Exhibit 10.1
 
FOURTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
 
This Fourth Amendment to Loan and Security Agreement (this “Amendment”) is
entered into as of January 28, 2015, to be effective as of December 31, 2014, by
and among Silicon Valley Bank (“Bank”), Relm Wireless Corporation, a Nevada
corporation (“Relm Wireless”), and Relm Communications, Inc., a Florida
corporation (“Relm Communications” and together with Relm Wireless, individually
and collectively, jointly and severally, “Borrower”) whose address is 7100
Technology Drive, West Melbourne, Florida 32904.
 
Recitals
 
A.           Bank and Borrower have entered into that certain Loan and Security
Agreement dated as of October 23, 2008 (as the same has been and may from time
to time be 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 amend the Loan Agreement to (i)
extend the maturity date, and (ii) make certain other revisions to the Loan
Agreement as more fully set forth herein.
 
D.           Bank has agreed to so amend certain provisions of the Loan
Agreement, 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.
 
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 Amendment shall
have the meanings given to them in the Loan Agreement.
 
2. Amendments to Loan Agreement.
 
2.1 Section 2.3 (Payment of Interest on the Credit Extensions).  Section 2.3(a)
is amended by deleting each reference to “1.25:1.00” and replacing it with
“1.50:1.00”.
 
2.2 Section 6.2 (Financial Statements, Reports, Certificates).  Sections
6.2(a)(i) and (ii) are amended in their entirety and replaced with the
following:
 
(i) (A) as soon as available, but no later than thirty (30) days after filing
with the Securities Exchange Commission (or, if not timely filed, not later than
thirty (30) days after the same were due to have been filed with the Securities
Exchange Commission), Borrower’s 10K and 8K reports, and (B) as soon as
available, but no later than thirty (30) days after the last day of each
quarter, Borrower’s 10Q reports; (ii) within sixty (60) days after the end of
each fiscal year, an annual operating budget (which shall include a balance
sheet, income statement and cash flow statement presented in monthly or
quarterly format) for the following fiscal year, together with any related
business forecasts used in the preparation of such annual financial projections,
and any material updates to such projections and operating budget must be
delivered to Bank within ten (10) days of the Board’s approval of such update;

 
 

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2.3 Section 6.2 (Financial Statements, Reports, Certificates).  Sections 6.2(b)
and (c) are amended in their entirety and replaced with the following:
 
(b)           Within thirty (30) days after the last day of each quarter,
deliver to Bank a duly completed Borrowing Base Certificate signed by a
Responsible Officer, with aged listings of accounts receivable and accounts
payable (by invoice date).

(c)           Within thirty (30) days after the last day of each quarter,
deliver to Bank its monthly financial statements together with a duly completed
Compliance Certificate signed by a Responsible Officer setting forth
calculations showing compliance with the financial covenants set forth in this
Agreement.

2.4 Section 6.2 (Financial Statements, Reports, Certificates).  A new Section
6.2(e) is added to the Loan Agreement as follows:
 
(e)           Upon the request of Bank, perpetual inventory reports for the
Inventory valued on a weighted average basis at the lower of cost or market (in
accordance with GAAP) or such other inventory reports as are requested by Bank
in its good faith business judgment.

2.5 Section 6.7 (Financial Covenants).  Section 6.7 is amended in its entirety
and replaced with the following:
 
6.7           Financial Covenants.  Borrower shall maintain at all times, to be
tested as of the last day of each quarter, unless otherwise noted, on a
consolidated basis with respect to Borrower and its Subsidiaries:

(a)           Adjusted Quick Ratio.  An Adjusted Quick Ratio of not less than
1.25 to 1.00.

(b)           Tangible Net Worth.  A Tangible Net Worth of at least Twenty-Six
Million Five Hundred Thousand Dollars ($26,500,000), increasing by (A) fifty
percent (50%) of quarterly Net Income and (B) seventy-five percent (75%) of the
net proceeds received from sales of equity and issuances of Subordinated Debt,
in each case received during the quarter ending December 31, 2014 or any time
thereafter.

2.6 Section 13 (Definitions).  The defined term “Permitted Distributions” in
Section 13.1 is amended by deleting the word “and” from the end of clause (g),
replacing the period at the end of clause (h) with “; and” and adding new clause
(i) as follows:
 
(i)           dividends to the shareholder of Relm Wireless not to exceed Three
Million Five Hundred Thousand Dollars ($3,500,000) in the aggregate in any
twelve month period so long as an Event of Default does not exist at the time of
such dividend and would not exist after giving effect to such dividend.

 
 

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2.7 Section 13 (Definitions).  The following terms and their respective
definitions set forth in Section 13.1 are amended in their entirety and replaced
with the following:
 
“Borrowing Base” is (a) eighty-five percent (85%) of Eligible Accounts plus (b)
twenty percent (20%) of the value of Borrowers’ Eligible Inventory (valued at
the lower of cost or wholesale fair market value), provided that the amount of
the Borrowing Base available against Eligible Inventory shall not exceed the
lesser of (i) One Million Dollars ($1,000,000) or (ii) twenty percent (20%) of
the sum of (x) the outstanding principal amount of any Advances and (y)
unrestricted cash maintained by either Borrower at Bank, in each case above, as
determined by Bank from Borrower’s most recent Borrowing Base Certificate;
provided, however, that Bank may decrease the foregoing amount or percentages in
its good faith business judgment based on events, conditions, contingencies, or
risks which, as determined by Bank, may adversely affect Collateral.
 
“Revolving Line Maturity Date” is December 30, 2015.
 
2.8 Section 13 (Definitions).  The following term and its definition are added
to Section 13.1, in appropriate alphabetical order, as follows:
 
“Adjusted Quick Ratio” is the ratio of (a) Quick Assets to (b) the sum of (i)
Current Liabilities plus (ii) to the extent not included in Current Liabilities,
the outstanding Indebtedness of Borrower to Bank minus (iii) Deferred Revenue.

2.9 Exhibit C (Borrowing Base Certificate).  Exhibit C to the Loan Agreement is
amended in its entirety and replaced with Exhibit C attached hereto.
 
2.10 Exhibit D (Compliance Certificate).  Exhibit D to the Loan Agreement is
amended in its entirety and replaced with Exhibit D 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 Amendment 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.
 
 
 

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4. Representations and Warranties.  To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:
 
4.1 Immediately after giving effect to this Amendment (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 Amendment
and to perform its obligations under the Loan Agreement, as amended by this
Amendment;
 
4.3 The organizational documents of Borrower most recently delivered to Bank
remain true, accurate and complete and have not been amended, supplemented or
restated and are and continue to be in full force and effect;
 
4.4 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, have been duly authorized;
 
4.5 The execution and delivery by Borrower of this Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, do not and will not contravene (a) any material law or regulation
binding on or affecting Borrower, (b) any material 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 Amendment and the performance
by Borrower of its obligations under the Loan Agreement, as amended by this
Amendment, 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 Amendment 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. Integration.  This Amendment and the Loan Documents represent the entire
agreement about this subject matter and supersede prior negotiations or
agreements.  All prior agreements, understandings, representations, warranties,
and negotiations between the parties about the subject matter of this Amendment
and the Loan Documents merge into this Amendment and the Loan Documents.
 
 
 

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6. Counterparts.  This Amendment 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.
 
7. Effectiveness.  This Amendment shall be deemed effective as of December 31,
2014, upon (a) the due execution and delivery to Bank of this Amendment by each
party hereto, (b) Borrower’s payment of a commitment fee in an amount equal to
Twelve Thousand Five Hundred Dollars ($12,500), and (c) payment of Bank’s legal
fees and expenses in connection with the negotiation and preparation of this
Amendment.
 
[Signature page follows.]
 
 
 

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In Witness Whereof, the parties hereto have caused this Amendment to be duly
executed and delivered as of the date first written above.
 
BANK
BORROWER
 
Silicon Valley Bank
 
 
By:  /s/ Thomas
Armstrong                                                               
Name:   Thomas Armstrong                                          
Title:     Vice President                                      
 
Relm Wireless Corporation
 
 
By:  /s/ David P. Storey                                                       
Name:   David P. Storey       
Title:     President and CEO                                          
 
 
 
Relm Communications, Inc.
 
 
By:  /s/ David P. Storey                                                      
Name:   David P. Storey       
Title:     President and CEO                                          

 
 

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EXHIBIT C - BORROWING BASE CERTIFICATE

Borrower: Relm Wireless Corporation and Relm Communications, Inc.
Lender:                      Silicon Valley Bank
Commitment Amount:                                           $5,000,000
 
ACCOUNTS RECEIVABLE
 
1. Accounts Receivable (invoiced) Book Value as of ____________________
$_______________
2. Additions (Please explain on next page)
$_______________
3. NET TRADE ACCOUNTS RECEIVABLE
$_______________
   
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
 
4. 90 Days Past Invoice Date
$_______________
5. Credit Balances over 90 Days
$_______________
6. Balance of 50% over 90 Day Accounts (Cross-Age or Current Affected)
$_______________
7. Foreign Account Debtor Accounts
$_______________
8. Foreign Invoiced and/or Collected Accounts
$_______________
9. Contra / Customer Deposit Accounts
$_______________
10. Intercompany/Employee Accounts
$_______________
11. U.S. Government Accounts in excess of $2,000,000 (w/o AOC)
$_______________
12. Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts
$_______________
13. Accounts with Memo or Pre-Billings
$_______________
14. Contract Accounts; Accounts with Progress / Milestone Billings
$_______________
15. Accounts for Retainage Billings
$_______________
16. Trust / Bonded Accounts
$_______________
17. Bill and Hold Accounts
$_______________
18. Unbilled Accounts
$_______________
19. Non-Trade Accounts (If not already deducted above)
$_______________
20. Accounts with Extended Term Invoices (Net 90+)
$_______________
21. Chargebacks Accounts / Debit Memos
$_______________
22. Product Returns / Exchanges
$_______________
23. Disputed Accounts; Insolvent Account Debtor Accounts
$_______________
24. Deferred Revenue, if applicable / Other (Please explain on next page)
$_______________
25. Concentration Limits
$_______________
26. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
$_______________
27. Eligible Accounts (#3 minus #26)
$_______________
28. ELIGIBLE AMOUNT OF ACCOUNTS (85% of #27)
$_______________
   
INVENTORY
 
29. Eligible Inventory Value as of ____________________
$_______________
30. ELIGIBLE AMOUNT OF INVENTORY (20% of #29, but not to exceed the lesser of
$1,000,000 or 20% of the sum of (i) the outstanding principal amount of any
Advances and (ii) unrestricted cash maintained by either Borrower at Bank)
$_______________
   
BALANCES
 
31. Maximum Loan Amount
$5,000,000
32. Total Funds Available [Lesser of #31 or (#28 plus #30)]
$_______________
33. Present balance owing on Line of Credit
$_______________
34. RESERVE POSITION (#32 minus #33)
$_______________

[Continued on following page.]
 
 
 

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Explanatory comments from previous page:
 

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The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
 
COMMENTS:
 
 
By: ___________________________
Authorized Signer
Date: __________________________                                
BANK USE ONLY
Received by: _____________________
authorized signer
Date:   __________________________
Verified: ________________________
authorized signer
Date: ___________________________
Compliance Status:                                Yes           No

 
 
 

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EXHIBIT D
 
COMPLIANCE CERTIFICATE
 
TO:           SILICON VALLEY
BANK                                                                                                     Date:_____________________
FROM:  RELM WIRELESS CORPORATION and RELM COMMUNICATIONS, INC.

The undersigned authorized officer of Relm Wireless Corporation and Relm
Communications, Inc. (individually and collectively, jointly and severally,
“Borrower”) certifies that under the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the “Agreement”):
 
(1) Borrower is in complete compliance for the period ending _______________
with all required covenants except as noted below; (2) there are no Events of
Default; (3) all representations and warranties in the Agreement are true and
correct in all material respects on this date except as noted below; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date;
(4) Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state
and local taxes, assessments, deposits and contributions owed by Borrower except
as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement;
and (5) no Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Bank.

Attached are the required documents supporting the certification.  The
undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.  The undersigned acknowledges that no
borrowings may be requested at any time or date of determination that Borrower
is not in compliance with any of the terms of the Agreement, and that compliance
is determined not just at the date this certificate is delivered.  Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.
 
Please indicate compliance status by circling Yes/No under “Complies” column.
 
Reporting Covenants
Required
Complies
     
Quarterly financial statements with
Compliance Certificate
Quarterly within 30 days
Yes   No
Annual financial projections
FYE within 60 days (updates within 10 days of Board approval)
Yes   No
10-K and 8-K
Within 30 days after filing with SEC
Yes   No
10-Q
Quarterly within 30 days
Yes   No
Borrowing Base Certificate, A/R & A/P Agings
Quarterly within 30 days
Yes   No
Inventory Reports
Upon request
Yes   No
 
The following Intellectual Property was registered (or a registration
application submitted) after the Effective Date (if no registrations, state
“None”)

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Financial Covenants
Required
Actual
Complies
       
Maintain on a Quarterly Basis:
     
Minimum Adjusted Quick Ratio
1.25:1.00
_____:1.00
Yes   No
Minimum Tangible Net Worth
$_______*
$_______
Yes   No

* $26,500,000 plus 50% of quarterly net profits plus 75% of equity and
Subordinated Debt net proceeds, in each case, from and after the quarter ending
12/31/14
 
 
 

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Performance Pricing
Applies
AQR ≥ 1.50:1.00
Prime
Yes   No
AQR < 1.50:1.00
Prime + 0.50%
Yes   No

The following financial covenant analyses and information set forth in Schedule
1 attached hereto are true and accurate as of the date of this Certificate.

Other Matters

Have there been any amendments of or other changes to the capitalization table
of Borrower and to the Operating Documents of Borrower or any of its
Subsidiaries?  If yes, provide copies of any such amendments or changes with
this Compliance Certificate.
Yes
No

The following are the exceptions with respect to the certification above:  (If
no exceptions exist, state “No exceptions to note.”)

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Relm Wireless Corporation
 
By:                                                       
Name:                                                  
Title:                                                    
 
Relm Communications, Inc.
 
By:                                                       
Name:                                                  
Title:                                                    
 
BANK USE ONLY
 
Received by: _____________________
authorized signer
Date:      _________________________
 
Verified:   ________________________
authorized signer
Date:      _________________________
 
Compliance Status:             Yes     No

 
 
 

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Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

In the event of a conflict between this Schedule and the Loan Agreement, the
terms of the Loan Agreement shall govern.

Dated:           ____________________

I.           Adjusted Quick Ratio (Section 6.7(a))
 
Required:                      1.25:1.00 (1.50:1.00 for pricing reduction)

Actual:                                _____:1.00

A.  
Aggregate value of the unrestricted cash and Cash Equivalents of Borrower and
its Subsidiaries
  $     B.  
Aggregate value of the net billed accounts receivable of Borrower and its
Subsidiaries
  $     C.  
Aggregate value of the Investments with maturities of fewer than 12 months
of Borrower and it Subsidiaries
 
  $     D.  
Quick Assets (the sum of lines A through C)
  $     E.  
Aggregate value of Obligations to Bank
  $     F.  
Aggregate value of liabilities that should, under GAAP, be classified as
liabilities on Borrower’s consolidated balance sheet, including all
Indebtedness, and not otherwise reflected in line E above that matures within
one (1) year
  $     G.  
Current Liabilities (the sum of lines E and F)
  $     H.  
Aggregate value of all amounts received or invoiced by Borrower in advance
of performance under contracts and not yet recognized as revenue
 
  $     I.  
Line G minus line H
  $     J.  
Adjusted Quick Ratio (line D divided by line I)
 
____:1.00
 

Is line J equal to or greater than 1.25:1:00?

  No, not in
compliance                                                                        
   Yes, in compliance

Is line J equal to or greater than 1.50:1:00?

  No, Prime +
0.50%                                                                                   Yes,
Prime

 
 

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II.           Tangible Net Worth (Section 6.7(b))

Required:

1.  
Base minimum Tangible Net Worth
  $ 26,500,000   2.  
Net Income from October 1, 2014 through the end of the last fiscal quarter
  $     3.  
50% of line 2
  $     4.  
Proceeds from the sale or issuance of Borrower’s equity securities and
Subordinated Debt from October 1, 2014 through the end of the last fiscal
quarter
  $     5.  
75% of line 4
  $     6.  
Required minimum Tangible Net Worth (line 1 plus line 3 plus line 5)
  $    

Actual:

A.  
Shareholders equity, as reflected on Borrower’s consolidated balance sheet
  $     B.  
Aggregate value of goodwill of Borrower and its Subsidiaries
  $     C.  
Non-cash related accounting adjustments to deferred tax
  $     D.  
Tangible Net Worth (line A minus line B minus line C)
  $    

Is line D equal to or greater than the required amount set forth in line 6
above?

  No, not in
compliance                                                                                       Yes,
in compliance

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