Exhibit 10.1
AMENDMENT NUMBER TWO TO LOAN AND SECURITY AGREEMENT
This Amendment Number Two to Loan and Security Agreement ("Amendment") is
effective as of February 28, 2005, by and among, on the one hand, ADVANCED
MARKETING SERVICES, INC., a Delaware corporation, PUBLISHERS GROUP WEST
INCORPORATED, a California corporation, and PUBLISHERS GROUP INCORPORATED, a
California corporation (collectively, "Borrowers"), and, on the other hand, the
lenders identified on the signature pages to the Agreement (as defined below)
("Lenders"), and XXXXX FARGO FOOTHILL, INC., a California corporation ("Agent"),
as the arranger and administrative agent for the Lenders, in light of the
following:
A. Borrowers, on the one hand, and Lender and Agent, on the other hand,
have previously entered into that certain Loan and Security Agreement, dated as
of April 27, 2004 (the "Agreement").
B. Borrowers, Lenders and Agent desire to, among other things, amend the
Agreement, and provide for certain waivers and extensions in connection
therewith, as provided for below and on the conditions herein.
NOW, THEREFORE, Borrowers, Lenders and Agent hereby amend and supplement
the Agreement as follows:
1. DEFINITIONS. All initially capitalized terms used herein shall have the
meanings given to them in the Agreement unless specifically defined herein.
2. OCCURRENCE OF TRIGGERING EVENT. Borrowers acknowledge that a Financial
Covenant Triggering Event occurred on February 3, 2005 due to the fact that the
sum of Borrowers' Excess Availability plus Qualified Cash on such date was
$19,501,897.41, which sum was less than the required amount of $20,000,000. Such
Financial Covenant Triggering Event shall be rescinded immediately following
Agent's receipt of a Compliance Certificate for the period ending September 30,
2005, provided that such Compliance Certificate evidences Borrowers' compliance
with all requirements set forth therein and, provided, further, that no Default
or Event of Default has occurred prior to such rescission date.
3. WAIVER. Borrowers have requested that Lenders and Agent waive Borrowers'
violation of Section 7.18(a) of the Agreement, namely, pursuant to such Section,
Borrowers were required to attain EBITDA in a minimum amount of $4,172,000 for
the 9 month period ending December 31, 2004, with Borrowers failing to attain
such amount due to the fact that their EBITDA for such 9 month period was a loss
of $3,266,000.
Lenders and Agent hereby grant such request and waive such violation. Such
waiver is limited precisely as written and shall not be deemed to be (a) a
waiver or modification of any other term or condition of the Agreement or (b)
prejudice any other rights or remedies which Lenders or Agent may now or in the
future have under or in connection with the Agreement.
4. EXTENSIONS.
(a) Pursuant to Section 6.3(b) of the Agreement, Borrowers were
required to deliver to Agent (with copies to each Lender), by June 30, 2004,
certain financial statements and compliance certificates for Borrowers' fiscal
year ending March 31, 2004. At Borrower's request, such deadline has been
previously extended by Agent and Lenders through February 28, 2005.
Contemporaneously herewith, Borrowers have requested additional time beyond
February 28, 2005 in which to satisfy the requirements of such Section. With
respect to same, Agent and Lenders hereby agree that Borrowers will have through
June 30, 2005 in which to satisfy all of the requirements of such Section.
Borrowers acknowledge and agree that their failure to satisfy all of such
requirements prior to or on June 30, 2005 shall constitute an Event of Default
under the Agreement.
(b) In connection with Borrowers' fiscal year commencing April 1, 2005
and ending March 31, 2006, Borrowers are required, pursuant to Section 6.3(c) of
the Agreement, to deliver to Agent (with copies to each Lender), as soon as
available, but in any event within 30 days prior to the start of such fiscal
year, copies of certain Projections of Borrowers. As of the date of this
Amendment, Borrowers have requested additional time through April 30, 2005 in
which to deliver such Projections. With respect to same and as of the date of
this Amendment, Agent and Lenders hereby agree that Borrowers will have through
April 30, 2005 in which to satisfy all of the requirements of such Section.
Borrowers acknowledge and agree that their failure to satisfy all of such
requirements prior to or on April 30, 2005 shall constitute an Event of Default
under the Agreement.
The extensions set forth herein shall be limited precisely as written and
shall not be deemed to be (a) a waiver or modification of any other term or
condition of the Agreement or (b) prejudice any other rights or remedies which
Agent or Lenders may now or in the future have under or in connection with the
Agreement.
5. AMENDMENT.
Section 7.18(a) of the Agreement is hereby amended and restated in its
entirety to read as follows:
(a) Following the occurrence of the Financial Covenant Triggering
Event, fail to maintain or achieve:
(i) Minimum EBITDA. EBITDA, measured on a quarterly basis, of at
least the required amount set forth in the following table for the applicable
period set forth opposite thereto:
Applicable Period Applicable Amount
-------------------------------- --------------------------------
For the 3 month period ($12,839,000)
ending March 31, 2005
-------------------------------- --------------------------------
To be determined.* To be determined.*
-------------------------------- --------------------------------
* Beyond March 31, 2005, Borrowers and Agent agree that "Applicable
Period(s)" and "Applicable Amount(s)" shall be determined by Agent in its sole
discretion based upon, among other things, the Projections to be delivered to
Agent (pursuant to Section 6.3 of the Agreement) prior to the commencement of
Parent's fiscal year ending March 31, 2006, with Borrowers, Lenders and Agent
agreeing that Borrowers shall deliver such Projections no later than April 30,
2005 notwithstanding any contrary deadline set forth in Section 6.3 of the
Agreement. Within 14 days of Agent's receipt of such Projections, Agent shall
advise Borrowers in writing of such future Applicable Period(s) and Applicable
Amount(s). Borrowers agree that their failure to deliver such Projections by
such deadline shall constitute and Event of Default under the Agreement.
6. REPRESENTATIONS AND WARRANTIES. Borrowers hereby affirm to Lender and
Agent that all of Borrowers' representations and warranties set forth in the
Agreement are true, complete and accurate in all respects as of the date hereof.
7. NO DEFAULTS. Borrowers hereby affirm to Lenders and Agent that, other
than those matters described in Section 3 above, no Event of Default has
occurred and is continuing as of the date hereof.
8. CONDITION PRECEDENT. The effectiveness of this Amendment is expressly
conditioned upon receipt by Agent of a fully executed copy of this Amendment.
9. COSTS AND EXPENSES. Borrowers shall pay to Agent all of the Lenders' and
Agents' out-of-pocket costs and expenses (including, without limitation, the
fees and expenses of its counsel, which counsel may include any local counsel
deemed necessary, search fees, filing and recording fees, documentation fees,
appraisal fees, travel expenses, and other fees) arising in connection with the
preparation, execution, and delivery of this Amendment and all related
documents.
10. LIMITED EFFECT. In the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of the Agreement, the
terms and provisions of this Amendment shall govern. In all other respects, the
Agreement, as amended and supplemented hereby, shall remain in full force and
effect.
11. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which when so executed and delivered shall be deemed to be an original. All
such counterparts, taken together, shall constitute but one and the same
Amendment. This Amendment shall become effective upon the execution of a
counterpart of this Amendment by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
March 4, 2005.
XXXXX FARGO FOOTHILL, INC.,
a California corporation, as Agent and a
Lender
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Title: Vice President
ADVANCED MARKETING SERVICES, INC., a
Delaware corporation
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Title: Executive Vice President and
Chief Financial Officer
PUBLISHERS GROUP WEST INCORPORATED, a
California corporation
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Title: Chief Financial Officer
PUBLISHERS GROUP INCORPORATED, a
California corporation
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Title: Chief Financial Officer
