Exhibit 10.12


                          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 903 Murray
                  Road, East Hanover, Morris County, New Jersey 07936 with its
                  mailing address at 903 Murray Road, P.O. Box 1960, East
                  Hanover, Morris County, New Jersey 07936 (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, 750 Walnut Avenue, Third
                  Floor, Cranford, New Jersey 07016 (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 $30,000,000  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

<PAGE>

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 $30,000,000  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
            $30,000,000,  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 $30,000,000 through
June 30, 2005):


            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


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<PAGE>

                    pay a prepayment  premium equal to $300,000 (i.e., 1% of the
                    maximum  potential  amount   [$30,000,000]   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  $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 $30,000,000):

        (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 $30,000,000 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  $30,000,000 "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



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<PAGE>

     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 $30,000,000;

        (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 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).


        (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 LI ABILITIES (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  bill  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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<PAGE>


     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:
-----------------------------------         ------------------------------------
Lydia DeSantis, Corporate Secretary         Steve Schilit, Exec. Vice President



                                        FLEET CAPITAL CORPORATION


                                        By:
                                            ------------------------------------
                                            John Leifer, Vice President