EXHIBIT 10.22
FOURTH AMENDMENT TO
CREDIT AGREEMENT
This Fourth Amendment to Credit Agreement is entered into as of this
27th day of June, 2000, and made effective as of January 1, 2000, by and
between COMERICA BANK, a Michigan banking corporation ("Bank"), with offices
at One Detroit Center, 000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 and
SIMPLE TECHNOLOGY, INC., a California corporation ("Company"), whose
principal office is located at 0000 Xxxxxxx Xxxxxx, Xxxxx Xxx, XX 00000.
RECITALS:
A. Bank and Company entered into a certain Credit Agreement dated as of
August 3, 1999 as amended by a First Amendment to Credit Agreement, a Second
Amendment to Credit Agreement and a Third Amendment to Credit Agreement (the
"Agreement"),
B. The parties desire to further amend the Agreement, upon the
following terms and conditions.
NOW THEREFORE, for good and valuable consideration, the parties agree as
follows:
1. The following new definition shall be inserted immediately after the
definition of "Collateral" on Page 3 of the Agreement:
" `CORPORATE TAX LIABILITY' shall mean income tax liability of the
Borrower's shareholders relating to salaries, wages and bonuses paid by
Borrower to its shareholders and corporate income of Borrower taxable to
its shareholders as a result of Borrower's Subchapter S election. For this
purpose, it shall be assumed that income recognized by the shareholders of
Borrower as a result of Borrower's election to be taxed as an S
corporation is subject to Federal and State of California income tax at
the highest marginal rates in effect for individuals."
2. The following new definition shall be inserted immediately after the
definition of "Indebtedness" on Page 6 of the Agreement:
" `INITIAL PUBLIC OFFERING' shall mean a primary sale or sales of
capital stock of Borrower pursuant to which not more than thirty percent
(30%) of the issued capital stock of Borrower is offered for sale pursuant
to a public offering thereof."
3. The following new definition shall be inserted immediately after the
definition of "Maturity Date" on Page 7 of the Agreement:
" `NET PROCEEDS' shall mean proceeds from the Initial Public
Offering net of (x) reasonable expenses associated with such issuance
(including commissions, legal and accounting fees and other offering
expenses), and (y) any tax expense incurred in connection with the
termination of Borrower's election to be treated as an S corporation, to
the extent such termination occurs in connection with the
Initial Public Offering, provided that the aggregate amount deducted on
account of expenses described in clauses (x) and (y) shall not exceed
fifteen percent (15%) of the gross proceeds of the Initial Public
Offering."
4. Section 7.1 of the Agreement is hereby amended and restated in its
entirety as follows:
"7.1 Declare or pay any cash dividends on, or make any other cash
distribution (whether by reduction of capital or otherwise) with respect
to any shares of its capital stock, other than:
(a) so long as Borrower is taxed as a Subchapter S corporation and
is not in default under this Agreement or the Notes, Borrower may
distribute to its shareholders such amounts (herein called "Permitted
Distribution Amounts") as may be required to allow such shareholders to
pay actual or estimated Corporate Tax Liability;
(b) so long as Borrower is not in default under this Agreement or
the Notes, Borrower may distribute to its shareholders Permitted
Distribution Amounts in an aggregate amount not to exceed Seven Hundred
Fifty Thousand Dollars ($750,000) per annum for application against actual
or estimated personal income tax expenses owing and arising out of
investment income or other earnings, except for Corporate Tax Liability;
(c) a dividend payable in cash or by means of one or more
promissory notes to Borrower's shareholders in an aggregate amount not to
exceed the lesser of (i) the retained earnings of Borrower or (ii) Twenty
Million Dollars ($20,000,000) which may be declared by Borrower prior to
the Initial Public Offering and shall be considered shareholder equity for
purposes of determining financial covenant calculations under this
Agreement, provided that the payment thereof is conditioned upon: (i) the
Initial Public Offering being completed on or before October 31, 2000 (the
"IPO Date") and (ii) the Net Proceeds thereof being equal to or greater
than Thirty Five Million Dollars ($35,000,000);
(d) the repayment of additional paid in capital either in cash or
by means of one or more promissory notes to Borrower's shareholders in an
aggregate amount of Three Million Dollars ($3,000,000), provided that the
payment thereof is conditioned upon: (i) the Initial Public Offering being
completed on or before the IPO Date, and (ii) the Net Proceeds thereof
being equal to or greater than Thirty Five Million Dollars ($35,000,000);
and
(e) the distribution permitted in Section 6.7 of the Agreement, as
amended by the First Amendment to Credit Agreement;
provided however, that dividends and distributions otherwise
permitted hereunder may only be declared and/or paid if, upon giving
effect to such declaration and/or payment, no Default or Event of Default
shall exist."
-2-
5. Section 7.2(b) of the Agreement is hereby amended and restated in
its entirety as follows:
"7.2(b) Incur, create, assume or permit to exist any indebtedness or
liability on account of deposits or advances or any indebtedness or
liability for borrowed money, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, or any
other indebtedness whatsoever, except for (i) the Debt on the
obligations from time to time secured by the Permitted Liens, (ii)
the dividend payable notes described in Section 7.1(c) and (iii) the
paid in capital notes described in Section 7.1(d)."
6. The following new section is added immediately after Section 7.10 of
the Agreement:
"7.11 STOCK ISSUANCE. Issue any additional shares of its capital
stock other than shares issued and authorized for sale pursuant to
the Initial Public Offering."
7. Company hereby ratifies and reaffirms the representations,
warranties and covenants set forth in the Agreement.
8. Company certifies that no Event of Default or Default (as defined in
the Agreement) has occurred and is continuing.
9. Company represents and warrants that its Articles of Incorporation
and Bylaws delivered to Bank as of March 10, 2000 in connection with the
Agreement, are in full force and effect and have not been modified, repealed or
amended since the date thereof.
10. If any provision of this Amendment shall be held invalid or
unenforceable, such invalidity or unenforceability shall affect only such
provision and shall not in any manner affect or render invalid or unenforceable
any other provision of this Amendment, and this Amendment shall be enforced as
if any such invalid or unenforceable provision were not contained herein.
11. Except as specifically amended hereby, the Agreement shall remain
unchanged and shall be in full force and effect, enforceable in accordance with
its terms.
12. Borrower agrees to pay all of Bank's costs and expenses (including
attorneys fees and expenses) incurred in connection with the Agreement and/or
this Amendment within fifteen (15) days of being presented with an invoice
therefor.
-3-
IN WITNESS WHEREOF, this Amendment has been executed as of the day first
stated above.
SIMPLE TECHNOLOGY, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Xxxxxxx Xxxxxxxxx
Its: CEO
COMERICA BANK
By: /s/ Xxxx X. Xxxxx
------------------------------------
Xxxx X. Xxxxx
Its: Vice President
