**Exhibit 10.1**

 

**THIRD AMENDMENT TO FINANCINGAGREEMENT**

 

 

THIRD AMENDMENTdated as of April 27, 2005 (the “Third Amendment”) to the Loan andSecurity Agreement, dated as of August 23, 2000, by and between iParty RetailStores Corp. and iParty Corp.(individually, each a Borrower and,collectively, the “Borrowers”), and Wells Fargo Retail Finance II, LLC,a Delaware limited liability company (formerly known as Wells Fargo RetailFinance, LLC)(in such capacity, the “Lender”), as amended by that FirstAmendment to Loan and Security Agreement dated as of May 23, 2002 by andbetween the Borrowers and the Lender, and as amended by that Second Amendmentto Loan and Security Agreement dated as of January 2, 2004 by and between theBorrowers and the Lender  (as amended fromtime to time, the “Loan Agreement”). All capitalized terms not otherwise defined herein shall have themeanings ascribed to them in the Loan Agreement.

 

The Borrowers haverequested that the Lender agree to certain modifications of the financial covenantscontained in the Loan Agreement as set forth herein.  The Lender is prepared to agree to theBorrowers’ request on the terms and conditions contained herein.

 

In considerationof the foregoing and for other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, each of the undersigned herebyagree as follows:

 

1.             Amendments to Loan Agreement.    The Loan Agreement is hereby amended asfollows

 

## (a)      Thedefinition of “Borrowing Base” is hereby deleted and the following issubstituted therefor:

 

“‘Borrowing Base’: Means the sum of

 

(A)          *the lesser of*(i) or (ii) where

 

(x)            Duringthe period commencing on October 1 and ending on June 30 of any calendar yearduring the term hereof (i) is the result (expressed in Dollars) of seventy(70%) percent *times* the aggregate value ofAcceptable Inventory at Cost, and (ii) is the result (expressed in Dollars) ofeighty-five (85%) percent times the then applicable Net Retail LiquidationValue; *or*

 

(y)           Duringthe period commencing on July 1 and ending on September 30 of any calendar yearduring the term hereof (i) is the result (expressed in Dollars) of seventy-five(75%) percent *times* the aggregate value ofAcceptable Inventory at Cost, and (ii) is the result (expressed in Dollars) ofninety (90%) percent times the then applicable Net Retail Liquidation Value; *plus*

 

(B)           *the lesser of*(i) or (ii) where (i) is the result (expressedin Dollars) of eighty-five (85%) percent *times* theaggregate value of Eligible Credit Card Receivables and (ii) is Two Million($2,000,000) Dollars; *plus*

 

(C)           theSpecial Subline.”

 

## (b)      Thedefinition of “Minimum Availability Block” shall be deleted in its entirety andthe following substituted therefor:

 

“Minimum Availability Block”:  Means, during the period between April 27,2005 and November 1, 2005, an amount expressed in Dollars equal to $375,000,and thereafter, an amount expressed in Dollars equal to at least five (5%) ofthe Credit Limit or the Adjusted Credit Limit, whichever is then in effect.”

 

 

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## (c)      Thedefinition of “Special Subline” shall be added to Exhibit 3 of the Loan Agreement,which definition shall read as follows:

 

“‘Special Subline’: Initially, zero ($0) Dollars. From and after the Special Subline Activation Date through the SpecialSubline Termination Date, Five Hundred Thousand ($500,000) Dollars, andthereafter zero ($0) Dollars.”

 

## (d)      Thedefinition of “Special Subline Activation Date” shall be added to Exhibit 3of the Loan Agreement, which definition shall read as follows:

 

“‘Special Subline Activation Date’:  That date which is five (5) days from thedate that the Borrower furnishes the Lender with written notice of itsintention to activate the Special Subline, which notice shall be effectiveprovided that there does not exist an Event of Default as of Special SublineActivation Date.

 

## (e)      Thedefinition of “Special Subline Termination Date” shall be added to Exhibit 3 ofthe Loan Agreement, which definition shall read as follows:

 

## (f)       “SpecialSubline Termination Date”: Means the date that is the earlier of (i) November1, 2005 or (ii) written notice by the Borrowers to the Lender of theirtermination of the Special Subline, which notice shall be irrevocable.  The Special Subline shall not be renewable orsubject to reinstatement following the occurrence of the Special SublineTermination Date.

 

## (g)      Section1-8(a) is deleted in its entirety and the following new Section 1.8(a) shall besubstituted therefor:

 

“(a)         Priorto the Special Subline Activation Date, the unpaid principal balance of theLoan Account, shall bear interest, until repaid (calculated based upon a360-day year and actual days elapsed), at the aggregate of Base plus one-halfof one (0.50 %) percent but in no event in excess of the maximum rate permittedby applicable law.  From and after theSpecial Subline Activation Date, the unpaid principal balance of the LoanAccount shall bear interest, until repaid (calculated based upon a 360-day yearand actual days elapsed), at the aggregate of Base plus three-quarters of one(0.75%) percent but in no event in excess of the maximum rate permitted byapplicable law, provided, that upon the occurrence of the Special SublineTermination Date and reduction by the Borrowers of the outstanding balance ofthe Special Subline to zero ($0) Dollars, the unpaid principal balance of theLoan Account shall bear interest, until repaid (calculated based upon a 360-dayyear and actual days elapsed), at the aggregate of Base plus one half of one(0.5%) percent but in no event in excess of the maximum rate permitted byapplicable law.”

 

## (h)      Section12-1 is amended to reflect a change in the notice address of counsel to theLender by deleting the reference to Ruberto, Israel & Weiner andsubstituting therefor the following:

 

“Brown Rudnick Berlack Israels LLP

One Financial Place, 18th Floor

Boston, MA 02111

Attention: Peter J. Antoszyk, Esq.

Phone:  (617)856-8513

Fax: (617) 856-8201”

 

(i)       The following Exhibits to the LoanAgreement are hereby stricken and replaced by the correspondingly identifiedExhibits attached hereto: Exhibits 5-4 [Locations], 5-5 [Encumbrances andLiens], 5-6 [Indebtedness], 5-7 [Insurance], 5-9 [Leases] and 9-10 [BusinessPlan].

 

2.             Acknowledgement of Liabilitiesby Borrowers. Borrowers confirm and agree that (a) all representations andwarranties contained in the Loan Agreement and in the other Loan Documents,after giving effect to the updated Exhibits attached to the Third Amendment,are on the date hereof true and

 

 

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correct in all materialrespects, and (b) they are unconditionally liable for the punctual and fullpayment of all Liabilities now due and owing under the Loan Agreement and otherLoan Documents, including, without limitation, all reasonable charges, fees,expenses and costs (including attorneys’ fees and expenses) under the LoanDocuments, and that Borrowers have no defenses, counterclaims or setoffs withrespect to full, complete and timely payment of all such Liabilities.

 

3.             Ratification of Financing.  The Borrowers confirm that the Loan Agreementand the Loan Documents remain in full force and effect without amendment ormodification of any kind, except for the amendments explicitly set forthherein.  This Third Amendment shall bedeemed to be one of the Loan Documents and, together with the other LoanDocuments, constitute the entire agreement between the parties with respect tothe subject matter hereof and supersedes all prior dealings, correspondence,conversations or communications between the parties with respect to the subjectmatter hereof.  This Third Amendmentshall be considered a Loan Document and, without in any way limiting theapplication of other provisions of the Loan Agreement, this Third Amendmentshall governed by the provisions of Sections 14-2,14-3,14-4, 14-7,14-8, 14-9,14-10, 14-14 of the Loan Agreement.  Nofurther amendment to the Loan Agreement shall be made except by a writingsigned by all parties to the Loan Agreement.

 

4.             Representations, Warranties andCovenants.  Each Borrower, jointly andseverally, represents, warrants and covenants with and to the Lender asfollows, which representations, warranties and covenants are continuing andshall survive the execution and delivery hereof, the truth and accuracy of, orcompliance with each, together with the representations, warranties andcovenants in the other Loan Agreements, begin continuing condition of themaking or providing any loans or letters of credit by the Lender to Borrowers:

 

(a)      This Third Amendment has been dulyauthorized, executed and delivered by all necessary action of each Borrower andeach Guarantor, and is in full force and effect, and the agreements andobligations of each Borrower and Guarantor contained herein constitute legal,valid and binding obligations of Borrower enforceable against each Borrower andGuarantor in accordance with its terms.

 

(b)      After giving effect to this ThirdAmendment, there is no Event of Default under the Loan Agreement or any of theLoan Documents.

 

5.             Conditions Precedent.    This Third Amendment shall become effective(the “Effective Date of the Third Amendment”) upon satisfaction of each of thefollowing conditions precedent or waiver of such conditions by the Lender:

 

(a)      Receipt by Lender of this Third Amendmentduly executed by the Borrowers, Lender and Lenders.

 

(b)      All representations and warrantiescontained herein shall be true and correct in all material respects.

 

(c)      After giving effect to this ThirdAmendment, no Default or Event of Default shall have occurred and becontinuing.

 

6.             Counterparts.    This Third Amendment may be executed in anynumber of counterparts, each of which shall be deemed to be an original hereofand submissible into evidence and all of which together shall be deemed to be asingle instrument.  In making proof ofthis Third Amendment, it shall not be necessary to produce or account for morethan one counterpart thereof signed by each of the parties hereto.  Delivery of an executed counterpart of thisThird Amendment by telefacsimile or other electronic method of transmissionshall have the same force and effect as delivery of an original executedcounterpart of this Third Amendment.

 

 

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 INWITNESS WHEREOF, the parties hereto have caused this Amendment to be dulyexecuted and delivered by their authorized officers as of the day and yearfirst above written.

 
|                       | WELLS  FARGO RETAIL FINANCE II, LLC            |
|----------------------------|------------------------------------------------|
|                       | (Lender)                                       |
|                       | By:                                       | /s/ LYNN WHITMORE |   |
|                       |                                           | Name: Lynn  Whitmore |
|                       |                                           | Title: Vice  President |
| BORROWERS:                 |                                           |   |
|                       |                                           |   |
| IPARTY RETAIL STORES CORP. |                                           |   |
|                       |                                           |   |
| By:                   | /s/  PATRICK FARRELL                           |   |   |   |
|                       | Name: Patrick Farrell                          |   |   |
|                       | Title:  President and Chief  Financial Officer |   |   |
| IPARTY CORP.               |                                           |   |
|                       |                                           |   |
| By:                   | /s/  PATRICK FARRELL                           |   |   |   |
|                       | Name: Patrick Farrell                          |   |   |
|                       | Title:  President and Chief  Financial Officer |   |   |

 

 

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ACKNOWLEDGMENTAND CONSENT

 

 

The undersigned, as a party to oneor more Loan Documents (as defined in the Loan and Security Agreement, dated as of August 23,2000, by and between iParty Retail Stores Corp. and iParty Corp. (individually,each a Borrower and, collectively, the “Borrowers”), and WellsFargo Retail Finance II, LLC, a Delaware limited liability company (formerlyknown as Wells Fargo Retail Finance, LLC)(in such capacity, the “Lender”),as amended by that First Amendment to Loan and Security Agreement dated as ofMay 23, 2002 by and between the Borrowers and the Lender, and as amended bythat Second Amendment to Loan and Security Agreement dated as of January 2,2004 by and between the Borrowers and the Lender  (as amended from time to time, the “LoanAgreement”), hereby (i) acknowledge andconsent to the Third Amendment dated as of April 27, 2005, to Loan Agreement(the “Amendment”, all terms defined therein being used herein as definedtherein), to which this Acknowledgement and Consent is attached; (ii) confirmand agree that each Loan Document to which the undersigned is a party is, andshall continue to be, in full force and effect and is hereby ratified andconfirmed in all respects; and (iii) confirm and agree that to the extent thatany such Loan Document purports to assign or pledge to the Lender, or to grantto the Lender a security interest in or lien on, any collateral as security forthe obligations of such Borrower or Guarantor from time to time existing inrespect of the Loan Documents, such pledge, assignment and/or grant of asecurity interest or lien is hereby ratified and confirmed in all respects assecurity for all such obligations of such Borrower or Guarantor, whether nowexisting or hereafter arising.

 

Dated:  April 27, 2005

 
| IPARTY RETAIL STORES CORP |                                           |
|---------------------------|------------------------------------------------|
|                      |                                           |
| By:                  | /s/ PATRICK FARRELL                            |   |   |
|                      | Name:  Patrick Farrell                         |   |
|                      | Title:  President and Chief  Financial Officer |   |
| IPARTY CORP.              |                                           |
|                      |                                           |
| By:                  | /s/  PATRICK FARRELL                           |   |   |
|                      | Name: Patrick Farrell                          |   |
|                      | Title:  President and Chief  Financial Officer |   |

 

*Signature Page to Third Amendment*

 

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