of invoice.

 

(e)           Section 3.6.  Section 3.6 is hereby deleted in its entirety.

 

4

 

(f)            Section 6.6.  The second paragraph of Section 6.6 is hereby deleted in its entirety with the following substituted therefor:

 

Any communications to LMI under the terms of this Section 6.6 shall be directed to the attention of the following agent for global pharmacovigilance or to LMI’s designee or successor:

 

	
United States

Phone: 1-800-343-7851 

 

·   Press   Option 2 for Adverse Events or Special Situations 

 

·   Press   Option 3 for Product Quality Complaints 

 

Fax: 1-866-880-9343
    	
Outside US/Canada  

Phone: 978-667-9531

 

 ·   Press   Option 2 for Adverse Events or Special Situations 

 

·   Press Option   3 for Product Quality Complaints 

 

Fax: 734-929-6688
    

 

E-Mail: lantheussafety@i3global.com

 

i3 Drug Safety is the pharmacovigilance partner of LMI

 

(g)           Section 9.1.  Section 9.1 is hereby deleted in its entirety with the following substituted therefor:

 

9.1          Unless earlier terminated as provided in this Agreement, the initial term of this Agreement shall commence as of October 31, 2001 (the “Effective Date”) and conclude December 31, 2017.  Notwithstanding the foregoing, this Agreement may be terminated at any time by either party on (i) three (3) years’ written notice relating to TechneLite® prior to December 31, 2013, (ii) two (2) years’ written notice relating to TechneLite® on and after December 31, 2013, and (iii) six (6) months’ written notice relating to the other Products.

 

(h)           Section 9.2(c).  Section 9.2(c) is hereby amended by replacing “**** (****) days” with “**** (****) days.”

 

(i)            Section 9.3(b).  Section 9.3(b) is hereby deleted in its entirety with the following substituted therefor:

 

(b) any substantial increase in Seller’s direct or indirect costs relating to radioactive waste or transportation costs relating to the supply of Mo-99 and other raw materials;

 

5

 

(j)            Section 9.3(c).  Section 9.3(c) is hereby deleted in its entirety with the following substituted therefor:

 

then the parties shall negotiate in good faith in an effort to modify this Agreement in accordance with any of the matters described above and such negotiations shall commence within **** (****) days of one party’s written notice to the other of (a) and/or (b) above.  During any negotiation period, the pricing increments defined in Exhibit C will continue in effect.

 

(k)           Section 10.3.  Section 10.3 is hereby added as follows:

 

10.3        Notwithstanding the foregoing provisions, in the event there is a ****, G.E. Healthcare may, at its reasonable discretion, divert some or all of G.E. Healthcare’s supply of Mo-99 (“GEH Mo-99”) to LMI for the manufacture of Product by LMI (pursuant to the terms of this Agreement, without the option of toll manufacturing).  LMI will use commercially reasonable efforts to accept such GEH Mo-99, provided that the acceptance of GEH Mo-99 will be subject to LMI’s then current manufacturing schedule and LMI’s other policies and procedures applicable to such volume, including, but not limited to, LMI’s purchasing specifications for Mo-99.  LMI will make a good faith effort to optimize the manufacturing schedule related to the GEH Mo-99, provided, however, that LMI will not be required to schedule a manufacturing run for batches of TechneLite® generators that would result in the sale by LMI of less than **** total curies of activity per manufacturing run (as measured in curies of TechneLite® generators purchased by G.E. Healthcare and other customers from the day of manufacture of such Product at LMI’s facility).  Notwithstanding anything herein to the contrary, LMI SHALL NOT BE LIABLE TO G.E. HEALTHCARE FOR, AND G.E. HEALTHCARE WAIVES ANY AND ALL CLAIMS AGAINST LMI FOR, DAMAGES RELATING TO THE DECAY OR LOSS OF GEH MO-99.  GEH Mo-99 will be used exclusively for the manufacture of Product for G.E. Healthcare, except that LMI shall have the right to use any GEH Mo-99 not used in the manufacture of TechneLite® generators for G.E. Healthcare in connection with the manufacture and sale of TechneLite® generators for LMI’s other customers.  During the period of disruption, LMI will continue to provide G.E. Healthcare with a fair allocation of the available Product, such fair allocation to be determined by LMI in its sole discretion acting reasonably after due consideration of ****, other percentage supply requirements, and the available amount of Product for LMI’s customers, including G.E. Healthcare, affected by such supply disruption, until previous production levels and LMI’s supply of Mo-99 have been restored.  The Parties hereby agree that, notwithstanding anything herein to the contrary, the foregoing provisions represent G.E. Healthcare’s sole and exclusive remedies with respect to such events.

 

6

 

(l)            Article 11.  Article 11, Assignment, is hereby deleted in its entirety with the following substituted therefor:

 

ARTICLE 11.  Assignment

 

Neither this Agreement, nor any right, interest or obligation hereunder, may be assigned, or otherwise transferred by either Party, whether by operation of law or otherwise, without the prior written consent of the other Party; provided, however that (a) either Party may assign or otherwise transfer any or all of its rights, or delegate any or all of its respective duties or obligations, under this Agreement without the prior written consent of the other Party to (i) an acquirer of, or successor to, all or substantially all of the assets of such Party, or (ii) the surviving entity in any merger, consolidation, equity exchange or reorganization to which such Party is a party, provided that, in each case contemplated by this clause (a), such acquirer, successor or surviving entity, as the case may be, agrees to be bound by all of the obligations of such Party under this Agreement; and (b) LMI may assign or otherwise transfer any or all of its rights, or delegate any or all of its duties or obligations, under this Agreement to an acquirer of, successor to, or other transferee with respect to all or substantially all of the assets used in or related to the manufacture, sale and distribution of the Products or otherwise to the business of LMI to which this Agreement relates, provided that, in each case contemplated by this clause (b), such acquirer, successor or transferee, as the case may be, agrees to be bound by all of the obligations of LMI under this Agreement.  In the event of any such assignment or transfer in violation hereof, such assignment or transfer shall be null and void and have no force or effect.  This Agreement shall be binding upon and inure to the benefit of the Parties, and their respective successors and assigns as permitted hereunder.

 

In addition, G.E. Healthcare shall be required to provide LMI at least **** (****) days prior written notice of any transaction or series of related transactions, whether or not G.E. Healthcare is a party thereto, which, after giving effect to such transaction or transactions, would result in the sale, lease, transfer or other disposition of some or all of the assets or business of G.E. Healthcare to which this Agreement relates (including, without limitation, the radiopharmacies owned or controlled by G.E. Healthcare).  Unless otherwise requested by LMI in writing prior to the effective date of such transaction, G.E. Healthcare shall assign and ensure that, as a condition of such transaction or transactions, such acquirer, successor or transferee, as the case may be, agrees to be bound by all of the obligations of G.E. Healthcare (or the applicable pro rata portion thereof) under this Agreement for a period of not less than **** (****) **** after the completion of such transaction or transactions.

 

7

 

(m)          Section 12.2.  The name and address for LMI in Section 12.2 is hereby amended to read as follows:

 

Lantheus Medical Imaging, Inc.

Attn: Cyrille Villeneuve, Chief Commercial Officer

331 Treble Cove Road

North Billerica, MA 01862

 

Copy to: General Counsel, Legal Department (at the same address)

 

(n)           Exhibit A.  Exhibit A is hereby deleted in its entirety with the following substituted therefor:

 

Exhibit A

 

Products

 

	
TechneLite®
    	
 
    
	
 
	
****
    	
 
    	
Calibrated   @ noon Eastern Time, ****
    	
 

	
 
	
****
    	
 
    	
Calibrated   @ noon Eastern Time, ****
    	
 

	
 
	
****
    	
 
    	
Calibrated   @ noon Eastern Time, ****
    	
 

	
 
	
****
    	
 
    	
Calibrated   @ noon Eastern Time, ****
    	
 

	
 
	
****
    	
 
    	
Calibrated   @ noon Eastern Time, ****
    	
 

	
 
	
****
    	
 
    	
Calibrated   @ noon Eastern Time, ****
    	
 

	
 
	
****
    	
 
    	
Calibrated   @ noon Eastern Time, ****
    	
 

	
 
	
****
    	
 
    	
Calibrated   @ noon Eastern Time, ****
    	
 

	
 
	
****
    	
 
    	
Calibrated   @ noon Eastern Time, ****
    	
 

	
 
	
****
    	
 
    	
Calibrated   @ noon Eastern Time, ****
    	
 

	
 
	
****
    	
 
    	
Calibrated   @ noon Eastern Time, ****
    	
 

	
 
	
****
    	
 
    	
Calibrated   @ noon Eastern Time, ****
    	
 

	
 
	
****
    	
 
    	
Calibrated   @ noon Eastern Time, ****
    	
 

	
 
	
 
    	
 
    	
 
    	
 

	
 
	
MHDLG
    	
 
    	
TechneLite®   handling fee
    	
 

	
 
	
 
    	
 
    	
 
    	
 

	
 
	
A15
    	
 
    	
Set   of **** ml saline eluent vials
    	
 

	
 
	
A17
    	
 
    	
Set   of **** ml saline eluent vials
    	
 

	
 
	
A3
    	
 
    	
Set   of **** ml evacuated collection vials
    	
 

	
 
	
EV12
    	
 
    	
Set   of **** ml evacuated collection vials
    	
 

	
 
	
A14
    	
 
    	
Lead   elution shield
    	
 

	
 
	
A25
    	
 
    	
Molycoddle®   radiation reducer
    	
 

	
 
	
A2
    	
 
    	
Aluminum   ion indicator kit
    	
 

						

 

8

 

	
Xenon- 133
    	
 
    	
 
    
	
X110
    	
 
    	
Xe-133   **** mCi, **** vial tube 
   Calibrated @ noon Eastern Time, ****
    
	
X510
    	
 
    	
Xe-133   **** mCi, **** vial tube 
   Calibrated @ noon Eastern Time, ****
    
	
X120
    	
 
    	
Xe-133   **** mCi, **** vial tube 
   Calibrated @ noon Eastern Time, ****
    
	
X520
    	
 
    	
Xe-133   **** mCi, **** vial tube 
   Calibrated @ noon Eastern Time, ****
    
	
XGUN
    	
 
    	
Xenon   Gun
    
	
XHDLG
    	
 
    	
Xenon   handling fee
    
	
 
    	
 
    	
 
    
	
Gallium-67
    	
 
    	
 
    
	
Ga6
    	
 
    	
****   mCi vial 
   Calibrated @ noon Eastern Time, ****
    
	
Ga8
    	
 
    	
****   mCi vial 
   Calibrated @ noon Eastern Time, ****
    
	
Ga12
    	
 
    	
****   mCi vial 
   Calibrated @ noon Eastern Time, ****
    
	
Ga18
    	
 
    	
****   mCi vial 
   Calibrated @ noon Eastern Time, ****
    
	
GHDLG
    	
 
    	
Gallium   handling fee
    

 

Notes (Exhibit A)

 

·                                          LMI reserves the right to add or delete specific items from its total product portfolio with **** days’ prior written notice.

·                                          DOM = Day of Manufacture

 

(p)           Exhibit C1.  Exhibit C1 is hereby deleted in its entirety with the following substituted therefor:

 

Exhibit C

 

****

 

Notes (Exhibit C1)

 

·      Handling fee schedule per order

	
·
    	
Federal   Express door to door
    	
$****
    
	
·
    	
Ground   carrier door to door
    	
$****
    
	
·
    	
Dual   leg, i.e., Air Express and
    	
 
    
	
 
    	
ground   carrier door to door
    	
$****
    

 

9

 

·                  When necessary to substitute requested items due to inventory shortfall, LMI will adjust prices for substituted items to reflect requested items total cost.

 

·                  Annual Price Adjustments will be calculated as follows:

 

·                  Pricing for the periods of **** through **** and each **** thereafter will be adjusted by an amount equal to the cost of materials plus ****% of the ****, provided that no ****-related adjustment will be applied to the **** for the TechneLite® pricing.

·                  Pricing for each calendar year will be communicated to G.E. Healthcare by **** of the previous year.

·                  Pricing will be in effect from **** through **** of the same year.

·                  Notwithstanding the foregoing, at any time during the term of this Agreement, LMI may adjust the Technelite® pricing to reflect any material change in costs of molybdenum, accounting for increases or decreases.  A change in such costs is considered material if the adjustment in the cost of molybdenum over any **** (****) day period is more than **** percent (****%).  In the event of such a material adjustment, LMI shall adjust the Technelite® pricing to reflect the incremental change in such costs effective as of when such costs are actually incurred by LMI, provided that LMI provides G.E. Healthcare at least **** (****) days written notice and reasonable documentation supporting such change in costs prior to implementing such effective cost adjustments.

 

·                  Weekday Unit = DOM on ****, as set forth in Section 2.6 of the Agreement.

·                  Weekend Unit = DOM on ****, as set forth in Section 2.6 of the Agreement.

 

3.             Full Force and Effect.  Except as expressly waived by this Amendment, the terms and conditions of the Agreement shall remain in full force and effect.  In the event of a conflict between the terms of this Amendment and the Agreement, this Amendment shall control.

 

4.             Successors.  This Amendment shall be binding upon and inure to the benefit of each of the Parties and their respective successors and assigns.

 

5.             Counterparts.  This Amendment may be executed in separate counterparts, each of which when so executed, shall be considered an original, and which counterparts together shall constitute the entire agreement.

 

10

 

6.             Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware, excluding the conflict of law provisions thereof.

 

7.             Severability.  Wherever possible, each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Amendment.

 

[Signature page follows.]

 

11

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as the effective date set forth above.

 

	
 
    	
G.E.   HEALTHCARE INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Aaron Bernstein
    
	
 
    	
 
    	
Name:   Aaron Bernstein
    
	
 
    	
 
    	
Title:   Global Sourcing Leader
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LANTHEUS   MEDICAL IMAGING, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Michael P. Duffy
    
	
 
    	
 
    	
Name:   Michael P. Duffy
    
	
 
    	
 
    	
Title:   Vice President and Secretary
    

 

12

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