Control Dispute Key Points (2004-2005)
11.04 Board dispute occurs over firm's strategic direction & possible merger with Creditex.
12.04 Wang, Stephan, Elwood terminate CEO Cawley with unauthorized vote .
- Wang, Stephan & Elwood, a purported majority, vote in the affirmative.
- Elwood, a voting Class B Manager, had sold his interest without Company knowledge eight months prior.
- Cawley and the second Class B Manager, McCabe, vote against decision to terminate Cawley without cause.
- Vote Carries 3-2.
- Cawley terminated over the objections of other investors.
- Cawley & outside Class B's offers Wang, Stephan & Elwood $5.00 per share ‘locked’ market. Either, they buy him and the investors out or the Class B's buy the insurgents out for $5.00. Wang, Stephan and Elwood refuse proposal.
01.05 Axiom Board Meeting Held-Elwood sued to vacate Board Seat
Background
- Elwood, a purported Board member, is entitled to hold a voting Board seat, so long as his employer, the hedgefund Van Eck Associates, maintains at least a 5% interest in Axiom, otherwise his seat reverts back to the other Class B investors.
- In April 2004, Van Eck had requested Axiom to 're-register' it's Class B Interests (shares) in the name Greylock Capital Associates or Van Eck's 'new name.' Van Eck did not change its name. Greylock was controlled by Hans Humes, a former work colleague and friend of Wes Wang. Van Eck & Greylock (it was later found) concealed their secret sale of Axiom stock, and in so doing denied the other 8 investors their right to occupy the seat. It was this fifth Board seat that proved pivotal in the subsequent control dispute.
(View Name Change Board Resolution).
The Dispute
- At the January Board meeting, Axiom presents Elwood with proof that Greylock is not the new name of Van Eck, but rather Greylock is a separate and distinct company.
- Elwood is asked to explain this inconsistency and he agrees that to call it a name change is 'mildly inaccurate.'
- Axiom then informs Elwood that because Van Eck no longer owns greater than 5% he has lost his right to a Board seat.
- The Class B investors then notify the Board that they have voted to fill Elwood's seat with another Class B, John Park.
- The newly constituted Board then votes in the affirmative to re-appoint Cawley as CEO
- Wang & Stephan attempt to disrupt Board meeting.
- The meeting ends.
01.05 Cawley v Elwood Filed
On January 5th 2004, the morning after the contentious Board meeting, Cawley, with the full support of the majority of the Class B's, initiates a AAA arbitration to ask that the AAA affirm that Van Eck/Elwood is not properly a Board member and to recognize the Class B vote to elect John Park to the now open second Class B seat.
Cawley and the majority of the Class B's also ask the AAA for emergency relief to have a 'Status Quo' Order put in place to protect the company from plundering and maintain the status quo (including allowing Wang & Stephan to remain as interim officers) during the pendency of the proceeding.
Cawley and the majority of the Class B's decide against 'self help' or seizing the firm so as to protect the enterprise value of the firm. They decide instead to litigate.
The Order is granted in February 2004.
05.05 AAA Decision in favor of Cawley & the majority of the Class B's
(view the AAA ruling)
May 24th 2005, the AAA ruled in favor of Cawley & the Class B's and confirms that Elwood had no right to be a Board member, that he had not properly disclosed his Company's sale of Axiom shares and that Park was properly the second elected Class B Board member.
The AAA also finds that Wang & Stephan had knowledge of Elwood or Van Eck's action, but "did nothing to disabuse ...Axiom's [wrongful] understanding" that it was a name change. In fact, Wang, Stephan, & Elwood "silently signed the Board resolution" approving a 'name change.'
Cawley & the majority of the Class B's then ask for the Status Quo order to be amended to enable the newly constituted Board to act to run the firm.
Wang and Stephan object to the having the Status Quo order amended, and unsuccessfully attempt to win Class B investor support. With Wang & Stephan firmly in the Board minority, they now seek to have Axiom judicially dissolved.
06.05 June 2005 Timeline
June 8th. The AAA amend the Status Quo order to reflect that Park is on the Board and that the Board can meet and act. The AAA also denies Wang & Stephan their attempt to have Axiom dissolved.
June 8th. Phoenix Partners Founded. A rival firm to Axiom Global Partners is founded. Wesley Wang, Nicholas Stephan, Marcos Brodsky, Jon Lines & Ezra Lunde all are partners in Phoenix. Stephan is the company's CEO.
June 10th. Axiom calls a Board meeting for June 17th. Wang & Stephan attempt to halt the board from acting by trying to postpone the meeting.
June 15th. Wang & Stephan attempt a second time to have Axiom, a Delaware LLC dissolved, this time in New York court by suing all other Axiom investors. Wang and Stephan also seek to enjoin Axiom from conducting business. They also level baseless allegations against Cawley, Park and others which they agree to withdraw days later. Such allegations are supported by certian former employees of Axiom who become Phoenix Partners employees.
June 20th. Wang and Stephan resign as employees and as directors from the Axiom Board. Wang & Stephan sell shares back to Axiom for $.50 or one tenth what they been offered before the litigation. The control dispute ends.
Senior Officers Resignations Story