Exhibit
10.3
GUARANTY
AND PLEDGE AGREEMENT
This
GUARANTY made and
dated as of June 27, 2008, by
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FIVE STAR PRODUCTS, INC. , a corporation of the State of
Delaware with its principal corporate place of business at 10 East
40 th
Street, Suite 3110, New York, New York 10016 (hereinafter referred
to as " GUARANTOR
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in favor
of
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BANK OF AMERICA, N.A. , a national
banking association organized and existing under the laws of the
United States, with offices at 335 Madison Avenue, 6th Floor, New
York, New York 10017 (hereinafter referred to as called "
LENDER
")
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WITNESSES THAT :
(1)
WHEREAS ,
FIVE STAR
GROUP, INC. , a corporation of the State of Delaware
with its principal corporate place of business at 903 Murray
Road, P.O. Box 1960, East Hanover, Morris County, New Jersey
(hereinafter referred to as " BORROWER ") and
LENDER are parties to a certain Loan and Security Agreement
dated even date herewith (such certain Loan and Security
Agreement being called the " Loan Agreement "
in this Guaranty and such term being more fully defined in
Article
I below);
(2)
WHEREAS , pursuant
to the Loan Agreement, BORROWER has obtained the benefits of a
$35,000,000
revolving loan facility (called the " Revolving Loan "
in this Guaranty and more fully defined in Article I below)
from LENDER; and
(3)
WHEREAS , it is a
condition of the obligation of LENDER to execute the Loan
Agreement and to extend to BORROWER the benefits of the
Revolving Loan that this Guaranty shall have been executed and
shall be in full force and effect; and
(4)
WHEREAS ,
GUARANTOR desires that LENDER enter into the Loan Agreement
and extend the Revolving Loan to BORROWER as aforesaid and, as
a result, executes this Guaranty as an inducement to LENDER to
do so;
NOW, THEREFORE , in consideration of the premises and other
good and valuable consideration, GUARANTOR does hereby covenant and
warrant to LENDER as follows:
ARTICLE I
DEFINITIONS
Section
1.1
Definitions.
(a) The
terms " BORROWER ", "
GUARANTOR " and "
LENDER
" shall have the meanings given those terms in the Preamble
and Preliminary Statements of this Guaranty.
(b) "
Collateral " shall
mean all property, whether real, personal or mixed, or
tangible or intangible, now or at any time hereafter given to
secure the Liabilities by GUARANTOR or by BORROWER. In all
cases, the term "Collateral" includes but is not limited to
Collateral (as defined in the Loan Agreement) and products and
Proceeds (as defined in the Uniform Commercial Code)
thereof.
(c) "
Loan
Agreement " is a collective term which means (1) that
certain Loan and Security Agreement dated even date herewith
between LENDER and BORROWER and (2) all extensions,
modifications (including without limitation modifications
increasing or decreasing the amount of the Revolving Loan),
refinancings, renewals, substitutions, replacements and/or
redatings of such certain Loan and Security
Agreement.
(d) "
Loan
Documents " means this Guaranty, the Loan Agreement,
the Revolving Note, the Subordination Agreement, UCC-1
financing statements and other documents required under the
Loan Agreement or related thereto and hereto
and all extensions, modifications, refinancings,
renewals, substitutions, replacements and/or redatings of any
of the foregoing.
(e) "
Pledged
Property " shall have the meaning given that term in
Section
3.1 below.
(f)
The terms " Advances ",
“ Lending Formula
”, " Liabilities ", "
Materially
Adverse Effect ", " Revolving Loan "
and " Revolving Note "
and all other capitalized words and terms not defined herein
shall have the respective meanings and shall be construed
herein as provided in the Loan Agreement.
Section
1.2
Incorporation
of Loan Agreement . Any reference to a
provision of the Loan Agreement shall be deemed to incorporate
that provision herein.
ARTICLE II
COVENANTS
AND AGREEMENTS
Section
2.1
The
Guaranty.
(a) GUARANTOR
hereby unconditionally and irrevocably guarantees to LENDER as
a primary obligor and not as a mere surety each and all of the
following:
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(1)
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BORROWER's
aforementioned indebtedness in the principal sum of THIRTY-FIVE MILLION AND NO/100
($35,000,000.00) DOLLARS , lawful money of the United
States, due under the Revolving Loan and the Revolving Note
(including all Advances, re-Advances, borrowings and re-borrowings
under the Revolving Loan and the Revolving Note),
and all extensions, modifications (including without
limitation modifications increasing or decreasing the amount
thereof), refinancings, renewals, substitutions, replacements
and/or redatings thereof, to be repaid with interest thereon as
provided in the Revolving Note;
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(2)
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the
payment of Advances, re-Advances, borrowings and re-borrowings made
from time to time by LENDER to BORROWER not in compliance with the
Lending Formula described and defined in Article II of the Loan
Agreement and/or not in compliance with the " loan value "
requirements of Article II of the Loan
Agreement, and the interest thereon;
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(3)
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the
payment of Advances, re-Advances, borrowings and re-borrowings made
from time to time by LENDER to BORROWER over and above any monetary
limitation on the Revolving Loan and over and above any other
lending limitation contained in the Loan Agreement, and the
interest thereon;
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(4)
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the
payment of all Liabilities;
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(5)
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BORROWER’s
obligation to indemnify LENDER from and against any and all claims,
damages, losses, liabilities, reasonable costs or expenses
whatsoever which LENDER may incur (or which may be claimed against
LENDER by any person or entity whatsoever) by reason of or in
connection with the execution and delivery of, or payment or
failure to pay under the Revolving Loan and/or the Loan
Agreement;
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(6)
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all
other indebtedness, liabilities and obligations owing, arising, due
and payable from BORROWER to LENDER of every kind or nature,
whether absolute or contingent, due or to become due, joint or
several, liquidated or unliquidated, matured or unmatured, primary
or secondary, now existing or hereafter incurred, purchase money or
nonpurchase money, arising under the Loan Agreement or any of the
other Loan Documents, regardless of the form or purpose of such
indebtedness, liabilities or obligations, including, without
limitation, all interest, commissions, checking account overdrafts,
bank overdrafts, charges, expenses, attorneys' fees and obligations
which BORROWER may have (under contract or any applicable law) to
reimburse LENDER in connection with any hedge contract, foreign
exchange contract, letter of credit, indemnity or guaranty issued
by LENDER to BORROWER or for BORROWER's benefit pursuant
hereto;
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(7)
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the
amount due upon any notes or other obligations given to, or
received by, LENDER on account of any of the foregoing;
and
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(8)
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the
performance and fulfillment by BORROWER of all the terms,
conditions, promises, covenants and provisions contained in the
Loan Agreement and the other Loan Documents to which BORROWER is a
party, whether now existing or hereafter arising or
created.
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(b) The
liability of GUARANTOR hereunder shall not be limited in any
way. The continuing liability of GUARANTOR shall not be
affected by nor shall anything herein contained be deemed to
be a limitation on the nature or the amount of loans or
Advances now or hereafter made by LENDER to
BORROWER.
(c) All
payments by GUARANTOR shall be paid in lawful money of the
United States of America. Each and every default in
payment of the principal of, and premium, if any, and interest
on the Revolving Loan and the other Liabilities shall give
rise to a separate cause of action hereunder, and separate
suits may be brought hereunder as each cause of action
arises.
(d) The
obligations of GUARANTOR under this Guaranty shall be
automatically reinstated if and to the extent that for any
reason any payment by or on behalf of BORROWER in respect of
the Liabilities is rescinded or must be otherwise restored by
any holder of any of the Liabilities, whether as a result of
any proceedings in bankruptcy or reorganization or otherwise,
and GUARANTOR agrees that it will indemnify LENDER on demand
for all reasonable costs and expenses (including, without
limitation, reasonable fees of counsel) incurred by LENDER in
connection with any such rescission or restoration, including
any such costs and expenses incurred in defending against any
claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy,
insolvency or similar law. The provisions of this
subsection shall survive the termination of this
Guaranty.
Section
2.2
Unconditional
Nature of Guaranty.
(a) The
obligations of GUARANTOR under this Guaranty shall be absolute
and unconditional and shall remain in full force and effect
until the entire principal of, and premium, if any, and
interest on the Revolving Loan and the other Liabilities shall
have been paid.
(b) The
aforesaid obligations shall not be affected, modified or
impaired upon the happening from time to time of any event,
including without limitation any of the following, whether or
not with notice to, or consent of GUARANTOR:
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(1)
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the
compromise, settlement, release, change, modification, amendment
(whether material or otherwise) or termination of any or all of the
obligations, duties, covenants or agreements of any party under the
Loan Documents;
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(2)
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the
failure to give notice to GUARANTOR of the occurrence of an Event
of Default under the terms and provisions of the Loan
Documents;
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(3)
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the
waiver of the payment, performance or observance of any of the
obligations, conditions, covenants or agreements contained in the
Loan Documents;
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(4)
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the
extension of the time for any of the following:
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(A)
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the
payment of the principal of, premium, if any, or interest due on
the Revolving Loan; or
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(B)
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the
payment of any other Liabilities; or
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(C)
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the
performance of any other obligations, covenants or agreements of
any person or entity under or arising out of the Loan
Documents;
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(5)
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the
extension, modification (including without limitation any
modification increasing or decreasing the amount of any debt),
refinancing, renewal, substitution, replacement, and/or redating of
any Loan Documents or the extension, renewal, modification or
waiver of the performance of any obligation
thereunder;
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(6)
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the
taking or the omission of any of the actions referred to in the
Loan Documents;
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(7)
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the
release (whether with or without consideration), impairment,
failure to perfect a security interest in, exchange, surrender,
substitution or modification of any of the Collateral;
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(8)
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any
failure, omission or delay on the part of LENDER to enforce, assert
or exercise any right, power or remedy conferred on it in the Loan
Documents or any other action or acts on the part of
LENDER;
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(9)
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the
voluntary or involuntary liquidation, dissolution, sale or other
disposition of all or substantially all the assets, marshaling of
assets and liabilities, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment or, other
similar proceedings which affect any of the following:
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(A) BORROWER;
or
(B) GUARANTOR;
or
(C) any
assets of the foregoing;
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(10)
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any
allegation of invalidity or any contest of the validity of any of
the Loan Documents in any proceeding;
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(11)
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the
default or failure of BORROWER or GUARANTOR fully to perform any of
the obligations set forth in the Loan Documents;
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(12)
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any
lack of validity or enforceability of any of the Loan
Documents;
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(13)
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any
amendment or waiver of or any consent to departure from all or any
of the Loan Documents;
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(14)
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the
existence of any claim, setoff, defense or other rights which
BORROWER or GUARANTOR may have at any time against any person
whether in connection with this Guaranty, the other Loan Documents
or any unrelated transactions; or
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(15)
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any
other circumstance or happening whatsoever, whether or not similar
to any of the foregoing.
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Section
2.3
Events of
Default . An " Event of Default "
hereunder shall exist if an Event of Default (as that term is
defined in the Loan Agreement) occurs under the Loan
Agreement.
Section
2.4
Remedies and
Actions .
(a) Upon
the occurrence of an Event of Default hereunder, LENDER may
proceed directly against GUARANTOR. This is a guaranty of
payment and not a guaranty of collection, and upon the
occurrence of an Event of Default hereunder, this Guaranty may
be enforced directly against GUARANTOR (1) without first
proceeding against BORROWER or (2) without first proceeding
against any collateral, pledged or assigned as security for
the payment of the principal of and interest on the
Liabilities (whether or not such collateral is pledged or
assigned under the Loan Agreement, under this Guaranty or
otherwise) or (3) without first proceeding against or
exhausting any other remedies which LENDER may have or (4)
without first resorting to any other security held by LENDER,
regardless of by whomsoever given.
(b) (1) Upon
the occurrence of an Event of Default, LENDER may immediately,
and without notice or other action, set-off and apply against
the Liabilities (A) the balance of every deposit account, now
or hereafter existing, of GUARANTOR with LENDER, or any of
LENDER's agents or any bank affiliated with LENDER or in
transit to any of them and/or (B) all money, instruments,
securities, documents, credits, claims, and other property of
GUARANTOR, now or hereafter in the possession or custody of
LENDER, or any of LENDER's agents or in transit to any of them
and/or (C) any sum now or hereafter owed by LENDER, or any of
LENDER's agents in any capacity to GUARANTOR whether due or
not and/or (D) all additions, substitutions, replacements, and
increments to the above-listed collateral, as well as proceeds
of all of the above-listed collateral in whatever form,
including cash, negotiable instruments and other instruments
for the payment of money, chattel paper, security agreements
or other documents, insurance or condemnation
awards.
(2) ANY
AND ALL RIGHTS TO REQUIRE LENDER TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES
THE REVOLVING LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF
WITH RESPECT TO THE FOREGOING, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED. LENDER may do
the foregoing even though some or all of the Liabilities may
be unmatured and regardless of the adequacy of any other
Collateral securing the Liabilities. LENDER shall
be deemed to have exercised such right of set-off and to have
made a charge against any such sum immediately upon the
occurrence of such Event of Default, even though the actual
book entries may be made at some time subsequent
thereto.
(c) The
rights of LENDER under this Article are in addition to all
other remedies, statutory and otherwise, which are available
to it at law or in equity or otherwise and whether or not
under the terms of any of the other Loan
Documents.
Section
2.5
Delay of
Subrogation Rights.
(a) GUARANTOR
shall not be subrogated, in whole or in part, to the rights of
any person in the Loan Documents until all of the Liabilities
shall have first been paid in full.
(b) GUARANTOR
shall not exercise rights (whether of contribution,
indemnification or otherwise) it may have against BORROWER
until all of the Liabilities shall have first been paid in
full.
Section
2.6
Waiver of
Notice of Acceptance and Reliance
. GUARANTOR hereby expressly waives notice of
acceptance and reliance on this Guaranty.
Section
2.7
Waiver of
Demand and Notices .
(a) GUARANTOR
hereby expressly waives diligence, demand, presentment,
protest, any requirement that any right or power be exhausted
or any action be taken against BORROWER or against any
Collateral.
(b) GUARANTOR
also waives the right to receive any and all notices
(including but not limited to notice of non-payment by
BORROWER or by anyone else, and also including but not limited
to notice of dishonor, protest, or otherwise) with respect to
the Liabilities, unless such notice is specifically required
herein.
Section
2.8
Claims
Against BORROWER and LENDER . No
set-off, counter-claim, reduction, or diminution of any
obligation, or any defense of any kind or nature (other than
performance by GUARANTOR of its obligations hereunder) which
GUARANTOR may have or assert against BORROWER and/or against
LENDER shall be available hereunder to, or shall be asserted
by, GUARANTOR against LENDER in any action arising out of the
transactions contemplated hereby or out of any of the
documents or instruments referred to herein.
Section
2.9
Payment of
Costs . GUARANTOR agrees to pay all
reasonable costs, expenses and fees, including all reasonable
attorneys' fees, which may be incurred by LENDER in enforcing
or attempting to enforce this Guaranty following any default
on the part of GUARANTOR hereunder, whether the same shall be
enforced by suit or otherwise.
ARTICLE III
SECURITY
Section
3.1
Pledge of
Stock.
(a) To
secure its obligations under this Guaranty, GUARANTOR hereby
creates in favor of LENDER and hereby grants to LENDER and
hereby pledges to LENDER a continuing first pledge and
security interest in the entirety of GUARANTOR's interest in
each and all of the following (all the following being a part
of the " Pledged Property "
defined below):
(1) 100
shares of capital stock owned by GUARANTOR in BORROWER, a copy
of the certificate evidencing such shares being attached
hereto as Exhibit "A"
;
(2) any
additional shares of capital stock in BORROWER that may
hereafter be pledged by GUARANTOR to LENDER;
(3) any
and all interest, stock rights, rights to subscribe,
dividends, stock dividends, dividends paid in stock,
liquidating dividends, new securities, and other property to
which GUARANTOR may become entitled by reason of the ownership
of the properties described in the preceding subsections of
this Paragraph;
(4) any
stock dividends, reclassifications, adjustments, or other
changes made during the term of the Loan Agreement in the
capital structure of BORROWER of any of the property described
in the foregoing provisions of this Paragraph (whether such
change in capital structure is by way of reorganization,
recapitalization, share split-up, combination of shares,
merger, transfer, or consolidation), together with all new,
additional, or substituted shares for securities of whatever
class, issued with respect to any of the property described in
the foregoing provisions of this Paragraph by reason of such
change;
(5) all
additions thereto and replacements and substitutes therefor,
whether or not left in the possession of LENDER and whether or
not otherwise mortgaged or pledged to LENDER;
(6) warrants,
options, or other rights with respect to any of the foregoing
property described in this Paragraph issued to GUARANTOR
during the term of the Loan Agreement, as from time to time
extended or amended, and to the extent that GUARANTOR
exercises any such warrants, option, or right, all new stock
or securities received upon exercise thereof; and
(7) any
Proceeds of the Pledged Property.
(b) GUARANTOR
covenants and warrants that it will perform or cause to be
performed any and all reasonable steps requested by LENDER to
create and maintain in LENDER's favor a valid first lien on
and first security interest in and pledge of the Pledged
Property, including, without limitation, the execution,
delivery, filing and recording of brokerage agreements,
assignments of brokerage agreements, stock transfer
authorizations, stock transfer powers, financing statements
and continuation statements, supplemental security agreements,
notes and any other documents necessary, in the opinion of
LENDER, for perfecting the liens and security interests
granted to LENDER hereunder, correcting any inadequate or
incorrect description of the Pledged Property or carrying out
the intention of or facilitating the performance of any term,
covenant or condition hereof. In the event
GUARANTOR fails to abide by this Section or in the event that
LENDER in its sole discretion believes time is of the essence,
LENDER may execute all of the above instruments on behalf of
GUARANTOR.
(c) Not
in limitation of the foregoing, GUARANTOR agrees to deliver
executed but undated transfer powers (hereinafter the "
Security
Transfer Authorizations ", copies of which are attached
hereto as Exhibit "B" )
relating to the Pledged Property.
(d) Whenever
an Event of Default has occurred and is continuing, LENDER may
do any or all of the following at the same time or at
different times:
(1) To
the extent LENDER has not already done so, LENDER may proceed
with or without judicial process to take immediate possession
of the Pledged Property or any part thereof not already in the
possession of LENDER and wherever the same may be found.
GUARANTOR agrees to pay all costs and expenses of LENDER in
the collection of the Liabilities and enforcement of LENDER's
rights hereunder, including, without limitation, LENDER's
reasonable attorney's fees. GUARANTOR agrees tha
