EXHIBIT 10.2
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated for reference purposes only as of January
11, 2002, is made at San Diego, California 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. Borrower wishes to obtain a revolving line of credit for business
acquisitions by, and general corporate purposes of, Borrower.
B. Bank is willing to extend a revolving credit facility to Borrower, in
the maximum aggregate amount of Thirteen Million Dollars ($13,000,000), on the
terms and subject to the conditions of this Agreement.
THE PARTIES AGREE:
ARTICLE 1. DEFINITIONS
1.1 CAPTIONS AS DEFINED TERMS. The captions appearing in the balance of
this Article 2 will be used as defined terms in this Agreement.
1.2 ACCOUNTS RECEIVABLE. All of Borrower's accounts and other rights to
receive payments for goods and other products sold or leased or for services
rendered, whether or not earned by performance, recognized by Borrower or
recorded on its book and records, and irrespective of whether any may be
characterized as accounts, chattel paper, choses-in-action, contract rights,
general intangibles, instruments, invoices, notes or otherwise in any document,
by any person or under applicable law.
1.3 ADVANCE. Each separate disbursement of funds by Bank to Borrower
pursuant to this Agreement.
1.4 AGREEMENT. This Revolving Credit Agreement, as the same may from time
to time be amended or supplemented.
1.5 BUSINESS DAY. Any day other than a Saturday or Sunday, which is not a
legal holiday in the State of California and which is not a date on which
national banks in the State of California are authorized to close.
1.6 COLLATERAL. The Accounts Receivable and any other personal property of
Borrower in which Bank is granted a security interest by the Security Agreement.
1.7 COMPUTATION PERIOD. Any period of four (4) consecutive fiscal quarters
of Borrower (including any fiscal year).
1.8 CURRENT ASSETS. 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.
1.9 CURRENT LIABILITIES. 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.
1.10 CURRENT RATIO. The ratio of Current Assets to Current Liabilities.
1.11 EBITDA. 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.
1.12 ELIGIBLE ACCOUNTS RECEIVABLE. All domestic Accounts Receivable that
are less than ninety (90) days past due.
1.13 EVENT OF DEFAULT. Any event described in Paragraph 5.1 of this
Agreement.
1.14 EXISTING REVOLVING LINE OF CREDIT. That certain revolving credit
facility extended by Bank to Borrower in the maximum aggregate amount of Twelve
Million Dollars ($12,000,000) pursuant to an Amended and Restated Loan Agreement
effective as of July 27, 2000, as modified concurrently with execution of this
Agreement.
1.15 FINANCIAL STATEMENTS. Financial statements of Borrower, including
income statements, balance sheets, statements of cash position and such other
financial reports and information as Bank may reasonably require.
1.16 FUNDING DATE. The date on which Bank first makes an Advance hereunder.
1.17 GAAP. Generally accepted accounting principles, consistently applied.
1.18 GOVERNMENTAL AUTHORITY. The United States, the State of California,
the County of San Diego and any other political subdivision therein, and any
agency, department, commission, board, bureau or instrumentality of any of them.
1.19 GOVERNMENTAL REQUIREMENTS. Any law, ordinance, order, rule, regulation
or requirement of a Governmental Authority.
1.20 INDEBTEDNESS. The Loan 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.
1.21 INTANGIBLES. 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.
1.22 LEVERAGE RATIO. The ratio of Total Liabilities to Tangible Net Worth.
1.23 LIBOR-BASED INTEREST PERIOD. A period of one (1), three (3), six (6),
nine (9) or twelve (12) months, as specified by Borrower for any LIBOR-Based
Portion pursuant to Paragraph 3 of the Note.
1.24 LIBOR-BASED PORTIONS. Portions of the Loan, each of which shall be in
the minimum amount of $2,000,000, for which interest accrues at the LIBOR-Based
Rate during the applicable LIBOR-Based Interest Period.
1.25 LIBOR-BASED RATE. The rate per annum defined as such in the Note.
1.26 LOAN. Thirteen Million Dollars ($13,000,000), subject to the terms of
this Agreement and the other Loan Documents.
1.27 LOAN DOCUMENTS. This Agreement, the Note, the Security Agreement and
any other documents delivered by Borrower pursuant hereto.
1.28 LOAN FEE. A fee for the Loan in the amount of Fifteen Thousand
Dollars ($15,000).
1.29 LONG-TERM LIABILITIES. 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.
1.30 MATURITY DATE. August 31, 2002.
1.31 NOTE. The revolving promissory note of even date herewith signed and
delivered by Borrower in favor of Bank in original principal amount of Thirteen
Million Dollars ($13,000,000).
1.32 PERSON. Any individual, general partnership, limited partnership,
limited liability company, joint venture, trust, estate, corporation,
association or other entity.
1.33 PRIME RATE. The "California Bank & Trust Prime Rate" as announced
from time to time by Bank. In the event Bank should cease to announce a
California Bank & Trust Prime Rate, the Prime Rate shall be the "Prime Rate" as
published from time to time in the Western edition of the Wall Street Journal,
and if a range of rates or more than one such rate is published, the Prime Rate
shall be the highest rate so published.
1.34 SENIOR DEBT. The Loan and the Existing Revolving Line of Credit.
1.35 SECURITY AGREEMENT. The Security Agreement made by Borrower in favor
of Bank, granting Bank a security interest in the Collateral.
1.36 SUBORDINATED DEBT. 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.
1.37 TANGIBLE NET WORTH. Borrower's book net worth, as established in
accordance with GAAP, minus Intangibles but plus Subordinated Debt.
1.38 TOTAL LIABILITIES. At a particular date, all Current Liabilities,
plus all Long-Term Liabilities that are not Subordinated Debt.
1.39 UNUSED LOAN. At a particular date, the amount of the Loan that has
not been disbursed, I.E., the amount that remains available for disbursement to
Borrower.
1.40 UNUSED LOAN FEE. One-quarter of one percent (0.25%) of the Unused
Loan.
ARTICLE 2. TERMS OF THE REVOLVING CREDIT
2.1 THE LOAN.
(a) Subject to the terms and conditions of this Agreement, Bank
agrees to lend to Borrower, and Borrower agrees to borrow from Bank an aggregate
principal amount at any one time outstanding up to but not exceeding the Loan.
The Loan will be a revolving line of credit, and within the overall maximum
principal amount, Borrower may borrow, repay and reborrow at any time or from
time to time, from the date hereof until the Maturity Date.
(b) The Loan shall mature and, except as otherwise set forth herein,
all amounts due from Borrower to Bank hereunder shall be due and payable in
full, on the Maturity Date. Borrower acknowledges and agrees that Borrower is
and shall be solely responsible for arranging funds necessary to pay Bank in
full on or before the Maturity Date. Borrower expressly acknowledges and agrees
that Bank has not agreed herein to provide long-term funding for Borrower's
business.
(c) Principal outstanding under the Loan shall bear interest at the
Prime Rate, as the same may change from time to time; provided, however, that as
set forth in the Note, at Borrower's request from time to time specified
portions of the Loan (each, a "Portion") shall bear interest at the LIBOR-Based
Rate during any LIBOR-Based Interest Period. Upon expiration of the LIBOR-Based
Interest Period, the applicable Portion shall thereafter bear interest at the
Prime Rate, unless and except to the extent that Borrower has established
another LIBOR-Based Portion in accordance with Paragraph 3 of the Note.
(d) Borrower shall make monthly payments of accrued interest in
arrears on the first day of each month.
(e) Advances may be requested by Borrower on at least two Business
Days prior notice. Requests may be made orally if confirmed in writing the day
of the request. All communications, instructions, or directions by telephone or
otherwise to Bank are to be directed to Bank's office shown herein. Any of the
following persons currently are authorized to request advances and authorize
payments under the lines of credit until Bank receives from Borrower, at Bank's
address shown herein, written notice of revocation of their authority: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, President and Chief Executive Officer; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive
Vice President and Chief Financial Officer; ▇▇▇▇▇ ▇▇▇▇▇, Vice President and
Controller; and ▇▇▇▇▇ ▇. ▇▇▇▇▇, Cash Manager.
(f) Each Advance shall be evidenced by endorsements on the Note or by
Bank's internal records, including daily computer print-outs.
2.2 LOAN FEES. In consideration of Bank's agreement to make the Loan, the
Loan Fee shall be due and payable to Bank upon execution of this Agreement by
Borrower and Bank. Borrower shall also reimburse Bank, up to a maximum of
$5,000, for all reasonable costs of Bank's legal counsel in preparing loan
documentation and any other out-of-pocket costs incurred by Bank in connection
with the Loan. In addition, beginning July 1, 2002 and continuing on the first
day of each calendar quarter thereafter, Borrower shall pay an Unused Loan Fee
calculated based the average amount of the Unused Loan that existed at any time
during the preceding calendar quarter.
2.3 DELIVERIES PRIOR TO INITIAL FUNDING DATE. Prior to the initial Funding
Date, and as conditions precedent to Bank's obligation to make the initial
Advance, the following shall have been received and approved by Bank, at its
sole discretion:
(a) The Note.
(b) The Security Agreement.
(c) The Financial Statements of Borrower.
(d) Borrower's articles of incorporation, bylaws and all amendments
thereto; borrowing authorizations and/or resolutions as specified by Bank;
evidence satisfactory to Bank that Borrower has been duly organized and is
validly existing in the State of Delaware.
(e) A modification agreement amending the terms of the Existing
Revolving Line of Credit, in form and of substance prescribed by Bank.
(f) Such other documentation as Bank may reasonably require.
2.4 DELIVERIES PRIOR TO EACH FUNDING DATE. Prior to the initial and each
other Funding Date, and as conditions precedent to Bank's obligation to make the
requested Advance, the following shall have been received and approved by Bank,
at its sole discretion:
(a) Evidence satisfactory to Bank that the aggregate amount of all
purchase money Indebtedness, unsecured Indebtedness and obligations constituting
Indebtedness under GAAP arising under capitalized leases does not exceed
$10,000,000.
(b) Evidence satisfactory to Bank that there are no liens encumbering
Borrower's real or personal property except Bank's lien under the Security
Agreement on Borrower's Accounts Receivable, and subject to the limitation of
Paragraph 2.4(a) above, liens securing (i) purchase money Indebtedness incurred
in the purchase of real and personal property in the ordinary course of
Borrower's business so long as each is secured only by the property purchased,
and (ii) obligations constituting Indebtedness under GAAP arising under
capitalized leases entered into in the ordinary course of Borrower's business.
(c) Evidence satisfactory to Bank that all of Borrower's
representations and warranties herein remain true and correct in all material
respects.
(d) Evidence satisfactory to Bank that there has been no material
adverse change in Borrower's financial condition.
(e) Evidence satisfactory to Bank that no Event of Default has
occurred, and no event or condition has occurred or exists which with notice or
the lapse of time or both would constitute an Event of Default.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY BORROWER
As a material inducement to Bank to enter into this Agreement and to make
the Loan to Borrower, Borrower hereby unconditionally makes the following
representations and warranties, which shall be deemed to be continuing
representations and warranties so long as any credit hereunder shall be
available and until payment in full of the Loan.
3.1 DUE ORGANIZATION. Borrower is duly organized, validly existing and in
good standing under the laws of Delaware, and is qualified to do business and in
good standing in the State of California, with full power and authority to
consummate the transaction contemplated hereby.
3.2 BORROWER'S POWERS. Borrower is a corporation duly organized and
existing in good standing under the laws of the State of Delaware, with full
power and adequate authority, and rights to own its property and to carry on its
business as now conducted, and is duly qualified and in good standing in each
State in which the character of its business makes such qualification necessary.
Borrower has full power and authority to sign and enter into the Loan Documents,
to undertake and consummate the transactions contemplated thereby, and to pay,
perform and observe all of the conditions, covenants, agreements and obligations
contained therein.
3.3 LOAN DOCUMENTS AUTHORIZED. The execution, delivery and performance by
Borrower of and under the Loan Documents are duly authorized, and do not require
the consent or approval of any governmental body or other regulatory authority.
The Loan Documents are the valid and binding obligations of Borrower, legally
enforceable against Borrower in accordance with their respective terms, except
as such enforceability may be limited by bankruptcy, insolvency, debtor relief
or other similar laws affecting the enforcement of creditors' rights generally
or by equitable principles.
3.4 NO CONFLICT. The execution, delivery and performance of the Loan
Documents by Borrower will not breach or constitute a default under any
agreement, indenture, undertaking or other instrument to which Borrower is a
party or by which Borrower may be bound or affected.
3.5 LITIGATION. Except as otherwise disclosed to Bank, there is no
litigation or other proceedings pending or, to the knowledge of Borrower,
threatened against or affecting Borrower or any of Borrower's assets which, if
determined adversely to Borrower, would have a materially adverse effect on the
financial condition, properties or operations of Borrower, and Borrower is in
default with respect to any order, writ, injunction, decree or demand of any
court or other governmental or regulatory authority.
3.6 NO VIOLATION. The consummation of the transaction contemplated by this
Agreement, and the payment and performance of all of the obligations set forth
in this Agreement, the Note, the Security Agreement and the other Loan
Documents, will not result in any breach of, or constitute a default under, any
mortgage, deed of trust, lease, contract, loan or credit agreement, corporate
charter, bylaws, partnership agreement, trust agreement, operating agreement or
other instrument to which Borrower is a party or by which Borrower or the
Collateral may be bound or affected.
3.7 FINANCIAL STATEMENTS. All Financial Statements delivered to Bank are
true and correct in all material respects, have been prepared in accordance with
GAAP unless otherwise noted therein, and fairly present the respective financial
conditions of Borrower and the subjects thereof as of their respective dates. No
materially adverse change has occurred in the financial reflected in the
Financial Statements, and no additional borrowings have been made by Borrower or
the subjects thereof, other than borrowings approved by Bank, since their
respective dates. Borrower understands and acknowledges that there are criminal
penalties for giving false financial information to federally insured financial
institutions.
3.8 TAXES. Borrower has filed all required Federal, State and local tax
returns and has paid all taxes due and payable. Borrower knows of no basis for
additional assessments with respect to any taxes.
3.9 BROKER'S FEES. Borrower has not dealt with any person or entity who is
or may be entitled to any brokerage commission, finder's fee, loan commission or
other sum in connection with signing and entering into this Agreement, the
consummation of the transaction contemplated hereby or the making of the Loan by
Bank to Borrower, and Borrower hereby agrees to indemnify, defend and hold Bank
harmless from and against any and all losses, costs, liabilities and expenses,
including attorneys' fees, that Bank may suffer or sustain should such
representation or warranty prove to be inaccurate in whole or in part.
3.10 ACCURACY. All reports, documents, instruments, information and forms
of evidence delivered to Bank concerning the Loan or required by this Agreement
or any of the other Loan Documents are accurate, correct and sufficiently
complete to give Bank true and accurate knowledge of their subject matter, and
do not contain any untrue statement of a material fact or omit any material fact
necessary to make the same not misleading.
3.11 NATURE OF REPRESENTATIONS AND WARRANTIES. Borrower certifies to Bank
that all representations and warranties made in this Agreement and all other
Loan Documents are true and correct in all material respects and do not contain
any untrue statement of a material fact or omit any material fact necessary to
make such representations and warranties not misleading. Any such
representations and warranties shall remain true and correct in all material
respects and shall survive so long as any of Borrower's obligations under this
Agreement have not been satisfied or the Loan or any part thereof remains
outstanding, and for any applicable statute of limitations period thereafter.
Each representation and warranty made in this Agreement, in any other Loan
Documents, and in any other document delivered to Bank by Borrower shall be
deemed to have been relied upon by Bank, notwithstanding any investigation,
inspection or inquiry theretofore or thereafter made by or on behalf of Bank, or
any disbursement made by Bank related thereto. The representations and
warranties contained in this Agreement which are made to the best knowledge of
Borrower have been made after diligent inquiry calculated to ascertain the truth
and accuracy of the subject matter of each such representation and warranty.
ARTICLE 4. COVENANTS OF BORROWER
Borrower covenants and agrees that so long as any credit hereunder shall be
available and until payment in full of the Loans, unless Bank shall otherwise
consent in writing:
4.1 LITIGATION. Borrower shall promptly inform Bank in writing of (i) all
material adverse changes in Borrower's financial condition; and (ii) all
litigation and claim s and all threatened litigation and claims affecting
Borrower which could materially affect the financial condition of Borrower.
4.2 MAINTAIN RECORDS. Borrower shall keep and maintain full and accurate
accounts and records of its operations according to GAAP and customary practices
for Borrower's type of business.
4.3 TAXES. Borrower shall pay and discharge all lawful claims,
including taxes, assessments and governmental charges or levies, imposed upon
Borrower, Borrower's income or profits and upon all properties belonging to
Borrower, before the date upon which penalties attach thereto.
4.4 INSURANCE. Borrower shall maintain insurance with responsible
insurance carriers against such risks and in such amounts as is customarily
carried by similar businesses, including, without limitation, fire, public
liability, property damage, workers' compensation and interruption of business
insurance.
4.5 PAYMENT OF COSTS. Subject to Paragraph 2.2 of this Agreement, Borrower
shall bear all costs and expenses required to satisfy the terms and conditions
of this Agreement, including, without limitation, the costs and expenses of
Bank's counsel in connection with the Loan.
4.6 NOTIFICATION OF DEFAULT. Borrower shall promptly notify Bank in
writing f the occurrence of any Event of Default as defined in this Agreement,
or of any facts then in existence that could become an Event of Default upon the
giving of notice or the lapse of time or both.
4.7 COMPLIANCE. Borrower shall comply promptly with all governmental
requirements applicable to Borrower, and shall cause all conditions in this
Agreement to be satisfied at the time and in the manner provided in this
Agreement.
4.8 SALE OF BUSINESS. Borrower shall not sell any assets except in the
ordinary course of its business as now conducted or as conducted by any business
hereafter acquired; or sell, lease, assign, or transfer any substantial part of
Borrower's business or fixed assets, or any property or other assets necessary
for the continuance of its business as now conducted or as conducted by any
business hereafter acquired, including, without limitation, the selling of any
property or other asset accompanied by the leasing back of the same.
4.9 FINANCIAL COVENANTS.
(a) 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.
(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 3.00:1 for the quarters ending March 31, June 30 and
December 31, and 3.25:1 for the quarter ending September 30.
4.10 FINANCIAL REPORTING. Borrower shall deliver to Bank: (i) within one
hundred twenty (120) days after the end of each fiscal year, audited Financial
Statements for Borrower; (ii) within forty-five days after the end of each
fiscal quarter, interim Borrower-certified Financial Statements of Borrower and
Borrower's Form 10-Q filing; (iii) within forty-five (45) days after the end of
each fiscal quarter, aging summaries of Borrower's Accounts Receivable and
accounts payable; (v) within forty-five (45) days after request, such interim or
periodic financial information regarding Borrower as Bank may reasonably
require. All such Financial Statements and other financial information shall be
in a form reasonably acceptable to Bank, and shall be the most recent that has
been prepared by or for the subjects thereof. Bank may rely thereon until
otherwise notified in writing by Borrower, and may, but shall not be obligated
to, verify the information contained therein. From time to time, Bank may
receive financial information about Borrower from others, and may answer
questions and requests from others seeking credit and experience information
about Borrower and their relationships with Bank.
ARTICLE 5. DEFAULT; REMEDIES
5.1 EVENTS OF DEFAULT. Any one or more of the following events shall be an
Event of Default:
(a) Failure to pay any installment of principal or interest on the
Notes or any other monetary obligations as required hereunder or thereunder
within ten (10) days after the date due.
(b) Failure of Borrower to perform any of its obligations under any
covenant, condition or agreement set forth in this Agreement, if such failure is
not cured within ten (10) days after written notice from Bank (or such longer
period as is reasonably determined by Bank to be necessary for completion of the
cure, so long as Borrower begins promptly and thereafter diligently continues to
cure the failure).
(c) Failure of Borrower to perform any of its obligations under any
covenant, condition or agreement set forth in the Note or any of the other Loan
Documents, if such failure is an event of default thereunder and is not cured
within the applicable cure period (if any).
(d) Failure to pay, or any default on the payment of, any principal
of or any interest on any Indebtedness, or any breach with respect to any term
of any evidence of such Indebtedness, or of any loan agreement, mortgage,
indenture or other agreement relating thereto, whether or not waived by the
note holder or obligee.
(e) Failure of Borrower to comply with any Governmental Requirements
within the applicable cure period (if any), if Bank reasonably determines that
such failure would have a material adverse effect on Borrower's financial
condition or Bank's security for the Loan.
(f) Any of Borrower' representations or warranties made herein or any
statement or certificate at any time given in writing by Borrower pursuant
hereto or in connection herewith shall be false or misleading in any material
respect.
(g) A court having jurisdiction shall enter a decree or order for
relief in respect of Borrower in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of Borrower, or for any substantial part of the properties
of any Borrower, or ordering the winding up or liquidation of the affairs of any
Borrower; or Borrower shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar
official) of Borrower, or for any substantial part of the properties of any
Borrower, or shall make any general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they come due or shall take any action
in furtherance of any of the foregoing.
(h) The attachment, levy, execution or other judicial seizure of any
Collateral provided by Borrower under any of the Loan Documents which is not
released, expunged, discharged or dismissed before the earlier of thirty (30)
days after such attachment, levy, execution or seizure, or (ii) five (5) days
prior to the date of any proposed sale of the assets affected thereby, if Bank
reasonably determines that such attachment, levy, execution or other judicial
seizure of Collateral would have a material adverse effect on Borrower's
financial condition or Bank's security for the Loan.
5.2 REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default,
Bank may at its option, without demand, presentment or notice, all of which
hereby are expressly waived, exercise one or more of the following remedies:
(a) Terminate all credit hereunder and all obligations of Bank to
make any further Advances hereunder.
(b) Declare the Note and all other sums owing to Bank with respect to
the other Loan Documents to be immediately due and payable, whereupon the same
shall be due and payable in full.
(c) Exercise its remedies under the Security Agreement and/or the
other Loan Documents.
(d) Exercise any and all other rights and remedies of Bank as it
shall deem appropriate at law, in equity, or otherwise.
5.3 REPAYMENT OF FUNDS ADVANCED. If Bank spends its funds in exercising or
enforcing any of its rights or remedies under the Loan Documents, the amount of
funds spent shall be payable to Bank upon demand, together with interest at the
rate applicable to the principal balance of the Note, from the date such funds
were spent until repaid.
5.4 REMEDIES CUMULATIVE. Bank shall have the right to enforce one or more
remedies hereunder successively or concurrently, and any such action shall not
stop or prevent Bank from pursuing any further remedy which it may have
hereunder or by law.
5.5 WAIVER OF TRIAL BY JURY. Bank and Borrower each knowingly, voluntarily
and intentionally waive any right it or they may have to a trial by jury in
respect of any claim or controversy arising out of the Loan, this Agreement or
any of the other Loan Documents.
5.6 APPLICATION OF PROCEEDS. Any money collected by Bank pursuant to this
Article (whether by means of voluntary payment, foreclosure or otherwise) shall
be promptly applied as follows unless otherwise required by provision of
applicable law:
(a) First, to the payment of all expenses incurred by Bank under this
Agreement and in enforcing its rights hereunder, including, without limitation,
all costs and expenses of collection, attorneys' fees, court costs and
foreclosure expenses.
(b) Next, to the payment of all principal and accrued interest on the
Note.
(c) Next, to the payment of any other amounts owed by Borrower to
Bank under this Agreement or other Senior Debt.
(d) Next, to Borrower.
ARTICLE 6. MISCELLANEOUS
6.1 SURVIVAL OF WARRANTIES. All agreements, representations and warranties
made herein shall survive the execution and delivery of this Agreement, the
making of the Loans hereunder, and the execution and delivery of the Notes.
6.2 INDEMNITY. Borrower hereby agrees to defend, indemnify, protect and
hold Bank and its directors, officers, employees, partners, attorneys, agents,
participants, successors and assigns harmless from and against all losses,
damages, liabilities, claims, actions, judgments, costs and attorneys' fees
which Bank may incur as a direct or indirect consequence of (i) the making of
the Loan, except for violations of banking laws or regulations by Bank; (ii)
Borrower's failure to perform any obligations as and when required by this
Agreement or any of the other Loan Documents; (iii) the failure at any time of
any of Borrower's representations or warranties to be true and correct in all
material respects; (iv) any lien or claim which may be alleged to have arisen on
or against the Collateral or any part thereof under the laws of the local or
state government or any other governmental or quasi-governmental authority or
any liability asserted against Bank with respect thereto; (v) any tax
attributable to the execution, delivery, filing or recording of the Security
Agreement or the Note; or (vi) any act or omission by Borrower or other Person
(other than Bank or its agents) with respect to the Collateral or any portion
thereof. Borrower shall pay immediately upon Bank's demand any amounts owing
under this indemnity, together with interest from the date the indebtedness
arises until paid at the rate of interest applicable to the principal balance of
the Note. Borrower's duty to defend, indemnify, protect and hold Bank harmless
shall survive the release and cancellation of the Note.
6.3 FURTHER ASSURANCES. At Bank's reasonable request and at Borrower's
expense, Borrower shall execute, acknowledge and deliver all other instruments
and perform all other acts necessary, desirable or proper to carry out the
purposes of the Loan Documents or to perfect and preserve any liens created by
the Loan Documents.
6.4 FORM OF DOCUMENTS. The form and substance of all documents,
instruments and forms of evidence to be delivered to Bank under the terms of any
of the Loan Documents shall be subject to Bank's approval, and shall not be
modified, superseded or terminated in any respect without Bank's prior written
approval.
6.5 NOT ASSIGNABLE. Neither this Agreement nor any rights of Borrower to
receive any sums, proceeds or disbursements under this Agreement or under the
Notes may be assigned, pledged, hypothecated or otherwise encumbered by
Borrower, without the prior written consent of Bank. Subject to the foregoing
restrictions, this Agreement shall inure to the benefit of Bank, its successors
and assigns, and shall bind Borrower and its permitted heirs, executors,
administrators, successors and assigns.
6.6 ATTORNEYS' FEES. If Bank refers this Agreement or any of the other
Loan Documents to an attorney to enforce, construe or defend the same, or as a
consequence of any Event of Default as defined in this Agreement, with or
without the filing of any legal action or proceeding, Borrower shall pay to
Bank, immediately upon demand, the amount of all reasonable attorneys' fees and
costs incurred by Bank in connection therewith, together with interest thereon
from the date of such demand at the rate of interest applicable to the principal
balance of the Notes. The reference to "attorneys' fees" in this Paragraph,
elsewhere in this Agreement and in all of the other Loan Documents shall
include, without limitation, fees charged by Bank for the services furnished by
attorneys who are in its employ, at rates not exceeding those that would be
charged by outside attorneys for comparable services.
6.7 GOVERNING LAW. The Loan Documents shall be governed by and construed
in accordance with the laws of the State of California, except the extent
preempted by Federal law. Borrower and all Persons and entities in any manner
obligated to Bank under the Loan Documents hereby consent to the jurisdiction of
any Federal or State court within the State of California and also consent to
service of process by any means authorized by California or Federal law.
6.8 NO THIRD PARTIES BENEFITTED. No Person other than Bank and Borrower
and their permitted successors and assigns shall have any right of action under
any of the Loan Documents.
6.9 TIME OF THE ESSENCE. Time is hereby declared to be of the essence of
this Agreement and of every part of this Agreement.
6.10 SEVERABILITY. If any provision of the Loan Documents is determined by
a court of competent jurisdiction to be invalid, illegal or unenforceable, that
portion shall be deemed severed from the Loan Documents, and all remaining parts
shall continue in full force as though the invalid, illegal or unenforceable
portion had never been part of the Loan Documents.
6.11 JOINT AND SEVERAL OBLIGATIONS. The obligations of Borrower shall be
the joint and several obligations of all entities comprising Borrower.
6.12 GENDER. When the context and construction so require, all words used
in the singular in this Agreement shall be deemed to have been used in the
plural, the masculine shall include the feminine and neuter, and vice versa.
6.13 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
Bank or any holder of the Notes in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing under this Agreement and the Notes are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
6.14 MODIFICATION. This Agreement may not be amended, waived or modified
in any manner without the written consent of Bank and Borrower.
6.15 NOTICES. Except as otherwise expressly provided herein, any notice
herein required or permitted to be given shall be in writing and may be
personally served or sent by United States mail and shall be deemed to have been
given when deposited in the United States mail, certified, with postage prepaid
and properly addressed. For the purposes hereof, the addresses of the parties
hereto (until notice of a change thereof served as provided in this Paragraph)
shall be as follows:
Borrower: Advanced Marketing Services, Inc.
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Attention: Chief Financial Officer
Bank: California Bank & Trust
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Attention: Metropolitan Corporate Banking
6.16 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.17 PARAGRAPH HEADINGS. The various headings used in this Agreement are
inserted for convenience only and shall not affect the meaning or
interpretations of this Agreement or any provision hereof.
BANK: CALIFORNIA BANK & TRUST, a California banking
corporation
By /S/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Name ▇▇▇▇▇ ▇▇▇▇▇▇
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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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and CEO
By /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Exec. Vice Pres. and CFO