FIRST AMENDMENT TO FORBEARANCE AGREEMENT

Exhibit 10.1

FIRST AMENDMENT TO FORBEARANCE AGREEMENT

THIS FIRST AMENDMENT TO FORBEARANCE AGREEMENT (this "Amendment") is executed and effective this 3rd day of March, 2010 (the "Effective Date"), by and between SILICON VALLEY BANK, a California corporation ("Bank") with its principal place of business of 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and SOCKET MOBILE, INC., a Delaware corporation ("Borrower") with its principal place of business of 00000 Xxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxx 00000.

RECITALS

A. Pursuant to the terms and subject to the conditions of that certain Forbearance Agreement dated February 4, 2010 by and between Bank and Borrower (as amended, modified, supplemented or restated, the "Forbearance Agreement"), Bank agreed to forbear from exercising its rights and remedies under the Loan Documents and EXIM Loan Documents through March 24, 2010 (the "Prior Forbearance Period") as a result of the Existing Event of Default.

B. Borrower has requested that Bank amend the Forbearance Agreement to extend the Prior Forbearance Period. Although Bank is under no obligation to do so, Bank is willing to extend the Prior Forbearance Period and to continue to forbear from exercising its rights and remedies against Borrower through the Forbearance Period (as extended below), but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

NOW, THEREFORE, in consideration of the agreements and covenants contained herein, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Incorporation by Reference; Acknowledgement of Recitals. Borrower acknowledges the recitals set forth herein and the description of the Existing Event of Default set forth above are true and correct statements of fact, are incorporated herein, and form a substantive part of this Amendment.

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

3. Ratification of Loan Documents and EXIM Loan Documents; Further Assurances.

a. Borrower acknowledges and agrees that each of the Loan Documents and EXIM Loan Documents remain in full force and effect in accordance with the original terms, except as expressly amended and modified by this Amendment.

b. Borrower hereby ratifies, confirms, and reaffirms that the Obligations include, without limitation, the Loans, and any future modifications, amendments, substitutions or renewals thereof.

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c. Borrower hereby agrees that this Amendment is the legal, valid and binding obligation of Borrower, enforceable against Borrower.

d. Borrower and Bank acknowledge that the Existing Event of Default is ongoing, existing and a continuing Event of Default under the Loan Agreements.

e. Borrower and Bank confirm that neither party has heretofore waived and has not agreed to waive any term of the Loan Documents or EXIM Loan Documents, and any actions that Borrower takes or fails to take (including the expenditure of any funds) is voluntary, informed and taken at its own risk.

f. Borrower shall, from and after the execution of this Amendment, execute and deliver to Bank whatever additional documents, instruments, and agreements that Bank may reasonably require in order to perfect the Collateral granted in the Loan Agreements more securely in Bank and to otherwise give effect to the terms and conditions of this Amendment.

4. Conditions Precedent. The effectiveness of this Amendment is subject to the satisfaction of each of the following conditions precedent:

a. This Amendment shall be executed by all parties and delivered to Bank; and

b. Borrower's payment of a non-refundable amendment fee in an amount equal to Twenty-Five Thousand Dollars ($25,000) (inclusive of the fee for the EXIM Bank) and all legal fees and expenses of Bank shall have been paid in full, in connection with the preparation, negotiation, execution and delivery of this Amendment and the Forbearance Documents. Borrower hereby authorizes Bank to debit the deposit account maintained by Borrower with Bank for all such amounts.

5. Forbearance Period. Subject to Borrower's strict compliance and performance with the terms of the Forbearance Agreement and this Amendment and so long as no Event of Default (other than the Existing Event of Default) or Termination Event (as hereinafter defined) occurs, Bank will forbear from enforcing its rights and remedies under the Loan Documents and EXIM Loan Documents through April 30, 2010 (the "Forbearance Period"). If Borrower is in compliance with the financial covenant set forth in Section 6(a) below for the quarter ending March 31, 2010, Bank will agree to waive the Existing Event of Default. Except as expressly provided herein, this Amendment does not constitute a waiver or release by Bank of any Obligations or of any Event of Default which may arise in the future after the Effective Date.

6. Amendments to Domestic Loan Agreement.

a. Bank and Borrower hereby agree that from and after the Effective Date, Borrower shall maintain at all times, to be tested as of the last day of each fiscal quarter, revenue of not less than the following amounts during the following fiscal quarters:

Quarter Ending	Minimum Revenue
March 31, 2010	$4,565,000
June 30, 2010	$5,495,000
September 30, 2010	$6,115,000
December 31, 2010	$6,265,000

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b. Bank and Borrower hereby agree that from and after the Effective Date, all references to the term "Maturity Date" in the Domestic Loan Agreement shall mean March 23, 2011. Bank's agreement to extend the Maturity Date in the Domestic Loan Agreement does not constitute an agreement to extend the Forbearance Period. Unless the Existing Event of Default is waived by Bank, upon the expiration of the Forbearance Period, all outstanding Obligations owed by Borrower to Bank shall be due and payable in full.

c. Bank and Borrower hereby agree that from and after the Effective Date, all references to the term "Compliance Certificate" in the Domestic Loan Agreement shall be deemed to refer to Exhibit B attached hereto.

7. Amendment to EXIM Loan Agreement. Bank and Borrower hereby agreed that from and after the Effective Date, all references to the term "EXIM Maturity Date" in the EXIM Loan Agreement shall mean March 23, 2011. Bank's agreement to extend the EXIM Maturity Date in the EXIM Loan Agreement does not constitute an agreement to extend the Forbearance Period. Unless the Existing Event of Default is waived by Bank, upon the expiration of the Forbearance Period, all outstanding Obligations owed by Borrower to Bank shall be due and payable in full.

8. Termination Events. In addition to the Termination Events set forth in the Forbearance Agreement, the failure of the Borrower to observe, perform, or comply with any of the terms, conditions, covenants or provisions of this Amendment, as and when required shall constitute a Termination Event under the Forbearance Agreement.

9. Representations of Borrower. Borrower warrants and represents to Bank as follows:

a. Borrower has no defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever against Bank or any past, present or future agent, attorney, legal representative, predecessor-in-interest, affiliate, successor, assign, employee, director or officer of Bank, directly or indirectly, arising out of, based upon, or in any manner connected with, any transaction, event, circumstance, action, failure to act, or occurrence of any sort or type, whether known or unknown, which occurred, existed, was taken, permitted, or began prior to the execution of this Amendment and accrued, existed, was taken, permitted or begun in accordance with, pursuant to, or by virtue of the terms or conditions of the Loan Documents or EXIM Loan Documents, or which directly or indirectly relate to or arise out of or in any manner are connected with any of the Loan Documents or EXIM Loan Documents; TO THE EXTENT ANY SUCH DEFENSES, AFFIRMATIVE OR OTHERWISE, RIGHTS OF SETOFF, RIGHTS OF RECOUPMENT, CLAIMS, COUNTERCLAIMS, ACTIONS OR CAUSES OF ACTION EXIST OR EXTEND, SUCH DEFENSES, RIGHTS, CLAIMS, COUNTERCLAIMS, ACTIONS AND CAUSES OF ACTION ARE HEREBY FOREVER WAIVED, DISCHARGED AND RELEASED.

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b. Borrower has freely and voluntarily entered into this Amendment after an adequate opportunity and sufficient period of time to review, analyze and discuss all terms and conditions of this Amendment and all factual and legal matters relevant hereto with counsel freely and independently chosen by it. Borrower further acknowledges that it has actively and with full understanding participated in the negotiation of this Amendment after consultation and review with its counsel and that this Amendment has been negotiated, prepared and executed without fraud, duress, undue influence or coercion of any kind or nature whatsoever having been exerted by or imposed upon any party to this Amendment.

c. As of the Effective Date, there are no proceedings or investigations pending or, so far as Borrower knows, threatened against it, before any court or arbitrator or any governmental, administrative or other judicial authority or agency.

d. There is no statute, rule, regulation, order or judgment, no charter, by-law or preference stock provision with respect Borrower, and no provision of any mortgage, indenture, contact or other Agreement binding on Borrower or any of its properties which would prohibit or cause a default under or in any way prevent the execution, delivery, performance, compliance or observance of any of the terms or conditions of this Amendment.

e. Borrower has not voluntarily or involuntarily, granted any liens or security interests to any creditor not previously disclosed to Bank in writing on or before the Effective Date or taken any action or failed to take any action which could or would impair, change, jeopardize or otherwise adversely affect the priority, perfection, validity or enforceability of any liens or securing interests securing all or any portion of the Obligations or the priority or validity of Bank's claims with respect to the Obligations relative to any other creditor of Borrower.

f. Borrower has the full legal right, power and authority to enter into and perform its obligations under this Amendment and the Forbearance Documents, and the execution and delivery of this Amendment and the other Forbearance Documents by Borrower and the consummation by the Borrower of the transactions contemplated hereby and thereby and performance of their obligations hereunder and thereunder have been duly authorized by all appropriate action (corporate or otherwise).

g. This Amendment, each of the Loan Documents and each of the EXIM Loan Documents to which it is a party constitutes the valid, binding and enforceable Agreement of Borrower, enforceable against Borrower in accordance with the terms thereof.

10. Reimbursement of Costs and Expenses. Borrower shall reimburse Bank for any and all reasonable costs, expenses, and costs of collection (including attorneys' fees, expenses, audit fees, and appraisal fees) heretofore or hereafter incurred by Bank in connection with this Amendment and with the protection, preservation, and enforcement by Bank of its rights and remedies. Borrower hereby authorizes and directs Bank to debit Borrower's deposit account maintained at Bank for all such fees and expenses.

11. Non-Interference. From and after the expiration or termination of the Forbearance Period, Borrower agrees not to interfere with the exercise by Bank of any of its rights and remedies. Borrower further agrees that it shall not seek to distrain or otherwise hinder, delay, or impair Bank's efforts to realize upon the Collateral, or otherwise to enforce its rights and remedies pursuant to the Loan Documents and EXIM Loan Documents. The provisions of this Section 9 shall be specifically enforceable by Bank.

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12. RELEASE OF CLAIMS. FOR AND IN CONSIDERATION OF BANK'S AGREEMENTS CONTAINED HEREIN, BORROWER, TOGETHER WITH ITS, SUCCESSORS AND ASSIGNS (INDIVIDUALLY AND COLLECTIVELY, "RELEASORS") HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER WAIVES AND DISCHARGES BANK AND EACH OF ITS RESPECTIVE PARENTS, DIVISIONS, SUBSIDIARIES, AFFILIATES, MEMBERS, MANAGERS, PARTICIPANTS, PREDECESSORS, SUCCESSORS, AND ASSIGNS, AND EACH OF THEIR RESPECTIVE CURRENT AND FORMER DIRECTORS, OFFICERS, SHAREHOLDERS, MEMBERS, MANAGERS, PARTNERS, AGENTS, AND EMPLOYEES, AND EACH OF THEIR RESPECTIVE PREDECESSORS, SUCCESSORS, HEIRS, AND ASSIGNS (INDIVIDUALLY AND COLLECTIVELY, THE "RELEASED PARTIES") FROM ALL POSSIBLE CLAIMS, COUNTERCLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES AND LIABILITIES WHATSOEVER, WHETHER KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT OR CONDITIONAL, OR AT LAW OR IN EQUITY, IN ANY CASE ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE EFFECTIVE DATE THAT ANY OF THE RELEASORS MAY NOW OR HEREAFTER HAVE AGAINST THE RELEASED PARTIES, IF ANY, IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, INCLUDING WITHOUT LIMITATION ARISING DIRECTLY OR INDIRECTLY FROM THE LAWSUIT, ANY PRIOR OR EXISTING LOANS BETWEEN RELEASORS AND RELEASED PARTIES, ANY OF THE LOAN DOCUMENTS OR EXIM LOAN DOCUMENTS, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER ANY OF THE LOAN DOCUMENTS AND EXIM LOAN DOCUMENTS, AND/OR NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE. EACH OF THE RELEASORS WAIVES THE BENEFITS OF ANY LAW, WHICH MAY PROVIDE IN SUBSTANCE: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY IT MUST HAVE MATERIALLY AFFECTED ITS SETTLEMENT WITH THE DEBTOR." EACH OF THE RELEASORS UNDERSTANDS THAT THE FACTS WHICH IT BELIEVES TO BE TRUE AT THE TIME OF MAKING THE RELEASE PROVIDED FOR HEREIN MAY LATER TURN OUT TO BE DIFFERENT THAN IT NOW BELIEVES, AND THAT INFORMATION WHICH IS NOT NOW KNOWN OR SUSPECTED MAY LATER BE DISCOVERED. EACH OF THE RELEASORS ACCEPTS THIS POSSIBILITY, AND EACH OF THEM ASSUMES THE RISK OF THE FACTS TURNING OUT TO BE DIFFERENT AND NEW INFORMATION BEING DISCOVERED; AND EACH OF THEM FURTHER AGREES THAT THE RELEASE PROVIDED FOR HEREIN SHALL IN ALL RESPECTS CONTINUE TO BE EFFECTIVE AND NOT SUBJECT TO TERMINATION OR RESCISSION BECAUSE OF ANY DIFFERENCE IN SUCH FACTS OR ANY NEW INFORMATION.

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13. Automatic Stay. Borrower agrees that upon the filing of any petition for relief by or against Borrower under the United States Bankruptcy Code, Bank shall be entitled to immediate and complete relief from the automatic stay, and Bank shall be permitted to proceed to protect and enforce its rights and remedies under state law. Borrower hereby expressly assents to any motion filed by Bank seeking relief from the automatic stay. Borrower further hereby expressly WAIVES the protections afforded under Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Bankruptcy Code with respect to Bank.

14. JURY TRIAL. BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION (I) ARISING UNDER THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT OR ANY RELATED AGREEMENT OR (II) IN ANY WAY RELATING TO THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS EVIDENCED HEREBY OR THEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND BORROWER HEREBY AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT BORROWER OR BANK MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 14 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWER TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY. 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 Xxxxx 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 Xxxxx 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 Xxxxx 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 orders 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 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.

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15. Power of Attorney. Borrower irrevocably appoints Bank as its lawful attorney to, after the expiration or termination of the Forbearance Period: (i) endorse Borrower's name on any checks or other forms of payment or security; (ii) sign Borrower's name on any invoice or xxxx of lading for any Accounts or drafts against Account Debtors, (iii) transfer the Collateral into the name of Bank or a third party as the Uniform Commercial Code in the State of California, as in effect from time to time, permits; and (iv) take such other actions as Bank deems necessary to carry out the intent of this Amendment and the Forbearance Documents. Bank may exercise the power of attorney to sign Borrower's name on any documents necessary to perfect or continue the perfection of any security interest regardless of whether a default has occurred under this Amendment, any of the Loan Documents or any of the EXIM Loan Documents. Bank's appointment as Borrower's attorney in fact, and all of Bank's rights and powers, coupled with an interest, are irrevocable until the Obligations have been fully repaid and performed and Bank's obligation to provide any extension of credit to Borrower under the Loan Documents or EXIM Loan Documents have been terminated.

16. Entire Agreement. This Amendment shall be binding upon Borrower and its successors and assigns, and shall inure to the benefit of Bank and its respective successors and assigns. This Amendment and all documents, instruments, and agreements executed in connection herewith incorporate all of the discussions and negotiations between Borrower and Bank, either expressed or implied, concerning the matters included herein and in such other documents, instruments and agreements, any statute, custom, or usage to the contrary notwithstanding. No such discussions or negotiations shall limit, modify, or otherwise affect the provisions hereof. No modification, amendment, or waiver of any provision of this Amendment, or any provision of any other document, instrument, or agreement between Borrower and Bank shall be effective unless executed in writing by the party to be charged with such modification, amendment, or waiver, and if such party be Bank, then by a duly authorized officer thereof.

17. Construction of Agreement.

a. All rights and obligations hereunder and thereunder, including matters of construction, validity, and performance, shall be governed by and construed in accordance with the law of the State of California and are intended to take effect as sealed instruments.

b. The captions of this Amendment are for convenience purposes only, and shall not be used in construing the intent of the Bank and the Borrower under this Amendment.

c. In the event of any inconsistency between the provisions of this Amendment and any other document, instrument, or agreement entered into by and between the Bank and the Borrower, the provisions of this Amendment shall govern and control.

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d. The Bank and the Borrower have prepared this Amendment and all documents, instruments, and agreements incidental hereto with the aid and assistance of their respective counsel. Accordingly, all of them shall be deemed to have been drafted by the Bank and the Borrower and shall not be construed against the Bank or the Borrower.

18. Illegality or Unenforceability. Any determination that any provision or application of this Amendment is invalid, illegal, or unenforceable in any respect, or in any instance, shall not affect the validity, legality, or enforceability of any such provision in any other instance, or the validity, legality, or enforceability of any other provision of this Amendment.

19. Consistent Changes; Conflicts. The Loan Documents and EXIM Loan Documents are hereby amended wherever necessary to reflect the changes described above. To the extent any term or provision herein conflicts with any term or provision contained in any of the Loan Documents or any of the EXIM Loan Documents, the term or provision provided for herein shall control.

20. Continuing Validity. Borrower understands and agrees that in entering into this Amendment, Bank is relying upon Borrower's representations, warranties, and agreements, as set forth in the Loan Documents and EXIM Loan Documents. Except as expressly modified pursuant to this Amendment, the terms of the Loan Documents and EXIM Loan Documents remain unchanged and in full force and effect. Bank's agreement to modifications to the existing Loan Agreements pursuant to this Amendment in no way shall obligate Bank to make any future modifications to the Loan Agreements. Nothing in this Amendment shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of the Loan Documents and the EXIM Loan Documents, unless the party is expressly released by Bank in writing. No maker, endorser, or guarantor will be released by virtue of this Amendment. The terms of this Section 20 apply not only to this Amendment, but also to all subsequent loan modification agreements.

21. No Waiver. This Amendment is not applicable to any Event of Default under any Loan Document whether arising before or after the Effective Date or as a result of the transactions contemplated hereby other than the Existing Event of Default.

22. Successors and Assigns. This Amendment shall inure to the benefit of and be binding upon the heirs, successors, and permitted assigns of the parties.

23. Governing Law and Jurisdiction. This Amendment shall be construed and enforced in accordance with the terms of the laws of the State of California without regard to its conflicts of laws principles. If any provision of this Amendment is not enforceable, the remaining provisions of the Agreement shall be enforced in accordance with their terms. Borrower, and Bank represent and warrant to each other that each is duly authorized to execute and deliver this Amendment on their respective behalves.

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24. Counterparts. This Amendment may be executed in two or more counterparts each of which shall constitute an original and all of which shall, when taken together, constitute one and the same agreement, notwithstanding that all parties may not have signed all counterparts of this Amendment.

[Signatures Appear on the Following Page]

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IN WITNESS WHEREOF, the parties hereto have executed, or caused this Amendment to be executed by the respective officer or authorized signatory thereunto duly authorized, as of the date first written above.

Bank:

SILICON VALLEY BANK

By:   /s/ Xxxx Xxxxx  

Name: Xxxx Xxxxx

Title: Relationship Manager

Borrower:

SOCKET MOBILE, INC.

By:   /s/ Xxxxx X. Xxxxxx  

Name: Xxxxx X. Xxxxxx

Title: CFO

EXHIBIT B

SILICON VALLEY BANK

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) + XX	XXX 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
Distributor sell-through reports	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 at all times:
Minimum Cash at Bank	$1,000,000	$________	Yes No
Maintain on a Quarterly Basis:
Minimum Revenue
March 31, 2010	$4,565,000	$________	Yes No
June 30, 2010	$5,495,000	$________	Yes No
September 30, 2010	$6,115,000	$________	Yes No
December 31, 2010	$6,265,000	$________	Yes No

Performance Pricing		Applies
Adjusted Quick Ratio > 1.25:1.00	No Collateral Handling Fee	Yes No
Adjusted Quick Ratio < 1.25:1.00	Collateral Handling Fee of 0.62%	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.

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Signature

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Title
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Date