Document:

Exhibit
10.4

 

This SECOND
AMENDMENT AGREEMENT, dated as of April 30, 2003 (this “Agreement”), is among
the parties to that certain Amended and Restated Credit Agreement, dated as of
October 12, 2001 (as amended to the date hereof, the “Credit Agreement”),
among LONGS DRUG STORES CALIFORNIA, INC., a California corporation (the “Borrower”),
each lender from time to time party hereto (collectively, the “Lenders”
and individually, a “Lender”), BANK OF AMERICA, N.A., as Administrative Agent and
Swing Line Lender, and FLEET NATIONAL BANK, as Syndication Agent and L/C
Issuer.

 

The parties hereto
agree as follows:

 

Section 1.                                            Definitions.  Terms defined in the Credit Agreement as
amended hereby are used herein with the same meanings unless otherwise defined
herein.

 

Section 2.                                            Amendments
to the Credit Agreement.  The Credit
Agreement is hereby amended:

 

(a)                                  To
amend and restate the definition of “Applicable Rate” in Section 1.01 in its
entirety as follows:

 

Applicable
Rate

 

	
  Pricing

  Level

  	
   

  	
  Consolidated

  Adjusted Total Debt

  to Consolidated

  Adjusted EBITDAR

  Ratio

  	
   

  	
  Commitment

  Fee

  	
   

  	
  Eurodollar

  Rate

  	
   

  	
  Base Rate

  	
   

  
	
  1

  	
   

  	
  33.00:1

  	
   

  	
  0.350

  	
  %

  	
  1.750

  	
  %

  	
  0.250

  	
  %

  
	
  2

  	
   

  	
  3 2.50:1 but < 3.00:1

  	
   

  	
  0.300

  	
  %

  	
  1.500

  	
  %

  	
  0.000

  	
  %

  
	
  3

  	
   

  	
  3 2.00:1 but < 2.50:1

  	
   

  	
  0.250

  	
  %

  	
  1.250

  	
  %

  	
  0.000

  	
  %

  
	
  4

  	
   

  	
  3  1.50 but< 2.00

  	
   

  	
  0.225

  	
  %

  	
  1.125

  	
  %

  	
  0.000

  	
  %

  
	
  5

  	
   

  	
  < 1.50:1

  	
   

  	
  0.200

  	
  %

  	
  1.000

  	
  %

  	
  0.000

  	
  %

  

 

(b)                                 To
insert new defined terms (in appropriate alphabetical order) in Section 1.01 as
follows:

 

“Asset Coverage Ratio”
means, at any time for the Parent and its Subsidiaries on a consolidated basis,
the ratio of (a) (i) 70% of pharmacy and other receivables (net) plus (ii) 55%
of the sum, without duplication, of merchandise inventories (net) and the LIFO
reserve to (b) (i) Consolidated Funded Indebtedness plus (ii) the aggregate
undrawn face amount of all outstanding standby letters of credit (including
standby Letters of Credit hereunder) and all unreimbursed drawings under such
letters of credit.

 

“Consolidated Adjusted
EBITDAR” means, for any four fiscal quarter period, for the Parent and its
Subsidiaries on a consolidated basis, an amount equal to Adjusted Consolidated
Net Income, plus or minus (as indicated) the

 

1

 

following, without duplication, to the extent (unless
otherwise stated) used or included in the determination of such Adjusted
Consolidated Net Income: plus (a) Consolidated Interest Charges, plus
(b) Consolidated Rent Expense, plus (c) the amount of taxes, based on or
measured by income, plus (d) the amount of depreciation and amortization
expense, plus (e) non-cash, non-recurring charges, minus (f)
non-recurring gains, minus (g) undistributed earnings from joint
ventures, plus (h) the amount of all reserves (including those for
employee severance and lease termination expense) taken with respect to the
stores of the Parent and its Subsidiaries actually closed during such period
(provided that the total amount of such reserves added under this clause (h)
attributable to any single fiscal year cannot exceed $40,000,000) and minus
(i) the amount of all cash expenditures during such period made in connection
with store closures, including payments in connection with employee severance
and monthly lease and termination payments on all closed store locations of the
Parent and its Subsidiaries and without regard to whether such cash
expenditures were used or included in the determination of Adjusted
Consolidated Net Income for such period.

 

(c)                                  To
delete the defined term “Consolidated EBITDAR” and substitute therefor the new
defined term “Consolidated Adjusted EBITDAR” wherever it appears in the Credit
Agreement.

 

(d)                                 To
amend and restate the definitions of “Fixed Charge Coverage Ratio” and “Letter
of Credit Sublimit” in Section 1.01 in their entirety as follows:

 

“Fixed Charge Coverage
Ratio” means for any four fiscal quarter period the ratio of (a)
Consolidated Adjusted EBITDAR to (b) the sum, without duplication, of (i)
Consolidated Interest Charges, (ii) Consolidated Rental Expense, (iii) the
amount by which all distributions from the Borrower to the Parent during such
period exceeded purchases of the capital stock of the Parent made by the Parent
during such period which did not violate the provisions of Section 7.05(d),
and (iv) the total amount of all principal payments of Indebtedness of the
Borrower scheduled to occur during such period.

 

*   *  
*

 

“Letter of Credit
Sublimit” means an amount equal to the lesser of the Aggregate Commitments
and $50,000,000.  The Letter of Credit
Sublimit is part of, and not in addition to, the Aggregate Commitments.

 

(e)                                  To
amend and restate Section 7.05(d) in its entirety as follows:

 

(d)                                 So
long as no Default has occurred and is continuing or would result therefrom,
(i) Borrower may make distributions to Parent and (ii) Borrower may purchase,
or may make distributions to the Parent for the purpose of the Parent
purchasing, shares of capital stock of the Parent for a total consideration not
exceeding $50,000,000 for all such purchases by the Borrower and the Parent,
taken together, in any fiscal year of the Parent; provided that to the
extent that

 

2

 

such purchases in any fiscal year ending after January
30, 2003, are less than $50,000,000, the maximum amount of such purchases
permitted for the subsequent fiscal year shall be increased (but not by more
than $10,000,000) by the amount of such shortfall.

 

(f)                                    To
amend and restate Section 7.14(a) in its entirety as follows:

 

(a)                                  The
Fixed Charge Coverage Ratio (A) as of the end of any fiscal quarter ending on
or after October 25, 2001 and on or prior to April 25, 2002, shall be equal to
or greater than 2.30 to 1.00, (B) as of the end of any fiscal quarter ending on
or after July 26, 2002, and prior to January 25, 2003, shall be equal to or
greater than 2.40 to 1.00, and (C) as of the end of any fiscal quarter ending
on or after January 25, 2003, be equal to or greater than 1.65 to 1.00.

 

(g)                                 To
amend and restate Section 7.14(c) in its entirety as follows:

 

(c)                                  The
Consolidated Adjusted Total Debt to Consolidated Adjusted EBITDAR Ratio as of
the end of any fiscal quarter shall be equal to or less than 3.50 to 1.00.

 

(h)                                 To
add a new subsection (d) to Section 7.14 as follows:

 

(d)                                 The
Asset Coverage Ratio as of the end of any fiscal quarter shall not be less than
1.25 to 1.00.

 

(i)                                     To
amend the form of Compliance Certificate, Exhibit D to the Credit Agreement, to
reflect the amendments set forth in subsections (b), (c), (d), (f), (g), and
(h) above.

 

Section 3.                                            Limited
Waiver.  Lenders hereby waive any
Event of Default under the Credit Agreement existing on the Effective Date
resulting from the Borrower’s failure to comply with the Credit Agreement but
only to the extent that such Event of Default will not exist after giving
effect to the amendments set forth in Section 2 of this Agreement.

 

Section 4.                                            Effect.  Except as specifically set forth herein,
this Agreement does not limit, modify, amend, waive, grant any consent with
respect to, or otherwise affect (a) any right, power, or remedy of the
Administrative Agent or any Lender under the Credit Agreement or any other Loan
Document or (b) any provision of the Credit Agreement or any other Loan
Documents, all of which shall remain in full force and effect and are hereby
ratified and confirmed.  This Agreement
does not entitle, or imply any consent or agreement to, any further or future
modification of, amendment to, waiver of, or consent with respect to any
provision of the Credit Agreement or any other Loan Document.

 

Section 5.                                            Fees.

 

(a)                                  On
or before the time this Agreement becomes effective pursuant to Section 7
hereof, the Borrower shall pay to the Administrative Agent for the account of
each Lender who has consented hereto before the time the Administrative Agent
gives notice of the effectiveness hereof pursuant to such Section 7, an
amendment fee (collectively, the “Amendment Fee”) equal to 0.125% of
such Lender’s Commitment.

 

(b)                                 The
Borrower shall pay an amendment arrangement fee to the Arranger for the

 

3

 

Arranger’s own account, in the amounts and at the times specified in
the letter agreement, dated April 10, 2003 (the “Amendment Fee Letter”),
between the Borrower, the Arranger and Bank of America.

 

(c)                                  The
fees payable pursuant to this Section are fully earned and non-refundable when
paid.

 

Section 6.                                            Costs.  The Borrower shall pay all fees, costs, and
expenses of any kind (including the reasonable fees and disbursements of
counsel) incurred by the Administrative Agent in connection with the
negotiation, preparation, and execution of this Agreement and the other
documents contemplated hereby.

 

Section 7.                                            Conditions
of Effectiveness.  This Agreement
shall become effective as of the date hereof (the “Effective Date”) when
the conditions set forth below are satisfied (or waived in accordance with the
provisions of the Credit Agreement), and the Administrative Agent gives notice
of such effectiveness as below provided:

 

(a)                                  Counterparts
of this Agreement.  Receipt by the
Administrative Agent of counterparts hereof signed by the Borrower and the
Required Lenders;

 

(b)                                 Fees.  Receipt by the Administrative Agent for the
account of the consenting Lenders of the Amendment Fee and receipt by the
Arranger of all fees then required to be paid to the Arranger under the Amendment
Fee Letter;

 

(c)                                  Payment
of Certain Amounts.  Payment of all
fees, costs, and expenses specified in Section 6 of this Agreement (including
the fees, costs, and expenses of counsel to the Administrative Agent) and
notified by the Administrative Agent to the Borrower; and

 

(d)                                 Corporation
Documents.  Receipt by the
Administrative Agent of all documents it may reasonably request relating to the
existence of Borrower, the corporate authority for and the validity of this
Agreement, and any other agreements, documents, instruments, or matters
relevant hereto, all in form and substance satisfactory to the Administrative
Agent;

 

provided
that this Agreement shall not become effective or be binding on any party
hereto unless the foregoing conditions are satisfied or waived as above
provided no later than May 1, 2003. 
Promptly upon the occurrence thereof, the Administrative Agent shall
notify the Borrower, Parent, L/C Issuer, and each Lender of the effectiveness
of this Agreement.

 

Section 8.                                            Representations
and Warranties.  Borrower represents
and warrants that:

 

(a)                                  The
execution, delivery and performance by the Borrower of this Agreement are
within the Borrower’s corporate powers, have been duly authorized by all
necessary corporate action, and require no action by or in respect of, or
filing with, any governmental body, agency or official, except as this
Agreement may be required to be filed with respect to state or federal
securities law provisions, and the execution, delivery and performance by the
Borrower of this Agreement do not contravene, or constitute a default under,
any provision of applicable law or regulations or of the certificate or
articles of incorporation or the by-laws of Borrower or any of its
Subsidiaries, or any material agreement, judgment, injunction, order, decree or
other instrument binding upon Borrower or any of its Subsidiaries or any assets
of Borrower or any of its Subsidiaries, or result in the creation or imposition
of any lien on any asset of the Borrower or

 

4

 

any of its Subsidiaries.

 

(b)                                 This
Agreement constitutes the valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with its terms, except as
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws now or hereafter in effect relating to
creditors’ rights, and to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).

 

(c)                                  After
giving effect to this Agreement, no Default has occurred and is continuing, and
after giving effect to this Agreement, the representations and warranties of
Borrower contained in the Credit Agreement and the other Loan Documents
delivered pursuant thereto are true and correct in all material respects as of
the date hereof as if made on the date hereof, unless they specifically relate
to an earlier date.

 

Section 9.                                            Counterparts;
Facsimile Signatures.  This
Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original with the same effect as if all the
signatures were on the same instrument. 
Delivery of an executed counterpart of the signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.  Any
party delivering an executed counterpart of the signature page to this Agreement
by telecopier shall thereafter promptly deliver a manually executed counterpart
of this Agreement, but the failure to deliver such manually executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Agreement.

 

Section 10.                                      Governing
Law, Submission to Jurisdiction, and Waiver of Jury Trial.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA (PROVIDED
THAT THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING
UNDER FEDERAL LAW) AND IS SUBJECT TO THE PROVISIONS OF SECTIONS 10.17 and 10.18
OF THE CREDIT AGREEMENT, RELATING TO SUBMISSION TO JURISDICTION AND WAIVER OF
JURY TRIAL, THE PROVISIONS OF WHICH ARE BY THIS REFERENCE HEREBY INCORPORATED
HEREIN IN FULL.

 

5

 

IN WITNESS
WHEREOF,  the
parties hereto have caused this Agreement to be duly executed as of the date
first above written.

 

	
  BORROWER:

  	
  LONGS DRUG STORES CALIFORNIA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/  Steven F. McCann

  	
   

  
	
   

  	
   

  	
  (One of Two Required and Authorized Signatures)

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  	
  Chief Financial Officer & Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  And by

  	
  /s/  William J. Rainey

  	
   

  
	
   

  	
  Title: 
  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
  ADMINISTRATIVE AGENT:

  	
  BANK OF AMERICA, N.A.,

  as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
  /s/  Ken Puro

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Ken Puro

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  LENDERS:

  	
  BANK OF AMERICA, N.A., as a Lender and

  Swing Line Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
  /s/  Ronald
  J. Drobny

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Ronald J. Drobny

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FLEET NATIONAL BANK, as a Lender,

  Syndication Agent, and L/C Issuer

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
  /s/  Stephen
  J. Garvin

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Stephen J. Garvin

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Managing Director

  	
   

  
														

 

6

 

	
   

  	
  BANK OF HAWAII

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
  /s/  Dana
  Takushi

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Dana Takushi

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WASHINGTON MUTUAL BANK

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
  /s/  Tony Yee

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Tony Yee

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Assistant Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UNION BANK OF CALIFORNIA, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
  /s/  Theresa
  L. Rocha

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Theresa L. Rocha

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
  /s/  Janet
  Jordan

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Janet Jordan

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK, NATIONAL

  ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
  /s/  Jeff
  Bailard

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Jeff Bailard

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President

  	
   

  
							

 

7EXHIBIT 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 Lender.

 

4.                                       Audits
and Examinations.  Section 5
of the Loan Agreement is hereby amended by adding the following section:

 

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

 

5.                                       Interest.

 

(a)                                  Interest
on Revolving Loans.  Section
10.5(a) of the Loan Agreement is hereby deleted and replaced
with the following:

 

“10.5                     Interest/Fees:

 

(a)                                  For
each fiscal quarter of Borrowers following a fiscal quarter during which the
Fixed Charge Coverage Ratio was less than 1.75 to 1.0, the Applicable
Percentage for purposes of calculating the applicable interest rate for any day
for any Revolving Loan during such fiscal quarter shall be determined in
accordance with the following chart and based on EBITDA (as defined in Section
6.19 and determined as of the end of the most recently ended
fiscal quarter for the 12 month period then ended) on the date the Applicable
Percentage 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 during
which the Fixed Charge Coverage Ratio was equal to or greater than

 

2

 

1.75 to 1.0,
the Applicable Percentage for purposes of calculating the applicable interest
rate for any day for any Revolving Loan during such fiscal quarter shall be
determined in accordance with the following chart and based on EBITDA (as
defined in Section 6.19 and determined as of the end of the most
recently ended fiscal quarter for the 12 month period then ended) on the date
the 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

  	
  %

  

 

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

 

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

 

6.                                       Daily/Weekly
Financial Reporting.

 

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

 

(b)                                 Section
6.10(d) of the Loan Agreement is hereby deleted in its entirety
and replaced with the following:

 

3

 

“(d)                           Borrowers
shall, at their own expense, on a daily basis, deliver to Lender a borrowing
base certificate in substantially the form of Schedule C hereto duly
completed and certified by Borrowers’ chief executive officer or chief
financial officer, detailing daily updates of Borrowers’ Eligible Accounts and
weekly updates of Borrower’s Eligible Inventory (on Monday of each week) and
containing, without limitation, daily sales, cash receipts, credits and other
adjustments.  Each borrowing base
certificate shall include information regarding purchases of foreign currency
exchange by Borrowers.  Each borrowing
base certificate shall be accompanied by such collateral and back-up
documentation as Lender may from time to time require.”

 

7.                                       Monthly
Financial Reporting.  Section
6.10 of the Loan Agreement is hereby amended by adding the
following subsection:

 

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

 

(i)                                     Monthly
consolidated internally prepared interim financial statements of Guarantor,
Borrowers and their subsidiaries, including a balance sheet and income
statement and statements of operations and of cash flows for such month, all in
form acceptable to Lender and in each case setting forth (i) in comparative
form figures for the corresponding month and year-to-date period of the
preceding fiscal year, (ii) year-to-date figures and (iii) in comparative form
figures for the corresponding period set forth in the annual budget and
business plan delivered pursuant hereto; and

 

(ii)                                  in
form acceptable to Lender, a separate internally prepared report of the
profits, assets and net worth of each subsidiary of Guarantor or any Borrower
which is not a Borrower under this Agreement.”

 

8.                                       Budgets.  On or before April 15, 2003, Borrowers shall
deliver to Lender budgets, cash flow statements and such other financial
statements as may be required by Lender, each in form and content acceptable to
Lender, 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.                                       Allonges
to Term Notes. 
Contemporaneously with the execution of this Amendment, Borrowers shall
execute and deliver to Lender an allonge to Term Note B and an allonge to Term
Note A, each in form and content acceptable to Lender (collectively, the “Allonges”).

 

10.                                 Further Agreements and
Representations. Each Borrower 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 obligations under the Loan
Agreement and the other Loan Documents, as amended;

 

(c)                                  acknowledge
and 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 of
the Obligations, as

 

4

 

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 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 except as heretofore disclosed to Lender by Borrowers in
writing, upon execution by Lender of this Amendment, 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’ failure to comply with the terms of this Amendment or
any of the documents executed or delivered to Lender pursuant to the terms
hereof (including, without limitation, Borrowers’ failure to obtain the New
Financing and repay a portion of the Revolving Loans) shall constitute an Event
of Default under the Loan Agreement.

 

11.                                 Additional Documents; Further
Assurances.  Borrowers
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 the Letter, the Allonges and any and all documents,
agreements, statements, resolutions, certificates, consents and information as
Lender may require in connection with the matters or actions described
herein.  Borrowers 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.

 

12.                                 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 has or may have arising from any act, omission or otherwise, at any
time up to and including the date of this Amendment.

 

13.                                 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 shall limit in any manner whatsoever Lender’s
right to reimbursement under any of the Loan Documents.

 

14.                                 No Waiver.  Lender has notified Borrowers that an Event
of Default has occurred pursuant to that certain letter dated March 10,
2003.  Nothing contained herein
constitutes an agreement or obligation by Lender to grant any further
amendments or waivers with respect to any of the Loan Documents.  Nothing contained in this Amendment
constitutes a waiver or release by Lender of any Event of Default or of any
rights or remedies available to Lender under the Loan Documents or at law or in
equity.

 

5

 

15.                                 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.

 

16.                                 Construction.  Any capitalized terms used in this Amendment
not otherwise defined shall have the meaning as set forth in the Loan
Agreement.

 

17.                                 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.

 

18.                                 Governing Law.  This Amendment shall be governed and
construed in accordance with the laws of the Commonwealth of Pennsylvania.

 

19.                                 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.

 

20.                                 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.

 

21.                                 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.

 

22.                                 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]

 

6

 

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:

  	
  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

 

April 7, 2003

 

Wachovia Bank, National Association

1335 Chestnut Street

Philadelphia, PA 19107

 

Re:                               Third
Amendment to that certain Loan Agreement by and between Wachovia Bank, National
Association, formerly known as First Union National Bank (“Lender”), Sherwood Brands of
Virginia, LLC, Sherwood Brands, LLC, Sherwood Brands of RI, Inc., Asher Candy
Acquisition 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 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 and as the same may be further amended from time to time, the
“Loan
Agreement”).  On the date
hereof, Lender, Borrowers, and Guarantor are further amending the Loan
Agreement in accordance with that certain Third Amendment and Modification to
Loan and Security Agreement  (the “Amendment”),  pursuant
to which, inter  alia, Lender agreed to extend to Borrower the
Permitted Out-of-Formula Amount. 
Capitalized terms used herein and not otherwise defined shall have the
meanings given such terms in the Amendment.

 

In connection
with the execution of the Amendment and for so long as the Permitted
Out-of-Formula Advance is available to Borrowers or any sums are owing that
constitute a Permitted Out-of-Formula Advance, Borrowers, Guarantor and
Creditor agree that (a) all sums advanced to any Borrower or Guarantor by
Creditor, whether currently outstanding or hereafter advanced, and all claims
and demands arising therefrom (the “Subordinated Debt”) shall be subordinate
to all liabilities and obligations of any nature of any Borrower of Guarantor
to Lender, now or at any time hereafter existing contracted or incurred, and
all claims and demands arising therefrom (the “Senior Debt”); (b) neither
Guarantor 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 any
part 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 the
Subordinated Debt, including, but not limited to, demand or acceleration of any
of the Subordinated Debt and the institution of court proceedings against any
Borrower or Guarantor to collect any Subordinated Debt.  Creditor further represents to Lender that
the Subordinated Debt is unsecured and hereby agrees that the Subordinated Debt
shall remain unsecured for so long as any Senior Debt

 

8

 

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

 

Intending to
be legally bound hereby and in order to induce Lender to enter into the
Amendment, 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

  
						

 

[SIGNATURES
CONTINUED ON FOLLOWING PAGE]

 

9

 

[SIGNATURES
CONTIUED 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

  	
   

  	 

									

 

10

 

ALLONGE
TO TERM NOTE B

DATED
APRIL 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 ACQUISITION
CORPORATION  (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 B
dated April 30, 2002 (the “Note”), Lender extended to Borrowers a
term loan in the original principal amount of Six Hundred Fifty Thousand
Dollars ($650,000.00).

 

D.                                    Borrower and Lender desire to amend the Note as
set forth herein.

 

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

 

1.                                       Interest
Rate Reference.  The
second paragraph of the Note is hereby amended, in its entirety, to read as
follows:

 

“The Borrowers further agree to pay interest at said office, in like
money, on the unpaid principal amount owing hereunder from time to time
outstanding from the date of disbursement on the dates and at the rates
specified in the Loan Agreement.”

 

2.                                       No Other
Modifications.  No other
provisions of the Note shall be modified hereby except as expressly set forth
herein, and this Allonge shall not be construed as a waiver of any of Lender’s
rights or remedies under the Note as heretofore existing or as hereafter
modified by this Allonge.

 

3.                                       Confirmation
of Debt.  Borrowers
hereby confirm and ratify the Note as modified hereby and acknowledges that
Borrowers have no defense, set-off, counterclaim or challenge against the
payment of all sums set forth in the Note, as modified hereby, the enforcement
of any of the terms thereof or the validity of the provisions thereof.

 

4.                                       Construction.  Any capitalized terms used in this Allonge
not otherwise defined herein shall have the meaning as set forth in the Note.

 

5.                                       Single
Instrument.  Borrowers
hereby direct Lender to affix this Allonge to the Note whereupon the Note and
this Allonge will become and constitute a single instrument.

 

6.                                       Multiple
Counterparts.  This
Allonge may be executed in multiple counterparts.

 

7.                                       Governing
Law.  This Allonge shall
be governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.

 

11

 

8.                                       No
Novation.  Borrowers
hereby acknowledge and agree that this Allonge is in no way intended to
constitute a novation of the Note.  In
the event this Allonge is for any reason held to be unenforceable, the Note as
in effect before this Allonge shall be reinstated and shall be in full force
and effect regardless of the existence of this Allonge.

 

IN WITNESS WHEREOF,
Lender and Borrowers have executed this Allonge under seal on the date first
above 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

 

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 ACQUISITION
CORPORATION  (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 A
dated April 30, 2002 (the “Note”), Lender extended to Borrowers a
term loan in the original principal amount of Six Hundred Fifty Thousand
Dollars ($650,000.00).

 

F.                                      Borrower and Lender desire to amend the Note as
set forth herein.

 

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

 

1.                                       Interest
Rate Reference.  The
second paragraph of the Note is hereby amended, in its entirety, to read as
follows:

 

“The Borrowers further agree to pay interest at said office, in like
money, on the unpaid principal amount owing hereunder from time to time
outstanding from the date of disbursement on the dates and at the rates
specified in the Loan Agreement.”

 

2.                                       No Other
Modifications.  No other
provisions of the Note shall be modified hereby except as expressly set forth
herein, and this Allonge shall not be construed as a waiver of any of Lender’s
rights or remedies under the Note as heretofore existing or as hereafter
modified by this Allonge.

 

3.                                       Confirmation
of Debt.  Borrowers
hereby confirm and ratify the Note as modified hereby and acknowledges that
Borrowers have no defense, set-off, counterclaim or challenge against the
payment of all sums set forth in the Note, as modified hereby, the enforcement
of any of the terms thereof or the validity of the provisions thereof.

 

4.                                       Construction.  Any capitalized terms used in this Allonge
not otherwise defined herein shall have the meaning as set forth in the Note.

 

5.                                       Single
Instrument.  Borrowers
hereby direct Lender to affix this Allonge to the Note whereupon the Note and
this Allonge will become and constitute a single instrument.

 

6.                                       Multiple
Counterparts.  This
Allonge may be executed in multiple counterparts.

 

7.                                       Governing
Law.  This Allonge shall
be governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.

 

13

 

8.                                       No
Novation.  Borrowers
hereby acknowledge and agree that this Allonge is in no way intended to
constitute a novation of the Note.  In
the event this Allonge is for any reason held to be unenforceable, the Note as
in effect before this Allonge shall be reinstated and shall be in full force
and effect regardless of the existence of this Allonge.

 

IN WITNESS WHEREOF,
Lender and Borrowers have executed this Allonge under seal on the date first
above 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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00053-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00053-of-00352.parquet"}]]