Untitled Document


Exhibit 10.1

  

 

 FIRST AMENDMENT
  TO SECOND AMENDED AND RESTATED

  LOAN AND SECURITY AGREEMENT

 

THIS FIRST AMENDMENT TO SECOND AMENDED
  AND RESTATED LOAN AND SECURITY AGREEMENT (this "Agreement") is entered
  into this 19th day of February 2009, by and between SILICON VALLEY BANK ("Bank")
  and SOCKET MOBILE, INC., a Delaware corporation ("Borrower"), whose address
  is 39700 Eureka Drive, Newark, California 94560. 

  

RECITALS

A. Bank and Borrower have
  entered into that certain Second Amended and Restated Loan and Security Agreement
  dated as of December 24, 2008 (as the same has and may continue to be from time
  to time further amended, modified, supplemented or restated, the "Loan Agreement").
  

B. Bank has extended credit
  to Borrower for the purposes permitted in the Loan Agreement. 

C. Borrower has requested
  that Bank (i) extend the Maturity Date, and (ii) amend certain other provisions
  of the Loan Agreement. 

D. Although Bank is under
  no obligation to do so, Bank is willing to (i) extend the Maturity Date and
  (ii) amend certain provisions of the Loan Agreement, all on the terms and conditions
  set forth in this Agreement, so long as Borrower complies with the terms, covenants
  and conditions set forth in this Agreement in a timely manner. 

AGREEMENT

NOW, THEREFORE, in
  consideration of the foregoing recitals and other good and valuable consideration,
  the receipt and adequacy of which is hereby acknowledged, and intending to be
  legally bound, the parties hereto agree as follows: 

1. Definitions. Capitalized
  terms used but not defined in this Agreement, including its preamble and recitals,
  shall have the meanings given to them in the Loan Agreement.

2. Amendments to Loan
  Agreement.

              2.1
  Section 2.1.1 (Financing of Accounts). Section 2.1.1(b) of the Loan Agreement
  is hereby amended in its entirety and replaced with the following: 

              (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 Agreement, the aggregate
  amount of Advances hereunder together with the aggregate amount of loan advances
  under the EXIM Agreement shall not at any event exceed Two Million Five Hundred
  Thousand Dollars ($2,500,000).

 

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                2.2
  Section 2.2 (Collections, Finance Charges, Remittances and Fees). Section
  2.2.4(b) of the Loan Agreement is hereby amended in its entirety and replaced
  with the following:

        

                2.2.4
  Collateral Handling Fee. At all times that the Adjusted
  Quick Ratio is less than 1.25 to 1.00, Borrower will pay to Bank a collateral
  handling fee equal to seven tenths of one percent (0.70%) 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 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.          

              2.3
  Section 6.7 (Financial Covenants). Commencing with the monthly reporting
  period for the month ending as of March 31, 2009, Section 6.6(a) of the Loan
  Agreement is hereby amended in its entirety and replaced with the following:
  

              (a)
  Adjusted Quick Ratio. Commencing with the month ending as of March 31, 2009,
  an Adjusted Quick Ratio of not less than (i) 0.75 to 1.00 for the month ending
  March 31, 2009, (ii) 0.90 to 1.00 for the months ending April 30, 2009 and May
  31, 2009 and (iii) 1.00 to 1.00 for the month ending June 30, 2009 and for each
  month thereafter. 

              2.4
  Section 13 (Definitions).

              (a)
  The following definitions set forth in Section 13.1 of the Loan Agreement are
  hereby amended in their entirety and replaced with the following:

              "Availability"
  means, as the date of determination, an amount equal to One Million Five Hundred
  Thousand Dollars ($1,500,000) minus all outstanding Credit Extensions.

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

              "Maturity
  Date" is March 24, 2010.

              "Total
  Liabilities" is on any day, obligations that should, under GAAP, be classified
  as liabilities on Borrower's consolidated balance sheet, including all Indebtedness,
  but excluding all other Subordinated Debt. 

 

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                (b)
  The following terms and their respective definitions are hereby added in alphabetical
  order to Section 13.1 of the Loan Agreement: 

              "Adjusted
  Quick Ratio" is a ratio of Quick Assets to Current Liabilities minus Deferred
  Revenue.       

              "Credit
  Extension" is any Advance or any other extension of credit by Bank for Borrower's
  benefit. 

              "Quick
  Assets" is, on any date, Borrower's unrestricted cash and Cash Equivalents
  maintained with Bank, plus net Eligible Accounts paid within ninety (90) days
  of invoice date, determined according to GAAP. 

              2.5
  Compliance Certificate. Exhibit B of the Loan Agreement is replaced in its
  entirety with Exhibit B attached hereto. From and after the date of this Agreement,
  all references in the Loan Agreement, to the Compliance Certificate shall be
  deemed to refer to Exhibit B attached hereto. 

3. Limitation of Amendments.

              3.1
  The amendments set forth in Section 2, above, are effective for
  the purposes set forth herein and shall be limited precisely as written and
  shall not be deemed to (a) be a consent to any amendment, waiver or modification
  of any other term or condition of any Loan Document, or (b) otherwise prejudice
  any right or remedy which Bank may now have or may have in the future under
  or in connection with any Loan Document. 

              3.2
  This Agreement shall be construed in connection with and as part of the Loan
  Documents and all terms, conditions, representations, warranties, covenants
  and agreements set forth in the Loan Documents, except as herein amended, are
  hereby ratified and confirmed and shall remain in full force and effect.

4. Representations and Warranties.
  To induce Bank to enter into this Agreement, Borrower hereby represents and
  warrants to Bank as follows:

              4.1
  Immediately after giving effect to this Agreement (a) 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 (b) no Event of Default has occurred and is continuing;

              4.2
  Borrower has the power and authority to execute and deliver this Agreement and
  to perform its obligations under the Loan Agreement, as amended by this Agreement;
  

              4.3
  The organizational documents of Borrower delivered to Bank on the Effective
  Date remain true, accurate and complete and have not been amended, supplemented
  or restated and are and continue to be in full force and effect; 

 

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                4.4
  The execution and delivery by Borrower of this Agreement and the performance
  by Borrower of its obligations under the Loan Agreement, as amended by this
  Agreement, have been duly authorized; 

              4.5
  The execution and delivery by Borrower of this Agreement and the performance
  by Borrower of its obligations under the Loan Agreement, as amended by this
  Agreement, do not and will not contravene (a) any law or regulation binding
  on or affecting Borrower, (b) any contractual restriction with a Person binding
  on Borrower, (c) any order, judgment or decree of any court or other governmental
  or public body or authority, or subdivision thereof, binding on Borrower, or
  (d) the organizational documents of Borrower; 

              4.6
  The execution and delivery by Borrower of this Agreement and the performance
  by Borrower of its obligations under the Loan Agreement, as amended by this
  Agreement, do not require any order, consent, approval, license, authorization
  or validation of, or filing, recording or registration with, or exemption by
  any governmental or public body or authority, or subdivision thereof, binding
  on Borrower, except as already has been obtained or made; and 

              4.7
  This Agreement has been duly executed and delivered by Borrower and is the binding
  obligation of Borrower, enforceable against Borrower 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.

5. Counterparts. This Agreement
  may be executed in any number of counterparts and all of such counterparts taken
  together shall be deemed to constitute one and the same instrument.

6. Effectiveness. This Agreement
  shall be deemed effective upon (a) the due execution and delivery to Bank of
  this Agreement by each party hereto, (b) the due execution and delivery to Bank
  of that certain First Amendment to Export-Import Bank Loan and Security Agreement,
  dated as of the date hereof, by each party hereto, (c) Borrower's payment of
  the EXIM Bank amendment and renewal fee in an amount equal to Three Thousand
  Dollars ($3,000), and (d) payment of Bank's legal fees and expenses in connection
  with the negotiation and preparation of this Agreement. 

IN WITNESS WHEREOF, the parties
  hereto have caused this Agreement to be duly executed and delivered as of the
  date first written above. 

BANK 

  

  SILICON VALLEY BANK 

  By: /s/ Aman Johal 

  Name: Aman Johal 

  Title: Relationship Manager 

  

  BORROWER

  

  SOCKET MOBILE, INC. 

  By: /s/ David W. Dunlap

  Name: David W. Dunlap

  Title: CFO 

 

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  EXHIBIT B

  

  SPECIALTY FINANCE DIVISION

  Compliance Certificate



  I, an authorized officer of Socket Mobile, Inc. ("Borrower") certify
  under the Loan and Security Agreement (the "Agreement") between Borrower
  and Silicon Valley Bank ("Bank") as follows (all capitalized terms used
  herein shall have the meaning set forth in the Agreement):

Borrower represents and warrants
  for each Financed Receivable:

Each Financed Receivable is an Eligible
  Account.

Borrower is the owner with legal
  right to sell, transfer, assign and encumber such Financed Receivable;

The correct amount is on the Invoice
  Transmittal and is not disputed;

Payment is not contingent on any
  obligation or contract and Borrower has fulfilled all its obligations as of
  the Invoice Transmittal date;

Each Financed Receivable is based
  on an actual sale and delivery of goods and/or services rendered, is due to
  Borrower, is not past due or in default, has not been previously sold, assigned,
  transferred, or pledged and is free of any liens, security interests and encumbrances
  other than Permitted Liens;

There are no defenses, offsets,
  counterclaims or agreements for which the Account Debtor may claim any deduction
  or discount;

It reasonably believes no Account
  Debtor is insolvent or subject to any Insolvency Proceedings;

It has not filed or had filed against
  it Insolvency Proceedings and does not anticipate any filing;

Bank has the right to endorse and/
  or require Borrower to endorse all payments received on Financed Receivables
  and all proceeds of Collateral.

No representation, warranty or other
  statement of Borrower in any certificate or written statement given to Bank
  contains any untrue statement of a material fact or omits to state a material
  fact necessary to make the statement contained in the certificates or statement
  not misleading.

 

 





  Additionally, Borrower represents and warrants as follows:

Borrower and each Subsidiary is
  duly existing and in good standing in its state of formation and qualified and
  licensed to do business in, and in good standing in, any state in which the
  conduct of its business or its ownership of property requires that it be qualified
  except where the failure to do so could not reasonably be expected to cause
  a Material Adverse Change. The execution, delivery and performance of the Loan
  Documents have been duly authorized, and do not conflict with Borrower's organizational
  documents, nor constitute an event of default under any material agreement by
  which Borrower is bound. Borrower is not in default under any agreement to which
  or by which it is bound in which the default could reasonably be expected to
  cause a Material Adverse Change.

Borrower has good title to the Collateral,
  free of Liens except Permitted Liens. All inventory is in all material respects
  of good and marketable quality, free from material defects.

Borrower is not an "investment company"
  or a company "controlled" by an "investment company" under the Investment Company
  Act of 1940, as amended. Neither Borrower nor any of its Subsidiaries is a "holding
  company" or an "affiliate" of a "holding company" or a "subsidiary company"
  of a "holding company" as each term is defined and used in the Public Utility
  Holding Company Act of 2005. Borrower is not engaged as one of its important
  activities in extending credit for margin stock (under Regulations X, T and
  U of the Federal Reserve Board of Governors). Borrower has complied in all material
  respects with the Federal Fair Labor Standards Act. Borrower has not violated
  any laws, ordinances or rules, the violation of which could reasonably be expected
  to cause a Material Adverse Change. None of Borrower's or any Subsidiary's properties
  or assets has been used by Borrower or any Subsidiary or, to the best of Borrower's
  knowledge, by previous Persons, in disposing, producing, storing, treating,
  or transporting any hazardous substance other than legally. Borrower and each
  Subsidiary has timely filed all required tax returns and paid, or made adequate
  provision to pay, all material taxes, except those being contested in good faith
  with adequate reserves under GAAP. Borrower and each Subsidiary has obtained
  all consents, approvals and authorizations of, made all declarations or filings
  with, and given all notices to, all government authorities that are necessary
  to continue its business as currently conducted except where the failure to
  obtain or make such consents, declarations, notices or filings would not reasonably
  be expected to cause a Material Adverse Change. 

 

 





  Please indicate compliance status by circling Yes/No under "Complies" column.

  

  

	Reporting Covenant	Required	Complies
	Monthly financial
      statements with Compliance Certificate 	Monthly within
      30 days	Yes     No
	Annual financial
      statement (CPA Audited) + CC	FYE within 120
      days	Yes     No
	10 Q, 10 K and
      8-K	Within 5 days after
      filing with SEC	Yes     No
	Borrowing Base
      Certificate A/R & A/P Agings	Monthly within
      30 days	Yes     No
	The
      following Intellectual Property was registered after the Closing Date (if
      no registrations, state "None")




  

	Financial Covenants	Required	Actual	Complies
	Maintain
      on a Monthly Basis: 	_
      	_
      	_
      
	Minimum
      Liquidity (as of February 28, 2009)	$250,000	$_________________	Yes     No
	Adjusted
      Quick Ratio of not less than the following for the following months ending
      	0.75
      to 1.00	_
      	_
      
	March
      31, 2009	0.75
      to 1.00	___:1.00	Yes     No
	April
      30, 2009	0.90
      to 1.00	___:1.00	Yes     No
	May
      31, 2009	0.90
      to 1.00	___:1.00	Yes     No
	June
      30, 2009 and for each month thereafter	1.00
      to 1.00	___:1.00	Yes     No


 

All representations and warranties
  in the Agreement are true and correct in all material respects on this date,
  and Borrower represents that there is no existing Event of Default.

Sincerely, 

Socket Mobile, Inc. 

____________________________________
  

  Signature 

____________________________________
  

  Title 

____________________________________
  

  Date