EXHIBIT 10.1
SECOND LOAN MODIFICATION AGREEMENT
THIS SECOND 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 Amended and Restated Loan
Agreement entered into effective July 27, 2000 ("Loan Agreement"), pursuant to
which Borrower delivered to Bank a promissory note dated July 27, 2000 made by
Borrower as maker to Bank, in the original principal amount of $12,000,000
("Note"). The Loan Agreement, Note and related documents are referred to
collectively as the "Loan Documents". The Loan Documents were previously
modified by that certain Loan Modification Agreement between Bank and Borrower
dated as of January 11, 2002 ("First Modification Agreement"). Initially
capitalized terms not otherwise defined herein have the same meanings as in the
Loan Agreement, as previously modified.
B. As part of the Senior Revolving Credit described in the First
Modification Agreement, which was increased as of January 11, 2002 from
$13,000,000 to $23,000,000, Borrower delivered to Bank a Security Agreement
dated as of January 11, 2002 ("Security Agreement"), through which Bank obtained
a security interest in Borrower's accounts receivable and other related
collateral as described in Paragraph 2 thereof ("Collateral"). The Security
Agreement provides in Paragraph 3 that it secures not only the Senior Revolving
Credit facility, but other obligations of Borrower to Bank which recite that
they are secured thereby.
C. The parties now wish to revise the Loan Documents to (i) extend the
Loan's Maturity Date, (ii) make certain changes to Borrower's financial
covenants added by the First Modification Agreement, and (iii) provide that all
obligations of Borrower to Bank under the Loan Documents as previously modified
shall be secured by the Security Agreement upon the occurrence of a specified
event.
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 described in Section A.(3) of the Loan
Agreement is extended from August 31, 2002 to March 31, 2003 ("Extended Maturity
Date").
1.2 The financial covenant of clause (iv) of Paragraph 1.3 of the
First Modification Agreement is modified so that the required Current Ratio
shall be 1.00:1 instead of 1.10:1. The financial covenant of Paragraph 1.4 of
the First Modification 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, Paragraphs 1.3 and 1.4 of the First Modification
Agreement shall read in their entirety as follows:
"1.3 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.
"1.4 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
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3.50:1 for the quarters ending March 31, June 30 and December 31, and
4.00:1 for the quarter ending September 30."
1.3 If Borrower's Current Ratio should fall below 1.10:1 at the end
of any fiscal quarter, as evidenced by Borrower's quarterly financial reports
required by the Loan Agreement, and whether or not the Current Ratio remains in
compliance with the minimum required Current Ratio as reduced by this
Modification Agreement (i.e., 1.00:1), then all obligations of Borrower to Bank
under the Loan Documents shall automatically and without further action by the
parties thereafter be secured by the Security Agreement and become "Obligations"
as defined in the Security Agreement.
1.4 Upon the reduction of Borrower's Current Ratio below 1.10:1, the
parties specifically agree that the last sentence of Paragraph 3 of the Security
Agreement shall automatically and without further action of the parties be
modified to read as follows:
"The Obligations secured by this Security Agreement shall hereafter
include all obligations and liabilities of Borrower arising out of that
certain revolving credit facility extended by Bank to Borrower in the
maximum aggregate amount of $12,000,000 pursuant to an Amended and
Restated Loan Agreement dated as of July 27, 2000, and modified as of
January 11 and July 10, 2002."
1.5 Notwithstanding the automatic nature of the changes described in
Paragraphs 1.3 and 1.4 of this Modification Agreement, Borrower shall sign any
amendments to the Loan Documents and/or the Security Agreement as may be
reasonably requested by Bank to implement or evidence those changes
2. CONDITION PRECEDENT. This Modification Agreement, and all rights and
obligations of the parties hereunder, shall be effective only upon the date on
which by which the following condition precedent has been satisfied or waived
("Effective Date"): Borrower and Bank shall have delivered a modification
agreement relating to the Senior Revolving Credit and Borrower shall have
satisfied the conditions precedent to the effectiveness thereof. The foregoing
condition precedent is 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
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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