**Exhibit 10.26**

 

**ELEVENTHAMENDMENT AND MODIFICATION TO**

**LOAN AND SECURITY AGREEMENT**

 

**THIS ELEVENTH AMENDMENT AND MODIFICATION TO LOAN AND SECURITYAGREEMENT** (the **“Amendment”**) is made effective as ofAugust 20, 2004, by and among **SHERWOODBRANDS OF VIRGINIA, LLC**(**“VA”**),**SHERWOOD BRANDS, LLC** (**“MD”**), **SHERWOODBRANDS OF RI, INC.**(**“RI”**),**ASHER CANDY, INC. (formerly known as AsherCandy Acquisition Corporation)**(**“Asher”**),**SHERWOOD BRANDS, INC.** (**“Guarantor”**) and **WACHOVIA BANK, NATIONAL ASSOCIATION**, formerly known as FirstUnion National Bank (the **“Lender”**).  VA, MD, RI and Asher are referred tocollectively as **“Borrowers”** oreach as a **“Borrower”**.

 

**BACKGROUND**

 

# A.                                   Borrowers, Guarantor andLender entered into that certain Loan and Security Agreement datedJune 12, 2001 (as amended by that certain First Amendment and Modificationto Loan and Security Agreement dated April 30, 2002, that certain SecondAmendment and Modification to Loan and Security Agreement datedSeptember 5, 2002, that certain Third Amendment and Modification to Loanand Security Agreement dated April 7, 2003, that certain Fourth Amendmentand Modification to Loan and Security Agreement dated May 30, 2003, thatcertain Fifth Amendment and Modification to Loan and Security Agreement datedJuly 30, 2003,  that certain SixthAmendment and Modification to Loan and Security Agreement datedNovember 24, 2003; that certain Seventh Amendment and Modification to Loanand Security Agreement dated February 13, 2004; that certain EighthAmendment and Modification to Loan and Security Agreement dated April 8,2004; that certain Ninth Amendment and Modification to Loan and SecurityAgreement dated June 11, 204, 2004; that certain Tenth Amendment andModification to Loan and Security Agreement dated July 31, 2004 and as thesame may be further amended from time to time, the **“Loan Agreement”**).

#  

# B.                                     Borrowers are in defaultunder the Loan Agreement for failure as of April 30, 2004 to comply withthe Tangible Net Worth requirement set forth in **Section 6.19(a)**of the Loan Agreement and the Fixed Charge Coverage Ratio set forth in **Section 6.19(b)** of the LoanAgreement (the **“Existing Defaults”**).

#  

# C.                                     Notwithstanding theexistence of the Existing Defaults Borrowers and Guarantors have requested thatLender extend the Term and further amend the Loan Agreement in accordance withthe terms and conditions set forth herein.

#  

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

 

## 1.                                       **Confirmation of Background**. Borrowers and Guarantor ratify, confirm and acknowledge that thestatements contained in the foregoing Background are true, accurate andcomplete in all respects.

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## 2.                                       **Term**.  **Section 10.4** of the LoanAgreement is deleted in its entirety and replaced with the following:

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“10.4  **Term**.  Terminating on August 31, 2004.”

 

## 3.                                       **Further Agreements andRepresentations****.** EachBorrower and Guarantor does hereby:

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

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### (b)                                 covenant and agree to perform all of suchBorrower’s and Guarantor’s obligations under the Loan Agreement and the otherLoan Documents, as amended;

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### (c)                                  acknowledge and agree that as of the datehereof, neither any Borrower nor Guarantor has any defense, set-off,counterclaim or challenge against the payment of any sums owing under any ofthe Obligations, as amended, or the enforcement of any of the terms of the LoanAgreement or of the other Loan Documents, as amended;

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### (d)                                 acknowledge and agree that except asheretofore disclosed to Lender by Borrowers in writing, all representations andwarranties of Borrowers and Guarantor contained in the Loan Agreement and/orthe other Loan Documents, as amended, are true, accurate and correct on and asof the date hereof as if made on and as of the date hereof;

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### (e)                                  represent and warrant that, except for theExisting Defaults, no Event of Default or event which with the delivery ofnotice, passage of time or both would constitute an Event of Default exists orwill exist; and

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### (f)                                    covenant and agree that Borrowers’ orGuarantor’s failure to comply with the terms of this Amendment or any of theother Loan Documents shall constitute an Event of Default under the LoanAgreement.

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## 4.                                       **General Acknowledgments**.

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### (a)                                  Borrowers and Guarantor fully and finallywaive any notice or demand from Lender to Borrowers or Guarantor in connectionwith the Existing Defaults.

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### (b)                                 By reason of the Existing Defaults Lender hasthe right to, at its option, declare all Obligations immediately due andpayable.

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### (c)                                  As a result of the Existing Defaults, Lenderhas no further obligation to make any further advances or extensions of creditto any Borrower.

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### (d)                                 Neither this Agreement nor any otheragreement executed in connection herewith or pursuant to the terms hereof, norany actions taken pursuant to this Agreement or such other agreement shall bedeemed to cure the Existing Defaults or any other Events of Default which mayexist under the Loan Agreement or the other Loan Documents or to be a waiver byLender of the Existing Defaults or any other defaults or Events of Defaultunder the Loan Agreement or the other Loan Documents, or of any rights orremedies in connection therewith or with respect thereto, it

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### being the intention of theparties hereto that the obligations of Borrowers and Guarantor with respect tothe Loan Agreement and the other Loan Documents are and shall remain in fullforce and effect

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## 5.                                       **Additional Documents;Further Assurances****.**  Borrowers and Guarantor covenant and agreesto execute and deliver to Lender, or to cause to be executed and delivered toLender contemporaneously herewith, at the sole cost and expense of Borrowers,all documents, agreements, statements, resolutions, certificates, consents andinformation as Lender may require in connection with the matters or actionsdescribed herein.  Borrowers andGuarantor further covenant and agree to execute and deliver to Lender or tocause 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 oreffect the terms hereof, the Loan Agreement, as amended, or any of the otherLoan Documents, or to enforce or to protect Lender’s interest in theCollateral.  All such documents,agreements, statements, etc., shall be in form and content acceptable to Lenderin its reasonable sole discretion.

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## 6.                                       **Release****.** Borrowers and Guarantor acknowledge and agree that they have no claims,suits or causes of action against Lender and hereby remise, release and foreverdischarge 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 fromany act, omission or otherwise, at any time up to and including the date ofthis Amendment.

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## 7.                                       **Certain Fees, Costs,Expenses And Expenditures**.  Borrowers will pay all of the Lender’sexpenses in connection with the review, preparation, negotiation, documentationand closing of this Amendment and the consummation of the transactionscontemplated hereunder, including without limitation, fees, disbursements,expenses, appraisal costs and fees and expenses of counsel retained by Lenderand all fees related to filings, recording of documents and searches, whetheror not the transactions contemplated hereunder are consummated.  Nothing contained herein shall limit in anymanner whatsoever Lender’s right to reimbursement under any of the LoanDocuments.

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## 8.                                       **No Further Amendment; NoCourse of Dealing**.  Nothing contained herein constitutes anagreement or obligation by Lender to grant any further amendments with respectto any of the Loan Documents.  Any waiveror implied waiver by Lender of any obligations or covenants of Borrowers,Guarantor or any of them, under the Loan Documents is expressly terminated andrescinded and Borrowers shall strictly perform and comply with all obligations andcovenants under the Loan Documents.

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## 9.                                       **Inconsistencies.** To the extent of any inconsistencies betweenthe terms and conditions of this Amendment and the terms and conditions of theLoan Agreement, the terms and conditions of this Amendment shall prevail. Allterms and conditions of the Loan Agreement not inconsistent herewith shallremain in full force and effect and are hereby ratified and confirmed byBorrowers.

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## 10.                                 **Construction.**  Anycapitalized terms used in this Amendment not otherwise defined shall have themeaning as set forth in the Loan Agreement.

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## 11.                                 **Binding Effect.**  ThisAmendment, upon due execution hereof, shall be binding upon and inure to thebenefit of the parties hereto and their respective successors and assigns.

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## 12.                                 **Governing Law.**  ThisAmendment shall be governed and construed in accordance with the laws of theCommonwealth of Pennsylvania.

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## 13.                                 **Severability**.  Theprovisions of this Amendment and all other Loan Documents are deemed to beseverable, and the invalidity or unenforceability of any provision shall notaffect or impair the remaining provisions which shall continue in full forceand effect.

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## 14.                                 **No Third Party Beneficiaries**.  Therights and benefits of this Amendment and the Loan Documents shall not inure tothe benefit of any third party.

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## 15.                                 **Headings**.  Theheadings of the Articles, Sections, paragraphs and clauses of this Amendmentare inserted for convenience only and shall not be deemed to constitute a partof this Amendment.

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## 16.                                 **Counterparts**.  ThisAmendment may be executed in any number of counterparts, all of which takentogether shall constitute one and the same instrument, and any of the partieshereto may execute this Amendment by signing any such counterpart.

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**(SIGNATURES ON FOLLOWING PAGE)**

 

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**IN WITNESS WHEREOF**, the parties hereto, intending to be legally bound hereby, have causedthis 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/ Amri Frydman |   |
|                                      | Amir  Frydman                          |
|                                      | Executive  Vice President              |
|                                           |                                        |  |  |  |  |  |  |  |

 

 

**(SIGNATURES CONTINUED ON FOLLOWING PAGE)**

 

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**(SIGNATURES CONTINUED FROM PREVIOUS PAGE)**

 
|   | **GUARANTOR:**             |
|--------|----------------------------|
|   |                       |
|   | **SHERWOOD  BRANDS, INC.** |
|   | ** **                 |
|   |                       |
|   | By:                        | /s/ Amir Frydman |   |
|   | Amir  Frydman              |
|   | Executive  Vice President  |

 

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