EXHIBIT 10.2
THIRD LOAN MODIFICATION AGREEMENT
THIS THIRD LOAN MODIFICATION AGREEMENT ("Modification Agreement") is made
as of July 10, 2002, between ADVANCED MARKETING SERVICES, INC., a Delaware
corporation ("Borrower"), and CALIFORNIA BANK & TRUST, a California banking
corporation ("Bank"), with reference to the following:
R E C I T A L S
A. Bank and Borrower are parties to that certain Revolving Credit
Agreement dated as of January 11, 2002 ("Loan Agreement"), pursuant to which
Borrower delivered to Bank a promissory note dated the same as the Loan
Agreement made by Borrower as maker to Bank, in the original principal amount of
$13,000,000 ("Note"), and a Security Agreement also dated the same as the Loan
Agreement made by Borrower in favor of Bank ("Security Agreement"). The Loan
Agreement, Note, Security Agreement and related documents are referred to
collectively as the "Loan Documents". The Loan Documents were previously
modified by those certain Loan Modification Agreements dated as of January 31,
2002 ("First Modification Agreement") and as of March 6, 2002 ("Second
Modification Agreement"). Initially capitalized terms not otherwise defined
herein have the same meanings as in the Loan Agreement, as previously modified.
B. The parties wish to revise the Loan Documents again, to make permanent
what the previous modification agreements described as a temporary increase in
the Loan amount from $13,000,000 to $23,000,000. The parties also wish to extend
the Loan's Maturity Date and to make certain changes to Borrower's financial
covenants.
THE PARTIES AGREE AS FOLLOWS:
1. MODIFICATION OF LOAN DOCUMENTS. Subject to the conditions precedent of
Paragraph 2 below, the Loan Documents are modified in the following respects:
1.1 The Maturity Date is extended from August 31, 2002 to March 31,
2003 ("Extended Maturity Date").
1.2 The maximum Loan amount shall remain at $23,000,000 through the
Extended Maturity Date, and the $10,000,000 reduction in the Loan amount
required by the First and Second Modification Agreements is deleted from the
Loan Documents. Within the $23,000,000 maximum Loan amount, and subject to the
other terms and conditions of the Loan Documents as previously modified,
Borrower may borrow, repay and reborrow at any time or from time to time, until
the Extended Maturity Date.
1.3 The financial covenant of clause (iv) of Paragraph 4.9(a) of the
Loan Agreement is modified so that the required Current Ratio shall be 1.00:1
instead of 1.10:1. The financial covenant of Paragraph 4.9(b) of the Loan
Agreement is modified to make the required maximum Leverage Ratio 3.50:1 for the
first, second and fourth quarters and 4.00:1 for the third quarter. As modified,
Paragraph 4.9 of the Loan Agreement shall read in its entirety as follows:
"4.9 Financial Covenants.
"(a) No later than forty-five (45) days after the end of each
fiscal quarter and one hundred twenty (120) days after the end of each
fiscal year, Borrower shall demonstrate to Bank's reasonable satisfaction
that (i) Borrower's Tangible Net Worth is not less than Seventy Million
Dollars ($70,000,000), (ii) the ratio of Senior Debt to EBITDA for the
Computation Period just ended is not more than 1.85:1, (iii) the value of
Eligible Accounts Receivable is more than the Loan; and (iv) Borrower's
Current Ratio is not less than 1.00:1.
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"(b) Borrower shall, no later than forty-five (45) days after
the end of each quarter, demonstrate to Bank's reasonable satisfaction a
Leverage Ratio that is no more than 3.50:1 for the quarters ending March
31, June 30 and December 31, and 4.00:1 for the quarter ending September
30."
2. CONDITIONS PRECEDENT. This Modification Agreement, and the temporary
increase of the Loan amount as set forth herein, shall be effective only upon
the date on which by which all of the following conditions precedent set forth
below have been satisfied or waived: (i) Borrower shall have paid Bank an
extension fee in the amount of $23,000 (0.1% of the Loan Amount); (ii) Borrower
shall have paid Bank the Unused Loan Fee required by Paragraph 2.2 of the Loan
Agreement for the quarter ending June 30, 2002, in the amount of $9,000 (0.25%
of the Average Amount of the Unused Loan during the previous quarter); and (iii)
Borrower shall have paid Bank all costs and expenses incurred by Bank in
connection with this Modification Agreement, including without limitation Bank's
legal fees. The foregoing conditions precedent are solely for the benefit of
Bank, and may be waived in writing unilaterally by Bank.
3. OTHER MATTERS OF AGREEMENT.
3.1 Except as expressly set forth herein, this Modification
Agreement shall not affect or impair any other covenants or conditions set forth
in the Loan Documents.
3.2 This document may be executed in two or more counterparts, each
of which will be considered an original but all of which together shall
constitute one agreement.
3.3 Except as modified hereby, all provisions of the Loan Documents
as previously modified shall remain in full force and effect.
BANK: CALIFORNIA BANK & TRUST, a California
banking corporation
By
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Name
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Title
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By
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Name
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Title
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BORROWER: ADVANCED MARKETING SERVICES, INC., a
Delaware corporation
By
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Xxxxxxx X. Xxxxxx, President and CEO
By
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Xxxxxx X. Xxxxxxx, Exec. Vice Pres.
and CFO
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