### Exhibit 10.17

**FIRST AMENDMENT TO LOAN AND SECURITYAGREEMENT**

 

 

THIS FIRST AMENDMENT AGREEMENT (the “Amendment”) dated December 12,2001, is between and among Wells Fargo Retail Finance LLC (hereinafter, **“WFRF” or“Lender”**), a Delaware limited liability company with its principalexecutive offices at One Boston Place, 18th Floor, Boston,Massachusetts 02108 and Paper Warehouse, Inc. a Minnesota corporation with itsprincipal executive offices at 7630 Excelsior Boulevard, Minneapolis,Minnesota, 55426-4504 (hereinafter “**Paper Warehouse**”), jointly and severallywith****PaperWarehouse Franchising, Inc. a Minnesota corporation with its principalexecutive offices at 7630 Excelsior Boulevard, Minneapolis, Minnesota,55426-4504 (hereinafter “**PWFI**”), PartySmart.com, Inc. a Minnesotacorporation with its principal executive offices at 7630 Excelsior Boulevard,Minneapolis, Minnesota, 55426-4504 (“**PartySmar**t”) (hereinafter Paper Warehouse,PWFI and PartySmart may be collectively referred to as collectively Borrowersand any one of them individually as **“Borrower”**)

 

**Recitals**

 

The Borrower and the Lender have entered into a Loan and SecurityAgreement dated as the 7th of September, 2001 (the **“LoanAgreement”**) and all indebtedness of the Borrower to the Lender issecured pursuant to the terms of the Loan Agreement and all other LoanDocuments as defined therein (collectively, the **“Loan Documents”**).

 

The Borrower and the Lender desire to amend the Loan Agreement toprovide for a substitute Exhibit 9-11, and that such amendment be deemed to beeffective as of the Closing Date.

 

NOW, THEREFORE, in consideration of the premises and of the mutualcovenants and agreements herein contained, it is agreed as follows:

 

1.             Termsused in this Amendment, which are defined in the Loan Agreement, shall have thesame meanings as defined therein, unless otherwise defined herein.

 

2.             TheLoan Agreement is hereby amended to provide that the EBITDA Covenant set forthon Exhibit 9-11 attached at closing is hereby stricken in its entirety and thenew EBITDA Covenant set forth below is substituted therefore as if attached onthe Closing Date:

 

# **EBITDA**

 

Measured on a rolling four quarter basis, on the lastday of each of the Company’s fiscal quarters (the “**Measurement Dates**”), duringthe term hereof, actual EBIDTA shall be at least 80% of the prior 12 monthEBITDA set forth in the Business Plan if the prior 12 month EBITDA isforecasted to be positive, and no greater than 120% of the prior 12 monthEBITDA if the prior 12 month EBITDA is forecasted to be negative.

 

 

1

----

 

 

To the extent there exist or have existed any Event(s) of Default basedupon the EBITDA covenant set forth on Exhibit 9-11 prior to amendment hereby,Lender hereby waives such Event of Default.

 

3.             Exceptas explicitly amended by this Amendment, all of the terms and conditions of theLoan Agreement and Forebearance Agreement are hereby ratified and confirmed,and shall remain in full force and effect and shall apply to any advancethereunder.

 

4.             TheBorrower hereby represents and warrants to the Lender as follows:

 

(a)                                  The Borrower has all requisite power andauthority to execute this Amendment and to perform all of its obligationshereunder, and this Amendment has been duly executed and delivered by theBorrower and constitutes the legal, valid and binding obligation of theBorrower, enforceable in accordance with its terms.

 

(b)                                 The execution, delivery and performanceby the Borrower of this Amendment has been duly authorized by all necessary corporateaction and does not (i) require any authorization, consent or approval by anygovernmental department, commission, board, bureau, agency or instrumentality,domestic or foreign, (ii) violate any provision of any law, rule or regulationor of any order, writ, injunction or decree presently in effect, havingapplicability to the Borrower, or the articles of incorporation or by-laws ofthe Borrower, or (iii) result in a breach of or constitute a default under anyindenture or loan or Loan agreement or any other agreement, lease or instrumentto which the Borrower is a party or by which it or its properties may be boundor affected.

 

(c)                                  All of the representations and warrantiescontained in Article 5 of the Loan Agreement are correct on and as of the datehereof as though made on and as of such date, except to the extent that suchrepresentations and warranties relate solely to an earlier date.

 

(d)                                 With respect to each of Paper Warehouse,PartySmart and PWFI: (i) The resolutions of the board of directors of theBorrower attached to the Borrower’s General Certificate provided at closing,and delivered to the Lender in connection with the execution and delivery ofthe Loan Agreement (the **“Certificate”**) are in full force andeffect, (ii) the Articles of Organization and By Laws of the Borrower, whichwere certified and delivered to the Lender pursuant to the Certificate,continue in full force and effect and have not been amended or otherwisemodified except as set forth in the Certificate to be delivered, and (iii) theofficers and agents of the Borrower who have been certified to the Lenderpursuant to the Certificate as being authorized.

 

2

----

 

 

5.              All references in the Loan Agreement to “thisAgreement” shall be deemed to refer to the Loan Agreement as amended hereby.

 

6.             The Loan Documents set forth in full are terms ofagreement between the parties and are intended as the full, complete andexclusive contract governing the relationship between the parties, supersedingall other discussions, promises, representations, warranties, agreements andthe understandings between the parties with respect thereto. No term of theLoan Documents may be modified or amended, nor may any rights thereunder bewaived, except in a writing signed by the party against whom enforcement of themodification, amendment or waiver is sought. Any waiver of any condition in, orbreach of, any of the foregoing in a particular instance shall not operate as awaiver of other or subsequent conditions or breaches of the same or a differentkind. The Lender’s exercise or failure to exercise any rights under any of theforegoing in a particular instance shall not operate as a waiver of its rightto exercise the same or different rights in subsequent instances. Except asexpressly provided to the contrary in this Amendment, or in another writtenagreement, all the terms, conditions, and provisions of the Loan Documentsshall continue in full force and effect. If in this Amendment’s description ofan agreement between the parties, rights and remedies of Lender or obligationsof the Borrower are described which also exist under the terms of the otherLoan Documents, the fact that this Amendment may omit or contain a brieferdescription of any rights, remedies and obligations shall not be deemed tolimit any of such rights, remedies and obligations contained in the other LoanDocuments.

 

7.             This Amendment has been prepared through the jointefforts of all the parties. Neither its provisions nor any alleged ambiguityshall be interpreted or resolved against any party on the ground that suchparty’s counsel was the draftsman of this Amendment.  Each of the parties declares that such party has carefully readthis Amendment and the agreements, documents and instruments being entered intoin connection herewith and that such party knows the contents thereof and signthe same freely and voluntarily. The parties hereto acknowledge that they havebeen represented in negotiations for and preparation of this Amendment and theagreements, documents and instrument being entered into in connection herewithby legal counsel of their own choosing, and that each of them has read the sameand had their contents fully explained by such counsel and is fully aware oftheir contents and legal effect.

 

 

                IN WITNESS WHEREOF, the partieshereto have caused this First Amendment to be duly executed as of the day andyear first above written.

 
|   |   |   |   |   |   | PAPER WAREHOUSE,  INC.                                   |
|--------|--------|--------|--------|--------|--------|----------------------------------------------------------|
|   |   |   |   |   |   | (BORROWER)                                               |
|   |   |   |   |   |   |                                                     |
|   |   |   |   |   |   | By:  \s\  Cheryl W. Newell                          |
|   |   |   |   |   |   | Print Name:   Cheryl W. Newell                      |
|   |   |   |   |   |   | Title:  Vice  President and Chief Financial Officer |

 

 

3

----

 
|   |   | PAPER WAREHOUSE  FRANCHISING, INC.        |
|--------|--------|-------------------------------------------|
|   |   | (BORROWER)                                |
|   |   |                                      |
|   |   | By:  \s\  Cheryl W. Newell           |
|   |   | Print Name:   Cheryl W. Newell       |
|   |   | Title:  Chief  Financial Officer     |
|   |   |                                      |
|   |   |                                      |
|   |   | PARTYSMART.COM, INC.                      |
|   |   | (BORROWER)                                |
|   |   |                                      |
|   |   | By:  \s\  Cheryl W. Newell           |
|   |   | Print Name:   Cheryl W. Newell       |
|   |   | Title:  Chief  Financial Officer     |
|   |   |                                      |
|   |   |                                      |
|   |   | WELLS FARGO RETAIL FINANCE LLC            |
|   |   | (LENDER)                                  |
|   |   |                                      |
|   |   | By:  \s\  Daniel F. O’Rourke    |
|   |   | Print Name:  Daniel F. O’Rourke |
|   |   | Title:   Account Executive           |
|   |   |                                      |

 

4

----