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 WELLS 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Financial  Covenant  Triggering Event shall be rescinded  immediately  following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.
<PAGE>
     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:
<PAGE>
              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
<PAGE>
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.

                                        WELLS FARGO FOOTHILL, INC.,
                                        a California corporation, as Agent and a
                                        Lender

                                        By:     /s/ Daniel Whitwer
                                           -------------------------------------
                                        Title: Vice President


                                        ADVANCED MARKETING SERVICES, INC., a
                                        Delaware corporation

                                        By:     /s/ Curtis R. Smith
                                           -------------------------------------
                                        Title: Executive Vice President and
                                               Chief Financial Officer



                                        PUBLISHERS GROUP WEST INCORPORATED, a
                                        California corporation

                                        By:     /s/ Curtis R. Smith
                                           -------------------------------------
                                        Title: Chief Financial Officer



                                        PUBLISHERS GROUP INCORPORATED, a
                                        California corporation

                                        By:     /s/ Curtis R. Smith
                                           -------------------------------------
                                        Title: Chief Financial Officer