**Exhibit 10.1**

 

**AMENDMENT TO LOANDOCUMENTS**

 

THIS **AMENDMENT** toLoan 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 Coloradocorporation (“Borrower”). Borrower’s chief executive office is located at 6797Winchester Circle, Boulder, CO 80301.

 

**RECITALS**

 

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

 

**B.**            Bank has extended credit to Borrowerfor the purposes permitted in the Loan Agreement.

 

**C.**            Borrower has requested that Bankamend the Loan Agreement to, among other things: (i) waive the DesignatedDefault, as set forth in Section 2.1 below; (ii) modify the interestrate applicable to Advances, as set forth in Section 2.2 below; (iii) modifythe provisions of Section 6.13 of the Loan Agreement to conform same inrespect of the interest rate modification, as set forth in Section 2.3below; (iv) modify the financial covenant, as set forth inSection 2.4 below; and (v) modify the form of Compliance Certificate toconform same in respect of the financial covenant modification, as set forth inSection 2.5 below; in each case, all as more fully set forth herein.

 

**D.**            Bank has agreed to so amend certainprovisions of the Loan Agreement, but only to the extent, in accordance withthe terms, subject to the conditions and in reliance upon the representationsand warranties set forth below.

 

**AGREEMENT**

 

**NOW, THEREFORE,** inconsideration of the foregoing recitals and other good and valuableconsideration, the receipt and adequacy of which is hereby acknowledged, andintending to be legally bound, the parties hereto agree as follows:

 

**1.             Definitions.** Capitalized terms used butnot defined in this Amendment shall have the meanings given to them in the LoanAgreement. The term “September 2010 Amendment Date” as defined abovehereby 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 Incomefinancial covenant, as set forth in Section 6.9 of the Loan Agreement (asin effect immediately prior to the effectiveness of the September 2010Amendment), for the period ended July 31, 2010 (such failure, solely withrespect to such financial covenant for such measurement date or period, the “DesignatedDefault”).

 

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

 

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

 

“(a)         Interest Rate; Advances.Subject to Section 2.3(b), the amounts outstanding under the RevolvingLine shall accrue interest at a per annum rate equal to the sum of the LoanMargin (as defined below) plus the Prime Rate, which interest shall be payablemonthly. As used herein, the term “Loan Margin” means, as of any date ofdetermination: (I) **2.50** percentagepoints, at all times after the occurrence of a Dominion Trigger Event and untilthe Bank has suspended the consequences of a Dominion Trigger Event underSection 6.13; and (II) **1.25** percentagepoints, 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 itsentirety to read as follows:

 

**“6.13      Dominion Trigger Events.** After theoccurrence of a Dominion Trigger Event, at such time as Borrower’s Quick Ratio equalsor exceeds 1.25 to 1.00 for three (3) consecutive months, Borrower mayrequest that the consequences of the Dominion Trigger Event (being: higherinterest rate Loan Margin pursuant to Section 2.3(a); float chargespursuant to Section 2.3(f); collateral monitoring fees pursuant toSection 2.4(d); Transaction Reports pursuant to Sections 3.4 and6.2(a)(i); daily application of cash to Obligations pursuant toSection 6.3(c); and increased frequency of audits (no more than once

 

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

 

Borrower hereby acknowledges that a Dominion Trigger Event occurredwith 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 asof August 31, 2010, and that, as of the September 2010 AmendmentDate, Bank has not suspended the consequences of each such Dominion TriggerEvent under Section 6.13.

 

**2.4          Modification of Financial Covenant**. Effective forthe period ending August 31, 2010 and thereafter, Section 6.9 of theLoan Agreement hereby is amended and restated in its entirety to read asfollows:

 

**“6.9        Financial Covenant(s).** Borrower shallmaintain, as of the last day of each month, Net Income, for and measured on atrailing three month basis, of not less than the following [note: amounts shownbelow 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 elsewhereherein, negative Net Income for any period shall be calculated as pre-tax lossplus stock option expense.”

 

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

 

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references in the Loan Documents to Exhibit E attached to the LoanAgreement shall mean and refer to the Amended Compliance CertificateForm 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 setforth herein and shall be limited precisely as written and shall not be deemedto (a) be a consent to any amendment, waiver or modification of any otherterm or condition of any Loan Document, or (b) otherwise prejudice anyright or remedy which Bank may now have or may have in the future under or inconnection with any Loan Document.

 

**3.2**          This Amendment shall be construed inconnection with and as part of the Loan Documents and all terms, conditions,representations, warranties, covenants and agreements set forth in the LoanDocuments (as amended by this Amendment, as applicable) are hereby ratified andconfirmed and shall remain in full force and effect.

 

**4.             Representations and Warranties.** To induce Bankto enter into this Amendment, Borrower hereby represents and warrants to Bankas follows:

 

**4.1**          Immediately after giving effect tothis Amendment, (a) the representations and warranties contained in theLoan Documents are true, accurate and complete in all material respects as ofthe date hereof (except to the extent such representations and warrantiesexpressly relate to an earlier date, in which ease they are true and correct asof such date), and (b) no Event of Default has occurred and is continuing;

 

**4.2**          Borrower has the power and authorityto execute and deliver this Amendment and to perform its obligations under theLoan Documents, as amended by this Amendment;

 

**4.3**          The organizational documents ofBorrower delivered to Bank on the Effective Date remain true, accurate andcomplete and have not been amended, supplemented or restated and are andcontinue to be in full force and effect;

 

**4.4**          The execution and delivery by Borrowerof this Amendment and the performance by Borrower of its obligations under theLoan Documents, as amended by this Amendment, have been duly authorized;

 

**4.5**          The execution and delivery by Borrowerof this Amendment and the performance by Borrower of its obligations under theLoan Documents, as amended by this Amendment, do not and will not contravene(a) any law or regulation binding on or affecting Borrower, (b) anycontractual 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) theorganizational documents of Borrower;

 

**4.6         **The execution and delivery by Borrower of thisAmendment and the performance by Borrower of its obligations under the LoanDocuments, as amended by this Amendment, do not require any order, consent,approval, license, authorization or validation of, or filing, recording orregistration with, or exemption by any governmental or public body orauthority, or subdivision thereof, binding on either Borrower, except asalready has been obtained or made; and

 

**4.7**          This Amendment has been duly executedand delivered by Borrower and is the binding obligation of Borrower,enforceable against Borrower in accordance with its terms, except as suchenforceability may be limited by bankruptcy, insolvency, reorganization,liquidation, moratorium or other similar laws of general application andequitable principles relating to or affecting creditors’ rights.

 

**5.**             **Release byBorrower.** Borrower hereby agrees as follows:

 

**5.1          FOR GOOD AND VALUABLE CONSIDERATION,** Borrowerhereby forever relieves, releases, and discharges Bank and its present orformer employees, officers, directors, agents, representatives, attorneys, andeach of them, from any and all claims, debts, liabilities, demands,obligations, promises, acts, agreements, costs and expenses, actions and causesof 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 thebeginning of time through and including the date of execution of this Amendment(collectively “**Released Claims**”). Withoutlimiting the foregoing, the Released Claims shall include any and allliabilities or claims arising out of or in any manner whatsoever connected withor related to the Loan Documents, the Recitals hereto, any instruments,agreements or documents executed in connection with any of the foregoing or theorigination, negotiation, administration, servicing and/or enforcement of anyof the foregoing.

 

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

 

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

 

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

 

**5.3**          By entering into this release,Borrower recognizes that no facts or representations are ever absolutelycertain and it may hereafter discover facts in addition to or different fromthose which it presently knows or believes to be true, but that it is theintention of Borrower hereby to fully, finally and forever settle and releaseall matters, disputes and differences, known or unknown, suspected orunsuspected; accordingly, if Borrower should subsequently discover that anyfact that it relied upon in entering into this release was untrue, or that anyunderstanding of the facts was incorrect, Borrower shall not be entitled to setaside this release by reason thereof, regardless of any claim of mistake offact or law or any other circumstances whatsoever. Borrower acknowledges thatit is not relying upon and has not relied upon any representation or statementmade by Bank with respect to the facts underlying this release or with regardto any of such party’s rights or asserted rights.

 

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

 

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

 

**(a)**           Except as expressly stated in thisAmendment, neither Bank nor any agent, employee or representative of Bank hasmade any statement or representation to Borrower regarding any fact relied uponby Borrower in entering into this Amendment.

 

**(b)**           Borrower has made such investigationof the facts pertaining to this Amendment and all of the matters appertainingthereto, as it deems necessary.

 

**(c)**           The terms of this Amendment arecontractual and not a mere recital.

 

**(d)**           This Amendment has been carefullyread by Borrower, the contents hereof are known and understood by Borrower, andthis Amendment is signed freely, and without duress, by Borrower.

 

**(e)**           Borrower represents and warrants thatit is the sole and lawful owner of all right, title and interest in and toevery claim and every other matter which it releases herein, and that it hasnot heretofore assigned or transferred, or purported to assign or transfer, toany 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 priorassignments or purported assignments or transfers of any claims or mattersreleased herein.

 

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

 

**7.             Counterparts.** This Amendment may beexecuted in any number of counterparts and all of such counterparts takentogether shall be deemed to constitute one and the same instrument.

 

**8.             Effectiveness**. This Amendment shall bedeemed effective upon the due execution and delivery to Bank of this Amendmentby each party hereto.

 

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

 

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**IN WITNESS WHEREOF,** the partieshereto have caused this Amendment to be duly executed and delivered as of thedate first written above.

 

**Borrower:**

 

**ENCISION INC., a Coloradocorporation**

 

 
| **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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