March 25, 2008
Exhibit
10.43
March
25, 2008
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FIVE
STAR GROUP, INC.
00 Xxxx
00xx Xxxxxx
Suite
3110
New York,
New York 10116
Attention: Xxx
Xxxxxxx
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Re:
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$35,000,000
Revolving Loan from Bank of America, N.A. to Five Star Group,
Inc.
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EIGHTH
MODIFICATION AGREEMENT:
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waiver of Xxxxxxxx’s
compliance with Capital Expenditures covenant of Section 6.16 (a) of the
Loan Agreement for the fiscal year ended December 31,
2007
amendment of the
formula which determines Borrower’s compliance with the Fixed Charge
Coverage covenant set forth in Section 5.21 of the Loan
Agreement
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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”):
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(a)
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an
instrument of modification dated as of May 28, 2004 and entitled “First
Modification Agreement”;
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(b)
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an
instrument of modification dated as of March 22, 2005 and entitled “Second
Modification Agreement”;
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(c)
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an
instrument of modification dated as of June 1, 2005 and entitled “Third
Modification Agreement”;
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FIVE STAR
GROUP, INC.
March 25,
2008
Page
2
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(d)
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an
instrument of modification dated as of September 26, 2005, but effective
as of August 1, 2005, and entitled “Fourth Modification
Agreement”;
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(e)
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an
instrument of modification dated as of November 14, 2005, but effective as
of August 1, 2005, and constituting a fifth modification
agreement;
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(f)
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an
instrument of modification dated as of March 23, 2006, but effective as of
December 31, 2005, and constituting a sixth modification agreement;
and
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(g)
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an
instrument of modification dated as of March 23, 2007, and constituting a
seventh modification agreement
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Section
6.16(a) of the Loan Agreement provides in relevant part as follows:
6.16 Capital
Expenditures:
(a) BORROWER
will not incur Capital Expenditures in an amount exceeding $500,000 in any fiscal
year.
Borrower
has incurred Capital Expenditures during the fiscal year ended on December 31,
2007 of $665,000 which, based upon the limitation contained in Section 6.16(a)
of the Loan Agreement, constitutes an Event of Default under, among other
provisions, Section 7.2 of the Loan Agreement.
In
recognition of the foregoing, Xxxxxxxx has requested that Lender waive
compliance with Section 6.16 (a) of the Loan Agreement for the fiscal year ended
December 31, 2007, to the extent necessary to accommodate the aforesaid $665,000
of Capital Expenditures and waive the aforesaid Event of Default.
In this
regard and in honor of such request, Xxxxxx waives Borrower’s failure to comply
with Section 6.16 (a) of the Loan Agreement for the fiscal year ended December
31, 2007, but only to the extent necessary to accommodate the aforesaid $665,000
of Capital Expenditures and waive the aforesaid Event of Default.
Xxxxxxxx has also requested that Lender
do each of the following:
(1) amend
the formula which determines Borrower’s compliance with the Fixed Charge
Coverage covenant set forth in Section 5.21 of the Loan Agreement by increasing
the amount of Borrower’s earnings by “non-cash charges related to any equity
instruments (common stock, options and warrants) issued to any employee,
director, or consultant”;
FIVE STAR
GROUP, INC.
March 25,
2008
Page
3
(2) amend
the formula which determines Borrower’s compliance with the “No Year-to-Date Net
Loss in Excess of $300,000” covenant set forth in Section 6.14 of the Loan
Agreement by increasing the amount of Borrower’s earning by “non-cash charges
related to any equity instruments (common stock, options and warrants) issued to
any employee, director, or consultant”; and
(3) amend
the formula which determines Borrower’s compliance with the “Losses in Any Two
Consecutive Fiscal Quarters” covenant set forth in Section 6.15 of the Loan
Agreement by increasing the amount of Borrower’s earning by “non-cash charges
related to any equity instruments (common stock, options and warrants) issued to
any employee, director, or consultant”.
In this
regard and in honor of such requests, Xxxxxx hereby amends the formula which
determines Borrower’s compliance with the Fixed Charge Coverage covenant set
forth in Section 5.21 of the Loan Agreement by deleting Section 5.21(c)(1) as it
now exists and replacing it with the following:
(c) (1) For purposes of this covenant, “Fixed Charge Coverage” means the following ratio: | ||
XXXXXXXX’s
earnings before interest, taxes, depreciation and amortization and before
the income statement component of any change in valuation arising under
the Master Agreement,
PLUS non-cash charges
related to any equity instruments (common stock, options and warrants)
issued to any employee, director, or consultant,
LESS BORROWER’s “Unfunded Capital
Expenditures”,
LESS cash payment of
income tax liabilities,
LESS cash distributions
to stockholders,
LESS all scheduled
principal payments paid as allowed by the Subordinated Seller Note (at the
present time there being no scheduled payments allowed by the Subordinated
Seller Note)
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--divided
by--
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interest
expense,
PLUS the current
maturities of
long
term debt as reported in BORROWER’s annual
financial
statements for its fiscal year immediately preceding the applicable test
period,
PLUS current maturities
of Capital Lease Obligations as reported in BORROWER’s annual financial
statements for its fiscal year immediately preceding the applicable test
period
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FIVE STAR
GROUP, INC.
March 25,
2008
Page
4
Also in
honor of such requests, Lender hereby amends the formula which determines
Borrower’s compliance with the “No Year-to-Date Net Loss in Excess of $300,000”
covenant set forth in Section 6.14 of the Loan Agreement and Borrower’s
compliance with the “Losses in Any Two Consecutive Fiscal Quarters” covenant set
forth in Section 6.15 of the Loan Agreement by, in each case, increasing the
amount of Borrower’s earning by “non-cash charges related to any equity
instruments (common stock, options and warrants) issued to any employee,
director, or consultant”.
Xxxxxx’s
aforesaid waiver of Borrower’s failure to comply with Section 6.16
(a) of the Loan Agreement for the fiscal year ended December 31, 2007, and
Xxxxxx’s aforesaid amendment of the formula determining Borrower’s compliance
with the Fixed Charge Coverage covenant of Section 5.21 of the Loan Agreement
and Borrower’s compliance with the “No Year-to-Date Net Loss in Excess of
$300,000” covenant set forth in Section 6.14 of the Loan Agreement and
Xxxxxxxx’s compliance with the “Losses in Any Two Consecutive Fiscal Quarters”
covenant set forth in Section 6.15 of the Loan Agreement are subject to
Borrower’s confirmation and acceptance of the following terms and conditions
(and Xxxxxxxx’s acceptance of this letter by its execution of a copy hereof will
be deemed such confirmation and acceptance):
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(1)
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This
consent relates only to Xxxxxxxx’s failure to comply with Section 6.16 (a)
of the Loan Agreement for the fiscal year ended December 31, 2007, and
only to the extent necessary to accommodate the aforesaid $665,000 of
Capital Expenditures and waive the aforesaid Event of
Default.
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(2)
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The
provisions of Section 6.16 of the Loan Agreement will otherwise remain in
effect without change for all other
purposes.
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(3)
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This
consent relates only to the amendment of the formula determining
Borrower’s compliance with the Fixed Charge Coverage covenant of Section
5.21 of the Loan Agreement and Borrower’s compliance with the “No
Year-to-Date Net Loss in Excess of $300,000” covenant set forth in Section
6.14 of the Loan Agreement and Borrower’s compliance with the “Losses in
Any Two Consecutive Fiscal Quarters” covenant set forth in Section 6.15 of
the Loan Agreement, in all cases as at December 31, 2007, and test dates
thereafter.
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FIVE STAR
GROUP, INC.
March 25,
2008
Page
5
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(4)
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(a)
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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.
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(b)
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Borrower
must confirm and, by its acceptance and execution of a copy of this
letter, does confirm that as of March 12, 2008, the following principal
and interest amounts were owed on the Revolving Loan:
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(1) Principal $ 24,375,532.98 | |||
(2) Interest: interest which has accrued from March 1, 2008 |
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(5)
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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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(6)
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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.
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(7)
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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.
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(8)
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Borrower
must continue to comply with the terms of the Revolving Loan and not be in
default thereunder.
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FIVE STAR
GROUP, INC.
March 25,
2008
Page
6
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(9)
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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.
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(10)
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This
letter will be deemed a modification of the Loan Agreement and Xxxxxxxx’s
obligations hereunder will be considered a covenant of the Loan
Agreement.
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(11)
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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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(12)
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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.
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(13)
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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.
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(14)
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Xxxxxxxx
must pay for the services of Xxxxxx’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.
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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 March 31, 2008.
Very
truly yours,
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BANK
OF AMERICA, N.A.
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/s/ XXXXXXX XXXX | |||
By: | Xxxxxxx Xxxx, Vice President |
FIVE STAR
GROUP, INC.
March 25,
2008
Page
7
CONSENT
OF FIVE STAR GROUP, INC.
FIVE STAR GROUP, INC., xxxxxx
agrees to the terms and conditions of the above letter as of March 25,
2008.
WITNESS: | FIVE STAR GROUP, INC. | ||
/s/ XXXXXX
XXXXXXXX
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By: |
/s/
XXXX XXXXXXX
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Xxxxxx
Xxxxxxxx
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Xxxx
Xxxxxxx
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Vice President |