L90 Under SEC Investigation

Ad network L90 is under investigation by the Securities and Exchange Commission, following the sudden resignation Friday of an executive.

The Los Angeles-based company, which is gearing up for a vote on merging with Web publisher eUniverse, said that vice president of finance Lucrezia Bickerton had tendered her resignation at the end of last week, effective immediately. In a statement, the company said that events surrounding her resignation were to be considered during the investigation.

L90 also said that the SEC had subpoenaed financial records from the company and from a member of its board of directors.

At the same time, L90 also said that Nasdaq’ listings investigations unit had requested information concerning the company’s ongoing inclusion in the exchange. Potentially, this request could stem from the SEC request, or from a separate matter altogether. In either event, however, it’s likely to center around the communications with regulatory authorities.

L90 said it intends to comply fully with the SEC investigation and Nasdaq’s information request. The company also said its board’s audit committee would begin an independent investigation into these matters, and it has retained outside counsel.

As a result of the inquiries, L90 said its proposed sale to eUniverse, which is pending regulatory and shareholder approval, would likely be delayed beyond its original Feb. 28 closing date. The company said that a special stockholder meeting, at which a vote on the merger was intended, would now likely be held no earlier than late March. Should the deal still go through, the companies’ operational and financial integration is slated to close by first quarter of 2003. The companies said this date currently remains unchanged.

In spite of the inquiry, eUniverse said it remained optimistic about its proposed purchase of L90.

“Despite the delay, we continue to be excited about the opportunity to acquire L90,” said eUniverse chairman and chief executive Brad Greenspan. “Throughout the last few weeks, we have been spending time getting to know the L90 employees. This process has provided eUniverse with more comfort than ever that the assets our company values, which include L90Direct and L90’s strong sales team, are indeed a great fit with eUniverse.”

eUniverse announced its proposed purchase of L90 in early January, in an arrangement that would see L90 actually largely funding its own buyout — paying shareholders between $1.80 and $2.00 in cash, for a total of $44.82 million to $49.8 million. eUniverse is to pay about $0.20 per share, or about $5.1 million in total. Combined, the two Los Angeles-based companies’ proposed per-share payout of $2.00 to $2.20 represented a 20 percent to 28 percent premium over L90’s average stock price for the ten trading days prior to the deal’s announcement.

At the time of the deal, L90 and eUniverse said the exact amount of L90’s payment to its shareholders would depend on precisely how much L90 has in cash immediately prior to the merger, and on the amount of “certain balance sheet items” — language that generally refers to outstanding liabilities.

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