Gradco Reschedules Shareholder Session : Litigation: A publisher and stockholder sues the Irvine-based company, charging that its officers tried to buy subsidiary stock at an ‘inordinately low’ price.
Gradco Systems Inc., a maker of copier and printer products, postponed its annual shareholders meeting Friday and said it will fight an attempt by a tiny New York publisher to seek representation on Gradco’s board of directors.
New York-based Plenum Publishing Corp., which owns 8.9% of Gradco, said in a filing last week that it plans to nominate at least one outside director to Gradco’s board. The company currently has no outside directors.
It was also disclosed Friday that Plenum Chairman Martin E. Tash filed a civil lawsuit on Aug. 24 against Keith B. Stewart, Gradco’s chairman, and the company’s directors for allegedly granting themselves warrants to buy a 17% stake in the company’s valuable new Japanese subsidiary at below-market prices.
“We will solicit proxies to replace the board of directors of Gradco,” said Bernard Bressler, Plenum’s corporate counsel and secretary. He said, however, that the New York firm has no plans to acquire a controlling interest in Gradco.
Gradco said it would seek to nominate its own outside director at the annual meeting, which was abruptly rescheduled for Oct. 12.
In its suit filed in Orange County Superior Court in Santa Ana, Plenum alleges that Stewart and company directors conspired to misappropriate for their own benefit one of the company’s most valuable assets--its Japanese subsidiary, worth an estimated $100 million.
Besides Stewart, the suits names Gradco officers Joseph Sanchez, president and chief operating officer, and Mark M. Takeuchi, president and chief executive of Gradco Japan. It also names two company directors, Thomas J. O’Keefe and Horst O. Sieben.
A Gradco spokesman declined to comment on the suit.
The suit alleges that the scheme arose from Gradco’s reorganization this spring in which it divided itself into two operating subsidiaries, Gradco Printer Systems Inc., a money-losing printer-products unit, and Gradco Japan Ltd., which consisted of the company’s lucrative copier-products sales owned almost wholly by the parent company.
As part of the restructuring, Gradco discontinued manufacturing in Santa Ana and shifted its production to Japan and South Korea.
The suit charges that the board approved a plan in April to give top officers warrants--or stock-purchase rights--to buy 2.5 million shares, or 17%, of Gradco Japan, for $4.6 million, or $1.86 per share. That “inordinately low” price contrasted with the company’s sale in June of 27% of Gradco Japan for $26.5 million, or $6.70 a share, to a group of Japanese investors led by Japan Associated Finance Co. Ltd., the suit said.
Stewart was given warrants to buy 64% of the 17% stake in Gradco Japan, the suit alleged. Gradco officers, according to the suit, stood to pocket a windfall of more than $12 million, including $7.7 million for Stewart.
The suit also alleges that the company engaged in a complex transaction to “window dress” the “misappropriation of corporate assets.” The suit seeks unspecified damages and asks the court to bar Gradco’s officers from exercising their warrants.
