Battle for control of A-dec rages
A struggle for control of Newberg's largest private employer is pitting family members against the man allegedly charged by the company's co-founder to guide the company, a designation made without his family's knowledge only months before his death.
The controversy at A-dec Inc. -- a dental equipment manufacturer that employs nearly 1,000 people locally, more than 1,300 worldwide and grossed more than $375 million in sales in 2018 -- began soon after the May death of Ken Austin Jr., co-founder of the company with his late wife, Joan Austin.
The issue came to a head in September when Brett Baker, trustee of Ken Austin Jr.'s trust and estate and chairman of the company's board of directors, attempted to name two new directors and dismiss two others, including Scott Parrish. Baker is also president of Austin Industries, the real estate holding component of the Austin empire.
"This vote was opposed by the minority voting shareholders, who incorrectly claim they control the voting majority and that they removed (Baker) from the A-dec board," Roy Tucker, an attorney for Perkins Coie, said in a prepared statement.
The board's actions prompted Baker to file for a preliminary injunction in Yamhill County Circuit Court in late September. In the plea for an injunction granting him control of the company, Baker notes that Ken Austin Jr. named him trustee of both Ken and Joan Austin's trusts and with that designation control of what is called the "Class A Voting Common Stock" that allows him to lead the board.
The plea for injunction further argues that the non-voting stocks held by the Austin's heirs -- specifically Loni Parrish, Scott Parrish, Ken Austin III and Celia Austin – while topping 50 percent of the collective shares, excludes them from making board decisions because they include primarily non-voting shares. In seeking the injunction, Baker asks the court to acknowledge his control of the board and bar the Parrishes and Austins from altering A-dec's bylaws in a way that would remove Baker from the board. A hearing is set for Nov. 22 in Yamhill County Circuit Court.
Heirs attempt to take control
At a regularly scheduled board meeting on Aug. 29, the minority board members "asserted, for the first time, that a 'change of control' of A-dec had occurred upon Ken Austin's death" under the terms of the company's Voters and Shareholders Agreement, Baker's legal team stated in the plea for injunction. "Defendants also contended for the first time that they were entitled to elect the board of directors and to otherwise exercise control of A-dec."
The two sides of the battle called for separate meetings on the same day, Sept. 13, and rendered opposite decisions: Baker attempted to dismiss board members Scott Parrish and Megan Clubb, as well as amend the company's bylaws. His opponents voted to throw Baker off the board and appoint local wine luminary Bill Stoller in his place.
Tucker contends that his client is following the path set by Ken Austin Jr.:
"Brett, in his role as trustee, was forced to initiate a legal process to affirm the correct board composition and to ensure he can steward Ken's legacy consistent with Ken's wishes and Brett's fiduciary obligations as trustee," Tucker said.
A few weeks after Baker filed for the injunction, his opponents filed a response in court and reached out to area media outlets with prepared statements.
"A-dec and the Austin Parrish family are disappointed that Mr. Baker has responded to this action by filing a legal claim against four shareholder members of the company's founding family," a release from the company said. "Mr. Baker is no longer a member of the A-dec board of directors and his attempt to set up his own board of directors is a gross distortion of the company's legal structure and bylaws, and a hostile grab for power."
Revelations of trustee position surprise some
Complicating the issue is a recently unveiled, twofold revelation: Several years after the death of his wife in June 2013, Ken Austin Jr. transferred 115 Class A (voting) shares from Joan Austin's trust to his own; and that the elder Austin had named Baker as the sole trustee of his trust last spring.
"No one … told me the real reason for his transfer of 115 Class A shares was to try to take voting control of A-dec," Loni Parrish stated in a declaration filed in opposition to Baker's motion for injunction. "Not one – not Ken Jr., (law firm) Stoel Rives or Baker – told me that Baker would be the sole trustee of his trust or that Baker intended to take control of A-dec after Ken Jr. died."
Loni Parrish went on to say that she also wasn't informed that Ken Austin Jr. had terminated the company's 2005 Voting and Shareholders Agreement in May 2018. "I only learned of this purported termination after Ken Jr. died," she said.
Scott Parrish echoed his wife sentiments and took it one step further, calling into question Baker's assertions that he controls the voting shares of stock and, therefore, control of the board.
"A-dec has never been run by its shareholders – let alone by one shareholder – and important decisions affecting A-dec have never been made by any one shareholder," the A-dec CEO wrote in his declaration submitted to the court. "For example, even though Ken Jr. held a majority of the Class A voting shares before his death … he never attempted to exercise unilateral control over A-dec. Decisions of the board of directors of A-dec have been made by a majority of directors and Ken Jr. respected the decisions of the board as a whole even when he was individual in disagreement."
Baker defended his actions in an interview with the Oregonian newspaper: "Ken asked me to do this. This is not a fun job. I don't get compensated beyond my current salary."
A-dec administrators have weighed in on the controversy at length on the company's website. "According to the company's bylaws, Mr. Baker acting alone as a shareholder cannot appoint or remove directors, no matter how many or what class of shares he holds," a statement on A-dec's website reported under its FAQs section.
Employees kept abreast of controversy
Word of the controversy has reached the rank and file employees at the company, Beanblossom said, adding "We have shared with them the facts about what has occurred, answered their questions and reinforced our steadfast commitment to A-dec employees and their families, and to the stewardship of our company's legacy."
He added that the response from employees has been heartening: "The outpouring of support from former and current A-dec employees has been incredibly moving. We receive messages of support every day from friends, community members, customers, vendors and current and former A-dec employees. … While this situation is unfortunate, the strength and solidarity of our employees and leaders, and the deep commitment to one another, to our customers and to our community that we share are shining through."
Liz Fuller, a spokesman for Gard Communications, hired by Baker soon after the controversy erupted, commented that "A-dec has a wonderful and dedicated employee base. No doubt they are focused on their work. Having said that, this dispute must be a distraction for employees and that is a real concern for (Baker)."
The company has added to its website a section termed "Stand Firm" that answers employees' questions about the controversy and allows individuals to add their name to a "letter of support for the Austin Parrish family as it defends itself against a legal attack by a former board member and his team of lawyers."
"While it is unfortunate that we must dedicate valuable time and resources to protecting our company's leadership and legacy from this legal attack, we are so incredibly grateful for the outpouring of support from employees and their families, Newberg-area residents and leaders, and friends and fellow business owners," the website says.
As it stands, according to Baker, the company has two boards of directors – one that is legitimate because he controls the majority of voting stock in the company, and one that was formed by the heirs, their spouses and several others that claim that the change of control means they now hold the majority of the voting stock.
"At present, the management team of A-dec is conflicted and is currently reporting to defendants' improperly constructed board of directors as if it were the legitimate board of directors," Tucker wrote in the plea for injunction. "The lack of clarity about the 'true' board of directors poses a legitimate risk to the welfare of A-dec and its operations."
You count on us to stay informed and we depend on you to fund our efforts. Quality local journalism takes time and money. Please support us to protect the future of community journalism.