LOAN AND SECURITY AGREEMENT

Exhibit 10.22

SEVENTH AMENDMENT AND MODIFICATION TO

LOAN AND SECURITY AGREEMENT

THIS SEVENTH AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT (the “Amendment”) is made this 13th day of February, 2004, by and among SHERWOOD BRANDS OF VIRGINIA, LLC (“VA”), SHERWOOD BRANDS, LLC (“MD”), SHERWOOD BRANDS OF RI, INC. (“RI”), XXXXX XXXXX, INC. (formerly known as Xxxxx Xxxxx Acquisition Corporation) (“Xxxxx”), XXXXXXXX BRANDS, INC. (“Guarantor”) and WACHOVIA BANK, NATIONAL ASSOCIATION, formerly known as First Union National Bank (the “Lender”).  VA, MD, RI and Xxxxx are referred to collectively as “Borrowers” or each as a “Borrower”.

BACKGROUND

A.            Borrowers, Guarantor 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, 2002, that certain Third Amendment and Modification to Loan and Security Agreement dated April 7, 2003, that certain Fourth Amendment and Modification to Loan and Security Agreement dated May 30, 2003, that certain Fifth Amendment and Modification to Loan and Security Agreement dated July 30, 2003 and that certain Sixth Amendment and Modification to Loan and Security Agreement dated November 24, 2003 and as the same may be further amended from time to time, the “Loan Agreement”).

B.            Borrowers, Guarantor and Lender desire to further amend the Loan Agreement in accordance with the terms and conditions set forth herein.

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

1.             Kmart Receivables.

(a)           Notwithstanding anything in the Loan Agreement to the contrary, commencing on the date hereof, accounts receivable due Borrowers from Kmart (collectively, “Kmart Receivables”) arising from shipments to Kmart on or before March 31, 2004 may be Eligible Accounts (subject to all of the conditions and limitations with respect to Eligible Accounts set forth in the Loan Agreement); provided, however, (i) the maximum amount of Kmart Receivables included in the Borrowing Base prior to application of the Eligible Accounts advance rate shall at no time exceed One Million Five Hundred Thousand Dollars ($1,500,000.00) and (ii) no Kmart Receivable which remains unpaid more than thirty (30) days after the due date for such account receivable shall be deemed an Eligible Account.

(b)           Kmart Receivables arising from shipments to Kmart after March 31, 2004 shall in no event be deemed Eligible Accounts.

2.             Subordinated Debt.

(a)           In addition to all of the other conditions set forth in that certain Subordination Agreement among Borrowers, Xxxx, LLC and Lender dated July 30, 2003 (as amended, the “Subordination Agreement”), at any time during which any Kmart Receivables are included in the Borrowing Base, Borrowers shall not make any payments on indebtedness to Xxxx, LLC which would cause the principal balance of such indebtedness to be less than the amount of Kmart Receivables then included in the Borrowing Base (after giving effect to the Eligible Accounts advance rate).

(b)           Contemporaneously with the execution of this Amendment, Borrowers shall cause Xxxx, LLC to execute and deliver to Lender an amendment to the Subordination Agreement in form and content satisfactory to the Lender, pursuant to which Xxxx, LLC shall acknowledge and agree to the additional condition on payment of the indebtedness to Xxxx, LLC set forth above.

3.             Further Agreements and Representations. Each Borrower and Guarantor 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 and Guarantor’s obligations under the Loan Agreement and the other Loan Documents, as amended;

(c)           acknowledge and agree that as of the date hereof, neither any Borrower nor Guarantor has any defense, set-off, counterclaim or challenge against the payment of any sums owing under any of the Obligations, as 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 and Guarantor 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 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’ or Guarantor’s failure to comply with the terms of this Amendment or any of the documents executed or delivered to Lender pursuant to the terms hereof shall constitute an Event of Default under the Loan Agreement.

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

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

6.             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.

7.             No Further Amendment; No Course of Dealing.  Nothing contained herein constitutes an agreement or obligation by Lender to grant any further amendments with respect to any of the Loan Documents.  Any waiver or implied waiver by Lender of any obligations or covenants of Borrowers, Guarantor or any of them, under the Loan Documents is expressly terminated and rescinded and Borrowers shall strictly perform and comply with all obligations and covenants under the Loan Documents.

8.             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.

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

10.           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.

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

12.           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.

13.           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.

14.           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.

15.           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.

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:	/s/ Xxxxxx X. Xxxxxxxxxx			By:		SHERWOOD BRANDS, INC.,
Xxxxxx X. Xxxxxxxxxx, Vice President						Sole Member
						By:	/s/ Xxxx Xxxxxxx
							Xxxx Xxxxxxx
				SHERWOOD BRANDS, LLC,
				a Maryland limited liability company
				By:		SHERWOOD BRANDS, INC.,
						Sole Member
						By:	/s/ Xxxx Xxxxxxx
							Xxxx Xxxxxxx
							Executive Vice President
				SHERWOOD BRANDS OF RI, INC.
				By:	/s/ Xxxx Xxxxxxx
						Xxxx Xxxxxxx
						Executive Vice President
				XXXXX XXXXX, INC.
				By:		/s/ Xxxx Xxxxxxx
						Xxxx Xxxxxxx
						Executive Vice President

		GUARANTOR:
		SHERWOOD BRANDS, INC.
		By:	/s/ Xxxx Xxxxxxx
			Xxxx Xxxxxxx
			Executive Vice President