L90, eUniverse Break Merger Plan

Interactive entertainment network eUniverse Inc. yesterday called off its planned merger with online direct marketer L90 Inc. Final terms of the termination are subject to negotiation, but L90 at least will have to reimburse eUniverse for certain expenses associated with the failed merger plan.

EUniverse said in early January that it planned to acquire L90 in a deal worth more than $50 million. However, in an unusually complicated agreement, L90 was to pay the bulk of the purchase price. EUniverse was to lay out only about $5.1 million in cash.

“We believe that based on the preliminary terms we have reached with L90 governing the termination of the merger agreement, coupled with the uncertainty of the conclusion of L90's pending SEC investigation, it is in the best interest of our shareholders at this time to terminate the existing merger agreement with L90,” Brad Greenspan, eUniverse's chairman/CEO, said in a statement.

The Securities and Exchange Commission has been investigating L90's finances, and the Nasdaq Stock Market was looking into its stock. Early yesterday, Nasdaq halted trading in L90's stock and asked for additional information about the company's trading activities. Nasdaq said trading in the company's stock would remain halted until it “fully satisfied Nasdaq's request for additional information.” As of early afternoon March 11, L90's share had not resumed trading.

On Feb. 4, L90 said that two investigations would delay its merger with eUniverse until at least the end of March. The companies planned to complete the merger Feb. 28.

The company received a letter from Nasdaq's Listing Investigations division seeking specific information under Marketplace Rule 4330 c, which considers whether a company's stock should remain listed on the exchange.

L90 said then that it intended to “fully comply” with the Nasdaq and SEC investigations.

The SEC investigation centered on the abrupt resignation shortly after the merger was announced of Lucrezia Bickerton, L90's vice president of finance.

Also on March 11, L90 said president/CEO John Bohan resigned and chief financial officer Thomas Sebastian was placed on administrative leave. The company named Mitchell Cannold, formerly with Space.com, as president/CEO to replace Bohan. Replacing Bickerton as vice president of finance is Steven Kantor, formerly with Dr. Koop.

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