exv10w6



 





Exhibit 10.6




PURCHASE AND SALE AGREEMENT




     THIS
PURCHASE AND SALE AGREEMENT (this “Agreement”) is made as of this 9th day of November,
2007 (the “Execution Date”), by and between RAE Systems, Inc., a Delaware corporation (“Seller”),
and D.R. Stephens & Company, LLC, a California limited liability company (“Buyer”), or its assignee
pursuant to Section 14.1.



RECITALS:




     A. Seller is the owner of the following property (collectively, the “Property”):



          (1) All that certain real property commonly known as 3775 North First Street, located in the
City of San Jose (the “City”), County of Santa Clara, State of California, as legally described in
Exhibit “A” attached hereto, together with all easements, rights and privileges appurtenant
thereto (collectively, the “Land”);




          (2) The building located on the Land (the “Building”), together with all improvements
appurtenant thereto (the Building and such improvements being hereinafter collectively referred to
as the “Improvements”);




          (3) All fixtures, equipment, supplies licenses and other tangible and intangible personal
property of every nature and description attached or pertaining to, or otherwise used in connection
with, the Property, owned by Seller and located at the Property (the “Personalty”); provided,
however, that the Personalty and the Property shall not include, and Seller shall retain ownership
of the items listed on Exhibit “D”, attached hereto; and




          (4) To the extent transferable, all of Seller’s right, title and interest, if any, in and to
all intangible assets of any nature relating to the Land, the Improvements and/or the Personalty to
the extent assignable, including, but not limited to (i) all warranties, guarantees, issued with
respect to the Personalty or the Improvements, (ii) all plans and specifications, drawings and
prints relating to the Improvements, (iii) trademarks or trade names associated with the
Improvements, and (iv) all licenses, permits, approvals, dedications and entitlements now or
hereafter issued, approved or granted by governmental authorities in connection with the Land or
the Improvements.




     B. Buyer and Seller have agree that, after Seller’s conveyance of the Property to Buyer,
Seller shall remain in occupancy of the Property as a tenant, subject to the terms and conditions
provided herein.



     C. Seller is prepared to sell and convey the Property to Buyer and Buyer is prepared to
purchase the Property from Seller, all for the purchase price and on the other terms and conditions
hereinafter set forth.



 









 





AGREEMENT:




     In consideration of the mutual covenants and agreements herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:



     1. Sale and Purchase. Seller hereby agrees to sell and convey the Property to Buyer
and Buyer hereby agrees to purchase and accept the Property from Seller for the purchase price and
subject to the other terms and conditions set forth in this Agreement.



     2. Purchase Price. The purchase price for the Property (the “Purchase Price”) shall be
Twelve Million Seven Hundred Thousand and no/100 Dollars ($12,700,000.00), payable as follows:



          2.1 Deposit.




               2.1.1 Upon execution of this Agreement and the opening of escrow, Buyer shall deliver to First
American Title Insurance Company (the “Escrow Agent”) at its office at 1737 North First Street, San
Jose, California 95112, attention: Liz Zankich, to be held in an escrow (the “Escrow”) and
delivered in accordance with this Agreement, an initial deposit in the amount of Two Hundred Fifty
Thousand and no/100 Dollars ($250,000.00) (the “Initial Deposit”). Unless Buyer elects, or is
deemed to have elected, to terminate this Agreement during the Due Diligence Period (defined
below), then after the expiration of the Due Diligence Period the Initial Deposit shall be deemed
non-refundable except as expressly provided in Section 5.8 or Article 9 or 10 below.



               2.1.2 Unless Buyer elects, or is deemed to have elected, to terminate this Agreement during
the Due Diligence Period as provided in Section 5.2 below, then no later than 5:00 p.m. (Pacific
Time) of the last day of the Due Diligence Period Buyer shall deliver to Escrow an additional
deposit in the amount of Two Hundred Fifty Thousand and no/100 Dollars ($250,000.00) (the
“Additional Deposit”) to indicate its election to waive Buyer’s condition set forth in Section 5.2
and proceed to consummate the purchase of the Property. After the expiration of the Due Diligence
Period, the Additional Deposit shall be deemed non-refundable except as expressly provided in
Section 5.8 or Article 9 or 10 below. Upon Escrow Agent’s receipt of Buyer’s demand therefor on or
before the expiration of the Due Diligence Period, Escrow Agent is hereby instructed, without the
need for further mutual instructions from the parties to immediately deliver the Initial Deposit
and all accrued interest thereon to Buyer and to cancel the Escrow.



               2.1.3 Each of the Initial Deposit and the Additional Deposit (collectively, the “Deposit”)
shall be deposited into the Escrow in the form of cash, certified check, bank cashier’s check, wire
transfer or other form of readily available federally insured funds. The Deposit shall be held by
the Escrow Agent in an interest-bearing account and all interest earned on the Deposit while in the
Escrow shall be deemed to be part of the Deposit and shall accrue to the benefit of Buyer (or
Seller to the extent provided in Sections 5.8 and/or 10.1 below).



               2.1.4 At the Closing (as defined in Section 7.1), the Deposit shall be applicable to the
Purchase Price.



 









 





          2.2 Remainder of Purchase Price. At the Closing, Buyer shall deliver to the Escrow
Agent, in cash, certified check, bank cashier’s check, wire transfer, or other form of readily
available federally insured funds, an amount equal to the Purchase Price less the Deposit plus
interest earned, if any, together with Buyer’s share of closing costs and prorations due and
payable by Buyer in accordance with this Agreement. The Purchase Price, subject to adjustments and
apportionments set forth herein, shall be transferred through the Escrow on the Closing Date to the
order or account of Seller or such other person as Seller may designate in writing.




          2.3 Lease-Back. At the Closing, Buyer and Seller shall execute and deliver through
Escrow a lease for Seller’s continued occupancy of the Property as a tenant thereof, which lease
shall be in the form attached hereto as Exhibit “F”, attached hereto (the “Lease”).




     3. Seller’s Representations, Warranties and Covenants. Seller represents, warrants and
acknowledges to Buyer and covenants with Buyer as follows:



          3.1 Authority. Seller is duly organized, validly existing and in good standing under
the laws of the State of California and all documents executed by Seller shall be valid, legal and
binding obligations of Seller. No consent of any third party is required in order for Seller to
perform any of its obligations hereunder.




          3.2 No conflict. This Agreement, and Seller’s sale of the Property hereunder, do not
violate any terms or provisions of any contract to which Seller is a party.




          3.3 Contracts. Seller shall deliver to Buyer copies of all material construction,
service, supply, utilities, maintenance or other agreements relating to the ownership, operation
and maintenance of the Land and the Improvements (but not including contracts relating to Seller’s
use and occupancy thereof in connection with the operation of its business) which are currently in
force with respect to the Property (collectively, the “Contracts”). To Seller’s actual knowledge,
the items delivered to Buyer pursuant to this Section 3.3 shall be accurate and complete copies of
all of the Contracts affecting the Property. To Seller’s actual knowledge, except for the
Contracts, there are no other agreements relating to the ownership, operation and maintenance of
the Land and the Improvements (but not including contracts relating to Seller’s use thereof in
connection with the operation of its business) which affect or will affect or which are or will be
obligations of Buyer, the Property or the Improvements after the Closing. To Seller’s actual
knowledge, there is no current default or breach under the terms and provisions of any of the
Contracts. On or before the Closing, Seller shall terminate all management and brokerage agreements
affecting the Property, if any. Pursuant to the terms and conditions of the Lease Seller shall
continue to perform regular maintenance, repairs and upkeep of the Property, and therefore Buyer
agrees that Seller shall keep all of the Contracts in place after the Closing and shall not assign
any such Contracts to the Buyer at Closing.




          3.4 Leases. Seller has not leased or licensed the Property to a third party, and there
are no other parties occupying, or with a right to occupy, the Property. Seller is the only
occupant of the Property.




 









 





          3.5 Documents. Within five (5) days after the Execution Date, Seller shall deliver or
make available to Buyer, to the extent in Seller’s possession, copies of the types of documents
listed on Exhibit “E” attached hereto respecting Seller’s ownership and operation of the
Property (the “Property Documents”). To Seller’s actual knowledge, without inquiry, the items
delivered to Buyer pursuant to this Section 3.5 shall be accurate and complete copies of all of the
Property Documents affecting the Property. From and after the Execution Date, Seller also shall
make available to Buyer, in Seller’s office, all of Seller’s non-confidential books and records
with respect to the Property.




          3.6 Maintenance of Property; New Leases. Seller shall maintain the Property in the
condition existing on the date hereof, reasonable wear and tear excepted. During the period from
the Execution Date to the earlier of the Closing or termination of this Agreement, Seller shall not
enter into any leases, contracts or other agreements or understandings which would be binding on
the Property after the Closing or result in any obligation or liability to Buyer upon or after
Buyer’s purchase of the Property, unless Buyer provides its written consent to Seller entering into
such agreements, which consent Buyer may withhold in its sole and absolute discretion.




          3.7 Marketing of Property. In consideration of Buyer’s entering into this Agreement
and undertaking its investigation of the Property, from the Execution Date through the Closing Date
(or such earlier date on which this Agreement may be terminated as provided herein), Seller shall
not market the Property for sale to third parties, and shall not accept, negotiate or otherwise
pursue any unsolicited offers for the Property which Seller may receive during such period.




          3.8 Litigation. There is no claim, action, litigation, arbitration or other proceeding
pending against the Property or against Seller which relates to the Property or the transactions
contemplated hereby and, to Seller’s actual knowledge, there is currently no governmental
investigation, threatened litigation or arbitration proceedings relating to the Property, or to
Seller relating to the Property or the transactions contemplated hereby.




          3.9 Condemnation. There are no pending or, to Seller’s actual knowledge, contemplated
condemnation or annexation proceedings affecting the Property or any part thereof.




          3.10 Compliance with Laws. Seller has not received any notice of any violation, and to
Seller’s actual knowledge, without inquiry, the Property is not in violation of any law, ordinance,
regulation, order or requirement applicable to the Property including without limitation,
requirements imposed under any recorded covenants, conditions, restrictions, easements or other
rights affecting the Property.




          3.11 Knowledge. When used in this Article, “Seller’s actual knowledge” shall be
limited to the actual knowledge of Rudy Mui. Seller represents and warrants that Rudy Mui is the
individual employed by Seller having the most extensive personal knowledge regarding the
management, use and operation of the Property. Rudy Mui has not undertaken any special duty of
investigation or inquiry with respect to the subject matter of the representations and warranties
contain in this Article.




 









 





          3.12 Survival. The representations and warranties expressly set forth in this Section
3 shall survive for a period of one (1) year after the Close of Escrow.




     4. Buyer’s Representations, Warranties and Covenants. Buyer hereby represents,
warrants and acknowledges to Seller and covenants with Seller as follows:



          4.1 Authority. Buyer has the power and authority to enter into and to perform all of
Buyer’s obligations pursuant to this Agreement and to purchase the Property on the terms and
conditions set forth herein. No consent of any other party is required in order for Buyer to
perform any of its obligations hereunder.




          4.2 No Conflict. This Agreement and Buyer’s purchase of the Property hereunder do not
violate any material terms or provisions of any contract to which Buyer is a party.




          4.3 Confidentiality. Until the Closing Date shall occur, Buyer shall keep in
confidence and not disclose any information or documents it receives from Seller or the terms and
conditions of this Agreement to any person, firm or entity without the prior written authorization
of Seller, except that the information may be disclosed to (i) Buyer’s partners, directors,
officers, existing and potential financial sources, assignees, lawyers, consultants, and
representatives, including Buyer’s Agents (as defined in Section 5.2.1 below) as needed to enable
Buyer to complete its obligations or exercise its rights hereunder, subject to the confidentiality
requirements of this Section 4.3, or (ii) as required by law or by regulatory or judicial process.
The provisions of this paragraph shall not apply to any information or documents that are already
in the public domain.




          4.4 “AS IS” Purchase. Other than as expressly set forth in this Agreement, (a) Buyer
acknowledges and agrees that Buyer is acquiring the Property in its “AS IS” condition, WITH ALL
FAULTS, IF ANY, AND WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, and (b) neither Seller nor any
agents, representatives, or employees of Seller have made any representations or warranties, direct
or indirect, oral or written, express or implied, to Buyer or Buyer’s Agents with respect to the
condition of the Property, its fitness for any particular purpose, or its compliance with any laws,
and Buyer is not aware of and does not rely upon any such representation. Buyer acknowledges that
the Due Diligence Period will have afforded Buyer the opportunity to make such inspections (or have
such inspections made by consultants) as it desires of the Property and all factors relevant to its
use, including, without limitation, the interior, exterior, and structure of any improvements on
the Property, the condition of soils and subsurfaces, and the status of all zoning, permitting and
other entitlements relevant to the use or contemplated use of the Property. Buyer acknowledges that
during the Due Diligence Period Buyer and Buyer’s Agents will independently and with the assistance
of Buyer’s professional advisors and consultants undertake whatever non invasive studies, tests and
investigation Buyer desires to conduct relating to the Property (including, without limitation,
economic reviews, engineering analyses, environmental analyses and analyses of the records of any
governmental or quasi-governmental entity having jurisdiction over the Property). Except as
otherwise provided herein, Buyer is relying solely on its own investigation as to the Property and
its value and is assuming the risk that adverse physical, economic or other conditions (including,
without limitation, adverse environmental conditions and the status of compliance with the




 









 




requirements of the Americans with Disabilities Act of 1990) may not have been revealed by
such investigation. Buyer agrees that the Property is to be sold to and accepted by Buyer, at
Closing, in the condition it is in at the end of the Due Diligence Period “AS-IS.”




          4.5 Release of Claims.




                    (a) Except for the representations and warranties expressly provided in this Agreement, from
and after the Closing, Buyer hereby completely releases and forever discharges Seller and Seller’s
partners, affiliates, employees, successors, assigns, heirs, agents, and representatives
(collectively, the “Indemnitees”) from and against all claims, liabilities, demands, judgments,
damages, losses, and costs (collectively, “Claims”) arising from or related to the following: (i)
any Hazardous Materials in, on, beneath, discharged from, migrating from, discharged to or
migrating to the Property, including the soil or groundwater thereof, at any time; and (ii) any
use, handling, treatment, storage, transportation or disposal of Hazardous Materials at or from the
Property after the Closing; and (iii) any latent or patent defect affecting the Property
(collectively, the “Released Matters”). As used in this Agreement, the term “Hazardous Materials”
shall have the meaning set forth in Exhibit “B” attached hereto. In connection with such
waiver and relinquishment, Buyer acknowledges that it is aware that it hereafter may discover
Claims or facts in addition to or different from those which it now knows or believes to exist with
respect to the Released Matters, but that it is Buyer’s intention to fully, finally and forever to
settle and release all of the Released Matters in accordance with the provisions of this Section
4.5, and the release set forth herein shall be and remain in effect as a full and complete release
notwithstanding the discovery or existence of any such additional or different Claims or facts. The
foregoing release of Claims shall be binding on Buyer and all subsequent owners, lessees and other
transferees of the Property.



                    (b) In connection with Section 4.5(a) above, Buyer expressly waives the benefits of Section
1542 of the California Civil Code which provides as follows:



“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR
HER SETTLEMENT WITH THE DEBTOR.”



Buyer’s Initials                     




     5. Conditions of Buyer’s Obligations. The Closing and Buyer’s obligations under this
Agreement to purchase the Property shall be subject to the satisfaction, prior to the times
prescribed herein, of the following conditions in Buyer’s sole and absolute discretion, with Buyer
to retain the right to waive, in writing, in whole or in part, any of the following conditions
(collectively, the “Contingencies”) at or prior to the time prescribed herein for approval or
disapproval by Buyer:



          5.1 Title Report. Within five (5) days after the Execution Date, Seller shall deliver
to Buyer a preliminary title report prepared by First American Title Insurance Company (“Title
Company”) with respect to the Property (the “Title Report”), together with complete




 









 




copies of all exceptions set forth therein. Buyer shall have until 5:00 p.m. (Pacific Time) on
the date which is twenty five (25) days after the Execution Date (or the next business day if such
date falls on a weekend or holiday) (the “Due Diligence Period”) to notify Seller and the Escrow
Agent, in writing, of Buyer’s disapproval of any exceptions or items shown thereon and to obtain
the commitment of the Title Company to issue the Title Policy (as defined in Section 5.5 below),
including such endorsements as Buyer may reasonably request. If Buyer does not give Seller written
notice of approval of any of the foregoing items within the prescribed time, the Title Report and
the supporting documents shall be deemed disapproved. Buyer may at any time during the Due
Diligence Period object to any title matters affecting the Property by providing written notice of
such objections to Seller. Within five (5) days of receipt of Buyer’s notice of disapproval of any
of the foregoing items, Seller shall notify Buyer whether Seller is willing to remove any such item
which Buyer has disapproved (“Seller’s Cure Notice”). If Seller does not give Buyer written notice
within the prescribed period of time, Seller shall be deemed to have elected not to remove any such
item which Buyer has disapproved. If there are exceptions which Buyer has disapproved and which
Seller is not willing to remove at Seller’s expense, Buyer shall have until the end of the later of
(A) the expiration of the Due Diligence Period, or (B) the fifth (5th) day following
Buyer’s receipt of Seller’s Cure Notice (or the expiration of the five (5) day period within which
Seller is to deliver a Seller’s Cure Notice if Seller fails to deliver a Seller’s Cure Notice) to
notify Seller in writing of Buyer’s election to either (a) waive its disapproval and approve such
exceptions, or (b) terminate this Agreement and receive a refund of the Deposit, with Buyer’s
failure to respond in writing within such period to be deemed Buyer’s election to terminate this
Agreement. If Buyer elects to waive its disapproval and approve any such exceptions, such
exceptions then shall be deemed to become Permitted Exceptions at the Closing. Buyer agrees that
the parties’ failure to have resolved the scope of Permitted Exceptions pursuant to this Section
5.1 prior to the expiration of the Due Diligence Period shall not effect any extension of the Due
Diligence Period or the Closing Date absent both parties’ written agreement. If Seller provides
Buyer with a Seller’s Cure Notice stating that Seller is willing to remove, cure or ameliorate
certain items disapproved by Buyer, Seller shall cause all such items to be removed, cured or
ameliorated to the extent provided in Seller’s Cure Notice on or before the Closing Date. Seller’s
failure to timely remove, cure or ameliorate all such items as provided in Seller’s Cure Notice
shall not be a default hereunder so long as Seller has undertaken commercially reasonable efforts
in good faith. As used herein, “Permitted Exceptions” shall mean those exceptions to the Title
Policy approved by Buyer.




          5.2 Due Diligence Period.




               5.2.1 At all times during the “Due Diligence Period”, Buyer, its authorized agents, employees,
consultants and representatives (“Buyer’s Agents”) shall have the right to enter the Property at
reasonable times and at reasonable intervals to conduct and carry out any and all non invasive
inspections, tests, and studies as Buyer deems appropriate or Buyer’s lender requires. Buyer shall
not have the right to do any invasive testing of the Property or the Improvements located thereon
without the prior written consent of Seller, which consent may be withheld in Seller’s reasonable
discretion. Buyer shall provide notice to Seller of its intent to enter the Property and provide
Seller the right to accompany Buyer on such entry. Buyer shall indemnify and hold Seller harmless
from all claims and demands arising from Buyer’s entry upon the Property. Buyer shall indicate its
approval of all the conditions and documents in Section 5.1 and this Section 5.2 and Buyer’s
election to proceed with the Closing



 









 







by delivering, no later than 5:00 p.m. (Pacific Time) of the last day of the Due Diligence
Period, (i) written notice of such approval (“Approval Notice”) to Seller, and (ii) the Additional
Deposit to Escrow Agent. Buyer shall have the right to terminate this Agreement at any time prior
to the expiration of the Due Diligence Period at Buyer’s sole and absolute discretion, for any
reason whatsoever or for no reason, by delivering to Seller written notice of Buyer’s election to
terminate this Agreement no later than 5:00 p.m. (Pacific Time) of the last day of the Due
Diligence Period (the “Termination Notice”). Buyer’s failure to deliver either an Approval Notice
or a Termination Notice within the Due Diligence Period shall conclusively be considered Buyer’s
disapproval of all the conditions and documents in Section 5.1 and this Section 5.2 and Buyer’s
election to terminate this Agreement, in which case Buyer shall immediately receive a refund of the
Initial Deposit.



               5.2.2 During the Due Diligence Period, Buyer and Buyer’s Agents shall be granted a right of
entry on the Property (i) to perform such non invasive engineering, environmental and geological
reviews as Buyer shall deem appropriate, (ii) examine all structural and mechanical systems within
the Improvements, (iii) examine the books and records of Seller relating to the management,
ownership, use and operation of the Property, and (iv) conduct such other non invasive physical
inspections and make such other reports as Buyer shall deem appropriate for any purpose related to
Buyer’s proposed use of the Property. Buyer’s right of entry upon the Property shall be subject to,
and Buyer agrees to perform, each of the following conditions and covenants, all of which shall
survive the expiration or termination of this Agreement and the delivery of the Deed (as defined in
Section 7.2.1 below):



                    (a) Buyer shall pay all costs, expenses, liabilities, and charges incurred by Buyer or related
to Buyer’s entry;



                    (b) Buyer, at Buyer’s sole cost, shall repair all damage or injury caused by Buyer or Buyer’s
Agents in connection with any such inspection or entry and shall return the Property to the
condition existing prior to such entry;



                    (c) Any entry upon the Property shall be upon reasonable notice to Seller, shall be at
reasonable times and shall not unreasonably interfere with the Seller’s operations on the Property.
Seller shall have the right to accompany Buyer and Buyer’s Agents during any entry upon the
Property and to require that Buyer and Buyer’s Agents comply with Seller’s safety and security
procedures;



                    (d) Buyer shall keep the Property free and clear of all liens arising out of the activities of
Buyer or Buyer’s Agents conducted upon the Property;



                    (e) Buyer shall indemnify and hold Seller harmless from any lien, loss, claim, liability, or
expense, including attorneys’ fees and costs, arising out of or in connection with the activities
of Buyer or Buyer’s Agents on or about the Property;



                    (f) Buyer shall provide liability insurance, with a combined single limit of liability not
less than One Million Dollars ($1,000,000), either under Buyer’s policy or such insurance provided
by Buyer’s Agents. Seller shall be named as an additional



 









 




insured upon such insurance. Buyer shall provide proof of such insurance reasonably acceptable
to Seller prior to, and as a condition of, any such entry; and




                    (g) Prior to performing any invasive testing (i.e. testing involving drilling, boring or other
similar physically intrusive investigation), Buyer shall obtain Seller’s written approval, which
approval may be withheld in Seller’s reasonable discretion, with respect to the scope of work
intended to be performed and shall provide Seller an opportunity to confer, either directly or
through Seller’s consultants, with Buyer’s environmental consultants in order to determine whether
to permit any sampling or testing of surface or subsurface soils, surface water or ground water or
to refine the scope of the work to be performed.



               5.2.3 Prior to the Closing, all information derived from Buyer’s tests and test results shall,
to the extent permissible under existing law, remain confidential and not be disclosed to any party
other than as is necessary to consummate the transaction contemplated hereby or to exercise Buyer’s
rights hereunder including, without limitation, Buyer’s counsel and its consultants. Seller shall
be entitled to receive copies of all tests and test results generated by Buyer with respect to the
Property, including draft versions of the same, as and when received by Buyer. Seller’s rights
shall survive the termination of this Agreement. Buyer shall bear the costs and expenses with
respect to its feasibility studies hereunder, including, but not limited to, all environmental
matters and investigations.



          5.3 Performance. Seller shall have performed, observed and complied with all
covenants, agreements and conditions required by this Agreement to be performed, observed and
complied with on its part prior to or as of the Closing hereunder.




          5.4 Documents and Deliveries. All instruments and documents required on Seller’s part
to effectuate the Closing, as set forth herein and the transactions contemplated hereby shall be
delivered to Buyer or the Escrow Agent, as required hereby, and shall be in form and substance
consistent with the requirements herein.




          5.5 Title Policy. At the Closing, Title Company shall have delivered to Buyer either
(a) a CLTA owner’s standard policy of title insurance (the “Title Policy”) including any
endorsements reasonably requested by Buyer, insuring Buyer’s fee simple title to the Property in
the amount of the Purchase Price subject only to the Permitted Exceptions, or (b) Title Company’s
irrevocable commitment to issue such policy.




          5.6 Condition of Property. Subject to the terms and conditions of Article 9 below, the
physical condition of the Property shall be substantially the same on the day of Closing as on the
date of Buyer’s execution of this Agreement, reasonable wear and tear excepted.




          5.7 Accuracy of Representations. All of the representations and warranties of Seller
contained in this Agreement shall have been true and correct in all material respects when made,
and shall be true and correct in all material respects on the date of Closing (as defined in
Section 7.1 below) with the same effect as if made on and as of such date.




          5.8 Failure of Conditions. If any conditions set forth in this Article 5 are not
satisfied or waived in writing by Buyer at or prior to the times prescribed therein, then Buyer




 









 




shall have the option, exercisable by written notice to Seller at or prior to the Closing, of
declining to proceed with the Closing. In such event, except as expressly set forth herein, all
rights, obligations and liabilities of Seller and Buyer under and pursuant to this Agreement shall
terminate (except for any obligations or liabilities under this Agreement which specifically set
forth that such obligations or liabilities shall survive the termination of this Agreement), and
the Escrow Agent shall, without further notice to or from any party, and without liability
therefor, cancel and terminate the Escrow. Upon such termination, the Deposit shall be paid to
Seller to the extent it has become nonrefundable in accordance with this Agreement, unless the
failure of a condition is caused solely by Seller’s breach of a representation, warranty covenant
or obligation of Seller arising under this Agreement, subject to Section 10.2 below (a “Seller’s
Breach), in which event the Deposit shall be refunded to Buyer.




          5.9 Copies of Reports. In the event of termination of this Agreement, within three (3)
days after such termination (i) Buyer shall promptly return to Seller all documentation delivered
by Seller to Buyer and (ii) unless the Closing does not occur because of Seller’s default under
this Agreement, Buyer shall provide copies to Seller of all reports and studies obtained or
developed by Buyer or Buyer’s consultants with respect to the Property at no cost to Seller to the
extent not already provided under Section 5.2.3 above.




     6. Conditions of Seller’s Obligations. The Closing and Seller’s obligations under this
Agreement to sell the Property shall be subject to the satisfaction, prior to the times prescribed
herein, of the following conditions, with Seller to retain the right to waive in writing, in whole
or in part, any of the following conditions at or prior to the time prescribed herein for approval
or disapproval by Seller:



          6.1 Accuracy of Representations. All of the representations and warranties of Buyer
contained in this Agreement shall have been true and correct in all material respects when made,
and shall be true and correct in all material respects on the date of Closing with the same effect
as if made on and as of such date.




          6.2 Performance. Buyer shall have performed, observed and complied with all material
covenants, agreements and conditions required by this Agreement to be performed, observed and
complied with on its part prior to or as of the Closing hereunder.




          6.3 Documents and Deliveries. All instruments and documents required on Buyer’s part
to effectuate the Closing and the transactions contemplated hereby shall be delivered to Seller or
the Escrow Agent, as required hereby, shall be in form and substance consistent with the
requirements herein, and all funds to be deposited into the Escrow pursuant hereto shall have been
timely deposited.




          6.4 Failure of Conditions. If any conditions precedent to Seller’s obligations
hereunder are not timely satisfied or waived in writing by Seller, as set forth in this Article 6
and including, but not limited to, timely delivery of the Deposit or other funds required to be
deposited by Buyer into the Escrow, then Seller shall have the option, exercisable by written
notice to Buyer at or prior to the Closing, of declining to proceed with the Closing. In such
event, except as expressly set forth herein, all obligations and liabilities of the parties under
this Agreement shall terminate (except for any obligations or liabilities under this Agreement
which




 









 




specifically set forth that such obligations or liabilities shall survive the termination of
this Agreement) and (a) all documentation delivered to Buyer pursuant hereto shall be returned to
Seller, (b) unless the Closing does not occur because of Seller’s default under this Agreement, all
third party reports obtained by Buyer with respect to the Property shall be delivered to Seller at
no cost to Seller, if requested by Seller, and (c) the Deposit shall be paid to Seller to the
extent is has become nonrefundable in accordance with this Agreement.




     7. Closing; Deliveries.



          7.1 Closing Date. The closing of the transaction described in this Agreement (the
“Closing”) shall take place on the date which is fifteen (15) days after the expiration of the Due
Diligence Period (or the next business day if such date falls on a weekend or holiday); provided,
however, that the Closing Date shall in no event be later than December 20, 2007 (the “Outside
Closing Date”). Upon either party’s request, the other party shall confirm in writing the date on
which the Due Diligence Period expires hereunder and the Closing Date. The Closing shall be deemed
to occur as of the moment the Deed is recorded and the Purchase Price is disbursed to Seller.




          7.2 Seller’s Closing Deposits. At or prior to the Closing, Seller shall deposit the
following into the Escrow for recordation and/or delivery to Buyer at the Closing:




               7.2.1 Grant Deed. A grant deed in the form attached hereto as Exhibit “G”,
duly executed and acknowledged by Seller and in proper form for recording (the “Deed”), subject to
the Permitted Exceptions.



               7.2.2 Bill of Sale. A bill of sale for the Personalty in the form attached hereto as
Exhibit “C.”



               7.2.3 Lease. Two (2) original counterparts of the Lease, in the form attached hereto
as Exhibit “F.”



               7.2.4 FIRPTA. A certification and affidavit as required by the Foreign Investors
Property Tax Act, as amended, and the comparable provisions of California law.



               7.2.5 Other Documents. Such resolutions, authorizations, bylaws or other
corporate/partnership documents or agreements relating to Seller as may be reasonably requested.



          7.3 Buyer’s Closing Deposits. At or prior to the Closing, Buyer shall deposit into the
Escrow for delivery to Seller at the Closing the following:




               7.3.1 Balance of Purchase Price. The balance of the Purchase Price in cash or by wire
transfer in the amount required under Article 2 hereof for delivery to Escrow Agent.



               7.3.2 Lease. Two (2) original counterparts of the Lease, in the form attached hereto
as Exhibit “F.”



 









 





               7.3.3 Other Documents. Such other instruments and documents as reasonably may be
required to effectuate this Agreement and consummate the transactions contemplated hereby.



     8. Apportionments; Expenses.



          8.1 Apportionment of Taxes, Utilities and Operating Expenses. All real estate taxes,
charges and any assessments affecting the Property and all charges for utilities, insurance and
other operating expenses of the Property, if any, shall be prorated on a per diem basis as of
midnight on the date before Closing. If any real estate taxes, charges or assessments or any
charges for utilities, insurance and other operating expenses of the Property have not been finally
assessed or billed to Seller as of midnight on the date before Closing, then the same shall be
adjusted at Closing based upon the most recently issued bills therefor and shall be re-adjusted
outside of the Escrow when final bills are issued; provided, however, that to the extent such
Property related expenses remain the responsibility of Seller under the Lease in its capacity as
“Tenant” thereunder, such items shall not be prorated at Closing and shall instead continue to be
paid by Seller. On or prior to the Closing Date, the parties shall agree upon an estimated closing
statement or will approve estimated closing statements prepared by the Escrow Agent which shall set
forth the prorations and credits provided for herein. If the prorations and credits made under such
closing statement shall prove to be incorrect or incomplete for any reason, then either party shall
be entitled to an adjustment to correct the same; provided, however, that any adjustment shall be
made, if at all, within one hundred eighty (180) days after the Closing Date (except with respect
to real property taxes, in which case such adjustment shall be made within thirty (30) days after
the information necessary to perform such adjustment is available), and if a party fails to request
an adjustment by a written notice delivered to the other party within the applicable period set
forth above (such notice to specify in reasonable detail the items within the closing statement
that such party desires to adjust and the reasons for such adjustment), then the prorations and
credits set forth in the closing statement shall be binding and conclusive against such party.




          8.2 Expenses. The expenses and costs of the transactions contemplated by this
Agreement shall be borne by the parties as follows, all of which obligations shall survive the
Closing:




               8.2.1 Advisors. Subject to Section 14.10 hereof, each party will pay all its own
expenses incurred in connection with this Agreement and the transactions contemplated hereby,
including, without limitation, (a) all costs and expenses stated herein to be borne by such party,
and (b) all of its own respective accounting, legal and appraisal fees.



               8.2.2 Seller’s Expenses. Seller shall pay at the Closing (a) the premium attributable
to a CLTA title policy for Buyer, (b) fifty percent (50%) of all escrow fees and any city transfer
taxes, and (c) all county transfer taxes.



               8.2.3 Buyer’s Expenses. Buyer shall pay at the Closing (a) all premiums for Buyer’s
title policy over and above a CLTA title policy and all endorsements, and (b) fifty percent (50%)
of all escrow fees and any city transfer taxes.



 









 





               8.2.4 Other Fees. All other costs shall be divided by the parties in accordance with
the custom of Santa Clara County.



          8.3 Possession. Possession of the Property shall be surrendered to Buyer at the
Closing free and clear of any rights of possession of others save and except Seller’s continued
rights of occupancy under the Lease.




     9. Casualty and Condemnation; Insurance.



          9.1 Threshold Amount for Termination Option. If, at any time prior to the date of
Closing, Improvements having a replacement value of Five Hundred Thousand Dollars ($500,000) or
more are destroyed or damaged as a result of fire or any other casualty whatsoever, or as a result
of the Property being condemned or taken by eminent domain proceedings by any public authority, the
Property’s value is reduced by Five Hundred Thousand Dollars ($500,000) or more, then, at Buyer’s
option, to be exercised by written notice to Seller, this Agreement shall terminate, and the
Deposit shall be returned to Buyer, and except as expressly set forth herein, neither party shall
have any further liability or obligation to the other hereunder. Buyer shall exercise such
termination right, if at all, within fifteen (15) days after (i) receipt of notice from Seller
advising Buyer of such damage or taking, or (ii) discovery of such damage or taking.




          9.2 Allocation of Compensation. If there is any damage or destruction or condemnation
or taking, as above set forth, and if (a) the resulting reduction in the value of the Property is
less than Five Hundred Thousand Dollars ($500,000), or (b) Buyer elects not to terminate this
Agreement as provided above, then Buyer shall pay the Purchase Price in full at the Closing and the
Property shall belong to Buyer, provided that (i) in the case of a taking, all condemnation
proceeds paid or payable to Seller shall be paid or assigned to Buyer at the Closing; or (ii) in
the case of a casualty, Seller shall assign to Buyer all rights to any insurance proceeds paid or
payable under the applicable insurance policies. In no event shall Seller have any obligation to
restore any damage to the Property caused by or arising from a condemnation or casualty event, nor
shall Buyer have the right to terminate this Agreement as a result thereof other than as provided
in Section 9.1 above.




     10. Remedies for Buyer’s Default and Seller’s Default.



          10.1 Buyer’s Default. IN THE EVENT BUYER BREACHES OR FAILS TO PERFORM ITS OBLIGATION
TO PURCHASE THE PROPERTY UNDER THIS AGREEMENT, THEN SELLER SHALL, AS ITS SOLE REMEDY THEREFOR, BE
ENTITLED TO RECEIVE THE DEPOSIT MADE PURSUANT TO SECTION 2 HEREOF, INCLUDING ALL INTEREST EARNED
AND ACCRUED THEREON, AS LIQUIDATED DAMAGES (AND NOT AS A PENALTY) IN LIEU OF, AND AS FULL
COMPENSATION FOR, ALL OTHER RIGHTS OR CLAIMS OF SELLER AGAINST BUYER BY REASON OF SUCH DEFAULT.
THEREUPON THIS AGREEMENT SHALL TERMINATE AND THE PARTIES SHALL BE RELIEVED OF ALL FURTHER
OBLIGATIONS AND LIABILITIES HEREUNDER, EXCEPT FOR THOSE OBLIGATIONS WHICH EXPRESSLY SURVIVE CLOSING
OR TERMINATION OF THIS AGREEMENT. BUYER AND SELLER ACKNOWLEDGE THAT THE DAMAGES TO SELLER RESULTING
FROM BUYER’S BREACH WOULD BE DIFFICULT, IF NOT IMPOSSIBLE TO ASCERTAIN WITH ANY




 









 




ACCURACY, AND THAT THE LIQUIDATED DAMAGE AMOUNT SET FORTH IN THIS SECTION REPRESENTS BOTH
PARTIES’ EFFORTS TO APPROXIMATE SUCH POTENTIAL DAMAGES. NOTWITHSTANDING THE FOREGOING, OR ANY OTHER
PROVISION TO THE CONTRARY, THIS SECTION 10.1 SHALL IN NO WAY LIMIT OR RESTRICT SELLER’S RECOVERY
UNDER SECTION 5.2.2 ABOVE AND/OR SECTION 14.10 BELOW.




	 	 	 
	                  RS                  Seller’s Initials

	 	                  LS                  Buyer’s Initials






          10.2 Seller Breach Before Closing. In the event that the Closing does not occur as a
result of a Seller’s Breach which is not cured by Seller within five (5) days after written notice
from Buyer to Seller of such Seller’s Breach, Buyer shall be entitled to (a) bring an action for
specific performance if filed and served upon Seller within sixty (60) days after the occurrence of
such alleged breach, or (b) terminate this Agreement, obtain a refund of the Deposit, if made, and
pursue any remedies at law to which it may be legally entitled; provided, however, that (i)
Seller’s liability for any such Seller’s Breach shall be limited to claims for which the damages
are not less than Fifty Thousand Dollars ($50,000) and shall be subject to an aggregate maximum sum
of Five Hundred Thousand Dollars ($500,000), and (ii) Seller shall in no event have any liability
for matters disclosed to Buyer in any documents and information produced for Buyer pursuant to this
Agreement or discovered by Buyer prior to termination of this Agreement, and (iii) Seller shall
have no liability for any such Seller’s Breach unless such damage claim is expressly asserted by
Buyer in an action filed and served on Seller within one (1) year following the termination of the
Agreement.




          10.3 Seller Breach After Closing. In the event the Closing does occur and Buyer
discovers a Seller’s Breach, (a) Seller’s liability for a Seller’s Breach shall be limited to
claims for which the damages are not less than Fifty Thousand Dollars ($50,000) and which shall be
subject to an aggregate maximum of Five Hundred Thousand Dollars ($500,000), (b) Seller shall in no
event have any liability for matters disclosed to Buyer in documents produced or made available to
Buyer by Seller or discovered by Buyer prior to the Closing if Buyer elects to proceed to close
this transaction notwithstanding the disclosure or discovery of such matters prior to the Closing,
and (c) Seller shall have no liability for any Seller’s Breach unless such damage claim is asserted
by Buyer in an action filed and served on Seller within one (1) year following the Closing.




     11. Further Assurances. Seller and Buyer each agrees to perform such other acts, and
to execute, acknowledge and deliver, prior to, at or subsequent to the Closing, such other
instruments, documents and other materials as the other may reasonably request and as shall be
necessary in order to effect the consummation of the transactions contemplated hereby.



     12. Notices. All notices and other communications provided for herein shall be in
writing and shall be sent to the address set forth below (or such other address as a party may
hereafter designate for itself by notice to the other parties as required hereby) of the party for
whom such notice or communication is intended:



          If to Seller:




 









 




RAE Systems, Inc.

3775 North First Street

San Jose, CA 95134

Attn: Chief Financial Officer or Treasurer

Fax: (408) 952-8480

Phone: (408) 952-8200



With a copy to:



DLA Piper

2000 University Avenue

East Palo Alto, California 94303

Attn: Austin Stewart, Esq.

Fax: (650) 833-2001

Phone: (650) 833-2078



If to Buyer:



D.R. Stephens & Company, LLC

465 California Street, 3rd Floor

San Francisco, California 94104

Attn: Lane Stephens

Fax: (415) 391-9823

Phone: (415) 781-8000




     Any such notice or communication shall be sufficient if sent by registered or certified mail,
return receipt requested, postage prepaid; by hand delivery; by overnight courier service; or by
telecopy, with an original by regular mail. Any such notice or communication shall be effective
when delivered to the office of the addressee or upon refusal of such delivery.



     13. Brokers. Buyer and Seller are represented by CRESA Partners in its capacity as a
dual agent for the parties (“Broker”). If and when the Closing occurs, Seller shall pay a brokerage
commission to Broker pursuant to a separate agreement with Broker. Except for the Broker set forth
herein, each party represents to the other that it has not dealt with any broker, agent, or finder
for which a commission or fee is payable in connection with this Agreement. Each party shall
indemnify, defend, and hold harmless the other party from any claims, demands, or judgments for
commissions or fees based on the claimant’s representation or alleged representation of the
indemnifying party in this transaction. The provisions of this Section 14 shall survive the Closing
or the termination of this Agreement.



     14. Miscellaneous.



          14.1 Assignability. Buyer shall have the right to assign its rights under this
Agreement to a corporation, partnership, limited liability company, tenancy-in-common, or other
entity in which either (i) Buyer holds, directly or indirectly, a fifty percent (50%) or greater
interest, or (ii) which is controlled by Buyer (i.e., Buyer has the right to direct the management
and operation of such entity). Except as expressly set forth herein, Buyer may not assign or




 









 




transfer all or any portion of its rights or obligations under this Agreement to any other
individual, entity or other person without the consent thereto by Seller, which may be withheld in
Seller’s absolute discretion.




          14.2 Governing Law; Parties in Interest. This Agreement shall be governed by the law
of the State of California and shall bind and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors, assigns and personal representatives.




          14.3 Recording. Neither this Agreement nor any notice or memorandum hereof shall be
recorded in any public record. A violation of this prohibition shall constitute a material breach
of this Agreement.




          14.4 Time of the Essence. Time is of the essence of this Agreement.




          14.5 Headings. The headings preceding the text of the sections and subsections hereof
are inserted solely for convenience of reference and shall not constitute a part of this Agreement,
nor shall they affect its meaning, construction or effect.




          14.6 Counterparts. This Agreement may be executed simultaneously in counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument.




          14.7 Exhibits. All Exhibits which are referred to herein and which are attached hereto
or bound separately and initialed by the parties are expressly made and constitute a part of this
Agreement.




          14.8 Survival. Unless otherwise expressly stated in this Agreement, the warranties,
representations and covenants of Seller and Buyer shall terminate as of the Closing and shall be
deemed to have merged with the Deed. The warranties, representations and covenants of Article 3
(subject to the limitations in Section 3.11 and Article 10), Article 4 (subject to the limitations
in Section 10.1), Sections 5.2.2, 5.2.3, 5.9, 9.2, and Articles 10, 11 & 13 and Section 14.10
hereof shall survive the Closing or any earlier termination of this Agreement.




          14.9 Entire Agreement; Amendments. This Agreement and the Exhibits hereto set forth
all of the promises, covenants, agreements, conditions and undertakings between the parties hereto
with respect to the subject matter hereof, and supersede all prior and contemporaneous agreements
and understandings, inducements or conditions, express or implied, oral or written, except as
contained herein. This Agreement may not be changed orally but only by an agreement in writing,
duly executed by or on behalf of the party or parties against whom enforcement of any waiver,
change, modification, consent or discharge is sought.




          14.10 Attorneys’ Fees. If there is any legal action or proceeding between Seller and
Buyer arising from or based upon this Agreement, the unsuccessful party to such action or
proceeding shall pay to the prevailing party all costs and expenses, including reasonable
attorneys’ fees and disbursements incurred by the prevailing party in such action or proceeding and
in any appeal in connection therewith, and such costs, expenses, attorneys’ fees and disbursements
shall be included in and as part of such judgment.




 









 





          14.11 Documentary Transfer Tax. Either party shall, at the time of recording the Grant
Deed, in accordance with California Revenue and Taxation Code Section 11932, be entitled to require
that the amount of the documentary transfer tax due be shown on a separate paper which shall be
affixed to the Grant Deed subsequent to recording.




          14.12 Tax Deferred Exchange: Each party agrees to cooperate with the other party for
the purpose of effecting a tax deferred exchange pursuant to Internal Revenue Code Section 1031.
Buyer and Seller agree that the consummation of this Agreement is not predicated or conditioned
upon the completion of any such exchange and such exchange shall not delay the Close of Escrow
hereunder. Neither party shall incur any additional liability or financial obligation (including
legal fees) as a consequence of the other party’s contemplated exchange and the exchanging party
agrees to hold the other party harmless from any liability that may arise from the other party’s
participation therein. In no event shall the non-exchanging party be required to take title to any
property other than the Property.




     15. Escrow Agent. Escrow Agent shall hold the Deposit in accordance with the terms and
provisions of the escrow instructions to be given to Escrow Agent by the parties in a form
consistent with this Agreement.



 









 





     IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date
first above written.



BUYER:



D.R. STEPHENS & COMPANY, LLC,

a California limited liability company




	 	 	 	 	 
	By:
	 	/s/ Lane Stephens	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Its:
	 	Manager	 	 
	 

	 	 

	 	 






SELLER:




RAE SYSTEMS, INC.,

a Delaware corporation




	 	 	 	 	 
	By:
	 	/s/ Randall Gausman	 	 
	 

	 	 

	 	 
	 
	 	 	 	 
	Its:
	 	Chief Financial Officer	 	 
	 

	 	 

	 	 







 









 








EXHIBIT A




LEGAL DESCRIPTION OF THE REAL PROPERTY



Real property in the City of San Jose, County of Santa Clara, State of California, described as
follows:




Parcel 1:



Parcel 62, as shown on that certain Parcel Map which was filed for record in the Office of the
Recorder of the County of Santa Clara on April 19, 1984, in Book 526, Pages 55 and 56.




Parcel 2:



Together with and as appurtenant to such Premises, that certain 15 foot by 92 foot Ingress-Egress
Easement over Lot 8 of Tract No. 7408, as granted in that certain instrument recorded September 8,
1983, in Book H879, Page 289, Official Records, Santa Clara County.




APN: 097-53-024




 









 





EXHIBIT B




DEFINITION OF HAZARDOUS MATERIALS




     The term “Hazardous Materials” means material, waste, chemical, compound, substance, mixture,
or byproduct that is identified, defined, designated, listed, restricted or otherwise regulated
under Environmental Laws (as defined hereinbelow) as a “hazardous constituent,” “hazardous
substance,” “hazardous material,” “extremely hazardous material,” “hazardous waste,” “acutely
hazardous waste,” “hazardous waste constituent,” “infectious waste,” “medical waste,” “biohazardous
waste,” “extremely hazardous waste,” “pollutant,” “toxic pollutant,” or “contaminant,” or any other
formulation intended to classify substances by reason of properties that are deleterious to the
environment, natural resources or public health or safety including, without limitation,
ignitability, corrosiveness, reactivity, carcinogenicity, toxicity, and reproductive toxicity. The
term “Hazardous Materials” shall include, without limitation, the following:



          (i) A “Hazardous Substance”, “Hazardous Material”, “Hazardous Waste”, or “Toxic Substance”
under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq.
or the Solid Waste Disposal Act, 42 U.S.C. Section 6901, et seq., including any regulations
promulgated thereunder, as any of the foregoing may be amended;




          (ii) An “Acutely Hazardous Waste”, “Extremely Hazardous Waste”, “Hazardous Waste”, or
“Restricted Hazardous Waste”, under Section 25110.02, 25115, 25117 or 25122.7 of the California
Health and Safety Code, or is listed pursuant to Section 25140 of the California Health and Safety
Code, as any of the foregoing may be amended;




          (iii) A “Hazardous Material”, “Hazardous Substance” or “Hazardous Waste” under Section 25260,
25281, 25316, 25501, or 25501.1 of the California Health and Safety Code, as any of the foregoing
may be amended;




          (iv) “Oil” or a “Hazardous Substance” under Section 311 of the Federal Water Pollution Control
Act, 33 U.S.C. Section 1321, as may be amended, as well as any other hydrocarbonic substance,
fraction, distillate or by-product;




          (v) Any substance or material defined, identified or listed as an “Acutely Hazardous Waste,”
“Extremely Hazardous Material”, “Extremely Hazardous Waste”, “Hazardous Constituent”, “Hazardous
Material”, “Hazardous Waste”, “Hazardous Waste Constituent”, or “Toxic Waste” pursuant to Division
4.5, Chapters 10 or 11 of Title 22 of the California Code of Regulations, as any of the foregoing
may be amended;




          (vi) Any substance or material listed by the State of California as a chemical known by the
State to cause cancer or reproductive toxicity pursuant to Section 25249.8 of the California Health
and Safety Code, as may be amended;




 









 





          (vii) A “Biohazardous Waste” or “Medical Waste” under Section 117635 or 117690 of the
California Health and Safety Code, as may be amended;




          (viii) Polychlorinated biphenyls, asbestos, and any asbestos containing material; and/or




          (ix) A substance that, due to its characteristics or interaction with one or more other
materials, wastes, chemicals, compounds, substances, mixtures, or byproducts, damages or threatens
to damage the environment, natural resources or public health or safety, or is required by any law
or public entity to be remediated, including remediation which such law or public entity requires
in order for the property to be put to any lawful purpose.




     As used herein, the term “Environmental Laws” means any applicable foreign, federal, state, or
local law, statute, regulation, rule, ordinance, permit, prohibition, restriction, license, order,
requirement, agreement, consent, or approval, or any decision, opinion, determination, judgment,
directive, decree or order of any executive, administrative or judicial authority at any applicable
foreign, federal, state or local level (whether now existing or subsequently adopted or
promulgated) relating to pollution or the protection of the environment, ecology, natural resources
or public health and safety.




 









 








EXHIBIT C




BILL OF SALE




     For good and valuable consideration, receipt of which is hereby acknowledged, the undersigned
                                        , a                                         
 (“Seller”), does hereby give, grant, bargain, sell,
transfer, assign, convey and deliver to                                        , a                      (“Buyer”) all fixtures,
equipment, furniture, furnishings, appliances, supplies, licenses and other tangible and intangible
personal property of every nature and description (including, without limitation, all warranties
made by or received from any third party) attached or pertaining to, or otherwise used in
connection with, the Real Property (as hereinafter defined), owned by Seller and located at the
Real Property (as hereinafter defined), and all of Seller’s right, title and interest in and to the
books and records relating to the operation and management of the building and other improvements
on that certain land commonly known as                                          and more particularly
described in Exhibit A hereto (“Real Property”).



     Seller does hereby represent to Buyer that Seller is the lawful owner of all of the foregoing
and that the foregoing is free and clear of all encumbrances, and that Seller has good right to
sell the same as aforesaid and will warrant and defend the title thereto under Buyer, its
successors and assigns, against the claims and demands of all persons whomsoever.



     Seller further agrees that it will execute such other and further conveyances, assignments,
transfers and other instruments as shall be reasonably necessary to effectuate the sale of and the
vesting in Buyer of title to all thereof.



     All references to “Seller” and “Buyer” herein shall be deemed to include their respective
heirs, representatives, nominees, successors and/or assigns, where the context permits.



Effective Date:                                         , 200                    




	 	 	 	 	 	             	 	 	 
	 	 	SELLER:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	a	 	 	 	 	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	Print Name:	 	 
	 

	 	Its:
	 	 	 	 

	 	 
	 	 	 	 	 	 	 





 









 






Exhibit A to Bill of Sale




LEGAL DESCRIPTION OF THE REAL PROPERTY



Real property in the City of San Jose, County of Santa Clara, State of California, described as
follows:




Parcel 1:



Parcel 62, as shown on that certain Parcel Map which was filed for record in the Office of the
Recorder of the County of Santa Clara on April 19, 1984, in Book 526, Pages 55 and 56.




Parcel 2:



Together with and as appurtenant to such Premises, that certain 15 foot by 92 foot Ingress-Egress
Easement over Lot 8 of Tract No. 7408, as granted in that certain instrument recorded September 8,
1983, in Book H879, Page 289, Official Records, Santa Clara County.




APN: 097-53-024




 









 





EXHIBIT D




RETAINED PERSONAL PROPERTY



Seller shall retain ownership of the following equipment and other personal property, which is not
included in the Property conveyed pursuant to this Agreement:



All furnishings, fixtures and equipment used and installed by Seller at the Property which is used
for the operation of Seller’s business at the Property which would not otherwise be present in
“vanilla shell” improvements, including without limitation all hoods, server racks and lab benches
and equipment, all computer equipment and all office furniture and equipment installed and used by
Seller.




 









 





EXHIBIT E




PROPERTY DOCUMENTS





	1.	 	An existing title policy for the Property;
	 
	2.	 	Plans and specifications for the Improvements;
	 
	3.	 	Copies of service contracts, governmental reports, correspondence or notices, HVAC reports,
roof reports, equipment leases, permits, certificates of occupancy, building inspection
reports, records of historical property and operating statements, CC&Rs with respect to the
Property, capital expenditure records, real property tax bills and maintenance records since
Seller’s initial occupancy of the Property;
	 
	4.	 	Any soils reports or environmental, engineering, architectural or other structural and
physical reports and similar data regarding the Property;
	 
	5.	 	Copies of tax bills and a statement of operating income and expenses for the Property for the
last three (3) years;
	 
	6.	 	Surveys of the Property; and
	 
	7.	 	Any other documents reasonably requested by Buyer, to the extent in Seller’s possession.





 









 





EXHIBIT F




FORM OF LEASE




 









 





EXHIBIT G




FORM OF DEED




	 	 	 	 	 
	WHEN RECORDED MAIL TO:	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	Attn:
	 	 	 	 
	 

	 	 

	 	 
	MAIL TAX STATEMENTS TO:	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	Attn:
	 	 	 	 
	 

	 	 

	 	 






 

(SPACE ABOVE THIS LINE FOR RECORDER’S USE)




	 	 	 	 	 
	 	 	DOCUMENTARY TRANSFER TAX
	 

	 	$	 	 
	 

	 	 	 
	 
	 	 	 	 
	 

	 	 	 
	 	 	(Signature of Declarant or Agent determining tax
	 	 	Firm Name)







GRANT DEED




FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,




hereby GRANT(S) to



The real property in the City of                                         , County of                         
                , State of California, described as set forth in
Exhibit A, attached hereto. The conveyance by Grantor to Grantee pursuant to this Grant
Deed is subject to: (i) a lien securing payment of real estate taxes and assessments not yet due
and payable; and (ii) all covenants, conditions, easements, restrictions, liens, encumbrances and
other exceptions of record as of the date hereof.




	 	 	 	 	 	 	 
	Dated	 	 	 	 
	 

	 	 

	 	 

	 	 
	STATE OF CALIFORNIA	 	}	 	 
	 

	 	 	 	} SS.	 	 
	COUNTY OF

 



	 	}	 	 
	 

	 	 

	 	 	 	 
	 
	 	 	 	 	 	 
	On                          ,
200                    , before me,                  , 

a Notary Public, personally appeared
                                 , personally
known to me (or proved to me
on the basis of satisfactory evidence) to
be the	 	 	 	 






 









 






	 	 	 	 	 	 	 
	person (s) whose names (s) is/are
subscribed to the within instrument and
acknowledged to me that he/she/they
executed the same in his/her/their
authorized capacity (ies), and that by
his/her/their signature (s) on the
instrument the person (s), or the entity
(ies) upon behalf of which the person(s)
acted, executed the instrument.	 	 	 	 
	 
	 	 	 	 	 	 
	WITNESS my hand and official seal.	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	(This Area for Notarial Seal)	 	 
	   	 	 	 	 
	Notary Public	 	 	 	 






 









 





Exhibit A to Grant Deed



Real property in the City of San Jose, County of Santa Clara, State of California, described as
follows:




Parcel 1:



Parcel 62, as shown on that certain Parcel Map which was filed for record in the Office of the
Recorder of the County of Santa Clara on April 19, 1984, in Book 526, Pages 55 and 56.




Parcel 2:



Together with and as appurtenant to such Premises, that certain 15 foot by 92 foot Ingress-Egress
Easement over Lot 8 of Tract No. 7408, as granted in that certain instrument recorded September 8,
1983, in Book H879, Page 289, Official Records, Santa Clara County.




APN: 097-53-024




 









 





FIRST AMENDMENT

TO

PURCHASE AND SALE AGREEMENT




     THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “Amendment”) is made as of this 19th
day of December, 2007 (the “Execution Date”), by RAE Systems, Inc., a Delaware corporation
(“Seller”), and Inland American/Stephens (N First) Ventures, LLC, a Delaware limited liability
company (“Buyer”).



RECITALS




     A. Seller and Buyer entered into that certain Purchase and Sale Agreement dated November 9,
2007 (the “Agreement”).



     B. Seller and Buyer wish to enter into this Amendment to amend the Agreement on the terms and
conditions set forth below.



AGREEMENT




     NOW, THEREFORE, in consideration of the covenants set forth in this Amendment and other
valuable consideration, the receipt and adequacy of which is hereby acknowledged, Seller and Buyer
hereby agree as follows:



     1. Defined Terms. All capitalized terms in this Amendment not otherwise defined in
this Amendment, shall have the same meaning as in the Agreement.



     2. Closing Date. Section 7.1 of the Agreement is hereby amended to provide that the
Closing shall be extended from December 19, 2007 (i.e., fifteen (15) days after expiration of the
Due Diligence Period on December 4, 2007) to December 20, 2007; provided, however, that in
consideration of Seller’s agreement to so extend the Closing, Buyer shall cause its lender to fund
Escrow no later than 3:00 p.m. PST on December 19, 2007, and approve the December 20, 2007, Closing
at such time, so that the Closing can occur on December 20, 2007 without any “gap” between the
Closing and the recordation of the Grant Deed.



     3. Electronic Signatures. In order to expedite the transaction contemplated herein,
telecopied or emailed signatures may be used in the place of original signatures on this Amendment.
Seller and Buyer intend to be bound by the signatures on the telecopied or emailed document, are
aware that the other party will rely on the telecopied or emailed signatures, and hereby waive any
defenses to the enforcement of the terms of this Amendment based on the telecopied or emailed
signatures



     4. No Other Modification. Except as expressly modified hereby, the terms and
conditions of the Agreement are not modified or changed in any manner by this Amendment.



     5. Counterparts. This Amendment may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall be deemed one and the same
instrument.



1









 





     IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the date
first above written.



SELLER:




RAE SYSTEMS, INC.,

a Delaware corporation




	 	 	 	 	 
	By:
	 	/s/ Randall Gausman	 
	 

	 	 

	 	 
	Its:
	 	Chief Financial Officer	 	 
	 

	 	 

	 	 






BUYER:



INLAND AMERICAN/STEPHENS (N FIRST) VENTURES, LLC,

a Delaware limited liability company





			
	By:	 	Stephens & Stephens, LLC, a

California limited liability company,

its Manager





	 	 	 	 	 	 	 
	 

	 	      By:	 	/s/ Lane Stephens	 	 
	 

	 	 	 	 

Lane B. Stephens, Manager
	 	 







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