Exhibit 10.1


 


AMENDMENT TO LOAN
DOCUMENTS


 


THIS AMENDMENT to
Loan Documents (this “Amendment”) is entered into as of September 30, 2010
(the “September 2010 Amendment Date”), by and between SILICON VALLEY BANK,
a California corporation (“Bank” or “Silicon”), and ENCISION INC., a Colorado
corporation (“Borrower”). Borrower’s chief executive office is located at 6797
Winchester Circle, Boulder, CO 80301.


 


RECITALS


 


A.            Borrower and Bank are parties to
that certain Loan and Security Agreement dated as of November 10, 2006 (as
amended, restated, supplemented or otherwise modified from time to time, the “Loan
Agreement”) in effect between Borrower and Bank.


 


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, among other things: (i) waive the Designated
Default, as set forth in Section 2.1 below; (ii) modify the interest
rate applicable to Advances, as set forth in Section 2.2 below; (iii) modify
the provisions of Section 6.13 of the Loan Agreement to conform same in
respect of the interest rate modification, as set forth in Section 2.3
below; (iv) modify the financial covenant, as set forth in
Section 2.4 below; and (v) modify the form of Compliance Certificate to
conform same in respect of the financial covenant modification, as set forth in
Section 2.5 below; in each case, all 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. The term “September 2010 Amendment Date” as defined above
hereby is incorporated into the Loan Agreement.


 


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2.             Amendments to Loan Documents.


 


2.1          Designated Default; Limited Waiver.


 


(a)           Borrower has failed to comply with the Net Income
financial covenant, as set forth in Section 6.9 of the Loan Agreement (as
in effect immediately prior to the effectiveness of the September 2010
Amendment), for the period ended July 31, 2010 (such failure, solely with
respect to such financial covenant for such measurement date or period, the “Designated
Default”).


 


(b)           Lender hereby expressly agrees that the Designated Default
is waived. It is understood, however, that the foregoing waiver of the
Designated Default does not constitute a waiver of the aforementioned covenant
with respect to any other date or time period, or of any other provision or
term of the Loan Agreement or any other Loan Document, nor an agreement to
waive in the future such covenant with respect to any other date or time period
or any other provision or term of the Loan Agreement or any other Loan
Document.


 


2.2          Modification of Interest Rate Applicable to Advances. Section 2.3(a) of
the Loan Agreement hereby is amended and restated in its entirety to read as
follows:


 


“(a)         Interest Rate; Advances.
Subject to Section 2.3(b), the amounts outstanding under the Revolving
Line shall accrue interest at a per annum rate equal to the sum of the Loan
Margin (as defined below) plus the Prime Rate, which interest shall be payable
monthly. As used herein, the term “Loan Margin” means, as of any date of
determination: (I) 2.50 percentage
points, at all times after the occurrence of a Dominion Trigger Event and until
the Bank has suspended the consequences of a Dominion Trigger Event under
Section 6.13; and (II) 1.25 percentage
points, at all times during which the Bank has suspended (and not reinstated)
the consequences of a Dominion Trigger Event under Section 6.13”


 


2.3          Conforming Modification of Section 6.13;
Acknowledgment of Current Dominion Trigger Event.
Section 6.13 of the Loan Agreement hereby is amended and restated in its
entirety to read as follows:


 


“6.13      Dominion Trigger Events. After the
occurrence of a Dominion Trigger Event, at such time as Borrower’s Quick Ratio equals
or exceeds 1.25 to 1.00 for three (3) consecutive months, Borrower may
request that the consequences of the Dominion Trigger Event (being: higher
interest rate Loan Margin pursuant to Section 2.3(a); float charges
pursuant to Section 2.3(f); collateral monitoring fees pursuant to
Section 2.4(d); Transaction Reports pursuant to Sections 3.4 and
6.2(a)(i); daily application of cash to Obligations pursuant to
Section 6.3(c); and increased frequency of audits (no more than once


 


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every 4 months) pursuant to Section 6.6) be
suspended, subject to reinstatement in the event another, subsequent Dominion
Trigger Event occurs, and as long as no Event of Default has occurred and is
continuing, Bank shall suspend the consequences of such Dominion Trigger Event.”


 


Borrower hereby acknowledges that a Dominion Trigger Event occurred
with respect to each of Borrower’s Quick Ratio as of June 30, 2010,
Borrower’s Quick Ratio as of July 31, 2010, and Borrower’s Quick Ratio as
of August 31, 2010, and that, as of the September 2010 Amendment
Date, Bank has not suspended the consequences of each such Dominion Trigger
Event under Section 6.13.


 


2.4          Modification of Financial Covenant. Effective for
the period ending August 31, 2010 and thereafter, Section 6.9 of the
Loan Agreement hereby is amended and restated in its entirety to read as
follows:


 


“6.9        Financial Covenant(s). Borrower shall
maintain, as of the last day of each month, Net Income, for and measured on a
trailing three month basis, of not less than the following [note: amounts shown
below within pointed brackets (< $ >) are negative amounts]:


 


	
  Three-month Period Ending

  	
   

  	
  Minimum Net Income

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  August 31, 2010

  	
   

  	
  $

  	
  < 200,000 >

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30, 2010

  	
   

  	
  $

  	
  < 200,000 >

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  October 31, 2010

  	
   

  	
  $

  	
  < 50,000 >

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  November 30, 2010,
  and each month thereafter

  	
   

  	
  $

  	
  1

  	
   

  



 


Notwithstanding anything to the contrary elsewhere
herein, negative Net Income for any period shall be calculated as pre-tax loss
plus stock option expense.”


 


2.5          Conforming Modification of Form of Compliance
Certificate. In order to amend the form of Compliance
Certificate to reflect the modification of Section 6.9 of the Loan
Agreement effected by this Amendment, the currently existing Exhibit E
[Form of Compliance Certificate] attached to the Loan Agreement (the “Existing
Compliance Certificate Form”) hereby is amended and restated in its entirety to
read as set forth on Exhibit E attached to this Amendment (the “Amended
Compliance Certificate Form”). From and after the September 2010 Amendment
Date, any and all


 


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references in the Loan Documents to Exhibit E attached to the Loan
Agreement shall mean and refer to the Amended Compliance Certificate
Form instead of the Existing Compliance Certificate Form.


 


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 (as amended by this Amendment, as applicable) are hereby ratified and
confirmed and shall remain in full force and effect.


 


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
expressly relate to an earlier date, in which ease 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 Documents, 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 Documents, 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 Documents, 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


 


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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
Documents, 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 either 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.             Release by
Borrower. Borrower hereby agrees as follows:


 


5.1          FOR GOOD AND VALUABLE CONSIDERATION, Borrower
hereby forever relieves, releases, and discharges Bank and its present or
former employees, officers, directors, agents, representatives, attorneys, and
each of them, from any and all claims, debts, liabilities, demands,
obligations, promises, acts, agreements, costs and expenses, actions and causes
of action, of every type, kind, nature, description or character whatsoever,
whether known or unknown, suspected or unsuspected, absolute or contingent,
arising out of or in any manner whatsoever connected with or related to facts,
circumstances, issues, controversies or claims existing or arising from the
beginning of time through and including the date of execution of this Amendment
(collectively “Released Claims”). Without
limiting the foregoing, the Released Claims shall include any and all
liabilities or claims arising out of or in any manner whatsoever connected with
or related to the Loan Documents, the Recitals hereto, any instruments,
agreements or documents executed in connection with any of the foregoing or the
origination, negotiation, administration, servicing and/or enforcement of any
of the foregoing.


 


5.2          In furtherance of this release,
Borrower expressly acknowledges and waives any and all rights under
Section 1542 of the California Civil Code, which provides as follows:


 


“A GENERAL RELEASE DOES NOT
EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR EXPECT TO EXIST IN HIS OR
HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER
MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.” (Emphasis
added.)


 


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(and the equivalent thereof, if any, under the laws of any other
applicable jurisdiction).


 


5.3          By entering into this release,
Borrower recognizes that no facts or representations are ever absolutely
certain and it may hereafter discover facts in addition to or different from
those which it presently knows or believes to be true, but that it is the
intention of Borrower hereby to fully, finally and forever settle and release
all matters, disputes and differences, known or unknown, suspected or
unsuspected; accordingly, if Borrower should subsequently discover that any
fact that it relied upon in entering into this release was untrue, or that any
understanding of the facts was incorrect, Borrower shall not be entitled to set
aside this release by reason thereof, regardless of any claim of mistake of
fact or law or any other circumstances whatsoever. Borrower acknowledges that
it is not relying upon and has not relied upon any representation or statement
made by Bank with respect to the facts underlying this release or with regard
to any of such party’s rights or asserted rights.


 


5.4          This release may be pleaded as a full
and complete defense and/or as a cross-complaint or counterclaim against any
action, suit, or other proceeding that may be instituted, prosecuted or
attempted in breach of this release. Borrower acknowledges that the release
contained herein constitutes a material inducement to Bank to enter into this
Amendment, and that Bank would not have done so but for Bank’s expectation that
such release is valid and enforceable in all events.


 


5.5          Borrower hereby represents and
warrants to Bank, and Bank is relying thereon, as follows:


 


(a)           Except as expressly stated in this
Amendment, neither Bank nor any agent, employee or representative of Bank has
made any statement or representation to Borrower regarding any fact relied upon
by Borrower in entering into this Amendment.


 


(b)           Borrower has made such investigation
of the facts pertaining to this Amendment and all of the matters appertaining
thereto, as it deems necessary.


 


(c)           The terms of this Amendment are
contractual and not a mere recital.


 


(d)           This Amendment has been carefully
read by Borrower, the contents hereof are known and understood by Borrower, and
this Amendment is signed freely, and without duress, by Borrower.


 


(e)           Borrower represents and warrants that
it is the sole and lawful owner of all right, title and interest in and to
every claim and every other matter which it releases herein, and that it has
not heretofore assigned or transferred, or purported to assign or transfer, to
any person, firm or entity any claims or other matters herein released.
Borrower shall indemnify Bank, defend and hold it harmless from and


 


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against all claims based upon or arising in connection with prior
assignments or purported assignments or transfers of any claims or matters
released herein.


 


6.             Fee.
In consideration for Bank entering into this Amendment, Borrower shall pay Bank
a fee in the mutually agreed amount of $2,500, which
fee shall be earned in full and payable concurrently with the execution and
delivery of this Amendment, and all Bank Expenses in connection herewith. Such
fee shall be non-refundable and in addition to all interest and other fees
payable to Bank under the Loan Documents. Bank is authorized to charge such fee
and such Bank Expenses to Borrower’s loan account.


 


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 upon the due execution and delivery to Bank of this Amendment
by each party hereto.


 


[Remainder of page intentionally left blank;
signature page immediately 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.


 


Borrower:


 


ENCISION INC., a Colorado
corporation


 


 


	
  By

  	
  /s/ John R. Serino

  	
   

  
	
  Print Name

  	
  John R. Serino

  	
   

  
	
  Title

  	
  President & CEO

  	
   

  
					



 


 


Bank:


 


SILICON VALLEY BANK


 


	
  By

  	
  /s/ Chris Ennis

  	
   

  
	
  Print Name

  	
  Chris Ennis

  	
   

  
	
  Title

  	
  Relationship Manager

  	
   

  
					



 


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