Document:

exv10w19

Exhibit 10.19

AMENDMENT NO. 9

TO LOAN AND SECURITY AGREEMENT

     This Amendment No. 9 to Loan and Security Agreement (this
“Amendment”) is entered
into as of September 1, 2010, 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 amended and as may be further 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 has now requested that Bank make certain changes to the Loan Agreement, all as set
forth more fully 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 make the changes set forth herein.

AGREEMENT

     NOW, THEREFORE, in consideration of the foregoing Recitals and intending to be legally
bound, the parties hereto agree as follows:

     1. Amendment to Loan Agreement.

         1.1 Section 8.11 (Compliance) of the Loan Agreement is amended and restated in its
entirety and replaced with the following:

    “8.11 Compliance. Borrower or any of its Subsidiaries (a) violates or fails to comply
with the Foreign Corrupt Practices Act and/or any related statutes and regulations and such
violation or failure results in either (i) the imposition of potential monetary penalties in
excess of $3,700,000 in the aggregate or material criminal sanctions, or (ii) debarment from
doing business resulting in a loss of $1,000,000 of revenue in the aggregate or (b) uses any
Credit Extension for the settlement or proposed settlement with respect to clause (a)
above.”

     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;

               (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; and

          4.2 Payment of Bank Expenses. Borrower shall have paid all Bank 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.

2

 

     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 Clara County, California.

[Remainder
of page intentionally left blank - signature page follows]

3

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 9 to Loan Agreement to be
executed as of the date first written above.

	 	 	 	 	 	 	 

	     
Borrower:	Rae Systems Inc.	 	 
	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 

	 	 	 	 	 	 	 
	 

	 	By:
	/s/ Randall K. Gausman	 	 
	 

	 	 	 	 	 
	 

	 	Printed Name: 	Randall K. Gausman	 	 
	 

	 	 	 	 	 	 
	 

	 	Title: 
	CFO	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	     Bank:	 	Silicon Valley Bank	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 
	 

	 	 	 	 	 
	 

	 	Printed Name:
	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:exv10w20

Exhibit 10.20

AMENDMENT NO. 10

TO LOAN AND SECURITY AGREEMENT

     This Amendment No. 10 to Loan and Security Agreement (this
“Amendment”) is entered into this 12th day of January, 2011, 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 has been and may be further 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 desires that Bank 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 conditional limited waiver
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. Amendments to Loan Agreement.

          1.1 Section 6.8 (Financial Covenants). Subsection (a) of Section 6.8 of the Loan
Agreement is amended and restated in its entirety and replaced with the following:

          “(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.”

          1.2 Exhibit D, “Compliance Certificate”, to 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;

               (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; and

          4.2 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.

2

 

     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.

     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 Clara 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/ Randall K. Gausman	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 	 	 
	 

	 	Printed Name:
	 	Randall K. Gausman	 	 
	 

	 	Title: CFO
	 	 	 	 
	 
	 	 	 	 	 	 
	Bank:	 	Silicon Valley Bank	 	 
	 
	 	 	 	 	 	 

	 	 	 	 	 	 	 
	 

	 	  By:
	 	/s/ Ray Aguilar	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 	 	 
	 

	 	Printed Name:
	 	Ray Aguilar	 	 
	 

	 	Title: RM
	 	 	 	 

3

 

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:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Minimum Quick Ratio, tested as
of the last day of each fiscal
quarter.

	 	1.0:1.0
	 	_______:1.0
	 	Yes    No

 

 

	 	 	 	 	 	 	 
	Financial Covenant	 	Required	 	Actual	 	Complies
	Minimum EBITDA, tested as
of the
last day of each fiscal
quarter indicated

	 	Fiscal Quarter Ending 03/31/10:

EBITDA > $(1,000,000)
	 	$________
	 	 Yes    No
	 
	 	 	 	 	 	 
	 

	 	Fiscal Quarter Ending 06/30/10:	 	 	 	 
	 

	 	Combined EBITDA for fiscal quarters ending	 	 	 	 
	 

	 	03/31/10 and 06/30/10 > $(1,900,000)	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Fiscal Quarter Ending 09/30/10:	 	 	 	 
	 

	 	Combined EBITDA for fiscal quarters ending	 	 	 	 
	 

	 	06/30/10 and 09/30/10 > $(1,800,000)	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Fiscal Quarter Ending 12/31/10:	 	 	 	 
	 

	 	Combined EBITDA for fiscal quarters ending	 	 	 	 
	 

	 	09/30/10 and 12/31/10 > $(1,000,000)	 	 	 	 

     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	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	Received by:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

AUTHORIZED SIGNER
	 	 
	Name:

	 	 	 	 	 	Date:	 	 	 	 
	Title:

	 	 
	 	 	 	 	 	 
	 	 
	 

	 	 

	 	 	 	Verified:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
AUTHORIZED SIGNER	 	 
	 

	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 	 	 	 	Compliance Status:                   Yes  No	 	 

2

 

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

(continued on next page)

 

 

	II.	 	Minimum EBITDA (Section 6.8(b))

Required:            See chart below

	 	 	 	 	 	 	 
	Fiscal	 	Measurement	 	Minimum
	Quarter	 	Period	 	EBITDA
	September 30, 2010

	 	Fiscal quarters ending
	 	Combined Quarters:

	 

	 	June 30, 2010, and
	 	$	(1,800,000	)
	 

	 	September 30, 2010	 	 	 	 
	 
	 	 	 	 	 	 
	December 31, 2010

	 	Fiscal quarters ending
	 	Combined Quarters:

	 

	 	September 30, 2010, and
	 	$(1,000,000)”

	 

	 	December 31, 2010	 	 	 	 

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.	 	non-cash stock compensation expense.	 	 	$                    	 
	 
	 	6.	 	The sum of lines 1 through 5	 	 	$                    	 
	C.
	 	EBITDA (line A plus line B.6)	 	 	                      	 

Is line C equal to or greater than the amounts referenced above?

			
	 	 	 
	                               No, not in compliance
	 	                      Yes, in compliance

2

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