Blueprint
February 2,
2017
VIA EDGAR
David
L. Orlic
Special
Counsel - Office of Mergers and Acquisitions
Division
of Corporation Finance
U.S.
Securities & Exchange Commission
100 F
Street, NE
Washington, D.C.
20549
Re:
|
Paybox Corp
Schedule 13E-3
Filed December 30, 2016
File No. 005-78531
Preliminary Proxy Statement on Schedule 14A
Filed December 30, 2016
File No. 000-20660
|
Dear
Mr. Orlic:
Paybox
Corp (the “Company”) submits this
letter in response to the comment letter (the “Comment Letter”), dated
January 24, 2017, from the Staff (the “Staff”) of the Securities
and Exchange Commission (the “Commission”) with respect
to the Company’s above-referenced Schedule 13E-3 and
Preliminary Proxy Statement on Schedule 14A.
For
ease of reference, set forth in bold below, are the comments to the
Preliminary Proxy Statement on Schedule 14A, as reflected in the
Comment Letter. The Company’s responses are set forth below
each comment. The revisions to the filing described below are
reflected in amendments (the “Amendments”) to the
Preliminary Proxy Statement on Schedule 14A referenced above (as so
amended, including all exhibits thereto, the “Preliminary Proxy
Statement”) and the Schedule 13E-3, each being filed
simultaneously with this letter. We are providing by email a copy
of the Amendments marked to show changes from the original
Preliminary Proxy Statement on Schedule 14A and the original
Schedule 13E-3.
General
1.
Please
file a form of proxy with your next amendment and mark it
“Preliminary Copy.” See Rule 14a-6(a) and (e)(1) of
Regulation 14A.
Response:
The
Preliminary Proxy Statement has been revised to include a form of
proxy. See Appendix C.
General
2.
Please
provide the information required by Items 1003(c) and
1015(b)(2)-(5) of Regulation M-A. Please also provide the
information required by Rule 14a-5(e) of Regulation
14A.
Response:
The
Preliminary Proxy Statement has been revised in response to the
Staff’s comment. See pages 32, 20 and 37
respectively.
General
3.
Please
confirm your intention to file a Form 10-K with respect to the
fiscal year ended December 31, 2016, or provide an analysis as to
why you believe this is not necessary.
Response:
The Company’s Annual Report on Form 10-K for
the year ended 2016 (the “2016 Form
10-K”) is due on March
31, 2016. If, as a result of the transactions contemplated by the
Preliminary Proxy Statement, the Company is able to deregister its
common stock under the Securities Exchange Act of 1934 (the
“Exchange
Act”) prior to that time,
it intends to terminate its current Registration Statement on Form
S-8 and timely file a Form 15 suspending its reporting obligations
under the Exchange Act such that it would not be obligated to file
the 2016 Form 10-K. Otherwise, the Company will file the 2016 Form
10-K.
Fairness of the Reverse Stock Split, page 14
4.
Rule
13e-3 normally requires a reasonable detailed discussion of whether
the consideration offered to unaffiliated security holders
constitutes fair value in relation to going concern value. If the
Board of Directors relied on the Kidron fairness opinion for this
purpose, it must specifically adopt the analyses and conclusions of
Kidron. Please advise, or revise your disclosure.
Response:
The
Preliminary Proxy Statement has been revised in response to the
Staff’s comment. See page 14.
Equal Treatment of Affiliated and Unaffiliated Holders of Our
Shares, page 15
5.
Disclosure
here and elsewhere throughout the document states that the reverse
stock split will not affect stockholders differently on the basis
of affiliate status. Given that the sole determining factor in
whether a stockholder will be cashed out is the number of shares of
common stock held by the stockholder, which is a factor used to
determine affiliate status, please advise how this statement is
correct.
Response:
The
Preliminary Proxy Statement has been revised in response to the
Staff’s comment. See pages 3, 4, 15 and 20.
Current and Historical Prices, page 15
6.
Please
disclose with specificity how the Board of Directors considered
historical and current market prices in making its fairness
determination.
Response:
The
Preliminary Proxy Statement has been revised in response to the
Staff’s comment. See page 15.
Net Book Value and Liquidation Value, page 15
7.
Please
disclose with specificity how the Board of Directors considered net
book value and liquidation value in making its fairness
determination.
Response:
The
Preliminary Proxy Statement has been revised in response to the
Staff’s comment. See page 15.
Comparable Company Analysis, page 21
8.
Please
advise why Versapay Corporation is not included in the chart
appearing on page 22.
Response:
The
Company is informed by Kidron Capital Advisors LLC, the
Company’s financial advisor (“Kidron”) that Versapay
was considered to be an “outlier” company since its
valuation multiple of 5.2x revenue was significantly higher than
the other companies in the Comparable Company Analysis. Kidron
showed Versapay for illustrative purposes only (since it is in the
same general industry), but noted in the presentation that it was
not being used in the calculations for the mean and median
multiples.
Comparable Company Analysis, page 21
9.
Please
disclose why Kidron selected an enterprise value multiple reference
range of 1.5x to 2.5x of 2016E revenue and 27.5x to 28.5x of 2016E
EBITDA, when these ranges appear to be below the mean and median
for those measures.
Response:
The
Preliminary Proxy Statement has been revised in response to the
Staff’s comment. See page 22.
The
Company is informed by Kidron that Kidron rounded down the median
multiples of 2.2x revenue and 28.5x EBITDA (out to two decimal
points these multiple were 2.24x and 28.54x) and then added .5x for
the “high” case and subtracted .5x for the
“low” case. If Kidron’s model would not have
rounded the numbers, the impact on the valuation range would have
been to increase the upper range and decrease the lower range by
$0.01. Kidron uses the
median because it tends to adjust for most of the outliers. For
example, the EBITDA mean is skewed higher because the EBIDTA
multiple for BasWare Oyj was an extreme
outlier.
Projections, page 22
10.
Disclosure
advises investors not to rely on the financial projections. Please
eliminate this disclaimer advising investors not to rely on
disclosure in the document.
Response:
The
Preliminary Proxy Statement has been revised in response to the
Staff’s comment.
Financial Information, page 35
11.
Given
that financial information required by Item 13 of Schedule 13E-3
has been incorporated by reference, summary financial information,
as described in Item 1010(c) of Regulation M-A, must be
disseminated to security holders. See Instruction 1 to Item 13 of
Schedule 13E-3. Please revise your disclosure to include this
information.
Response:
The
Preliminary Proxy Statement has been revised in response to the
Staff’s comment. See page 35. Please
note that the Company has no material fixed charges, and that
accordingly information on ratios of earnings to fixed charges is
not included.
Incorporation of Certain Documents by Reference, page
37
12.
Neither
Schedule 13E-3 nor the proxy rules provide for incorporation by
reference of additional documents that you may file with the
Commission. Please revise the language in the fourth paragraph of
this section accordingly.
Response:
The
Preliminary Proxy Statement has been revised in response to the
Staff’s comment.
Annex B
We
note the statement that the financial analysis should not be
construed as creating any fiduciary duty on the part of Kidron to
any party. Similar language appears in Annex C. We believe that
these statements are inconsistent with the balance of the
disclosure addressing the fairness to security holders of the
proposed transaction from a financial perspective. Please eliminate
these disclaimers of responsibility to shareholders.
Response:
As a
preliminary matter, the Company has determined not to include the
Kidron presentation in the proxy materials and will instead refile
the presentation as an exhibit to Schedule 13E-3. The Kidron
opinion will be re-designated as Annex B.
The
Kidron opinion states, “This Opinion does not constitute a
recommendation to the Board or any stockholders of Paybox regarding
the proposed Reverse Stock Split. . . . Furthermore, the Opinion
should not be construed as creating any fiduciary duty on the part
of Kidron to any such party.” The Company respectfully
submits that this is a correct statement of the law, in that it
reflects the absence of a contractual or quasi-contractual
relationship between Kidron and the stockholders of the Company.
For example, in the oft-cited case of Joyce v. Morgan Stanley, 538 F.3d 797
(7th Cir. 2008), the court held that the shareholders of a target
company did not have a claim against the target company's financial
advisor based on the inclusion of a fairness opinion in a merger
proxy statement. It is also worth noting that in RBC Capital Markets v. Jervis, 129 A.3d
816 (Del. 2015) (Rural
Metro), the court upheld liability for a financial
advisor’s aiding and abetting the breach of the board’s
fiduciary duty, but it was not suggested that the advisor breached
a direct duty to stockholders. Accordingly, the Company
respectfully submits that it would not be appropriate to require
Kidron to modify the language in its presentation or fairness
opinion.
* * * *
*
Lastly,
in responding to the Staff’s comments, the Company
acknowledges the following:
●
the Company is
responsible for the accuracy and adequacy of the disclosures in the
filing;
●
Staff comments or
changes to disclosure in response to Staff comments do not
foreclose the Commission from taking any action with respect to the
filing; and
●
the Company may not
assert Staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities laws of
the United States.
If you
have any questions, or if we may be of any assistance, please do
not hesitate to contact the undersigned at 954-510-3765 or Abbe
Dienstag at 212-715- 9280.
Very
truly yours,
/s/ Lowell
Rush
Lowell
Rush
Chief
Financial Officer of Paybox Corp
cc:
Scott Rosenblum, Kramer Levin Naftalis & Frankel
LLP
Abbe L. Dienstag, Kramer Levin Naftalis & Frankel
LLP