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USA Technologies urges shareholder to call off proxy contest

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March 5, 2020

USA Technologies, Inc. said it will recommend the company opt out of two anti-takeover statutes and is urging a key shareholder, Hudson Executive Capital, to cancel a proxy contest in a U.S. Securities and Exchange Commission filing. HEC, a shareholder, has opposed the board’s recent decisionson its new CEO and recommended board member changes.

"Three of the nominees named in our proxy materials are individuals also identified by HEC, and we therefore hope that HEC will act in the best interests of all shareholders by calling off its unnecessary proxy contest. USAT is committed to ensuring we have best-in-class governance and will continue to act with shareholders’ best interests in mind," Donald W. Layden, Jr., USAT CEO and president, said in a press release.

USA Technologies Inc. filed a preliminary proxy statement today with the SEC in connection with the company’s annual meeting of shareholders scheduled to be held on April 30.

As previously announced and as detailed in its preliminary proxy statement filed today, the USAT slate of director nominees will comprise 10 individuals, nine of whom would serve as independent directors and eight of whom will have been appointed since April 2019. The USAT slate is comprised of Donald W. Layden Jr., Lisa P. Baird, Kelly Ann Kay, Robert L. Metzger, Patricia A. Oelrich, Ellen Richey, Sunil Sabharwal, William J. Schoch, Anne M. Smalling and Ingrid S. Stafford. Baird, Richey and Smalling are also nominees named as part of the proxy solicitation commenced by Hudson Executive Capital, one of the company’s shareholders, and Kay and Sabharwal are nominees who were appointed to the board in February 2020. In addition to the election of directors, USAT shareholders will vote on other matters including the ratification of the company’s auditors and executive compensation.

The company will put forth the following proposals to be voted on at the annual meeting:

• The board will recommend and put to a vote that USAT opt out of two Pennsylvania anti-takeover statutes: Subchapter E (control transactions) and Subchapter F (business combination with interested shareholder) of Chapter 25 of the Pennsylvania business corporation law.
• The board will put to a non-binding advisory vote as to whether shareholders wish the company to directly prosecute any claims it may have in the future against HEC for disgorgement of profits it may realize in disposing of any USAT shares during the 18-month period beginning November 2019. Shareholders can still bring any claim by or on behalf of the company if USAT declines to directly prosecute them. As previously announced, USAT believes that, in November 2019, HEC triggered the 18-month disgorgement period as defined by Subchapter H of Chapter 25 of the Pennsylvania business corporation law.

The company noted that, consistent with correspondence delivered to HEC in November, 2019, if shareholder proxies are delivered to HEC, shareholders may be in a position to demand that HEC acquire their shares for "fair value" under provisions of Subchapter E of the Pennsylvania business corporation law, the press release noted. This is in addition to the disgorgement statute that the company believes HEC has already triggered.

"We advise shareholders to review our preliminary solicitation materials that were filed today, as HEC only made passing reference in its proxy statement to Subchapter E, without providing substantive disclosure to shareholders they were soliciting about the consequences of such statute on HEC’s solicitation," the press release said. "Any amendment to USAT’s charter to opt out of Subchapter E will be completed in a way that does not impair any shareholder right against HEC that may vest at or prior to the annual meeting."