USAT Says Hudson Executive Capital's Attempt To Seize Control Of Company Through Special Meeting Is Invalid

Posted On: 11/12/2019

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MALVERN, PA -- USA Technologies Inc. announced that its board of directors, in consultation with legal counsel, has determined that New York City-based Hudson Executive Capital LP's announced solicitation to call a special meeting of shareholders is invalid under the company's bylaws.

On Oct. 14, USAT announced that USAT chief executive Stephen Herbert had stepped down as Hudson Executive Capital, its largest shareholder, threatened to take over its board. Hudson Executive Capital LP, said it would nominate a slate of prospective board members at USAT's next stockholder meeting. Hudson Executive Capital managing director Douglas L. Braunstein blamed USAT for "value-destructive conduct" and declared that the cashless payment giant needs new leadership. | READ MORE

On Oct. 18, Hudson Executive Capital responded, stating that "…after 18 months without holding a meeting, the board must call a shareholder meeting at the earliest practicable date. At a minimum, it should comply with its previous commitment to hold the shareholder meeting within 90 days of October 10, and set and announce a meeting and record date accordingly. Any further delay will demonstrate the contempt this board appears to have for its shareholders."

Click here to read Hudson Executive Capital's full statement.

In response, on Nov. 10, USAT's board issued the following statement:

The USAT management team, with the assistance and oversight of the board of directors, is continuing to take necessary actions to advance our market leadership position, accelerate our growth and deliver value for our shareholders.

In addition, USAT has regained compliance with its financial reporting obligations and significantly strengthened its corporate governance, while also implementing a series of measures to bring USAT's oversight and control functions in line with best practices.

In tandem with this work, the USAT Board engaged in good faith discussions with Hudson, and in the interest of reaching a constructive path forward, proposed to work with Hudson in the Company's ongoing Board refreshment process, including considering board candidates that Hudson may propose.

To further its effort to take control of the company without payment of a premium to USAT shareholders, Hudson recently announced a complex plan to replace eight Board members with a slate of nominees that includes three candidates who formerly worked for JPMorgan Chase & Co., where Hudson's Founder and Managing Partner Douglas Braunstein served in a number of roles. Two other purportedly independent candidates, in addition to Mr. Braunstein, turn out to be investors in Hudson.

Following careful review of Hudson's preliminary consent solicitation materials, and in consultation with our legal counsel, the board has concluded that Hudson's plan is invalid under USAT's bylaws, which expressly prohibit the calling of special meetings for the purpose of removing directors.

Furthermore, in order to enable the company to focus on operating the business without unnecessary distraction and waste of resources at this critical time, the Board has amended the USAT bylaws so that no special meeting may be called before the next annual meeting.

The board of directors and management team remain open to a constructive dialogue with Hudson, but are not prepared to turn control of the company over to Hudson and its nominees.