UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported)  October 20, 2010
 
RELM Wireless Corporation
(Exact name of registrant as specified in its charter)
 
Nevada
(State or other jurisdiction of incorporation)
 

000-07336
 
59-34862971
(Commission File Number)
 
(IRS Employer Identification No.)

7100 Technology Drive, West Melbourne, FL
 
32904
(Address of principal executive offices)  
(Zip Code)
 
Registrant's telephone number, including area code   (321) 984-1414)
 
N/A
(Former name or former address, if changed since last report)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
ITEM 1.01  ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
 
On October 20, 2010, RELM Wireless Corporation (the “ Registrant ”), RELM Communications, Inc., the Registrant’s wholly-owned subsidiary,  and Silicon Valley Bank, as lender (“ SVB ”), amended their Loan and Security Agreement dated as of October 23, 2008 (the “ Loan and Security Agreement ”), under which the Registrant’s existing secured revolving credit facility is maintained, by entering into the First Amendment to Loan and Security Agreement (the “ First Amendment ”).  Under  the First Amendment, the Registrant’s existing secured revolving credit facility with SVB was  amended as follows:
 
●        
maximum borrowing availability has been increased to $5.0 million from $3.5 million;
 
●        
the maturity date has been extended to December 31, 2012 from October 23, 2010;
 
●        
the variable rate at which borrowings bear interest has been reduced to prime rate plus 50 basis points from prime rate plus 100 basis points (such 100 basis points previously subject to reduction of 50 basis points anytime the Registrant’s quarterly net income was greater than $1.0 million); and
 
●        
the Registrant’s minimum “tangible net worth” requirement has been reset at $25.35 million,  such minimum requirement still continuing to be subject to increase by (i) 50% of quarterly net profits and (ii) 75% of the net proceeds received from issuances of equity and issuances of “subordinated debt”; and
 
●        
the unused revolving line fee has been reduced to 20 basis points from 30 basis points.
 
The Registrant continues to be subject to the substantially same customary borrowing terms and conditions under the SVB credit facility as it was prior to the First Amendment, including the accuracy of representations and warranties, compliance with financial maintenance and restrictive covenants and the absence of events of default.
 
The Registrant was in compliance with all covenants under the Loan and Security Agreement, as amended by the First Amendment, as of the date of filing this Current Report on Form 8-K.  As of the date of filing this Current Report on Form 8-K, the Registrant had $2.0 million of borrowings outstanding under the amended SVB credit facility and approximately $1.1 million of additional borrowing availability thereunder.
 
The foregoing description of the SVB credit facility and the Loan and Security Agreement, as amended by the First Amendment, does not purport to be complete and is qualified in its entirety by reference to the text of the First Amendment filed herewith as Exhibit 10.1 and incorporated herein by this reference.
 
ITEM 2.03   CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF THE REGISTRANT.
 
The information required by this Item 2.03 is set forth in Item 1.01 above, which is incorporated herein by reference.
 
ITEM 9.01  FINANCIAL STATEMENTS AND EXHIBITS.
 
(d)           Exhibits.
 
Exhibit Number
 
Description
 
First Amendment to Loan and Security Agreement dated as of October 20, 2010 by and among Silicon Valley Bank, RELM Wireless Corporation and RELM Communications, Inc.
 
Press Release issued by RELM Wireless Corporation on October 20, 2010
 

 
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SIGNATURES
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
   
RELM WIRELESS CORPORATION
   
(Registrant)
     
Date:  October 20, 2010 By: /s/ William P. Kelly  
 
 
 
William P. Kelly
Executive Vice President and
Chief Financial Officer
     

 
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Exhibit Index
 
Exhibit Number
 
Description
 
First Amendment to Loan and Security Agreement dated as of October 20, 2010 by and among Silicon Valley Bank, RELM Wireless Corporation and RELM Communications, Inc.
 
Press Release issued by RELM Wireless Corporation on October 20, 2010
 
 
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Exhibit 10.1
 
FIRST AMENDMENT TO
LOAN AND SECURITY AGREEMENT
 
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into this 20 th day of October, 2010, by and  SILICON VALLEY BANK (“Bank”), RELM WIRELESS CORPORATION, a Nevada corporation whose address is 7100 Technology Drive, West Melbourne, Florida  32904 (“Relm Wireless”), and RELM COMMUNICATIONS, INC., a Florida corporation (“Relm Communications”; Relm Wireless and Relm Communications are sometimes hereinafter referred to individually as a “Borrower” and collectively as the “Borrowers”).
 
Recitals
 
A.            Bank and Borrowers have entered into that certain Loan and Security Agreement dated as of October 23, 2008 (as the same 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) increase the amount available to be borrowed under the Revolving Line, (ii) extend the maturity date, (iii) lower the interest rate payable on the Advances, and (iv) 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(a) (Advances) .  Section 2.3(a) is amended in its entirety and replaced with the following:
 
(a)            Advances .  Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at a per annum rate equal to the Prime Rate plus one half of one percent (0.50%), which interest shall be payable monthly in accordance with Section 2.3(f) below.  Accrued interest on amounts outstanding under the Revolving Line shall be payable monthly.
 
 
1
 
 
2.2   Section 2.4(c) (Unused Revolving Line Facility Fee) .  Section 2.4(c) is amended in its entirety and replaced with the following:
 
(c)            Unused Revolving Line Facility Fee .  A fee (the “ Unused Revolving Line Facility Fee ”), payable monthly, in arrears, on a calendar year basis, in an amount equal to two tenths of one percent (0.20%) per annum of the average unused portion of the Revolving Line, as determined by Bank.  The unused portion of the Revolving Line, for the purposes of this calculation, shall include amounts reserved under the Cash Management Services Sublimit for products provided and under the Foreign Exchange Sublimit for FX Forward Contracts.  Borrowers shall not be entitled to any credit, rebate or repayment of any Unused Revolving Line Facility Fee previously earned by Bank pursuant to this Section notwithstanding any termination of the Agreement or the suspension or termination of Bank’s obligation to make loans and advances hereunder; and
 
2.3   Section 6.7(b) (Financial Covenants) .  Section 6.7(b) is amended in its entirety and replaced with the following:
 
(b)            Tangible Net Worth .  A Tangible Net Worth of at least $25,350,000, increasing by (i) 50% of quarterly net profits and (ii) 75% of the net proceeds received from issuances of equity and issuances of Subordinated Debt, in each case received after October 20, 2010.
 
2.4   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:
 
“ Revolving Line ” is an Advance or Advances in an aggregate amount of up to Five Million Dollars ($5,000,000).
 
 “ Revolving Line Maturity Date ” is December 31, 2012.
 
2.5   Exhibit D (Compliance Certificate) .  Exhibit D to the Loan Agreement is amended in its entirety by replacing such Exhibit D with the 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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3.3   In addition to those Events of Default specifically enumerated in the Loan Documents, the failure to comply with the terms of any covenant or agreement contained herein shall constitute an Event of Default and shall entitle the Bank to exercise all rights and remedies provided to the Bank under the terms of any of the other Loan Documents as a result of the occurrence of the same.
 
4.   Representations and Warranti e s .  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 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;
 
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 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 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.
 
 
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5.   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.
 
6.   Effectiveness.   This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto, (b) Borrower’s payment of a non refundable amendment fee in an amount equal to $30,000, (c) Bank’s receipt of such other agreements, documents and instruments as it may require in its sole discretion, and (d) 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
   
     
Silicon Valley Bank
   
     
By:_____________________________________________
   
Name: __________________________________________
   
Title: ___________________________________________
   
     
     
BORROWERS
   
     
Relm Wireless Corporation
   
     
By:_____________________________________________
   
Name:___________________________________________
   
Title:____________________________________________
   
     
     
Relm Communications, Inc.
   
     
By: _____________________________________________
   
Name:___________________________________________
   
Title:____________________________________________
   
 
 
 
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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. (“Borrowers”) certifies that under the terms and conditions of the Loan and Security Agreement among Borrowers and Bank (the “Agreement”), (1) Borrowers are 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) Borrowers, and each of their 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 Borrowers 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 Borrowers or any of their 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 Covenant
 
Required
 
Complies
         
Monthly financial statements with Compliance Certificate
 
Monthly within 30 days
 
Yes   No
Projections
 
Within 60 days prior to FYE
 
Yes   No
Annual Financial Statement (CPA Audited)
 
Within 15 days after filing with SEC (or within 15 days of filing deadline, if not timely filed)
 
Yes   No
10-Q, 10-K and 8-K
 
Within 15 days after filing with SEC (or within 15 days of filing deadline, if not timely filed)
 
Yes   No
Borrowing Base Certificate, A/R & A/P Agings and Inventory Reports
 
Monthly within 30 days
 
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 Covenant
 
Required
 
Actual
 
Complies
             
Maintain on a Monthly Basis:
           
Minimum Adjusted Quick Ratio
 
1.75:1.0
 
_____:1.0
 
Yes   No
Minimum Tangible Net Worth
 
$____________
(which equals $25,350,000 plus 50% of quarterly net profits plus 75% of equity and Subordinated Debt net proceeds)
 
$_______
 
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.

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

 
Relm Wireless Corporation   BANK USE ONLY  
         
    Received by:    
      authorized signer  
By:_____________________________________        
Name:___________________________________    Date:     
Title:____________________________________        
     Verified:    
      authorized signer  
Relm Communications, Inc.        
         
 By:_____________________________________    Date:     
 Name:___________________________________        
 Title:____________________________________    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:_____________:1.00

Actual:

A.
Aggregate value of the unrestricted cash and cash equivalents of Borrowers and their Subsidiarie
$ ______
     
B.
Aggregate value of the net billed accounts receivable of Borrowers and their Subsidiaries
$______
     
C.
Aggregate value of the Investments with maturities of fewer than 12 months of Borrowers and their 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 Borrowers’ 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 Borrowers 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)
 
 
Is line J equal to or greater than 1.75:1:00?

___________No, not in compliance________________Yes, in compliance_________________________
 
 
8
 
 
II.            Tangible Net Worth (Section 6.7(b))

Required: $________________ (which is $25,350,000 plus 50% of quarterly net profits plus 75% of equity and Subordinated Debt net proceeds)

Actual:

A.
Shareholders Equity, as reflected on Borrower’s consolidated balance sheet
$________
     
B.
Aggregate value of goodwill of Borrowers and their 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 Tangible Net Worth as set forth above?
 
____________No, not in compliance ___________________________Yes, in compliance
 
 
9
 

 
 
 
  Exhibit 99.1
 
Company Contact:
RELM Wireless Corporation
William P. Kelly, EVP & CFO
(321) 984-1414

RELM WIRELESS AMENDS REVOLVING CREDIT FACILITY WITH SILICON VALLEY BANK
- Facility Size Increased to $5 Million; Variable Interest Rate Reduced by 50 Basis Points; Term Extended To December 31, 2012 -
 
WEST MELBOURNE, FL, October 20, 2010 -- RELM Wireless Corporation (NYSE AMEX: RWC) today announced that it has amended its revolving credit facility with Silicon Valley Bank (SVB), the primary subsidiary of SVB Financial Group (NASDAQ: SIVB), as follows:
 
●   
maximum borrowing availability has been increased to $5.0 million from $3.5 million;
 
●   
the maturity date has been extended to December 31, 2012 from October 23, 2010;
 
●   
the variable rate at which borrowings bear interest has been reduced to prime rate plus 50 basis points;
 
●   
the Company’s minimum “tangible net worth” requirement has been reset at $25.35 million,  such minimum requirement still continuing to be subject to increase by (i) 50% of quarterly net profits and (ii) 75% of the net proceeds received from issuances of equity and issuances of “subordinated debt”; and
 
●   
the unused revolving line fee has been reduced to 20 basis points.
 
The Company continues to be subject to the substantially same customary borrowing terms and conditions as it was prior to amending the credit facility. The Company currently has $2.0 million of borrowings outstanding under the amended credit facility and additional borrowing availability of approximately $1.1 million.
 
“We value, and are pleased to continue, our longstanding relationship with SVB; first established in 2003.  The amended facility is intended to provide additional working capital at a reduced interest cost, if needed, to execute our strategic business plans and growth initiatives,” stated RELM President and Chief Executive Officer Dave Storey.  “SVB understands our business and has been instrumental in its success, consistently demonstrating confidence in our operations and plans for future growth.”

For additional information about the Company’s amended revolving credit facility with Silicon Valley Bank, please see the Company’s Current Report on Form 8-K dated October 20, 2010 to be filed with the Securities and Exchange Commission later today.
 
 
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About Silicon Valley Bank
 
Silicon Valley Bank is the premier commercial bank for companies in the technology, life science, venture capital, private equity and premium wine industries. SVB provides a comprehensive suite of financing solutions, treasury management, corporate investment and international banking services to its clients worldwide. Through its focus on specialized markets and extensive knowledge of the people and business issues driving them, Silicon Valley Bank provides a level of service and partnership that measurably impacts its clients' success. Founded in 1983 and headquartered in Santa Clara, Calif., the company serves clients around the world through 26 U.S. offices and international operations in China, India, Israel and the United Kingdom. Silicon Valley Bank is a member of global financial services firm SVB Financial Group (NASDAQ: SIVB), with SVB Analytics, SVB Capital, SVB Global and SVB Private Client Services. More information on the company can be found at www.svb.com .
 
Silicon Valley Bank is the California bank subsidiary and the commercial banking operation of SVB Financial Group. Banking services are provided by Silicon Valley Bank, a member of the FDIC and the Federal Reserve System. SVB Private Client Services is a division of Silicon Valley Bank. SVB Financial Group is also a member of the Federal Reserve System.
 
About RELM Wireless Corporation

As an American Manufacturer for more than 60 years, RELM Wireless Corporation has produced high-specification two-way communications equipment of unsurpassed reliability and value for use by public safety professionals and government agencies, as well as radios for use in a wide range of commercial and industrial applications.  Advances include a broad new line of leading digital two-way radios compliant with APCO Project 25 specifications.  RELM’s products are manufactured and distributed worldwide under BK Radio and RELM brand names. The Company maintains its headquarters in West Melbourne, Florida and can be contacted through its web site at www.relm.com or directly at 1-800-821-2900.  The Company’s common stock trades on the NYSE Amex market under the symbol “RWC”.
 
This press release contains certain forward-looking statements that are made pursuant to the “Safe Harbor” provisions of the Private Securities Litigation Reform Act Of 1995.  These forward-looking statements concern the Company’s operations, economic performance and financial condition and are based largely on the Company’s beliefs and expectations.  These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such factors and risks include, among others, the following: risks relating to the current financial crisis and adverse economic conditions; reliance on contract manufacturers; heavy reliance on sales to the U.S. Government; federal, state and local budget deficits and spending limitations; limitations in available radio spectrum for use by land mobile radios; general economic and business conditions amid the financial crisis; changes in customer preferences; competition; changes in technology; changes in business strategy; the debt and inventory levels of the Company; quality of management, business abilities and judgment of the Company’s personnel; and the availability, terms and deployment of capital.  Certain of these factors and risks, as well as other risks and uncertainties, are stated in more detail in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and in the Company’s subsequent filings with the SEC.  These forward-looking statements are made as of the date of this press release, and the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.
 
 
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