Exhibit 10.2
SUBORDINATED
CONVERTIBLE NOTE
NEITHER
THE ISSUANCE NOR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD
CAREFULLY REVIEW THE TERMS OF THIS NOTE.
Socket
Mobile, Inc.
SUBORDINATED
CONVERTIBLE NOTE
| Issuance
Date: September 4, 2013 |
Principal
Amount: U.S. $371,928.77 |
FOR
VALUE RECEIVED, Socket Mobile, Inc., a Delaware corporation (the “Company”), hereby promises to pay to
the order of Charlie Bass or his registered assigns (“Holder”) the amount of $371,928.77 (the
“Principal”) when due, by repayment in cash at the Maturity Date of September 4, 2017 or upon conversion
into common stock, and to pay interest (“Interest”) on any outstanding Principal at an Interest Rate, compounded
at the end of each quarter, as described in Section 2, from the date set out above as the Issuance Date (the “Issuance
Date”) until the same becomes due and payable, whether in cash at the Maturity Date or upon conversion into common stock.
This Subordinated Convertible Note (including all Subordinated Convertible Notes issued in exchange or replacement hereof, this
“Note”) is issued pursuant to a Socket Mobile Board of Directors resolution dated September 4, 2013 approving
the issuance of the notes by the Company. This note replaces the note principal plus accrued interest through September 3, 2013
for notes dated November 7, 2012, November 14, 2012, November 21, 2012, November 28, 2012, December 6, 2012 and December 12, 2012.
1.
PAYMENTS OF PRINCIPAL. On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding
Principal.
2.
INTEREST; INTEREST RATE. Interest on this Note shall commence accruing on the Issuance Date and shall be payable on the
Maturity Date. Interest Rate shall be the greater of eighteen percent (18%) interest during all periods that warrants issued to
Hudson Bay Master Fund or Dawson James Securities on November 19, 2010 are outstanding, or a rate of twelve percent (12%). Interest
shall compound at the end of each quarter.
3.
CONVERSION OF NOTES. This Note and accrued interest shall be convertible into validly issued, fully paid and non-assessable
shares of Common Stock at any time on or prior to the Maturity Date at the option of the Holder.
(a)
Conversion Right. At any time or times on or after the Issuance Date up to and including the Maturity Date, the
Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into validly
issued, fully paid and non-assessable shares of Common Stock in accordance with Section 3(c), at the Conversion Price (as defined
below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result
in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up
to the nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar taxes that may be payable
with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.
(b)
Conversion Formula. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant
to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion
Rate”).
(i)
“Conversion Amount” means the portion of the Principal to be converted, redeemed or otherwise with respect
to which this determination is being made, plus all accrued and unpaid Interest with respect to such
portion of the Principal amount, in an amount as determined by the Holder.
(ii)
“Conversion Price” means, as of any Conversion Date or other date of determination, the greater of:
a) if warrants previously issued to Hudson Bay Master Fund or Dawson James Securities on November 19, 2010 are outstanding on
the Conversion Date, the current warrant exercise price per share ($2.44 per share at the Note issue date); or b) $1.25 per share
(the closing market price on the note issue date).
(iii)
“Conversion Date” means the date conversion is requested by the Holder. Conversion may be requested
at anytime up to and including the Maturity Date.
(c)
Mechanics of Conversion.
(i)
Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any “Conversion Date”,
the Holder shall deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., Pacific time, on such date,
a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”)
to the Company. The Holder shall surrender this Note to a nationally recognized overnight delivery service for delivery to the
Company (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction as contemplated
by Section 8). On or before the first (1st) Trading Day following the date of receipt of a Conversion Notice, the Company
shall transmit by facsimile or email an acknowledgment of confirmation, in the form attached hereto as Exhibit II, of receipt
of such Conversion Notice to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or
before the third (3rd) Trading Day following the date of receipt of a Conversion Notice, the Company shall cause the Transfer
Agent to issue and deliver (via reputable overnight courier) to the address as specified in the Conversion Notice, a restricted
certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder
shall be entitled. If this Note is physically surrendered for conversion pursuant to this Section and the outstanding Principal
of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as
practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver
to the Holder (or its designee) a new Note representing the outstanding Principal not converted. The Person or Persons entitled
to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on the Conversion Date.
(ii)
Principal Market Regulation. The Company shall not issue any shares of Common Stock upon conversion of this Note
if the issuance of such shares of Common Stock would exceed the aggregate number of shares of Common Stock which the Company may
issue upon conversion of the Note without breaching the Company’s obligations under the rules or regulations of the Principal
Market, except that such limitation shall not apply in the event that the Company (A) obtains the approval of its stockholders
as required by the applicable rules of the Principal Market for issuances of shares of Common Stock in excess of such amount or
(B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably
satisfactory to the Holder.
4.
RESERVATION OF AUTHORIZED SHARES
The
Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for the Note
sufficient to convert 100 percent of the principle and interest at the Maturity Date. So long as any of the Note is outstanding,
the Company shall take all action reasonably necessary to reserve and keep available out of its authorized and unissued Common
Stock, solely for the purpose of effecting the conversion of the Note and accrued interest, the number of shares required to be
reserved by the previous sentence (the “Required Reserve Amount”).
5.
VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law (including,
without limitation, the Delaware General Corporation Law).
6.
RANK. All payments due under this Note (a) shall rank pari passu with all Notes issued with the same rank
(“Other Notes”), and (b) shall be senior to all other Indebtedness of the Company except assets securing specific
liens relating to those assets, and Collateral assigned to Silicon Valley Bank (or successor bank) which holds the senior security
interest on all of the Company’s assets in connection with balances outstanding on the Company’s revolving line of
credit.
7.
SECURITY. This Note and the Other Notes are secured by the assets of the Company including its intellectual property
assets (“Collateral”) excluding assets securing specific liens, and is in second position to Silicon Valley
Bank (or successor bank) which has a perfected senior position to the Collateral to secure outstanding balances on its revolving
credit facilities with the Company.
8.
LOST, STOLEN OR MUTILATED NOTE. Upon receipt by the Company of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Note (as to which a written certification and indemnification shall suffice
as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company
in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall
execute and deliver to the Holder a new Note representing the outstanding Principal.
9.
CURRENCY. All dollar amounts referred to in this Note are in United States Dollars (“U.S. Dollars”),
and all amounts owing under this Note shall be paid in U.S. Dollars.
10.
CANCELLATION. After all Principal and accrued Interest owed on this Note have been paid in full, this Note shall
automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.
11.
GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of California, without
giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the State of California for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction
of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action
or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule
of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified
to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate
to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect
on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or
to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING
OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.
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SOCKET
MOBILE, INC. |
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By: |
/s/
David W. Dunlap |
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Name:
David W. Dunlap
Vice
President, Finance and Administration
and
Chief Financial Officer |
EXHIBIT
I
Socket Mobile, INC.
CONVERSION NOTICE
Reference
is made to the Subordinated Convertible Note (the “Note”) issued to the undersigned by Socket Mobile, Inc.
(the “Company”). In accordance with and pursuant to the Note, the undersigned hereby elects to convert the
Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, $0.001 par value per share
(the “Common Stock”), of the Company, as of the date specified below.
| Date
of Conversion: |
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| Aggregate
Principal to be converted: |
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| Aggregate
accrued and unpaid Interest with respect to such portion of the Aggregate Principal and such Aggregate
Interest to be converted: |
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AGGREGATE
CONVERSION AMOUNT
TO BE CONVERTED: |
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| Please
confirm the following information: |
| Conversion
Price: |
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| Number
of shares of Common Stock to be issued: |
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| Please
issue the Common Stock into which the Note is being converted in the following name and to the following address: |
| Issue
to: |
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| Tax
ID: |
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| Facsimile
Number: |
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| Holder: |
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| By: |
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| Title: |
Dated: |
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EXHIBIT
II
ACKNOWLEDGMENT
The
Company hereby acknowledges this Conversion Notice and hereby directs American Stock Transfer & Trust to issue the above indicated
number of shares of Common Stock.
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SOCKET
MOBILE, INC. |
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By: |
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Name:
Title: |
