SECOND BUSINESS FINANCING MODIFICATION AGREEMENT AND WAIVER OF DEFAULTS
Exhibit 10.1
SECOND BUSINESS FINANCING MODIFICATION AGREEMENT AND WAIVER OF DEFAULTS
This Second Business Financing Modification Agreement and Waiver of Defaults (this “BFMA”) is entered into as of January 25, 2023, by and between Socket Mobile, Inc., a Delaware corporation (“Borrower”), and Western Alliance Bank, an Arizona corporation (“Lender”).
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among other documents, an Amended and Restated Business Financing Agreement, dated as of January 29, 2021, as amended by that certain First Business Financing Modification Agreement, dated as of February 9, 2022 (the “Agreement”). Capitalized terms used without definition herein shall have the meanings assigned to them in the Agreement.
Hereinafter, all indebtedness owing by Borrower to Lender shall be referred to as the “Obligations” and the Agreement and any and all other documents executed by Borrower in favor of Xxxxxx shall be referred to as the “Existing Documents.”
2. WAIVER OF DEFAULTS. Events of Default have occurred and are continuing as listed on Schedule 1 attached hereto (the “Existing Defaults”). In reliance upon the representations and warranties of Borrower set forth in this BFMA, and upon the terms and subject to the conditions set forth in this BFMA, Bank hereby waives the Existing Defaults. This waiver shall be effective only in this specific instance and for the specific purpose for which it is given, and this waiver shall not entitle Borrower to any other or further waiver in any similar or other circumstances. Bank's waiver shall not be deemed a course of conduct or course of dealing.
| 3. | DESCRIPTION OF CHANGE IN TERMS. |
| A. | Modifications to Agreement: |
| (i) | Sections 4.12(a) and (b) of the Agreement are hereby amended in their entirety |
as follows:
| (a) | Reserved. |
(b) Adjusted EBITDA of at least $100,000 with respect to any fiscal quarter, commencing with the fiscal quarter ending December 31, 2022.
(ii) The following definition set forth in Section 12.1 of the Agreement is hereby amended in its entirety as follows:
“Maturity Date” means (i) for Advances under the Domestic Line of Credit, January 31, 2025, (ii) for Advances under the EXIM Line of Credit, January 31, 2025, or, in each case, such earlier date as Lender shall have declared the Obligations immediately due and payable pursuant to Section 7.2.
B. Replacement Exhibit A. Exhibit A to the Agreement is hereby replaced with Exhibit A attached to this BFMA.
4. CONSISTENT CHANGES. The Existing Documents are each hereby amended wherever necessary to reflect the changes described above.
5. CONDITIONS TO EFFECTIVENESS. The effectiveness of this BFMA shall be subject to the satisfaction of the following conditions precedent:
A. Execution of this BFMA. Xxxxxx shall have received a fully executed copy of this BFMA, duly executed by Xxxxxxxx.
B. Representations and Warranties. After giving effect to this BFMA, the representations and warranties set forth in the Existing Documents shall be true and correct (and Borrower so certifies, by its signature below) as of the date hereof.
C. No Default or Event of Default. After giving effect to this BFMA, no Default or Event of Default shall exist or be continuing as of the date hereof.
D. Payment of Xxxxxx’s Legal Fees and Expenses. Borrower shall have reimbursed Lender for all sums due in payment of Xxxxxx’s legal fees and expenses in connection with the preparation, negotiation and execution of this BFMA.
6. NO DEFENSES OF BORROWER/GENERAL RELEASE. Xxxxxxxx agrees that, as of this date, it has no defenses against the obligations to pay any amounts under the Obligations. Xxxxxxxx acknowledges that Xxxxxx would not enter into this BFMA without Xxxxxxxx’s assurance that it has no claims against Lender or any of Lender’s officers, directors, employees or agents. Except for the obligations arising hereafter under this BFMA, each Borrower releases Lender, and each of Lender’s and entity’s officers, directors and employees from any known or unknown claims that Borrower now has against Lender of any nature, including any claims that Borrower, its successors, counsel, and advisors may in the future discover they would have now had if they had known facts not now known to them, whether founded in contract, in tort or pursuant to any other theory of liability, including but not limited to any claims arising out of or related to the Agreement or the transactions contemplated thereby. Borrower waives the provisions of California Civil Code section 1542, which states:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.
The provisions, waivers and releases set forth in this section are binding upon Borrower and its shareholders, agents, employees, assigns and successors in interest. The provisions, waivers and releases of this section shall inure to the benefit of Lender and its agents, employees, officers, directors, assigns and successors in interest. The provisions of this section shall survive payment in full of the Obligations, full performance of all the terms of this BFMA and the Agreement, and/or Lender’s actions to exercise any remedy available under the Agreement or otherwise.
7. CONTINUING VALIDITY. Xxxxxxxx understands and agrees that in modifying the existing Obligations, Xxxxxx is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Documents. Except as expressly modified pursuant to this BFMA, the terms of the Existing Documents remain unchanged and in full force and effect. Lender’s agreement to modifications to the existing Obligations pursuant to this BFMA in no way shall obligate Lender to make any future modifications to the Obligations. Nothing in this BFMA shall constitute a satisfaction of the Obligations. It is the intention of Xxxxxx and Borrower to retain as liable parties all makers and endorsers of Existing Documents, unless the party is expressly released by Xxxxxx in writing. No maker, endorser, or guarantor will be released by virtue of this BFMA. The terms of this paragraph apply not only to this BFMA, but also to any subsequent Business Financing Modification Agreements.
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2
BN 73999619v2
8. NOTICE OF FINAL AGREEMENT. BY SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND AGREES THAT: (A) THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES, (B) THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES, AND (C) THIS WRITTEN AGREEMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.
BORROWER:
Name: Xxxx Xxxx Title: CFO
|
LENDER:
By: /s/ Xxxxxxx Xxxxx Name: Xxxxxxx Xxxxx Title: Senior Director
|
SCHEDULE 1
TO
SECOND BUSINESS FINANCING MODIFICATION AGREEMENT AND WAIVER OF DEFAULTS
EXISTING DEFAULTS
| Section of Agreement | Required Performance | Actual Performance1 |
| Section 4.12(a) – Minimum Revenue | $5,396,000 for the fiscal quarter ended September 30, 2022 (75% of the projections approved by Xxxxxxxx's board of directors) | $3,727,871 for the fiscal quarter ended September 30, 2022 |
| Section 4.12(b) – Minimum Quarterly Adjusted EBITDA | $897,000 for the fiscal quarter ended September 30, 2022 (75% of the projections approved by Xxxxxxxx's board of directors) | <$505,988> for the fiscal quarter ended September 30, 2022 |
________________________________
1 Numbers between “<>” are negative.
EXHIBIT A TO SECOND BUSINESS FINANCING MODIFICATION AGREEMENT AND WAIVER OF DEFAULTS
REPLACEMENT FORM OF COMPLIANCE CERTIFICATE
COMPLIANCE CERTIFICATE
TO: WESTERN ALLIANCE BANK, an Arizona corporation (the “Lender”)
FROM: SOCKET MOBILE, INC., a Delaware corporation (the “Borrower”)
The undersigned authorized officer of Borrower hereby certifies that in accordance with the terms and conditions of the Business Financing Agreement between Borrower and Lender (the “Agreement”), (i) Borrower is in complete compliance for the period ending ___________ with all required covenants except as noted below and (ii) all representations and warranties of Borrower stated in the Agreement are true and correct as of the date hereof. Attached herewith are the required documents supporting the above certification. The Officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under “Complies” column.
| Reporting Covenant | Required | Complies | |
| Audited annual financial statements | 120 days after FYE | Yes | No |
| Monthly financial statements | 30 days after month end | Yes | No |
| Copies of management letters to or from Xxxxxxxx’s auditors | Promptly upon sending or receipt | Yes | No |
Form 10-K Annual Report, Form 10-Q Quarterly Report and Form 8-K |
concurrent with the date of filing with the Securities and Exchange Commission | Yes | No |
| Annual financial projections and budget | 30 days of FYE | Yes | No |
| Compliance Certificate | 30 days after month end | Yes | No |
| Domestic and EXIM Borrowing Base Certificates | 10 days after the last day of the month | Yes | No |
Domestic A/R and A/P agings by invoice date, sales journal, and cash receipts journal |
10 days after the last day of the month | Yes | No |
| EXIM A/R by due date and A/P agings | 10 days after the last day of the month | Yes | No |
| Sell through reports | 10 days after the last day of the month | Yes | No |
| CPA prepared business tax returns | Within 5 days of filing | Yes | No |
| Financial Covenant | Required | Actual | Complies | ||
| Performance to Plan (EBITDA) | Adjusted EBITDA of at least $100,000 with respect to any fiscal quarter |
$ | Yes | No | |
| Deposits | |||||
Deposits held at Western Alliance Bank: $ |
|||||
Deposits held outside of Western Alliance Bank: $ |
|||||
| Comments Regarding Exceptions: See Attached. | BANK USE ONLY | |||
| Received by: | ||||
| Sincerely, | AUTHORIZED SIGNER | |||
| Date: | ||||
| Verified: | ||||
| SIGNATURE | AUTHORIZED SIGNER | |||
| Date: | ||||
| TITLE | ||||
| Compliance Status | Yes | No | ||
| DATE | ||||
