UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 8)
Infusion Brands International, Inc.
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(Name of Issuer)
Common Stock, $0.00001 par value per share
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(Title of Class of Securities)
45685W106
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(CUSIP Number)
Shad Stastney
Vicis Capital, LLC
445 Park Avenue, Suite 1043
New York, NY 10022
(212) 909-4600
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)
July 15, 2013
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. [ ]
CUSIP No. 45685W106
| 1. | Names of Reporting Persons. | ||
| I.R.S. Identification Nos. of above persons (entities only). | |||
| Vicis Capital, LLC | |||
| 45-0538105 | |||
| 2. | Check the Appropriate Box if a Member of a Group (See Instructions) | ||
| (a) ¨ | |||
| (b) ¨ | |||
| 3. | SEC Use Only | ||
| 4. | Source of Funds (See Instructions) | ||
| OO — funds of its advisory client | |||
| 5. | Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) ¨ | ||
| 6. | Citizenship or Place of Organization | ||
| Delaware | |||
|
NUMBER OF
|
7. | Sole Voting Power | |
| 878,502,441 | |||
| 8. | Shared Voting Power | ||
| 0 | |||
| 9. | Sole Dispositive Power | ||
| 878,502,441 | |||
| 10. | Shared Dispositive Power | ||
| 0 | |||
| 11. | Aggregate Amount Beneficially Owned by Each Reporting Person | ||
| 878,502,441 | |||
| 12. | Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) ¨ | ||
| 13. | Percent of Class Represented by Amount in Row (11) | ||
| 95.3% | |||
| 14. | Type of Reporting Person (See Instructions) | ||
| IA | |||
Item 1. Security and Issuer
The securities to which this Schedule 13D (the "Schedule") relates are shares of common stock, par value $0.00001 per share (the "Common Stock"), of Infusion Brands International, Inc. (the "Issuer"). The address of the Issuer's principal executive offices is 14375 Myerlake Circle, Clearwater, FL 33760.
Item 2. Identity and Background
| (a) | The name of the reporting person is Vicis Capital, LLC ("Vicis"). All 878,502,441 shares reported on this Schedule are held directly by Vicis Capital Master Fund (the "Fund"), for which Vicis acts as investment advisor. Vicis may be deemed to beneficially own such 878,502,441 shares within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, by virtue of the voting and dispositive power over such shares granted by the Fund to Vicis. |
| (b) | The address of Vicis is 445 Park Avenue, Suite 1043, New York, NY 10022. |
| (c) | Vicis is an investment adviser registered under the Investment Advisers Act of 1940, as amended, that provides investment advisory services to the Fund. |
| (d) | Vicis has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) during the last five years. |
| (e) | Vicis has not, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. |
| (f) | Vicis is a limited liability company organized under the laws of the state of Delaware. |
Pursuant to General Instruction C of Schedule 13D, the following information is being provided with respect to each member of Vicis (the "Insiders"):
Members of Vicis Capital, LLC
| Name | Occupation |
| Shad Stastney | Member and Chief Operating Officer |
| John Succo | Member and Chief Investment Officer |
| Sky Lucas | Member and Head of Global Convertible Arbitrage |
The business address of each of the Insiders is 445 Park Avenue, Suite 1043, New York, NY 10022. To Vicis's knowledge, each of the Insiders is a United States citizen, and none of the Insiders has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), nor has any Insider been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
The Fund previously acquired (a) 138,502,441 shares of Common Stock; (b) a warrant to purchase 97,606,276 shares of Common Stock (the "2009 Warrant"), with respect to which 70,000,000 shares of Common Stock underlying the 2009 Warrant have not yet been exercised; (c) 11,500,000 shares of the Issuer's Series G Convertible Preferred Stock, convertible into 115,000,000 shares of Common Stock and having a mandatory redemption date of June 30, 2015 (the "Series G Preferred Stock"); and (d) certain warrants to purchase 115,000,000 shares of Common Stock that are exercisable immediately (such warrants together with the 2009 Warrant, the "Warrants").
On July 3, 2013, the Fund and the Issuer entered into an Omnibus Amendment pursuant to which, among other matters, the Fund granted to the Issuer an option to redeem all securities of the Issuer held by the Fund as of the date thereof at any time on or before June 30, 2014, for a redemption price of $12 million, and the Fund consented to the amendment of the Certificate of Designations designating the terms of the Series G Preferred Stock in order in part to (1) permit the Issuer at the Issuer’s sole discretion to declare and pay the Dividend (as defined below) in lieu of paying the holder of the Series G Preferred Stock certain amounts owed under the Series G Preferred Stock and (2) extend the mandatory redemption date to June 30, 2015. On July 15, 2013, in accordance with the Certificate of Designations designating the terms of the Series G Preferred Stock (as amended and restated, the “Certificate of Designations”), the Board of the Issuer declared a dividend (the “Dividend”) of 440,000,000 shares of Common Stock in the aggregate in respect of the Series G Preferred Stock to the Fund, as the sole holder thereof. The Dividend was declared in lieu of and in complete satisfaction of all amounts owed to the Fund as of June 30, 2013, as Additional Dividend, Special Preferred Distribution, accrued but unpaid Quarterly Preferred Dividends (as each of those terms is defined in the Certificate of Designations), and any interest accrued with respect to the foregoing relating to the shares of Series G Preferred Stock held by the Fund. The descriptions of the Certificate of Designations and the Omnibus Amendment are necessarily limited and each is qualified in its entirety by reference to such Certificate and such Amendment filed as an Exhibit to this Schedule.
As a result, Vicis is deemed to beneficially own 878,502,441 shares of Common Stock.
Item 4. Purpose of Transaction.
The Fund is deemed to own approximately 95.3% of the Issuer's outstanding Common Stock. Vicis, on behalf of the Fund, acquired the Common Stock for investment purposes in the ordinary course of its business pursuant to specified investment objectives of the Fund.
On August 10, 2012, the Issuer entered into an Agreement and Plan of Merger (the "Merger Agreement") with Ronco Holdings, Inc., a Delaware corporation ("Ronco"), CD3 Holdings, Inc., the holder of all of the issued and outstanding common stock of Ronco ("CD3"), Ronco Brands, Inc., a Nevada corporation, the Issuer's newly formed wholly owned subsidiary ("Acquisition Sub") and the Fund. Upon the closing of the merger (the "Closing Date"), Ronco will merge with and into Acquisition Sub, Acquisition Sub will cease to exist and Ronco will survive the merger and become a wholly owned subsidiary of Issuer (the "Merger"). Upon consummation and in consideration for the Merger, CD3 shall be entitled to receive such number of shares of Issuer's Common Stock equal to 50% of the issued and outstanding Common Stock of Issuer as of the Closing Date along with the right to receive, at any time after the Closing Date, one additional share of Issuer's Common Stock for every share of Common Stock issued upon the conversion of any derivative security of Issuer outstanding at the Closing Date.
Pursuant to the Merger Agreement, the Issuer will redeem from the Fund all 11,500,000 shares of the Issuer's Series G Convertible Preferred Stock held by Vicis in exchange for two promissory notes having an aggregate principal amount of $8,000,000. Further pursuant to the Merger Agreement and that certain Memorandum of Understanding dated as of August 10, 2012, by and between CD3, Ronco, Issuer, Acquisition Sub, and the Fund (the "MOU"), Vicis agreed in principle to guarantee the repayment by Issuer of a certain bridge loan expected to be sought by the Issuer in the amount of up to $6,000,000. In conjunction therewith, on September 12, 2012, the Fund purchased a promissory note in the principal amount of $2,000,000, which was due and payable on October 15, 2012. Under the terms of such promissory note, on the maturity date thereof, the Issuer was required to pay the Fund an additional $150,000 to reimburse legal fees, due diligence and other costs incurred by the Fund.
In connection with the execution of the Merger Agreement, a secured creditor of Ronco holding certain debt of Ronco that was in default entered into a forbearance agreement with Ronco whereby it agreed to accept a payment in consideration for the cancellation of such Ronco debt and to forbear upon exercising its rights under the defaulted Ronco debt under certain conditions. Pursuant to the Merger Agreement, in the event this Ronco creditor elects to exercise its rights and remedies under this Ronco debt (as such rights and remedies are modified by its forbearance agreement with Ronco) and foreclose upon the assets of Ronco, the Fund, in its sole discretion, may elect to unwind the redemption of the Fund’s Series G Preferred Stock and return the promissory notes issued in consideration therefor for cancellation (and upon the occurrence thereof the shares of Common Stock issued to CD3 pursuant to the Merger Agreement shall be cancelled). In the event such forbearance agreement expires and the terms of such agreement are not consequently extended or modified, then the Issuer is obligated to issue to the Fund a promissory note of like tenor as the indebtedness held by the Ronco creditor and the Fund is obligated to return the promissory notes issued in consideration therefor for cancellation. The Fund has agreed in such circumstance that it will not foreclose on any of the Issuer’s assets prior to such time, if any, that the Ronco creditor forecloses on the assets of Ronco. In the event the foregoing exchange relating to the promissory notes issued to the Fund occurs and the claims that the Ronco creditor has against Ronco shall be satisfied or released, all actions taken regarding the exchange of the promissory notes issued to the Fund shall be rescinded and the Fund shall be reissued promissory notes on the terms originally issued to the Fund, modified to reflect analogous changes made with respect to the Ronco creditor.
Pursuant to the Certificate of Designations, as the sole holder of the Series G Preferred Stock, is entitled to elect two directors to the Issuer's Board of Directors. The Fund has elected Shad Stastney and Keith Hughes to the Issuer’s Board pursuant to such right. Pursuant to the Merger Agreement, Todd Barrett, Bill Moore, Fred Schulman, Robert DeCecco, Shad Stastney, and Keith Hughes shall be elected as members of the board of directors of Issuer. Further, Fred Schulman shall serve as Chairman of the Board, and Messrs. DeCecco and Barret shall serve as Co-Chief Executive Officers, of the Issuer. Information regarding Messrs. Stastney and Hughes and their experience and qualifications is provided below.
As the majority common shareholder of the Issuer and a signatory to the Merger Agreement, Vicis has consented to the aforementioned changes to the Issuer's corporate governance structure and to the Merger Agreement, the MOU, and the transactions contemplated thereby.
On February 18, 2013, Mr. Stastney was appointed as Chairman and Chief Strategy Officer of the Issuer by its Board of Directors. In conjunction with his appointment, he entered into an at-will employment relationship with the Issuer, in consideration for which he will receive a base salary of $175,000 and has been granted and may be recommended for future grant(s) of equity awards of the Issuer. He has executed a standard and customary non-disclosure and non-competition agreement in conjunction with the employment arrangement.
Mr. Stastney is the Chief Operating Officer and Head of Research for Vicis Capital, LLC, a company he jointly founded in 2004. Mr. Stastney also jointly founded Victus Capital Management LLC in 2001. From 1998 through 2001, Mr. Stastney worked with the corporate equity derivatives origination group of Credit Suisse First Boston, eventually becoming a Director and Head of the Hedging and Monetization Group, a joint venture between derivatives and equity capital markets. In 1997, he joined Credit Suisse First Boston's then-combined convertible/equity derivative origination desk. From 1994 to 1997, he was an associate at the law firm of Cravath, Swaine and Moore in New York, in their tax and corporate groups, focusing on derivatives. He graduated from the University of North Dakota in 1990 with a B.A. in Political Theory and History, and from the Yale Law School in 1994 with a J.D. degree focusing on corporate and tax law. Mr. Stastney is a director of a number of public and private companies.
Mr. Hughes is the Chief Financial Officer of Vicis. He is a Certified Public Accountant and graduated from St. John's University in 1978 with a B.A. in Accounting. Mr. Hughes joined Vicis in January 2006 from International Fund Services, the fund administrator, where he was a Managing Director in Operations since 2001. From 1998 to 2001, he has held various financial roles with hedge funds including treasurer, controller and chief financial officer. From 1986 to 1998 Mr. Hughes worked at the Union Bank of Switzerland (UBS) where he was a Managing Director and the Equity Controller for North America. Previous to UBS, Mr. Hughes worked at Dean Witter, Merrill Lynch and McGladrey & Pullen, LLP. Mr. Hughes is a director of a number of companies.
Vicis, and representatives of Vicis and the Fund, have had discussions with senior management of the Issuer and expect in the future to have such discussions, through Mr. Stastney or otherwise, concerning ways in which the Issuer could maximize shareholder value. Vicis, and representatives of Vicis and the Fund, expect that Mr. Stastney, in his role as Chairman and Chief Strategy Officer of the Issuer, will work with the Issuer’s Board and senior management to explore implementing a variety of measures on behalf of the Issuer that seek to improve the profitability of and/or grow the Issuer, including through opportunistic merger and acquisition and joint venture activity.
Except as set forth in this Item 4, Vicis has no present plan or proposal that relates to or would result in any of the actions specified in clauses (a) through (j) of Item 4 of Schedule 13D, but will continue to review this position based upon further developments. Furthermore, Vicis anticipates that any measure implemented by the Issuer relating to any such clause, to the extent such measure may be attributable to Mr. Stastney, will be so attributable to him in his role as Chairman and Chief Strategy Officer of the Issuer rather than in his role with Vicis.
As permitted by law, Vicis may purchase shares of Common Stock or other securities convertible, exchangeable or exercisable into Common Stock or dispose of any or all of such securities from time to time in the open market, in privately negotiated transactions, or otherwise, depending upon future evaluation of the Issuer and upon other developments, including general economic and stock market conditions.
Item 5. Interest in Securities of the Issuer
| (a) | All 878,502,441 shares reported on this Schedule are held directly by Vicis Capital Master Fund, for which Vicis Capital, LLC acts as investment advisor. Vicis Capital, LLC may be deemed to beneficially own such 878,502,441 shares within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, by virtue of the voting and dispositive power over such shares granted by Vicis Capital Master Fund to Vicis Capital, LLC. The voting and dispositive power granted to Vicis Capital, LLC by Vicis Capital Master Fund may be revoked at any time. Vicis Capital, LLC disclaims beneficial ownership of any shares reported on this Schedule. |
The foregoing 878,502,441 shares of Common Stock represent approximately 95.3% of the Issuer's outstanding Common Stock (based upon 181,459,602 shares of Common Stock outstanding at November 14, 2012, as reported by the Issuer in its Quarterly Report on Form 10-Q filed with the SEC for the period ended September 30, 2012 plus 185,000,000 shares of Common Stock still underlying the Warrants, 115,000,000 shares of Common Stock underlying the Series G Preferred Stock, 440,000,000 shares of Common Stock relating to the Dividend, and 878,502,441 shares of Common Stock deemed to be beneficially owned by Vicis).
| (b) | For information on voting and dispositive power with respect to the above-listed shares, see Items 7-10 of the Cover Pages. |
| (c) | Except as set forth in Items 3 and 4, Vicis has not effected any transaction in the Common Stock in the past 60 days. |
| (d) | Not applicable. |
| (e) | Not applicable. |
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
The information set forth in Items 3 and 4 is hereby incorporated by reference in this Item 6.
Item 7. Material to Be Filed as Exhibits
| Exhibit | Description of Exhibit | |
| 99.1 | Omnibus Amendment dated as of July 3, 2013, by and between Infusion Brands International, Inc. and Vicis Capital Master Fund (omitting schedules thereto and furnished herewith). | |
| 99.2 | Infusion Brands International, Inc. Second Amended and Restated Certificate of Designations, Preferences and Rights of Series G Convertible Preferred Stock (furnished herewith). | |
Signature
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
July 19, 2013
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Date
/s/ Andrew Comito
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Signature
Andrew Comito, Compliance Officer*
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Name/Title
*Executed pursuant to the authorization of the members of Vicis Capital, LLC attached as Attachment A to the Schedule 13D/A previously filed with the SEC by Vicis Capital, LLC with respect to the Amacore Group, Inc. on October 1, 2009.
OMNIBUS AMENDMENT
THIS OMNIBUS AMENDMENT, dated as of July 3, 2013 (this “Amendment”), by and between INFUSION BRANDS INTERNATIONAL, INC., a Nevada corporation (the “Company”), and VICIS CAPITAL MASTER FUND (“Vicis”), a sub-trust of Vicis Capital Master Series Trust, a unit trust organized and existing under the laws of the Cayman Islands, is entered into with reference to the following facts:
WHEREAS, the Company and Vicis are parties to that certain Securities Purchase Agreement dated as of December 14, 2011 (the “Purchase Agreement”);
WHEREAS, the Company previously issued and sold to Vicis 11,500,000 preferred shares of the Company’s Series G Convertible Preferred Stock, which are convertible into shares of common stock of the Company, par value $0.00001 per share, and which have such terms, rights and preferences as are set forth in the Certificate of Designation, Preferences, and Rights of Series G Convertible Preferred Stock of the Company (the “Certificate of Designation”);
WHEREAS, the Company issued to Vicis that certain promissory note dated as of September 12, 2012 in the principal amount of Two Million Dollars ($2,000,000) (the “Note”), and Vicis has funded an additional $810,000 to the Company which has not been documented in the form of an additional promissory note;
WHEREAS, the parties desire to (i) amend and restate the Note in order to increase its principal amount to reflect additional amounts funded to the Company by Vicis, (ii) extend the maturity date of the Note, and to amend and restate the Certificate of Designation, and (iii) grant the Company an option to redeem all Company securities currently held by Vicis.
NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth in or incorporated by reference into this Amendment and intending to be legally bound hereby, the parties hereto agree as follows:
1. Amendment and Restatement of Note. The Company shall deliver to Vicis an amended and restated promissory note in the form set forth on Exhibit A hereto (the “Amended Note”), and upon receipt thereof Vicis shall deliver the Note to the Company for cancellation.
2. Amendment of Certificate of Designation. The Company shall amend the Certificate of Designation in the form of amendment set forth as Exhibit B hereto by filing such amendment with the Secretary of State of Nevada as soon as practicable after the date hereof, not to exceed three business days after the date hereof.
3. Optional Redemption.
(a) At any time from the date hereof until on or before June 30, 2014 (unless sooner terminated by mutual written agreement of Vicis and the Company) (the “Termination Date”), the Company shall have the option (the “Option”) to redeem all, but not less than all, of the securities held by Vicis set forth on Exhibit C hereto (the “Securities”) for a price of Twelve Million Dollars ($12,000,000) cash (the “Securities Redemption Price”). The term “Securities” shall include, for the avoidance of doubt, all securities issued in substitution of or exchange for, or on account of, any such Securities, including, but not limited to, securities issued upon a conversion, stock dividend, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, combination of shares, spinoff or otherwise, and all rights, powers and privileges that attach to any such Securities, including, but not limited to, voting rights, preferential rights, liquidiation rights, dividends of any type whether accrued, unpaid, or otherwise, interest, appreciation, distributions, and all other rights, powers and privileges appertaining to any such Securities as the case may be.
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(b) The Company may exercise the Option by delivering written notice to Vicis, at any time prior to the Termination Date, of the Company’s intent to exercise the Option (the “Exercise Notice”). The closing of the sale and redemption of the Securities shall take place at a time and date mutually agreeable to Vicis and the Company, which shall be no later than ten (10) days after the date that the Exercise Notice is given to Vicis (the “Closing”), it being understood that such date for Closing may be after the Termination Date. The Closing shall occur at the offices of legal counsel for Vicis, or at such other location (which may include the waiver of any physical closing and the exchange of executed documentation by facsimile or electronic transmission or otherwise), as may be agreed to by Vicis and the Company. If the parties do not mutually agree to a time and date for the Closing, the Closing shall occur at 10:00 a.m., Eastern Prevailing Time, on the tenth (10th) day after the date that the Exercise Notice is given to Vicis. At the Closing, (a) Vicis shall deliver to Company the certificates or instruments evidencing the Securities in negotiable form or accompanied by an executed stock power or instrument of transfer in a form acceptable to Company, and (b) Company shall deliver to Vicis payment of the Securities Redemption Price.
(c) Vicis represents that it (i) has good and marketable title to the Securities free and clear of all liens, claims, encumbrances and restrictions, legal or equitable, of every kind, except for certain restrictions on transfer imposed by federal and state securities laws, and (ii) has full and unrestricted legal right, power and authority to sell, assign and transfer such Securities to the Company without obtaining the consent or approval of any other person or governmental authority.
(d) Nothing in this Amendment shall convey upon the Company any rights with respect to, or deny Vicis of any rights as a securityholder of, the Securities prior to the exercise of the Option and the transfer of the Securities pursuant to the terms and conditions set forth herein.
(e) As long as this Option remains outstanding, Vicis shall not sell, convey, transfer, exchange, or otherwise dispose of any of the Securities or any interest therein or create, incur, or permit to exist any pledge, mortgage, lien, charge, encumbrance, or any security interest whatsoever with respect to any of the Securities, unless the following conditions are satisfied: (i) all of the Securities are sold in a single transaction and (ii) the purchaser thereof agrees in writing that the Option remains in effect following such sale pursuant to the terms of this Section 3.
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4. Company Representations.
(a) The Company hereby represents that it has obtained all authorizations of its Board of Directors and stockholders necessary to effect the transactions contemplated hereby and such authorizations remain in effect.
(b) The Company hereby represents that each of the representations and warranties contained in Sections 3.1(b) through 3.1(e) of the Purchase Agreement is true as of the date hereof as if made with respect to the date hereof.
5. Effect of Amendments. Nothing herein invalidates or shall impair or release any covenants, conditions, agreements or stipulations in the Note (as amended and restated by the Amended Note) or the Series G Convertible Preferred Stock, except as such is modified herein, and the same shall continue in full force and effect; (b) nothing herein affects, invalidates, impairs or releases it from its obligations to repay the Note (as amended and restated by the Amended Note) or amounts owing with respect to the Series G Convertible Preferred Stock; and (c) nothing herein shall be deemed a waiver by Vicis of any rights it may have against any party with respect to any other documents ancillary to the Note (as amended and restated by the Amended Note), this Amendment, or the Transaction Documents (as defined in the Purchase Agreement).
6. Miscellaneous. Sections 5.2 through 5.14 of the Purchase Agreement are incorporated herein by reference as if set forth in full herein (as if the term “Agreement” were referring to this Amendment and the term “Transaction Documents” included the Amended Note and this Amendment).
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment effective as of the day and year first written above.
COMPANY:
INFUSION BRANDS INTERNATIONAL, INC.
By: /s/Robert DeCecco
Name: Robert DeCecco
Title: CEO
VICIS:
VICIS CAPITAL MASTER FUND,
a sub-trust of Vicis Capital Master Series Trust
By: Vicis Capital, LLC, its investment advisor
By: /s/ Keith Hughes
Name: Keith Hughes
Title: Chief Financial Officer
SECOND AMENDED AND RESTATED
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
SERIES G CONVERTIBLE PREFERRED STOCK
of
INFUSION BRANDS INTERNATIONAL, INC.
Infusion Brands International, Inc., a corporation organized and existing under the laws of the State of Nevada (“Corporation”), hereby certifies that the Board of Directors of the Corporation (the “Board of Directors” or the “Board”), pursuant to authority of the Board of Directors as required by applicable corporate law, and in accordance with the provisions of its certificate of incorporation and bylaws, has and hereby authorizes a series of the Corporation’s previously authorized Preferred Stock, par value $.00001 per share (the “Preferred Stock”), and hereby states the designation and number of shares, and fixes the rights, preferences, privileges, powers and restrictions thereof, as follows:
Capitalized terms used and not otherwise immediately defined shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated June 30, 2010 or shall be defined in Section 8 below.
1. Designation, Amount, Stated Value and Par Value. The series of preferred stock shall be designated as its Series G Convertible Preferred Stock (the “Series G Preferred Stock”) and the number of shares so designated shall be 11,500,000. The par value of each issued share of Series G Preferred Stock shall be $.00001 per share, and the stated value of each issued share of Series G Preferred Stock shall be deemed to be $1.00 (the “Stated Value”). The Series G Preferred Stock shall have a mandatory redemption date of June 30, 2015 (the “Mandatory Redemption Date”).
2. Dividends and Distributions.
a. Dividends.
(i) Quarterly Cumulative Preferred Dividends. Before any dividends shall be paid or set aside for payment on any Junior Security of the Corporation, each Holder of the Series G Preferred Stock shall be entitled to receive dividends payable on the Stated Value of the Series G Preferred Stock at a rate of 8% per annum (“Quarterly Preferred Dividends”), which shall be cumulative, accrue daily from the Original Issuance Date and be due and payable on the last day of March, June, September and December of each year (each a “Quarterly Dividend Date”). Such dividends shall accrue whether or not declared, and the accumulation of unpaid dividends shall bear interest at a rate of 8% per annum. If a Quarterly Dividend Date is not a Business Day, then the dividend shall be due and payable on the Business Day immediately following such Quarterly Dividend Date. Such dividends may be paid in cash or may, with respect to dividends accrued on or before July 15, 2013, be paid in Common Stock in accordance with Section 2(d) hereof.
(ii) Additional Dividend. If the Special Preferred Distribution payable pursuant to Section 2(b) hereof has not been paid to Holders of the Series G Preferred Stock by June 30, 2013 then, in addition to Quarterly Preferred Dividends payable pursuant to Section 2(a)(i) hereof, each Holder of Series G Preferred Stock shall be entitled to receive an additional one-time dividend on June 30, 2013 in an amount equal to the Stated Value of the Series G Prefered Stock for each share of Series G Preferred Stock then held by such Holder (the “Additional Dividend”). Such Additional Dividend shall accrue whether or not declared, and the accumulation of any unpaid amount of such Additional Dividend shall bear interest at a rate of 8% per annum. Such Additional Dividend may be paid in cash or may be paid in Common Stock in accordance with Section 2(d) hereof.
b. Special Preferred Distribution.
(i) Prior to such time that the Corporation permits the exercise of any of the Management Options, the Corporation shall declare and pay to each Holder of Series G Preferred Stock with respect to each share of Series G Preferred Stock then held by such Holder the Special Preferred Distribution (defined below). Notwithstanding the foregoing, the exercise of the Management Options shall not be prohibited if the Corporation has the funds to pay the Special Preferred Distribution and (i) the Board of Directors elects not to distribute the Special Preferred Distribution or (ii) it offers to pay the Special Preferred Distribution, but the Holders of the Series G Preferred Stock, in their sole discretion, elect to waive the payment of the Special Preferred Distribution. Additionally, if the Special Preferred Distribution is paid to the Holders of the Series G Preferred Stock in part, the Management Options will become exercisable on a pro rata basis, proportionate to the amount of payment made under the Special Preferred Distribution. The Special Preferred Distribution may be paid in cash or may be paid in Common Stock in accordance with Section 2(d) hereof.
(ii) If the Special Preferred Distribution has not been paid to Holders of the Series G Preferred Stock before the Mandatory Redemption Date, then each Holder of Series G Preferred Stock shall be entitled to receive, with respect to each share of Series G Preferred Stock then held by such Holder, the Special Preferred Distribution on the Mandatory Redemption Date. Such Special Preferred Distribution shall accrue whether or not declared on the Mandatory Redemption Date, and the accumulation of any unpaid amount of such Special Preferred Distribution shall bear interest at a rate of 8% per annum. For the avoidance of doubt, the Special Preferred Distribtion with respect to each share of Series G Prefered Stock outstanding on the Mandatory Redemption Date shall become due and payable on such date regardless of whether such share is redeemed by the Coporation on such date.
(iii) “Special Preferred Distribution” means, with respect to each share of Series G Prefered Stock, an amount equal to (A) the sum of (1) the product of the Stated Value of such share multiplied by 4.0965218) all accrued but unpaid Quarterly Preferred Dividends thereon, less (B) the amount of the Additional Dividend, if any, paid on such share prior to the payment date of the Special Preferred Distribution.
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c. Payment Procedures. Dividends and distributions shall be payable to holders of record, as they appear on the stock books of the Corporation on such record dates as may be declared by the Board of Directors, not more than sixty (60) days, nor less than ten (10) days preceding the payment dates of such dividends. If the dividend on the Series G Preferred Stock shall not have been paid or set apart in full for the Series G Preferred Stock when payable, the aggregate deficiency shall be cumulative and shall be fully paid or set apart for payment before any dividends shall be paid upon or set apart for, or any other distributions paid made on, or any payments made on account of the purchase, redemption or retirement of any Junior Security. When dividends are not paid in full upon the shares or fractions of a share of Series G Preferred Stock and any other Pari Passu Security, all dividends declared upon this series and any other Pari Passu Security shall be declared, pro rata, so that the amount of dividends declared per share or fraction of a share on this Series G Preferred Stock and such other Pari Passu Security shall in all cases bear to each other the same rates that accrued dividends per share on the shares of Series G Preferred Stock and such other Pari Passu Security bear to each other.
d. Common Stock Dividend and Distribution. The Company may, on or before July 15, 2013, in lieu of paying in cash each of the Additional Dividend, the Special Preferred Distribution, all accrued but unpaid Quarterly Preferred Dividends, and any interest accrued with respect to any of the foregoing in satisfaction thereof, declare and pay to each Holder its pro rata share of 440,000,000 shares of Common Stock in satisfaction of all such amounts. Shares issued pursuant to this subsection (d) shall be delivered in accordance with the share delivery mechanics set forth in Section 5.d.i. hereof (as if such date of declaration and payment were a Conversion Date).
3. Voting.
a. Voting Rights.
(i) Board of Directors. So long as any shares of Series G Preferred Stock are outstanding, the holders of outstanding shares of Series G Preferred Stock shall, voting together as a separate class, be entitled to elect two Directors to the Board (the “Series G Directors”). The Series G Directors shall be elected by a plurality vote of holders of Series G Preferred Stock, with the elected candidates being the individuals receiving the greatest number of affirmative votes (with each holder of Series G Preferred Stock entitled to cast one vote for or against each candidate with respect to each share of Series G Preferred Stock held by such holder) of the outstanding shares of Series G Preferred Stock, with votes cast against such candidate and votes withheld having no legal effect. The election of the Series G Directors shall occur:
(1) at the annual meeting of holders of capital stock;
(2) at any special meeting of holders of capital stock if such meeting is called for the purpose of electing directors;
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(3) at any special meeting of holders of Series G Preferred Stock called by holders of not less than a majority of the outstanding shares of Series G Preferred Stock; or
(4) by the written consent of holders of the outstanding shares of Series G Preferred Stock entitled to vote for Series G Directors in the manner and on the basis specified above.
If, at any time when the holders of Series G Preferred Stock are entitled to elect Series G Directors, any such Series G Director should cease to be a Director for any reason, the vacancy shall be filled only by the vote or written consent of the holders of the outstanding shares of Series G Preferred Stock, voting together as a separate class, in the manner and on the basis specified above or as otherwise provided by law. The holders of outstanding shares of Series G Preferred Stock shall also be entitled to vote in the election of all other Directors of the Corporation together with holders of all other shares of the Corporation’s outstanding capital stock entitled to vote thereon, voting as a single class, with each outstanding share of Series G Preferred Stock entitled to the number of votes specified in Section 3(a)(ii) hereof. The holders of outstanding shares of Series G Preferred Stock, may, in their discretion, determine not to elect Series G Directors as provided herein from time to time, and during any such period the Board nonetheless shall be deemed duly constituted.
(ii) Other Matters. Except as otherwise provided herein or as otherwise required by law, each holder of the shares of Series G Preferred Stock shall have the right to the number of votes equal to the number of Conversion Shares then issuable upon conversion of the Series G Preferred Stock held by such Holder in all matters as to which holders of Common Stock are required or permitted to vote, and with respect to such vote, such Holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision in these Articles as amended hereby, to vote, together with the holders of Common Stock as a single class, with respect to any question upon which holders of Common Stock have the right to vote. To the extent permitted under applicable corporate law, but subject to Section 3(b) below, the Corporation’s shareholders may take action by the affirmative vote of a majority of all shareholders of this Corporation entitled to vote on an action. Without limiting the generality of the foregoing the Corporation may take any of the actions by the affirmative vote of the holders of a majority of the Series G Preferred Stock and the Common Stock and other voting Common Stock Equivalents, voting together as one class, with each holder of Series G Preferred Stock having the number of votes set forth above.
b. Limitations on Corporate Actions. Notwithstanding anything to the contrary in Section 3(a) above, as long as any shares of Series G Preferred Stock are outstanding, the Corporation agrees that it shall be bound by its covenants set forth in Sections 4.13 and 4.14 of the Securities Purchase Agreement.
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4. Liquidation, Dissolution, or Winding-Down.
a. Payments to Holders of Series G Preferred Stock. Upon any liquidation, dissolution or winding-down of the Corporation, whether voluntary or involuntary (a “Liquidation”), the holders of the shares of Series G Preferred Stock shall be paid in cash, before any payment shall be paid to the holders of Common Stock, or any other Junior Security, an amount for each share of Series G Preferred Stock held by such holder equal to the sum of the Stated Value thereof plus all accrued but unpaid dividends thereon (such applicable amount payable with respect to a share of Series G Preferred Stock sometimes being referred to as the “Individual Series G Preferred Liquidation Preference Payment” and with respect to all shares of Series G Preferred Stock in the aggregate sometimes being referred to as the “Aggregate Series G Liquidation Preference Payment”). If, upon such liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, the assets to be distributed among the holders of shares of Series G Preferred Stock shall be insufficient to permit payment to the holders of Series G Preferred Stock of an aggregate amount equal to the Aggregate Series G Liquidation Preference Payment, then the entire assets of the Corporation to be so distributed shall be distributed ratably among the holders of Series G Preferred Stock (based on the Individual Series G Preferred Liquidation Preference Payments due to the respective holders of Series G Preferred Stock).
b. Payments to Holders of a Junior Security. After the payment of all preferential amounts required to be paid to the holders of the Series G Preferred Stock and any other Senior Security or Pari Passu Security, the holders of any Junior Security then outstanding shall be entitled to receive the remaining assets of the Corporation available for distribution to its stockholders as otherwise set forth in the Corporation’s certificate or articles of incorporation.
5. Conversion. The holders of Series G Preferred Stock shall have the conversion rights as follows.
a. Right to Convert. Each share of Series G Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the Original Issue Date, and without the payment of additional consideration by the holder thereof, into such number of fully-paid and nonassessable shares of Common Stock as is determined by dividing the Stated Value per share, by the Series G Conversion Price in effect at the time of conversion. The “Series G Conversion Price” shall be ten cents ($0.10); provided, however, that the Series G Conversion Price, and the rate at which shares of Series G Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided in Section 6 below. Shares of Series G Preferred Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall not be reissued.
b. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”). Each Notice of Conversion shall specify the number of shares of Series G Preferred Stock to be converted, the number of shares of Series G Preferred Stock owned prior to the conversion at issue, the number of shares of Series G Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Holder delivers by facsimile such Notice of Conversion to the Corporation (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder. To effect conversions of shares of Series G Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing such shares of Series G Preferred Stock to the Corporation unless all of the shares of Series G Preferred Stock represented thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of Series G Preferred Stock promptly following the Conversion Date at issue. Certificates representing the Series G Preferred Stock shall have the following legend:
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THE HOLDER AND ANY ASSIGNEE OR TRANSFEREE, BY ACCEPTANCE OF THIS STOCK CERTIFICATE, ACKNOWLEDGE AND AGREE THAT, PURSUANT TO SECTION 5.B. OF THE CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES G PREFERRED STOCK, THE NUMBER OF SHARES REFLECTED ON THE FACE OF THIS CERTIFICATE MAY NOT BE THE ACTUAL NUMBER OF SHARES HELD BY THE HOLDER OR ASSIGNEE. PLEASE INQUIRE WITH THE CORPORATION AS TO THE ACTUAL NUMBER OF SHARES EVIDENCED BY THIS CERTIFICATE.
c. Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series G Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors, or round-up to the next whole number of shares, at the Corporation’s option. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series G Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
d. Mechanics of Conversion.
i. Delivery of Certificate Upon Conversion. Not later than five Trading Days after each Conversion Date (the “Share Delivery Date”), the Corporation shall deliver, or cause to be delivered, to the converting Holder a certificate or certificates which, on or after the Effective Date, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Transaction Documents) representing the number of shares of Common Stock being acquired upon the conversion of shares of Series G Preferred Stock. On or after the Effective Date, the Corporation shall, upon request of such Holder, use its reasonable efforts to deliver any certificate or certificates required to be delivered by the Corporation under this Section electronically through the Depository Trust Company or another established clearing corporation performing similar functions. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the fifth Trading Day after the Conversion Date, the applicable Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such certificate or certificates, to rescind such Notice of Conversion by written notice to the Corporation, in which event the Corporation shall promptly return to such Holder any original Series G Preferred Stock certificate delivered to the Corporation and such Holder shall promptly return any Common Stock certificates representing the shares of Series G Preferred Stock tendered for conversion to the Corporation.
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ii. Obligation Absolute; Damages. The Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Series G Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation; provided, however, that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder. If the Corporation fails to deliver to a Holder such certificate or certificates pursuant to this Section on the fifth Trading Day after the Share Delivery Date applicable to such conversion, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Stated Value of Series G Preferred Stock being converted, $10 per Trading Day (increasing to $20 per Trading Day on the tenth Trading Day after the Share Deliver Date) for each Trading Day after such fifth Trading Day after the Share Delivery Date until such certificates are delivered.
e. Reservation of Shares Issuable Upon Conversion. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Series G Preferred Stock, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holders of the Series G Preferred Stock, not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions in the Securities Purchase Agreement) be issuable upon the conversion of all outstanding shares of Series G Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.
6. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Corporation, at any time while this Series G Preferred Stock is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, this Series G Preferred Stock); (B) subdivides outstanding shares of Common Stock into a larger number of shares; (C) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (D) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Series G Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 6(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
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b) Subsequent Sales. Except with respect to the issuance by the Corporation of Management Equity Compensation, neither the Corporation nor any Subsidiary thereof, as applicable, shall at any time while any share of Series G Preferred Stock is outstanding (i) issue or sell, or be deemed to have issued or sold (by way of any grant or sale of Options or issuance or sale of any Convertible Securities or otherwise), any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Corporation), or (ii) change at any time (nor shall any changes be made to) the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable or exercisable for Common Stock, in either case without the prior express written affirmative consent of the holders of a majority of the Series G Preferred Stock, which consent may be granted or withheld in the sole discretion of such holders. For purposes of this Section 6(b), “Convertible Securities” means any stock or other securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock, and “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
c) Pro Rata Distributions. The Corporation shall not, at any time while this Series G Preferred Stock is outstanding, distribute to all holders of Common Stock (and not to Holders) evidences of its indebtedness or assets (including cash and cash dividends) (other than stock dividends, which shall be subject to Section 6(a)) without the prior express written affirmative consent of the holders of a majority of the Series G Preferred Stock, which consent may be granted or withheld in the sole discretion of such holders.
d) Fundamental Transaction. If, at any time while this Series G Preferred Stock is outstanding, (i) the Corporation effects any merger or consolidation of the Corporation with or into another Person, (ii) the Corporation effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of this Series G Preferred Stock, the Holders shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “Alternate Consideration”). For purposes of any such conversion, the determination of the Series G Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall apportion the Series G Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holders shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Series G Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new preferred stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 6(d) and insuring that this Series G Preferred Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.
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e) Other Events. If any event occurs of the type contemplated by the provisions of this Section 6 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Corporation’s Board of Directors in good faith will make an appropriate adjustment in the Series G Conversion Price so as to be equitable under the circumstances and otherwise protect the rights of the Holders; provided that no such adjustment will increase the Series G Conversion Price as otherwise determined pursuant to this Section 6.
f) Calculations. All calculations under this Section 6 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 6, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.
g) Notice to the Holders.
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i. Adjustment to Conversion Price. Whenever the Series G Conversion Price is adjusted pursuant to any provision of this Section 6, the Corporation shall promptly mail to each Holder a notice setting forth the Series G Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Conversion by Holder. If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Series G Preferred Stock, and shall cause to be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, at least 10 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert the Series G Preferred Stock (or any part hereof) during the 10-day period commencing on the date of such notice through the effective date of the event triggering such notice.
7. Mandatory Redemption at Maturity. If any share of Series G Preferred Stock remains outstanding on Mandatory Redemption Date, then on the Mandatory Redemption Date, the Corporation shall redeem each such share of Series G Preferred Stock for an amount in cash equal to its Stated Value plus all accrued and unpaid dividends or distributions thereon, unless the Holder, in its sole discretion, elects to convert each such share at the Series G Conversion Price as of the Mandatory Redemption Date.
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8. Definitions. As used herein, the following terms shall have the following meanings:
a. “Affiliate” means any Person that, directly or indirectly through one (1) or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder.
b. “Business Day” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
c. “Common Stock” means the Corporation’s common stock, par value $.00001 per share.
d. “Common Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
e. “Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Series G Preferred Stock in accordance with the terms hereof.
f. “Effective Date” means the date that the registration statement registering the Conversion Shares for resale is declared effective by the SEC.
g. “Holder” means a holder of Series G Preferred Stock.
h. “Junior Security” means the Common Stock, the Series C Preferred Stock, the Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, Series H Preferred Stock, all other Common Stock Equivalents of the Corporation existing on the date hereof, and any class or series of capital stock of the Corporation hereafter created that does not, by its terms, rank senior to or pari passu with the Series G Preferred Stock as to distribution of assets upon Liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or payment of dividends on shares of equity securities.
i. “Management Equity Compensation” means (i) Management Options; and (ii) shares of restricted Common Stock issued to executives, consultants, employees and agents of the Corporation, the issuance of which has been duly approved by or has occurred pursuant to a plan duly adopted by the Board of Directors of the Company.
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j. “Management Options” means options to purchase (a) shares of Common Stock of the Corporation issued to executives, consultants, employees and agents of the Corporation (including options issued to Robert DeCecco, Richard Diamond, Christopher Phillips and Stuart Rouse to acquire shares of Common Stock of the Corporation pursuant to their employment or consulting agreements, as the case may be, referenced in Section 2.4(b)(v) of the Securities Purchase Agreement) and (b) shares of common stock of Infusion Brands, Inc. issued to Robert DeCecco, Richard Diamond, Christopher Phillips and Stuart Rouse, as the case may be, granted pursuant to their employment or consulting agreements, as the case may be, referenced in Section 2.4(b)(v) of the Securities Purchase Agreement and provided that such options, by their terms: (a) vest two (2) years from the date of issue; and (b) become exercisable only after payment by the Corporation of the Special Preferred Distribution in full to holders of Series G Preferred Stock or as otherwise contemplated by the terms of the Certificate of Designation.
k. “Original Issue Date” the date the Corporation initially issues the shares of Series G Preferred Stock, regardless of the number of times transfer of such share is made on the stock records maintained by or for the Corporation and regardless of the number of certificates which may be issued to evidence such share.
l. “Pari Passu Security” means any class or series of capital stock of the Corporation hereafter created that, by its terms, ranks on parity with the Series G Preferred Stock as to distribution of assets upon Liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, and payment of dividends on shares of equity securities.
m. “Person” shall mean any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
n. “SEC” means the United States Securities and Exchange Commission.
o. “Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.
p. “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
q. “Securities Purchase Agreement” means the Securities Purchase Agreement dated on or about June 30, 2010, by and between the Corporation, and each of the purchasers of Series G Preferred Stock of the Corporation a party thereto.
r. “Senior Security” means any class or series of capital stock of the Corporation hereafter created that, by its terms, ranks senior to the Series G Preferred Stock as to distribution of assets upon Liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or payment of dividends on shares of equity securities.
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s. “Series A Preferred Stock” means the Series A Convertible Preferred Stock of the Corporation and such designations, preferences and limitations as set forth in the Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock filed with the State of Nevada on November 22, 2006.
t. “Series B Preferred Stock” means the Series B Convertible Preferred Stock of the Corporation and such designations, preferences and limitations as set forth in the Certificate of Designation, Preferences and Rights of Series B Convertible Preferred Stock filed with the State of Nevada on May 25, 2007.
u. “Series C Preferred Stock” means the Series C Convertible Preferred Stock of the Corporation and such designations, preferences and limitations as set forth in the Certificate of Designation, Preferences and Rights of Series C Convertible Preferred Stock filed with the State of Nevada on October 17, 2007 and amended on July 22, 2009.
v. “Series D Preferred Stock” means the Series D Convertible Preferred Stock of the Corporation and such designations, preferences and limitations as set forth in the Certificate of Designation, Preferences and Rights of Series D Convertible Preferred Stock filed with the State of Nevada on April 30, 2008 and amended on July 22, 2009.
w. “Series E Preferred Stock” means the Series E Preferred Stock of the Corporation and such designations, preferences and limitations as set forth in the Certificate of Designation, Preferences and Rights of Series E Preferred Stock filed with the State of Nevada on August 27, 2009.
x. “Series F Preferred Stock” means the Series F Preferred Stock of the Corporation and such designations, preferences and limitations as set forth in the Certificate of Designation, Preferences and Rights of Series F Preferred Stock filed with the State of Nevada on February 12, 2009 and amended on July 22, 2009.
y. “Series H Preferred Stock” means the Series H Preferred Stock of the Corporation and such designations, preferences and limitations as set forth in the Certificate of Designation, Preferences and Rights of Series H Preferred Stock, which as of the date of this Certificate of Designations has not been filed with the State of Nevada.
z. “Spin-off Transaction” means a transaction whereby certain Subsidiaries, assets, brands and/or lines of business of the Corporation or a Subsidiary may be spun-off and merged with and into a public shell company.
aa. “Subsidiary” shall mean any corporation, association, partnership, limited liability company or other business entity of which more than fifty percent (50%) of the total voting power is, at the time, owned or controlled, directly or indirectly, by the Corporation or one or more of the other Subsidiaries of the Corporation or a combination thereof.
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bb. “Trading Day” means a day on which the securities exchange, association, or quotation system on which shares of Common Stock are listed or quoted for trading shall be open for business or, if the shares of Common Stock shall not be listed on such exchange, association, or quoted on a quotation system for such day, a day with respect to which trades in the United States domestic over-the-counter market shall be reported.
cc. “Trading Market” means the following exchanges on which the Common Stock is listed for trading on the date in question: the New York Stock Exchange, the Nasdaq Capital Market or the Nasdaq Global Market, the American Stock Exchange, the OTCBB, or Pink Sheets.
dd. “Transaction Documents” shall have the meaning ascribed to such term in the Securities Purchase Agreement.
ee. “VWAP” of a share of Common Stock as of a particular date (the “Determination Date”) shall mean the price determined by the first of the following clauses that applies: (a) if shares of Common Stock are traded on a national securities exchange (an “Exchange”), the weighted average of the closing sale price of a share of the Common Stock of the Corporation on the last five (5) Trading Days prior to the Determination Date reported on such Exchange as reported in The Wall Street Journal (weighted with respect to the trading volume with respect to each such day); (b) if shares of Common Stock are not traded on an Exchange but trade in the over-the-counter market and such shares are quoted on the National Association of Securities Dealers Automated Quotations System (“NASDAQ”), the weighted average of the closing sale price of a share of the Common Stock of the Corporation on the last five (5) Trading Days prior to the Determination Date reported on NASDAQ as reported in The Wall Street Journal (weighted with respect to the trading volume with respect to each such day); (c) if such shares are an issue for which last sale prices are not reported on NASDAQ, the average of the closing sale price, in each case on the last five (5) Trading Days (or if the relevant price or quotation did not exist on any of such days, the relevant price or quotation on the next preceding Business Day on which there was such a price or quotation) prior to the Determination Date as reported by the Over the Counter Bulletin Board (the “OTCBB”), or any other successor organization; (d) if no closing sales price is reported for the Common Stock by the OTCBB or any other successor organization for such day, the average of the closing sale price, in each case on the last five (5) Trading Days (or if the relevant price or quotation did not exist on any of such days, the relevant price or quotation on the next preceding Business Day on which there was such a price or quotation) prior to the Determination Date as reported by the "pink sheets" by the Pink Sheets, LLC, or any successor organization; (e) if no closing sales price is reported for the Common Stock by the OTCBB or any other successor organization for such day, then the average of the high and low bid and asked price of any of the market makers for the Common Stock as reported on the OTCBB or in the "pink sheets" by the Pink Sheets, LLC on the last five (5) Trading Days; or (f) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holder and reasonably acceptable to the Corporation.
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IN WITNESS WHEREOF, this Second Amended and Restated Certificate of Designations has been executed by a duly authorized officer of the Corporation on this 2nd day of July, 2013.
INFUSION BRANDS INTERNATIONAL, INC.
By: /s/ Robert DeCecco
Robert DeCecco
Chief Executive Officer
(Signature Page to Second Amended and Restated Series G Preferred Certificate of Designations)
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ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES
OF SERIES G PREFERRED STOCK)
The undersigned hereby elects to convert the number of shares of Series G Convertible Preferred Stock indicated below into shares of common stock, $.00001 par value per share (the “Common Stock”), of Infusion Brands International, Inc., a Nevada corporation (the “Corporation”), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be required by the Corporation in accordance with the Purchase Agreement. No fee will be charged to the Holders for any conversion, except for any such transfer taxes.
Conversion calculations:
Date to Effect Conversion: __________________________________________________________________________
Number of shares of Preferred Stock owned prior to Conversion: ______________________________________________
Number of shares of Preferred Stock to be Converted: ______________________________________________________
Stated Value of shares of Preferred Stock to be Converted: __________________________________________________
Applicable Conversion Price: ________________________________________________________________________
Number of shares of Preferred Stock subsequent to Conversion: ______________________________________________
| [HOLDER] | ||||
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| Name: | ||||
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