Exhibit 10.1
THIRD MODIFICATION AGREEMENT
This THIRD MODIFICATION AGREEMENT (hereinafter the "Modification")
dated as of June 1, 2005, by and between
FIVE STAR GROUP, INC., a corporation of the State of Delaware
with its principal corporate place of business at 000 Xxxxxx
Xxxx, Xxxx Xxxxxxx, Xxxxxx Xxxxxx, Xxx Xxxxxx 00000 with its
mailing address at 000 Xxxxxx Xxxx, X.X. Xxx 0000, Xxxx
Xxxxxxx, Xxxxxx Xxxxxx, Xxx Xxxxxx 00000 (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, 000 Xxxxxx Xxxxxx, Xxxxx
Xxxxx, Xxxxxxxx, Xxx Xxxxxx 00000 (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 Agreement";
(3) WHEREAS, the 2003 Loan Agreement was again amended by an instrument
of modification dated as of March 22, 2005 and entitled "Second Modification
Agreement";
(4) WHEREAS, the 2003 Loan Agreement as amended by the First
Modification Agreement and the Second Modification Agreement is hereinafter
referred to as the "Loan Agreement";
(5) 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 with
$30,800,000 being available during the period from March 22, 2005 to June 30,
2005 (reverting back to $28,000,000 on July 1, 2005), 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;
(6) WHEREAS, the Loan Agreement matures on June 30, 2008;
(7) 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);
(8) 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 permanently increased to $35,000,000; and
(b) the Inventory sublimit be increased from $16,500,000 to
$18,000,000 and the Inventory advance rate be increased to
60%; and
(c) LENDER memorialize the aforesaid change by a written
modification of the Loan Agreement;
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(9) WHEREAS, LENDER is willing to do the foregoing, but only if the
conditions contained in this Modification are satisfied;
(10) WHEREAS, in order to induce LENDER to enter into this Modification,
BORROWER is willing to execute this Modification and comply with the provisions
hereof;
(11) 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
permanently increased to $35,000,000 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) $35,000,000 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 The definition of "Loan Value" set forth in Section 1.45 of the Loan
Agreement is hereby amended as follows (it being intended to reflect the fact
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that (1) the Inventory sublimit has been increased from $16,500,000 to
$18,000,000 and (2) the advance rate has been increased to 60% and (3) any time
the term "Loan Value" appears in the Loan Agreement, that term shall
collectively mean all of the following):
1.45 "LOAN VALUE" means:
(a) As it relates to Eligible
Receivables: Eligible Receivables shall
normally have a "loan value" of eighty
percent (80%) of such Eligible Receivables,
provided, however, that LENDER in good faith
and in the exercise of its reasonable
commercial judgment may on prior notice to
BORROWER fix the aforesaid advance rate at
some lesser percentage; or
(b) As it relates to Eligible
Inventory: Eligible Inventory shall normally
have a "loan value" of up to the lesser of
$18,000,000 or 60% of the value of Eligible
Inventory, provided, however, that LENDER in
good faith and in the exercise of its
reasonable commercial judgment may on prior
notice to BORROWER fix the aforesaid "loan
value" at some lesser amount or percentage.
1.5 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
permanent increase in the Revolving Loan to $35,000,000):
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 June 1, 2005 and
ending on June 30, 2005, BORROWER shall pay
a prepayment premium equal to $350,000
(i.e., 1% of the maximum potential amount
[$35,000,000] 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 $350,000
(i.e., 1% of the maximum potential amount
[$35,000,000] 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 $262,500
(i.e., 3/4% of the maximum potential amount
[$35,000,000] that could be borrowed under
the Revolving Loan during such period).
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(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 $175,000
(i.e., 1/2% of the maximum potential amount
[$35,000,000] that could be borrowed under
the Revolving Loan during such period).
1.6 Section 2.11(a) of the Loan Agreement is hereby amended as follows (it
being intended to reflect the fact that the March 22, 2005 "master" Revolving
Note has been restated and amended and replaced by a note dated as of even date
herewith in the face amount of $35,000,000):
(a) The Revolving Loan is evidenced by BORROWER's
certain master $35,000,000 (face amount) promissory
revolving note dated as of June 1, 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 $35,000,000 so as to evidence the amendments to the Revolving Loan and
the Loan Documents which are made and effected by this Modification.
2.2 BORROWER foregoing $35,000,000 "master" Restated and Amended Revolving
Note restates, replaces and substitutes for the "master" Revolving Note executed
by BORROWER and dated as of June 1, 2005.
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.
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(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
$35,000,000;
(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 June 1,
2005, there was now due and outstanding on the Revolving Loan the principal sum
of $25,718,639.20 in direct and attributed Revolving Loan borrowings (accrued
interest, if any, for the month of May 2005, having been paid in full).
(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, TH E 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 xxxx 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.
By:
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Xxxxx XxXxxxxx, Corporate Secretary Xxxxx Xxxxxxx, Exec. Vice President
FLEET CAPITAL CORPORATION
By:
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xxx Xxxxxx, Vice President
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