Exhibit 10.23

 

EIGHTH AMENDMENT AND MODIFICATION TO

LOAN AND SECURITY AGREEMENT

 

THIS EIGHTH AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT (the
“Amendment”) is made this 8th day of April, 2004, by and among SHERWOOD BRANDS
OF VIRGINIA, LLC (“VA”), SHERWOOD BRANDS, LLC (“MD”), SHERWOOD BRANDS OF RI,
INC. (“RI”), ASHER CANDY, INC. (formerly known as Asher Candy Acquisition
Corporation) (“Asher”), SHERWOOD BRANDS, INC. (“Guarantor”) and WACHOVIA BANK,
NATIONAL ASSOCIATION, formerly known as First Union National Bank (the
“Lender”).  VA, MD, RI and Asher are referred to collectively as “Borrowers” or
each as a “Borrower”.

 

BACKGROUND

 

A.            BORROWERS, GUARANTOR AND LENDER ENTERED INTO THAT CERTAIN LOAN AND
SECURITY AGREEMENT DATED JUNE 12, 2001 (AS AMENDED BY THAT CERTAIN FIRST
AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT DATED APRIL 30, 2002,
THAT CERTAIN SECOND AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT
DATED SEPTEMBER 5, 2002, THAT CERTAIN THIRD AMENDMENT AND MODIFICATION TO LOAN
AND SECURITY AGREEMENT DATED APRIL 7, 2003, THAT CERTAIN FOURTH AMENDMENT AND
MODIFICATION TO LOAN AND SECURITY AGREEMENT DATED MAY 30, 2003, THAT CERTAIN
FIFTH AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT DATED JULY 30,
2003,  THAT CERTAIN SIXTH AMENDMENT AND MODIFICATION TO LOAN AND SECURITY
AGREEMENT DATED NOVEMBER 24, 2003 AND THAT CERTAIN SEVENTH AMENDMENT AND
MODIFICATION TO LOAN AND SECURITY AGREEMENT DATED FEBRUARY 13, 2004 AND AS THE
SAME MAY BE FURTHER AMENDED FROM TIME TO TIME, THE “LOAN AGREEMENT”).

 

B.            BORROWERS, GUARANTOR AND LENDER DESIRE TO FURTHER AMEND THE LOAN
AGREEMENT IN ACCORDANCE WITH THE TERMS AND CONDITIONS SET FORTH HEREIN.

 

NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agree
as follows:

 

1.             PERMITTED OUT-OF FORMULA AMOUNT.

 

(A)           DURING THE PERIOD COMMENCING ON THE DATE HEREOF THROUGH AND
INCLUDING JUNE 12, 2004 ONLY, IN ADDITION TO THE SUMS OTHERWISE AVAILABLE TO
BORROWERS AS REVOLVING LOANS SUPPORTED BY THE BORROWING BASE, BORROWERS MAY
BORROW AN ADDITIONAL AMOUNT EQUAL TO ONE MILLION DOLLARS ($1,000,000.00) (THE
“PERMITTED OUT-OF-FORMULA AMOUNT”) AS REVOLVING LOANS.

 

(B)           COMMENCING ON JUNE 13, 2004 AND AT ALL TIMES THEREAFTER, NO
PERMITTED OUT-OF-FORMULA AMOUNT SHALL BE AVAILABLE TO BORROWERS.

 

(C)           NOTWITHSTANDING ANYTHING IN THIS AMENDMENT TO THE CONTRARY, IN NO
EVENT WILL THE SUM OF THE (I) REVOLVING LOANS AND LETTERS OF CREDIT SUPPORTED BY
THE BORROWING BASE, PLUS (II)REVOLVING LOANS AND LETTERS OF CREDIT SUPPORTED BY
THE PERMITTED OUT-OF-FORMULA AMOUNT, EXCEED THE MAXIMUM REVOLVING CREDIT, LESS
ANY RESERVES.

 

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2.             CERTAIN INVENTORY.  NOTWITHSTANDING ANYTHING IN THE LOAN
AGREEMENT TO THE CONTRARY, INVENTORY OF BORROWERS CONSISTING OF CHRISTMAS GIFT
ITEMS WHICH OTHERWISE SATISFIES ALL OTHER REQUIREMENTS FOR ELIGIBLE INVENTORY
MAY BE INCLUDED IN THE CALCULATION OF THE BORROWING BASE PRIOR TO MAY 1, 2004
(THE DATE ON WHICH SUCH INVENTORY WOULD OTHERWISE BE ELIGIBLE FOR INCLUSION IN
ACCORDANCE WITH THE LOAN AGREEMENT); PROVIDED, HOWEVER, THE MAXIMUM AMOUNT OF
SUCH INVENTORY INCLUDED IN THE CALCULATION OF THE BORROWING BASE (PRIOR TO THE
APPLICATION OF THE APPLICABLE ADVANCE RATE AND PRIOR TO MAY 1, 2004) SHALL NOT
EXCEED TWO HUNDRED EIGHTY-FIVE THOUSAND DOLLARS ($285,000.00).

 

3.             SUBORDINATED DEBT.

 

(A)           IN ADDITION TO ALL OF THE OTHER CONDITIONS SET FORTH IN THAT
CERTAIN SUBORDINATION AGREEMENT AMONG BORROWERS, LANA, LLC AND LENDER DATED JULY
30, 2003 (AS AMENDED, THE “SUBORDINATION AGREEMENT”), AT ANY TIME DURING WHICH
THE PERMITTED OUT-OF-FORMULA AMOUNT IS AVAILABLE TO BORROWERS, BORROWERS SHALL
NOT MAKE ANY PAYMENTS OF PRINCIPAL, INTEREST OR OF ANY OTHER NATURE ON
INDEBTEDNESS TO LANA, LLC.

 

(B)           CONTEMPORANEOUSLY WITH THE EXECUTION OF THIS AMENDMENT, BORROWERS
SHALL CAUSE LANA, LLC TO EXECUTE AND DELIVER TO LENDER AN AMENDMENT TO THE
SUBORDINATION AGREEMENT IN FORM AND CONTENT SATISFACTORY TO THE LENDER, PURSUANT
TO WHICH LANA, LLC SHALL ACKNOWLEDGE AND AGREE (I) THAT ALL INDEBTEDNESS OF
BORROWERS TO LANA, LLC SHALL BE FULLY SUBORDINATED TO ALL OBLIGATIONS,
REGARDLESS OF WHETHER OR NOT SUCH INDEBTEDNESS TO LANA, LLC IS EVIDENCED BY A
NOTE OR ANY OTHER INSTRUMENT, (II) THAT THE OUTSTANDING PRINCIPAL BALANCE OF THE
INDEBTEDNESS OF BORROWERS TO LANA, LLC IS AT LEAST THREE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($3,500,000.00) AND (III) TO THE ADDITIONAL CONDITION ON
PAYMENT OF THE INDEBTEDNESS TO LANA, LLC SET FORTH ABOVE.

 

4.             OUTSIDE ACCOUNTS.

 

(A)           BORROWERS AND GUARANTOR REPRESENT AND WARRANT TO LENDER THAT
ATTACHED HERETO AS SCHEDULE 3 IS A COMPLETE LISTING OF ALL ACCOUNTS OF BORROWERS
AND GUARANTOR MAINTAINED WITH ANY BANK OR OTHER FINANCIAL INSTITUTION OTHER THAN
LENDER (COLLECTIVELY, THE “OUTSIDE ACCOUNTS”).

 

(B)           ON OR BEFORE MAY 30, 2004, BORROWERS AND GUARANTOR SHALL CAUSE TO
BE DELIVERED TO LENDER CONTROL AGREEMENTS WITH RESPECT TO LENDER’S SECURITY
INTEREST IN EACH OF THE OUTSIDE ACCOUNTS, WHICH CONTROL AGREEMENTS MUST BE IN
FORM AND CONTENT SATISFACTORY TO LENDER.

 

5.             APPRAISALS.  LENDER INTENDS TO OBTAIN A CURRENT APPRAISAL OF ALL
EQUIPMENT OF BORROWERS AND A DESK-TOP REVIEW OF PREVIOUSLY PERFORMED APPRAISALS
OF BORROWERS’ REAL ESTATE.  BORROWERS SHALL BE FULLY LIABLE FOR ALL COSTS AND
EXPENSES INCURRED BY LENDER IN CONNECTION WITH SUCH APPRAISAL AND REVIEW, WHICH
SUMS MAY BE DEDUCTED BY LENDER FROM ANY DEPOSIT ACCOUNT OF BORROWERS MAINTAINED
WITH LENDER OR CHARGED AS A REVOLVING LOAN.  BORROWERS SHALL FULLY COOPERATE
WITH RESPECT TO SUCH EQUIPMENT APPRAISAL SUCH THAT THE EQUIPMENT APPRAISAL IS
COMPLETED ON OR BEFORE MAY 30, 2004.

 

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6.             FURTHER AGREEMENTS AND REPRESENTATIONS. EACH BORROWER AND
GUARANTOR DOES HEREBY:

 

(A)           RATIFY, CONFIRM AND ACKNOWLEDGE THAT, AS AMENDED HEREBY, THE LOAN
AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE VALID, BINDING AND IN FULL FORCE AND
EFFECT;

 

(B)           COVENANT AND AGREE TO PERFORM ALL OF SUCH BORROWER’S AND
GUARANTOR’S OBLIGATIONS UNDER THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS,
AS AMENDED;

 

(C)           ACKNOWLEDGE AND AGREE THAT AS OF THE DATE HEREOF, NEITHER ANY
BORROWER NOR GUARANTOR HAS ANY DEFENSE, SET-OFF, COUNTERCLAIM OR CHALLENGE
AGAINST THE PAYMENT OF ANY SUMS OWING UNDER ANY OF THE OBLIGATIONS, AS AMENDED,
OR THE ENFORCEMENT OF ANY OF THE TERMS OF THE LOAN AGREEMENT OR OF THE OTHER
LOAN DOCUMENTS, AS AMENDED;

 

(D)           ACKNOWLEDGE AND AGREE THAT EXCEPT AS HERETOFORE DISCLOSED TO
LENDER BY BORROWERS IN WRITING, ALL REPRESENTATIONS AND WARRANTIES OF BORROWERS
AND GUARANTOR CONTAINED IN THE LOAN AGREEMENT AND/OR THE OTHER LOAN DOCUMENTS,
AS AMENDED, ARE TRUE, ACCURATE AND CORRECT ON AND AS OF THE DATE HEREOF AS IF
MADE ON AND AS OF THE DATE HEREOF;

 

(E)           REPRESENT AND WARRANT THAT NO EVENT OF DEFAULT OR EVENT WHICH WITH
THE DELIVERY OF NOTICE, PASSAGE OF TIME OR BOTH WOULD CONSTITUTE AN EVENT OF
DEFAULT EXISTS OR WILL EXIST AND ALL INFORMATION DESCRIBED IN THE FOREGOING
BACKGROUND IS TRUE AND ACCURATE; AND

 

(F)            COVENANT AND AGREE THAT BORROWERS’ OR GUARANTOR’S FAILURE TO
COMPLY WITH THE TERMS OF THIS AMENDMENT OR ANY OF THE DOCUMENTS EXECUTED OR
DELIVERED TO LENDER PURSUANT TO THE TERMS HEREOF SHALL CONSTITUTE AN EVENT OF
DEFAULT UNDER THE LOAN AGREEMENT.

 

7.             ADDITIONAL DOCUMENTS; FURTHER ASSURANCES.  BORROWERS AND
GUARANTOR COVENANT AND AGREES TO EXECUTE AND DELIVER TO LENDER, OR TO CAUSE TO
BE EXECUTED AND DELIVERED TO LENDER CONTEMPORANEOUSLY HEREWITH, AT THE SOLE COST
AND EXPENSE OF BORROWERS, ALL DOCUMENTS, AGREEMENTS, STATEMENTS, RESOLUTIONS,
CERTIFICATES, CONSENTS AND INFORMATION AS LENDER MAY REQUIRE IN CONNECTION WITH
THE MATTERS OR ACTIONS DESCRIBED HEREIN.  BORROWERS AND GUARANTOR FURTHER
COVENANT AND AGREE TO EXECUTE AND DELIVER TO LENDER OR TO CAUSE TO BE EXECUTED
AND DELIVERED AT THE SOLE COST AND EXPENSE OF BORROWERS, FROM TIME TO TIME, ANY
AND ALL OTHER DOCUMENTS, AGREEMENTS, STATEMENTS, CERTIFICATES AND INFORMATION AS
LENDER SHALL REASONABLY REQUEST TO EVIDENCE OR EFFECT THE TERMS HEREOF, THE LOAN
AGREEMENT, AS AMENDED, OR ANY OF THE OTHER LOAN DOCUMENTS, OR TO ENFORCE OR TO
PROTECT LENDER’S INTEREST IN THE COLLATERAL.  ALL SUCH DOCUMENTS, AGREEMENTS,
STATEMENTS, ETC., SHALL BE IN FORM AND CONTENT ACCEPTABLE TO LENDER IN ITS
REASONABLE SOLE DISCRETION.

 

8.             RELEASE.  BORROWERS AND GUARANTOR ACKNOWLEDGE AND AGREE THAT THEY
HAVE NO CLAIMS, SUITS OR CAUSES OF ACTION AGAINST LENDER AND HEREBY REMISE,
RELEASE AND FOREVER DISCHARGE LENDER AND ITS OFFICERS, DIRECTORS, SHAREHOLDERS,
EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS FROM ANY CLAIMS, SUITS OR CAUSES OF
ACTION WHATSOEVER, IN LAW OR EQUITY, WHICH ANY BORROWER OR GUARANTOR HAS OR MAY
HAVE ARISING FROM ANY ACT, OMISSION OR OTHERWISE, AT ANY TIME UP TO AND
INCLUDING THE DATE OF THIS AMENDMENT.

 

9.             CERTAIN FEES, COSTS, EXPENSES AND EXPENDITURES.  BORROWERS WILL
PAY ALL OF THE LENDER’S EXPENSES IN CONNECTION WITH THE REVIEW, PREPARATION,
NEGOTIATION, DOCUMENTATION AND CLOSING OF THIS AMENDMENT AND THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED HEREUNDER, INCLUDING WITHOUT LIMITATION, FEES,
DISBURSEMENTS, EXPENSES, APPRAISAL COSTS AND FEES AND EXPENSES OF COUNSEL
RETAINED BY LENDER AND ALL FEES RELATED TO FILINGS, RECORDING OF DOCUMENTS AND
SEARCHES, WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREUNDER ARE
CONSUMMATED.  NOTHING CONTAINED HEREIN

 

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SHALL LIMIT IN ANY MANNER WHATSOEVER LENDER’S RIGHT TO REIMBURSEMENT UNDER ANY
OF THE LOAN DOCUMENTS.

 

10.           NO FURTHER AMENDMENT; NO COURSE OF DEALING.  NOTHING CONTAINED
HEREIN CONSTITUTES AN AGREEMENT OR OBLIGATION BY LENDER TO GRANT ANY FURTHER
AMENDMENTS WITH RESPECT TO ANY OF THE LOAN DOCUMENTS.  ANY WAIVER OR IMPLIED
WAIVER BY LENDER OF ANY OBLIGATIONS OR COVENANTS OF BORROWERS, GUARANTOR OR ANY
OF THEM, UNDER THE LOAN DOCUMENTS IS EXPRESSLY TERMINATED AND RESCINDED AND
BORROWERS SHALL STRICTLY PERFORM AND COMPLY WITH ALL OBLIGATIONS AND COVENANTS
UNDER THE LOAN DOCUMENTS.

 

11.           INCONSISTENCIES. TO THE EXTENT OF ANY INCONSISTENCIES BETWEEN THE
TERMS AND CONDITIONS OF THIS AMENDMENT AND THE TERMS AND CONDITIONS OF THE LOAN
AGREEMENT, THE TERMS AND CONDITIONS OF THIS AMENDMENT SHALL PREVAIL. ALL TERMS
AND CONDITIONS OF THE LOAN AGREEMENT NOT INCONSISTENT HEREWITH SHALL REMAIN IN
FULL FORCE AND EFFECT AND ARE HEREBY RATIFIED AND CONFIRMED BY BORROWERS.

 

12.           CONSTRUCTION.  ANY CAPITALIZED TERMS USED IN THIS AMENDMENT NOT
OTHERWISE DEFINED SHALL HAVE THE MEANING AS SET FORTH IN THE LOAN AGREEMENT.

 

13.           BINDING EFFECT.  THIS AMENDMENT, UPON DUE EXECUTION HEREOF, SHALL
BE BINDING UPON AND INURE TO THE BENEFIT OF THE PARTIES HERETO AND THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS.

 

14.           GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.

 

15.           SEVERABILITY.  THE PROVISIONS OF THIS AMENDMENT AND ALL OTHER LOAN
DOCUMENTS ARE DEEMED TO BE SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF
ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL
CONTINUE IN FULL FORCE AND EFFECT.

 

16.           NO THIRD PARTY BENEFICIARIES.  THE RIGHTS AND BENEFITS OF THIS
AMENDMENT AND THE LOAN DOCUMENTS SHALL NOT INURE TO THE BENEFIT OF ANY THIRD
PARTY.

 

17.           HEADINGS.  THE HEADINGS OF THE ARTICLES, SECTIONS, PARAGRAPHS AND
CLAUSES OF THIS AMENDMENT ARE INSERTED FOR CONVENIENCE ONLY AND SHALL NOT BE
DEEMED TO CONSTITUTE A PART OF THIS AMENDMENT.

 

18.           COUNTERPARTS.  THIS AMENDMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, ALL OF WHICH TAKEN TOGETHER SHALL CONSTITUTE ONE AND THE SAME
INSTRUMENT, AND ANY OF THE PARTIES HERETO MAY EXECUTE THIS AMENDMENT BY SIGNING
ANY SUCH COUNTERPART.

 

 

(SIGNATURES ON FOLLOWING PAGE)

 

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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have caused this Amendment to be executed the day and year first above written.

 

LENDER:

 

BORROWERS:

 

 

 

 

WACHOVIA BANK,
NATIONAL ASSOCIATION

 

SHERWOOD BRANDS OF VIRGINIA,
LLC

 

 

a Virginia limited liability company

 

 

 

 

By:

 /s/ George C. Kyvernitis

 

By:

SHERWOOD BRANDS, INC.,

Georgios C. Kyvernitis, Director

 

Sole Member

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Amir Frydman

 

 

 

 

 

Amir Frydman

 

 

 

 

 

 

 

 

 

 

SHERWOOD BRANDS, LLC,

 

 

a Maryland limited liability company

 

 

 

 

 

 

By:

SHERWOOD BRANDS, INC.,

 

 

 

Sole Member

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Amir Frydman

 

 

 

 

 

Amir Frydman

 

 

 

 

Executive Vice President

 

 

 

 

 

 

 

 

 

 

SHERWOOD BRANDS OF RI, INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Amir Frydman

 

 

 

 

Amir Frydman

 

 

 

Executive Vice President

 

 

 

 

 

 

ASHER CANDY, INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Amir Frydman

 

 

 

 

Amir Frydman

 

 

 

Executive Vice President

 

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(SIGNATURES CONTINUED ON FOLLOWING PAGE)

 

(SIGNATURES CONTINUED FROM PREVIOUS PAGE)

 

 

 

GUARANTOR:

 

 

 

 

 

 

SHERWOOD BRANDS, INC.

 

 

 

 

 

 

By:

/s/ Amir Frydman

 

 

 

 

Amir Frydman

 

 

 

Executive Vice President

 

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SCHEDULE 3

 

OUTSIDE ACCOUNTS

 

 

Bank of America - Account Number 0000 0070 6660 maintained by Sherwood Brands,
Inc.

 

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