Exhiubit 10.1
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SECOND MODIFICATION AGREEMENT
This SECOND MODIFICATION AGREEMENT (hereinafter the "Modification")
dated as of March 22, 2005, by and between
FIVE STAR GROUP, INC., a corporation of the State of Delaware
with its principal corporate place of business at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ with its
mailing address at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred
to as "BORROWER")
and
FLEET CAPITAL CORPORATION, a corporation organized and
existing under the laws of the State of Rhode Island with
offices at Mail Stop NJ RP 46703E, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (being hereinafter referred
to as "LENDER")
WITNESSES THAT:
(1) WHEREAS, on or about June 20, 2003, BORROWER and LENDER entered into
a certain Loan and Security Agreement (such certain Loan and Security Agreement
being hereinafter referred to as the "2003 Loan Agreement");
(2) WHEREAS, the 2003 Loan Agreement was amended by an instrument of
modification dated as of May 28, 2004 and entitled "First Modification";
(3) WHEREAS, the 2003 Loan Agreement as amended by the First
Modification is hereinafter referred to as the "Loan Agreement";
(4) WHEREAS, pursuant to the Loan Agreement, BORROWER received approval
to borrow up to $28,000,000 from LENDER in the form of a revolving loan (such
revolving loan is called the "Revolving Loan" in the Loan Agreement and, except
as hereby amended, such term to have the same meaning herein that it has in the
Loan Agreement);
(5) WHEREAS, the Loan Agreement matures on June 30, 2008;
(6) WHEREAS, in order to secure BORROWER's payment and performance
obligations under the Loan Agreement, BORROWER provided LENDER with Collateral
as more fully defined and set forth in the Loan Agreement (such Collateral being
hereinafter referred to as the "Collateral", such term to have the same meaning
herein that it has in the Loan Agreement);
(7) WHEREAS, BORROWER has requested that LENDER modify the Loan
Agreement so that:
(a) the maximum amount that can be borrowed under the
Revolving Loan be increased from $28,000,000 to
$30,800,000 during the period from the date
hereof to June 30, 2005 (reverting back to
$28,000,000 on July 1, 2005); and
(b) LENDER memorialize the aforesaid change by a
written modification of the Loan Agreement;
(8) WHEREAS, LENDER is willing to do the foregoing, but only if the
conditions contained in this Modification are satisfied;
(9) WHEREAS, in order to induce LENDER to enter into this Modification,
BORROWER is willing to execute this Modification and comply with the provisions
hereof; (
10) WHEREAS, BORROWER represents that its execution of this Modification
and its performance of the covenants and terms contained herein will inure to
its economic benefit and will be in furtherance of its corporate purposes;
NOW, THEREFORE, in consideration of the premises and the covenants
contained in this Modification and for other good and valuable consideration,
BORROWER and LENDER do hereby agree as follows:
ARTICLE I
AMENDMENT OF THE LOAN AGREEMENT
1.1 Unless otherwise specifically defined herein, all terms defined in
Article I of the Loan Agreement shall have the same meanings herein as those
given therein.
1.2 The definition of "Agreement" set forth in Section 1.8 of the Loan
Agreement is hereby amended as follows (it being intended that any time the term
"Agreement" appears in the Loan Agreement, that term shall collectively mean all
of the following):
(a) the Loan Agreement; as amended by
(b) the First Modification; as amended by
(c) this Modification; as amended by
(d) all extensions, modifications (including without limitation
modifications increasing or decreasing the amount of the
Revolving Loan or any other financial accommodation or facility
now or hereafter provided hereunder), refinancings, renewals,
substitutions, replacements and/or redatings thereof.
1.3 The definition of "Lending Formula" set forth in Section 1.40 of the
Loan Agreement is hereby amended as follows (it being intended to reflect the
facts that (1) the maximum amount of the Revolving Loan has been hereby
increased from $28,000,000 to $30,800,000 through June 30, 2005 (reverting back
to $28,000,000 on July 1, 2005) and (2) any time the term "Lending Formula"
appears in the Loan Agreement, that term shall mean the Lending Formula set
forth below):
1.40 "LENDING FORMULA" means the lesser of:
(a) $28,000,000 (but during the period from March 22, 2005 through
June 30, 2005, the aforesaid $28,000,000 shall be $30,800,000,
reverting to $28,000,000 on July 1, 2005) LESS in all cases the
"Swap Reserve" (i.e., the amount approximating the marked to
market exposure from time to time of LENDER or LENDER's Affiliate
under the Master Agreement), such "Swap Reserve" to be instituted
only if BORROWER's Fixed Charge Coverage (as defined in Article V
below) is less than 1.13 to 1.0 as at any testing date which said
Article V fixes for such covenant; or
(b) the total of the "loan value" of Eligible Receivables PLUS the
"loan value" of Eligible Inventory.
1.4 Section 2.9(d) of the Loan Agreement is hereby amended as follows
(it being intended to make the provisions of this Section consistent with the
temporary increase in the Revolving Loan from $28,000,000 to $30,800,000 through
June 30, 2005):
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2.9(d) Termination Charges. At the effective date
of termination of this Agreement for any
reason (and whether by LENDER or by
BORROWER), BORROWER shall pay to LENDER (in
addition to the then outstanding principal,
accrued interest and other charges owing
under the terms of this Agreement and any
of the other Loan Documents and in addition
to any amounts payable under Section 2.10)
as a premium or liquidated damages for the
loss of the bargain and not as a penalty,
the following amount:
(1) If termination occurs during the
period commencing on March 22, 2005 and
ending on June 30, 2005, BORROWER shall pay
a prepayment premium equal to $300,000
(i.e., 1% of the maximum potential amount
[$30,800,000] that could be borrowed under
the Revolving Loan during such period).
(2) If termination occurs during the
period commencing on July 1, 2005, and
ending on June 30, 2006, BORROWER shall pay
a prepayment premium equal to $280,000
(i.e., 1% of the maximum potential amount
[$28,000,000] that could be borrowed under
the Revolving Loan during such period).
(3) If termination occurs during the
period commencing on July 1, 2006, and
ending on June 30, 2007, BORROWER shall pay
a prepayment premium equal to $210,000
(i.e., 3/4% of the maximum potential amount
[$28,000,000] that could be borrowed under
the Revolving Loan during such period).
(4) If termination occurs during the
period commencing on July 1, 2007, and
ending on June 29, 2008, BORROWER shall pay
a prepayment premium equal to $140,000
(i.e., 1/2% of the maximum potential amount
[$28,000,000] that could be borrowed under
the Revolving Loan during such period).
1.5 Section 2.11(a) of the Loan Agreement is hereby amended as follows
(it being intended to reflect the fact that the May 28, 2004 "master" Revolving
Note has been restated and amended and replaced by a note dated as of even date
herewith in the face amount of $30,800,000):
(a) The Revolving Loan is evidenced by BORROWER's certain master
promissory revolving note dated as of March 22, 2005, and made
payable to the order of LENDER. The amounts due under such note
shall be payable as provided in this Agreement.
ARTICLE II
RESTATEMENT/SUBSTITUTION OF "MASTER" REVOLVING NOTE
2.1 BORROWER agrees to execute on the date hereof a "master" restated
and amended Revolving Note, such note to be dated as of even date herewith and
be entitled (in part) "Restated and Amended Promissory Note" and be in the face
amount of $30,800,000 so as to evidence the amendments to the Revolving Loan and
the Loan Documents which are made and effected by this Modification.
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2.2 BORROWER foregoing $30,800,000 "master" Restated and Amended
Revolving Note restates, replaces and substitutes for the "master" Revolving
Note executed by BORROWER and dated as of May 28, 2004.
2.3 BORROWER's foregoing "master" Restated and Amended Revolving Note,
together with all extensions, modifications (including without limitation
modifications increasing or decreasing the amount thereof or any financial
accommodation provided thereunder), refinancings, renewals, substitutions,
replacements and/or redatings thereof, together with the Loan Agreement and the
records of LENDER described in the Loan Agreement, constitute and are the
"REVOLVING NOTE" as such term is used in the Loan Agreement.
ARTICLE III
MISCELLANEOUS
3.1 All of the Loan Documents described and defined in the Loan
Agreement shall be deemed to be amended in manner consistent hereto and
conforming herewith.
3.2 On and after the date hereof, the rights and obligations of LENDER
and BORROWER shall be determined by reference to the Loan Agreement and the
other aforementioned Loan Documents as amended by this Modification and as
amended from time to time hereafter.
3.3 (a) In order to induce LENDER to enter into this Modification and to
perform its obligations hereunder, BORROWER reaffirms all of the representations
and warranties which BORROWER made in the Loan Agreement and BORROWER hereby
makes and gives each and all such representations and warranties directly to
LENDER.
(b) All such representations and warranties remain true and accurate
as of the date hereof.
(c) All such representations and warranties shall survive the
execution and delivery of this Modification.
3.4 As a condition of this Modification, BORROWER shall deliver to
LENDER:
(a) this Modification;
(b) BORROWER's "master" Restated and Amended Revolving Note dated as
of even date herewith and entitled (in part) "Restated and
Amended Promissory Note" and in the face amount of $30,800,000;
(c) enabling corporate resolutions of BORROWER;
(d) the consent of FIVE STAR PRODUCTS, INC. (formerly known as
AMERICAN DRUG COMPANY, INC., and the "Guarantor" named in the
Loan Agreement;;
(e) the consent of JL DISTRIBUTORS, INC. (the "Seller" named in the
Loan Agreement);
(f) enabling corporate resolutions of the aforesaid "Guarantor"; and
(g) enabling corporate resolutions of the aforesaid "Seller".
3.5 (a) BORROWER agrees that, as of the opening of business on March 22,
2005, there was now due and outstanding on the Revolving Loan the principal sum
of $27,236,493.24 in direct and attributed Revolving Loan borrowings (accrued
interest, if any, for the month of February 2005, having been paid in full).
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(b) BORROWER agrees that there exist no defenses, recoupments,
setoffs, counterclaims or any other claims or charges against the
amounts due to LENDER under the Revolving Loan or the Loan
Agreement.
(c) BORROWER agrees that there exist no claims or charges against any
actions or inactions of LENDER in extending the Loan Agreement or
in making disbursements under the Loan Agreement or in otherwise
administering the Loan Agreement.
3.6 EXCEPT AS SPECIFICALLY SET FORTH IN THIS MODIFICATION, NOTHING IN
THIS MODIFICATION IS INTENDED TO IN ANY WAY ALTER OR AFFECT THE TERMS AND
PROVISIONS OF THE LOAN AGREEMENT, INCLUDING BUT NOT LIMITED TO BORROWER'S
PAYMENT AND PERFORMANCE OF THE REVOLVING LOAN.
3.7 NOTHING IN THIS MODIFICATION IS INTENDED TO IN ANY WAY RELEASE OR
LESSEN THE COLLATERAL GIVEN TO SECURE THE PAYMENT AND THE PERFORMANCE OF THE
LOAN AGREEMENT, THE REVOLVING LOAN AND THE OTHER LIABILITIES (AS DEFINED IN THE
LOAN AGREEMENT) OF BORROWER TO LENDER.
3.8 (a) BORROWER shall pay the legal expenses of LENDER for the
preparation of this Modification, plus disbursements.
(b) BORROWER shall promptly pay such expenses within 7 days from
BORROWER's receipt of the ▇▇▇▇ therefor and, if not so paid,
BORROWER hereby authorizes LENDER to effect payment of such
expenses in the manner specified in the Authorization to Charge
set forth in the Loan Agreement.
3.9 This Modification may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Modification by facsimile shall be as effective as
delivery of a manually executed counterpart of this Modification.
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IN WITNESS WHEREOF, BORROWER and LENDER have caused this Modification
Agreement to be executed by their respective duly authorized officers as of the
date and year first above written.
ATTEST: FIVE STAR GROUP, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Corporate Secretary ▇▇▇▇▇ ▇▇▇▇▇▇▇, Exec. Vice President
FLEET CAPITAL CORPORATION
▇▇▇▇ ▇▇▇▇▇▇, Vice President
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