EX-99.5 2 d270558dex995.

htm COMPLAINT FOR BREACH OF FIDUCIARY DUTY AND DECLARATORY

RELIEF
Exhibit 99.5

Exhibit
Mark M.99.5Gloven (State BarAttorneys
No. 139397) ENGLISHSherman
& GLOVEN A Professional Corporation 550 West “C” Street, SuiteDavid
1800 S.
SanDiego, California 92101andTelephone: (619) 338-6610C
Facsimile:
SUPERIOR (619) 338-6657
COURT OFcompany;
THE STATE for
OFPlaintiffs
CALIFORNIA Capital
FOR THEGroup,
COUNTY LLC,OF Singer
SANChildren’s
DIEGOFOR: Management
SHERMAN Trust,
CAPITAL GROUP, Oros,
LLC,Milfam NG,No.
an ) Case LLC, Lloyd I. Miller—Trust
37-2011-00102496-CU-BT-CTL
Arizona
FIDUCIARY limited liability
DUTY; MILFAM NG) SINGER
LLC, CHILDREN’S
a Delaware limitedMANAGEMENT
liability) AND ) COMPLAINT LLOYD I.TRUST, a New Jersey trust; ) DAVID
trust S. OROS, an individual;RELIEF
) (1) BREACH OF ) )
v. ) ) OC KIM,
J. (DAVID) an an
LEE, individual; ) GARY
individual; and NELSON,
) DOES 1—10,an inclusive,
individual; ) )) JOON WONcompany;
Defendants. JYOUNG, andan) individual; MILLER—TRUST
) JOHNATHAN
Group, LLC,CHEE,
C, an Ohio
Singeran
) (2)
individual; DECLARATORY
) BENJAMIN CHIJNG, ) Plaintiffs,
anOros,
individual; ) YUN
LLC and Lloyd I. Miller—Trust C (collectively, “Plaintiffs”), allege as follows:) )COMPLAINT
) Plaintiffs Sherman Capital Children’s Management Trust, David S. Milfam NG,
INTRODUCTION 1.
disenfranchisement ofThis is an action to
the stockholders ofrecover
Franklin damages
Wireless for breach
Corp. of fiduciary
(“Company” orduty and declaratory
“Franklin”) relief in connection
by Company,
the Defendants. with
Defendants the failed
have systematic corporate
toshareholders
manage mismanagement
the and
Company in a way and intentional
that will federal
maximize
and value forand
state securities shareholders,
corporate repeatedly
governance taken
laws actions
and the designed to entrench themselves in the intentionally misled Companyvarious regulators, andCompany
violated
stockholders,
principal placeand thereby
of Franklin
business damaged
located atPlaintiffs.
3820 W. PARTIES
Happy 2. Company’s
Valley Plaintiff
Road, Suite
governing
Sherman
141-601,
corporate
Capital Group,documents.
Glendale, LLC In doing
is a85310.
Arizona limited so, Defendants
liability
the company
breached
organized under fiduciary
the laws ofduties owed
the State to
of305,000
Arizona,shares
with aof
commonatstock
located 212 of
Vaccaro (“Franklin
Drive, Common
Cresskill, New Stock”).
Jersey 3. Plaintiff
07626. As of theSinger
date Children’s
hereof, Management
Singer Children’s Trust is aAs
Management
of created
trustTrust
dateunder
hereof,
holds theSherman
455,846 laws
shares
Capital
of New
of
Group,
Jersey,
Franklin
LLC
with
Common
holds
a principal
Stock. place
4. of business
Plaintiff David
Oros is anCommon
Franklin individual who 5.
Stock. resides in Maryland,
Plaintiff Milfam NG with a principal place of business at 621 E. Prattunder
Street,
theBaltimore, Marylandwith
21202. As of the dateofhereof, Mr.atOros
4550holds 456,005 shares ofS.
Florida 34102.
principal place As of the date
of business hereof,
at 4550 Milfam
Gordon NG LLC
Drive LLC is
Naples,
a limited
holds 264,900
Florida
liability
shares
34102.
company
of the
As of
organized
Franklin Common
date hereof, Stock.
Lloyd
laws of Delaware,
6. Plaintiff
I. Miller—Trust Lloyd a principal
I. Miller—Trust
C holds
place business
50,000 sharesCofis Franklin
a trust created
Common under Gordon
the
Stock. laws Drive
of Ohio,
2 COMPLAINT
Naples,
with a
7. Franklin isand
information a corporation
that organized
belief,County,
Defendant under the laws
OC9.Kim, is theofallege,
the State acting
President, of Nevada
Chiefwith a principal place
Financial andofSecretary
business of
located at 6205
andLusk Blvd.,ofSan Diego,and
California 92121.of8.the
Plaintiffs allege, on
residing in of
individual SantheDiego California. Plaintiffs onCalifornia.
information10.and belief, Officer
that Defendant Gary NelsonFranklin,
is a directora director
and ChairmanFranklin,
of the an individual
Board isofthe
a Directors
age of majority
ofofFranklin,
Franklin, andan
an
individual
San of the age
age of
of majority
majority. residing
11. in San
Plaintiffs Diegoon
allege, County,
information and belief, Plaintiffs
that allege,
Defendant on information
Johnathan Cheeis and
is abelief, thatofDefendant
director JoonanWon
Franklin,and
and Jyoung
individualofofthe
director
ageofofmajority
majority and
residing in
San Diego
Diego
majority
County,
County,inCalifornia.
residing California.
San Diego
12.
13. Plaintiffs
Plaintiffs
County,
allege,
California.
on
on information
allege, 14. information
Plaintiffs are
and
and belief,
belief,ofthat
unaware that
the
Defendant
Defendant
true
Benjamin
Yunnature
identity,
Chung
J. (David)
and Lee, aisdirector
capacity the
of Chief
each
of Operating
of
Franklin,
the
an individual
Officer
defendants of Franklin,
herein andage
designated an DOES
as individual
1 ofresiding
age in
the 10,
through of
inclusive. Plaintiffs
complaint. Upon allege,the
learning on true
information
identity, and belief,
nature and that each of
capacity of the
defendants
DOE designatedPlaintiffs
defendants, herein aswill
a DOE is in
amend some
this mannertoresponsible
complaint allege theirfor thenames
true actions,
anddamages
capacities. and15.
injuries alleged
Plaintiffs in this
allege, on
information
within and belief,
the course that all
and scope of material times
their agency herein,
and/or Defendants16.
employment. andSubject
DOES matter
1 through 10, and each
jurisdiction of them,
and venue arewere
propertheinagents of the/1/
this Court. other
/1/ defendants,
3 COMPLAINT and the acts of each defendant were
FACTUAL
3G andor4G BACKGROUND
wireless Company
modules and modems.Overview 17. Thefocuses
Theproducts
Company Company is engaged
primarily in the design,
on wireless manufacture
broadband and sale
USB modems, of broadband
which allow high speed
consumers wirelesstodata
to connect communication
wireless broadbandplayproducts,
networks such
fromas
laptop
games, anddesktop computers.
receive, send and The Company’s
download high resolution are based videos
pictures, on proprietary technology
andwireless
music content. which
The enables
Company end users
was to send
the world’s andsupplier
first receive of
email
bothwith
CDMA largeEVDO
file attachments,
Rev wireless
A and dual-modeinteractive
(CDMA
Rev A/WiMAX)
mobile computing Universal Serial
and internet Bus (USB)
markets. modems. markets
The Company 18. The Company’s
and sells itsthe
products data communication
through products are positioned atoperators,
the convergence(ii) of the growing communications,
distributors.
that the The Company’s
Company’s USB global
modems customer
are base
certified by extends
such primarily
industry from
leaders as United
Sprint, TimeStates totwo
Warner
channels:
South
Cable,
(i) directly
American
Comcast and
Cable,
to wireless
Caribbean
Cox, andcountries. Theasand
Clearwire, Company
well as
indirectly
other
through
has reported
wireless in strategic
that
operators
partners
its public
located
and
filings
in the
United States
market, andsystematic
through Caribbeanand
androutine
South mismanagement,
American countries. Corporate Mismanagement
incompetence and corporate and DeclineDefendants
malfeasance, 19. Notwithstanding
have driventhe Company’s
the Company’s position in and
financial the growing
stock wireless communication
performance into the ground.
Among other
emerging things, unlike their industry
“Machine-to-Machine” or “M2M” competitors,
business. including
20. As Novatel
shown in theWireless,
Company’s Inc.Form
(“Novatel”)
10-Q and on
filed Sierra Wireless,
November 14,Inc.
2011,(“Sierra”),
the Defendants
Company’s have results
financial stubbornly
underresisted
the entering the
management of
Defendants have been and continue to be abysmal. For example, in the third quarter of 2011, as compared to the third quarter of 2010, the Company’s gross 4 COMPLAINT
profit fell by a startling
approximately 85%— —with
fromnoapproximately $4.9 million to approximately $700,000 —During
and netthis
sales fellperiod,
by an equally alarming 81% — from approximately $16.5 million to fell
financial from$3.1
12.5%—-performance million
approximately
improved $49 legitimate
million
significantly
business
to approximately reason accounting
$43 million— andforrevenues
such decline.
fellfrom — from same
15%approximately approximately Sierra’s
$172 financial
million to performance
approximately declined
$147and modestly
million) and(gross profit
Novatel ‘ s by
more than
failure 50%—-proper
to observe from approximately
corporate $75.6 (gross
governance million profit
procedures
increased
to approximately
and
by $113.2
protocols.
more
For
than 200%21.
million).
example,
— In addition
thenot
Company to admitted,$13 million
mismanaging in itsthe
to approximately
Company’s $27 million—
operations, and
12,Defendants
nethave
revenues increased
exhibited a chronic
procedures
Defendant wereWon
Joon not effective
Jyoung for the
lives in most recent
South Korea fiscal
and year.
has Moreover,
never attended the
a Company
single has
meeting of the an has
heldBoard.
annual
The shareholders
Company
Form
has
1 OKJA
meeting
never in 11 filed
conductedyears.
a
onPlaintiffs
May
quarterly
2011, that
allege,
stockholders
its disclosure
on information
conference andcontrols
belief,
call andused
and
that
has
failed to find
Franklin a marketInc.,
Technology maker
a for its company
Korean securities of
or which
cause an analystpurportedly
Franklin to follow the Company’s
owns performance.
approximately 51%, toFurthermore,
divert Plaintiffs
corporate allege, on
opportunities awayinformation
from the and belief,and
Company thatsiphon
Defendants
value have
from the
Company’s
Franklin shareholders.
Common Stock 22. Theatmarket
closed a price has
of madeper
$3.09 it clear
share.that
By itNovember
does not believe
15, thatthe
2011, theshare
Defendants
price are
of competent
Franklin to manage
Common Stock the
hadaffairs and direction
plummeted to $1.50.of Plaintiffs
the Company. OnonApril
allege, 20, 2011,
information and
belief,
Option that this precipitous
Plan Amendment decline
23. On is due to the mismanagement of the Company by Defendants, and their attempts to disenfranchise Company stockholders
February 15, 2011, the Company filed a Schedule 14C Infon-nation Statement (the “Information Statement”) with the Securities and Exchange Commission. and entrench themselves. Stock
In the Information Statement, 5 COMPLAINT
the Company
Company’s announced that shareholders holdingthe55.49% of Franklin Common Stock had voted, by thewritten consent, to approve an for
amendment (the “Option Planawards
Amendment”) of the from
1,300,000 to2009
approximately
stock option
2,000,000 ofshares.
plan. If effective,
24. Tn theFranklin
Information Option Plan
Statement, Amendment
Stock.the Company would have increased
alsoStatement
announced that, number
notcollectively,
of shares
anyatother
authorized
the time
largeofstockholders
the Option insider
Plan awards (including
Amendment, its officers to Defendants)
and directors held
securities this19.3%
account forlaws vote,
and and the
didoutstanding
not25.
regulations). explain
Inof how the
addition
Common
to votes
beingnecessary
in violation
The
to of
Information
adopt the Option
applicable securities
did
Plan Amendment
laws,
identify
the10-K were obtained
purported Option without
Plan endeda solicitation
Amendment
inofaddition
also
to Defendants
shareholder
appears to havevotes
been
who
(asmade would
required by (or could)
applicable
in express violation
of the Company’s
shareholders taken Bylaws.
by Section
written 12
consent. theBylaws
The Company’s Bylaws
specifically (as filed
provide with
that the actions
“[a]ll Company’s Form
required or for theto
permitted fiscal
be year
taken by the June 30,
shareholders 2009) prohibits
shall be takenoutright
at a anyconvened
duly action bymeeting
shareholders.”ofThe
performance the Plaintiff
Company’s Letter andthe
stock, Sale Offer 26. On
Company’s August
failure to 4, 2011, certain
adequately discloseof information
the Plaintiffstosent
its a letter to the and
shareholders, Company’s
the Board expressing
Company’s improper their extreme
corporate dissatisfaction
governance (“August with
4 the of In
Letter”).
the August
had violated4 its
Letter,
own the Plaintiffs
Bylaws noted numerous,
in connection with thedeeply-troubling
purported Optionexamples of the Board’s
Plan Amendment, andfailing
and by management’s
toand, failings
holdinansome
annual in governancemeeting
shareholders and financial management,
for over a decade. includingAugust
Following that the4,Company
2011,
however,
continuedthe Company’s
to plunge pattern
and the of poor financial
Company’s performance andcontinued
results disenfranchisement
to decline. 6ofCOMPLAINT
shareholders continued instances, worsened. Among other things, the Company’s stock price
27. Plaintiffs
the After receiving
with athe August
startling 4 Letter,
offer. Defendants,
Defendant Kim throughonDefendant
offered, behalf of OC Kim,and
himself thetheCompany’s President,toacting
other Defendants, allChief Financial Officer, Secretary and a member of the Board, contacted
Plaintiffsthe
manage and concurrently
Company resign all positions14.
with theProxy
Company. Defendants’ actions confirm they have lostsell shares
all confidence ofinthe
theCompany’s
prospects ofcommon stock
the Company, held
and by
theathe Defendants
Board’s abilitytotothe for
Decemberallege,
Plaintiffs 22, 2011, ineffectively.
the middle
on information
November
andofbelief,
the Holiday 2011
season,
that the timing
Statement
when
of theDefendants
meeting
28. On
was
November
knew 14,
andorisunannounced
should 2011,
have
expressly
the Company
known
intended that
to
filed a proxy
publicshareholder
reduce shareholders statement
would be(the
participation
“Proxy”),
unable
thetopurpose
attendscheduling
(or at least shareholder
likely tomeeting
less the attend).as
Franklin’sthe
meeting, management
earliest dateand directors.
permitted 29. the
under Moreover,
Company’sthe Company
Bylaws. set afailure
The previously
to announce a recordrecord
date date
in of October
advance 14, 2011
effectively for votingfor
disenfranchisedshares of Franklin
Franklin
of entrenching
Common
stockholders StockDefendants
(including atPlaintiffs)
the annual
who
be thepurchased
first shares ofCompany
opportunity Franklin shareholders
Common Stock willfollowing
have had the record
to vote date.
their Suchinshareholders
shares over a decade.will not be able totovote all ofshareholder
their sharesapproval
at the annual meeting, notwithstanding that this
of will
certain of the
effectively Defendants
acknowledged to thethe
that Company’s
Company board, the
previously Proxy
misledalso seeks
Company shareholder
stockholders ratification
and the of 30.
SEC the In
when
addition
defective
it Option
reported
seeking
in PlanInformation
the Amendment. By seeking
Statement
ofthesuch
that a
appointment or the
ratification,
majority of
reappointment
Company
stockholders had has
previously approved the Option Plan Amendment. /// /// /// 7 COMPLAINT
FIRST officers
and/or CAUSEofOF theACTION (Breach ofofthe
Fiduciary Duty) 31.fiduciary
Plaintiffsduties
incorporate
care,byloyalty
reference the allegations of Company’s
paragraphs 1stockholders,
through 31, including
as though Plaintiffs.
fully set forth herein. 32. As directors
include obligations
Company and and toCompany,
its stockholders,
eachbusiness
exercise good
and towith
put the
Defendants
judgment,ofowe
the terms
interests to actCompany
prudentlybefore ofoperation
in the own. of
andCompany’s
33.the
good faith business,
to the to fiduciary
discharge duty
theirof
actions in good faith, Defendants’
tothings,
act in the bestfiduciary
interests duties
of the
the Company,
faith by, to
among failing
other to comply
things, intentionally violating of the the
Company’s governingtheir
corporate Defendants
to documents andbreached
applicabletheir
corporate law.
and34.
care by,
Defendants among other
breached routinely
their dutiesinofthe
mismanaging
loyalty and good
seeking
Plaintiffs disenfranchise
and other Company
Company stockholders
stockholders have andfederal
been damaged
securities
entrench by the
laws
themselves in Company
as an attempt
Defendants’ breach
approve the
management
of their andOption
members
fiduciary
PlanofAmendment
duties. the Company’s
SECOND CAUSE
issue
Board
OF
themselves
ACTION
additional
at the expense of the equity
(Declaratory Company’s
Relief) 36.
Company,
stockholders.
Plaintiffs
and
35.
incorporatematters:
following by reference
a. the allegations
Defendants’ lack ofofcompliance
paragraphswith1 through
the 36, as though
Company’s fully set
governing forth herein.
corporate 37. Anand
documents actual controversy
applicable has arisen
corporate law; and
b. thenow existsofbetween
validity the the Plan
Option parties concerning 8the
Amendment;
COMPLAINT
c. the validity
Judicial of the Proxy,
declarations including
are necessary andthe notice andatscheduling ofenable
the annual shareholder meeting scheduled forduties
December 22,other.
2011.WHEREFORE,
d. other issues to be shown according to proof. 38.
An award
further ofother
compensatory damages in appropriate
an amount thisshown
just andtoproper.
be time to
accordingthe
to parties
proof; to Declaratory
2. ascertain their rights
relief and
as requested to each
herein; 3. Attorneys fees and Plaintiffs
costsM.toGlove
pray
the extentfor the following
allowed
forby law; relief:
4. Such1.
Capital and
Group, LLCrelief as this
Singer Court deems
Children’s Management Dated:
Trust, David S.December 14, 2011
Oros Milfam ENGLISH
NG, LLC, & GLOVEN
and Lloyd A Professional
I. Miller—Trust Corporation
C 9 COMPLAINT By: Mark Attorneys Sherman