Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. IPARTY CORP (1078383) 10-Q published on May 23, 2013 at 5:16 pm
Reporting Period: Mar 29, 2013
On May 9, 2013, pursuant to the terms of the Agreement and Plan of Merger (the “Merger Agreement”), dated as of March 1, 2013, by and among the Company, Party City Holdings Inc., a Delaware corporation (“Party City”), and Confetti Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Party City (“Merger Sub”), Merger Sub was merged with and into the Company, with the Company being the surviving corporation (the “Merger”). Upon completion of the Merger, the Company became a wholly-owned subsidiary of Party City. In connection with the Merger, the Company (i) paid in full all principal and interest outstanding under the Facility as of the close of the Merger and (ii) is in the process of delisting and deregistering its common stock.
Our prospective cash flows are subject to certain trends, events and uncertainties, including demands for capital to support growth, including store acquisitions and openings and our e-commerce site, finance inventory purchases, improve our infrastructure, respond to economic conditions, and meet contractual commitments. Based on our current operating plan, we believe that we will have sufficient liquidity to fund our operations, working capital requirements and capital expenditures through the next twelve months. Primary sources of liquidity will be from our cash from operating activities and, prior to the Merger, our credit facility with Wells Fargo, and, following the Merger, access to liquidity from Party City, our parent corporation, which will provide us with long-term liquidity.
Prior to the Merger, we were a party to that certain First Amendment (“Amendment”) to the Second Amended and Restated Credit Agreement (the “Facility”) with Wells Fargo, which was further amended on February 28, 2013. The Facility provided credit in the amount of up to $12,500,000 for five years through October 14, 2016. The amount of credit that was available from time to time under the Facility was determined as a percentage of the value of eligible inventory plus a percentage of the value of eligible credit card receivables, as reduced by certain reserve amounts that may be required by Wells Fargo. In connection with the Merger, the Company paid in full all principal and interest outstanding under the Facility as of the close of the Merger, and Wells Fargo no longer has any obligations to provide borrowings under the Facility.
On May 1, 2013, the Company, Party City, Merger Sub, and plaintiff in the Halstead Complaint reached an agreement-in-principle providing for the settlement of the outstanding litigation on the terms and conditions set forth in a memorandum of understanding (the “MOU”). Pursuant to the terms of the MOU, without agreeing that any of the claims in the Halstead Complaint have merit or that any supplemental disclosure was required under any applicable statute, rule, regulation or law, the Company agreed to make certain supplemental and amended disclosures in connection with its definitive proxy statement filed with the Commission on April 10, 2013. The MOU further provides that, among other things, (a) the parties to the MOU will enter into a definitive settlement agreement (the “Agreement”) and will submit the Agreement to the Suffolk County Superior Court (the “Court”) for review and approval; (b) the Agreement will provide for dismissal of the Halstead Complaint with prejudice; (c) the Agreement will include a general release of defendants of claims relating to the transaction; and (d) the proposed settlement is conditioned on final approval by the Court. There can be no assurance that the settlement will be finalized or that the Court will approve the settlement.
The Company and the other defendants have vigorously denied, and continue vigorously to deny, that they have committed or aided and abetted in the commission of any violation of law or engaged in any of the wrongful acts that were or could have been alleged in the referenced lawsuits, and expressly maintain that, to the extent applicable, they diligently and scrupulously complied with any applicable fiduciary and other legal duties. The Company and the other defendants entered into the contemplated settlement solely to eliminate the burden and expense of further litigation, to put the claims that were or could have been asserted to rest, and to avoid any adverse effects due to any possible delay to the closing of the Merger that might have arisen from further litigation. Nothing in this Quarterly Report on Form 10-Q, the MOU or any stipulation of settlement shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the amended and supplemental disclosures or any of the allegations in the Halstead Complaint.