Exhibit 10.12

 

SECOND AMENDED AND RESTATED
EXPORT-IMPORT BANK LOAN AND SECURITY AGREEMENT

THIS SECOND AMENDED AND RESTATED EXPORT-IMPORT BANK LOAN AND SECURITY AGREEMENT
dated December 31, 2008 (this "EXIM Agreement"), between SILICON VALLEY BANK
("Bank"), whose address is 3003 Tasman Drive, Santa Clara, California 95054 and
SOCKET MOBILE, INC., a Delaware corporation ("Borrower"), whose address is 39700
Eureka Drive, Newark, California 94560 provides the terms on which Bank shall
lend to Borrower and Borrower shall repay Bank. The parties agree as follows:

RECITALS

A. Borrower and Bank have entered into that certain Amended and Restated Loan
and Security Agreement (EXIM Program) dated March 24, 2008 (as the same has been
amended, restated, or otherwise modified from time to time, the "Original EXIM
Agreement") pursuant to which Bank has agreed to extend and make available to
Borrower certain credit facilities.

B. Borrower and Bank have agreed to amend and restate the Original EXIM
Agreement in its entirety pursuant to the terms of this EXIM Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Bank and Borrower agree that the Original
EXIM Agreement is amended and restated in its entirety as follows:

1. ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this EXIM Agreement will be construed following
GAAP Calculations and determinations must be made following GAAP. The term
"financial statements" includes the notes and schedules. The terms "including"
and "includes" always mean "including (or includes) without limitation" in this
or any Loan Document. This EXIM Agreement shall be construed to impart upon Bank
a duty to act reasonably at all times.

2. LOAN AND TERMS OF PAYMENT

2.1 Advances.

Borrower will pay Bank the unpaid principal amount of all Advances and interest
on the unpaid principal amount of the Advances. Borrower acknowledges and agrees
that as of the Closing Date it has no offsets or defenses against the Bank under
the Original EXIM Agreement

2.1.1 Revolving Advances.

(a) Availability. Subject to the terms of this EXIM Agreement, Borrower may
request that Bank finance specific EXIM Eligible Foreign Accounts. Bank may, in
its sole discretion in each instance, finance EXIM Eligible Foreign Accounts by
extending credit to Borrower in an amount equal to the result of the Advance
Rate multiplied by the face amount of the Eligible Account (the "Advance"). Bank
may, in its sole discretion, change the percentage of the Advance Rate for a
particular Eligible Account on a case by case basis. When Bank makes an Advance,
the Eligible Account becomes a "Financed Receivable."

(b) Maximum Advances. The aggregate outstanding amount of all Advances,
outstanding at any time may not exceed One Million Five Hundred Thousand Dollars
($1,500,000). Notwithstanding any other term or provision of this EXIM
Agreement, the aggregate amount of Advances hereunder together with the
aggregate amount of loan advances under the Domestic Loan Agreement shall not at
any event exceed Two Million Five Hundred Thousand Dollars ($2,500,000).

 

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(c) Borrowing Procedure. To obtain an Advance, Borrower will deliver an Invoice
Transmittal for each EXIM Eligible Foreign Account it offers and submit purchase
orders and Export Orders in connection with such Advance. Bank may rely on
information set forth in or provided with the Invoice Transmittal. Bank will
credit Advances to Borrower's deposit account.

(d) Maturity. This Agreement shall terminate and all Obligations outstanding
hereunder shall be immediately due and payable on the EXIM Maturity Date, when
all Advances and other amounts due under this EXIM Agreement are immediately
payable.

(e) Credit Quality; Confirmations. Bank may, at its option, conduct a credit
check of the Account Debtor for each Account requested by Borrower for financing
hereunder in order to approve any such Account Debtor's credit before agreeing
to finance such Account. Bank may also verify directly with the respective
Account Debtors the validity, amount and other matters relating to the Accounts
(including confirmations of Borrower's representations in Section 5.2) by means
of mail, telephone or otherwise, either in the name of Borrower or Bank from
time to time in its sole discretion.

(f) Accounts Notification/Collection. Bank may notify any Person owing Borrower
money of Bank's security interest in the funds and verify and/or collect the
amount of the Account.

(g) Bank's Discretion. Notwithstanding anything to the contrary contained
herein, this EXIM Agreement may be terminated by Borrower or Bank at any time,
and Bank is not obligated to finance any EXIM Eligible Foreign Accounts. Bank
and Borrower hereby acknowledge and agree that Bank's agreement to finance EXIM
Eligible Foreign Accounts hereunder is discretionary in each instance.
Accordingly, there shall not be any recourse to Bank, nor liability of Bank, on
account of any delay in Bank's making of, and/or any decline by Bank to make,
any loan or advance requested hereunder. If this EXIM Agreement is terminated by
Bank or Borrower for any reason, Borrower shall pay to Bank a termination fee in
an amount equal to one percent (1.0%) of the EXIM Facility Amount (the "Early
Termination Fee"). The Early Termination Fee shall be due and payable on the
effective date of such termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations. Notwithstanding
the foregoing, Bank agrees to waive the Early Termination Fee if Bank agrees to
refinance and re-document this EXIM Agreement under another division of Bank (in
its sole and exclusive discretion) prior to the EXIM Maturity Date.

2.1.2 Certain Receivables Billed/Payable Outside of the United States.

All accounts owing to Borrower or any affiliate of the Borrower that are billed
and payable outside of the United States are not eligible for borrowing
hereunder. However, such accounts may possibly be considered eligible, in the
sole discretion of Bank, for borrowing under this credit facility only if all of
the following conditions are satisfied: (a) each such loan party is a borrower
under this EXIM Agreement; (b) all proceeds relating to any and all such
accounts are remitted to the United States on a monthly basis (subject to
certain de minimus retention for local expenses); (c) all such accounts are
derived from eligible exports originating from the United States; (d) Bank
obtains a perfected first priority security interest in all assets of the
applicable borrowing entity or entities in the foreign location all as
determined to be acceptable to Bank in its sole discretion; (e) the Bank obtains
a legal opinion from counsel to the applicable borrowing entity or entities in
the foreign location as to such matters as the Bank shall in its discretion
determine are necessary or desirable, including, without limitation, that the
collateral lien position of the Bank is fully enforceable; (f) such accounts are
denominated in United States Dollars or other currencies acceptable to Bank and
the EXIM Bank; (g) not more than 50% of the Eligible Accounts hereunder may
consist of those that are billed and payable outside of the United States; (h)
the advance rate for any such Accounts may not in any event exceed 70%; and (i)
such other terms and conditions as to advance rate and other matters as are
acceptable to Bank and EXIM Bank in their sole discretion.

 

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2.1.3 Domestic Loan Agreement.

Bank and Borrower are parties to that certain Second Amended and Restated Loan
and Security Agreement, dated the Closing Date (the "Domestic Loan Agreement").
Both this EXIM Agreement and the Domestic Loan Agreement shall continue in full
forced and effect, and all rights and remedies under this EXIM Agreement and
Domestic Loan Agreement are cumulative. The term "Obligations" as used in the
Agreement and in the Domestic Loan Agreement shall include, without limitation,
the obligation to pay when due all Credit Extensions made pursuant to this EXIM
Agreement (the "EXIM Loans") and all interest thereof and the obligation to
apply when due all Credit Extensions made pursuant to the Domestic Loan
Agreement (the "Domestic Loans") and all interest thereon. Without limiting the
generality of the foregoing, all "Collateral" as defined in this EXIM Agreement
and defined in the Domestic Loan Agreement shall secure all EXIM Loans and all
Domestic Loans and all interest thereon, and all other Obligations. Any Event of
Default under this EXIM Agreement shall also constitute an Event of Default
under the Domestic Loan Agreement and any Event of Default under the Domestic
Loan Agreement shall constitute an Event of Default under this EXIM Agreement.
In the event Bank assigns its right under the Domestic Loan Agreement or its
rights under this EXIM Agreement to any third party, including without
limitation, EXIM Bank, whether before or after the occurrence of any Event of
Default, Bank shall have the right (but not any obligation), it its sole
discretion, to allocate and apportion Collateral to this EXIM Agreement and/or
to specify the priorities of the respective security interests in such
Collateral between itself and the assignee, all without notice to, or consent
of, Borrower.

2.2 Collections, Interest Rate, Lockbox.

(a) Collections. Collections will be credited to the Financed Receivable Balance
for such Financed Receivable, but if there is an Event of Default, Bank may
apply Collections to the Obligations in any order it chooses. If Bank receives a
payment for both a Financed Receivable and a non-Financed Receivable, the funds
will first be applied to the Financed Receivable and, if there is no Event of
Default then existing, the excess will be remitted to Borrower, subject to
Section 2.2(d).

(b) Finance Charges. In computing Finance Charges on the Obligations under this
EXIM Agreement, all Collections received by Bank shall be deemed applied by Bank
on account of the Obligations three (3) Business Days after receipt of the
Collections. Borrower will pay a finance charge (the "Finance Charge") on the
Financed Receivable Balance which is equal to the Applicable Rate divided by 360
multiplied by the number of days each such Financed Receivable is outstanding
multiplied by the outstanding Financed Receivable Balance. The Finance Charge is
payable when the Advance made based on such Financed Receivable is payable in
accordance with Section 2.3 hereof. Because the Advance Rate may differ based on
the type of EXIM Eligible Account, the Bank will from time to time, adjust the
Finance Charge on Advances made at an Advance Rate of 60% so that the effective
Finance Charge on such Advances is reasonably equivalent to the Finance Charge
which applies to Advances based on an 80% Advance Rate. After an Event of
Default, the Applicable Rate will increase an additional five percent (5.0%) per
annum effective immediately upon the occurrence of such Event of Default.

 

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(c) Lockbox. Borrower shall direct each Account Debtor (and each depository
institution where proceeds of Accounts are on deposit) to remit payments with
respect to the Accounts to a lockbox account established with Bank or to wire
transfer payments to a cash collateral account that Bank controls (collectively,
the "Lockbox"). It will be considered an immediate Event of Default if the
Lockbox is not set-up and operational on the Closing Date.

(d) Account Collection Services. Upon receipt by Borrower of such proceeds,
Borrower shall immediately transfer and deliver same to Bank, along with a
detailed cash receipts journal. Provided no Event of Default exists or an event
that with notice or lapse of time will be an Event of Default, within three (3)
days of receipt of such amounts by Bank, Bank will turn over to Borrower the
proceeds of the Accounts other than Collections with respect to Financed
Receivables and the amount of Collections in excess of the amounts for which
Bank has made an Advance to Borrower, less any amounts due to Bank, such as the
Finance Charge, the Facility Fee, payments due to Bank, other fees and expenses,
or otherwise; provided, however, Bank may hold such excess amount with respect
to Financed Receivables as a reserve until the end of the applicable
Reconciliation Period if Bank, in its discretion, determines that other Financed
Receivable(s) may no longer qualify as an Eligible Account at any time prior to
the end of the subject Reconciliation Period. This Section does not impose any
affirmative duty on Bank to perform any act other than as specifically set forth
herein. All Accounts and the proceeds thereof are Collateral and if an Event of
Default occurs, Bank may apply the proceeds of such Accounts to the Obligations.

2.3 Repayment of Obligations; Adjustments.

(a) Repayment. Borrower will repay each Advance on the earliest of: (i) the date
on which payment is received of the Financed Receivable with respect to which
the Advance was made, (ii) the date on which the Financed Receivable is no
longer an EXIM Eligible Foreign Account, (iii) the date on which any Adjustment
is asserted to the Financed Receivable (but only to the extent of the Adjustment
if the Financed Receivable remains otherwise an Eligible Account), (iv) the date
on which there is a breach of any warranty or representation set forth in
Section 5.2 , or a breach of any covenant in this EXIM Agreement or (v) the EXIM
Maturity Date (including any early termination). Each payment will also include
all accrued Finance Charges, Collateral Handling Fees and all other amounts then
due and payable hereunder or under the Domestic Loan Agreement.

(b) Repayment on Event of Default. When there is an Event of Default, Borrower
will, if Bank demands (or, upon the occurrence of an Event of Default under
Section 8, immediately without notice or demand from Bank) repay all of the
Advances. The demand may, at Bank's option, include the Advance for each
Financed Receivable then outstanding and all accrued Finance Charges, Collateral
Handling Fee, the Early Termination Fee, attorneys' and professional fees, court
costs and expenses, and any other Obligations.

 

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(c) Debit of Accounts. Bank may debit any of Borrower's deposit accounts for
payments or any amounts Borrower owes Bank hereunder. Bank shall promptly notify
Borrower when it debits Borrower's accounts. These debits shall not constitute a
set-off.

(d) Adjustments. If, at any time during the term of this EXIM Agreement, any
Account Debtor asserts an Adjustment, Borrower issues a credit memorandum, or
any of the representations and warranties in Section 5 or covenants in this EXIM
Agreement are no longer true in all material respects, Borrower will promptly
advise Bank.

2.4 Fees.

Borrower will pay:

(a) Bank Expenses. All Bank Expenses incurred through and after the date of this
EXIM Agreement, (including reasonable attorneys' fees and expenses) payable when
due.

(b) EXIM Bank Expenses. On the Closing Date, EXIM Bank Expenses incurred through
the date hereof.

(c) Collateral Handling Fee. Borrower will pay to Bank a collateral handling fee
equal to .70% per month of the Financed Receivable Balance for each Financed
Receivable outstanding based upon a 360 day year (the "Collateral Handling
Fee"). This fee is charged on a daily basis which is equal to the Collateral
Handling Fee divided by 30, multiplied by the number of days each such Financed
Receivable is outstanding, multiplied by the outstanding Financed Receivable
Balance. The Collateral Handling Fee is payable when the Advance made based on
such Financed Receivable is payable in accordance with Section 2.3 hereof. In
computing Collateral Handling Fees under this EXIM Agreement, all Collections
received by Bank shall be deemed applied by Bank on account of Obligations three
(3) Business Days after receipt of the Collections. After an Event of Default,
the Collateral Handling Fee will increase an additional 0.50% effective
immediately upon such Event of Default.

2.5 Use of Proceeds.

Borrower will use the proceeds of the Advances only for the purposes specified
in the Borrower Agreement. Borrower will not use the proceeds of the Advances
for any purpose prohibited by the Borrower Agreement.

2.6 EXIM Guarantee.

To facilitate the financing of EXIM Eligible Foreign Accounts, the EXIM Bank has
agreed to guarantee the EXIM Advances made under this EXIM Agreement, pursuant
to a Master Guarantee Agreement, Loan Authorization Agreement and (to the extent
applicable) Delegated Authority Letter Agreement (collectively, the "EXIM
Guarantee"). If, at any time after the EXIM Guarantee has been entered into by
Bank, for any reason other than due to any action or inaction of Borrower under
the EXIM Guarantee, (a) the EXIM Guarantee shall cease to be in full force and
effect, or (b) if the EXIM Bank declares the EXIM Guarantee void or revokes any
obligations thereunder or denies liability thereunder, and any Overadvance
results from either of the foregoing, Bank shall provide notice of such
Overadvance to Borrower, and Borrower shall immediately pay the amount of the
excess to Bank. If, at any time after the EXIM Guarantee has been entered into
by Bank, for any reason other than the one described in the foregoing sentence,
(x) the EXIM Guarantee shall cease to be in full force and effect, or (y) the
EXIM Bank declares the EXIM Guarantee void or revokes any obligations thereunder
or denies liability thereunder, any such event shall constitute an Event of
Default under this EXIM Agreement. Nothing in any confidentiality agreement in
this EXIM Agreement or in any other agreement shall restrict Bank's right to
make disclosures and provide information to the EXIM Bank in connection with the
EXIM Guarantee.

 

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2.7 EXIM Borrower Agreement.

Borrower shall execute and deliver a Borrower Agreement, in the form specified
by the EXIM Bank, in favor of Bank and the EXIM Bank, together with an amendment
thereto approved by the EXIM Bank to conform certain terms of such Borrower
Agreement to the terms of this EXIM Agreement (as amended, the "Borrower
Agreement"). When the Borrower Agreement is entered into by Borrower and the
EXIM Bank and delivered to Bank, this EXIM Agreement shall be subject to all of
the terms and conditions of the Borrower Agreement, all of which are hereby
incorporated herein by this reference. From and after the time Borrower and the
EXIM Bank have entered into the Borrower Agreement and delivered the same to
Bank, Borrower expressly agrees to perform all of the obligations and comply
with all of the affirmative and negative covenants and all other terms and
conditions set forth in the Borrower Agreement as though the same were expressly
set forth herein. In the event of any conflict between the terms of the Borrower
Agreement (if then in effect) and the other terms of this EXIM Agreement,
whichever terms are more restrictive shall apply. Borrower acknowledges and
agrees that it has received a copy of the Loan Authorization Agreement which is
referred to in the Borrower Agreement. If the Borrower Agreement is entered into
by Borrower and the EXIM Bank and delivered to Bank, Borrower agrees to be bound
by the terms of the Loan Authorization Agreement, including, without limitation,
by any additions or revisions made prior to its execution on behalf of EXIM
Bank. Upon the execution of the Loan Authorization Agreement by EXIM Bank and
Bank, it shall become an attachment to the Borrower Agreement. Borrower shall
reimburse Bank for all fees and all out of pocket costs and expenses incurred by
Bank with respect to the EXIM Guaranty and the Borrower Agreement, including
without limitation all facility fees and usage fees, and Bank is authorized to
debit any of Borrower's deposit accounts with Bank for such fees, costs and
expenses when paid by Bank.

3. CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Advance.

Bank's obligation to make the initial Advance is subject to the condition
precedent that it receive the agreements, documents and fees it requires.

3.2 Conditions Precedent to all Advances.

Bank's obligations to make each Advance, including the initial Advance, is
subject to the following:

(a) receipt of the Invoice Transmittal;

(b) Bank shall have (at its option) conducted the confirmations and
verifications as described in Section 2.1.1(e) and

(c) each of the representations and warranties in Section 5 shall be true on the
date of the Invoice Transmittal and on the effective date of each Advance
(except for those representations and warranties that relate specifically to an
earlier date) and no Event of Default shall have occurred and be continuing, or
result from the Advance. Each Advance is Borrower's representation and warranty
on that date that the representations and warranties in Section 5 remain true
(except for those representations and warranties that relate specifically to an
earlier date); and

 

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(d) the EXIM Guarantee will be in full force and effect.

4. CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest.

Borrower grants Bank a continuing security interest in all presently existing
and later acquired Collateral to secure all Obligations and performance of each
of Borrower's duties under the Loan Documents. Except for Permitted Liens, any
security interest will be a first priority security interest in the Collateral.
Bank may place a "hold" on any deposit account pledged as Collateral.

4.2 Authorization to File.

Borrower authorizes Bank to file financing statements without notice to
Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to perfect or protect Bank's interest in the Collateral.

5. REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

5.1 Domestic Loan Documents.

The representations and warranties contained in the Domestic Loan Documents,
which are incorporated into this EXIM Agreement, are true and correct.

5.2 Accounts Receivable.

(a) For each Account with respect to which Advances are requested, on the date
each Advance is requested and made, such Account shall meet the minimum Eligible
Foreign Accounts requirements, as the case may be, set forth in Section 13.1
below.

(b) All statements made and all unpaid balances appearing in all invoices,
instruments and other documents evidencing the Accounts are and shall be true
and correct and all such invoices, instruments and other documents, and all of
Borrower's Books are genuine and in all respects what they purport to be. All
sales and other transactions underlying or giving rise to each Account shall
comply in all material respects with all applicable laws and governmental rules
and regulations. Borrower has no knowledge of any actual or imminent Insolvency
Proceeding of any Account Debtor whose accounts are an Eligible Foreign Account
in any Invoice Transmittal. To the best of Borrower's knowledge, all signatures
and endorsements on all documents, instruments, and agreements relating to all
Accounts are genuine, and all such documents, instruments and agreements are
legally enforceable in accordance with their terms.

6. AFFIRMATIVE COVENANTS

Borrower will do all of the following:

6.1 Domestic Loan Documents.

Borrower will comply with all the provisions of the Domestic Loan Documents.

6.2 EXIM Insurance.

If required by Bank, Borrower will obtain, and pay when due all premiums with
respect to, and maintain uninterrupted foreign credit insurance. In addition,
Borrower will execute in favor of Bank an assignment of proceeds of any
insurance policy obtained by Borrower and issued by EXIM Bank insuring against
comprehensive commercial and political risk (the "EXIM Bank Policy"). The
insurance proceeds from the EXIM Bank Policy assigned or paid to Bank will be
applied to the balance outstanding under this EXIM Agreement. Borrower will
immediately notify Bank and EXIM Bank in writing upon submission of any claim
under the EXIM Bank Policy. Then Bank will not be obligated to make any further
Credit Extensions to Borrower without prior approval from EXIM Bank.

 

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6.3 Borrower Agreement.

Borrower will comply with all terms of the Borrower Agreement. If any provision
of the Borrower Agreement conflicts with any provision contained in this EXIM
Agreement, the more strict provision, with respect to the Borrower, will
control.

6.4 Terms of Sale.

Borrowers will, if required by EXIM Bank or Bank, cause all sales of products on
which the Credit Extensions are based to be supported by one or more irrevocable
letters of credit in an amount and of matter, naming a beneficiary and issued by
a financial institution acceptable to Bank and negotiated by Bank.

6.5 Reporting Requirements.

Borrower shall deliver all reports, certificates and other documents to Bank as
provided in the Borrower Agreement, including, without limitation, purchase
orders and any other information that Bank and EXIM Bank may reasonably request.
In addition, Borrower shall comply with the reporting requirements set forth in
the Domestic Loan Documents.

6.6 Further Assurances.

Borrower will execute any further instruments and take further action as Bank
requests to perfect or continue Bank's security interest in the Collateral or to
effect the purposes of this EXIM Agreement.

7. NEGATIVE COVENANTS

Borrower will not do any of the following:

7.1 Domestic Loan Documents.

Violate or fail to comply with the Domestic Loan Documents.

7.2 Borrower Agreement.

Violate or fail to comply with any provision of the Borrower Agreement.

7.3 EXIM Guarantee.

Take an action, or permit any action to be taken, that causes, or could be
expected to cause, the EXIM Guarantee to not be in full force and effect.

8. EVENTS OF DEFAULT

Any one of the following is an Event of Default:

 

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8.1 Payment Default.

If Borrower fails to pay any of the Obligations within 3 days after their due
date. During the additional period the failure to cure the default is not an
Event of Default (but no Credit Extension will be made during the cure period);

8.2 Covenant Default.

If Borrower violates any covenant in this EXIM Agreement or in any of the
Domestic Loan Documents or the Borrower Agreement or an Event of Default occurs
under this EXIM Agreement or the Domestic Loan Documents.

8.3 EXIM Guarantee.

If the EXIM Guarantee ceases for any reason to be in full force and effect, or
if the EXIM Bank declares the EXIM Guarantee void or revokes any obligations
under the EXIM Guarantee.

8.4 Domestic Loan Agreement.

The occurrence of any Event of Default under the Domestic Loan Agreement.

9. BANK'S RIGHTS AND REMEDIES

9.1 Rights and Remedies.

When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:

(a) Declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 of the Domestic Loan Documents occurs all
Obligations are immediately due and payable without any action by Bank);

(b) Stop advancing money or extending credit for Borrower's benefit under this
EXIM Agreement or under any other agreement between Borrower and Bank;

(c) Settle or adjust disputes and claims directly with account debtors for
amounts, on terms and in any order that Bank considers advisable;

(d) Make any payments and do any acts it considers necessary or reasonable to
protect its security interest in the Collateral. Borrower will assemble the
Collateral if Bank requires and make it available as Bank designates. Bank may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank's rights or remedies;

(e) Apply to the Obligations any (i) balances and deposits of Borrower it holds,
or (ii) any amount held by Bank owing to or for the credit or the account of
Borrower;

(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell the Collateral; and

(g) Dispose of the Collateral according to the Code.

 

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9.2 Power of Attorney.

Borrower irrevocably appoints Bank and its successors and assigns as
attorney-in-fact and authorizes Bank, regardless of whether there has been an
Event of Default, to: (a) sell, assign, transfer, pledge, compromise, or
discharge all or any part of the Financed Receivables; (b)demand, collect, sue,
and give releases to any Account Debtor for monies due and compromise,
prosecute, or defend any action, claim, case or proceeding about the Financed
Receivables, including filing a claim or voting a claim in any bankruptcy case
in Bank's or Borrower's name, as Bank chooses; (c) prepare, file and sign
Borrower's name on any notice, claim, assignment, demand, draft, or notice of or
satisfaction of lien or mechanics' lien or similar document; (d) notify all
Account Debtors to pay Bank directly; (5) receive, open, and dispose of mail
addressed to Borrower; (e) endorse Borrower's name on checks or other
instruments (to the extent necessary to pay amounts owed pursuant to this EXIM
Agreement); and (f) execute on Borrower's behalf any instruments, documents,
financing statements to perfect Bank's interests in the Financed Receivables and
Collateral and do all acts and things necessary or expedient, as determined
solely and exclusively by Bank, to protect, preserve, and otherwise enforce
Bank's rights and remedies under this EXIM Agreement, as directed by Bank.

9.3 Accounts Collection.

When an Event of Default occurs and continues, Bank may notify any Person owing
Borrower money of Bank's security interest in the funds and verify the amount of
the Account. Borrower must collect all payments in trust for Bank and, if
requested by Bank, immediately deliver the payments to Bank in the form received
from the account debtor, with proper endorsements for deposit.

9.4 Bank Expenses.

If Borrower fails to pay any amount or furnish any required proof of payment to
third persons Bank may make all or part of the payment or obtain insurance
policies required in Section 6.5 of the Domestic Loan Agreement, and take any
action under the policies Bank deems prudent. Any amounts paid by Bank are Bank
Expenses and immediately due and payable, bearing interest at the then
applicable rate and secured by the Collateral. No payments by Bank are deemed an
agreement to make similar payments in the future or Bank's waiver of any Event
of Default.

9.5 Bank's Liability for Collateral.

If Bank complies with reasonable banking practices it is not liable for: (a) the
safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any
diminution in the value of the Collateral; or (d) any act or default of any
carrier, warehouseman, bailee, or other person. Borrower bears all risk of loss,
damage or destruction of the Collateral.

9.6 Remedies Cumulative.

Bank's rights and remedies under this EXIM Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.

9.7 Demand Waiver.

Borrower waives demand, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees held by Bank on which Borrower is liable.

 

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9.8 EXIM Direction.

Upon the occurrence of an Event of Default, EXIM Bank shall have right to (i)
direct Bank to exercise the remedies specified in Section 9.1 and (ii) request
that Bank accelerate the maturity of any other loans to Borrower.

9.9 EXIM Notification.

Bank has the right to immediately notify EXIM Bank in writing if it has
knowledge of any of the following events: (1) any failure to pay any amount due
under this EXIM Agreement; (2) any failure to pay when due any amount payable to
Bank under any Loan owing by Borrower to Bank; (3) the filing of an action for
debtor's relief by, against or on behalf of Borrower; (4) any threatened or
pending material litigation against Borrower, or any dispute involving Borrower.

If Bank sends a notice to EXIM Bank, Bank has the right to send EXIM Bank a
written report on the status of events covered by the notice every 30 days after
the date of the original notification, until Bank files a claim with EXIM Bank
or the defaults have been cured (but no Advances may be required during the cure
period unless EXIM Bank gives its written approval). If directed by EXIM Bank,
Bank will have the right to exercise any rights it may have against the Borrower
to demand the immediate repayment of all amount outstandings under the EXIM Loan
Documents.

10. NOTICES

All notices or demands by any party about this EXIM Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses first written above. A Party may
change its notice address by giving the other Party written notice.

11. CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE

California law governs the EXIM Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Santa Clara County, California; provided,
however, that nothing in this EXIM Agreement shall be deemed to operate to
preclude Bank from bringing suit or taking other legal action in any other
jurisdiction to realize on the Collateral or any other security for the
Obligations, or to enforce a judgment or other court order in favor of Bank.
Borrower expressly submits and consents in advance to such jurisdiction in any
action or suit commenced in any such court, and Borrower hereby waives any
objection that it may have based upon lack of personal jurisdiction, improper
venue, or forum non conveniens and hereby consents to the granting of such legal
or equitable relief as is deemed appropriate by such court. Borrower hereby
waives personal service of the summons, complaints, and other process issued in
such action or suit and agrees that service of such summons, complaints, and
other process may be made by registered or certified mail addressed to Borrower
at the address set forth in Section 10 of this EXIM Agreement and that service
so made shall be deemed completed upon the earlier to occur of Borrower's actual
receipt thereof or three (3) days after deposit in the U.S. mails, proper
postage prepaid.

 

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TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE
THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF ANY
OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT,
BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR
BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER
WITH ITS COUNSEL.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES' AGREEMENT TO WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial
by jury is not enforceable, the parties hereto agree that any and all disputes
or controversies of any nature between them arising at any time shall be decided
by a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court. The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure §§ 638 through 645.1, inclusive. The private judge shall have the
power, among others, to grant provisional relief, including without limitation,
entering temporary restraining orders, issuing preliminary and permanent
injunctions and appointing receivers. All such proceedings shall be closed to
the public and confidential and all records relating thereto shall be
permanently sealed. If during the course of any dispute, a party desires to seek
provisional relief, but a judge has not been appointed at that point pursuant to
the judicial reference procedures, then such party may apply to the Santa Clara
County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a
court under the rules of evidence applicable to judicial proceedings. The
parties shall be entitled to discovery which shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and order applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in
this paragraph shall limit the right of any party at any time to exercise
self-help remedies, foreclose against collateral, or obtain provisional
remedies. The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph.

12. GENERAL PROVISIONS

12.1 Successors and Assigns.

This EXIM Agreement binds and is for the benefit of the successors and permitted
assigns of each party. Borrower may not assign this EXIM Agreement or any rights
under it without Bank's prior written consent which may be granted or withheld
in Bank's discretion. Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank's obligations, rights and benefits under this
EXIM Agreement.

 

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12.2 Indemnification.

Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.

12.3 Time of Essence.

Time is of the essence for the performance of all obligations in this EXIM
Agreement.

12.4 Severability of Provision.

Each provision of this EXIM Agreement is severable from every other provision in
determining the enforceability of any provision.

12.5 Amendments in Writing, Integration.

All amendments to this EXIM Agreement must be in writing. This EXIM Agreement
represents the entire agreement about this subject matter, and supersedes prior
negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of this EXIM Agreement merge into this EXIM Agreement and the
Loan Documents.

12.6 Counterparts.

This EXIM Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.

12.7 Survival.

All covenants, representations and warranties made in this EXIM Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.

12.8 Confidentiality.

In handling any confidential information, Bank will exercise the same degree of
care that it exercises for its own proprietary information, but disclosure of
information may be made (i) to Bank's subsidiaries or affiliates in connection
with their business with Borrower, (ii) to prospective transferees or purchasers
of any interest in the Loans, (iii) as required by law, regulation, subpoena, or
other order, (iv) as required in connection with Bank's examination or audit and
(v) as Bank considers appropriate exercising remedies under this EXIM Agreement.
Confidential information does not include information that either: (a) is in the
public domain or in Bank's possession when disclosed to Bank, or becomes part of
the public domain after disclosure to Bank; or (b) is disclosed to Bank by a
third party, if Bank does not know that the third party is prohibited from
disclosing the information.

13. DEFINITIONS

13.1 Definitions.

Except as otherwise defined, terms that are capitalized in this EXIM Agreement
will have the same meaning assigned in the Domestic Loan Documents. In this EXIM
Agreement:

"Advance" or "Advances" is defined in Section 2.1.1(a).

 

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"Advance Rate" is (i) eighty percent (80%) of EXIM Eligible Foreign Accounts
which are hedged and covered by the EXIM working Capital Guarantee Program, and
(ii) seventy percent (70%) of the EXIM Eligible Foreign Accounts which are
covered by the EXIM working Capital Guarantee Program, provided, however, that
with respect to any Account Debtor which is a distributor, the Advance Rate
shall be sixty percent (60%).

"Applicable Rate" is a per annum rate equal to the greater of either (i) the
Prime Rate plus two percent (2.0%), or (ii) six percent (6.0%).

"Borrower Agreement" is defined in Section 2.7.

"Buyer" is defined in the Borrower Agreement.

"Closing Date" is the date of this EXIM Agreement.

"Collateral" is the property described on Exhibit A.

"Collateral Handling Fee" is defined in Section 2.4(c).

"Country Limitation Schedule" shall mean the schedule published from time to
time by EXIM Bank and provided to Borrower by Bank which sets forth on a country
by country basis whether and under what conditions EXIM Bank will provide
coverage for the financing of export transactions to countries listed therein.

"Credit Extension" is all Advances and each other extension of credit by Bank
for Borrower's benefit under this EXIM Agreement.

"Domestic Loan Agreement" is defined in Section 2.1.3.

"Domestic Loan Documents" means the Domestic Loan Agreement, any note or notes
executed by Borrower or any other agreement entered into in connection with the
Domestic Loan Agreement, between Borrower and Bank.

"Early Termination Fee" is defined in Section 2.1.1(g).

"EXIM Bank" is the Export-Import Bank of the United States.

"EXIM Bank Expenses" are all audit fees and expenses; reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the EXIM Loan Documents
(including appeals or Insolvency Proceedings) and the fees that the Bank pays to
the EXIM Bank in consideration of the issuance of the EXIM Guarantee.

"EXIM Bank Policy" is defined in Section 6.2.

"EXIM Eligible Foreign Accounts" shall mean those Accounts arising from the sale
of items which are due and payable to Borrower in the United States which are
acceptable to Bank and which are deemed to be eligible pursuant to the Loan
Documents, but in no event shall EXIM Eligible Foreign Accounts include any
Account:

(a) that does not arise from the sale of Items in the ordinary course of the
Borrower's business;

(b) that is not subject to a valid, perfected, and enforceable first priority
security interest in favor of Bank;

(c) as to which any covenant, representation or warranty contained in the Loan
Documents relating to such Receivable has been breached;

 

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(d) that is not owned by the Borrower or is subject to any right, claim, or
interest of another party other than the Lien in favor of Bank;

(e) with respect to which an invoice has not been sent;

(f) generated by the sale or provision of defense articles or services, subject
to exceptions approved in writing by EXIM Bank;

(g) that is due and payable from a military Buyer, subject to exceptions
approved in writing by EXIM Bank;

(h) that is due and payable from a foreign Buyer located in a country with which
EXIM Bank is legally prohibited from doing business as set forth in the current
Country Limitation Schedule. (Note: If the Borrower has knowledge that an export
to a country in which EXIM Bank may do business, as set forth in the current
Country Limitation Schedule, will be re-exported to a country with which EXIM
Bank is legally prohibited from doing business, the corresponding receivables
(or a pro-rata portion thereof) shall not be considered EXIM Eligible Foreign
Accounts.);

(i) that does not comply with the requirements of the Country Limitation
Schedule;

(j) that by its original terms is due and payable more than one-hundred-eighty
(180) days from the date of invoice;

(k) that is not paid within sixty (60) calendar days from its original due date
unless insured through EXIM Bank (or other acceptable) export credit insurance
for comprehensive commercial and political risk, in which case ninety (90)
calendar days shall apply;

(l) that arises from a sale of goods to or performance of services for an
employee, stockholder, or subsidiary of the Borrower, intra-company receivables
or any receivable from a stockholder, any person or entity with a controlling
interest in the Borrower or which shares common controlling ownership with the
Borrower;

(m) that is backed by a letter of credit where the Items covered by the subject
letter of credit have not yet been shipped, or where the covered services have
not yet provided;

(n) that Bank or EXIM Bank, in its reasonable judgment, deem uncollectible or
unacceptable; this category includes, but is not limited to, finance charges or
late charges imposed on the foreign Buyer by the Borrower as a result of the
foreign Buyer's past due status;

(o) that is denominated in non-U.S. currency, unless pre-approved in writing by
EXIM Bank;

(p) that does not comply with the terms of sale as set forth by EXIM Bank;

(q) that is due and payable from a Buyer who becomes unable to pay its debts or
whose ability to pay its debts becomes questionable;

(r) that arises from a bill-and-hold, guaranteed sale, sale-and-return, sale on
approval, consignment, or any other repurchase or return basis or is evidenced
by chattel paper;

(s) for which the Items giving rise to such Account have not been shipped to the
Buyer or when the Items are services, such services have not been performed or
when the Export Order specifies a timing for invoicing the Items other than
shipment or performance and the Items have not been invoiced in accordance with
such terms of the Export Order, or the Account does not otherwise represent a
final sale;

 

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(t) that is subject to any offset, deduction, defense, dispute, or counterclaim,
or the Buyer is also a creditor or supplier of the Borrower, or the Account is
contingent in any respect or for any reason;

(u) for which the Borrower has made any agreement with the Buyer for any
deduction therefrom, except for discounts or allowances made in the ordinary
course of business for prompt payment;

(v) for which any of the Items giving rise to such Account have been returned,
rejected, or repossessed;

(w) that arises from the sale of Items that do not meet 50% U.S. Content
requirements;

(x) that is deemed to be ineligible by EXIM Bank; or

(y) Accounts with terms of sales greater than 90 days.

Further, Eligible Accounts are also required to constitute "Eligible Export
Related Accounts Receivable" (as defined in the Borrower Agreement) and meet all
standards for lending as set forth in the Borrower Agreement.

"EXIM Guarantee" is that certain Master Guarantee Agreement or other agreement,
as amended from time to time, the terms of which are incorporated into this EXIM
Agreement.

"EXIM Loan Documents" means this EXIM Agreement, any note or notes executed by
Borrower or any other agreement entered into in connection with this EXIM Loan
Agreement, pursuant to which EXIM Bank guarantees Borrower's obligations under
this EXIM Agreement.

"EXIM Maturity Date" is February 15, 2009.

"EXIM Facility Amount" is One Million Eight Hundred Seventy-Five Thousand
Dollars ($1,875,000).

"Export Order" is a written export order or contract for the purchase by the
Buyer from the Borrower of any finished goods or services which are intended for
export.

"Finance Charge" is defined in Section 2.2(b).

"Financed Receivables" are all those EXIM Eligible Foreign Accounts, including
their proceeds which Bank finances and makes an Advance, as set forth in Section
2.1.1. A Financed Receivable stops being a Financed Receivable (but remains
Collateral) when the Advance made for the Financed Receivable has been fully
paid.

"Financed Receivable Balance" is the total outstanding gross face amount, at any
time, of any Financed Receivable.

"Invoice Transmittal" shows EXIM Eligible Foreign Accounts which Bank may
finance and, for each such Account, includes the Account Debtor's, name,
address, invoice amount, invoice date and invoice number.

"Loan Documents" are, collectively, this EXIM Agreement, the Domestic Loan
Documents, any note, or notes or guaranties executed by Borrower in connection
with this EXIM Agreement or the Domestic Loan Documents, and any other present
or future agreement between Borrower and/or for the benefit of Bank in
connection with this EXIM Agreement or the Domestic Loan Documents, all as
amended, extended or restated.

 

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"Lockbox" is defined in Section 2.2(c).

"Obligations" are debts, principal, interest, Bank Expenses and other amounts
Borrower owes Bank now or later, including letters of credit and exchange
contracts and including interest accruing after Insolvency Proceedings begin and
debts, liabilities, or obligations of Borrower assigned to Bank and the
Obligations of Borrower under the Domestic Loan Documents.

"Schedule" is any attached schedule of exceptions.

"U.S. Content" means, with respect to any Item, all the costs, including labor,
materials, services and overhead, but not markup or profit margin, which are of
U.S. origin or manufacture, and which are incorporated into an Item in the
United States.

[Signatures Appear on the Following Page]

 

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this EXIM Agreement to be
executed as of the Closing Date.

BORROWER:

SOCKET MOBILE, INC.

By   /s/ David W. Dunlap  
Name:  David W. Dunlap  
Title:  Vice President of Finance and Administration and
Chief Financial Officer (Duly Authorized Officer and
Principal Financial and Accounting Officer)

BANK:

SILICON VALLEY BANK

By  /s/ Aman Johal  
Name:  Aman Johal  
Title:  Relationship Manager

Effective Date: December 31, 2008

 

 

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EXHIBIT A

The Collateral consists of all of Borrower's right, title and interest in and to
the following:

All goods, equipment, inventory, contract rights or rights to payment of money,
leases, license agreements, franchise agreements, general intangibles (including
payment intangibles) accounts (including health-care receivables), documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), commercial tort claims,
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and
any copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work, whether published or
unpublished, now owned or later acquired; any patents, trademarks, service marks
and applications therefor; trade styles, trade names, any trade secret rights,
including any rights to unpatented inventions, know how, operating manuals,
license rights and agreements and confidential information, now owned or
hereafter acquired; or any claims for damages by way of any past, present and
future infringement of any of the foregoing; and

All Borrower's books relating to the foregoing and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.