AMENDMENT NO. 2 AND CONSENT TO LOAN AND SECURITY AGREEMENT
Exhibit 10.17
AMENDMENT NO. 2 AND CONSENT TO
LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT
This Amendment No. 2 and Consent to Loan and Security Agreement (this “Amendment”) is
entered into this 20th day of December, 2007, 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 and Bank have entered into that certain Loan and Security Agreement dated as of
March 14, 2007 (as may be amended, restated, or otherwise modified, the “Loan Agreement”), pursuant
to which the Bank has extended and will make available to Borrower certain advances of money.
B. Borrower (a) contemplates entering into the Sale Agreement, pursuant to which (i) Borrower
will (1) sell the San Xxxx Facility to the Buyer and (2) leaseback from the Buyer the San Xxxx
Facility, each in accordance with the Sale Agreement, and (b) desires that Bank (i) consent to the
Asset Sale and (ii) amend the Loan Agreement upon the terms and conditions more fully set forth
herein.
C. Subject to the representations and warranties of Borrower herein and upon the terms and
conditions set forth in this Amendment, Bank is willing to provide the consent contained herein and
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. Consent to Asset Sale. Subject to the terms of Section 5 below, Bank hereby
consents to the Asset Sale for purposes of Section 7.1 of the Loan Agreement and agrees that the
Asset Sale shall not violate Section 7.1 and shall not constitute an Event of Default under Section
8 as result thereof.
2. Amendment to Loan Agreement.
2.1 Section 13 (Definitions). The following term and its definition is amended to read in its
entirety as follows:
“Borrowing Base” is (a) $7,000,000; provided however, immediately after the consummation of
the Asset Sale, $5,000,000 plus (b) 80% of Eligible Accounts, as determined by Bank from Borrower’s
most recent Borrowing Base Certificate; provided, however, that Bank may decrease the foregoing
percentages in its good faith business judgment based on events (including without limitation, the
initial field audit examination and the on-going periodic examinations), conditions, contingencies,
or risks which, as determined by Bank, may adversely affect Collateral.
2.2 Section 13 (Definitions). The following terms and definitions are added in their
respective follows:
“Asset Sale” means the sale of the San Xxxx Facility by Borrower to Buyer pursuant to the Sale
Agreement, including without limitation the sale of certain permanently affixed equipment and
fixtures which, to the extent subject to Bank’s Lien, shall be deemed released therefrom as of the
date hereof.
“Buyer” means Inland American/Xxxxxxxx (N First) Ventures, LLC, a Delaware limited liability
company.
“Sale Agreement” means the Purchase and Sale Agreement by and among Borrower, as seller, and
X.X. Xxxxxxxx & Company, LLC, a California limited liability company, and attached hereto as
Exhibit E.
“San Xxxx Facility” means the real property located at 0000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxx,
Xxxxxxxxxx 00000.
2.3 Exhibit C, “Borrowing Base Certificate” of the Loan Agreement is hereby amended by
deleting it in its entirety and replacing it with Exhibit A attached hereto.
2.4 Exhibit E “Sale Agreement”, a new Exhibit E is hereby added to the Loan Agreement,
which is Exhibit B attached hereto.
3. 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;
(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
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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.
4. Limitation. The consent and amendment 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.
5. Effectiveness. This Amendment shall become effective upon the satisfaction of all
the following conditions precedent:
5.1 Amendment. Borrower and Bank shall have duly executed and delivered this Amendment to
Bank;
5.2 Sale Agreement. Bank shall have received true and complete executed copies of the Sale
Agreement and all material documents related thereto, each in form and substance reasonably
satisfactory to Bank;
5.3 Landlord Waiver. Bank shall have received an executed landlord waiver in the form attached
hereto as Exhibit C from the Buyer, in its capacity as landlord of the San Xxxx Facility;
and
5.4 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.
6. 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.
7. 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.
8. Governing Law; Venue. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
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STATE OF CALIFORNIA. Borrower and Bank each submit
to the exclusive jurisdiction of the State and Federal courts in Santa Xxxxx County, California.
[signature page follows]
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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 |
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| By: | /s/ Xxxxxxx X. Xxxxxxx | |||||
| Printed Name: | Xxxxxxx X. Xxxxxxx | |||||
| Title: | Chief Financial Officer | |||||
| Bank: | Silicon Valley Bank | |||||
| By: | /s/ Xxx Xxxxx | |||||
| Printed Name: | Xxx Xxxxx | |||||
| Title: | Senior Relationship Manager | |||||
EXHIBIT A
EXHIBIT C
BORROWING BASE CERTIFICATE
The undersigned represents and warrants that this is true, complete and correct, and that the
information in this Borrowing Base Certificate complies with the representations and warranties in
the Loan and Security Agreement (as amended from time to time) between the undersigned and Silicon
Valley Bank.
| ACCOUNTS RECEIVABLE | |||||||
1. |
Accounts Receivable Book Value as of ____________________ | $ | |||||
2. |
Additions (please explain on reverse) | $ | |||||
3. |
TOTAL ACCOUNTS RECEIVABLE | $ | |||||
| ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication) | |||||||
4. |
Amounts over 90 days due | $ | |||||
5. |
Balance of 50% over 90 day accounts | $ | |||||
6. |
Credit balances over 90 days | $ | |||||
7. |
Concentration Limits | $ | |||||
8. |
Foreign Accounts | $ | |||||
9. |
Governmental Accounts | $ | |||||
10. |
Contra Accounts | $ | |||||
11. |
Promotion or Demo Accounts | $ | |||||
12. |
Intercompany/Employee Accounts | $ | |||||
13. |
Disputed Accounts | $ | |||||
14. |
Deferred Revenue | $ | |||||
15. |
Other (please explain on reverse) | $ | |||||
16. |
TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS | $ | |||||
17. |
Eligible Accounts (#3 minus #16) | $ | |||||
18. |
ELIGIBLE AMOUNT OF ACCOUNTS ( 80% of #17) | $ | |||||
| BALANCES | |||||||
19. |
Maximum Loan Amount | $15,000,000 | |||||
20. |
Total Funds Available [Lesser of #19 or #18 plus $7,000,000 (or $5,000,000 | ||||||
| upon the consummation of the Asset Sale)] | $ | ||||||
21. |
Present balance owing on Line of Credit | $ | |||||
22. |
Outstanding under Sublimits | $ | |||||
23. |
RESERVE POSITION (#20 minus #21 and #22) | $ | |||||
The undersigned represents and warrants that this is true, complete and correct, and that the
information in this Borrowing Base Certificate complies with the representations and warranties in
the Loan and Security Agreement (as amended from time to time) between the undersigned and Silicon
Valley Bank.
| COMMENTS: | ||
By: |
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| Authorized Signer | ||
Date: |
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| BANK USE ONLY |
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| Received by: | ||||
| authorized signer | ||||
Date: |
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Verified: |
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| authorized signer |
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Date: |
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| Compliance Status: Yes No | ||||
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EXHIBIT B
EXHIBIT E
SALE AGREEMENT
EXHIBIT C
LANDLORD’S SUBORDINATION AND CONSENT
This LANDLORD’S SUBORDINATION AND CONSENT (this “Agreement”), is made and entered into between
SILICON VALLEY BANK (“Bank”), and INLAND AMERICAN/XXXXXXXX (N FIRST) VENTURES, LLC, a Delaware
limited liability company (“Owner”), and affects the premises located at 0000 Xxxxx Xxxxx Xxxxxx,
Xxx Xxxx, Xxxxxxxxxx 00000 (the “Premises”).
This Agreement is executed in connection with that certain Loan and Security Agreement (as
modified, renewed and amended, collectively the “Loan Agreement”), between Bank and RAE Systems
Inc., a Delaware corporation (“Borrower”). The Borrower is “Lessee” pursuant to the terms and
conditions of that certain Agreement of Lease between Borrower and Owner dated as of December 19,
2007 (the “Lease”). Pursuant to the Loan Agreement, the Bank shall lend credit or monies or has
loaned credit or monies to the Borrower against the security of collateral which includes, among
other things, the inventory, accounts receivable, and equipment of the Borrower, together with all
additions, substitutions, replacements, improvements and repairs to same (hereinafter referred to
as, the “Collateral”), certain of which Collateral is or shall be located on and may be affixed to
the Premises or improvements thereon.
Bank and Owner agree that the following shall govern the rights between Bank and Owner
pertaining to the Collateral:
1. Notwithstanding anything to the contrary herein, Bank’s rights under this Agreement and
Owner’s obligations under this Agreement, including, without limitation, Owner’s agreement herein
to subordinate certain of its rights in the Collateral, are subject to the rights of Bank of the
West, a California banking corporation (“BOW”), and its successors and assigns, pursuant to those
certain loan documents executed by and between Owner and BOW on or around December 19, 2007
(collectively, the “BOW Loan Documents”), and Owner’s obligations under the BOW Loan Documents.
The BOW Loan Documents include a Deed of Trust, Assignment of Leases and Rents, Security Agreement
and Fixture Filing recorded in the Official Records of Santa Xxxxx County. Owner has not obtained,
and does not intend to obtain, any consents, modifications or releases of collateral from BOW
pursuant to the BOW Loan Documents in connection with this Agreement.
2. To the extent not subject to BOW’s rights under the BOW Loan Documents, the Collateral (a)
shall be and remain personal property, notwithstanding the manner of their annexation to the
Premises, their adaptability to the uses and purposes for which the Premises are used and the
intention of the party making the annexation; and (b) shall not become fixtures.
3. SUBJECT TO BOW’S RIGHTS UNDER THE BOW LOAN DOCUMENTS, UNTIL THE EARLIER OF THE EXPIRATION
DATE (AS HERINAFTER DEFINED) AND THE REMOVAL DEADLINE (AS HEREINAFTER DEFINED), OWNER HEREBY
SUBORDINATES IN FAVOR OF BANK EACH AND EVERY RIGHT WHICH OWNER NOW HAS, OR MAY HEREAFTER HAVE,
UNDER THE LAWS OF THE UNITED STATES OF AMERICA AND THE STATE IN WHICH THE PREMISES ARE LOCATED, OR
BY VIRTUE OF ANY LEASE NOW IN EFFECT, TO LEVY OR DISTRAIN UPON FOR RENT IN ARREARS, IN ADVANCE, OR
BOTH AGAINST THE COLLATERAL OR TO CLAIM OR ASSERT ANY RIGHT OR TITLE TO, INTEREST IN OR LIEN UPON
THE COLLATERAL. NOTWITHSTANDING THE PRECEDING, SUCH SUBORDINATION BY OWNER OF ITS RIGHTS SHALL NOT
PREVENT OWNER FROM EXERCISING ANY AND
ALL RIGHTS UNDER THE LEASE SO LONG AS THE PRIOR RIGHTS OF
BANK IN THE
COLLATERAL ARE RECOGNIZED. THE SUBORDINATION GRANTED IN THIS PARAGRAPH IS EXPRESSLY
CONDITIONED UPON REMOVAL OF THE COLLATERAL FROM THE PREMISES BY BANK ON OR BEFORE THE REMOVAL
DEADLINE. FAILURE TO REMOVE THE COLLATERAL IN THE TIME PROVIDED FOR HEREIN SHALL RENDER SUCH
SUBORDINATION NULL AND VOID.
4. Subject to BOW’s rights under the BOW Loan Documents and the other terms of the Lease,
Owner grants to Bank the right to enter upon the Premises for the purpose of removing the
Collateral. Owner further agrees that Bank may do to and with the Collateral any or all of the
acts below enumerated, and grants the Bank a license for a period of up to ninety (90) days,
following the termination of the Lease or abandonment of or surrender of the Premises by the
Lessee, whichever occurs sooner (the “Removal Deadline”), to enter upon the Premises to do any or
all of the following (the “Permitted Actions”) to said Collateral: assemble, appraise, display,
operate, sever, remove, maintain, prepare for sale or lease, advertise, inspect, repair, lease,
transfer and/or sell (at public auction(s) or private sale(s)) of the Collateral, or any part
thereof. If and to the extent Bank elects to take possession of the Premises for any of the
purposes set forth above, then during such period (unless and until the Bank is no longer in
possession of the Premises), Bank shall pay Owner, periodically, a daily license fee equivalent to
one-thirtieth (1/30th) of the minimum monthly rental provided for in the Lease. Any
extension of the foregoing period shall only be with the written consent of Owner. If Bank enters
onto the Premises, Bank will repair any damage to the Premises caused by removal of the Collateral
(ordinary wear and tear excluded) or resulting from Bank’s use of the Premises. Except as
otherwise expressly set forth herein, Bank shall comply with all terms and provisions of the Lease
during any entry upon the Premises. Bank shall not be required to restore the Premises to its
original condition. If Bank fails to make any repairs it is obligated to perform under this
Agreement, Owner may do so and the cost of same shall be paid forthwith by Bank to Owner. Bank
agrees to indemnify Owner for any and all claims arising from or related to Bank’s entry into or
upon the Premises or removal of the Collateral from the Premises. Subject to the terms hereof,
Bank shall not otherwise be entitled to enter the Premises during any time that Lessee is not
entitled to occupy the Premises pursuant to the Lease.
5. Owner acknowledges that at any time prior to the termination of the Lease for the Premises,
or abandonment of or surrender of the Premises by the Lessee, Bank may take any or all of the
Permitted Actions subject only to Bank’s agreements with the Lessee.
6. The waivers and consents herein granted shall continue until all obligations of the Lessee
to the Bank in the Loan Agreement have been paid in full and/or fully performed (the “Expiration
Date”).
7. Bank may amend, modify and extend any indebtedness of the Borrower to the Bank or any of
the terms and conditions of the Loan Agreement without the consent of the Owner and without giving
notice thereof to the Owner.
8. No party shall be deemed to have waived any rights under this Agreement unless such waiver
is in writing and signed by that party. No delay or omission on the part of a party in exercising
any right shall operate as a waiver of such right or any other right. A waiver by a party of a
provision of this Agreement shall not constitute a waiver of or prejudice that party’s right
otherwise to demand strict compliance with that provision or any other provision. Whenever consent
by a party is required in this Agreement, the granting of such consent by that party in any one
instance shall not constitute continuing consent to subsequent instances where such consent is
required.
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9. This Agreement may be executed in any number of counterparts, each counterpart for all
purposes being deemed an original, and all such counterparts shall together constitute only one and
the same agreement.
10. In the event of any litigation arising hereunder, the prevailing party shall recover its
attorneys’ fees and expenses from the unsuccessful party.
[signature page follows]
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THIS AGREEMENT SHALL BE INTERPRETED UNDER THE LAWS OF THE UNITED STATES OF AMERICA AND THE
STATE IN WHICH THE PREMISES ARE LOCATED and shall inure to the benefit of and be binding upon the
successors, heirs, and assigns of Owner and Bank.
Dated:
December 20, 2007
| BANK: | ||||
| SILICON VALLEY BANK | ||||
| By: | /s/ Xxx Xxxxx | |||
| Name: | Xxx Xxxxx | |||
| Title: | Senior Relationship Manager | |||
| OWNER: | ||||
| INLAND AMERICAN/XXXXXXXX (N FIRST) VENTURES, LLC, a Delaware limited liability company |
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| By: Xxxxxxxx & Xxxxxxxx, LLC, a California limited liability company, as its manager |
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| By: | /s/ Lane X. Xxxxxxxx | |||
| Name: | Lane X. Xxxxxxxx | |||
| Title: | Manager | |||
| ACKNOWLEDGED AND AGREED ON THIS ___ DAY OF _______, 2007 ON BEHALF OF THE LESSEE: |
||||
| RAE SYSTEMS INC., a Delaware corporation | ||||
By: |
/s/ Xxxxxxx X. Xxxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxxx | |||
Title:
|
Chief Financial Officer | |||
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