Exhibit 10.2
November 14, 2005
FIVE STAR GROUP, INC.
000 Xxxxxx Xxxx
P.O. Box 0000
Xxxx Xxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx Xxxxxxx, Exec. Vice President
Re: $35,000,000 Revolving Loan from Bank of America, N.A.
to Five Star Group, Inc.
Dear Xx. Xxxxxxx:
On or about June 20, 2003, Five Star Group, Inc. ("Borrower")
and Bank of America, N.A. (through its predecessor Fleet Capital Corporation and
hereinafter "Lender") entered into a certain Loan and Security Agreement which
has been amended by the following instruments of modification (such certain Loan
and Security Agreement as so amended being hereinafter referred to as the "Loan
Agreement"):
(a) an instrument of modification dated as of May 28,
2004 and entitled "First Modification Agreement";
(b) an instrument of modification dated as of March 22,
2005 and entitled "Second Modification Agreement";
(c) an instrument of modification dated as of June 1, 2005
and entitled "Third Modification Agreement"; and
(d) an instrument of modification dated as of September
26, 2005, but effective as of August 1, 2005, and
entitled "Fourth Modification Agreement".
Section 5.21(a) and (b) of the Loan Agreement provides as
follows:
Fixed Charge Coverage:
(a) As at March 31, 2003 and continuing at all times
thereafter, BORROWER must maintain its "Fixed Charge Coverage"
at a ratio greater than 1.1 to 1.0.
(b) Compliance with this Section will be tested
quarterly and annually, using a rolling 12 month basis, by
reference to BORROWER's annual and quarterly financial
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statements required to be submitted pursuant to Section 5.6
above and by using GAAP.
Borrower has failed to comply with the aforesaid covenant for
its fiscal quarter ending September 30, 2005, because its Fixed Charge Coverage
was less than 1.1 to 1.0.
Borrower's failure to comply with the aforesaid covenant
constitutes an Event of Default under, among other provisions, Section 7.2 of
the Loan Agreement. Borrower has asked that Lender waive such Event of Default
for the fiscal quarter ending September 30, 2005, and only for such quarter.
In this regard, please be advised that Lender will honor
Borrower's request and does hereby waive Borrower's default for failing to
comply with the requirement set forth in Section 5.21(a) and (b) of the Loan
Agreement that Borrower's Fixed Charge Coverage be more than 1.1 to 1.0.
Lender's aforesaid waiver and amendment is subject to
Borrower's confirmation and acceptance of the following terms and conditions
(and Borrower's acceptance of this letter by its execution of a copy hereof will
be deemed such confirmation and acceptance):
(1) (a) Borrower must confirm and, by its acceptance and
execution of a copy of this letter, does confirm that
all amounts due and owing under the Revolving Loan,
the Loan Agreement and the Loan Documents described
therein (hereinafter the "Loan Documents") are owed
to Lender without offset, defense, recoupment,
set-off, deduction, or counterclaim.
(b) Borrower must confirm and, by its acceptance and
execution of a copy of this letter, does confirm that
as of the opening of business on November 11, 2005,
the following principal and interest amounts were
owed on the Revolving Loan:
(1) Principal $19,005,550.36
(2) Interest: interest which accrued from November 1,
2005.
(2) Borrower must confirm and, by its acceptance and execution of
a copy of this letter, does confirm that there exist no claims
or charges against any actions or inactions of Lender in
extending the Revolving Loan or in making disbursements
thereunder or in otherwise administering the Revolving Loan,
the Loan Agreement and/or the Loan Documents.
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(3) Borrower must waive, release and discharge and, by its
acceptance and execution of a copy of this letter, does waive,
release and discharge any and all claims or causes of action
of any kind whatsoever, whether at law or in equity, arising
on or prior to the date hereof, which Borrower may have
against Lender, its predecessors, its successors and assigns,
agents, employees and counsel, in connection with the
Revolving Loan, the Loan Agreement and the Loan Documents. The
waivers and releases made herein include the waiver of any
damages which may have been or may in the future be caused to
Borrower or to its properties or business prospects because of
the actions waived and released and the agreements made
herein, including without limitation, any actual or implicit,
direct or indirect, incidental or consequential damages
suffered by Borrower therefrom, including but not limited to
(a) lost profits, (b) loss of business opportunity, (c)
increased financing costs, (d) increased legal and other
administrative fees and (e) damages to business reputation.
(4) Borrower must confirm and, by its acceptance and execution of
a copy of this letter, does confirm that all of the terms,
covenants and provisions of the Revolving Loan, the Loan
Agreement and the Loan Documents (as all have been heretofore
and hereby amended) shall continue in full force and effect.
(5) Borrower must continue to comply with the terms of the
Revolving Loan and not be in default thereunder.
(6) All rights of Lender shall continue to be determined in
accordance with the Loan Agreement and the Loan Documents
until all Liabilities (as defined in the Loan Agreement) are
paid in full.
(7) This waiver and amendment relates only to Borrower's fiscal
quarter ending September 30, 2005.
(8) The provisions of Section 5.21(a) and (b) of the Loan
Agreement will remain in effect for all quarters after the
quarter ending September 30, 2005.
(9) This letter will be deemed a modification of the Loan
Agreement and Borrower's obligations hereunder will be
considered a covenant of the Loan Agreement.
(10) 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.
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(11) Five Star Products, Inc., as guarantor of the amounts owed
under the Loan Agreement, must confirm to Lender that its
instrument of guaranty continues in full force and effect and
is not impaired or otherwise lessened or adversely affected by
the waiver and amendment granted by this letter.
(12) JL Distributors, Inc. as the holder of debt whose payment has
been subordinated to the payment of the Liabilities owed under
the Loan Agreement, must confirm to Lender that its instrument
of subordination continues in full force and effect and is not
impaired or otherwise lessened or adversely affected by the
waiver and amendment granted by this letter.
(13) Borrower must pay Lender a waiver fee of $18,000 and
authorizes Lender to effect payment of such fee in the manner
allowed by the "Authorization to Charge Accounts" as set forth
in the Loan Agreement.
(14) Borrower must pay for the services of Lender's counsel who was
engaged to review the Loan Agreement and to assist in the
preparation of this letter and authorizes Lender to effect
payment of such fee in the manner allowed by the
"Authorization to Charge Accounts" as set forth in the Loan
Agreement.
If Borrower is in agreement with the terms and conditions of
this letter, please execute and also have guarantor Five Star Products, Inc.,
and subordinated debt xxxxxx XX Distributors, Inc., execute the enclosed copy of
this letter and return it to me no later than November 21, 2005.
Very truly yours,
BANK OF AMERICA, N.A.
By: Xxxxxxx Xxxx, Vice President
CONSENT OF FIVE STAR GROUP, INC.
FIVE STAR GROUP, INC., hereby agrees to the terms and conditions of the
above letter as of November 14, 2005.
WITNESS: FIVE STAR GROUP, INC.
_____________________________ By: ________________________
Xxxxx XxXxxxxx, Corporate Secretary Xxxxx Xxxxxxx, Exec. VP
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