<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
GRADCO SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
GRADCO SYSTEMS, INC.
----------------
NOTICE OF ANNUAL MEETING
TO BE HELD ON SEPTEMBER 18, 1998
------------------------
To the Holders of the Common Stock:
PLEASE TAKE NOTICE that the Annual Meeting of Stockholders of GRADCO
SYSTEMS, INC. will be held on September 18, 1998 at 9:00 a.m. local time, at
Caesars Palace, 3570 Las Vegas Boulevard South, Las Vegas, Nevada.
The purposes of the meeting are as follows:
1. To elect six directors of the Company to serve a term of one year;
2. To transact such other business as may properly be brought before the
meeting.
Stockholders of record as of the close of business on August 11, 1998 will
be entitled to vote at said meeting.
Enclosed is a copy of the Company's Report on Form 10-K for the fiscal year
ended March 31, 1998 (excluding exhibits), and Letter to Shareholders, which
comprise the Company's 1998 Annual Report to Stockholders, along with a proxy
statement and proxy. Stockholders who do not expect to attend the Annual Meeting
are requested to sign and return the enclosed proxy in the enclosed envelope.
By Order of the Board of Directors
Bernard Bressler
SECRETARY
August 18, 1998
<PAGE>
GRADCO SYSTEMS, INC.
3753 HOWARD HUGHES PARKWAY
SUITE 200
LAS VEGAS, NEVADA 89109
------------------------
PROXY STATEMENT
FOR HOLDERS OF COMMON STOCK
---------------------
This Proxy Statement is furnished to stockholders of GRADCO SYSTEMS, INC.
(the "Company" or "Gradco") in connection with the solicitation by the Board of
Directors of proxies to be used at the Annual Meeting of Stockholders of the
Company. Such meeting will be held on September 18, 1998, at 9:00 a.m., local
time, at Caesars Palace, 3570 Las Vegas Boulevard South, Las Vegas, Nevada, for
the purposes set forth in the Notice of Meeting. It is anticipated that this
Proxy Statement and accompanying material will be mailed to stockholders on
August 18, 1998.
If the enclosed form of proxy is executed and returned, it may nevertheless
be revoked at any time insofar as it has not been exercised. The proxy is in
ballot form and each stockholder may indicate approval or disapproval as to the
proposal identified in the proxy and accompanying Notice of Annual Meeting and
as set forth and discussed in this Proxy Statement. The proposal will be
presented by the Board of Directors of the Company. Where a choice is specified
with respect to the proposal, the shares represented by the proxy will be voted
in accordance with the specification made. Where a choice is not so specified,
the shares represented by the proxy will be voted in favor of the proposal. The
Proxy Committee appointed by the Board of Directors consists of Martin E. Tash
and Bernard Bressler.
VOTING SECURITIES OUTSTANDING
Stockholders of record entitled to vote will be determined as of the close
of business on August 11, 1998. At that date, there were outstanding and
entitled to vote 7,910,848 shares of Common Stock of the Company. Each share of
Common Stock entitles the holder thereof to one vote.
1
<PAGE>
Set forth below is information concerning persons known to the Company to be
beneficial owners of more than five percent (5%) of the Common Stock of the
Company as of August 11, 1998:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ---------------------------------------- ---------------------------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock, Ryback Management Corporation 878,600(1) 11.1%
no par value 7711 Carondelet Avenue
Box 16900
St. Louis, MO 63105
580,549(2) 7.3%
Dimensional Fund
Advisors, Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
431,548 5.4%
Martin E. Tash
17049 Northway Circle
Boca Raton, FL 33496
</TABLE>
- ------------------------
(1) As set forth in Amendment No. 3 to Statement on Schedule 13G, dated January
23, 1998, Ryback Management Corporation ("Ryback"), a registered investment
advisor, has sole voting and dispositive power as to 878,600 shares as of
December 31, 1997. 776,000 of such shares are held by Lindner Growth Fund, a
registered investment company, and 102,600 are managed by Ryback.
(2) As set forth in Amendment No. 6 to Statement on Schedule 13G, dated February
13, 1998, Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 580,549 shares
as of December 31, 1997, all of which shares are held on behalf of advisory
clients of Dimensional, a registered open-end management investment company.
Dimensional disclaims beneficial ownership of all such shares.
(3) As set forth in their joint Statement on Schedule 13D, dated June 29, 1998,
Martin E. Tash and his wife Arlene Tash may be deemed to be the beneficial
owners of 431,548 shares. Martin E. Tash has sole voting and dispositive
power as to 111,990 shares owned solely by him (49,852 shares of which are
held by a private profit sharing plan of which Mr. Tash is sole beneficiary
and 28,085 shares of which are held by the Plenum Publishing Corporation
("Plenum") Profit Sharing Plan for the benefit of Mr. Tash) which, together
with his currently exercisable options, represent 2.3% of the outstanding
stock. Mr. and Mrs. Tash have shared voting and dispositive power as to
244,558 shares owned jointly by them, representing 3.1% of the outstanding
stock. 75,000 shares which may be acquired upon the exercise of options held
by Mr. Tash have been deemed outstanding for the purpose of computing his
individual percentage ownership of outstanding shares, but not for the
purpose of computing the percentage owned by any other party. Mrs. Tash
disclaims beneficial ownership of the shares owned solely by Mr. Tash.
ELECTION OF DIRECTORS
NOMINEES FOR DIRECTORS
The By-laws of the Company provide for a Board of Directors consisting of
between three and seven persons who are elected to serve until the next annual
meeting and until their successors are elected and have qualified.
Proxies solicited herein will be voted (unless authority is withheld) for
the election, as directors of the Company, of the six nominees named in the
following table, who will hold office until the Annual Meeting
2
<PAGE>
to be held in 1999, and until their respective successors are elected and have
qualified. The nominees comprise the current Board of Directors, five of whom
were elected by a vote of stockholders at a meeting held in September 1997 at
which proxies were solicited, and the sixth of whom (Mark Takeuchi) was elected
by the unanimous consent of the directors on September 12, 1997 after the Board
increased its size to six directors.
Management has no reason to expect that any of these nominees will fail to
be a candidate at the meeting and, therefore, does not at this time have in mind
any substitute for any nominee. In the event that any nominee for director
should be unavailable, it is intended that such shares will be voted for the
substitute nominee or nominees as may be determined by the Board of Directors.
In accordance with the laws of the State of Nevada and the Company's
By-laws, the election of directors requires a plurality of the votes cast.
Proxies and ballots marked "FOR all nominees," "WITHHOLD AUTHORITY to vote for
all nominees," or specifying that votes be withheld for one or more nominees, or
which are executed without specification of a choice (in which case they will be
voted for all nominees), are counted to determine the total number of votes
cast. Broker non-votes are not counted.
The following table sets forth the names, ages, principal occupations and
other information regarding management's nominees for director, and the
executive officers of the Company. Unless otherwise indicated, the term of
office of all executive officers expires at the Annual Meeting.
<TABLE>
<CAPTION>
YEAR FIRST
BECAME A
NAME DIRECTOR BUSINESS EXPERIENCE
- ---------------------------------------- ----------- ----------------------------------------------------------------
<S> <C> <C>
Martin E. Tash, 1990 Mr. Tash has been Chairman of the Board and Chief Executive
age 57 Officer of the Company since October 1990, and President of the
Chairman of the Board, Chief Executive Company since October 1991. Mr. Tash served as Chairman of the
Officer, and President Board and President of Plenum Publishing Corporation from July
1977 to July 1998.
Harland L. Mischler, 1990 Mr. Mischler has been Chief Financial Officer and a director of
age 66 the Company since October 1990, and Executive Vice President of
Executive Vice President, Chief the Company since October 1991. Mr. Mischler is a certified
Financial Officer, and Director public accountant. Mr. Mischler served as Vice President,
Controller and Treasurer of Hobart Corporation from 1966 to
1981. From 1981 to 1984 he was Vice President of Finance of
Bausch & Lomb, Inc. At that time he purchased, with another,
Applied Research Laboratories, Inc., an analytical instrument
company, in a leveraged buyout from Bausch & Lomb. After such
company was sold profitably in 1987, Mr. Mischler founded HLM
Capital Resources, Inc., a private investment and holding
company of which he is President and Chairman.
Bernard Bressler, 1990 Mr. Bressler has been Secretary and a director of the Company
age 70 since October 1990, and Treasurer of the Company since April
Secretary, Treasurer and Director 1992. He has been a practicing attorney since 1952, and is
presently a member of the firm of Bressler, Amery & Ross, P.C.,
counsel to the Company.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
BECAME A
NAME DIRECTOR BUSINESS EXPERIENCE
- ---------------------------------------- ----------- ----------------------------------------------------------------
<S> <C> <C>
Robert J. Stillwell, 1991 Mr. Stillwell has been a director of the Company since October
age 62 1991. Mr. Stillwell owns and operates the Robert J. Stillwell
Director Agency, Inc., an independent life and health insurance agency
which he founded over 20 years ago, and he owns and operates
Nationwide Property Management, which handles diverse real
estate investments in which he is involved. In 1985 Mr.
Stillwell founded and is the principal owner of Service Concepts
Unlimited, Inc. Mr. Stillwell is a director of Crusader Savings
Bank located in Rosemont, Pennsylvania.
Thomas J. Burger, 1993 Mr. Burger has been a director of the Company since October
age 51 1993. He is Associate Senior Vice President of NEC America, Inc.
Director (a position he has held since July 1993), and is responsible for
the sale and marketing of its business telephone systems
throughout the United States. Prior thereto, he was President
and a director of two wholly-owned subsidiaries of NEC America
Inc., which conducted the sales, installation and maintenance of
NEC communication systems and networks throughout the Central,
South and Western United States. From August 1988 to December
1989 Mr. Burger was President and a director of Marcom
Communications Inc. After he reorganized its telecommunication
subsidiary, the subsidiary was sold to NEC America and he became
an employee of NEC. In July 1987 Mr. Burger founded Astra
Services Inc., a computer company providing various software
development services to the communications industry. Astra
Services was sold profitably in 1992. From 1973 to 1987 Mr.
Burger was employed in various capacities by Telecom Plus
International Inc., one of the major independent interconnect
companies in the U.S. He became President in 1980, a position he
held until May 1987 when the company was sold to Siemens
Communications.
Masakazu (Mark) Takeuchi, 1997 Mr. Takeuchi has been a director of the Company since September
age 61 1997. He has been President and Chief Executive Officer of
Director of the Company and President, Gradco (Japan) Ltd. ("GJ") since 1989 and a director of GJ since
Chief Executive Officer and Director 1988. He is also President and a director of Gradco (USA) Inc.
of Gradco (Japan) Ltd. He was Senior Vice President of Far East Operations and New
Business Development of the Company from August 1988 to October
1990, and a director of the Company from March 1990 until
October 1990. Mr. Takeuchi was also Chairman of GJ from August
1988 until December 1988. Previously, from 1961, Mr. Takeuchi
was employed by C. Itoh & Co. Ltd. in various positions.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
BECAME A
NAME DIRECTOR BUSINESS EXPERIENCE
- ---------------------------------------- ----------- ----------------------------------------------------------------
<S> <C> <C>
Akira (Tony) Shinomiya,(1) -- Mr. Shinomiya has been Chief Financial Officer and a director of
age 55 GJ since January 1989. From 1987 to 1988, he served as deputy
Chief Financial Officer and Director General Manager of C. Itoh Electronics Corp. and from September
of Gradco (Japan) Ltd. 1985 through 1986 he was Section Manager of the Electronics
Division of C. Itoh & Co. Ltd. From 1975 to 1985 he was Vice
President of C. Itoh Electronics Inc. in Los Angeles,
California.
</TABLE>
- ------------------------
(1) Akira (Tony) Shinomiya, who is listed in the table, is an executive officer
of Gradco (Japan) Ltd. ("GJ"), the Company's majority-owned Japanese
subsidiary. The Company's primary business is conducted through GJ. Due to
the significance of the role of Mr. Shinomiya in managing the operations of
GJ and conducting its relationship with the Company, information regarding
him has been included in various portions of this Proxy Statement. However,
the inclusion of such information under references to "executive officers of
the Company" is not an acknowledgement that Mr. Shinomiya may be so
characterized, since he is not employed by the Company nor does he perform a
policy-making function for the Company.
The term of office of Mr. Shinomiya expires at the ordinary general
shareholders meeting of GJ for fiscal 2000, to be held in June 2000.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
During fiscal 1998, Harland L. Mischler failed to file on a timely basis a
Statement of Changes in Beneficial Ownership On Form 4, reporting the exercise
of stock options for the purchase of 4,000 shares. Mr. Mischler has since filed
the Form 4 reporting such exercise.
5
<PAGE>
EQUITY SECURITIES OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
the Company by each director, each of the executive officers named in the
Summary Compensation Table set forth below, and by all officers and directors as
a group (7 persons), as of August 11, 1998.
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS OF AMOUNT AND NATURE OF OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
- ---------------------------------------- ---------------------------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock, Martin E. Tash 431,548(2) 5.4%
no par value 17049 Northway Circle
Boca Raton, FL 33496
123,000(3) 1.5%
Harland L. Mischler
7900 Glades Road
Boca Raton, FL 33434
23,786(4) *
Bernard Bressler
17 State Street
New York, NY 10004
34,600(5) *
Robert J. Stillwell
1009 N. Bethlehem Pike
Springhouse, PA 19477
7,500(6) *
Thomas J. Burger
1555 West Walnut Lane
Irving, TX 75038
33,000(6) *
Masakazu (Mark) Takeuchi
Shibuya-ku, Tokyo 150 Japan
16,000(7) *
Akira (Tony) Shinomiya
Shibuya-ku, Tokyo 150 Japan
669,434(8) 8.3%
All Executive Officers and Directors as
a Group (comprising the 7 persons shown
above)
</TABLE>
- ------------------------
* Less than 1%
(1) In each instance where a named individual is listed as the holder of a
currently exercisable option, the shares which may be acquired upon exercise
thereof have been deemed outstanding for the purpose of computing the
percentage of outstanding shares owned by such person, but not for the
purpose of computing the percentage owned by any other person, except the
group referred to in note (8).
(2) See note (3) to the table in section, VOTING SECURITIES OUTSTANDING, above.
(3) Includes 52,000 shares owned directly by HLM Capital Resources, Inc., a
private investment and holding corporation, of which Mr. Mischler is
President, Chairman and major shareholder, and 25,000 shares owned directly
by Mr. Mischler. Also includes currently exercisable options granted to Mr.
Mischler to purchase 46,000 shares of the Company's stock.
(4) Includes 2,626 shares held by Mr. Bressler's wife. Mr. Bressler disclaims
beneficial ownership of the shares owned by his wife.
(5) Includes 17,100 shares held for Mr. Stillwell in an individual retirement
account, and 7,500 shares which may be acquired upon the exercise of
currently exercisable options.
(6) Represents shares which may be acquired upon the exercise of currently
exercisable options.
6
<PAGE>
(7) See note (1) to table under NOMINEES FOR DIRECTORS, in section, ELECTION OF
DIRECTORS, above. The number of shares shown represents those which are
subject to currently exercisable options.
(8) The number of shares and percentage owned includes 185,000 shares which may
be acquired through exercise of currently exercisable options held by
certain of such persons individually named. The number of outstanding shares
for purpose of computation of percentage of ownership by the group includes
such shares.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors has an Audit Committee. The members of the
Committee currently are Harland L. Mischler (Chairman), Robert J. Stillwell and
Thomas J. Burger. The functions of the Committee include the recommendation to
the Board of independent auditors for the annual audit of the Company, and the
discussion and review of the audit work with the auditors so appointed. The
Audit Committee met once during the last fiscal year.
The Board of Directors has no Nominating Committee or Compensation
Committee.
The Board of Directors met four (4) times during the last fiscal year. Each
of the directors in office at the times of such meetings were in attendance.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation awarded to, earned by or
paid to the following persons through August 11, 1998 for services rendered in
all capacities to the Company and its subsidiaries during each of the fiscal
years ended March 31, 1998, 1997 and 1996: (1) the Company's Chief Executive
officer, and (2) each of the other executive officers whose total compensation
for the fiscal year ended March 31, 1998 required to be disclosed exceeded
$100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
SALARY AND UNDERLYING
NAME AND PRINCIPAL POSITION YEAR BONUS ($)(1)(2) OPTIONS(3)
- ------------------------------------------------------------------------------------------ ---- --------------- ----------
<S> <C> <C> <C>
Martin E. Tash............................................................................ 1998 125,000 100,000
Chairman of the Board, 1997 125,000 --
President and Chief 1996 125,000 --
Executive Officer
Masakazu (Mark) Takeuchi.................................................................. 1998 263,388 60,000
President, 1997 317,996 --
Gradco (Japan) Ltd. 1996 315,248 --
Akira (Tony) Shinomiya.................................................................... 1998 232,358 40,000
Chief Financial Officer 1997 278,757 --
Gradco (Japan) Ltd. 1996 277,940 --
</TABLE>
- ------------------------
(1) With regard to Mr. Tash, the amounts shown in this column represent
compensation for special services rendered as a director.
(2) With regard to Messrs. Takeuchi and Shinomiya, the amounts shown in these
columns represent compensation paid to such individuals for services as
executive officers of GJ. See note (1) to table under NOMINEES FOR
DIRECTORS, in section, ELECTION OF DIRECTORS, above. Such compensation
includes bonuses for 1997 in the amount of $37,286 and $31,072 for Messrs.
Takeuchi and Shinomiya,
7
<PAGE>
respectively. All such compensation was paid in yen by GJ and is translated
into dollars at each year's average annual exchange rates in the above
table. When measured in yen, there was a 17% increase in compensation from
1996 to 1997 and a 9.4% decrease in compensation from 1997 to 1998.
(3) Represents the number of shares of common stock issuable upon the exercise
of options granted to the named officer pursuant to the 1997 Stock Option
Plan (see below) during the last fiscal year.
STOCK OPTION PLANS
On September 11, 1997, the Board of Directors adopted the Company's 1997
Stock Option Plan (the "1997 Plan") which provides for the grant of options
which do not qualify as "incentive stock options" within the meaning of Section
422A of the Internal Revenue Code. Any officer, director, key employee or
consultant of the Company or any of its subsidiaries, in the discretion of the
Board of Directors, may be designated to receive options under this plan. The
1997 Plan provides for the issuance of up to 400,000 shares of Gradco common
stock upon the exercise of stock options (subject to adjustment in the event of
a stock split, stock dividend, consolidation, reorganization, or comparable
change in Gradco's capital structure).
The 1997 Plan is administered by the Company's Board of Directors. Subject
to limitations contained in the 1997 Plan, the Board determines the optionees,
option prices, number of shares subject to such options, the duration of each
option, the dates of grant (no options may be granted after September 11, 2007),
and the schedule for exercise of each option. The options are not transferable.
Currently, options for 259,000 shares are outstanding under the 1997 Plan.
133,000 shares are available for issuance under the 1997 Plan.
Gradco also has a 1988 Stock Option Plan (the "1988 Plan") which provides
for the grant of options which either do or do not qualify as "incentive stock
options" within the meaning of Section 422A of the Internal Revenue Code. Any
officer, director or key employee of Gradco or any of its subsidiaries, in the
discretion of the Stock Option Committee, may be designated to receive options
under this plan. The 1988 Plan, which provided for the issuance of up to 350,000
shares of Gradco common stock upon exercise of stock options, terminated on May
25, 1998 in accordance with its terms. Thus, no additional options may be
granted thereunder, but the termination does not affect the validity of
outstanding options. Currently, options for 287,000 shares are outstanding under
the 1988 Plan.
The Stock Option Committee, which administers the 1988 Plan, is appointed by
the Board of Directors. Bernard Bressler and Robert J. Stillwell currently
comprise the Stock Option Committee. Since no new options may be issued under
the 1988 Plan, the Committee's powers under such Plan are limited to such
administrative matters as may arise with regard to currently outstanding
options.
The following table sets forth the options that were granted under the 1997
Plan during fiscal 1998 to the executive officers named in the SUMMARY
COMPENSATION TABLE, above. During this period, no options were granted to said
executive officers under the 1988 Plan and no options were exercised by said
executive officers under either stock option plan.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF MARKET
SECURITIES PERCENT OF PRICE ON
UNDERLYING TOTAL OPTIONS EXERCISE DATE OF GRANT DATE
OPTIONS GRANTED IN PRICE GRANT EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR ($/SH) ($/SH) DATE (1) VALUE($)(2)
- ------------------------------ --------- ------------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Martin E. Tash................ 100,000 32.1% 2.00 8.00 9/11/07 712,000
Masakazu (Mark) Takeuchi...... 60,000 19.2% 2.00 8.00 9/11/07 427,200
Akira (Tony) Shinomiya........ 40,000 12.8% 2.00 8.00 9/11/07 284,800
</TABLE>
- ------------------------
(1) The options also expire 90 days after the optionee ceases to be an employee
of the Company (or a subsidiary) for any reason other than the optionee's
death or total permanent disability. In the event of an optionee's death or
total permanent disability, the options may be exercised for a period of 365
days after such event, but in no event later than September 11, 2007.
(2) The Black-Scholes model was used to calculate the present value of the
options granted. The underlying assumptions used were: expected volatility
(50%), risk-free rate of return (6.5%), dividend yield (none) and time of
exercise (10 years).
The following table sets forth the number of shares underlying unexercised
options held at March 31, 1998 together with the value of such options as of
March 31, 1998.
UNEXERCISED OPTIONS AT FISCAL YEAR-END
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNEXERCISED AT FISCAL YEAR-END
NAME EXERCISABLE/UNEXERCISABLE
- -------------------------------------------------------------------------------- ----------------------------------
<S> <C>
Martin E. Tash.................................................................. 75,000/75,000
Masakazu (Mark) Takeuchi........................................................ 33,000/45,000
Akira (Tony) Shinomiya(1)....................................................... 16,000/30,000
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END
NAME EXERCISABLE/UNEXERCISABLE ($)
- -------------------------------------------------------------------------------- -----------------------------
<S> <C>
Martin E. Tash.................................................................. 334,375/384,375
Masakazu (Mark) Takeuchi........................................................ 83,625/230,625
Akira (Tony) Shinomiya(1)....................................................... 53,500/153,750
</TABLE>
- ------------------------
(1) Mr. Shinomiya (together with Mr. Takeuchi) is an executive officer of Gradco
(Japan) Ltd. See note (1) to table under NOMINEES FOR DIRECTORS, in section,
ELECTION OF DIRECTORS, above.
During the last fiscal year, no options under the 1988 Plan or 1997 Plan
were exercised by the executive officers named in the SUMMARY COMPENSATION
TABLE, above.
RETIREMENT PLAN (GJ)
In June 1994, GJ adopted a retirement plan providing that, subject to
approval by GJ's shareholders at the time of proposed payment, a retirement
allowance be paid by GJ to a member of GJ management who retires after his term
of office or by reason of reaching his mandatory retirement age. The amount of
the retirement allowance is determined by a formula multiplying (1) the monthly
salary at the time of retirement, by (2) the number of years served, by (3) a
factor which varies depending upon the office held by the eligible individual.
Each of Messrs. Takeuchi and Shinomiya is eligible for payments under this plan
upon his retirement.
COMPENSATION OF DIRECTORS
Each director of the Company who is not also an officer (of the Company or
GJ) receives a fee of $1,250 for each quarter in a fiscal year during which he
serves in such position. Accordingly, Mr. Stillwell and Mr. Burger each received
$5,000 for the 1998 fiscal year.
9
<PAGE>
Martin E. Tash (the Company's President and Chairman of the Board) received
$125,000 in cash for special services rendered to the Company as a director
during the fiscal year ended March 31, 1998. This amount is included in the
SUMMARY COMPENSATION TABLE, above.
HLM Capital Resources, Inc., a closely held corporation controlled by
Harland L. Mischler (the Company's Executive Vice President and Chief Financial
Officer) received $70,000 in cash for special services rendered by Mr. Mischler
as a director during the fiscal year ended March 31, 1998.
All directors (and Messrs. Tash, Mischler, Bressler and Shinomiya in their
capacity as officers as well) are eligible to receive options under the 1988
Stock Option Plan and 1997 Stock Option Plan. See the table captioned
UNEXERCISED OPTION GRANTS AT FISCAL YEAR-END, above, as to options held by
Messrs. Tash, Takeuchi and Shinomiya as of March 31, 1998. As of that date, Mr.
Mischler held options for 46,000 shares and Messrs. Stillwell and Burger each
held options for 7,500 shares, all of which were issued under the 1988 Plan.
Bernard Bressler, a practicing attorney, receives compensation based on his
usual hourly rate for attendance at Board meetings.
INDEMNIFICATION
The Company's By-Laws provide that it shall, to the fullest extent permitted
by the Nevada General Corporation Law, indemnify any person against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with any proceeding arising by reason of the fact that any such
person is or was a director, officer, employee or agent of the Company.
Accordingly, all current officers and directors of the Company are entitled to
indemnification by the Company under this provision. In addition, James P.
Owens, who served as an officer of the Company from 1989 until April 1992, is
entitled to indemnification under such provision based on his activities in such
capacity. Mr. Owens is currently Vice President, Finance and Administration, of
Gradco (USA) Inc., a wholly-owned subsidiary of Gradco Systems, Inc.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors has no compensation committee (or other
Board committee performing equivalent functions); compensation policies
applicable to executive officers are determined by the Board. During the fiscal
year ended March 31, 1998, the officers of the Company participating in the
Board's deliberations concerning executive compensation were Martin E. Tash,
Harland L. Mischler and Bernard Bressler (who are members of the Board).
During the period since April 1, 1997 (the beginning of the Company's last
fiscal year), there were no transactions between the Company and Plenum
Publishing Corporation (which owned 913,000 shares of the Company prior to March
20, 1998) of the type required to be disclosed in section, CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, below.
BOARD REPORT ON EXECUTIVE COMPENSATION
The Board of Directors of the Company, currently consisting of six members,
approves all of the policies under which compensation is paid or awarded to the
Company's executive officers. The executive officers of the Company (Messrs.
Tash and Mischler) are members of the Board. While Messrs. Takeuchi and
Shinomiya are listed in the SUMMARY COMPENSATION TABLE, above, for informational
purposes, they are considered to be executive officers of Gradco (Japan) Ltd.
("GJ") and not of the Company; their compensation is paid by GJ and is
determined by GJ's Board of Directors.
It is the current policy of the Company's Board of Directors to compensate
those directors of the Company who are also executive officers of the Company
(i.e., Messrs. Tash and Mischler) only for their special services rendered as
directors, and not for their services as officers, PER SE. This policy has been
implemented as a means of saving costs for the Company in an area in which it
might otherwise have to expend substantial sums in order to pay said executive
officers, as such, at a level commensurate with their
10
<PAGE>
levels of authority. Messrs. Tash and Mischler (who became directors and
officers in October 1990) have thus far been willing to serve on this basis.
Their activities as officers are performed part time, and they are not
separately compensated for them.
The compensation paid to Messrs. Tash and Mischler during the fiscal year
ended March 31, 1998 is in recognition of their extraordinary services as
directors in connection with, among other matters, the continuing implementation
of cost efficiencies, the restructuring of the Company's subsidiaries and the
defense of the Hamma and DuBois lawsuits against the Company. Because this
compensation is for special services as a director, rather than services as an
executive officer, it is not related to corporate performance factors, and the
discussion of said factors, which would otherwise be required by this item, has
therefore not been included.
PERFORMANCE GRAPH
Set forth below is a graph comparing the yearly percentage change in the
cumulative total return of Gradco Common Stock with the cumulative total return
of the NASDAQ Stock Market (US & Foreign) Index and with the cumulative total
return of an index comprised of a group of peer issuers, selected by the
Company, in its industry, over the five-year period ending on March 31, 1998.
<TABLE>
<CAPTION>
DATE COMPANY INDEX MARKET INDEX PEER INDEX
- --------- -------------- ------------ -----------
<S> <C> <C> <C>
03/31/93 100.000 100.000 100.000
03/31/94 113.333 108.449 83.753
03/31/95 180.000 119.420 69.386
03/29/96 180.000 161.671 102.080
03/31/97 178.333 179.159 67.855
03/31/98 380.000 270.505 63.517
</TABLE>
11
<PAGE>
It is assumed in the graph that $100 was invested in the Common Stock of the
Company, in the stock of the companies in the NASDAQ Stock Market (US & Foreign)
Index, and in the stocks of the companies comprising the peer group index, on
March 31, 1993, and that all dividends received within a quarter were reinvested
in that quarter. The ten issuers selected by the Company for inclusion in the
peer group index are: Check Technology Corp., CSP, Inc., Datasouth Computer
Corp., Gateway Industries, Inc., Liuski International, Inc., Mitek Systems,
Inc., NDC Automation, Inc., PCC Group, Inc., Personal Computer Products, Inc.,
and Random Access, Inc. The stock of five of said issuers ceased trading on
their respective exchanges, as of the following dates, within the five-year
period covered by the graph: Datasouth and Gateway (in November 1994), Random
Access (in September 1995), Personal Computer (in October 1995) and NDC
Automation (in November 1995).
The NASDAQ Stock Market (US & Foreign) and peer group indices were prepared
by the Center for Research in Security Prices.
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN BUSINESS RELATIONSHIPS
Bernard Bressler, Secretary, Treasurer and a director of the Company, is a
member of the law firm of Bressler, Amery & Ross, P.C., counsel to the Company.
During the 1998 fiscal year, the Company paid legal fees of $128,803 to such
firm.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP are the independent certified public accountants
who audited the Company's financial statements for the fiscal year ended March
31, 1998. The Board of Directors has not yet selected auditors for the current
fiscal year; the Board believes that it will be appropriate to do so at a later
date, closer to the time when the audit is to be conducted, so that the
selection can be made in the context of the Company's specific requirements at
that time.
It is not expected that representatives of PricewaterhouseCoopers LLP will
be present in person at the Annual Meeting. However, it is expected that such
representatives will be available by telephone during the meeting to answer
appropriate questions of stockholders.
MISCELLANEOUS
TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, Management has no knowledge of any
business which will be presented for consideration at the meeting other than
that described above. Should any other matter come before the meeting, it is the
intention of the persons named in the accompanying proxy to vote such proxy in
accordance with their best judgment.
STOCKHOLDER PROPOSALS
In order for stockholder proposals to be presented at the 1999 Annual
Meeting of Stockholders, to be eligible for inclusion in the Company's Proxy
Statement and the form of proxy for such meeting, they must be received by the
Company at its principal offices in Las Vegas, Nevada prior to May 22, 1999.
13
<PAGE>
SOLICITATION OF PROXIES
The entire expense of preparing, assembling and mailing this Proxy
Statement, the form of proxy and other material used in the solicitation of
proxies will be paid by the Company. In addition to the solicitation of proxies
by mail, arrangements may be made with brokerage houses and other custodians,
nominees and fiduciaries to send proxy material to their principals, and the
Company will reimburse them for expenses in so doing. To the extent necessary in
order to insure sufficient representation, officers and other regular employees
of the Company, who will not be additionally compensated therefor, may request
the return of proxies personally, by telephone or facsimile. The extent to which
this will be necessary depends on how promptly proxies are received, and
stockholders are urged to send their proxies without delay.
By Order of the Board of Directors
MARTIN E. TASH
CHAIRMAN
Dated: August 18, 1998
Las Vegas, Nevada
14
<PAGE>
PROXY
GRADCO SYSTEMS, INC.
SOLICITED BY THE BOARD OF DIRECTORS
FOR USE AT THE SEPTEMBER 18, 1998 ANNUAL MEETING
The undersigned hereby appoints Martin E. Tash and Bernard Bressler, as
Proxies, and each with power of substitution, who shall be present at the
meeting to vote all of the shares of the undersigned as follows regarding the
election of directors:
<TABLE>
<S> <C>
/ / FOR all nominees listed / / WITHHOLD
below AUTHORITY
(EXCEPT AS INDICATED TO THE to vote for all
CONTRARY BELOW) nominees listed
below
</TABLE>
Nominees: Martin E. Tash, Harland L. Mischler, Bernard Bressler, Robert J.
Stillwell, Thomas J. Burger, Masakazu (Mark) Takeuchi.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
and in their discretion upon such other business as may be properly brought
before the Annual Meeting of Stockholders of GRADCO SYSTEMS, INC. to be held at
Caesars Palace, 3570 Las Vegas Boulevard South, Las Vegas, Nevada at 9:00 a.m.
local time, and any adjournments thereof. This proxy revokes all prior proxies
given by the undersigned.
(Continued on the reverse side)
<PAGE>
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF
THE MANAGEMENT SLATE OF DIRECTORS.
Date:_____________________________
Signature: _______________________
Print Name:_______________________
Signature:________________________
(if jointly held)
IMPORTANT: Please sign exactly as
name appears here. Joint owners
should both sign. When signing as
executor, trustee, guardian,
attorney or officer of a
corporation, give title as such.
If a partnership, please sign in
partnership name.
PLEASE COMPLETE, SIGN, DATE AND MAIL THIS PROXY IN THE ENCLOSED ENVELOPE.
