AMENDMENT NO. 6 TO LOAN AND SECURITY AGREEMENT
Exhibit 10.21
AMENDMENT NO. 6 TO
This Amendment No. 6 to Loan and Security Agreement (this “Amendment”) is entered
into this 29th day of April, 2009, by and among Rae Systems Inc., a Delaware corporation
(“Borrower”), and Silicon Valley Bank (“Bank”). Capitalized terms used herein without
definition shall have the same meanings given them in the Loan Agreement (as defined below).
Recitals
A. Borrower desires that Bank amend the Loan Agreement upon the terms and conditions more
fully set forth herein.
B. Subject to the representations and warranties of Borrower herein and upon the terms and
conditions set forth in this Amendment, Bank is willing to so amend the Loan Agreement.
agreement
NOW, THEREFORE, in consideration of the foregoing Recitals and intending to be legally bound,
the parties hereto agree as follows:
1. Amendments to Loan Agreement.
1.1 Section 6.3(c) of the Loan Agreement. Section 6.3(c) of the Loan Agreement is amended and
restated in its entirety and replaced with the following:
(c) Within thirty (30) days after the last day of such month, deliver to Bank a duly completed
Borrowing Base Certificate signed by a Responsible Officer, with aged listings of accounts
receivable and accounts payable (by invoice date) and a deferred revenue report.
1.2 Section 6.8 of the Loan Agreement. Section 6.8 of the Loan Agreement is amended and
restated in its entirety and replaced with the following:
6.8 Financial Covenants.
Borrower shall maintain at all times, unless otherwise noted, on a consolidated basis with
respect to Borrower and its Subsidiaries:
(a) Quick Ratio. Tested as of the last day of each fiscal quarter, a ratio of Quick
Assets to Current Liabilities of at least 1.0 to 1.0.
(b) Minimum EBITDA. Maintain, measured as of the end of each fiscal quarter during
the following periods, EBITDA of at least the following:
| Period | Minimum EBITDA | |||
January 1, 2009 through March 31, 2009
|
$ | (2,015,000 | ) | |
(c) Trailing 2-Quarter minimum EBITDA. Maintain, measured as of the end of each
fiscal quarter during the following periods, EBITDA of at least the following:
| Period | Minimum EBITDA | |||
January 1, 2009 through June 30, 2009
|
$ | (3,780,000 | ) | |
April 1, 2009 through September 30, 2009
|
$ | (2,250,000 | ) | |
July 1, 2009 through December 31, 2009
|
$ | (350,000 | ) | |
1.3 Section 13 (Definitions). The following terms and their definitions are amended to read
in their entirety as follows:
Clause (f) of the definition of “Eligible Accounts” is amended to read in its entirety as
follows:
(f) Accounts owing from an Account Debtor which is a federal government entity or any
department, agency, or instrumentality thereof except for Accounts of the United States if Borrower
has assigned its payment rights to Bank and the assignment has been acknowledged under the Federal
Assignment of Claims Act of 1940, as amended;
“Revolving Line Maturity Date” is May 15, 2010.
1.4 Exhibit D, “Compliance Certificate” of the Loan Agreement is hereby amended by deleting it
in its entirety and replacing it with Exhibit A attached hereto.
2. Borrower’s Representations And Warranties. Borrower represents and warrants that:
(a) immediately upon giving effect to this Amendment, (i) the representations and warranties
contained in the Loan Documents are true, accurate and complete in all material respects as of the
date hereof (except to the extent such representations and warranties relate to an earlier date, in
which case they are true and correct as of such date), and (ii) no Event of Default has occurred
and is continuing;
(b) Borrower has the corporate power and authority to execute and deliver this Amendment and
to perform its obligations under the Loan Agreement, as amended by this Amendment;
(c) the certificate of incorporation, bylaws and other organizational documents of Borrower
delivered to Bank on the Effective Date remain true, accurate and complete and have not been
amended, supplemented or restated and are and continue to be in full force and effect;
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(d) the execution and delivery by Borrower of this Amendment and the performance by Borrower
of its obligations under the Loan Agreement, as amended by this Amendment, have been duly
authorized by all necessary corporate action on the part of Borrower;
(e) this Amendment has been duly executed and delivered by the Borrower and is the binding
obligation of Borrower, enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws of general application and equitable principles relating to or affecting
creditors’ rights; and
(f) as of the date hereof, it has no defenses against the obligations to pay any amounts under
the Obligations. Borrower acknowledges that Bank has acted in good faith and has conducted in a
commercially reasonable manner its relationships with such Borrower in connection with this
Amendment and in connection with the Loan Documents.
Borrower understands and acknowledges that Bank is entering into this Amendment in reliance
upon, and in partial consideration for, the above representations and warranties, and agrees that
such reliance is reasonable and appropriate.
3. Limitation. The amendments set forth in this Amendment shall be limited precisely
as written and shall not be deemed (a) to be a forbearance, waiver or modification of any other
term or condition of the Loan Agreement or of any other instrument or agreement referred to therein
or to prejudice any right or remedy which Bank may now have or may have in the future under or in
connection with the Loan Agreement or any instrument or agreement referred to therein; (b) to be a
consent to any future amendment or modification, forbearance or waiver to any instrument or
agreement the execution and delivery of which is consented to hereby, or to any waiver of any of
the provisions thereof; or (c) to limit or impair Bank’s right to demand strict performance of all
terms and covenants as of any date. Except as expressly amended hereby, the Loan Agreement shall
continue in full force and effect.
4. Effectiveness. This Amendment shall become effective upon the satisfaction of all
the following conditions precedent:
4.1 Amendment. Borrower and Bank shall have duly executed and delivered this Amendment to
Bank;
4.2 Payment of Loan Fee. Borrower shall have paid Bank a commitment fee of $25,000; provided
however, any unearned fees collected for the previous 60 day extension will be applied towards this
fee; and
4.3 Payment of Bank Expenses. Borrower shall have paid all Bank Expenses (including all
reasonable attorneys’ fees and reasonable expenses) incurred through the date of this Amendment.
5. Counterparts. This Amendment may be signed in any number of counterparts, and by
different parties hereto in separate counterparts, with the same effect as if the signatures to
each such counterpart were upon a single instrument. All counterparts shall be deemed an original
of this Amendment.
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6. Integration. This Amendment and any documents executed in connection herewith or
pursuant hereto contain the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior agreements, understandings, offers and negotiations, oral or
written, with respect thereto and no extrinsic evidence whatsoever may be introduced in any
judicial or arbitration proceeding, if any, involving this Amendment; except that any financing
statements or other agreements or instruments filed by Bank with respect to Borrower shall remain
in full force and effect.
7. Governing Law; Venue. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. Borrower and Bank each submit
to the exclusive jurisdiction of the State and Federal courts in Santa Xxxxx County, California.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the
date first written above.
| Borrower: | Rae Systems Inc. a Delaware corporation |
|||||||||
| By: | /s/ Xxxxxxx X. Xxxxxxx | |||||||||
| Printed Name: Xxxxxxx X. Xxxxxxx | ||||||||||
| Title: | Chief Financial Officer | |||||||||
| Bank: | Silicon Valley Bank | |||||||||
| By: | /s/ Xxx Xxxxxxx | |||||||||
| Printed Name: Xxx Xxxxxxx | ||||||||||
| Title: | Relationship Manager | |||||||||
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EXHIBIT A
EXHIBIT D
COMPLIANCE CERTIFICATE
TO:
|
SILICON VALLEY BANK | Date: | ||||||
FROM:
|
RAE SYSTEMS INC. | |||||||
The undersigned authorized officer of RAE Systems Inc. (“Borrower”) certifies that under the terms
and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”), (1)
Borrower is in complete compliance for the period ending with all required
covenants except as noted below, (2) there are no Events of Default, (3) all representations and
warranties in the Agreement are true and correct in all material respects on this date except as
noted below; provided, however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties expressly referring to a
specific date shall be true, accurate and complete in all material respects as of such date, (4)
Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and
Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and
contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9
of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously
provided written notification to Bank. Attached are the required documents supporting the
certification. The undersigned certifies that these are prepared in accordance with generally GAAP
consistently applied from one period to the next except as explained in an accompanying letter or
footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered. Capitalized terms
used but not otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under “Complies” column.
| Reporting Covenant | Required | Complies | ||
Quarterly financial statements (along with
Borrower
prepared consolidating financial statements) with
Compliance Certificate
|
Quarterly within earlier of 5 days of filing 10Q or 50 days of quarter end | Yes No | ||
Annual financial statement (CPA Audited) + CC
|
within earlier of 5 days of filing 10K or 90 days of FYE | Yes No | ||
8-K
|
Within 5 days after filing with SEC | Yes No | ||
Borrowing Base Certificate A/R & A/P Agings and
deferred revenue report
|
within 30 days of each month | Yes No | ||
Projections
|
Within 45 days of FYE | Yes No | ||
Cash balance report
|
Within 30 days of end of month | Yes No |
| Financial Covenant | Required | Actual | Complies | |||
Maintain at all times: |
||||||
Tested as of the last day of each
fiscal quarter,
a Minimum Quick Ratio
|
1.0:1.0 | :1.0 | Yes No |
| Financial Covenant | Required | Actual | Complies | |||
Tested as of the last day of each fiscal
quarter, a Minimum EBITDA
|
1/1/09-3/31/09 ($2,015,000) | $ | Yes No | |||
Tested as of the end of each fiscal quarter during the following periods, a trailing 2-quarter minimum EBITDA |
1/1/09-6/30/09 ($3,780,000) 4/1/09-9/30/09 ($2,250,000) 7/1/09-12/31/09 ($350,000) |
$ | Yes No |
The following financial covenant analys[is][es] and information set forth in Schedule 1
attached hereto are true and accurate as of the date of this Certificate.
The following are the exceptions with respect to the certification above: (If no exceptions
exist, state “No exceptions to note.”)
| RAE SYSTEMS INC. | BANK USE ONLY | |||||||||||||
| Received by: | ||||||||||||||
| AUTHORIZED SIGNER | ||||||||||||||
By:
|
Date: | |||||||||||||
Name:
|
Verified: | |||||||||||||
| AUTHORIZED SIGNER | ||||||||||||||
Title:
|
Date: | |||||||||||||
| Compliance Status: Yes No | ||||||||||||||
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Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
Dated: |
||||
I. Quick Ratio (Section 6.8(a))
Required: 1.00:1.00
Actual:
A.
|
Aggregate value of Borrower’s consolidated unrestricted cash and cash equivalents | $ | ||||||
B.
|
Aggregate value of Borrower’s consolidated net billed accounts receivable | $ | ||||||
C.
|
Aggregate value of Borrower’s consolidated short and long term investments | $ | ||||||
D.
|
Quick Assets (the sum of lines A through C) | $ | ||||||
E.
|
Aggregate value of Obligations to Bank | $ | ||||||
F.
|
Aggregate value of Total Liabilities that mature within one year | $ | ||||||
G.
|
Current Liabilities (the sum of lines E and F) | $ | ||||||
H.
|
Quick Ratio (line D divided by line G) | |||||||
Is line H equal to or greater than 1.00:1:00?
| No, not in compliance | Yes, in compliance | |||||||||
II. Minimum EBITDA (Section 6.8(b))
Required: See chart below
| Period | EBITDA | |||
January 31, 2009 through March 31, 2009 |
($2,015,000 | ) | ||
Actual:
A. |
Net Income | $ | ||||||
B. |
To the extent included in the determination of Net Income | |||||||
| 1. The provision for income taxes | $ | |||||||
| 2. Depreciation expense | $ | |||||||
| 3. Amortization expense | $ | |||||||
| 4. Net interest expense | $ | |||||||
| 5. The sum of lines 1 through 4 | $ | |||||||
C. |
EBITDA (line A plus line B.5) | |||||||
Is line C equal to or greater than the amounts referenced above?
| No, not in compliance | Yes, in compliance | |||||||||
III. Trailing 2-Quarter Minimum EBITDA (Section 6.8(c))
Required: See chart below
| Period | EBITDA | |||
January 1, 2009 through June 30, 2009
|
$ | (3,780,000 | ) | |
April 1, 2009 through September 30, 2009
|
$ | (2,250,000 | ) | |
July 1, 2009 through December 31, 2009
|
$ | (350,000 | ) | |
Actual:
A. Line II(C) above for such periods referenced above
|
$ | ||||||||||||
Is line A equal to or greater than the amounts referenced above?
|
|||||||||||||
| No, not in compliance | Yes, in compliance | ||||||||||||
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