**Exhibit10.26**

 

REVOLVING FUND LOANAGREEMENT

 

THIS LOAN AGREEMENT, made and entered into this 13thday of August, 2002, by and between SHERWOOD BRANDS, INC., a North Carolina corporation, (the“Borrower”) and LAKE COUNTRY DEVELOPMENT CORPORATION, a Virginia non-stockcorporation, (the “Lender”).

 

WHEREAS, the Borrower desires to borrow from Lender,funds for the purchase of new equipment for the expansion of its facilitylocated in Chase City, Mecklenburg County, Virginia (The “Project”), the sum ofTHREE HUNDRED FIFTY THOUSAND and 00/l00 Dollars ($350,000.00) to be secured ashereinafter provided; and

 

WHEREAS, Borrower and Lender desire to set out certainterms and provisions which will govern said loan.

 

NOW, THEREFORE, THIS AGREEMENT WITNESSETH:

 

That for and in consideration of the loan of THREEHUNDRED FIFTY THOUSAND and 00/100 Dollars ($350,000.00) from Lender to Borrowerand the benefits to be derived by Borrower thereby and the mutual covenants andpromises hereinafter contained. Borrower and Lender agree as follow:

 

1.                                       ThatLender agrees to loan and does hereby loan to Borrower the sum of THREE HUNDREDFIFTY THOUSAND and 00/100 Dollars ($350,000.00) “the Loan” out of Lender’sRevolving Loan Fund, the receipt of which is hereby acknowledged.

 

2.                                       Borrowershall make and deliver to Lender its promissory note in writing requiring therepayment of the sum of THREE HUNDRED FIFTY THOUSAND and 00/100 Dollars($350,000.00) to Lender in monthly installments of Four Thousand Seven HundredEighty Four and 08/100 Dollars ($4,784.08) for eighty-four (84) months afterthis date with interest at the rate of four percent (4.0%) per annum at theoffice of Lender, 200 South Mecklenburg Avenue, P. 0. Box 150, South Hill,Virginia 23970, or at such other place as Lender may designate in writing.  Payments under said note shall be deemedlate if not paid within fifteen (15) days of the due date, and Borrower shallpay Lender a late penalty of five

 

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percent (5%) of all past due payments in the event of such latepayment, calculated on the accumulated late payments and penalties, as moreparticularly provided in the Note.

 

3                                        Theparties hereto covenant and agree that Borrower shall give to Lender a securityinterest in the project equipment listed in Exhibit A. Once the entireindebtedness of the Lender is paid, including principal, interest and any feesthereon, the lien of Lender shall be released.

 

4.                                       Lenderagrees that prepayment of principal may be made at any time without penalty.

 

*5.*                                      Borrowerand Lender hereby covenant and agree to maintain, or cause to be maintained,fire and casualty insurance on the building and equipment, which is thecollateral for the Loan which is subject to this agreement in the amount of theprincipal balance of all loans made by Wachovia Bank, N.A. PLUS it least THREEHUNDRED FIFTY THOUSAND and 00/100 Dollars ($350,000.00), with a loss payableclause to Lake Country Development Corporation, or its assigns as theirinterests may appear.

 

6.                                       Borrowerhereby agrees to provide Lender a copy of its annual audited financialstatements in conformity with generally accepted accounting principles within90 days of the end of the fiscal year and prepared by a certified publicaccountant.  Borrower will provide astatement from Wachovia Bank every 6 months reflecting the outstanding balanceof Borrower’s revolving line of credit with Wachovia.  This balance must always exceed the outstanding balance of thisLoan.

 

7.                                       Borrowerhereby agrees to use all funds borrowed from Lake Country Development Corporationsolely for the purchase of new equipment to expand Borrower’s businessfacilities located in Chase City, Mecklenburg County, Virginia, as stated inthe application.  In no event may thefunds be used to generate interest or to arbitrage the loan funds.

 

8.                                       Borrowerhereby agrees that it must create sixty five (65) jobs within twenty four(24)months of the completion of the Project. If at least one job for every $10,000.00 borrowed (35 jobs) has not beenmet within two (2) years, the loan will be called.  A good faith effort must be made to create 65 jobs.  Borrower will provide a job report to Lenderin

 

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such format prescribed by the Lender on a semi-annual basis, dueannually in February and July of each year.

 

9.                                       Borrowerhereby agrees that if its facility is intended for use by the public or for theemployment of physically handicapped, it must be accessible to the physicallyhandicapped, pursuant to Public Law 90-480, as amended (42 U.S.C. 4151, etseq.), and the regulations issued thereunder.

 

10.                                 Borroweragrees to comply with civil rights requirements which prohibit borrower fromdiscriminating against employees or applicants for employment or providers ofgoods and services.

 

11.                                 Borroweragrees to comply with a11 applicable environmental protection laws and statutesand represents the following:

 

a.                    The Borrower(including for purposes of this Section any former or current Affiliate of theBorrower) is in, material compliance with all applicable laws, rules,regulations and orders of all governmental authorities, agencies and officialsrelating to environmental matters and the release, handling and disposal ofhazardous, toxic and polluting substances.

 

b.                   The Borrowerhas obtained and is in material compliance with all required Governmentalpermits, certificates, licenses, approvals and other authorizations, and hasfiled all notifications relating to air emissions, effluent discharges andsolid and hazardous waste storage, treatment and disposal required inconnection with its ownership or use of real estate or the operation of itsbusiness.

 

c.                    There are nooutstanding notices of violation, orders, claims, citations, complaints,penalty assessments, suits or other proceedings, administrative, criminal orcivil, at law or in equity, pending against the Borrower or its properties thatwould have a material adverse effect on the Borrower’s business, financialposition, results of operations or prospects or on any facility or theoperation of any facility.  Noinvestigation or review is pending or to the knowledge of the Borrowerthreatened against the Borrower by any governmental body, agency or officialwith respect to any alleged violation of any Environmental Law,

 

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regulation, ordinance, standard, pen-nit or order inconnection with its ownership or use of any real estate or the conduct of itsbusiness.

 

d.                   No toxic orhazardous substances have been generated by the Borrower.  No notification of release of a hazardoussubstance pursuant to any Environmental Law has been filed as to any propertynow or formerly occupied or owned by the Borrower.

 

c.                    No hazardous,toxic or polluting substances have been released, discharged or disposed of onproperty now or formerly owned or occupied by the Borrower which could resultin an action under any Environmental Law which could have a material adverseeffect on the Borrower’s business, financial position, results of operations orprospects or any facility or operation of such facility.

 

f.                      The Borrowerhas not received from any environmental regulatory entity any requests forinformation, notices of claim, demand letters or other notification that inconnection with the ownership or use of any real estate or the conduct of theBorrower’s business is or may be potentially responsible with respect to anyinvestigation or clean-up of hazardous substances or toxic waste or pollutantsat any sites.

 

g.                   To the bestknowledge of the Borrower, no waste generated by the Borrower has ever beensent, nor is waste: generated by the Borrower being sent, directly orindirectly, to any site listed or formerly, proposed for listing on theNational Priority, List promulgated pursuant to CERCLA or to any site listed onany state list of hazardous substances sites requiring investigation or cleanup.

 

h.                   “EnvironmentalLaw” means and includes any present and future local, state, federal orintentional law or treaty (whether under common law, statute, rule, regulationor otherwise) relating to public health, safety or the environment, including,by way of example, but not limitation, the following: the Recourse Conservationand Recovery Act 42 U.S.C. 6901, etseq., as amended by theHazardous and Solid Waste Act Amendments of 1984; the ComprehensiveEnvironmental Response, Compensation and Liability Act, 42 U.S.C. 9601, etseq., as amended by the Superfund Amendments and

 

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Reauthorization Act of 1986, the Hazardous MaterialsTransportation Act, 49 U.S.C. 1802, et seq.; the Rivers and Harbors Actof 1899, 33 U..S.C. 401, et seq.; the Clean Water Act, 33 U.S.C. 1251, etseq.; the Clean Water Act, 42 U.S.C. 7401, et seq.; the ToxicSubstances Control Act, 15 U.S.C. **26015**et seq.; the Safe DrinkingWater Act, 42 LI.S.C. 7901.300f, et seq.; the Uranium Mill TailingsRadiation Control Act, 42 U.S.C. 7901, et seq.; the Federal OccupationalSafety and Health Act, 29 U.S.C. 651, etseq.; the FederalInsecticide, Fungicide and Rodenticide Act, 7 U.S.C. 136, et seq., theNational Environmental Policy Act, 42 U.S.C. 4321, et seq.; the NoiseControl Act, 42 U.S.C. 4901, et seq., the Emergency Planning andCommunity Right to Know Act of 1986, 42 U.S.C. 11001, et seq.; the LeadBased Paint Poisoning Prevention Act, 42 U.S.C. 4821, et seq., TheChesapeake Bay, Prevention Act, VA Code Section 10.1-2100 et seq., andany Regulations now or hereafter promulgated pursuant thereto and, as to all ofthe foregoing, the amendments, regulations, orders, decrees, permits orlicenses now or hereafter promulgated thereunder as any of the foregoing nowexist or may be changed or amended or come into effect in the future.

 

12.  Borrower hereby agrees thatit shall be responsible for all closing costs of this Loan, and shall pay uponclosing this Loan to Lake Country Development Corporation for a fee of TWOTHOUSAND FIVE HUNDRED and 00/100 Dollars ($2,500.00), for itsadministrative/service fee.

 

13.                                 Theparties hereto acknowledge, agree and understand that the Lender cannot be asole lender and that, accordingly, an additional loan was made to Borrower byWachovia Bank, Primary Lender, for the improvement of Borrower’s facilities inthe Town of Chase City, Mecklenburg County, Virginia, Accordingly, the partieshereto, acknowledge and covenant that the loan to Borrower by Wachovia Bank hasbeen completed and the loan funds were disbursed to Borrower prior to thedisbursement of these funds.

 

14.                                 Ifall or any part of the property securing the loan or an interest therein issold or transferred by Borrower without Lender’s prior written consent,excluding the creation of a lien or encumbrance subordinate to this lien,Lender, by operation of law, may at Lender’s

 

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option declare all sums secured by this agreement to be immediately dueand payable.  Lender shall have waivedsuch option to accelerate if, prior to the sale or transfer, Lender and theentity to whom the property is to be sold or transferred reach an agreement inwriting that the credit of such entity is satisfactory to Lender and that theinterest payable on the sums secured by this agreement shall be at such rate asLender shall request.  If Lender haswaived the option to accelerate provided herein, and if Borrower’s successor ininterest has executed a written assumption agreement accepted in writing byLender, Lender shall release Borrower from all obligations under thisagreement.

 

15.**                              Ifany clause, provision or section of this Revolving Loan Fund Agreement be heldillegal or invalid by any court, the illegality or invalidity of such clause,provision or section shall not affect any of the remaining clauses, provisionsor sections hereof, and this Revolving Fund Loan Agreement shall be construedand enforced as if such illegal or invalid clause, provisions or sections hadnot been contained herein.

 

16.                                 Feminineor neuter pronouns are to be substituted for those of the masculine form andthe plural is to be substituted for the singular number in any place or placesherein in which the context may require such substitution.

 

17.                                 THEBORROWER ACKNOWLEDGES THAT THE FAILURE TO COMPLY WITH ANY PROVISION OF THISAGREEMENT MAY RESULT IN THE LENDER, AT ITS OPTION, ACCELERATING THE DUE DATE OFTHIS LOAN AND DECLARING THAT THE ENTIRE BALANCE, PRINCIPAL AND INTEREST, SHALLBECOME DUE AND PAYABLE AT T HE OPTION OF T HE HOLDER OF THE PROMISSORY NOTE.

 

18.                                 ThisAgreement shall be construed and interpreted according to the laws of theCommonwealth of Virginia.

 

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IN WITNESS WHEREOF, Sherwood Brands, Inc., (Borrower), and Lake CountryDevelopment Corporation (Lender), have caused this agreement to be dulyexecuted by their respective proper corporate officers who have been duly andproperly empowered to do so by proper resolution of any board of directors, andthey have hereunto set their hands and seals, all on the day and year firstabove written.

 
|                                  | SHERWOOD BRANDS, INC.                |
|---------------------------------------|--------------------------------------|
|                                  | A North Carolina Corporation         |
|                                  |                                 |
|                                  |                                 |
|                                  |                                 | By: | /s/ Uziel Frydman |   |
|                                  |                                 |   | Uziel Frydman |
|                                  | Chairman,   President and CEO   |
|                                  |                                 |
|                                  |                                 |
| ATTEST:                               |                                 |
|                                  |                                 |
| /s/ Christopher J. Willi              |                                 |   |
| Christopher J. Willi,  Secretary |                                 |
|                                  |                                 |
|                                  |                                 |
|                                  | LAKE COUNTRY DEVELOPMENT CORPORATION |
|                                  | A Virginia Non-Stock Corporation     |
|                                  |                                 |
|                                  |                                 | By | F. Randolph Johns |   |
|                                  | F.Randolph Jones,  President         |
|                                  |                                 |
|                                  |                                 |
| ATTEST:                               |                                 |
|                                  |                                 |
|                                  |                                 |
| /s/ Gerald Vincent                    |                                 |   |
| Gerald Vincent, Secretary             |                                 |
|                                       |                                      |  |  |  |  |  |  |  |

 

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ANY PROVISION OF THIS AGREEMENT MAY RESULT IN THE LENDER, AT ITSOPTION, ACCELERATING THE DUE DATE OF THIS LOAN AND DECLARING THAT THE ENTIREBALANCE, PRINCIPAL AND INTEREST, SHALL BECOME DUE AND PAYABLE AT THE OPTION OFTHE HOLDER OF THE PROMISSORY NOTE.

 
| PROMISSORY NOTE              |
|------------------------------|
|                         |
| *$350,000.00*                |
|                         |
| August  13,   2002 |
|                         |
| South Hill,Virginia          |

 

FOR VALUE RECEIVED, SHERWOOD BRANDS, INC., a NorthCarolina Corporation, Borrower, promises to pay to the order of Lake CountyDevelopment Corporation, a Virginia Non-Stock Corporation, Lender, the sum ofTHREE HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($350,000.00), with interestthereon from date until paid, at Four Percent (4.0%) per annum, negotiable andpayable at the office of the payee, 200 South Mecklenburg Avenue, P. 0. Box150, South Hill, Virginia 23970, or at such other place as the holder of thenote may designate in writing from time to time, without offset.  It is further agreed by the makers andendorsers hereof that time is of the essence. And the makers and endorsers hereof waive the benefit of the homesteadexemptions as to this debt; and waive notice of maturity, presentment, demand,protest, and notice of nonpayment and dishonor of this note; and agree to payall costs of collection, including reasonable attorney’s fees, if it becomesnecessary to place this note in the hands of an attorney for collection.  The makers and endorsers hereof agree that15 days after the giving of 10 days notice to the undersigned of default (a) ofa payment of any installment hereof, or (b) in the observance of any uncuredviolation of any covenant contained in the Revolving Fund Loan Agreement, orany other document executed in connection with this loan, the entire balance,principal and interest, shall become due and payable at the option of theholder or holders hereof.  Failure toexercise said option shall not constitute a waiver of the right to exercise thesame in the event of any subsequent default.

 

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This note is payable in eighty four (84) equal monthlyinstallments of FOUR THOUSAND SEVEN HUNDRED EIGHTY FOUR and 08/100 DOLLARS($4,784.08) commencing on the lst day of October, 2002 and on the lst day ofeach and every month thereafter until paid, except if not sooner paid, theentire indebtedness shall be due and payable on September 1, 2009.

 

Optional prepayment is permitted at any time in wholeor in part without Penalty.  Any suchpartial payment shall be applied to installments of principal in inversechronological order, but such prepayments shall not reduce the amount of themonthly payments set forth above. Payments not received by the 15th day of the month in which they are dueshall be subject to a late charge of five percent (.5%), provided said latecharge shall apply on the accumulated late monthly installments and penalty asset forth herein or as determined in accordance herewith, and shall not operateor be construed to apply to the outstanding principal balance of this Note inthe event the same becomes due and payable prior****to maturity.

 

This note is secured by Personal properly listed onExhibit A located in Chase City, Mecklenburg County, Virginia.

 

IN WITNESS WHEREOF, SHERWOOD BRANDS, INC., a NorthCarolina Corporation, have caused this note to be duly executed by its propercorporate officers who have been duly and properly empowered to do so this 13day of August, 2002.

 

 
|                            | SHERWOOD BRANDS, INC*.* |
|---------------------------------|-------------------------|
|                            |                    |
|                            |                    |
|                            |                    | By | /s/ Uziel Frydman |   |
|                            |                    |   | Uziel Frydman |
|                            |                    | Chairman, President and CEO |
|                            |                    |
|                            |                    |
| ATTEST:                         |                    |
|                            |                    |
| /s/ Christopher J. Willi        |                    |   |
| Christopher J. Willi, Secretary |                    |
|                                 |                         |  |  |  |  |

 

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