Exhibit 10.1
[Xxxxx Fargo Foothill, Inc. letterhead]
March 16, 2006
ADVANCED MARKETING SERVICES, INC.
0000 Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxx, Chief Financial Officer
Re: Waiver of Defaults and Amendment of Loan and Security Agreement.
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Dear Xxxx:
Reference is hereby made to that certain Loan and Security Agreement, dated
as of April 27, 2004 (as amended and modified, from time to time, the
"Agreement"; initially capitalized terms used but not defined herein shall have
the meanings ascribed to such terms in the Agreement), by and among, on the one
hand, Advanced Marketing Services, Inc., Publishers Group, Incorporated, and
Publishers Group West, Incorporated (collectively, jointly and severally, the
"Borrowers"), and, on the other hand, the lenders identified on the signatures
pages to the Agreement ("Lenders"), and Xxxxx Fargo Foothill, Inc. ("Agent"), as
the arranger and administrative agent for the Lenders.
Pursuant to Section 6.3(d) of the Agreement (as previously modified by
mutual agreement), Borrowers were required to deliver to Agent, with copies to
each Lender, on or before February 28, 2006, certain consolidated financial
statements of Parent and its Subsidiaries, audited by independent certified
public accountants, for the fiscal year ending March 31, 2004. Borrowers have
failed to provide the aforementioned financial statements within the prescribed
time period and such failure constitutes an Event of Default under the Agreement
(the "Reporting Default").
In addition to the forgoing, Borrowers have failed to satisfy the EBITDA
related financial covenant set forth in Section 7.18(a)(i) of the Agreement for
the period ended December 31, 2005. The EBITDA covenant for the nine months
ended December 31, 2005 required the Borrowers to generate $2,500,000 of EBITDA
and the Borrowers reported $1,943,000. The failure to satisfy such covenant for
the applicable period constitutes an Event of Default under the Agreement (the
"EBITDA Default" and collectively with the Reporting Default, the "Defaults").
1. Limited Waiver.
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Borrowers have requested that Agent and Xxxxxxx waive the Defaults for the
prescribed periods. Agent and Xxxxxxx hereby agree to waive the Reporting
Default as of February 28, 2006 and the EBITDA Default as of December 31, 2005
subject to the delivery by Borrowers to Agent (with a copy to each Lender) of
the consolidated financial statements of Parent and its Subsidiaries, audited by
independent certified public accountants, for the fiscal year ending March 31,
2004, on or before April 30, 2006. Borrowers acknowledge and agree that their
failure to satisfy the aforementioned requirement prior to the prescribed
deadline shall constitute an Event of Default under the Agreement.
2. Amendments.
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(a) The table in Section 6.2 of the Agreement is hereby amended and
restated in its entirety as follows:
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Daily (a) a sales journal, collection journal, and credit
register since the last such schedule, a report regarding
credit memoranda that have been issued since the last such
report.
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Weekly (b) Inventory reports specifying the cost of Borrowers'
and their Subsidiaries Inventory, by category,
(c) a detailed calculation of the Borrowing Base
(including detail regarding those Accounts of Borrowers
that are not Eligible Accounts),
(d) a detailed aging, by total, of the Accounts of
Xxxxxxxxx, and
(e) a consolidated 13 week cash flow projection for
Parent and its Subsidiaries, in form and substance
(including as to scope and underlying assumptions)
acceptable to Agent, in its sole discretion.
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Monthly (not (f) a detailed aging, by total, of the Accounts of
later than the Borrowers and a reconciliation to the general ledger,
10th day of
each month) (g) a summary aging, by vendor, of Borrowers' and their
Subsidiaries' accounts payable, accrued expenses, held
check listing and any book overdraft, together with a
reconciliation to the general xxxxxx, and
(h) a detailed report regarding Borrowers' and their
Subsidiaries' cash and Cash Equivalents including an
indication of which amounts constitute Qualified Cash.
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Quarterly (i) a detailed list of each Borrower's and each of its
Subsidiaries' customers,
(j) a report regarding each Borrower's and each of its
Subsidiaries' accrued, but unpaid, ad valorem taxes, and
(k) a complete inventory of Parent's and its
Subsidiaries' registered Copyrights (as such term is
defined in Section 7.21) as well as all other Copyrights
that are the subject of pending applications for
registration which were acquired, generated, or filed by
Parent or any of its Subsidiaries during the prior period.
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Upon request (l) copies of invoices in connection with Borrowers'
by Agent and their Subsidiaries' Accounts, credit memos, remittance
advices, deposit slips, shipping and delivery documents in
connection with Borrowers' and their Subsidiaries'
Accounts and, for Inventory and Equipment acquired by
Borrowers or their Subsidiaries, purchase orders and
invoices,
(m) such other reports as to the Collateral or the
financial condition of Borrowers and their Subsidiaries,
as Agent may request, and
(n) notice of all claims, offsets, or disputes asserted
by Account Debtors with respect to Borrowers' and their
Subsidiaries' Accounts.
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(b) Section 6.3(c) of the Agreement is hereby amended and restated in
its entirety as follows:
"(c) as soon as available, but in any event within 30 days
following the start of each of Parent's fiscal years, copies of Borrowers'
Projections, in substantially the form previously approved for the Closing
Date Business Plan and in substance (including as to scope and underlying
assumptions) reasonably satisfactory to Agent, in its Permitted Discretion,
for the forthcoming 3 years, year by year, and for the forthcoming fiscal
year, month by month, certified by the chief financial officer of Parent as
being such officer's good faith estimate of the financial performance of
Parent and its Subsidiaries during the period covered thereby,"
(c) A new Section 7.21 shall be added to the Agreement and shall read
as follows:
"7.21 Copyrights. In no event shall Parent, nor shall Parent permit
any of its Subsidiaries to, either itself or through any agent, employee,
licensee, or designee, file an application for the registration of any
Copyright with the United States Copyright Office or any similar office or
agency without providing Agent not less than 15 days prior written notice
of such Person's intent to file such application. As used herein,
"Copyright" shall mean copyrights and copyright registrations, including,
without limitation, the copyright registrations and recordings thereof and
all applications in connection therewith listed on Schedule C-2 attached
hereto and made a part hereof, and (i) all restorations, reversions,
reissues, continuations, extensions and renewals thereof, (ii) all income,
royalties, damages and payments now and hereafter due and/or payable under
and with respect thereto, including, without limitation, payments under all
licenses entered into in connection therewith and damages and payments for
past or future infringements or dilutions thereof, (iii) the right to sue
for past, present and future infringements and dilutions thereof, (iv) the
goodwill of each Person's business symbolized by the foregoing and
connected therewith, and (v) all of each Person's rights corresponding
thereto throughout the world."
(d) The new Schedule C-2 attached hereto is hereby added to the
Agreement and incorporated by this reference.
3. Miscellaneous.
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Without limiting the other terms and provisions contained herein, the
effectiveness of the amendments, waivers, consents, and modifications set forth
herein shall be subject to the receipt by Agent, for the ratable benefit of the
Lenders, of an amendment fee in the amount of $135,000, such fee to be charged
to Borrowers' Loan Account pursuant to the terms of the Agreement.
The waivers, amendments, and extensions herein are limited to the specifics
hereof, shall not apply with respect to any Default or Event of Default, or any
other facts or occurrences other than those on which the same are based, shall
not excuse future non-compliance with the Agreement, and, except as expressly
set forth herein, shall not operate as a waiver or an amendment of any right,
power, or remedy of Agent, nor as a consent to or waiver of any further or other
matter, under the Loan Documents.
This letter shall constitute a Loan Document and shall be subject to the
provisions regarding governing law, waiver of jury trial, jurisdiction and venue
applicable to the Agreement.
This waiver letter may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. Delivery of an executed counterpart of
this letter by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this letter. Any party delivering an executed
counterpart of this letter by telefacsimile shall also deliver an original
executed counterpart of this letter, but the failure to do so shall not affect
the validity, enforceability or binding effect of this letter. This letter shall
be governed by the laws of the state of California applicable to contracts made
and to be performed in the state of California.
Please sign and return to the undersigned a copy of this letter confirming
your receipt of this letter and your agreement to be bound by the terms and
provisions outlined herein.
Very truly yours,
XXXXX FARGO FOOTHILL, INC.,
as Agent and a Lender
By: /s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx, Vice President
ACKNOWLEDGED AND ACCEPTED:
ADVANCED MARKETING SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxx
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Name Xxxxxx X. Xxxxx
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Title: EVP & CFO
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PUBLISHERS GROUP, INCORPORATED
By: /s/ Xxxxxx X. Xxxxx
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Name Xxxxxx X. Xxxxx
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Title: VP & CFO
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PUBLISHERS GROUP WEST, INCORPORATED
By: /s/ Xxxxxxx X. Xxxxxx
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Name Xxxxxxx X. Xxxxxx
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Title: President
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LASALLE BUSINESS CREDIT, LLC
By:
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Name
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Title:
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MARATHON STRUCTURED FINANCE FUND L.P.
By: /s/ Xxxx X. Xxxxx
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Name Xxxx X. Xxxxx
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Title: Director
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CAPITALSOURCE FINANCE LLC
By: /s/ Xxxxxxx X. Xxxxx
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Name Xxxxxxx X. Xxxxx
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Title: Managing Director
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