Exhibit 10.21
FIRST AMENDMENT AND MODIFICATION TO
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT AND MODIFICATION TO LOAN AND SECURITY AGREEMENT (the
"Amendment") is made this 30 day of April, 2002, by and among SHERWOOD BRANDS OF
VIRGINIA, LLC ("VA"), SHERWOOD BRANDS, LLC ("MD"), SHERWOOD BRANDS OF RI, INC.
("RI"), XXXXX XXXXX ACQUISITION CORPORATION ("Xxxxx"), SHERWOOD 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. VA, MD, RI (the "Existing Borrowers") and Lender entered into that
certain Loan and Security Agreement dated June 12, 2001 (as the same may be
amended from time to time, the "Loan Agreement") pursuant to which Lender agreed
to make available to Existing Borrowers a revolving line of credit in the
maximum principal amount of up to Twenty Million Dollars ($20,000,000.00) (the
"Revolving Loans").
B. Lender has also issued for the account of Existing Borrowers (i)
letter of credit no. 874-096052 for the benefit of Suntrust Bank in the face
amount of Five Hundred Eighty-Nine Thousand Eight Hundred Fifty-Three Dollars
($589,853.00) and (ii) letter of credit no. 874-096042 for the benefit of
Suntrust Bank in the face amount of Nine Hundred Fifty Thousand Eight Hundred
Eighty-Three ($950,883.00) (collectively, the "Existing Letters of Credit").
C. Guarantor, Sherwood Acquisition Corp. ("Sherwood Acquisition"), a
wholly-owned subsidiary of Guarantor, Xxxxx and the shareholders of Xxxxx have
entered into that certain Agreement and Plan of Merger dated April 25, 2002 (the
"Plan of Merger"), pursuant to which, inter alia, (i) Sherwood Acquisition
merged into Xxxxx, with Xxxxx being the surviving entity, and (ii) Xxxxx became
a wholly owned subsidiary of Guarantor (such transaction being referred to
herein as the "Merger").
D. The Existing Borrowers, Xxxxx and Lender desire to amend the Loan
Agreement to provide, inter alia, for (i) an increase in the maximum principal
amount available under the Revolving Loans to Twenty-Five Million Dollars
($25,000,000.00); (ii) the extension of an additional term loan in the original
principal amount of Six Hundred Fifty Thousand Dollars ($650,000.00); (iii) the
extension of a second additional term loan in the original principal amount of
Six Hundred Fifty Thousand Dollars ($650,000.00); and (iv) the addition of Xxxxx
as a joint and several Borrower; all of which the Lender is willing to do
subject to the terms and conditions described herein.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Addition of Xxxxx as a Borrower. The parties hereto acknowledge and
agree that Xxxxx is hereby added as a joint and several Borrower under the Loan
Agreement. By
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execution of this Amendment, Xxxxx becomes a party to and agrees to be bound by
the terms of the Loan Agreement to the same extent as Existing Borrowers. The
parties hereto agree that each reference to "Borrower" or "Obligor" in the Loan
Agreement shall be deemed to include Xxxxx, mutatis mutandis; except that all
references to "Borrower" in the definition of "Eligible Inventory" contained in
Section 2.1(d) of the Loan Agreement shall not include Xxxxx but shall mean
Existing Borrowers only. Xxxxx joins in all of the representations, warranties
and waivers of Existing Borrowers under the Loan Agreement and agrees to be
bound by the covenants and other provisions thereof, in each case as if Xxxxx
was an original signatory thereto.
2. Existing Letters of Credit. Xxxxx hereby agrees to be bound by and
obligated under the Existing Letters of Credit and all documents executed in
connection therewith (collectively, the "Letter of Credit Documents") as if such
Existing Letters of Credit were issued for the account of Xxxxx. Xxxxx shall be
jointly and severally liable with the Existing Borrowers for all payment and
performance obligations under the Existing Letters of Credit and the Letter of
Credit Documents.
3. Security Interest.
(a) Grant of Security Interest. To secure the payment and performance
in full of all Obligations, Xxxxx hereby grants to Lender a continuing security
interest in and lien upon and a right of setoff against, and Xxxxx hereby
assigns and pledges to Lender all of the Xxxxx Collateral, including any Xxxxx
Collateral not deemed eligible for lending purposes.
(b) Xxxxx Collateral. "Xxxxx Collateral" shall mean all now owned or
hereafter acquired personal property of Xxxxx, including without limitation, the
following and any other property hereafter pledged as security for any of the
Obligations:
(i) All now owned and hereafter acquired right, title and
interest of Xxxxx in, to and in respect of all: accounts (including health care
insurance receivables), interest in goods represented by accounts, returned,
reclaimed or repossessed goods with respect thereto and rights as an unpaid
vendor; contract rights; chattel paper; investment property; general intangibles
(including, but not limited to payment intangibles, tax and duty refunds,
registered and unregistered patents, trademarks, service marks, copyrights,
trade names, applications for the foregoing, trade secrets, goodwill, processes,
drawings, blueprints, customer lists, licenses, whether as licensor or licensee,
choses in action and other claims, existing and future leasehold interests in
equipment and fixtures, goodwill and software); stock and other ownership
interests in subsidiaries and other entities; documents (including bills of
lading, warehouse receipts and other documents of title); instruments; including
promissory notes, investment property and financial assets of every kind;
insurance policies (including, without limitation, the cash surrender value of
all life insurance policies); letters of credit, bankers' acceptances,
guaranties and letter of credit rights; and all supporting obligations and
rights to receive payment thereunder; cash monies, deposits, securities, bank
accounts, deposit accounts, reserves and credits; all property now or hereafter
held in any capacity by Lender, its affiliates or any entity which, at any time,
participates in Lender's financing of Xxxxx at any other depository or other
institution; agreements or property securing or relating to any of the items
referred to above; all commercial tort claims of Xxxxx based on or arising in
connection with any of the matters
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described on Exhibit 3(b) hereto, and all judgments, orders and awards issued in
connection therewith;
(ii) All now owned and hereafter acquired right, title and
interest of Xxxxx in, to and in respect of goods, including, but not limited to:
1. All inventory, wherever located, whether now owned or
hereafter acquired, of whatever kind, nature or description, including all raw
materials, work-in-process, finished goods, and materials to be used or consumed
in Xxxxx'x business; all returned or repossessed goods and all names or marks
affixed to or to be affixed thereto for purposes of selling same by the seller,
manufacturer, lessor or licensor thereof; and
2. All equipment and fixtures, wherever located whether
now owned or hereafter acquired, including, without limitation, all machinery,
equipment, motor vehicles, furniture and fixtures, and any and all additions,
substitutions, replacements (including spare parts), and accessions thereof and
thereto.
(iii) All now owned and hereafter acquired right, title and
interests of Xxxxx in, to and in respect of any personal property in or upon
which Lender has or may hereafter have a security interest, lien or right of
setoff;
(iv) All present and future books and records relating to any of
the above including, without limitation, all computer programs, printed output
and computer readable data in the possession or control of Xxxxx, any computer
service bureau or other third party; and
(v) All accessories, commingled goods, products and proceeds of
the foregoing in whatever form and wherever located, including, without
limitation, all insurance proceeds and all claims against third parties for loss
or destruction of or damage to any of the foregoing.
4. Authorization to File. Xxxxx hereby authorizes Lender to file in the
appropriate jurisdictions UCC-1 financing statements against Xxxxx identifying
"all assets" of Xxxxx as the collateral covered thereby.
5. Borrowing Base. Section 2.1(b) of the Loan Agreement is hereby deleted
in its entirety and replaced with the following:
"(b) The "Borrowing Base" shall be calculated at any time as the sum
of (i) the product obtained by multiplying the outstanding amount of
Eligible Accounts, net of all sales taxes, discounts, allowances and
credits given, by the Eligible Accounts Percentage set forth in
Section 10.1(b), plus (ii) the product(s) obtained by multiplying the
applicable Eligible Inventory Percentage set forth in Section 10.1(b),
by the value (as determined by Lender in its reasonable discretion
based on the lower of cost (on a FIFO basis) or market) of Eligible
Inventory, plus (iii) for the period commencing on April 30, 2002 and
continuing until the Audit
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Completion Date, the product(s) obtained by multiplying the applicable
Eligible Inventory Percentage set forth in Section 10.1(b) by an
amount equal to 75% of the book value (as determined by Lender based
on financial reporting of Xxxxx) of Xxxxx Eligible Inventory, plus
(iv) at all times subsequent to the Audit Completion Date, the
product(s) obtained by multiplying the applicable Eligible Inventory
Percentage set forth in Section 10.1(b) by the value (as determined by
Lender in its reasonable discretion based on the lower of cost (on a
FIFO bases) or market) of Xxxxx Eligible Inventory. Aggregate advances
against Eligible Inventory and Xxxxx Eligible Inventory shall not
exceed the sublimits applicable thereto set forth in Section 10.1(c).
In addition, aggregate advances against that portion of Xxxxx Eligible
Inventory consisting of raw materials shall not exceed Three Hundred
Thousand Dollars ($300,000.00). As used herein "Audit Completion Date"
means the date on which Lender has completed a satisfactory audit of
Xxxxx'x inventory and notified Borrowers of the same. Borrowers shall
fully cooperate with Lender in connection with such audit so that the
foregoing audit shall be completed no later than May 30, 2002."
6. Xxxxx Eligible Inventory. The following definition is hereby added as
a new paragraph to the end of Section 2.1(d) of the Loan Agreement:
"(b) "Xxxxx Eligible Inventory" is inventory owned by Xxxxx which is
and remains acceptable to Lender, in its reasonable discretion, for
lending purposes, and is located at one of the addresses set forth in
Section 10.3(c). General criteria for Xxxxx Eligible Inventory are set
forth below but may be revised from time to time by Lender, in its
sole reasonable judgment. Lender shall, in general, determine Xxxxx
Eligible Inventory as follows: (1) the aggregate gross amount of each
item of Xxxxx'x inventory, valued at 75% of book value prior to the
Audit Completion Date and at the lower of cost (on a FIFO basis) or
market after the Audit Completion Date, which (A) is owned solely by
Xxxxx and with respect to which Xxxxx has good, valid and marketable
title, (B) is stored on property that is either (i) owned or leased by
Xxxxx or another Borrower or (ii) owned or leased by a warehouseman
that has contracted with Xxxxx or another Borrower to store inventory
on such warehouseman's property or by a filler, processor or packer of
Xxxxx or another Borrower (provided, that, with respect to inventory
stored on property leased by Xxxxx or another Borrower or property
owned or leased by a warehouseman, filler, processor or xxxxxx, Xxxxx
or such other Borrower shall have delivered in favor of Lender a lien
waiver in form and substance satisfactory to Lender (a "Landlord
Waiver") from such landlord, warehouseman, filler, processor or
packer, as applicable, in respect thereof); (C) is subject to a valid,
enforceable and first priority lien in favor of Lender (except, with
respect to Xxxxx Eligible Inventory stored at sites described in
clause (B)(ii) above for normal and customary warehouseman, filler,
packer and processor charges); (D) is
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located in the United States; and (E) is not obsolete or slow moving
and for which a markdown reserve has not been made, and which
otherwise conforms to the warranties contained herein and which at all
times continues to be acceptable to Lender in its sole reasonable
discretion, (2) less inventory consisting of work-in-process,
packaging or manufacturing supplies (other than raw materials), (3)
less markdown reserves, (4) less any goods returned or rejected by
Xxxxx'x customers for which a credit has not yet been issued and goods
in transit to third parties (other than to Xxxxx'x or another
Borrower's agents, warehouses, fillers, processors or packers that
comply with clause (1)(B)(ii) above), (5) less any inventory that is
slow-moving, obsolete or which Lender determines in its commercially
reasonable judgment to be a no charge or sample item; (6) less a
reserve equal to the amount of all accounts payable of Xxxxx or
another Borrower (as applicable) owed or owing to any warehouseman,
filler, packer or processor; (7) less any reserves required by Lender
in its sole reasonable discretion for special order goods and market
value declines; (8) less any inventory which is held by Xxxxx pursuant
to consignment, sale or return, sale on approval or similar
arrangement; and (9) less any increase in inventory value representing
production variances. Inventory of Xxxxx which satisfies all of the
foregoing criteria except that it is in transit to a site described in
clause (B)(i) or (ii), may be deemed Xxxxx Eligible Inventory if such
inventory consists of finished goods, is fully insured, Lender is
named on such insurance as loss payee under a lender's loss payable
clause acceptable to Lender, except for the purpose of transporting
such inventory or clearing customs, Xxxxx has not delivered or
consigned to any Person any documents, instruments, warehouse
receipts, bills of lading or other instruments evidencing such
inventory or the right to receive such inventory (collectively the
"Title Items") and all negotiable Title Items bear a legend evidencing
Lender's security interest therein and in the inventory covered
thereby; and Xxxxx satisfies all other conditions established by
Lender from time to time.
7. References to Eligible Inventory. All references to "Eligible
Inventory" in the Loan Agreement (other than references contained in the
definition of "Borrowing Base" and in the definition of "Eligible Inventory",
both of which are contained in Section 2.1(b) of the Loan Agreement) shall be
deemed to be references to both Eligible Inventory and Xxxxx Eligible Inventory.
The reference to "Section 10.4(d)" in the definition of "Eligible Inventory"
contained in Section 2.1(d) of the Loan Agreement is hereby deleted and replaced
with "Section 10.3(c)".
8. Reserves. The last sentence of Section 2.1(e) of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:
"Without limiting the foregoing, Lender may establish Reserves against
dilution of Eligible Accounts and Eligible Inventory or for credit exposure
under swap
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agreements (as defined in 11 U.S.C.(S) 101) issued by Lender or an
affiliate of Lender, and Lender will establish Letter of Credit Reserves."
9. Term Loan A.
(a) Extension of Term Loan A; Purpose. Lender will lend to Borrowers
and Borrowers will borrow from Lender a term loan in the original principal
amount of Six Hundred Fifty Thousand Dollars ($650,000.00) ("Term Loan A").
Borrowers shall use the proceeds of Term Loan A to finance costs incurred in
connection with the Merger and for other working capital purposes.
(b) Interest on Term Loan A. Interest on the unpaid principal balance
of Term Loan A shall accrue from the date of advance until final payment thereof
at a per annum rate of interest equal to 275 basis points in excess of the Term
Loan LIBOR Market Rate. 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).
(c) Payments on Term Loan A. Borrowers will pay the principal of Term
Loan A in (i) thirty-three (33) equal and consecutive monthly principal
installments of Nineteen Thousand Dollars ($19,000.00), plus all accrued and
unpaid interest thereon, on the first day of each calendar month, commencing May
1, 2002 and (ii) one final payment of the remaining principal balance of Term
Loan A, plus all accrued and unpaid interest thereon and all fees, costs and
expenses due in connection therewith, on February 1, 2005. Lender shall apply
all proceeds of accounts or other Collateral received by Lender and all other
payments in respect of Term Loan A in whatever order or manner Lender shall
determine.
(d) Term Loan A Note. Borrowers' obligation to repay Term Loan A
shall be evidenced by Borrowers' joint and several promissory note ("Term Note
A") in the face amount of Six Hundred Fifty Thousand Dollars ($650,000.00),
which shall be in the form attached hereto as Exhibit 9(d), with the blanks
appropriately filled in.
10. Term Loan B.
(a) Extension of Term Loan B; Purpose. Lender will lend to Borrowers
and Borrowers will borrow from Lender a term loan in the original principal
amount of Six Hundred Fifty Thousand Dollars ($650,000.00) ("Term Loan B").
Borrowers shall use the proceeds of Term Loan B to finance costs incurred in
connection with the Merger and for other working capital purposes.
(b) Interest on Term Loan B. Interest on the unpaid principal balance
of Term Loan B shall accrue from the date of advance until final payment thereof
at a per annum rate of interest equal to 275 basis points in excess of the Term
Loan LIBOR Market Rate.
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(c) Payments on Term Loan B. Borrowers shall pay all accrued and
unpaid interest on Term Loan B on the first day of each calendar month
commencing May 1, 2002. In the event the outstanding principal balance under
Term Loan B, all accrued and unpaid interest thereon and all other sums due in
connection therewith are not paid in full on or before December 31, 2002,
Borrower shall pay the principal of Term Loan B in (i) thirty-six (36) equal and
consecutive principal payments of Eighteen Thousand Fifty-Five and 56/100
Dollars ($18,055.56) each, plus all accrued and unpaid interest thereon, on the
first day of each calendar month commencing on January 1, 2003, and (ii) one
final payment of the remaining principal balance of Term Loan B, plus all
accrued and unpaid interest thereon, and all fees, costs and expenses in
connection therewith on December 1, 2006.
Lender shall apply all proceeds of accounts or other Collateral received by
Lender and all other payments in respect of Term Loan B in whatever order or
manner Lender shall determine.
(i) Refinance of Term Loan B. Any refinance of Term Loan B by
any entity or person other than Lender shall be subject to the terms, conditions
and requirements of Section 6.14(c) of the Loan Agreement.
(ii) Term Loan B Reserve. If by June 30, 2002, Lender has not
received, reviewed and approved an appraisal in form and content satisfactory to
Lender performed by an appraiser satisfactory to Lender showing a forced
liquidation value of all equipment of Existing Borrowers of at least
$765,000.00, Lender shall create a cumulative reserve (the "Term Loan B
Reserve") against sums otherwise available in respect of Revolving Loans in an
amount equal to $100,000 per month. Such reserve shall be implemented on the
last day of each month commencing June 30, 2002 and shall continue until the
entire outstanding principal amount of Term Loan B is reserved against Revolving
Loans. The Term Loan B Reserve shall be reduced on a dollar for dollar basis
upon receipt by Lender of principal payments on Term Loan B as required
hereunder. The Term Loan B Reserve, if implemented, shall be in addition to all
other reserves established by Lender under the Loan Agreement. All reserves
established under this subsection shall be included within the definition of
"Reserves" contained in Section 2.1(e) of the Loan Agreement.
(d) Term Loan B Note. Borrowers' obligation to repay Term loan B
shall be evidenced by Borrowers' joint and several promissory note ("Term Note
B") in the face amount of Six Hundred Fifty Thousand Dollars ($650,000.00),
which shall be in the form attached hereto as Exhibit 10(d), with the blanks
appropriately filled in.
11. Loans Co-Terminus. In the event the Revolving Loans are terminated as
a result of an Event of Default, expiration of the Term, or otherwise, the
outstanding balance of Term Loan A and Term Loan B, together with any accrued
and unpaid interest thereon and any of the sums due pursuant to the terms
hereof, and all other Obligations shall be immediately due and payable in full.
12. Financial Covenants. Subsection (a) - (c) of Section 6.19 of the Loan
Agreement is hereby deleted in its entirety and replaced with the following:
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"(a) Borrowers shall maintain Tangible Net Worth of not less than (i)
$10,500,000.00 as of the date hereof and at all times hereafter through October
30, 2001; (ii) $11,500,000.00 as of October 31, 2001 and at all times thereafter
through January 30, 2002; (iii) $12,500,000.00 as of January 31, 2002 and at all
times thereafter through October 30, 2002; (iv) $14,000,000.00 as of October 31,
2002; and (v) $16,000,0000 as of January 31, 2003 and at all times thereafter.
(b) Borrowers shall maintain a Fixed Charge Coverage Ratio, determined as
of the end of each fiscal quarter of Borrowers for the 12-month period then
ended, of not less than: (i) 1.75 to 1.0 as of July 31, 2001 and as of the end
of each fiscal quarter thereafter through October 31, 2002; and (ii) 3.0 to 1.0
as of January 31, 2003 and as of the end of each fiscal quarter thereafter.
(c) Borrowers and Guarantor shall not, directly or indirectly, expend or
commit to expend, for fixed or capital assets (including capital lease
obligations) (collectively "Capital Expenditures") an aggregate amount in excess
of: (i) $1,000,000.00 in the fiscal year ending July 31, 2001; (ii)
$2,000,000.00 in the fiscal year ending July 31, 2002; and (iii) $1,200,000.00
in the fiscal year ending July 31, 2003 and in any fiscal year thereafter."
13. Term. The reference to "Section 10.5" in Section 9.1 of the Loan
Agreement is hereby deleted and replaced with "Section 10.4".
14. Maximum Revolving Credit. The reference to "$20,000,000.00" as the
Maximum Revolving Credit contained in Section 10.1(a) of the Loan Agreement is
hereby deleted and replaced with $25,000,000.00.
15. Interest/Fees. Section 10.5(a) of the Loan Agreement is hereby
deleted and replaced with the following:
"10.5 Interest/Fees:
(a) The Applicable Percentage for purposes of calculating the
applicable interest rate for any day for any Loan 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:
LIBOR Market
EBITDA Base Rate Loan Eurodollar Loan Rate Loan
-------------- --------------- ------------
*** $4,850,000.00 .25% 2.35% 2.35%
** $4,850,000.00 and .25% 2.15% 2.15%
*** $7,350,000.00
** $7,350,000.00 .25% 1.85% 1.85%
Until Lender's receipt of Borrowers' Quarterly Statements for the quarter ending
April 30, 2001, each Applicable Percentage shall be determined assuming that
EBITDA is * $4,500,000.00."
*** means less than or equal to
** means greater than
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16. Borrowing Base Certificate. The following sentences are hereby added
to the end of Section 6.10(d) of the Loan Agreement:
"If Borrowers' Net Excess Availability (as shown on the weekly
borrowing base certificates delivered by Borrowers to Lender) is less
than Five Hundred Thousand Dollars ($500,000.00) for two (2)
consecutive weeks, the borrowing base certificates and sales and cash
receipts reports required by the preceding sentence shall be delivered
on a daily basis by Borrowers until such time as Borrowers' Net Excess
Availability (as shown on the daily borrowing base certificates
delivered by Borrowers to Lender) is more than Five Hundred Thousand
Dollars ($500,000.00) for two (2) consecutive weeks. As used herein,
"Net Excess Availability" means undrawn availability under the
Revolving Loans after deducting all sums due and owing to Borrowers'
trade creditors which are outstanding beyond normal trade terms (as
determined by Lender), less all Reserves established by Lender."
17. Put Option Reserve.
(a) If Guarantor has not filed with the Securities and Exchange
Commission (the "SEC") the registration rights agreement contemplated by Section
4.2 of the Plan of Merger (the "Reg Rights Agreement") by July 31, 2002, Lender
shall create a cumulative reserve against sums otherwise available in respect of
Revolving Loans in an amount equal to Two Hundred One Thousand Nine Hundred
Twenty-Four Dollars ($201,924.00) per month commencing August 1, 2002 and
continuing on the first day of each month through October 1, 2002. If at any
time prior to October 1, 2002, Borrowers present satisfactory evidence to
Lender's counsel that such Reg Rights Agreement has been filed with the SEC,
such reserve shall be released.
(b) Commencing November 1, 2002 (provided that such a reserve has not
been fully established and maintained pursuant to the foregoing subsection (a)),
Lender shall create a cumulative reserve against sums otherwise available in
respect of Revolving Loans in a monthly amount determined by Lender to be the
amount necessary to fully reserve by April 1, 2003 the amount payable by
Guarantor under Section 4.3 of the Plan of Merger if the put option contained in
such Section 4.3 is exercised. Such reserve shall be implemented on the first
day of each month commencing November 1, 2002 and continuing through April 1,
2003. Upon expiration of the time provided for exercise of the put option in
Section 4.3 of the Plan of Merger, upon request by Borrowers, such reserve shall
be released. Upon delivery of evidence satisfactory to Lender that all or a
portion of the Holdback Shares may be permanently retained by Guarantor pursuant
to the terms of the Escrow Agreement (collectively, the "Retained Shares"),
Lender agrees to adjust the reserve established pursuant to this subsection (b)
for the value of such Retained Shares (with an assumed value of $4.50 per
share). As used herein, "Holdback Shares" and "Escrow Agreement" shall have the
meanings given such terms in the Plan of Merger.
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(c) All reserves established under this Section 17 shall be included
within the definition of "Reserves" contained in Section 2.1(e) of the Loan
Agreement.
(d) Borrowers shall provide Lender with prompt written notice of the
exercise of the put option in Section 4.3 of the Plan of Merger.
18. Fees. In consideration for the Lender's execution of this Amendment
and the extension to Borrowers of Term Loan A and Term Loan B, Borrowers hereby
shall pay to Lender a fee in the amount of $25,000, $15,000 of which is due and
payable on the date hereof and $10,000 of which is due and payable on the
earlier of (i) January 1, 2003 or (ii) Lender's demand for payment in full of
the Obligations in accordance with the Loan Agreement.
19. Conditions. This Amendment is conditioned upon Borrowers' satisfaction
of the following conditions:
(a) Borrowers shall execute and deliver to Lender, in the form
attached hereto as Exhibit 19(a), an Amended and Restated Revolving Note with
the blanks appropriately filled in (the "A&R Revolving Note").
(b) Borrowers shall cause Guarantor to execute and deliver to Lender
an Amendment, Ratification and Confirmation of Surety Agreement (the "Surety
Ratification") in form and content acceptable to Lender pursuant to which, inter
alia, Guarantor shall agree to continue to guaranty and act as surety for all
present and future Obligations of Borrowers to Lender, including, without
limitation, all Obligations of Xxxxx to Lender.
(c) Borrowers shall cause Guarantor to execute and deliver to Lender
a securities pledge agreement in form and content acceptable to Lender pursuant
to which Guarantor shall pledge to Lender all stock of Xxxxx.
(d) Lender shall have received, reviewed and approved audited
financial statements of Xxxxx for the fiscal years 1997 through 2001.
(e) Lender shall have received an opening combined balance sheet of
Borrowers in form and content satisfactory to Lender.
(f) Lender shall have received a copy of the final Plan of Merger and
all documents executed in connection therewith which shall be in the form
attached hereto as Exhibit 19(f).
(g) Lender shall have received search reports against Xxxxx showing
no judgments, liens, encumbrances or restrictions of any nature with respect to
the assets of Xxxxx except for those liens in favor of Xxxxx Fargo Business
Credit ("Xxxxx"), which Xxxxx shall agree to promptly terminate pursuant to a
payoff letter from Xxxxx in form and content satisfactory to Lender.
(h) Lender shall have received authorizing resolutions for each
Borrower and Guarantor with respect to the transactions contemplated hereunder.
Lender shall have received
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current good standing certificates for each Borrower and Guarantor; certificates
of no change regarding the articles of incorporation and by-laws for the
Existing Borrowers and Guarantor; copies of articles of incorporation and
by-laws of Xxxxx; an officer's certificate of Xxxxx; a copy of the filed
Certificate of Merger in respect of the Merger; and such other documents and
information as Lender may require, all of which shall be in form and content
satisfactory to Lender.
(i) Lender shall have received an opinion of Borrowers' and
Guarantor's counsel in form and content satisfactory to Lender regarding the
Merger and the transactions contemplated by this Amendment.
(j) Lender shall have received policies of insurance (or evidence
thereof on Xxxxx 27 form) with respect to the assets of Xxxxx in amounts
satisfactory to Lender, pursuant to which Lender shall be named as lender loss
payee and additional insured pursuant to such endorsements as shall be
satisfactory to Lender.
(k) Borrowers shall execute and deliver, or cause to be executed and
delivered to Lender, at Borrowers' sole cost and expense, (i) Term Note A, (ii)
Term Note B and (iii) and any and all other documents, agreements, certificates
and opinions as Lenders shall request in connection with the execution and
delivery of this Amendment or any documents in connection herewith, or to
further evidence, effect, enforce or protect any of the terms hereof or the
rights or remedies granted or intended to be granted to Lender herein or
therein, each of which shall be in form and content applicable to Lender.
(l) Lender shall have received landlord waiver agreements,
warehouseman waiver agreements and mortgagee waiver agreements, as applicable,
for all locations of Xxxxx.
20. Interrelatedness Of Borrowers. The business operations of each
Borrower are interrelated and complement one another, and such entities have a
common business purpose. To permit their uninterrupted and continuous
operations, such entities now require and will from time to time hereafter
require funds and credit accommodations for general business purposes. The
proceeds under the credit facilities extended under the Loan Documents will
directly or indirectly benefit each Borrower, severally and jointly, regardless
of which Borrower requests or receives part or all of the proceeds of such
advances.
21. Confirmation Of Collateral. Borrowers and Guarantor hereby confirm,
acknowledge and agree that none of the collateral securing any obligations of
Borrowers or Guarantor to Lender shall be impaired by anything contained in this
Amendment, and such collateral shall continue to secure all of the Obligations.
22. Schedules to Loan Agreement. All existing Schedules to the Loan
Agreement are hereby removed and replaced with the schedules bearing the same
schedule names and numbers attached hereto.
23. Definitions/References.
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(a) Xxxxx. The following definition is hereby added to the Loan
Agreement: "Xxxxx" means Xxxxx Xxxxx Acquisition Corporation.
(b) Loan Documents. The definition of "Loan Documents" contained in
Section 10.6 of the Loan Agreement is hereby amended to expressly include,
without limitation, Term Note A and Term Note B.
(c) Loans. Unless the context thereof clearly indicates otherwise,
all references in the Loan Agreement to the "Loans" shall be deemed to be
references to the Revolving Loans, Term Loan A and Term Loan B, collectively.
(d) Obligations. The definition of "Obligations" contained in Section
4.2 of the Loan Agreement is hereby amended to expressly include, without
limitation, Term Loan A and Term Loan B.
(e) Promissory Note. Unless the context thereof clearly indicates
otherwise, all references in the Loan Agreement to the "Promissory Note" shall
be deemed to be references to the Revolving Note, as amended and restated by the
foregoing A&R Revolving Note, Term Note A and Term Note B, collectively.
(f) Revolving Note. All references in the Loan Agreement to the
"Revolving Note" shall mean the Revolving Note, as amended and restated by the
foregoing A&R Revolving Note.
(g) Surety. All references in the Loan Agreement to the "Surety
Agreement" shall mean the Surety Agreement, as amended by the Surety
Ratification.
24. 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 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, 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
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constitute an Event of Default exists or will exist, and all information
described in the foregoing Background is true and accurate;
(f) covenant and agree that Borrowers' failure to comply with the
terms of this Amendment or other documents executed or delivered to Lender
pursuant to the terms hereof shall constitute an Event of Default under the Loan
Agreement, subject to the notice and grace periods provided therein, if
applicable; and
25. 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.
26. No Waiver. Nothing contained herein constitutes an agreement or
obligation by Lender to grant any further amendments to any of the Loan
Documents. Nothing contained herein 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.
27. 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.
28. Construction. Any capitalized terms used in this Amendment not
otherwise defined shall have the meaning as set forth in the Loan Agreement.
29. 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.
30. Governing Law. This Amendment shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
31. 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.
32. 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.
33. 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.
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34. 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.
35. WAIVER OF RIGHT TO TRIAL BY JURY. BORROWERS, GUARANTOR AND LENDER
WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
(a) ARISING UNDER ANY OF THE LOAN DOCUMENTS OR (b) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF BORROWERS, GUARANTOR OR LENDER WITH
RESPECT TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO, IN EACH CASE WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWERS, GUARANTOR AND LENDER AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND
THAT ANY PARTY TO THIS AMENDMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWERS,
GUARANTOR AND LENDER TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. BORROWERS
AND GUARANTOR ACKNOWLEDGE THAT THEY HAVE HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL REGARDING THIS SECTION, THAT THEY FULLY UNDERSTAND ITS TERMS, CONTENT
AND EFFECT, AND THAT THEY VOLUNTARILY AND KNOWINGLY AGREE TO THE TERMS OF THIS
SECTION.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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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, SHERWOOD BRANDS OF VIRGINIA,
NATIONAL ASSOCIATION L.L.C.
a Virginia limited liability company
By: SHERWOOD BRANDS, INC.,
By: /s/ Xxxxxx X. Xxxxxxxxxx Sole Member
---------------------------------
Xxxxxx X. Xxxxxxxxxx, Vice President
By: /s/ Xxxx Xxxxxxx
-----------------------------------
Xxxx Xxxxxxx
Executive Vice President
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 ACQUISITION
CORPORATION
By: /s/ Xxxx Xxxxxxx
-----------------------------------
Xxxx Xxxxxxx
Executive Vice President
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GUARANTOR:
SHERWOOD BRANDS, INC.
By: /s/ Xxxx Xxxxxxx
-----------------------------------
Xxxx Xxxxxxx
Executive Vice President
16
