EXHIBIT 10.1
Sherwood Brands, Inc.
THIRD AMENDMENT AND MODIFICATION TO
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT AND 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"), SHERWOOD BRANDS, LLC ("MD"), SHERWOOD BRANDS OF RI,
INC. ("RI"), 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 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, 2003 and as the same may be further
amended from time to time, the "Loan Agreement").
B.
Borrowers and Lender desire to further
amend the Loan Agreement in accordance with the terms and conditions set forth
below.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agree
as follows:
1.
Restricted Use of Revolving Loans.
From and after the date hereof, Revolving Loans shall no longer be available to
Borrowers for Capital Expenditures.
2.
Permitted Out-of Formula Amount.
(A)
DURING THE PERIOD COMMENCING ON THE DATE
THE PROCEEDS OF THE NEW FINANCING (AS DEFINED BELOW) ARE APPLIED TO THE
OUTSTANDING REVOLVING LOANS THROUGH AND INCLUDING MAY 31, 2003 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 THREE HUNDRED
THOUSAND DOLLARS ($300,000.00) (THE "PERMITTED OUT-OF-FORMULA AMOUNT") AS
REVOLVING LOANS.
(B)
COMMENCING ON JUNE 1, 2003 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 APPLICABLE PERMITTED OUT-OF-FORMULA AMOUNT, EXCEED
THE MAXIMUM REVOLVING CREDIT, LESS ANY RESERVES.
3.
NEW FINANCING.
(A)
ON OR BEFORE THE DATE HEREOF, BORROWERS
SHALL CLOSE UNDER AND RECEIVE THE PROCEEDS OF A FINANCING (THE "NEW FINANCING")
FROM A SOURCE OTHER THAN LENDER, WHICH NEW FINANCING SHALL PROVIDE NET CASH TO
BORROWERS IN AN AMOUNT EQUAL TO THREE HUNDRED FIFTY THOUSAND DOLLARS
($350,000.00).
ALL OF THE
proceeds of the New Financing shall be used by Borrowers on the date received to
pay a portion of the outstanding Revolving Loans.
(B)
THE NEW FINANCING SHALL NOT BE SECURED BY
ANY ASSETS OF ANY BORROWERS AND THE PARTY EXTENDING THE NEW FINANCING MUST ENTER
INTO A LETTER AGREEMENT REGARDING THE SUBORDINATION OF THE NEW FINANCING, IN
FORM AND CONTENT AS SHALL BE SATISFACTORY TO LENDER (THE "LETTER").
IN ADDITION
TO THE FOREGOING, THE NEW FINANCING MUST OTHERWISE BE ON TERMS AND CONDITIONS
SATISFACTORY TO