FIRST AMENDMENT to
AMENDED AND RESTATED Loan and security agreement

 

THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
“Amendment”) is entered into this 19th day of May, 2014, but effective as of May
10, 2014, by and between SILICON VALLEY BANK, a California corporation (“Bank”),
and ENCISION INC., a Colorado corporation (“Borrower”).

 

Recitals

 

A. Bank and Borrower have entered into that certain Amended and Restated Loan
and Security Agreement dated as of May 10, 2012 (as the same may from time to
time be 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 is currently in default of Section 6.9(a) of the Loan Agreement for
failing to comply with the Tangible Net Worth financial covenant for the month
ending March 31, 2014 (the “Existing Event of Default”).

 

D. Borrower has requested that Bank amend the Loan Agreement to (i) extend the
Revolving Line Maturity Date, (ii) revise the Tangible Net Worth financial
covenant, (iii) waive the Existing Event of Default, and (iv) make certain other
revisions to the Loan Agreement as more fully set forth herein.

 

E. Although Bank is under no obligation to do so, Bank is willing to (i) extend
the Revolving Line Maturity Date, (ii) revise the Tangible Net Worth financial
covenant, (iii) waive the Existing Event of Default, and (iv) make certain other
revisions to the Loan Agreement, all on the terms and conditions set forth in
this Amendment, so long as Borrower complies with the terms, covenants and
conditions set forth in this Amendment in a timely manner.

 

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,
including its preamble and recitals, shall have the meanings given to them in
the Loan Agreement.

 

2. Amendments to Loan Agreement.

 

2.1 Section 6.9 (Financial Covenants). Section 6.9(a) of the Loan Agreement is
hereby amended by deleting it in its entirety and replacing it with the
following:

 

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(a) Tangible Net Worth. Commencing with the month ending April 30, 2014, a
Tangible Net Worth of at least Three Million Three Hundred Thousand Dollars
($3,300,000), which amount shall be increased by the sum of (i) fifty percent
(50%) of Borrower’s quarterly Net Income (without reduction for any losses) for
such quarter, plus (ii) fifty percent (50%) of the Net Proceeds received by
Borrower from any bona-fide issuances of new equity during such quarter, plus
(iii) fifty percent (50%) of the Net Proceeds received by Borrower from any
Subordinated Debt incurred by Borrower during such quarter.

 

2.2 Section 13 (Definitions).

 

(a) The following terms and their respective definitions set forth in
Section 13.1 of the Loan Agreement are hereby amended by deleting them in their
entirety and replacing them with the following:

 

“Revolving Line Maturity Date” is May 31, 2015.

 

“Streamline Eligible” shall mean at all times that Borrower’s Net Cash for the
immediately preceding month is at least One Dollar ($1.00), as determined by
Bank, in its sole discretion (the “Streamline Threshold”); provided, however,
Borrower shall not be Streamline Eligible during the continuance of an Event of
Default. At any time that Borrower’s Net Cash is less than the Streamline
Threshold, Borrower will not be Streamline Eligible until such time as Bank
confirms that (a) Borrower’s Net Cash is equal to or greater than the Streamline
Threshold as of such date and (b) Borrower’s Net Cash is equal to or greater
than the Streamline Threshold at all times during the immediately preceding
three (3) monthly reporting periods as reported in each monthly Compliance
Certificate as of the first (1st) day of the first (1st) month following Bank’s
receipt of such monthly Compliance Certificate.

 

(b) The following term and its definition are hereby added in alphabetical order
to Section 13.1 of the Loan Agreement as follows:

 

“Net Cash” is the sum of all of Borrower’s unrestricted cash and Cash
Equivalents held at or through Bank and Bank’s Affiliates less outstanding
Obligations.

 

(c) The defined term “Quick Ratio” set forth in Section 13.1 of the Loan
Agreement and all references thereto in the Loan Agreement are hereby deleted in
their entirety.

 

2.3 Compliance Certificate. From and after the date hereof, Exhibit B of the
Loan Agreement is replaced in its entirety with Exhibit B attached hereto and
all references in the Loan Agreement to the Compliance Certificate shall be
deemed to refer to Exhibit B attached hereto.

 

3. Waiver of the Existing Event of Default. Borrower acknowledges and agrees
that unless the Existing Event of Default is waived by Bank, the Existing Event
of Default would constitute an Event of Default under the Loan Documents. Bank
hereby waives the Existing Event of Default. Bank’s agreement to waive the
Existing Event of Default shall in no way obligate Bank to make any other
modifications to the Loan Agreement or to waive Borrower’s compliance with any
other terms of the Loan Documents, and shall not limit or impair Bank’s right to
demand strict performance of all other terms and covenants as of any date. The
waiver set forth above shall not be deemed or otherwise construed to constitute
a waiver of any other provisions of the Loan Agreement in connection with any
other transaction.

 

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4. Limitation of Waiver and Amendments.

 

4.1 The amendments set forth in Section 2 and the waiver set forth in Section 3,
above, are effective for the purposes set forth herein and shall be limited
precisely as written and shall not be deemed to \l3i) be a consent to any
amendment, waiver or modification of any other term or condition of any Loan
Document, or \l3ii) 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.

 

4.2 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.

 

4.3 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.

 

5. Representations and Warranties. To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:

 

5.1 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, except for the Existing Event of Default;

 

5.2 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;

 

5.3 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;

 

5.4 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;

 

5.5 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 \l3iii) any law or regulation binding
on or affecting Borrower, \l3iv) any contractual restriction with a Person
binding on Borrower, \l3v) any order, judgment or decree of any court or other
governmental or public body or authority, or subdivision thereof, binding on
Borrower, or \l3vi) the organizational documents of Borrower;

 

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5.6 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

 

5.7 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.

 

6. 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.

 

7. 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.

 

8. Effectiveness. This Amendment shall be deemed effective as of May 10, 2014
upon \l3vii) the due execution and delivery to Bank of this Amendment by each
party hereto, \l3viii)Borrower’s payment of a fully earned, non-refundable
amendment fee in an amount equal to Ten Thousand Dollars ($10,000), and
\l3ix) payment of Bank’s legal fees and expenses in connection with the
negotiation and preparation of this Amendment.

 

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[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.

 

BORROWER:               ENCISION INC.                   By: /s/ Gregory J.
Trudel           Name: Gregory J. Trudel           Title: Presidentand CEO      
 

 

BANK:               SILICON VALLEY BANK                   By: /s/ Daniel
Harrison           Name: Daniel Harrison           Title:  Vice President      
 

 

 

[Signature Page to First Amendment to Amended and Restated Loan and Security
Agreement]