The lawsuit alleges that, in pursuing their scheme, Chatham, AllianceBernstein and Omega have, among other things, derailed efforts to refinance a credit facility that matures next year, which has placed the Company at the risk of default and has caused the Company's auditor to refuse to certify the Company's financial statements; appointed individuals to serve on the Board of Directors -- including their own employees -- who are "intractably conflicted" and beholden to them; and directed those appointees to terminate Carl Grimstad, the Company's founder and long-time CEO, because of Mr. Grimstad's opposition to their scheme.
According to the lawsuit, Chatham, AllianceBernstein and Omega own more than 50% of iPayment's second-lien debt and 41% of its outstanding stock. Pursuant to an Investor Rights Agreement, the debtholders are entitled to appoint independent members of the Board of Directors until the end of this year, at which time any appointments will be subject to a vote of all shareholders. As a result, the three hedge funds are pursuing a plan "to appropriate for themselves the economic value of the Company, obtain for themselves the vast majority of the Company's shares and secure permanent control of the Company before their contractual control rights expire on December 29, 2016 -- all at the expense of the [other shareholders]."
The lawsuit seeks, among other things, to recover damages from Chatham, AllianceBernstein and Omega, and certain of their appointees on the Board of Directors, for the loss of the value of their shares in the Company, and to remove the hedge fund appointees from the Company's Board of Directors.
The plaintiffs are represented by New York City-based Kasowitz, Benson, Torres & Friedman LLP. A copy of the complaint is linked.
PDF - http://origin-qps.onstreammedia.com/origin/multivu_archive/ENR/9-29-16VerifiedComplaint.pdf
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/lawsuit-alleges-hedge-funds-and-their-hand-picked-board-members-pursued-illegal-scheme-to-steal-ipayment-from-equity-holders-including-companys-founder-breaching-fiduciary-duty-300337355.html
SOURCE Kasowitz, Benson, Torres & Friedman LLP