Greater Washington Investors Inc., a small business investment company, is seeking a federal court order that would require a McLean technology firm to sell 75,000 shares of its stock to GWI.
A central issue of the dispute is the role played by a director of both companies in providing information to Greater Washington about a possible takeover of the McLean company, Radiation Systems, Inc.
In a suit filed this week in U.S. District Court in Alexandria, GWI alleged that Radiation Systems refused to issue the 75,000 shares, as required under an option agreement signed earlier.
But Radiation Systems said its lawyers advised against issuing the stock on the ground that "the purported option exercise was invalid because it was brought about by an unauthorized disclosure to Greater Washington," by GWI president Don Christensen - who also happened to be a director of Radiation Systems at the time.
In the wake of the controversy over what role was played by Christensen, he has resigned as a Radiation Systems director - a post he held since 1967.
Radiation Systems charged that Christensen disclosed non-public information about certain merger discussions then going on to Greater Washington, which subsequently decided to exercise an option to buy the 75,000 shares at $2.80 a share for investment purposes.
Greater Washington acquired 75,000 shares of the McLean company at $1.30 a share, as part of a 1968 venture capital investment. Last Sept. 28, the shares were sold back to Radiation Systems at $2.50 a share plus an option through June 15 to buy up to 75,000 shares at $2.80 apiece. At the time, Radiation stock was quoted at $2 bid in the over-the-counter market.
On June 15, Greater Washington elected to exercise its option and paid $210,000 for the 75,000 shares ($2.80 a share) on a day Radiation stock was quoted at $3 bid.
Greater Washington said Radiation Systems accepted the $210,000 payment at the time but since declined to deliver the stock "in th absence of a court order."
Responding to the allegation that Christensen delivered non-public information about possible mergers to Greater Washington, GWI said in a formal statement.
"GWI believes that TSI had an affirmative obligation to disclose to it, as an option holder, all matters that would be material to its discussion decision as to the exercise of the option, even though such matters had not been publicly announced and asserts that it was fully entitled to exercise its options."
If the shares are not to be delivered, GWI told the court, damages in an amount to be proved should be awarded the investment firm.
RSI confirmed, in a separate statement, that it received recent overtures from two different companies about possible acquisition of the McLean firm. The discussions have been terminated and RSI said it has no immediate plans for further discussions relating to any merger.