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. LML PAYMENT SYSTEMS INC (781891) 10-Q published on Nov 13, 2012 at 3:47 pm
Reporting Period: Sep 29, 2012
On September 21, 2012, the Corporation entered into an Arrangement Agreement (the “Arrangement Agreement”) with Digital River, Inc. (“Digital River”) and LML Acquisition Corp., a direct wholly-owned subsidiary of Digital River (“Merger Sub”). The Arrangement Agreement contemplates the acquisition by Digital River, through Merger Sub, of all of the outstanding equity securities of the Corporation pursuant to a “plan of arrangement” (the “Arrangement”) under the Business Corporations Act (British Columbia), under which the Corporation is now governed. The Corporation’s Board of Directors, acting upon the unanimous recommendation of a special committee of the Board of Directors comprised of all the independent members of the Board of Directors, has approved and adopted the Arrangement Agreement and has recommended that the Corporation’s shareholders vote to approve the Arrangement Agreement. The Arrangement Agreement has also been approved by the boards of directors of all other parties to the Arrangement Agreement.
The Arrangement is to be implemented by way of a statutory plan of arrangement under the Business Corporations Act (British Columbia) and is subject to the approval of 66 2/3% of the votes cast by the Corporation’s common shareholders at a special meeting of the Corporation’s shareholders, the approval of the Supreme Court of British Columbia and other customary closing conditions (all as set forth in the Arrangement Agreement). The Arrangement Agreement contains certain customary covenants and agreements, including covenants with respect to the operation of the business of the Corporation and its subsidiaries between signing and closing, governmental filings and approvals, public disclosures and similar matters. The Arrangement Agreement provides for certain termination rights in favor of each of Digital River and the Corporation (including, if the Arrangement Agreement is terminated in certain specified circumstances, the payment by the Corporation to Digital River of a termination fee of $3 million, which is approximately 2.9% of the aggregate consideration to be paid in the Arrangement). For the terms of the Arrangement Agreement, including the circumstances under which the Arrangement Agreement can be terminated and the ramifications of such a termination, refer to the Arrangement Agreement as filed as Exhibit 2.1 to the Corporation’s Current Report on Form 8-K dated September 24, 2012.
On October 12, 2012, the Corporation filed a Preliminary Proxy Statement with the SEC indicating its intention to call a special meeting of its shareholders to vote on the Arrangement and the Arrangement Agreement. The Corporation’s shareholder meeting to vote on the Arrangement Agreement and the closing of the Arrangement are expected to occur during the latter half of the fourth quarter of 2012 or the first quarter of 2013; however, no assurance can be given that the Arrangement Agreement will be approved by the Corporation’s shareholders or that the Arrangement will ultimately be completed.
As of September 30, 2012, we have incurred approximately $853,000 in costs, including certain investment banking, travel, legal and accounting fees and other miscellaneous transaction expenses relating to the pending Arrangement between us and Digital River. Pursuant to the terms of the Arrangement Agreement, all costs and expenses that we incur that are associated with the Arrangement will be the obligation of Digital River following the closing of the Arrangement. However, if the Arrangement does not close, then we will be liable for such costs and expenses and will be required to expense the amounts accordingly.
Uncertainty about the effect of the Arrangement on suppliers, partners, regulators, and customers may have an adverse effect on us. These uncertainties could cause suppliers, customers and others that deal with us to defer purchases or other decisions concerning us or seek to change existing business relationships with us. In addition, the Arrangement Agreement restricts us from making certain acquisitions and taking other specified actions without Digital River’s approval. These restrictions could prevent us from pursuing attractive business opportunities that may arise prior to the completion of the Arrangement.
The Arrangement Agreement contains “no shop” provisions that restrict our ability to solicit proposals relating to alternative business combination transactions and, subject to certain exceptions, to enter into discussions, or enter into any agreement concerning, or provide confidential information in connection with, any proposals for alternative business combination transactions. Further, there are only a limited number of exceptions that would allow our Board of Directors to withdraw or change its recommendation to our common shareholders that they vote in favor of the adoption of the Arrangement Agreement. If our Board of Directors were to take such actions as permitted by the Arrangement Agreement, doing so in specified situations could entitle Digital River to terminate the Arrangement Agreement and be paid a termination fee of $3 million. These restrictions could deter a potential acquiror from proposing an alternative transaction.