**EXHIBIT 10.1**

 

Sherwood Brands, Inc.

 

**THIRD AMENDMENT AND MODIFICATION TOLOAN AND SECURITY AGREEMENT**

 

**THIS THIRD AMENDMENTAND MODIFICATION TO LOAN AND SECURITY AGREEMENT** (the **“Amendment”**)is made this 7th day of April, 2003, by and among **SHERWOOD BRANDS OF VIRGINIA, LLC**(**“VA”**),**SHERWOODBRANDS, LLC** (**“MD”**), **SHERWOOD BRANDS OF RI, INC.**(**“RI”**),**ASHERCANDY ACQUISITION CORPORATION**(**“Asher”**), **SHERWOOD BRANDS, INC.** (**“Guarantor”**)and **WACHOVIABANK, NATIONAL ASSOCIATION**, formerly known as First Union NationalBank (the **“Lender”**).  VA, MD, RI and Asher are referred tocollectively as **“Borrowers”** or each as a **“Borrower”**.

 

**BACKGROUND**

 

A.                                   Borrowersand Lender entered into that certain Loan and Security Agreement dated June 12,2001 (as amended by that certain First Amendment and Modification to Loan andSecurity Agreement dated April 30, 2002, that certain Second Amendment andModification to Loan and Security Agreement dated September 5, 2003 and as thesame may be further amended from time to time, the **“Loan Agreement”**).

 

B.                                     Borrowersand Lender desire to further amend the Loan Agreement in accordance with theterms and conditions set forth below.

 

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

 

1.                                       **RestrictedUse of Revolving Loans**. From and after the date hereof, Revolving Loans shall no longer beavailable to Borrowers for Capital Expenditures.

 

2.                                       **Permitted Out-of Formula Amount.**

##  

### (a)                                  Duringthe period commencing on the date the proceeds of the New Financing (as definedbelow) are applied to the outstanding Revolving Loans through and including May31, 2003 only, in addition to the sums otherwise available to Borrowers asRevolving Loans supported by the Borrowing Base, Borrowers may borrow anadditional amount equal to Three Hundred Thousand Dollars ($300,000.00) (the **“PermittedOut-of-Formula Amount”**) as Revolving Loans.

###  

### (b)                                 Commencingon June 1, 2003 and at all times thereafter, no Permitted Out-of-Formula Amountshall be available to Borrowers.

###  

### (c)                                  Notwithstandinganything 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 applicablePermitted Out-of-Formula Amount, exceed the Maximum Revolving Credit, less anyReserves.

###  

## 3.                                       **NewFinancing**.

##  

### (a)                                  Onor before the date hereof, Borrowers shall close under and receive the proceedsof a financing (the **“New Financing”**) from a source other thanLender, which New Financing shall provide net cash to Borrowers in an amountequal to Three Hundred Fifty Thousand Dollars ($350,000.00).  All of the

 

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proceeds of the New Financingshall be used by Borrowers on the date received to pay a portion of theoutstanding Revolving Loans.

 

### (b)                                 TheNew Financing shall not be secured by any assets of any Borrowers and the partyextending the New Financing must enter into a letter agreement regarding thesubordination of the New Financing, in form and content as shall besatisfactory to Lender (the **“Letter”**). In addition to the foregoing, the New Financing must otherwise be onterms and conditions satisfactory to Lender.

###  

## 4.                                       **Auditsand Examinations**.  **Section 5**of the Loan Agreement is hereby amended by adding the following section:

##  

“5.9A                 FieldExaminations.  From time to time, asrequested by Lender, but in not event less than four (4) times per calendaryear, Borrowers shall provide Lender, or its designee, complete access to theCollateral and all of Borrowers’ facilities, books and records for the purposeof conducting audits or examinations of such Collateral, facilities, books andrecords as Lender or its designees may deem necessary.  Borrowers agree to cooperate with Lenderwith respect to any such audits or examinations conducted by Lender or itsdesignee pursuant to this **Section 5.9A**.  Any such audit or examination conducted shall be at Borrowers’cost and expense.”

 

## 5.                                       **Interest**.

##  

### (a)                                  Intereston Revolving Loans.**  Section10.5(a)** of the Loan Agreement is hereby deleted and replacedwith the following:

###  

“10.5                     **Interest/Fees**:

 

(a)                                  Foreach fiscal quarter of Borrowers following a fiscal quarter during which theFixed Charge Coverage Ratio was less than 1.75 to 1.0, the ApplicablePercentage for purposes of calculating the applicable interest rate for any dayfor any Revolving Loan during such fiscal quarter shall be determined inaccordance with the following chart and based on EBITDA (as defined in **Section6.19** and determined as of the end of the most recently endedfiscal quarter for the 12 month period then ended) on the date the ApplicablePercentage is to be determined:

 
| **EBITDA**                                 |   | **Base Rate  Loan** |   | **Eurodollar  Loan** |   | **LIBOR  Market   Rate Loan** |   |
|--------------------------------------------|--------|---------------------|--------|----------------------|--------|-------------------------------|--------|
| <  $4,850,000.00                        |   | .90                 | %      | 3.00                 | %      | 3.00                          | %      |
| > $4,850,000.00 and <  $7,350,000.00 |   | .90                 | %      | 2.80                 | %      | 2.80                          | %      |
| > $7,350,000.00                         |   | .90                 | %      | 2.50                 | %      | 2.50                          | %      |

 

For each fiscal quarter of Borrowers following a fiscal quarter duringwhich the Fixed Charge Coverage Ratio was equal to or greater than

 

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1.75 to 1.0,the Applicable Percentage for purposes of calculating the applicable interestrate for any day for any Revolving Loan during such fiscal quarter shall bedetermined in accordance with the following chart and based on EBITDA (asdefined in **Section 6.19** and determined as of the end of the mostrecently ended fiscal quarter for the 12 month period then ended) on the datethe Applicable Percentage is to be determined:

 
| **EBITDA**                                 |   | **Base Rate  Loan** |   | **Eurodollar  Loan** |   | **LIBOR  Market  Rate Loan** |   |
|--------------------------------------------|--------|---------------------|--------|----------------------|--------|------------------------------|--------|
| <  $4,850,000.00                        |   | .25                 | %      | 2.35                 | %      | 2.35                         | %      |
| > $4,850,000.00 and <  $7,350,000.00 |   | .25                 | %      | 2.15                 | %      | 2.15                         | %      |
| > $7,350,000.00                         |   | .25                 | %      | 1.85                 | %      | 1.85                         | %      |

 

CommencingApril 1, 2003 and continuing until Lender’s receipt of Borrowers’ QuarterlyStatements for the quarter ending April 31, 2003, each Applicable Percentageshall be determined assuming that EBITDA is < $4,850,000.00 and Borrower’sFixed Charge Coverage Ratio was less than 1.75 to 1.0.”

 

### (b)                                 Intereston Term Loan A and Term Loan B. Interest on the unpaid principal balance of Term Loan A and Term Loan Bshall accrue from April 1, 2003 until final payment thereof at a per annum rateof interest equal to the Term Loan LIBOR Market Rate plus the Applicable TermLoan Margin.  As used herein,  **“Term Loan LIBOR Market Rate”** means therate for one month U.S. dollar deposits as reported on Telerate Page 3750 (orany successor page) as of 11:00 a.m. London Time, on such day, or if such dayis not a London business day, then the immediately preceding London businessday (or if not so reported, then as determined by Lender from anotherrecognized source or interbank quotation). As used herein, **“Applicable Term Loan Margin”** means, (i)340 basis points, for each fiscal quarter of Borrowers following a fiscalquarter during which the Fixed Charge Coverage Ratio was less than 1.75 to1.0  and (ii) 275 basis points, for eachfiscal quarter of Borrowers following a fiscal quarter during which the FixedCharge Coverage Ratio was equal to or greater than 1.75 to 1.0.  The Applicable Term Loan Margin will be 340basis points until Lender receives Borrower’s Quarterly Statements for thequarter ending April 31, 2003, at which time the Applicable Term Loan Marginshall be adjusted accordingly.

###  

## 6.                                       **Daily/WeeklyFinancial Reporting**.

##  

### (a)                                  Inaddition to all other information required to be delivered under the LoanAgreement, Borrowers shall, at their expense, deliver to Lender, in formacceptable to Lender, on a weekly basis: (i) true and complete agings of their respective accounts receivable andaccounts payable, identifying all Eligible Accounts; and (ii) inventoryreports, including an identification of all Eligible Inventory, the location ofall inventory; and information as to all inventory in excess of a 12 months’supply and as to out-of-season inventory.

###  

### (b)                                 **Section6.10(d)** of the Loan Agreement is hereby deleted in its entiretyand replaced with the following:

 

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“(d)                           Borrowersshall, at their own expense, on a daily basis, deliver to Lender a borrowingbase certificate in substantially the form of **Schedule C** hereto dulycompleted and certified by Borrowers’ chief executive officer or chieffinancial officer, detailing daily updates of Borrowers’ Eligible Accounts andweekly updates of Borrower’s Eligible Inventory (on Monday of each week) andcontaining, without limitation, daily sales, cash receipts, credits and otheradjustments.  Each borrowing basecertificate shall include information regarding purchases of foreign currencyexchange by Borrowers.  Each borrowingbase certificate shall be accompanied by such collateral and back-updocumentation as Lender may from time to time require.”

 

## 7.                                       **MonthlyFinancial Reporting**.  **Section6.10** of the Loan Agreement is hereby amended by adding thefollowing subsection:

 

“(g)                           Borrowersshall, at their expense and within forty-five (45) days following the end ofeach calendar month, deliver to Lender:

 

(i)                                     Monthlyconsolidated internally prepared interim financial statements of Guarantor,Borrowers and their subsidiaries, including a balance sheet and incomestatement and statements of operations and of cash flows for such month, all inform acceptable to Lender and in each case setting forth (i) in comparativeform figures for the corresponding month and year-to-date period of thepreceding fiscal year, (ii) year-to-date figures and (iii) in comparative formfigures for the corresponding period set forth in the annual budget andbusiness plan delivered pursuant hereto; and

 

(ii)                                  inform acceptable to Lender, a separate internally prepared report of theprofits, assets and net worth of each subsidiary of Guarantor or any Borrowerwhich is not a Borrower under this Agreement.”

 

## 8.                                       **Budgets**.  On or before April 15, 2003, Borrowers shalldeliver to Lender budgets, cash flow statements and such other financialstatements as may be required by Lender, each in form and content acceptable toLender, on a monthly and a weekly basis for the fiscal years ending July 31,2003 and July 31, 2004, prepared by the chief financial officer of Borrower.

##  

## 9.                                       **Allongesto Term Notes**. Contemporaneously with the execution of this Amendment, Borrowers shallexecute and deliver to Lender an allonge to Term Note B and an allonge to TermNote A, each in form and content acceptable to Lender (collectively, the **“Allonges”**).

 

## 10.                                 **Further Agreements andRepresentations.** Each Borrower does hereby:

##  

### (a)                                  ratify,confirm and acknowledge that, as amended hereby, the Loan Agreement and theother Loan Documents are valid, binding and in full force and effect;

###  

### (b)                                 covenantand agree to perform all of such Borrower’s obligations under the LoanAgreement and the other Loan Documents, as amended;

###  

### (c)                                  acknowledgeand agree that as of the date hereof, such Borrower has no defense, set-off,counterclaim or challenge against the payment of any sums owing under any ofthe Obligations, as

 

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### amended, or the enforcement of any of theterms of the Loan Agreement or of the other Loan Documents, as amended;

###  

### (d)                                 acknowledgeand agree that except as heretofore disclosed to Lender by Borrowers inwriting, all representations and warranties of Borrowers contained in the LoanAgreement and/or the other Loan Documents, as amended, are true, accurate andcorrect on and as of the date hereof as if made on and as of the date hereof;

###  

### (e)                                  representand warrant that except as heretofore disclosed to Lender by Borrowers inwriting, upon execution by Lender of this Amendment, no Event of Default orevent which with the delivery of notice, passage of time or both would constitutean Event of Default exists or will exist and all information described in theforegoing Background is true and accurate; and

###  

### (f)                                    covenantand agree that Borrowers’ failure to comply with the terms of this Amendment orany of the documents executed or delivered to Lender pursuant to the termshereof (including, without limitation, Borrowers’ failure to obtain the NewFinancing and repay a portion of the Revolving Loans) shall constitute an Eventof Default under the Loan Agreement.

###  

## 11.                                 **Additional Documents; FurtherAssurances.**  Borrowerscovenant and agrees to execute and deliver to Lender, or to cause to beexecuted and delivered to Lender contemporaneously herewith, at the sole costand expense of Borrowers the Letter, the Allonges and any and all documents,agreements, statements, resolutions, certificates, consents and information asLender may require in connection with the matters or actions describedherein.  Borrowers further covenant andagree to execute and deliver to Lender or to cause to be executed and deliveredat the sole cost and expense of Borrowers, from time to time, any and all otherdocuments, agreements, statements, certificates and information as Lender shallreasonably 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 protectLender’s interest in the Collateral. All such documents, agreements, statements, etc., shall be in form andcontent acceptable to Lender in its reasonable sole discretion.

##  

## 12.                                 **Release.**  Borrowers and Guarantor acknowledge andagree that they have no claims, suits or causes of action against Lender andhereby remise, release and forever discharge Lender and its officers,directors, shareholders, employees, agents, successors and assigns from anyclaims, suits or causes of action whatsoever, in law or equity, which anyBorrower has or may have arising from any act, omission or otherwise, at anytime up to and including the date of this Amendment.

##  

## 13.                                 **Certain Fees, Costs, Expenses AndExpenditures**.  Borrowerswill pay all of the Lender’s expenses in connection with the review,preparation, negotiation, documentation and closing of this Amendment and theconsummation of the transactions contemplated hereunder, including withoutlimitation, fees, disbursements, expenses, appraisal costs and fees andexpenses of counsel retained by Lender and all fees related to filings,recording of documents and searches, whether or not the transactionscontemplated hereunder are consummated. Nothing contained herein shall limit in any manner whatsoever Lender’sright to reimbursement under any of the Loan Documents.

##  

## 14.                                 **No Waiver.**  Lender has notified Borrowers that an Eventof Default has occurred pursuant to that certain letter dated March 10,2003.  Nothing contained hereinconstitutes an agreement or obligation by Lender to grant any furtheramendments or waivers with respect to any of the Loan Documents.  Nothing contained in this Amendmentconstitutes a waiver or release by Lender of any Event of Default or of anyrights or remedies available to Lender under the Loan Documents or at law or inequity.

 

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## 15.                                 **Inconsistencies.** Tothe extent of any inconsistencies between the terms and conditions of thisAmendment and the terms and conditions of the Loan Agreement, the terms andconditions of this Amendment shall prevail. All terms and conditions of theLoan Agreement not inconsistent herewith shall remain in full force and effectand are hereby ratified and confirmed by Borrowers.

##  

## 16.                                 **Construction.**  Any capitalized terms used in this Amendmentnot otherwise defined shall have the meaning as set forth in the LoanAgreement.

##  

## 17.                                 **Binding Effect.**  This Amendment, upon due execution hereof,shall be binding upon and inure to the benefit of the parties hereto and theirrespective successors and assigns.

##  

## 18.                                 **Governing Law.**  This Amendment shall be governed andconstrued in accordance with the laws of the Commonwealth of Pennsylvania.

##  

## 19.                                 **Severability**.  The provisions of this Amendment and allother Loan Documents are deemed to be severable, and the invalidity orunenforceability of any provision shall not affect or impair the remainingprovisions which shall continue in full force and effect.

##  

## 20.                                 **No Third Party Beneficiaries**.  The rights and benefits of this Amendmentand the Loan Documents shall not inure to the benefit of any third party.

##  

## 21.                                 **Headings**.  The headings of the Articles, Sections,paragraphs and clauses of this Amendment are inserted for convenience only andshall not be deemed to constitute a part of this Amendment.

##  

## 22.                                 **Counterparts**.  This Amendment may be executed in any numberof counterparts, all of which taken together shall constitute one and the sameinstrument, and any of the parties hereto may execute this Amendment by signingany such counterpart.

 

**[SIGNATURESON FOLLOWING PAGE]**

 

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**IN WITNESS WHEREOF**,the parties hereto, intending to be legally bound hereby, have caused thisAmendment 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:                                    | **SHERWOOD BRANDS,  INC.**, |
| By:                                      | /s/ George C. Kyvernitis               |   |   | Sole Member |
| George C. Kyvernitis, Vice President     |                                   |
|                                     | By:                                    | /s/ Amir Frydman |   |
|                                     | Amir Frydman                           |
|                                     | Executive Vice President               |
|                                     |                                   |
|                                     | **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  ACQUISITION**           |
|                                     | **CORPORATION**                        |
|                                     | By:                                    | /s/ Amir Frydman |   |
|                                     |                                   | Amir Frydman |
|                                     |                                   | Executive Vice President |
|                                     |                                   |
|                                     | **GUARANTOR:**                         |
|                                     |                                   |
|                                     | **SHERWOOD BRANDS,  INC.**             |
|                                     |                                   |
|                                     |                                   |
|                                     | By:                                    | /s/ Amir Frydman |   |
|                                     |                                   | Amir Frydman |
|                                     |                                   | Executive Vice President |
|                                          |                                        |  |  |  |  |  |  |  |  |  |  |  |

 

7

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April 7, 2003

 

Wachovia Bank, National Association

1335 Chestnut Street

Philadelphia, PA 19107

 

Re:                               ThirdAmendment to that certain Loan Agreement by and between Wachovia Bank, NationalAssociation, formerly known as First Union National Bank (**“Lender”**), Sherwood Brands ofVirginia, LLC, Sherwood Brands, LLC, Sherwood Brands of RI, Inc., Asher CandyAcquisition Corporation, (collectively, the **“Borrowers”** and each a **“Borrower”**)and Sherwood Brands, Inc. (**“Guarantor”**)

 

Ladies and Gentlemen:

 

This letter, when executed by the parties hereto where indicated below,shall constitute the agreement among Lender, Ilana Frydman (the **“Creditor”**),Borrowers and Guarantor concerning the matters contained herein.

 

Lender,Borrowers and Guarantor are parties to that certain Loan and Security Agreementdated June 12, 2001 (as amended by that certain First Amendment andModification to Loan and Security Agreement dated April 30, 2002, that certainSecond Amendment and Modification to Loan and Security Agreement datedSeptember 5, 2002 and as the same may be further amended from time to time, the**“LoanAgreement”**).  On the datehereof, Lender, Borrowers, and Guarantor are further amending the LoanAgreement in accordance with that certain Third Amendment and Modification toLoan and Security Agreement  (the**“Amendment”**),****pursuantto which, interalia, Lender agreed to extend to Borrower thePermitted Out-of-Formula Amount. Capitalized terms used herein and not otherwise defined shall have themeanings given such terms in the Amendment.

 

In connectionwith the execution of the Amendment and for so long as the PermittedOut-of-Formula Advance is available to Borrowers or any sums are owing thatconstitute a Permitted Out-of-Formula Advance, Borrowers, Guarantor andCreditor agree that (a) all sums advanced to any Borrower or Guarantor byCreditor, whether currently outstanding or hereafter advanced, and all claimsand demands arising therefrom (the **“Subordinated Debt”**) shall be subordinateto all liabilities and obligations of any nature of any Borrower of Guarantorto Lender, now or at any time hereafter existing contracted or incurred, andall claims and demands arising therefrom (the **“Senior Debt”**); (b) neitherGuarantor nor any Borrower will make, and Creditor will not demand or accept,either directly or indirectly, payment (of any kind or character) of all or anypart of the Subordinated Debt without the prior written consent of Lender; and(c) Creditor will not exercise any of her rights or remedies with regard to theSubordinated Debt, including, but not limited to, demand or acceleration of anyof the Subordinated Debt and the institution of court proceedings against anyBorrower or Guarantor to collect any Subordinated Debt.  Creditor further represents to Lender thatthe Subordinated Debt is unsecured and hereby agrees that the Subordinated Debtshall remain unsecured for so long as any Senior Debt

 

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remains outstanding or Lenderhas any agreement or understanding with any Borrower or Guarantor pursuant towhich Lender may extend credit to any Borrower or Guarantor.

 

Intending tobe legally bound hereby and in order to induce Lender to enter into theAmendment, the parties hereto agree to the provisions of this letter agreement.

 
|   | **CREDITORS:**                                                                                      |                      |
|--------|-----------------------------------------------------------------------------------------------------|---------------------------|
|   |                                                                                                |                      |
|   | /s/ Ilana Frydman                                                                                   |                      |
|   |                                                                                                |                      |
|   |                                                                                                |
|   | By:                                                                                                 |  Ilana  Frydman |   |
|   | Name/Title:                                                                                         |                      |   |
|   |                                                                                                |
|   |                                                                                                |
|   | **BORROWERS:**                                                                                      |
|   |                                                                                                |
|   | **SHERWOOD BRANDS OF  VIRGINIA,  NATIONAL ASSOCIATION, LLC**, a Virginia  limited liability company |
|   |                                                                                                |
|   | By:   **SHERWOOD  BRANDS, INC.**, Sole  Member                                                 |
|   |                                                                                                |
|   | By:                                                                                                 | /s/ Amir Frydman          |   |
|   | Amir Frydman, Executive Vice President                                                              |
|   |                                                                                                |
|   | **SHERWOOD BRANDS,  LLC**, a Maryland  limited liability company                                    |
|   |                                                                                                |
|   | By:   **SHERWOOD  BRANDS, INC**., Sole  Member                                                 |
|   |                                                                                                |
|   |                                                                                                |
|   | By:                                                                                                 | /s/Amir   Frydman    |   |
|   | Amir Frydman, Executive Vice President                                                              |
|        |                                                                                                     |                           |  |  |  |

 

**[SIGNATURESCONTINUED ON FOLLOWING PAGE]**

 

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**[SIGNATURESCONTIUED FROM PREVIOUS PAGE]**

 

 
|                                            | **SHERWOOD BRANDS OF  RI, INC.**          |
|-------------------------------------------------|-------------------------------------------|
|                                            |                                      |
|                                            |                                      |
|                                            | By:                                       |  /s/ Amir Frydman |   |
|                                            | Amir Frydman, Executive Vice President    |
|                                            |                                      |
|                                            |                                      |
|                                            | **ASHER CANDY  ACQUISITION  CORPORATION** |
|                                            |                                      |
|                                            |                                      |
|                                            | By:                                       |  /s/ Amir Frydman |   |
|                                            | Amir Frydman, Executive Vice President    |
|                                            |                                      |
|                                            |                                      |
|                                            | **GUARANTOR:**                            |
|                                            |                                      |
|                                            | **SHERWOOD BRANDS,  INC.**                |
|                                            |                                      |
|                                            |                                      |
|                                            | By:                                       |  /s/ Amir Frydman |   |
|                                            | Amir Frydman, Executive Vice President    |
|                                            |                                      |
|                                            |                                      |
| **READ AND ACCEPTED this 9 day of April, 2003** |
|                                            |
|                                            |
|                                            |                                      | **WACHOVIA BANK,  NATIONAL  ASSOCIATION** |   |
|                                            |                                      |   |   |
|                                            |                                      | By: | /s/ George Kyvernitis |   |   |
|                                            |                                      | Name/Title: | George Kyvernitis/Vice President |   |   |
|                                                 |                                           |  |  |  |  |  |  |  |

 

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**ALLONGETO TERM NOTE B**

**DATEDAPRIL 30, 2002**

 

**THIS ALLONGE**(**“Allonge”**)is made this 7 day of , 2003, by and between **SHERWOOD BRANDS OF VIRGINIA, LLC,SHERWOOD BRANDS OF RI, INC., SHERWOOD BRANDS, LLC and ASHER CANDY ACQUISITIONCORPORATION**  (collectively,the **“Borrowers”**and individually a **“Borrower”**) and **WACHOVIA BANK, NATIONAL ASSOCIATION,formerly known as First Union National Bank** (the **“Lender”**).

 

**BACKGROUND**

 

# C.                                     Pursuant to the terms of that certain Term Note Bdated April 30, 2002 (the **“Note”**), Lender extended to Borrowers aterm loan in the original principal amount of Six Hundred Fifty ThousandDollars ($650,000.00).

#  

# D.                                    Borrower and Lender desire to amend the Note asset forth herein.

#  

**NOW THEREFORE**,in consideration of the mutual benefits inuring to Borrowers and Lender, andintending to be legally bound hereby, the Note is hereby modified as follows:

 

## 1.                                       **InterestRate Reference**.  Thesecond paragraph of the Note is hereby amended, in its entirety, to read asfollows:

##  

“The Borrowers further agree to pay interest at said office, in likemoney, on the unpaid principal amount owing hereunder from time to timeoutstanding from the date of disbursement on the dates and at the ratesspecified in the Loan Agreement.”

 

## 2.                                       **No OtherModifications.**  No otherprovisions of the Note shall be modified hereby except as expressly set forthherein, and this Allonge shall not be construed as a waiver of any of Lender’srights or remedies under the Note as heretofore existing or as hereaftermodified by this Allonge.

##  

## 3.                                       **Confirmationof Debt.**  Borrowershereby confirm and ratify the Note as modified hereby and acknowledges thatBorrowers have no defense, set-off, counterclaim or challenge against thepayment of all sums set forth in the Note, as modified hereby, the enforcementof any of the terms thereof or the validity of the provisions thereof.

##  

## 4.                                       **Construction.**  Any capitalized terms used in this Allongenot otherwise defined herein shall have the meaning as set forth in the Note.

##  

## 5.                                       **SingleInstrument.**  Borrowershereby direct Lender to affix this Allonge to the Note whereupon the Note andthis Allonge will become and constitute a single instrument.

##  

## 6.                                       **MultipleCounterparts.**  ThisAllonge may be executed in multiple counterparts.

##  

## 7.                                       **GoverningLaw.**  This Allonge shallbe governed by and construed in accordance with the laws of the Commonwealth ofPennsylvania.

 

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## 8.                                       **NoNovation.**  Borrowershereby acknowledge and agree that this Allonge is in no way intended toconstitute a novation of the Note.  Inthe event this Allonge is for any reason held to be unenforceable, the Note asin effect before this Allonge shall be reinstated and shall be in full forceand effect regardless of the existence of this Allonge.

 

**IN WITNESS WHEREOF**,Lender and Borrowers have executed this Allonge under seal on the date firstabove written.

 
|   | **SHERWOOD BRANDS OF  VIRGINIA, LLC**, a Virginia  limited liability company |
|--------|------------------------------------------------------------------------------|
|   |                                                                         |
|   | By:                                                                          | **SHERWOOD BRANDS,  INC.** |
|   |                                                                         | Sole Member |
|   |                                                                         |
|   | By:                                                                          | /s/ Amir Frydman |   |
|   |                                                                         | Amir Frydman |
|   |                                                                         | Executive Vice President |
|   |                                                                         |
|   | **SHERWOOD BRANDS OF  RI, INC.**, a Rhode Island  corporation                |
|   |                                                                         |
|   | By:                                                                          | /s/ Amir Frydman |   |
|   |                                                                         |   Amir Frydman |
|   |                                                                         |   Executive Vice President |
|   |                                                                         |
|   | **SHERWOOD BRANDS,  LLC**,  a Maryland limited liability company             |
|   |                                                                         |
|   | By:                                                                          | **SHERWOOD BRANDS,  INC.**, |
|   |                                                                         | Sole Member |
|   |                                                                         |
|   | By:                                                                          | /s/ Amir Frydman |   |
|   |                                                                         | Amir Frydman |
|   |                                                                         | Executive Vice President |
|   |                                                                         |
|   | **ASHER CANDY  ACQUISITION CORPORATION**                                     |
|   |                                                                         |
|   | By:                                                                          | /s/ Amir Fyrdman |   |
|   |                                                                         | Amir Frydman |
|   |                                                                         | Executive Vice President |
|        |                                                                              |  |  |  |  |  |  |  |

 

12

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**ALLONGE TO TERM NOTE A**

**DATED APRIL 30, 2002**

 

**THIS ALLONGE**(**“Allonge”**)is made this 7 day of April, 2003, by and between **SHERWOOD BRANDS OF VIRGINIA, LLC,SHERWOOD BRANDS OF RI, INC., SHERWOOD BRANDS, LLC and ASHER CANDY ACQUISITIONCORPORATION**  (collectively,the **“Borrowers”**and individually a **“Borrower”**) and **WACHOVIA BANK, NATIONAL ASSOCIATION,formerly known as First Union National Bank** (the **“Lender”**).

 

**BACKGROUND**

 

# E.                                      Pursuant to the terms of that certain Term Note Adated April 30, 2002 (the **“Note”**), Lender extended to Borrowers aterm loan in the original principal amount of Six Hundred Fifty ThousandDollars ($650,000.00).

#  

# F.                                      Borrower and Lender desire to amend the Note asset forth herein.

#  

**NOW THEREFORE**,in consideration of the mutual benefits inuring to Borrowers and Lender, andintending to be legally bound hereby, the Note is hereby modified as follows:

 

## 1.                                       **InterestRate Reference**.  Thesecond paragraph of the Note is hereby amended, in its entirety, to read asfollows:

##  

“The Borrowers further agree to pay interest at said office, in likemoney, on the unpaid principal amount owing hereunder from time to timeoutstanding from the date of disbursement on the dates and at the ratesspecified in the Loan Agreement.”

 

## 2.                                       **No OtherModifications.**  No otherprovisions of the Note shall be modified hereby except as expressly set forthherein, and this Allonge shall not be construed as a waiver of any of Lender’srights or remedies under the Note as heretofore existing or as hereaftermodified by this Allonge.

##  

## 3.                                       **Confirmationof Debt.**  Borrowershereby confirm and ratify the Note as modified hereby and acknowledges thatBorrowers have no defense, set-off, counterclaim or challenge against thepayment of all sums set forth in the Note, as modified hereby, the enforcementof any of the terms thereof or the validity of the provisions thereof.

##  

## 4.                                       **Construction.**  Any capitalized terms used in this Allongenot otherwise defined herein shall have the meaning as set forth in the Note.

##  

## 5.                                       **SingleInstrument.**  Borrowershereby direct Lender to affix this Allonge to the Note whereupon the Note andthis Allonge will become and constitute a single instrument.

##  

## 6.                                       **MultipleCounterparts.**  ThisAllonge may be executed in multiple counterparts.

##  

## 7.                                       **GoverningLaw.**  This Allonge shallbe governed by and construed in accordance with the laws of the Commonwealth ofPennsylvania.

 

13

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## 8.                                       **NoNovation.**  Borrowershereby acknowledge and agree that this Allonge is in no way intended toconstitute a novation of the Note.  Inthe event this Allonge is for any reason held to be unenforceable, the Note asin effect before this Allonge shall be reinstated and shall be in full forceand effect regardless of the existence of this Allonge.

 

**IN WITNESS WHEREOF**,Lender and Borrowers have executed this Allonge under seal on the date firstabove written.

 
|   | **SHERWOOD BRANDS OF  VIRGINIA, LLC**, a Virginia  limited liability company |
|--------|------------------------------------------------------------------------------|
|   |
|   | By:                                                                          | **SHERWOOD BRANDS,  INC.** |
|   |                                                                         | Sole Member |
|   |                                                                         |   |
|   | By:                                                                          | /s/ Amir Fyrdman |
|   |                                                                         | Amir Frydman |
|   |                                                                         | Executive Vice President |
|   |
|   | **SHERWOOD BRANDS OF  RI, INC.**, a Rhode Island  corporation                |
|   |
|   | By:                                                                          | /s/ Amir Frydman |
|   |                                                                         | Amir Frydman |
|   |                                                                         | Executive Vice President |
|   |
|   | **SHERWOOD BRANDS,  LLC**,  a Maryland limited liability company             |
|   |
|   |
|   | By:                                                                          | **SHERWOOD BRANDS,  INC.**, |
|   |                                                                         | Sole Member |
|   |                                                                         |   |
|   | By:                                                                          | /s/ Amir Frydman |
|   |                                                                         | Amir Frydman |
|   |                                                                         | Executive Vice President |
|   |
|   | **ASHER CANDY  ACQUISITION CORPORATION**                                     |
|   |
|   | By:                                                                          | /s/ AmirFrydman |
|   |                                                                         | Amir Frydman |
|   |                                                                         | Executive Vice President |
|        |                                                                              |  |  |

 

14

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