FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

Exhibit 10.1

FIRST AMENDMENT TO

THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered into this 20th day of October, 2010, by and SILICON VALLEY BANK (“Bank”), RELM WIRELESS CORPORATION, a Nevada corporation whose address is 0000 Xxxxxxxxxx Xxxxx, Xxxx Xxxxxxxxx, Xxxxxxx 00000 (“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.

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.

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 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 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.

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.]

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:____________________________________________

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”)

___________________________________________________________________________________________

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

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_________________________

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

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FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

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