Exhibit 10.1
LOAN MODIFICATION AGREEMENT
THIS LOAN MODIFICATION AGREEMENT ("Modification Agreement") is made as of
January 11, 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". Initially capitalized terms not otherwise
defined herein have the same meanings as in the Loan Agreement.
B. The parties now wish to revise the Loan Documents to (i) increase the
minimum Optional Interest Rate advance, (ii) change the Optional Interest Rate
periods from which Borrower may select, and (iii) revise certain financial
covenants of Borrower.
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 minimum portion of the Revolving Line that may bear interest at
the Optional Interest Rate shall be increased from $500,000 to $2,000,000.
1.2 The periods for which Borrower may select an Optional Interest Rate
shall be periods of one (1), three (3), six (6), nine (9) or twelve (12) months.
1.3 No later than forty-five (45) days after the end of each fiscal
quarter and ninety (90) 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 1.10:1.
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 3.00:1 for the quarters ending March 31, June 30 and
December 31, and 3.25:1 for the quarter ending September 30.
1.5 For purposes of this Modification Agreement, the following terms
shall have the following meanings:
(a) "Computation Period" means any period of four (4) consecutive
fiscal quarters of Borrower (including any fiscal year).
(b) "Current Assets" means, at a particular date, all amounts that
would, in conformity with GAAP, be included under current assets on a balance
sheet of Borrower as of such date; provided, however, that such amounts shall
not include any Intangibles.
(c) "Current Liabilities" means, at a particular date, all amounts
that would, in conformity with GAAP, be included under current liabilities on a
balance sheet of Borrower as of such date, but in any event including the
amounts of (i) all Indebtedness of Borrower payable on demand or, at the option
of the Person to whom such Indebtedness is owed, not more than twelve (12)
months after such date, (ii) any payments in respect of any Indebtedness of
Borrower (whether installment, serial maturity or sinking fund payments or
otherwise) required to be made not more than twelve (12) months after such date,
(iii) all Indebtedness of Borrower hereunder to Bank with respect to the Loan,
and (iv) to the extent that maintenance of such reserves is required under GAAP,
all reserves in respect of liabilities or Indebtedness payable on demand, or at
the option of the Person to whom such Indebtedness is owed, not more than twelve
(12) months after such date, the validity of which is contested at such date.
(d) "Current Ratio" means the ratio of Current Assets to Current
Liabilities.
(e) "EBITDA" means, for any referenced Computation Period, the
aggregate earnings of Borrower before interest, income and franchise taxes,
amortization and depreciation for the Computation Period, excluding
extraordinary items, each as determined in accordance with GAAP.
(f) "GAAP" means generally accepted accounting principles,
consistently applied.
(g) "Indebtedness" means the Loan, the Senior Revolving Credit,
and all other loans and advances to Borrower (including those made hereunder),
whether by Bank or by a third-party lender, and debts, liabilities, obligations,
covenants and duties of Borrower, whether now or hereafter made, incurred,
covenanted or created, whether voluntary or involuntary, and however arising,
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, regardless of whether Borrower may be liable
individually or jointly with others, or whether recovery upon any of the same
may be or hereafter become barred by any statute of limitations, and whether any
of the same may be or hereafter become otherwise unenforceable. The term
"Indebtedness" also includes all renewals and extensions of any and all such
loans, advances, debts, obligations and liabilities.
(h) "Intangibles" means, at a particular date, all assets of
Borrower, determined at such date, that would be classified as intangible assets
in accordance with GAAP, but in any event including, without limitation,
unamortized debt discount and expense, unamortized organization and
reorganization expense, costs in excess of the net asset value of acquired
companies, patents, trade or service marks, franchises, trade names, goodwill
and the amount of any write-up in the book value of any assets resulting from
any revaluation thereof after the Funding Date.
(i) "Leverage Ratio" means the ratio of Total Liabilities to
Tangible Net Worth.
(j) "Long-Term Liabilities" means, at a particular date, all
amounts that would, in conformity with GAAP, be included under liabilities on a
balance sheet of Borrower as of such date, but excluding Current Liabilities.
(k) "Senior Debt" means the Loan and the Senior Revolving Credit;
(l) "Senior Revolving Credit" means that certain revolving credit
facility being extended by Bank to Borrower in the maximum aggregate amount of
Thirteen Million Dollars ($13,000,000) pursuant to a Revolving Credit Agreement
dated as of December 31, 2001 between Bank and Borrower and executed
concurrently with execution of this Modification Agreement.
(m) "Subordinated Debt" means all Long-Term Liabilities that have
been subordinated to the Senior Debt by subordination agreements, acceptable to
Bank in its sole discretion, signed by Borrower and the creditor on the
Subordinated Debt.
(n) "Tangible Net Worth" means Borrower's book net worth, as
established in accordance with GAAP, minus Intangibles but plus Subordinated
Debt.
(o) "Total Liabilities" means, at a particular date, all Current
Liabilities, plus all Long-Term Liabilities that are not Subordinated Debt.
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 the documents
evidencing and securing the Senior Revolving Credit and Borrower shall have
satisfied the conditions precedent to the initial advance thereunder. 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 /S/ XXXXX XXXXXX
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Name XXXXX XXXXXX
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Title VICE PRESIDENT
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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 /S/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx, President and CEO
By /S/ XXXXXX X. XXXXXXX
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Xxxxxx X. Xxxxxxx, Exec. Vice Pres. and CFO