Document:

Exhibit 10.1
    

    
      Execution Copy
    

    
       FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT
      AGREEMENT
    

    
      

      FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”)
      dated as of October 14, 2011 between
    

    
      IPARTY RETAIL STORES CORP., a Delaware corporation (the “Lead
      Borrower”),
    

    
      IPARTY CORP., a Delaware corporation (a “Borrower”, and,
      together with the Lead Borrower, the “Borrowers”),
    

    
      the Guarantors party hereto (each a “Guarantor”, and,
      together with the Borrowers, the “Loan Parties”),
    

    
      the Lenders party hereto, and
    

    
      WELLS FARGO BANK, NATIONAL ASSOCIATION, as successor by merger to Wells
      Fargo Retail Finance, LLC, as assignee to Wells Fargo Retail Finance II,
      LLC, as administrative agent and as collateral agent (the “Agent”);
    

    
      in consideration of the mutual covenants herein contained and benefits
      to be derived herefrom.
    

    
      W I T N E S S E T
      H:
    

    
      WHEREAS, the Loan Parties, the Lenders and the Agent entered into a
      certain Second Amended and Restated Credit Agreement dated as of July 1,
      2009 (as amended, restated or otherwise modified from time to time, the “Credit
      Agreement”); and
    

    
      WHEREAS, the Loan Parties, the Lenders and the Agent have agreed to
      amend the Credit Agreement as set forth herein.
    

    
      NOW THEREFORE, in consideration of the mutual promises and agreements
      herein contained, the parties hereto hereby agree as follows:
    

    
      1.    Defined Terms.   All capitalized terms
      not otherwise defined herein shall have the same meaning as ascribed
      thereto in the Credit Agreement, respectively.
    

    
      2.    Representations and Warranties.  Each Loan
      Party hereby represents and warrants that (a) no Default or Event of
      Default has occurred and is continuing, and (b) after giving effect to
      this Amendment, all representations and warranties contained in the
      Credit Agreement and each other Loan Document are true and correct in
      all material respects (except to the extent that such representation or
      warranty is already qualified by materiality or subject to a “Material
      Adverse Effect” qualifier) on and as of the date hereof, as though made
      on and as of such date (except to the extent that such representations
      and warranties relate solely to an earlier date, in which case such
      representations and warranties were true and correct as of such earlier
      date).
    

    
      

      

    

    
      
        

        

      

      
        
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      3.    Ratification of Loan Documents.  Each Loan
      Party hereby acknowledges and agrees, except as expressly amended
      hereby, that no other amendments, changes or modifications to the Loan
      Documents are intended or implied and hereby ratifies and confirms that
      all the terms and conditions of the Loan Documents as amended hereby
      remain in full force and effect.
    

    
      4.    Amendments to Credit Agreement.  The Credit
      Agreement is hereby amended as follows:
    

    
             a.        AMENDMENTS
      TO ARTICLE I.  The provisions of Article I are hereby amended as
      follows:
    

    
              i.       by deleting the definition of “Applicable Margin” in
      its entirety and by substituting the following in its stead:
    

    
      ““Applicable Margin” means:
    

    	
           
        	
          
            LIBOR Margin
          

        	
          
            Base Rate Margin
          

        
	

        	
          
            2.00%
          

        	
          
            0.25%
          

        

    

    
      ii.     by deleting the definition of “Applicable Rate” in its entirety
      and by substituting the following in its stead:
    

    
      ““Applicable Rate” means, at any time of calculation,
      with respect to Commercial Letters of Credit, a per annum rate equal to
      1.50%, and, with respect to Standby Letters of Credit, a per annum rate
      equal to 2.00%.”
    

    
      iii.     by deleting clauses (x) and (xi) from the definition of
      “Availability Reserves” and by substituting the following in its stead:
    

    
      “and (x) held or post-dated checks.”
    

    
       iv.      by deleting the definition of “Borrowing Base” in its entirety
      and by substituting the following in its stead:
    

    
      ““Borrowing Base” means, at any time of calculation,
      an amount equal to:
    

    
      (a)       the lesser of (x) the Cost of Eligible Inventory (net of
      Inventory Reserves), multiplied by 75%, and (y) 90% of the Net Retail
      Liquidation Value of Eligible Inventory (net of Inventory Reserves);
    

    
      plus
    

    
      (b)        the amount of Eligible Credit Card Receivables multiplied by
      the Credit Card Advance Rate;
    

    
      minus
    

    
      (c)       the then amount of all Availability Reserves;
    

    
       minus
    

    
      (d)       the Minimum Availability Block.”
    

    
      
        

        

      

      
        
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       v.       by deleting the definition of “Capital Lease Obligations” in
      its entirety and by substituting the following in its stead:
    

    
      ““Capital Lease Obligations” means, with respect to
      any Person for any period, the obligations of such Person to pay rent or
      other amounts under any lease of (or other arrangement conveying the
      right to use) real or personal property, or a combination thereof, which
      obligations are required to be classified and accounted for as
      liabilities on a balance sheet of such Person under GAAP and the amount
      of which obligations shall be the capitalized amount thereof determined
      in accordance with GAAP as in effect on October 14, 2011.”
    

    
      vi        by deleting the period at the end of the definition of “Change
      in Law” and substituting the following in its stead:
    

    
      “; provided, however, for the purposes of this
      Agreement: (x) the Dodd-Frank Wall Street Reform and Consumer Protection
      Act and all requests, rules, guidelines or directives thereunder or
      issued in connection therewith and (y) all requests, rules, guidelines
      or directives promulgated by the Bank for International Settlements, the
      Basel Committee on Banking Supervision (or any successor or similar
      authority) or the United States regulatory authorities, in each case
      pursuant to Basel III, shall in each case be deemed to be a “Change in
      Law”, regardless of the date enacted, adopted or issued.”
    

    
      vii       by deleting the definition of “Committed Loan Note” in its
      entirety and by substituting the following in its stead:
    

    
      ““Committed Loan Note” means (a) the Third Amended
      and Restated Master Note, dated as of October 14, 2011 (as may be
      amended, amended, modified, supplemented or restated from time to time)
      and (b) any other promissory note made by the Borrowers in favor of a
      Lender evidencing Committed Loans made by such Lender, substantially in
      the form of Exhibit C.”
    

    
      viii      by deleting the definition of “Early Termination Fee” in its
      entirety.
    

    
       ix.      by deleting the definition of “Highbridge Note” in its
      entirety.
    

    
       x.       by deleting the definition of “Maturity Date” in its entirety
      and by substituting the following in its stead:
    

    
       ““Maturity Date” means October 14, 2016.”
    

    
                 xi.       by deleting clause (h) from the definition of
      “Permitted Encumbrances” and substituting the following in its stead:
    

    
       “(h)      Liens on fixed or capital assets acquired by any Loan Party
      which are permitted under clause (c) of the definition of
      Permitted Indebtedness so long as (i) such Liens and the  Indebtedness
      secured thereby are incurred prior to or within ninety (90) days after
      such acquisition, (ii) the Indebtedness secured thereby does not exceed
      the cost of acquisition of  such fixed or capital assets, (iii) such
      Liens shall not extend to any other property or assets of the Loan
      Parties, and (iv) such Liens and the Indebtedness secured thereby are in
       amounts equal to or less than those amounts permitted under the proviso
      of clause (c) of the definition of Permitted Indebtedness;”

    

    
      
        

        

      

      
        
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                xii.      by deleting clause (c) from the definition of
      “Permitted Indebtedness” and substituting the following in its stead:
    

    
       “(c) purchase money Indebtedness of any Loan Party to finance the
      acquisition of any fixed or capital assets, including Capital Lease
      Obligations, and any Indebtedness assumed in   connection with the
      acquisition of any such assets or secured by a Lien on any such assets
      prior to the acquisition thereof, and extensions, renewals and
      replacements of any such   Indebtedness that do not increase the
      outstanding principal amount thereof or result in an earlier maturity
      date or decreased weighted average life thereof provided that the terms
        relating to principal amount, amortization, maturity, collateral (if
      any) and subordination (if any), and other material terms taken as a
      whole, of any such refinancing, refunding,   renewing or extending
      Indebtedness, and of any agreement entered into and of any instrument
      issued in connection therewith, are no less favorable in any material
      respect to the   Loan Parties or the Lenders than the terms of any
      agreement or instrument governing the Indebtedness being refinanced,
      refunded, renewed or extended and the interest rate   applicable to any
      such refinancing, refunding, renewing or extending Indebtedness does not
      exceed the then applicable market interest rate, provided, however,
      that the aggregate   principal amount of Indebtedness permitted by this clause
      (c) shall not at any time exceed $500,000 from October 14, 2011 to
      October 13, 2012; $700,000 from October 14, 2012   to October 13, 2013;
      $1,050,000 from October 14, 2013 to October 13, 2014; $1,400,000 from
      October 14, 2014 to October 13, 2015; $1,750,000 from October 14, 2015
      to   October 13, 2016; and provided, further,
      that, if requested by the Collateral Agent, the Loan Parties shall cause
      the holders of any such Indebtedness to enter into a Collateral  
        Access  Agreement on terms reasonably satisfactory to the Collateral
      Agent;”
    

    
        xiii.     by deleting the definition of “Reverse Stock Split” in its
      entirety and substituting the following  in its stead:
    

    
         ““Reverse Stock Split” means a
      reverse stock split of the existing shares of iParty Corp.’s common
      stock as approved by iParty’s stockholders, pursuant to which the
      existing    shares of iParty Corp.’s common stock shall be combined into
      new shares of iParty Corp. common stock.”
    

    
                  xiv.     by deleting the definition of “Seller Note” in its
      entirety.
    

    
                   xv.      by deleting the definition of “Subordinated
      Indebtedness” in its entirety and substituting the following in its
      stead:
    

    
          ““Subordinated Indebtedness”
      means Indebtedness which is expressly subordinated in right of payment
      to the prior payment in full of the Obligations and which is in form and
      on     terms approved in writing by the Administrative Agent.”
    

    
                  xvi.      by deleting the definition of “Trade Note” in its
      entirety.
    

    
      

      

    

    
      
        

        

      

      
        
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          b.          AMENDMENTS
      TO ARTICLE II.  The provisions of Article II are hereby amended
      as follows:
    

    
             i.         Section 2.03 is hereby deleted in its entirety and the
      language contained in Annex A attached hereto is herby substituted in
      its stead.
    

    
             ii.        Section 2.06 is hereby amended by deleting “Early
      Termination Fees,” where it appears therein.
    

    
             iii.       Section 2.09(a) is hereby amended by deleting “one
      half of one percent (0.50%)” where it appears therein and substituting
      the following in its stead:
    

    
                  “three hundred seventy five thousandths of one percent
      (0.375%)”.
    

    
             iv.        Section 2.09(b) is hereby deleted in its entirety and
      the following is substituted in its stead:
    

    
         “(b)  Reserved”.
    

    
          c.          AMENDMENT
      TO ARTICLE IV.  The provisions of Section 4.02(h) are hereby
      amended by deleting “Early Termination Fees” where it appears therein.
    

    
          d.          AMENDMENT
      TO ARTICLE VI.   The provisions of Section 6.15 are hereby
      amended by deleting clauses (c) and (d) thereof and substituting the
      following in their stead:
    

    
      “(c)      Upon the Administrative Agent’s request from time to time, the
      Borrowers shall permit the Administrative Agent to obtain appraisals (in
      all events, at the Borrowers’ expense) conducted by such appraisers up
      to two (2) times per Fiscal Year; provided, however, if
      the Borrowers’ average Excess Availability is less than percent (50%) of
      the Loan Cap for any Fiscal Quarter during any Fiscal Year, then the
      Borrowers shall permit the Administrative Agent to obtain up to three
      (3) appraisals at the Borrowers’ expense in such Fiscal Year.  In its
      discretion, the Lender may obtain additional appraisals at the
      Borrowers’ expense, as provided in Section 6.10(b).
    

    
      (d)       The Administrative Agent contemplates conducting commercial
      finance audits (in each event, at the Borrowers’ expense) of the
      Borrowers’ books and records up to two (2) times per Fiscal Year; provided,
      however, if the Borrowers’ average Excess Availability is less
      than percent (50%) of the Loan Cap for any Fiscal Quarter during any
      Fiscal Year, then the Borrowers shall permit the Administrative Agent to
      obtain up to three (3) commercial finance audits at the Borrowers’
      expense in such Fiscal Year. In its discretion the Lender may undertake
      additional audits at the Borrowers’ expense,  as provided in Section
      6.10(b).”
    

    
          e.          AMENDMENTS
      TO ARTICLE VII.          The provisions of Article VII are
      hereby amended as follows:
    

    
              i.         the provisions of Section 7.17 are hereby deleted in
      their entirety and the following is substituted in their stead:
    

    
      
        

        

      

      
        
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      “7.17     Minimum Availability.  Permit
      Excess Availability (without giving effect to clause (d) of the
      definition of the Borrowing Base) at any time to be less than an amount
      equal to 7.5% of the then applicable Aggregate Commitments (the “Minimum
      Availability Block”); provided, however, the
      Minimum Availability Block shall be equal to zero (0) for the months of
      January through and including April of 2012.”
    

    
             ii.          the provisions of Section 7.18 are hereby deleted in
      their entirety and the following is substituted in their stead:
    

    
      “7.18    Capital Expenditures.  Make
      Capital Expenditures in excess of (a) the amount set forth on Schedule
      7.18  for the Fiscal Year ending on or about December 31, 2009; (b) 110%
      of the amount set forth for Capital Expenditures in the Business Plan
      for each of the Fiscal Years ending on or about December 31, 2010, 2011,
      2012, 2013, 2014, and 2015, respectively; and (c) 110% of the amount set
      forth for Capital Expenditures in the Business Plan, pro-rated through
      the Maturity Date, for the Fiscal Year ending on or about December 31,
      2016.”
    

    
             iii.         Section 7.20 is hereby deleted in its entirety.
    

    
          f.          AMENDMENTS
      TO ARTICLE VIII.  The provisions of Article VIII are hereby
      amended as follows:
    

    
              i.          The provisions of Section 8.01(u) are amended by
      deleting clause (iii) in its entirety and substituting the following in
      its stead:
    

    
      “(iii) the occurrence and continuance of any default or event of default
      in respect of any Subordinated Indebtedness;”
    

    
             ii.           The provisions of Section 8.03 are hereby amended
      by deleting the fourth clause thereof in its entirety and substituting
      the following in its stead:
    

    
      “Fourth, to payment of that portion of the Obligations
      constituting accrued and unpaid interest on the Committed Loans, L/C
      Borrowings and other Obligations, and fees (including Letter of Credit
      Fees), ratably among the Lenders and the L/C Issuer in proportion to the
      respective amounts described in this clause Fourth payable to
      them;”
    

    
      5.        Conditions to
      Effectiveness.  This Amendment shall not be effective until each of
      the following conditions precedent have been fulfilled to the reasonable
      satisfaction of the Agent:
    

    
       a.       This Amendment shall have been duly executed and delivered by
      the Loan Parties, Agent, and the Lenders.  The Agent shall have received
      a fully executed copy hereof.
    

    
        b.       All action on the part of the Loan Parties necessary for the
      valid execution, delivery and performance by the Loan Parties of this
      Amendment shall have been duly and effectively taken.
    

    
        c.       After giving effect to this Amendment, no Default or Event of
      Default shall have occurred and be continuing.
    

    
        d.       The Loan Parties shall have paid to the Agent all fees, costs
      and expenses, including the attorneys’ fees, incurred by the Agent in
      connection with this Amendment.
    

    
      
        

        

      

      
        
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      6.           Investment
      Account Closure.          As of the date hereof, the Loan Parties
      maintain that certain investment account ending in -2880 with Sovereign
      Bank (the “Investment Account”).  The Loan Parties hereby
      represent and warrant that, as of the date hereof, the balance of such
      account is zero ($0).  The Loan Parties hereby agree that: (i) from and
      after the date hereof, the Loan Parties shall not deposit, transfer,
      maintain, or otherwise permit any funds to be deposited, transferred, or
      maintained in the Investment Account, and (ii) the Loan Parties shall
      close the Investment Account and deliver the Agent confirmation of same
      within thirty (30) days of the date hereof (or such longer period as the
      Agent may agree in writing).  
    

    
      7.           Miscellaneous.
    

    
          a.       The terms and provisions hereof shall be binding upon and
      inure to the benefit of the parties hereto and their successors and
      assigns.
    

    
          b.       This Amendment may be executed in multiple counterparts,
      each of which shall constitute an original and together which shall
      constitute but one and the same instrument.  Delivery of              an
      executed counterpart of a signature page of this Amendment by facsimile
      or other electronic transmission shall be effective as delivery of a
      manually executed counterpart of this              Amendment. This
      Amendment shall constitute a Loan Document.
    

    
          c.       The Loan Parties agree to do such further acts and things,
      and to execute and deliver, or cause to be executed and delivered, such
      additional instruments, documents, and assignments and
                   agreements as the Agent and its counsel may reasonably
      request in connection with the administration and enforcement of this
      Amendment or in order to better assure and confirm unto              the
      Agent its rights and remedies hereunder or under any of the other Loan
      Documents.
    

    
          d.       This Amendment shall be governed by, and construed and
      interpreted in accordance with, the law of the Commonwealth of
      Massachusetts.
    

    
      

      

    

    
      [Signature Pages Follow]
    

    
      

      

    

    
      
        

        

      

      
        
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                IN WITNESS WHEREOF, this Amendment has been duly executed and
      delivered by each of the parties hereto as a sealed instrument as of the
      date first above written.
    

    

    

    	
           
        	
           
        	

        
	

        	

        	
          
            IPARTY RETAIL STORES CORP.,
          

        
	

        	

        	
          
            as Lead Borrower
          

        
	

        	

        	
           
        
	

        	

        	
          
            By: /s/ Sal Perisano
          

        
	

        	

        	
          
            Name:  Sal Perisano
          

        
	

        	

        	
          
            Title:    Chief Executive Officer
          

        
	

        	

        	
           
        
	

        	

        	
           
        
	

        	

        	
          
            IPARTY CORP.,
          

        
	

        	

        	
          
            as a Borrower
          

        
	

        	

        	
           
        
	

        	

        	
           
        
	

        	

        	
          
            By: /s/ Sal Perisano
          

        
	

        	

        	
          
            Name:  Sal Perisano
          

        
	

        	

        	
          
            Title: Chief Executive Officer
          

        

    

    
      

      

      

    

    
      [Signature Page to First Amendment]
    

    
      

    

    
      
        

        

      

      
        

        

        
          

        

      

      
        

        

      

    

    
      

    

    	
           
        	
           
        	
          
            WELLS FARGO BANK, NATIONAL
          

        
	

        	

        	
          
            ASSOCIATION, as successor by merger to
          

        
	

        	

        	
          
            Wells Fargo Retail Finance, LLC, as Agent
          

        
	

        	

        	
          
            and Lender
          

        
	

        	

        	
           
        
	

        	

        	
          
            By:      /s/ Michele Ayou
          

        
	

        	

        	
          
            Name:   Michele Ayou
          

        
	

        	

        	
          
            Title:   An Authorized Officer
          

        

    

    
      

    

    
      [Signature Page to First Amendment]
    

    
      

      

    

    
      
        

        

      

      
        

        

        
          

        

      

      
        

        

      

    

    
      

    

    
      ANNEX A
    

    
      

      SECTION 2.03 REPLACEMENT LANGUAGE
    

    
      “2.03     Letters of Credit.
    

    
      (a)  The Letter of Credit Commitment.
    

    
         (i)       Subject to the terms and conditions set forth herein, (A)
      the L/C Issuer agrees, in reliance upon the agreements of the Lenders
      set forth in this Section 2.03, (1) from time to time on any
      Business Day during the period from the Closing Date until the Letter of
      Credit Expiration Date, to issue Letters of Credit for the account of
      the Borrowers, and to amend or extend Letters of Credit previously
      issued by it, in accordance with Section 2.03(b) below, and (2)
      to honor drawings under the Letters of Credit; and (B) the Lenders
      severally agree to participate in Letters of Credit issued for the
      account of the Borrowers and any drawings thereunder; provided that
      after giving effect to any L/C Credit Extension with respect to any
      Letter of Credit, (x) the Total Outstandings shall not exceed the Loan
      Cap, (y) the aggregate Outstanding Amount of the Committed Loans of any
      Lender, plus such Lender’s Applicable Percentage of the Outstanding
      Amount of all L/C Obligations, plus such Lender’s Applicable Percentage
      of the Outstanding Amount of all Swing Line Loans shall not exceed such
      Lender’s Commitment, and (z) the Outstanding Amount of the L/C
      Obligations shall not exceed the Letter of Credit Sublimit.  Each
      request by the Lead Borrower for the issuance or amendment of a Letter
      of Credit shall be deemed to be a representation by the Borrowers that
      the L/C Credit Extension so requested complies with the conditions set
      forth in the proviso to the preceding sentence.  Within the foregoing
      limits, and subject to the terms and conditions hereof, the Borrowers’
      ability to obtain Letters of Credit shall be fully revolving, and
      accordingly the Borrowers may, during the foregoing period, obtain
      Letters of Credit to replace Letters of Credit that have expired or that
      have been drawn upon and reimbursed.  Any L/C Issuer (other than Wells
      Fargo or any of its Affiliates) shall notify the Agent in writing on
      each Business Day of all Letters of Credit issued on the prior Business
      Day by such L/C Issuer, provided that (A) until the Agent advises any
      such L/C Issuer that the provisions of Section 4.02 are not
      satisfied, or (B) the aggregate amount of the Letters of Credit issued
      in any such week exceeds such amount as shall be agreed by the Agent and
      the L/C Issuer, such L/C Issuer shall be required to so notify the Agent
      in writing only once each week of the Letters of Credit issued by such
      L/C Issuer during the immediately preceding week as well as the daily
      amounts outstanding for the prior week, such notice to be furnished on
      such day of the week as the Agent and such L/C Issuer may agree.  All
      Existing Letters of Credit shall be deemed to have been issued pursuant
      hereto, and from and after the Closing Date shall be subject to and
      governed by the terms and conditions hereof.
    

    
        (ii)         No Letter of Credit shall be issued if:
    

    
                     (A)       subject to Section (b)(iii),
      the expiry date of such requested Standby Letter of Credit would occur
      more than twelve months after the date of issuance or last extension,
      unless the Required Lenders have approved such expiry date; or
    

    
                     (B)  subject to Section (b)(iii),
      the expiry date of such requested Commercial Letter of Credit would
      occur more than 45 days after the date of issuance or last extension,
      unless the Required Lenders have approved such expiry date; or
    

    
                     (C)  the expiry date of such requested Letter of Credit
      would occur after the Letter of Credit Expiration Date, unless either
      such Letter of Credit is Cash Collateralized on or prior to the date of
      issuance of such Letter of Credit (or such later date as to which the
      Agent may agree) or all the Lenders have approved such expiry date.
    

    
      

    

    
      
        

        

      

      
        

        

        
          

        

      

      
        

        

      

    

    
      

    

    
       (iii)        No Letter of Credit shall be issued without the prior
      consent of the Agent if:
    

    
                     (A)  any order, judgment or decree of any Governmental
      Authority or arbitrator shall by its terms purport to enjoin or restrain
      the L/C Issuer from issuing such Letter of Credit, or any Law applicable
      to the L/C Issuer or any request or directive (whether or not having the
      force of law) from any Governmental Authority with jurisdiction over the
      L/C Issuer shall prohibit, or request that the L/C Issuer refrain from,
      the issuance of letters of credit generally or such Letter of Credit in
      particular or shall impose upon the L/C Issuer with respect to such
      Letter of Credit any restriction, reserve or capital requirement (for
      which the L/C Issuer is not otherwise compensated hereunder) not in
      effect on the Closing Date, or shall impose upon the L/C Issuer any
      unreimbursed loss, cost or expense which was not applicable on the
      Closing Date and which the L/C Issuer in good faith deems material to it;
    

    
                     (B)  the issuance of such Letter of Credit would violate
      one or more policies of the L/C Issuer applicable to letters of credit
      generally;
    

    
                     (C)  except as otherwise agreed by the Agent and the L/C
      Issuer, such Letter of Credit is in an initial Stated Amount less than
      $10,000, in the case of a Commercial Letter of Credit, or $20,000, in
      the case of a Standby Letter of Credit;
    

    
                     (D)  such Letter of Credit is to be denominated in a
      currency other than Dollars;
    

    
                     (E)  such Letter of Credit contains any provisions for
      automatic reinstatement of the Stated Amount after any drawing
      thereunder; or
    

    
                     (F)  a default of any Lender’s obligations to fund under Section 2.03(c)
      exists or any Lender is at such time a Defaulting Lender or
      Deteriorating Lender hereunder, unless the Agent or L/C Issuer has
      entered into satisfactory arrangements with the Borrowers or such Lender
      to eliminate the L/C Issuer’s risk with respect to such Lender.
    

    
        (iv)        The L/C Issuer shall not amend any Letter of Credit if (A)
      the L/C Issuer would not be permitted at such time to issue such Letter
      of Credit in its amended form under the terms hereof or (B) the
      beneficiary of such Letter of Credit does not accept the proposed
      amendment to such Letter of Credit.
    

    
         (v)        The L/C Issuer shall act on behalf of the Lenders with
      respect to any Letters of Credit issued by it and the documents
      associated therewith, and the L/C Issuer shall have all of the benefits
      and immunities (A) provided to the Agent in Article IX with
      respect to any acts taken or omissions suffered by the L/C Issuer in
      connection with Letters of Credit issued by it or proposed to be issued
      by it and Issuer Documents pertaining to such Letters of Credit as fully
      as if the term “Agent” as used in Article IX included
      the L/C Issuer with respect to such acts or omissions, and (B) as
      additionally provided herein with respect to the L/C Issuer.
    

    
      

    

    
      
        

        

      

      
        

        

        
          

        

      

      
        

        

      

    

    
      

    

    
      (b)         Procedures
      for Issuance and Amendment of Letters of Credit Auto-Extension Letters
      of Credit.
    

    
         (i)        Each Letter of Credit shall be issued or amended, as the
      case may be, upon the request of the Lead Borrower delivered to the L/C
      Issuer (with a copy to the Agent) in the form of a Letter of Credit
      Application, appropriately completed and signed by a Responsible Officer
      of the Lead Borrower.  Such Letter of Credit Application must be
      received by the L/C Issuer and the Agent not later than 11:00 a.m. at
      least two Business Days (or such other date and time as the Agent and
      the L/C Issuer may agree in a particular instance in their sole
      discretion) prior to the proposed issuance date or date of amendment, as
      the case may be.  In the case of a request for an initial issuance of a
      Letter of Credit, such Letter of Credit Application shall specify in
      form and detail satisfactory to the Agent and the L/C Issuer: (A) the
      proposed issuance date of the requested Letter of Credit (which shall be
      a Business Day); (B) the amount thereof; (C) the expiry date thereof;
      (D) the name and address of the beneficiary thereof; (E) the documents
      to be presented by such beneficiary in case of any drawing thereunder;
      (F) the full text of any certificate to be presented by such beneficiary
      in case of any drawing thereunder; and (G) such other matters as the
      Agent or L/C Issuer may require.  In the case of a request for an
      amendment of any outstanding Letter of Credit, such Letter of Credit
      Application shall specify in form and detail satisfactory to the Agent
      and the L/C Issuer (A) the Letter of Credit to be amended; (B) the
      proposed date of amendment thereof (which shall be a Business Day); (C)
      the nature of the proposed amendment; and (D) such other matters as the
      Agent or the L/C Issuer may require.  Additionally, the Lead Borrower
      shall furnish to the L/C Issuer and the Agent such other documents and
      information pertaining to such requested Letter of Credit issuance or
      amendment, and any Issuer Documents (including, if requested by the L/C
      Issuer, a Standby Letter of Credit Agreement or Commercial Letter of
      Credit Agreement, as applicable), as the L/C Issuer or the Agent may
      require.
    

    
        (ii)        Promptly after receipt of any Letter of Credit
      Application, the L/C Issuer will confirm with the Agent (by telephone or
      in writing) that the Agent has received a copy of such Letter of Credit
      Application from the Lead Borrower and, if not, the L/C Issuer will
      provide the Agent with a copy thereof.  Unless the L/C Issuer has
      received written notice from any Lender, the Agent or any Loan Party, at
      least one Business Day prior to the requested date of issuance or
      amendment of the applicable Letter of Credit, that one or more
      applicable conditions contained in Article IV shall not then be
      satisfied or unless the L/C Issuer would not be permitted, or would have
      no obligation, at such time to issue such Letter of Credit under the
      terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a)
      or otherwise), then, subject to the terms and conditions hereof, the L/C
      Issuer shall, on the requested date, issue a Letter of Credit for the
      account of the applicable Borrower or enter into the applicable
      amendment, as the case may be, in each case in accordance with the L/C
      Issuer's usual and customary business practices.  Immediately upon the
      issuance or amendment of each Letter of Credit, each Lender shall be
      deemed to (without any further action), and hereby irrevocably and
      unconditionally agrees to, purchase from the L/C Issuer, without
      recourse or warranty, a risk participation in such Letter of Credit in
      an amount equal to the product of such Lender’s Applicable Percentage
      times the Stated Amount of such Letter of Credit.  Upon any change in
      the Commitments under this Agreement, it is hereby agreed that with
      respect to all L/C Obligations, there shall be an automatic adjustment
      to the participations hereby created to reflect the new Applicable
      Percentages of the assigning and assignee Lenders.

    

    
      
        

        

      

      
        

        

        
          

        

      

      
        

        

      

    

    
      

    

    
       (iii)        If the Lead Borrower so requests in any applicable Letter
      of Credit Application, the L/C Issuer may, in its sole and absolute
      discretion, agree to issue a Standby Letter of Credit that has automatic
      extension provisions (each, an “Auto-Extension Letter of Credit”);
      provided that any such Auto-Extension Letter of Credit must permit the
      L/C Issuer to prevent any such extension at least once in each
      twelve-month period (commencing with the date of issuance of such
      Standby Letter of Credit) by giving prior notice to the beneficiary
      thereof not later than a day (the “Non-Extension Notice Date”)
      in each such twelve-month period to be agreed upon at the time such
      Standby Letter of Credit is issued.  Unless otherwise directed by the
      Agent or the L/C Issuer, the Lead Borrower shall not be required to make
      a specific request to the Agent or the L/C Issuer for any such
      extension.  Once an Auto-Extension Letter of Credit has been issued, the
      Lenders shall be deemed to have authorized (but may not require) the L/C
      Issuer to permit the extension of such Standby Letter of Credit at any
      time to an expiry date not later than the Letter of Credit Expiration
      Date; provided, however, that the Agent shall instruct the L/C
      Issuer not to permit any such extension if (A) the L/C Issuer has
      determined that it would not be permitted, or would have no obligation,
      at such time to issue such Standby Letter of Credit in its revised form
      (as extended) under the terms hereof (by reason of the provisions of
      clause (ii) or (iii) of Section 2.03(a) or otherwise), or
      (B) the L/C Issuer has received notice (which may be by telephone or in
      writing) on or before the day that is five Business Days before the
      Non-Extension Notice Date (1) from the Agent that the Required Lenders
      have elected not to permit such extension or (2) from the Agent, any
      Lender or the Lead Borrower that one or more of the applicable
      conditions specified in Section 4.02 is not then satisfied,
      and in each such case directing the L/C Issuer not to permit such
      extension.
    

    
        (iv)        Promptly after its delivery of any Letter of Credit or any
      amendment to a Letter of Credit to an advising bank with respect thereto
      or to the beneficiary thereof, the L/C Issuer will also deliver to the
      Lead Borrower and the Agent a true and complete copy of such Letter of
      Credit or amendment.
    

    
      (c)        Drawings and
      Reimbursements; Funding of Participations.
    

    
         (i)        Upon receipt from the beneficiary of any Letter of Credit
      of any notice of a drawing under such Letter of Credit, the L/C Issuer
      shall notify the Lead Borrower and the Agent thereof (as defined below; provided,
      however, that any failure to give or delay in giving such notice shall
      not relieve the Borrowers of their obligation to reimburse the L/C
      Issuer and the Lenders with respect to any such payment.  On the date of
      any payment by the L/C Issuer under a Letter of Credit (each such date,
      an “Honor Date”), the Borrowers shall be deemed to have
      requested a Committed Borrowing of Base Rate Loans to be disbursed on
      the Honor Date in an amount equal to the amount of such payment, without
      regard to the minimum and multiples specified in Section 2.02
      for the principal amount of Base Rate Loans, and without regard to
      whether the conditions set forth in Section 4.02 have been
      met. Any notice given by the L/C Issuer or the Agent pursuant to this Section 2.03(c)(i)
      may be given by telephone if immediately confirmed in writing; provided
      that the lack of such an immediate confirmation shall not affect the
      conclusiveness or binding effect of such notice.
    

    
        (ii)        Each Lender’s obligation to make Committed Loans to
      reimburse the L/C Issuer for amounts drawn under Letters of Credit, as
      contemplated by this Section 2.03(c) shall be absolute and
      unconditional and shall not be affected by any circumstance, including
      (A) any setoff, counterclaim, recoupment, defense or other right which
      such Lender may have against the L/C Issuer, any Borrower or any other
      Person for any reason whatsoever; (B) the occurrence or continuance of a
      Default or Event of Default, or (C) any other occurrence, event or
      condition, whether or not similar to any of the foregoing, and without
      regard to whether the conditions set forth in Section 4.02
      have been met.
    

    
      (d)        Repayment of
      Participations.  If any payment received by the L/C Issuer pursuant
      to Section 2.03(c)(i) is required to be returned under any
      of the circumstances described in Section 10.05 (including
      pursuant to any settlement entered into by the L/C Issuer in its
      discretion), each Lender shall pay to the Agent for the account of the
      L/C Issuer its Applicable Percentage thereof on demand of the Agent,
      plus interest thereon from the date of such demand to the date such
      amount is returned by such Lender, at a rate per annum equal to the
      Federal Funds Rate from time to time in effect.  The obligations of the
      Lenders under this clause shall survive the payment in full of the
      Obligations and the termination of this Agreement.

    

    
      
        

        

      

      
        

        

        
          

        

      

      
        

        

      

    

    
      

    

    
      (e)        Obligations
      Absolute.  The obligation of the Borrowers to reimburse the L/C
      Issuer for each drawing under each Letter of Credit shall be absolute,
      unconditional and irrevocable, and shall be paid strictly in accordance
      with the terms of this Agreement under all circumstances, including the
      following:
    

    
         (i)        any lack of validity or enforceability of such Letter of
      Credit, this Agreement, or any other Loan Document;
    

    
        (ii)        the existence of any claim, counterclaim, setoff, defense
      or other right that the Borrowers or any Subsidiary may have at any time
      against any beneficiary or any transferee of such Letter of Credit (or
      any Person for whom any such beneficiary or any such transferee may be
      acting), the L/C Issuer or any other Person, whether in connection with
      this Agreement, the transactions contemplated hereby or by such Letter
      of Credit or any agreement or instrument relating thereto, or any
      unrelated transaction;
    

    
       (iii)        any draft, demand, certificate or other document presented
      under such Letter of Credit proving to be forged, fraudulent, invalid or
      insufficient in any respect or any statement therein being untrue or
      inaccurate in any respect; or any loss or delay in the transmission or
      otherwise of any document required in order to make a drawing under such
      Letter of Credit;
    

    
        (iv)        any payment by the L/C Issuer under such Letter of Credit
      against presentation of a draft or certificate that does not strictly
      comply with the terms of such Letter of Credit; or any payment made by
      the L/C Issuer under such Letter of Credit to any Person purporting to
      be a trustee in bankruptcy, debtor-in-possession, assignee for the
      benefit of creditors, liquidator, receiver or other representative of or
      successor to any beneficiary or any transferee of such Letter of Credit,
      including any arising in connection with any proceeding under any Debtor
      Relief Law;
    

    
         (v)        any other circumstance or happening whatsoever, whether or
      not similar to any of the foregoing, including any other circumstance
      that might otherwise constitute a defense available to, or a discharge
      of, the Borrowers or any of their Subsidiaries; or
    

    
        (vi)        the fact that any Default or Event of Default shall have
      occurred and be continuing.
    

    
           The Lead Borrower shall promptly examine a copy of each Letter of
      Credit and each amendment thereto that is delivered to it and, in the
      event of any claim of noncompliance with the Lead Borrower’s
      instructions or other irregularity, the Lead Borrower will immediately
      notify the Agent and the L/C Issuer.  The Borrowers shall be
      conclusively deemed to have waived any such claim against the L/C Issuer
      and its correspondents unless such notice is given as aforesaid.
    

    
      

    

    
      
        

        

      

      
        

        

        
          

        

      

      
        

        

      

    

    
      

    

    
      (f)        Role of L/C Issuer.  Each
      Lender and the Borrowers agree that, in paying any drawing under a
      Letter of Credit, the L/C Issuer shall not have any responsibility to
      obtain any document (other than any sight draft, certificates and
      documents expressly required by the Letter of Credit) or to ascertain or
      inquire as to the validity or accuracy of any such document or the
      authority of the Person executing or delivering any such document.  None
      of the L/C Issuer, the Agent, any of their respective Related Parties
      nor any correspondent, participant or assignee of the L/C Issuer shall
      be liable to any Lender for (i) any action taken or omitted in
      connection herewith at the request or with the approval of the Lenders
      or the Required Lenders, as applicable; (ii) any action taken or omitted
      in the absence of gross negligence or willful misconduct; (iii) any
      error, omission, interruption, loss or delay in transmission or delivery
      of any draft, notice or other communication under or relating to any
      Letter of Credit or any error in interpretation of technical terms; or
      (iv) the due execution, effectiveness, validity or enforceability of any
      document or instrument related to any Letter of Credit or Issuer
      Document.  The Borrowers hereby assume all risks of the acts or
      omissions of any beneficiary or transferee with respect to its use of
      any Letter of Credit; provided, however, that this assumption is
      not intended to, and shall not, preclude the Borrowers’ pursuing such
      rights and remedies as it may have against the beneficiary or transferee
      at law or under any other agreement.  None of the L/C Issuer, the Agent,
      any of their respective Related Parties nor any correspondent,
      participant or assignee of the L/C Issuer shall be liable or responsible
      for any of the matters described in clauses (i) through (v) of Section 2.03(e)
      or for any action, neglect or omission under or in connection with any
      Letter of Credit or Issuer Documents, including, without limitation, the
      issuance or any amendment of any Letter of Credit, the failure to issue
      or amend any Letter of Credit, or the honoring or dishonoring of any
      demand under any Letter of Credit, and such action or neglect or
      omission will bind the Borrowers; provided, however, that
      anything in such clauses to the contrary notwithstanding, the Borrowers
      may have a claim against the L/C Issuer, and the L/C Issuer may be
      liable to the Borrowers, to the extent, but only to the extent, of any
      direct, as opposed to consequential, exemplary or punitive damages
      suffered by the Borrowers which the Borrowers prove were caused by the
      L/C Issuer's willful misconduct or gross negligence or the L/C Issuer's
      willful failure to pay under any Letter of Credit after the presentation
      to it by the beneficiary of a sight draft and certificate(s) strictly
      complying with the terms and conditions of a Letter of Credit; provided
      further, however, that any claim against the L/C Issuer by the Borrowers
      for any loss suffered or incurred by the Borrowers shall be reduced by
      an amount equal to the sum of (i) the amount (if any) saved by the
      Borrowers as a result of the breach or other wrongful conduct that
      allegedly caused such loss, and (ii) the amount (if any) of the loss
      that would have been avoided had the Borrowers taken all reasonable
      steps to mitigate such loss, including, without limitation, by enforcing
      their rights against any beneficiary and, in case of a claim of wrongful
      dishonor, by specifically and timely authorizing the L/C Issuer to cure
      such dishonor.  In furtherance and not in limitation of the foregoing,
      the L/C Issuer may accept documents that appear on their face to be in
      order, without responsibility for further investigation, regardless of
      any notice or information to the contrary (or the L/C Issuer may refuse
      to accept and make payment upon such documents if such documents are not
      in strict compliance with the terms of such Letter of Credit and may
      disregard any requirement in a Letter of Credit that notice of dishonor
      be given in a particular manner and any requirement that presentation be
      made at a particular place or by a particular time of day), and the L/C
      Issuer shall not be responsible for the validity or sufficiency of any
      instrument transferring or assigning or purporting to transfer or assign
      a Letter of Credit or the rights or benefits thereunder or proceeds
      thereof, in whole or in part, which may prove to be invalid or
      ineffective for any reason.  The L/C Issuer shall not be responsible for
      the wording of any Letter of Credit (including, without limitation, any
      drawing conditions or any terms or conditions that are ineffective,
      ambiguous, inconsistent, unduly complicated or reasonably impossible to
      satisfy), notwithstanding any assistance the L/C Issuer may provide to
      the Borrowers with drafting or recommending text for any Letter of
      Credit Application or with the structuring of any transaction related to
      any Letter of Credit, and the Borrowers hereby acknowledge and agree
      that any such assistance will not constitute legal or other advice by
      the L/C Issuer or any representation or warranty by the L/C Issuer that
      any such wording or such Letter of Credit will be effective.  Without
      limiting the foregoing, the L/C Issuer may, as it deems appropriate,
      modify or alter and use in any Letter of Credit the terminology
      contained on the Letter of Credit Application for such Letter of Credit.

    

    
      
        

        

      

      
        

        

        
          

        

      

      
        

        

      

    

    
      

    

    
      (g)        Cash Collateral.  Upon
      the request of the Agent, (i) if the L/C Issuer has honored any full or
      partial drawing request under any Letter of Credit and such drawing has
      resulted in an L/C Obligation that remains outstanding, or (ii) if, as
      of the Letter of Credit Expiration Date, any L/C Obligation for any
      reason remains outstanding, the Borrowers shall, in each case,
      immediately Cash Collateralize the then Outstanding Amount of all L/C
      Obligations.  Sections 2.05 and 8.02(c) set
      forth certain additional requirements to deliver Cash Collateral
      hereunder.  For purposes of this Section 2.03, Section 2.05
      and Section 8.02(c),“Cash Collateralize” means
      to pledge and deposit with or deliver to the Agent, for the benefit of
      the L/C Issuer and the Lenders, as collateral for the L/C Obligations,
      cash or deposit account balances in an amount equal to 105% of the
      Outstanding Amount of all L/C Obligations, pursuant to documentation in
      form and substance satisfactory to the Agent and the L/C Issuer (which
      documents are hereby Consented to by the Lenders).  The Borrowers hereby
      grant to the Agent a security interest in all such cash, deposit
      accounts and all balances therein and all proceeds of the
      foregoing.  Cash Collateral shall be maintained in blocked, non-interest
      bearing deposit accounts at Wells Fargo.  If at any time the Agent
      determines that any funds held as Cash Collateral are subject to any
      right or claim of any Person other than the Agent or that the total
      amount of such funds is less than the aggregate Outstanding Amount of
      all L/C Obligations, the Borrowers will, forthwith upon demand by the
      Agent, pay to the Agent, as additional funds to be deposited as Cash
      Collateral, an amount equal to the excess of (x) such aggregate
      Outstanding Amount over (y) the total amount of funds, if any, then held
      as Cash Collateral that the Agent determines to be free and clear of any
      such right and claim.  Upon the drawing of any Letter of Credit for
      which funds are on deposit as Cash Collateral, such funds shall be
      applied, to the extent permitted under applicable Laws, to reimburse the
      L/C Issuer and, to the extent not so applied, shall thereafter be
      applied to satisfy other Obligations.
    

    
      (h)        Applicability of
      ISP and UCP 600.  Unless otherwise expressly agreed by the L/C
      Issuer and the Lead Borrower when a Letter of Credit is issued
      (including any such agreement applicable to an Existing Letter of
      Credit), (i) the rules of the ISP and the UCP 600 shall apply to each
      Standby Letter of Credit, and (ii) the rules of the UCP 600 shall apply
      to each Commercial Letter of Credit.
    

    
      (i)        Letter of Credit
      Fees.  The Borrowers shall pay to the Agent for the account of each
      Lender in accordance with its Applicable Percentage a Letter of Credit
      fee (the “Letter of Credit Fee”) for each Letter of Credit
      equal to the Applicable Rate times the daily Stated Amount under each
      such Letter of Credit (whether or not such maximum amount is then in
      effect under such Letter of Credit).  For purposes of computing the
      daily amount available to be drawn under any Letter of Credit, the
      amount of the Letter of Credit shall be determined in accordance with Section 1.06.
      Letter of Credit Fees shall be (i) due and payable on the first day
      after the end of each month commencing with the first such date to occur
      after the issuance of such Letter of Credit, and thereafter on demand,
      and (ii) computed on a monthly basis in arrears.  Notwithstanding
      anything to the contrary contained herein, while any Event of Default
      exists, all Letter of Credit Fees shall accrue at the Default Rate as
      provided in Section 2.08(b) hereof.
    

    
      (j)        Documentary and
      Processing Charges Payable to L/C Issuer.    For purposes of
      computing the daily amount available to be drawn under any Letter of
      Credit, the amount of the Letter of Credit shall be determined in
      accordance with Section 1.06. In addition, the Borrowers
      shall pay directly to the L/C Issuer, for its own account, the customary
      issuance, presentation, amendment and other processing fees, and other
      standard costs and charges, of the L/C Issuer relating to letters of
      credit as from time to time in effect.  Such customary fees and standard
      costs and charges are due and payable on demand and are nonrefundable.
    

    
      (k)        Conflict with
      Issuer Documents.  In the event of any conflict between the terms
      hereof and the terms of any Issuer Document, the terms hereof shall
      control.a50034676ex4-1.htm

Exhibit 4.1

 

Promissory Note

 

 

	
Borrower Information:

	 	 
	
Name:

	
Tri-Valley Corporation

	
Address:

	
4927 Calloway Drive

	  	
Bakersfield, CA 933 12

	
Phone:

	
661-864-0500

	 	 
	
Lender Information:

	
Name:

	
G. Thomas Gamble

	
Address:

	  
	  	  
	
Phone:

	  
	 	 
	
Loan Information:

                                                                                                                   

On Monday, August 29, 2011 , Mr. G. Thomas Gamble loaned Tri-Valley Corporation a total amount of $150,000.00.  The loan is to be repaid, with simple interest at 10% annually, upon demand by Mr. G. Thomas Gamble.

 

Promise to Pay.  For value received of $150,000.00, Tri-Valley Corporation ("Borrower") promises to pay Mr. G Thomas Gamble ("Lender") $150,000.00 and accumulated interest thereon at an annual rate of 10% on any unpaid balance as specified below.

 

Borrower will pay one lump payment upon demand by Mr. G. Thomas Gamble.

 

This was an unsecured loan.

 

Collection Costs.  If Lender prevails in a lawsuit to collect on this Note, Borrower will pay Lender's costs and lawyer's fees in an amount the court finds to be reasonable.

 

The undersigned and all other parties to this note, whether as endorsers, guarantors or sureties, agree to remain fully bound until this note shall be fully paid and waive demand, presentment and protest and all notices hereto and further agree to remain bound notwithstanding any extension, modification, waiver, or other indulgence or discharge or release of any obligor hereunder or exchange, substitution, or release of any collateral granted as security for this note.  No modification or indulgence by any holder hereof shall be binding unless in writing; and any indulgence on anyone occasion shall not be an indulgence for any other or future occasion.  Any modification or change in terms, hereunder granted by any holder hereof, shall be valid and binding upon each of the undersigned, notwithstanding the acknowledgement of any of the undersigned, and each of the undersigned does hereby irrevocably grant to each of the others a power of attorney to enter into any such modification on their behalf.  The rights of any holder hereof shall be cumulative and not necessarily successive.  This note shall take effect as a sealed instrument and shall be construed, governed and enforced in accordance with the laws of the State of California.

 

	
Borrower: Tri-Valley Corporation

	

Date:    August 29, 2011

	 	 
	  	  	  
	
By:

	
/s/ Maston N. Cunningham

	  
	  	
Maston N. Cunningham

	  
	  	
President and Chief Executive Officer

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