This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Terence Bernard Wise Files Derivative Suit Against Forward Industries' Chairman Frank LaGrange Johnson For Breach Of Fiduciary Duty And To Prevent Dilutive Stock Issuance

Stocks in this article: FORD

On July 15, 2014, Terence Bernard Wise filed a derivative suit on behalf of Forward Industries, Inc. (NASDAQ:FORD) in the Supreme Court of the State of New York against Chairman Frank LaGrange Johnson and affiliated members of Forward's Board of Directors to prevent a dilutive stock issuance and other entrenchment tactics that he believes are aimed at disenfranchising shareholders in advance of Forward's 2014 Annual Meeting. Mr. Wise is the largest shareholder and member of the board of directors of Forward, a designer and distributor of custom carry and protective solutions, holding approximately 19.6% of Forward's common stock. Mr. Wise gave the following explanation as to why he has been compelled to bring litigation on behalf of the Company:

I have repeatedly entreated Forward's Board, which has been under the control of Mr. Johnson and his supporters, to address numerous highly problematic related-party transactions and corporate governance deficiencies that have resulted in the substantial erosion of shareholder value. These efforts have been to no avail. Instead, Mr. Johnson and the other directors aligned with him continued to implement what I believe to be entrenchment techniques aimed at securing their position on the Board in response to my proposed slate of directors to be voted on at the 2014 Annual Meeting.

I sent a letter to the Forward Board on July 1, 2014 advising Mr. Johnson and his supporters against taking any further action that may destroy value and further entrench the Board, including a dilutive capital raise or other extraordinary transaction, in advance of the 2014 Annual Meeting. On July 9, 2014, Forward's CFO alerted the Board by email that a listing application had been signed in his name, without his knowledge or authorization, and filed with NASDAQ, seeking to list 1,760,000 shares of common stock underlying a planned issuance of convertible preferred stock. The listing application indicated that the Board had approved a new series of convertible preferred stock that it planned to issue to unidentified investors at a 10% discount to market value. In fact, however, the proposed issuance has never been approved by the Company’s Board. As alleged in the Complaint filed in the New York State Supreme Court:

  • The convertible preferred stock that Mr. Johnson and his supporters purport to have approved would represent over 20% of Forward's outstanding common stock , which would significantly dilute Forward's existing shareholders
  • The proposed issuance would violate NASDAQ rules requiring shareholder approval for issuances constituting more than 20% of a company's outstanding common stock
  • The listing application filed with Nasdaq was filed under the name and affirmation of Forward's CFO without his knowledge or authorization
  • The listing application included material misrepresentations , stating that the Board had approved the proposed issuance on July 7, 2014, even though it had never been approved by the Board but, apparently, by a special committee which "exceeded the authority delegated to it by the resolutions of the Board."
  • The proposed issuance was not permitted under Forward's governing documents , which require Board approval to issue preferred stock

Following its discovery, Mr. Johnson and his supporters have now stated in court that the NASDAQ filing was done in error and that they have withdrawn it. However, I believe this proposed issuance was an attempt by Mr. Johnson and his supporters on the Board to entrench themselves in office, at the expense of Forward's shareholders and in violation of their duties of loyalty to the Company, and that similar action is being contemplated notwithstanding the claimed withdrawal of the NASDAQ application. It is also my belief that such dilutive proposal is intended to disenfranchise shareholders in advance of the 2014 Annual Meeting. I am calling on Mr. Johnson and his cohorts to abstain from further entrenchment efforts in response to my proxy contest.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,810.06 +91.06 0.51%
S&P 500 2,063.50 +10.75 0.52%
NASDAQ 4,712.97 +11.1030 0.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs