UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14C INFORMATION STATEMENT
(Rule
14C-101)
Schedule
14C Information
Information
Statement Pursuant to Section 14(c) of the Securities Exchange Act of
1934
Check the
appropriate box:
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[X]
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Preliminary
Information Statement
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[
]
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Confidential,
for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
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[
]
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Definitive
Information Statement
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CHDT
CORPORATION
(Name of
Registrant as Specified In Its Charter)
Payment of
Filing Fee (Check the appropriate box):
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[X]
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No
fee required.
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[ ]
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Fee
computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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[ ]
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Fee
paid previously with preliminary materials.
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[ ]
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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CHDT
CORPORATION
350 Jim
Moran Boulevard, Suite 120
Deerfield
Beach, Florida 33442
Telephone:
(954) 252-3440
August 7,
2009
WE
ARE NOT ASKING YOU FOR A PROXY AND
YOU
ARE REQUESTED NOT TO SEND US A PROXY.
Dear
holders of CHDT Corporation Common Stock (“shareholders” or “you”):
No action
is required by you. The accompanying Information Statement is furnished only to
inform shareholders of the actions described below in accordance with Rule 14c-2
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the
applicable Florida Statutes. This Information Statement is first being furnished
to you on or about August 17, 2009. See “Questions and Answers” at
page 7 below.
Who is
entitled to Notice: The enclosed information statement is being furnished to
shareholders of record as of July 20, 2009, of CHDT Corporation ("Company,”
"CHDT,” “we,” “us’” or “our”), a Florida corporation, in connection with the
following corporate actions, each of which was approved by written consents of
shareholders representing more than 50% of the shares of Common Stock entitled
to be cast on each of the corporate actions:
(1) Amend
the Articles of Incorporation of the Company to Increase Authorized Shares of
Common Stock and Reduce Authorized Shares of Serial Preferred
Stock. The amendment of Article IV(“Amendment”) of the Company’s
Amended and Restated Articles of Incorporation (“Restated Articles”) in order
to, and for the sole purpose of, increasing the authorized shares of Common
Stock from 600 million to 850 million and reducing the authorized
shares of serial preferred stock to 50 million from 100 million, which action
was approved on July 9, 2009, by the Company’s Board of Directors and on July
17, 2009 by written consents by shareholders representing 52% of the shares of
Common Stock entitled to be cast on the Amendment. This increase in
the authorized shares of Common Stock is necessary to meet all existing,
potential obligations to issue shares of Common Stock, especially for any
conversion of shares of the Company preferred stock to shares of Common Stock,
or exercise of options or warrants to purchase shares of the Common Stock. The
Company wants to reduce the authorized shares of serial preferred stock to a
number that the Company believes is more realistic in terms of the maximum
number of shares that might be issued in the foreseeable future by the Company.
(See “Amendment of
Article IV” at page 11 below).
The proposed Amendment is set
forth in Exhibit A to this Information Statement.
(2)
Approval
and adoption of the Restated Articles, which was approved on July 9, 2009, by
the Company’s Board of Directors and approved on July 9, 2009, by
written consents by shareholders representing 54% of the shares entitled to be
cast on the Restated Articles. The Restated Articles are set forth as
Exhibit B to this Information Statement. The Restated Articles were
adopted for the sole purpose of changing the Company’s articles of incorporation
to do the following:
(a) Amend
Article IV of the Restated Articles to Authorize the following two new series of
Preferred Stock:
(i) Series
C Convertible Preferred Stock, $1.00 par value per share, (“Series C Stock”).
The Series C Stock was authorized for issuance to an investor under a July 9,
2009 Stock Purchase Agreement (“SPA”) by the Company and Involve, LLC, a Florida
limited liability company, (“Investor”). Under the Restated Articles,
1,000 shares of Series C Stock are authorized for issuance. The
Series C Stock also entitles the holders to nominate and elect two of the seven
directors on the Company’s Board of Directors (See: “Restated Articles: Series C
Stock” at page 13 below); and
(ii) Series
B-1 Convertible Preferred Stock, $0.0001 par value per share, (“Series B-1
Stock”). The Series B-1 Stock was created to replace the previously authorized
Series B Convertible Preferred Stock, $0.10 par value per share, (“Series B
Stock”). Under the Restated Articles, 2,108,813 shares of Series B-1 Stock are
authorized for issuance. The Series B Stock was voluntarily cancelled
by its holders on July 9, 2009. The Series B-1 Stock was authorized
to conform its rights and preferences to the rights and preferences of the
Series C Stock and to replace the cancelled Series B Stock. The
outstanding shares of the Series B Stock were voluntarily surrendered by the
holders on July 9, 2009. See: “Restated Articles: Series B-1 Stock”
at page 12 below; and
(b) Amend
Article V, Section 1 of the Company’s articles of incorporation to reduce the
maximum number of directors allowed to sit on the Company’s Board of Directors
from eleven to seven directors in order to reflect the maximum number of
directors that have typically sat on the Company’s Board of Directors and to
comply with an obligation in the SPA to reduce the maximum number of directors
allowed to sit on the Company’s Board of Directors. See: “Restated
Articles: Reduce Board Size” at page 13 below.
Under
federal law, the Amendment and Restated Articles will not be effective until at
least 20 days after this Information Statement has first been furnished to
shareholders who have not previously consented, which date is August
20 2009.
Please
feel free to call us at (954) 252-3440 should you have any questions on the
enclosed Information Statement.
By order
of and for the Board of Directors of
CHDT
Corporation
By: /s/
Stewart Wallach, Chief Executive Officer
Stewart
Wallach, Chief Executive Officer
August 7,
2009
CHDT
CORPORATION
350
Jim Moran Boulevard, Suite 120
Deerfield
Beach, Florida 33442
INFORMATION
STATEMENT REGARDING
ACTION
TAKEN BY WRITTEN CONSENT OF
MAJORITY
STOCKHOLDERS
IN
LIEU OF AN ANNUAL OR SPECIAL MEETING
NOTICE
OF ACTION TO BE TAKEN PURSUANT TO THE WRITTEN CONSENT OF STOCKHOLDERS IN
LIEU OF A SPECIAL MEETING OF THE STOCKHOLDER
THIS
INFORMATION STATEMENT IS DATED AUGUST 7, 2009
THIS
IS NOT A NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS AND NO STOCKHOLDER MEETING
WILL BE HELD TO CONSIDER ANY MATTER DESCRIBED HEREIN. THE ACTIONS DESCRIBED IN
THIS INFORMATION STATEMENT HAVE BEEN APPROVED BY WRITTEN CONSENT OF THE HOLDERS
OF A MAJORITY OF THE SHARES OF THE COMPANY’S COMMON STOCK. THERE ARE NO
DISSENTERS’ RIGHTS WITH RESPECT TO THE ACTIONS DESCRIBED IN THIS INFORMATION
STATEMENT.
WE
ARE NOT ASKING YOU FOR A PROXY,
AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
Dear
Holders of CHDT Corporation Common Stock (“shareholders” or “you”):
Introduction. This
Information Statement is being furnished to the shareholders of CHDT Corporation
(“Company,” “we,” “our” or “us”), a Florida corporation with its principal
executive offices at 350 Jim Moran Boulevard, Suite 120, Deerfield Beach,
Florida 33442, Broward County, in connection with the following corporate
actions, which will take effect 20 days after the furnishing of this Information
Statement to shareholders.
The
corporate actions are:
(1) Amend
the Articles of Incorporation to Increase the Authorized Shares of Common Stock
and Reduce the Authorized Shares of Preferred Stock: The amendment of Article IV
of the Amended and Restated Articles of Incorporation (“Restated
Articles”) to increase the authorized shares of Common Stock from 600
million to 850 million and to reduce the total authorized number of shares of
serial preferred stock from 100 million to 50 million shares (“Amendment”) (See
“Amendment of Article IV” at page 11 below); and
(2) Adopt
and Approve the Restated Articles, which Restated Articles do the
following:
(a) Amend
Article IV of the Restated Articles to authorize two new series of preferred
stock:
(i) Series C
Convertible Preferred Stock, $1.00 par value per share, (“Series C Stock”).
The Series C Stock was authorized for issuance to an investor under a
July 9, 2009 Stock Purchase Agreement (“SPA”) by the Company and Involve, LLC, a
Florida limited liability company, (“Investor”). Under the Restated
Articles, 1,000 shares of Series C Stock are authorized for
issuance. The Series C Stock also entitles the holders to nominate
and elect two of the seven directors on the Company’s Board of Directors (See:
“Restated Articles: Series C Stock” at page 13 below); and
(ii) Series
B-1 Convertible Preferred Stock, $0.0001 par value per share, (“Series B-1
Stock”). The Series B-1 Stock was created to replace the previously authorized
Series B Convertible Preferred Stock, $0.10 par value per share, (“Series B
Stock”). The outstanding shares of the Series B Stock were
voluntarily surrendered for cancellation by its holders on July 9,
2009. The Series B-1 Stock was authorized to conform its rights and
preferences to the rights and preferences of the Series C
Stock. Under the Restated Articles, 2,108,813 shares of Series B-1
Stock are authorized for issuance. See: “Restated Articles: Series
B-1 Stock” at page 12 below; and
(b) Amend
Article V, Section 1 of the Company’s articles of incorporation to reduce the
maximum number of directors allowed to sit on the Company’s Board of Directors
from eleven to seven directors in order to reflect the number of directors that
have typically sat on the Company’s Board of Directors and to comply with an
obligation in the SPA to reduce the maximum number of directors allowed to sit
on the Company’s Board of Directors. See: “Restated Articles: Reduce
Board Size” at page 13 below.
Dilution
Impact of Amendment and Restated Articles. The Amendment will allow the Company
to issue additional shares of Common Stock over and above the previously
authorized 600 million shares of Common Stock, but not to exceed 850 million
shares of capital stock. The authorization of Series C Stock and Series B-1
Stock under the Restated Articles, both series being convertible into shares of
Common Stock upon demand of the holders, may, if the preferred stock is in fact
converted into Common Shares, result in the issuance of up to 156,570,565 shares
of additional Common Stock. The issuance of any additional shares of
Common Stock will have the effect of diluting the equity interests of existing
stockholders and the earnings per share of existing shares of Common Stock. See
“Dilution” at page 13 below. Such dilution could be substantial,
depending upon the amount of shares issued for exercised stock options or
warrants or for converted serial preferred stock. The newly authorized shares of
Common Stock will have voting and other rights identical to those of the
currently authorized shares of Common Stock. The amendment to increase the
number of authorized shares has no effect on the legal rights of the holders of
the existing shares of Common Stock. The authorization of Series C
Stock creates another series of capital stock in addition to the Series B-1
Stock that have priority over the Common Stock in connection with any dividend
and other distributions, including liquidation distributions, by the
Company.
Approval
of Corporate Actions. On July 9, 2009, the Amendment was approved by the
Company’s Board of Directors. On July 17, 2009, the Amendment was
approved by written consent of holders of the Common Stock, $0.0001 par value
per share, of the Company (“Common Stock”) representing a majority of the votes
entitled to be cast by all shareholders on the Amendment. As such,
there will be no shareholders’ meeting to approve the Amendment. On
July 9, 2009, the Restated Articles were approved by the Company’s Board of
Directors and by written consent of holders of the Common Stock representing a
majority of the votes entitled to be cast by all shareholders on the Amendment.
As such, there will be no shareholders’ meeting to approve the Restated
Articles.
Notice to
Shareholders. The Information Statement is first being furnished on or about
August 20, 2009 to holders of record of the Common Stock on July 20,
2009.
Reasons for Amendment and
Restated Articles.
With respect to the Amendment, the Company’s current
articles of incorporation do not authorize sufficient shares of Common Stock to
cover all possible future conversions of outstanding shares of preferred stock
or the exercise of existing and granted stock options and warrants for the
purchase of Common Stock. The Company wants to reduce the authorized shares of
serial preferred stock to a number that is more realistic in terms of the
maximum number of shares that the Company believes might be issued in the
foreseeable future by the Company.
With
respect to the Restated Articles, the Company needed to obtain funding for
working capital especially the purchase of products for pending and anticipated
customer orders in the second half of 2009, and such funding was
readily available from the Investor who was willing to purchase a series of
preferred stock with certain specified rights and preferences. Such funding was
not readily available from other sources or not available on terms and
conditions as favorable, in the opinion of the Company, as the proposed SPA.
With such a transaction, which is described in the next paragraph in more
detail, the Company needed to restate its articles of incorporation under
Florida law to authorize and designate the rights and preferences of the Series
C Stock and then also to authorize a another new series of preferred stock, the
Series B-1 Stock, to replace the Series B Stock and in order conform to the
rights and preferences of the Series B-1 Stock to the rights and preferences of
Series C Stock.
Both the
Amendment and the Restated Articles were approved by the Board of Directors as
part of and as required SPA The Investor is an accredited investor under Rule
501(a) of Regulation D under the Securities Act of 1933, as
amended, (“Securities Act”). Under the SPA, the Investor
purchased 1,000 shares of Series C Stock for an aggregate purchase price of
$700,000, or $700 per share. The sale of the Series C Stock to the
Investor was made in reliance on an exemption from registration pursuant to Rule
506 of Regulation D under the Securities Act. The investment proceeds will be
used by the Company for working capital of the Company and its operating
subsidiaries and was primarily required to fund the acquisition of products in
2009 to be sold by the Company’s two wholly-owned, operating subsidiaries,
Capstone Industries, Inc. and Black Box Innovations, LLC. See:
“Restated Articles - SPA ” below at page 13 for a description of the
SPA. The SPA closed on July 9, 2009. A copy of the SPA was
filed as Exhibit 10.1 to the Form 8-K, dated July 9, 2009, and filed with the
Commission on July 14, 2009 (Commission File Number 000-28831).
This
Information Statement has been prepared by our management, and the entire cost
of furnishing this Information Statement will be borne by us. We will request
brokerage houses, nominees, custodians, fiduciaries and other like parties to
forward this Information Statement to the beneficial owners of our voting
securities held of record by them and we will reimburse such persons for
out-of-pocket expenses incurred in forwarding such material.
Florida
law provides in substance that unless the Company's current Articles of
Incorporation provides otherwise, stockholders may take action without a meeting
of stockholders and without prior notice if a consent or consents in writing,
setting forth the action so taken, is signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to take
such action at a meeting at which all shares entitled to vote thereon were
present.
No
shareholder proposal has been submitted in respect of the Amendment, the
Restated Articles, or any related action.
Pursuant
to Rule 14c-2 under the Securities Exchange Act of 1934, as
amended, the Amendment and Restated Articles will not be adopted
until a date at least 20 days after the date on which this Information Statement
is first being furnished to the shareholders. The Company anticipates
that the actions contemplated herein will be effected under said rule on or
about the close of business on August 31, 2009.
As used in
this Information Statement, “SEC” or “Commission” shall mean the U.S. Securities
and Exchange Commission.
TABLE
OF CONTENTS
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Section
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Starts
at Page#
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Introduction
– Information Statement
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4
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Questions
and Answers
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8
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Vote
Required for Approval
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9
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Outstanding
Shares and Voting on the Corporate Actions
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9
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No
Shareholders Meeting; Notice to Shareholders; Notice to
Shareholders
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11
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Dissenters’
Rights
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11
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Amendment
of Article IV
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11
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Restated
Articles
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12
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Series
B-1 Stock
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12
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SPA
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13
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Series
C Stock
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14
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Reduce
Board Size
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14
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Dilution
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14
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Anti-Takeover
Effects of Amendment and Restated Articles
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15
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Series
A Convertible Preferred Stock, $1.00 par value
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16
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Voting
Rights and Security Ownership of Certain Beneficial Owners and
Management
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17
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Interest
of Certain Persons in or Opposition to Matters to be Acted
Upon
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19
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Additional
Information
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19
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Incorporation
of Information
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19
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Exhibit
A: Amendment to Article IV of the Amended and
Restated Articles of Incorporation
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20
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Exhibit
B: Amended and Restated Articles of
Incorporation
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21
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QUESTIONS
AND ANSWERS
Q. Why did
I receive this Information Statement?
A.
Applicable laws require us to provide you information regarding the Amendment
and Majority Shareholder Action - even though your vote is neither required nor
requested for the Amendment and Restated Articles to become effective under SEC
rules.
Q. What
will I receive when the corporate actions are effective?
A. The
Amendment and Restated Articles have already been approved, and you will not
receive anything further.
Q. Why am
I not being asked to vote?
A. The
holders of a majority of the issued and outstanding shares of Common Stock have
already approved the Amendment and Restated Articles by a written consent in
lieu of a shareholders' meeting. Such approval, together with the approval of
the Company's Board of Directors, is sufficient under Florida law, and no
further approval by our shareholders is required.
Q. What do
I need to do now?
A.
Nothing. This Information Statement is purely for your information and does not
require or request you to do anything.
Q. Whom
can I contact with questions?
A. If you
have any questions about any of the actions to be taken by the Company, please
contact Jill Mohler, Secretary, at Company, (954) 252-3440 or mail your inquiry
to her at CHDT Corporation, 350 Jim Moran Blvd., Suite 120, Deerfield Beach,
Florida 33442.
Q. Why is
Article IV of the Amended and Restated Articles of Incorporation being
amended?
A. The
Company must increase its authorized shares of Common Stock to ensure a
sufficient number of shares of Common Stock to cover existing obligations under
the Restated Articles and the SPA for the possible future issuances of shares of
Common Stock upon any conversion of Company’s preferred stock and upon any
exercise of Company options and warrants to purchase Common
Shares. The Amendment will increase the authorized shares of Common
Stock to 850 million shares from the current 600 million shares of authorized
Common Stock in Restated Articles, an increase of 250 million from the 600
million shares of Common Stock. As of July 20, 2009, the
number of shares of Common Stock issuable upon conversion of all outstanding
preferred stock is 156,570,565 and the number of shares of Common Stock issuable
upon the exercise of all outstanding options and warrants is
89,992,152.
Q. Why
were the Company’s Articles of Incorporation amended and restated?
A. As part
of the SPA, the Company was required to amend its Articles of Incorporation to
authorize the Series C Stock and Series B-1 Stock as well as adjust the maximum
number of directors allowed to serve on the Company’s Board of Directors from
eleven to seven directors. The Series C Stock was authorized
for the sole purpose of issuing the shares of the Series C Stock to the Investor
under the SPA. The Series B-1 Stock was created to replace the Series
B Convertible Preferred Stock, $0.10 par value, (“Series B Stock”), which were
issued and held solely by directors of the Company as consideration for past
cash loans made to Company by the directors or as payment in full of, or
consideration for cancelling, such loans in lieu of cash payment. All shares of
Series B Stock were voluntarily cancelled by its holders on July 9, 2009 in
order to comply with the SPA requirements that the two existing series of
Company preferred stock would have the designations, rights and preferences set
forth in the SPA, which set forth the terms and conditions upon which the
Investor was willing to invest $700,000 in the Company through the purchase of
the Series C Stock. A comparison of Series C Stock, Series B-1
Stock and Series B Stock are set forth in “Restated Articles” below at page
12.
Q. Why did
the Company enter into the SPA?
A. The
Company has relatively little assets suitable for asset based financing and its
current accounts receivable are subject to an accounts receivable line of credit
from Sterling National Bank. Further, the Company’s Common Stock is a
“penny stock” under SEC rules and typically trades at one cent per share and
rarely exceeds two to three cents per share. The Company also does
not produce sufficient and regular cash flow from operations to fund all working
capital needs. As such, the traditional means for obtaining working
capital funding on affordable terms and conditions and on a regular basis are
not available to the Company. This has forced the Company to fund
short falls in working capital needs that are not met by cash flow from
operations by periodic, short term loans from directors or the private placement
of its Common Stock. The directors’ willingness and ability to make
such loans to the Company are limited in terms of the frequency of such loans
and the amount of principal loan amount. In order to fund the current
growth in Company sales of its operating company’s products, the Company needed
to find a single investor source to provide working capital for the company and
its subsidiaries and funding for the purchase of products for pending or
anticipated 2009 product orders from customers of the Company’s operating
subsidiaries, which funding was not available from the directors who have loaned
money to the Company in the past or from other investors or funding
sources. The Company believes, but cannot make any assurances, that
the relationship with the Investor that was created by the SPA will enhance the
ability of the Company to obtain future debt, equity or debt and equity funding
from other sources. Said belief is based on the possible funding
sources of the Investor as well as the fact that a single accredited investor
has made an investment in the Company that is, in terms of the typical size of
an investment in or funding of the Company (and in the opinion of the management
of the Company), deemed to be significant and an indication of that investor’s
confidence in the future of the Company. See: “Restated Articles –
SPA” at page 13 below.
VOTE
REQUIRED FOR APPROVAL
In
addition to the approval of the Company’s Board of Directors, the Amendment and
Restated Articles required the approval of the holders of the Common Stock
representing a majority of votes entitled to be cast by all shareholders on the
Amendment. As of July 9, 200, July 17, 2009 and as of July 20, 2009,
there were 560,041,645 shares of Common Stock outstanding. The
affirmative vote of at least 280,020,823 shares of Common Stock was necessary to
approve the Amendment and Restated Articles. On July 9, 2009, holders of
302,118,450 shares of Common Stock consented to the Restated Articles, which
represents 54% of the outstanding shares of Common Stock. On July 17,
2009 holders of 288,423,955 shares of Common Stock consented to the Amendment,
which represents 52% of the outstanding shares of Common Stock.
OUTSTANDING
SHARES AND VOTING ON PROPOSAL
As of July
9, 2009, the Company's authorized capitalization consisted of 600,000,000 shares
of Common Stock, of which 560,041,645 shares were issued and outstanding as of
all dates referenced herein; and 100 million shares of serial preferred stock,
with 5 million shares of Series B Stock authorized and 2,108,813 shares of
Series B Stock outstanding. All holders of outstanding shares of the Series B
Stock unanimously approved the Restated Articles on July 9, 2009, prior to
cancellation of all of those shares.
As of July
20, 2009, the Company's authorized capitalization consisted of 600,000,000
shares of Common Stock, of which 560,041,645 shares were issued and outstanding;
and 100 million shares of serial preferred stock, consisting
of: 1,000 shares of Series C Convertible Preferred Stock, $1.00 par
value, of which 1,000 shares were issued; and 2,108,813 shares of series B-1
Convertible Preferred Stock, $1.00 par value, of which 1,329,000 shares are
issued. The Series C Stock and Series B-1 Stock have no voting rights
and their approval is not required to approve the Amendment.
Holders of
Common Stock of the Company have no preemptive rights to acquire or subscribe to
any of the additional shares of Common Stock. Each share of Common
Stock entitles its holder to one vote on each matter submitted to the
stockholders.
The Common
Stock is quoted on the Over-the-Counter Bulletin Board under the trading symbol
“CHDO.OB.” There is no public market for any series of Company
preferred stock and the Company has no intention or establishing a public market
for any such series of preferred stock.
The
following shareholders consented to the Amendment on July 17, 2009, in a written
consent in lieu of a meeting, which has the effect, under Florida Law, of a vote
of a majority of the votes attributable to the outstanding shares of Common
Stock:
|
Name of Common Shares
Shareholder
|
Number of Common Shares
|
|
Howard
Ullman
|
93,869,536
|
|
Stewart
Wallach
|
65,157,295
|
|
Manny
Bello
|
10,500,000
|
|
Margaret
Fisher
|
43,295,000
|
|
Bart
Fisher
|
30,715,419
|
|
Jeffrey
Postal
|
7,236,250
|
|
Laurie
Holtz
|
4,295,000
|
|
Jeffrey
Guzy
|
832,000
|
|
Larry
Sloven
|
792,000
|
|
Paul
W. Richter
|
425,950
|
|
Gerry
McClinton
|
500,000
|
|
Allen
Singer
|
3,300,000
|
|
Rita
Ullman
|
1,100,000
|
|
Lorenzo
Lamadrid
|
6,990,000
|
|
Diane
& Alan Frank
|
4,447,647
|
|
Wayne
Hardack
|
1,470,588
|
|
Gary
Dear
|
1,470,588
|
|
Dan
Strauss
|
2,083,824
|
|
Mark
Dice
|
1,100,000
|
|
Ross
Dimaggio
|
2,000,000
|
|
Lisa
Kasten
|
3,421,429
|
|
Phyllis
Arnold
|
3,421,429
|
|
TOTAL
|
288,423,955
|
The
following shareholders consented to the Restated Articles on July 9, 2009, in a
written consent in lieu of a meeting, which has the effect, under Florida Law,
of a vote of a majority of the votes attributable to the outstanding shares of
Common Stock:
|
Name of Common Shares
Shareholder
|
Number of Common Shares
|
|
Howard
Ullman
|
148,869,536
|
|
Stewart
Wallach
|
65,157,295
|
|
Margaret
Fisher
|
43,295,000
|
|
Bart
Fisher
|
30,715,419
|
|
Jeffrey
Postal
|
7,236,250
|
|
Laurie
Holtz
|
4,295,000
|
|
Jeffrey
Guzy
|
832,000
|
|
Larry
Sloven
|
792,000
|
|
Paul
W. Richter
|
425,950
|
|
Gerry
McClinton
|
500,000
|
|
TOTAL
|
302,118,450
|
The Series
B Stock holders unanimously consented to the Restated Articles on July 9,
2009. The name of the holders of Series B Stock as of July 9, 2009,
and their respective share ownership are set forth below:
|
Name of Series B Stock
Holder
|
Number of Series B Stock
Shares
|
|
Stewart
Wallach
(1)
|
939,000
|
|
Howard
Ullman
(2)
|
914,813
|
|
Jeffrey
Postal
(2)
|
250,000
|
|
Laurie
Holtz
(2)
|
5,000
|
Notes to
Table: (1) Mr. Wallach is the Chief Executive Officer and a director
of the Company.
(2)
Messrs. Ullman, Postal and Holtz are directors of the Company.
Accordingly,
Majority Shareholder Action approved the Amendment and Restated
Articles.
NO
SHAREHOLDER MEETING; NOTICE TO SHAREHOLDERS
There WILL
NOT be a meeting of shareholders and none is required under applicable Florida
statutes when an action has been approved by majority shareholders without a
meeting. This Information Statement is first being mailed on or about August 20,
2009, to the holders of Common Stock of record of July 20, 2009. There are
estimated 3300 shareholders of record as of the record date.
This
Information Statement constitutes the written notice to shareholders required
under Section 607.0704(3)
of Florida
Statutes.
DISSENTERS'
RIGHTS
.
Under
Florida law, our shareholders do not have dissenters' rights in connection with
the Amendment or the Restated Articles.
AMENDMENT
OF ARTICLE IV
Reason for
the Amendment. The Amendment amends Article IV, Section 1 of the
Restated Articles in order to and for the sole purpose of increasing the
authorized shares of Common Stock from 600 million to 850 million and to reduce
the authorized shares of serial preferred stock from 100 million to 50 million
shares. The Amendment makes no other change to the Restated
Articles. The Amendment is necessary because the Company’s
existing obligations to issue shares of Common Stock upon any future conversion
of all of the Company’s outstanding preferred stock and upon any future exercise
of outstanding options and warrants exceeds the currently authorized number of
shares of Common Stock. The Company estimates that it needs
approximately 850 million shares of Common Stock authorized to meet all such
possible future issuances of Common Stock upon conversion of preferred stock,
exercise of options and warrants and possible future registered or private
offerings of shares of the Common Stock by the Company.
Calculation
of Necessary Authorized Common Shares. The Company needs to the
following number of additional authorized shares of Common Stock (beyond the
currently authorized 600 million): 88,591,140 common shares to cover the
possible future conversion B-1 Series Preferred stock; 67,979,425 common shares
to cover the possible future conversion of 1,000 shares of Series C stock;
70,433,333 shares of Common Stock to cover possible future exercise of
outstanding stock options and 19,558,819 shares of Common Stock to cover
outstanding warrants.
Effect of
the Amendment on Common Stock - Dilution. The Amendment will allow
the Company to issue additional shares of Common Stock, which issuances may be
substantial. The issuance of any additional shares of Common Stock
will have the effect of diluting the equity interests of
existing shareholders and the earnings per share of existing shares of Common
Stock. Such dilution may be substantial, depending upon the amount of shares
issued. See “Dilution” at page 13 below.
Voting
Rights. The newly authorized shares of Common Stock will have voting
and other rights identical to those of the currently authorized shares of Common
Stock. The Amendment has no effect on the legal rights of the holders of the
existing shares of Common Stock.
Accounting
Consequences: The par value of the Company’s Common Stock will not
change from $0.0001 per share as a result of the Amendment or Restated
Articles.
Federal
Tax Consequences: There are no federal tax consequences resulting
from the Amendment or Restated Articles to shareholders.
RESTATED
ARTICLES
Under the
SPA, the Company agreed to and restated its Articles of Incorporation to
authorize the Series C Stock and authorized Series B-1
Stock. The holders of the Series B Stock voluntarily agreed on
July 9, 2009, to cancel all of their shares of Series B Stock in order to allow
the Company to meet its obligations under the SPA. Upon the adoption
of the Restated Articles, all outstanding shares of Series B Stock were
cancelled. The Restated Articles authorized the Common Stock with no
changes in the authorized shares or rights and preferences of such Common Stock,
authorized 1,000 shares of newly authorized Series C Stock and authorized
2,108,813 shares of newly authorized Series B-1 Stock. As
before, the Restated Articles authorizes the Company’s Board of Directors to
authorize and determine the designations, rights and preferences of up to 100
million authorized shares of serial preferred stock. The Series
B Stock was the only authorized and issued serial preferred of record of the
Company as of July 9, 2009.
The
Restated Articles and the prior articles of incorporation of the Company
authorized the Board of Directors to authorize and determine the designations,
rights and preferences of one or more series of preferred stock. Such
serial preferred stock is commonly referred to as “blank check” preferred stock.
Under Florida law, the articles of incorporation must be amended to file the
designation of rights and preferences for any class or series of serial
preferred stock.
Series B-1
Stock:
Reason for Cancellation of Series B Stock and
Authorization and Issuance of Series B-1 Stock. As a condition for
the investment by the Investor, the Company was required to authorize the Series
C Stock and to conform any other series of preferred stock to the rights and
preferences of the Series C Stock, including reducing the authorized number of
shares of the Series B-1 Stock to that number of shares that equaled the number
of Series B Stock outstanding prior to their cancellation. In order
for the Company to conform to the requirements of the SPA, and at the request of
the Company, the holders of the Series B Stock agreed to cancel and did cancel
all of their shares of Series B Stock on July 9, 2009, in return for issuance of
the Series B-1 Stock on a one-for-one basis, except Howard Ullman voluntarily
agreed to accept the issuance of 135,000 shares of Series B-1 Stock in order to
reduce the number of shares of Common Stock required to be authorized to cover
the conversion of outstanding preferred stock. Mr. Ullman owned
914,813 shares of Series B Stock. As of July 17, 2009, the Company
has issued the Series B-1 Stock to the former Series B Stock
holders.
The Series
B Stock was issued to directors in the past as consideration for making cash
loans to the Company to fund working capital needs or as payment in full or
cancellation of such loans in lieu of cash payments on the loan. Such
consideration was replaced by the issuance of the shares of Series B-1
Stock. The SPA limited the authorized shares of Series B-1 Stock to
2,108,813 shares in order to limit the issuance of Series B-1 Stock in the
future to directors as an inducement to make future cash loans to the Company to
fund working capital needs. The Company is seeking to fund working
capital needs through traditional bank or financial institutions or through
investments by accredited investors like the Investor and end its past reliance
on director loans or private placement of securities to natural persons who are
accredited investors. This effort is necessary in light of the
limited capacity and/or willingness of directors to continue to personally fund
the working capital needs of the Company and the absence of known natural
persons who are accredited investors and willing to purchase the Company
securities. Due to the lack of assets suitable to collateralize
asset based loans from banks or financial institutions and the lack of available
inventory and accounts receivable, both of which are pledged under an existing
accounts receivable loan from Sterling National Bank, the limited capacity
and/or willingness of the Company directors to personally fund the working
capital needs of the Company, and because the Company’s Common Stock is a “penny
stock” under SEC rules, has a public float in excess of 200 million shares and
typically and rarely trades above two cents per share, the Company’s affordable
funding and financing options are very limited, the Company believes that its
working capital funding or financing options are limited to issuance of
securities to investors in private placements. The Company believes
that investments by investors like the Investor are in the best interests of the
Company because they provide the necessary funding on acceptable terms and
conditions in light of the Company’s circumstances and result in less direct
dilution of shareholders through the issuance of preferred stock instead of
Common Stock. Further, the Company believes that investments by
entities like the Investor indicate a certain level of confidence by investors
deemed to be sophisticated by the Company in the Company’s future.
Comparison
of Series B Stock and Series B-1 Stock. The Series B Stock and Series
B-1 Stock have the same rights and preferences, except as
follows: (1) The authorized shares of the Series B Stock was 5
million shares as opposed to 2,108,813 authorized shares for the Series B-1
Stock; (2) the par value of the Series B Stock was $0.10 par value as opposed to
the par value of $0.0001 per share for the Series B-1 Stock, and (3) the Series
B-1 Stock ranks
pari
passu
with the newly authorized Series C Stock, except for those special
preferences stated below in the description of the Series C Stock and the par
value of the Series C Stock being $1.00 per share as opposed to a par value of
$0.0001 par value for the Series B-1 Stock.
Conversion
and Voting Rights. The Series B-1 Stock is convertible upon the
holder’s demand into shares of Common Stock at the conversion ratio of one share
of Series B-1 Stock for sixty six and 66/100’s shares of Common
Stock. The Series B Stock had the same conversion ratio as the Series
B-1 Stock. Neither the Series B Stock nor the Series B-1 Stock have any voting
rights or any right to elect directors, except where applicable laws require
otherwise.
Adjustments
in Number of Shares. The Series B-1 Stock is entitled to the same
proportionate adjustment of the securities issuable to the holders thereof in
the event of a merger or business combination; stock split; reclassification or
recapitalization; stock exchange; or dividend distribution of the
securities of the Company, as the Series B Stock and the Series C
Stock.
Liquidation
Value. The Series B-1 Stock has a stated liquidation value of $1.00
per share and the stated liquidation value of the Series B Stock was $0.10 per
share.
SPA. Under
the SPA, the Company sold 1,000 restricted shares of a newly authorized Series C
Stock to the Investor for $700 per share or for an aggregate purchase price of
$700,000. The sale was made in reliance on the exemption from
registration under Rule 506 under Regulation D of the Securities Act of 1933, as
amended. The proceeds from the sale of the Series C Stock shall be used for
general working capital purposes of the Company and its operating subsidiaries.
This transaction is part of the Company’s efforts to attain more affordable and
more reliable sources of funding or financing for the Company and its operating
subsidiaries.
Series C
Stock. Rights and Preferences of the Series C Stock - Voting Rights
and Limitation on Senior Series of Preferred Stock: The Series C
Stock shall be entitled to elect two directors to the Company Board of Directors
as long as the Series C Stock is outstanding. Otherwise, the Series C
Stock has no voting rights on matter requiring or presented for shareholder
approval.
Under the Restated Articles, the size of the Company’s Board of
Directors is currently limited to seven directors. Any director
nominated by the Series C Stock holder cannot be removed without cause without
the affirmative vote of a majority of the shares of Series C
Stock. Under the Restated Articles, the Common Stock holders may
remove any director for cause by an affirmative majority
vote. “Cause” is not defined in the Restated Articles, but the
Company believes that “cause” means any reason that is customarily sufficient
under Florida law, including case law, to justify the removal of a
directors.
No senior
series of preferred stock to the Series C Stock shall be issued by the Company
unless the directors elected by the Series C Stock approve such issuance or the
issuance of a senior series of preferred stock is to an “accredited investor”
(as defined in Rule 501(a) of Regulation D) for net offering proceeds of
$5,000,000 or more.
Conversion. The
Series C Stock can be converted upon the holder’s demand into shares of Company
Common Stock at a conversion ratio of one share of Series C Stock for sixty
seven thousand nine hundred seventy nine and 425/100’s shares of Common Stock,
or an aggregate of 67,979,425 shares of Common Stock; provided, however, in no
event shall any holder of Series C Stock be entitled to convert that number of
Series C Stock if such conversion would cause the holder of the Series C Stock
to own more than 4.99% of the then-outstanding shares of Common Stock (as
adjusted for the conversion of Series C Stock into Common Shares).
Participation
in Future Private Placement of Securities. Under the SPA, the
Investor is entitled from July 9, 2009 through July 9, 2011 to participate in an
amount up to or equal to 50% of offering amount of any private placement of the
Company’s securities and to do so on the same terms, conditions and price
offered other prospective investors in any such private placement. The SPA also
requires the Company to attain and maintain a key man life insurance policy for
two years on Stewart Wallach for $700,000 with the Investor as the policy
beneficiary.
Liquidation. The
Series C Stock has a stated liquidation value of $700 per share as opposed to
the stated liquidation value of $1.00 for the Series B-1 Stock.
Adjustments
in Number of Shares. Both the Series C Stock and Series B-1 Stock are
both entitled to the same proportionate adjustment of the securities issuable to
the holders thereof in the event of a merger or business combination; stock
split; reclassification or recapitalization; stock exchange; or
dividend distribution of the securities of the Company.
Reduce
Board Size. The Restated Articles amend Article V, Section 1 to
provide that the maximum number of directors allowed to sit on the Company’s
Board of Directors shall be seven instead of the previously authorized eleven
directors. This amendment was made to reflect the maximum number of
directors who have typically sat on the Company’s Board of Directors and to
comply with a requirement in the SPA to limit the maximum number of directors to
seven directors. The Series C Stock is entitled to elect two of the
seven directors on the Company’s Board of Directors. As of the date
of this Information Statement, the Series C Stock holder has not nominated any
directors or indicated when it would do so.
DILUTION
The
Amendment will allow the Company to issue additional shares of Common Stock,
which issuances may be substantial. The issuance of any additional
shares of Common Stock will have the effect of diluting the
equity interests of existing shareholders and the earnings per share of existing
shares of Common Stock. Such dilution may be substantial, depending upon the
amount of shares issued.
We have a
net tangible book value of ($892,681) or ($0.001594) per share. Pro
Forma net tangible book value per share represents our total tangible assets
less our total liabilities divided by the number of shares of our common stock
outstanding.
If all
246,562,717 new shares are issued, which consist of 88,591,140 shares issuable
upon conversion of Series B-1 Preferred Stock, 67,979,425 shares issuable upon
conversion of Series C Preferred Stock, 70,433,333 shares issuable upon exercise
of non-qualified stock options, and 19,558,819 shares issuable upon exercise of
stock warrants, there would be a total of 806,604,363 shares issued and
outstanding. If all of the options and warrants were exercised, the
Company would receive net proceeds of $2,609,772 and the net tangible book value
would be $1,717,091. Dividing our net worth by the number shares
outstanding discloses a per share book value of approximately $0.002129 per
share. The Company would receive no proceeds from the conversion of
preferred stock to common stock.
The
following table sets forth information on dilution to shareholders presuming
100% of the 246,562,717 shares are issued (156,570,565 shares convertible from
preferred shares and 89,992,152 shares convertible from the exercise of options
and warrants):
|
Net
tangible book value per share before new shares
|
|
$
|
(0.001594
|
)
|
|
Net
tangible book value per share after new shares
|
|
$
|
0.002129
|
|
|
Increase
of net tangible book value after new shares
|
|
$
|
0.003723
|
|
The
following table sets forth information on dilution to shareholders presuming
only 100% of the preferred shares are converted to 156,570,565 shares of common
stock:
|
Net
tangible book value per share before new shares
|
|
$
|
(0.001594
|
)
|
|
Net
tangible book value per share after new shares
|
|
$
|
(0.001246
|
)
|
|
Increase
of net tangible book value after new shares
|
|
$
|
0.000348
|
|
The
following table sets forth information on dilution to shareholders presuming
only 100% of the options and warrants are exercised and converted to 89,992,152
shares of common stock:
|
Net
tangible book value per share before new shares
|
|
$
|
(0.001594
|
)
|
|
Net
tangible book value per share after new shares
|
|
$
|
0.002642
|
|
|
Increase
of net tangible book value after new shares
|
|
$
|
0.004236
|
|
ANTI-TAKEOVER EFFECTS OF AMENDMENT
AND RESTATED ARTICLES
.
Any
conversion of outstanding Series C Stock or Series B-1 Stock would have the
effect of increasing the number of outstanding shares of Common Stock and
possibly delaying or preventing a change in control of the Company by increasing
the number of outstanding shares entitled to vote and by increasing the number
of votes required to approve a change in control of the
Company. The Restated Articles authorize the issuance of serial
preferred stock. The ability of the Board of Directors to issue such
additional shares of serial preferred stock, with the rights and preferences it
deems advisable, could discourage an attempt by a third party to acquire control
of the Company by tender offer or other means. Such issuances could therefore
deprive stockholders of benefits that could result from such an attempt, such as
the realization of a premium over the market price that such an attempt could
cause.
The Series
C Stock entitles its holder to elect two of the Company’s seven directors and
does not allow the removal of those directors without cause unless the Series C
Stock directors approve of such removal. The right of the Series C
Stock to elect two directors as well as the ability of the Board of Directors to
issue serial preferred stock could make it more difficult to remove incumbent
managers and directors from office even if such change were to be favorable to
stockholders generally
.
The
Company does not have any other provisions in its articles or incorporation,
by-laws, employment agreements, credit agreements or any other documents that
have material anti-takeover consequences. Additionally, the Company has no plans
or proposals to adopt other provisions or enter into other arrangements, except
as disclosed below, that may have material anti-takeover consequences. The Board
of Directors is not aware of any attempt, or contemplated attempt, to acquire
control of the Company, and the corporate actions are not being presented with
the intent that it be utilized as a type of anti-takeover device.
SERIES
A CONVERTIBLE PREFERRED STOCK, $2.00 PAR VALUE, (“SERIES A STOCK”).
The
Company’s previous articles of incorporation authorized the issuance of 600,000
shares of Series A Stock. There were no shares of Series A Stock
issued since February 2008 and all issued shares of Series A Stock were
cancelled as of January 26, 2007 in connection with the cancellation of the
Company’s Membership Interests in Complete Power Solutions, LLC. The
cancellation of those securities was previously reported by the Company in the
Form 8-K, dated January 26, 2007, and filed with the Commission on February 1,
2007.
The Restated
Articles are set forth in Exhibit B hereto.
VOTING RIGHTS AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
:
The sole
class of voting equity securities of the Company as of July 21, 2009, that are
issued and outstanding is the Common Stock. The table below sets
forth, as of July 20, 2009 (“Record Date”), certain information with respect to
the Common Stock beneficially owned by (i) each Director, nominee and executive
officer of the Company; (i) each person who owns beneficially more than 5% of
the Common Stock; and (iii) all Directors, nominees and executive officers as a
group. The table below also shows ownership as of the Record Date of shares of:
(1) Series B-1 Stock; and (2) Series C Stock. There were the following shares of
Company capital stock outstanding as of July 20, 2009: (a) 560,041,645 shares of
Common Stock; (b) 1,329,000 shares of Series B-1 Stock; and (c) 1,000 shares of
Series C Stock.
OWNERSHIP
OF OFFICERS, DIRECTORS AND PRINCIPAL SHAREHOLDERS
as
of July 20, 2009
(1)
|
NAME,
TITLE, & ADDRESS
|
OWNERSHIP
OF SHARES OF COMMON STOCK
|
%
OF OUTSTANDING COMMON SHARES OWNED
|
OWNERSHIP
OF COMMON SHARES AFTER CONVERSION OF OPTIONS AND WARRANTS
|
%
OF OUTSTANDING COMMON SHARES OWNED AFTER CONVERSION OF OPTIONS AND
WARRANTS
|
SHARES
OF SERIES B-1 STOCK
OWNED
|
%
OF OUTSTANDING SHARES OF SERIES B-1 STOCK OWNED
|
SHARES
OF COMMON SHARES OWNED AFTER CONVERSION OF SERIES B-1
STOCK
|
%
OF SHARES OF OUTSTANDING COMMON SHARES
OWNED
AFTER CONVERSION OF SERIES B-1 STOCK
|
|
|
|
|
|
|
|
|
|
|
|
Stewart
Wallach,
|
65,157,295
|
11.5%
|
94,655,334
|
16%
|
939,000
|
71%
|
127,751,035
|
23%
|
|
Chief
Executive Officer & President
(2)
**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard
Ullman,
|
93,869,536
|
17%
|
95,369,536
|
17%
|
135,000
|
10%
|
102,868,636
|
18%
|
|
Chairman
and Assistant Secretary
(3)**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerry
McClinton,
|
500,000
|
*
|
27,750,000
|
5%
|
-
|
-
|
-
|
-
|
|
COO
& Director
(4)**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laurie
Holtz, **
|
4,295,000
|
*
|
5,795,0000
|
1%
|
5,000
|
*
|
4,628,300
|
*
|
|
Chief
Financial Officer & Director
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
Postal, Director **
(6)
|
7,236,250
|
1.3%
|
13,236,250
|
2.3%
|
250,000
|
19%
|
23,901,250
|
4.2
%
|
|
|
|
|
|
|
|
|
|
|
|
Jill
Mohler, Secretary **
(7)
|
0
|
0
|
150,000
|
*
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
Guzy,
Director
**
3139
N. 19
th
St. Arlington VA 22203
(8)
|
832,000
|
*
|
3,332,000
|
*
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Larry
Sloven, Director
10400
Griffin Rd.
Cooper
City, FL 33328
|
792,000
|
*
|
2,792,000
|
*
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
ALL OFFICERS & DIRECTORS AS
A
GROUP
|
172,682,081
|
31.%
|
243,080,120
|
41.3%
|
1,329,000
|
100%
|
259,149,221
|
46%
|
|
NAME,
TITLE, & ADDRESS
|
OWNERSHIP
OF SHARES OF COMMON STOCK
|
%
OF OUTSTANDING COMMON SHARES OWNED
|
OWNERSHIP
OF COMMON SHARES AFTER CONVERSION OF OPTIONS AND WARRANTS
|
%
OF OUTSTANDING COMMON SHARES OWNED AFTER CONVERSION OF OPTIONS AND
WARRANTS
|
SHARES
OF SERIES B-1 STOCK
OWNED
|
%
OF OUTSTANDING SHARES OF SERIES B-1 STOCK OWNED
|
SHARES
OF COMMON SHARES OWNED AFTER CONVERSION OF SERIES B-1
STOCK
|
%
OF SHARES OF OUTSTANDING COMMON SHARES
OWNED
AFTER CONVERSION OF SERIES B-1 STOCK
|
|
PRINCIPAL
SHAREHOLDERS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bart
Fisher
(10)(11)
9009
Potomac
Forest
Dr.
Great
Falls, VA 22066
|
30,715,419
|
5%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Margaret
Fisher
9009
Potomac
Forest
Dr.
Great
Falls, VA 22066
|
43,295,000
|
8%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL
SHAREHOLDER SUBTOTAL:
|
74,010,419
|
13%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
ALL
OFFICERS DIRECTORS AND PRINICPAL SHAREHOLDERS
TOTAL:
|
246,692,500
|
44%
|
243,080,120
|
41.3%
|
1,329,000
|
100%
|
259,149,221
|
46%
|
Notes to
Table
* Less
than One Percent (1%)
** Address
is 350 Jim Moran Blvd., Suite 120, Deerfield Beach, Florida 33442.
(1) Unless
otherwise indicated, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.
(2) Total
shares includes 27,733,333 million shares that Mr. Wallach has the right to
acquire non-qualified stock option and 1,764,706 shares of Common Stock issuable
under the warrants issued to Mr. Wallach as part of his $100,000 investment in
Company’s 2007 private placement under Rule 506 of restricted shares of Common
Stock. Mr. Wallach was appointed Chief Executive Officer and President of the
Company on April 23, 2007.
(3) Total
shares include 1,500,000 shares of Common Stock currently available for
acquisition under outstanding non-qualified stock options granted to Mr. Ullman.
Mr. Ullman was Chief Executive Officer and President of the Company until April
20, 2007. Mr. Ullman was appointed Assistant Secretary of the Company and
Capstone in April 2008. Mr. Ullman’s Common Stock ownership was reduced by
55,000,000 on July 13, 2009 as result of collateral forfeiture of pledged stock
on personal loan.
(4) Total
shares include 27,250,000 shares of Common Stock that Mr. McClinton has the
right to acquire under a non-qualified stock option.
(5) Total
shares include an aggregate of 1,000,000 shares of Common Stock that Mr. Holtz
has the right to acquire under a non-qualified stock option issued on June 8,
2009. Mr. Holtz was appointed as Chief Financial Officer in December
2007. He resigned on June 1, 2009. Mr. Holtz is the
father-in-law of Howard Ullman but disclaims any interest in Mr. Ullman’s
ownership of Company securities for SEC reporting purposes.
(6) Total
includes an aggregate of 1,000,000 shares of Common Stock that Mr. Postal has
the right to acquire under a non-qualified stock options issued on June 8,
2009.
(7) Ms.
Mohler was appointed as Secretary on February 5, 2008, and replaced Gerry
McClinton, who reigned on that same date to focus on his duties as Chief
Operating Officer. Ms. Mohler was granted a non-qualified stock option for
150,000 shares of Common Stock in 2008 as part of her compensation
arrangement.
(8) Total
includes an aggregate of 1.5 million shares of Common Stock that Mr. Guzy has
the right to acquire under a non-qualified stock options issued on June 8,
2009.
(9) Total
includes an aggregate of 1,000,000 shares of Common Stock that Mr. Sloven has
the right to acquire under a non-qualified stock option issued on June 8,
2009.
(10)(11)
Bart Fisher is the spouse of Margaret Fisher. Bart Fisher was an officer and
director of the Company in 2002. If the ownership of Bart Fisher is combined
with his spouse’s holdings, then Bart Fisher may be deemed to be an “affiliate”
of the Company under the rules of the Securities Exchange Act of 1934, as
amended, and on the basis of owning more than 10% of the Company’s outstanding
shares of Common Stock.
(12) If
the Series B-1 Stock were converted into shares of Common Stock, then the number
of Common Stock shares issued would be 88,591,140, which would increase the
outstanding shares of Common Stock to 648,632,785.
The number
of shares beneficially owned by each director or executive officer is determined
under rules of the SEC and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has the sole or shared
voting power or investment power and, as footnoted, also any shares that the
individual has the right to acquire within 60 days of the date hereof through
the exercise of any stock option or other right. Unless otherwise indicated,
each person has the sole investment and voting power (or shares such powers with
his or her spouse) with respect to the shares set forth in the
table.
OWNERSHIP
OF SERIES C STOCK AS OF July 20, 2009
The
following table sets forth beneficial ownership of Series C Convertible
Preferred Stock of members of Company management as of July 20,
2009.
|
NAME
OF SHAREHOLDER
|
Number
of Shares of Series C Stock Owned
|
%
of Outstanding Shares of Series C Stock Owned
|
Number
of Shares of Common Stock issuable upon conversion of Series C
Stock
|
%
of Shares of Common Stock Owned upon Conversion of Series C
Stock
|
|
|
|
|
|
|
|
Involve,
LLC, a Florida limited liability company
(1)
|
|
|
|
|
|
c/o
Harris & Cramer LLP
1555
Palm Beach Lakes Blvd. #310
West
Palm Beach, FL 33401
|
1,000
|
100%
|
67,979,425
|
11%
|
Notes to
Table
|
(1)
|
Involve,
LLC acquired the Series C Stock shares in a private sale under
Rule 506 of Regulation D, as promulgated under the Securities Act of 1933,
as amended, on July 9, 2009 and pursuant to a Stock Purchase
Agreement of the same date between Involve, LLC and the
Company. A copy of the Stock Purchase Agreement was filed with
the Commission on July 14, 2009. Involve, LLC is not a
single-member limited liability
company.
|
INTEREST
OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS TO BE ACTED UPON
The
Amendment and Restated Articles was unanimously approved by the directors of the
Company. No director has informed the Company that he will oppose the
Amendment or Restated Articles. The increase in the authorized
shares of Common Stock benefits every holder of serial preferred stock of the
Company and holder of any option or warrant of the Company in that it makes
available to such holders sufficient shares of Common Stock to cover the
conversion of their preferred stock or the exercise of their options or
warrants. Stewart Wallach, Howard Ullman, Jeffery Postal and Laurie
Holtz, all directors of the Company, hold Series B-1 Stock as well as options to
purchase shares of Common Stock. Jeffrey Guzy, Larry Sloven, Howard
Ullman, Stewart Wallach, Jeffrey Postal, Gerry McClinton and Laurie Holtz, all
directors of the Company, hold options to purchase shares of Common
Stock. Mr. Wallach and Mr. McClinton are also officers of the
Company. Mr. Wallach also has a warrant to purchase shares of Common
Stock. As such, these directors and officers have a direct interest
in the approval of the Amendment because it would make available shares of
Common Stock to cover the conversion of their Series B-1 Stock or options to
purchase shares of Common Stock. Currently, and until the
effectiveness of the Amendment, the Company does not have sufficient shares of
Common Stock to cover all of its obligations to issue such shares upon
conversion of the outstanding serial preferred stock or the exercise of options
or warrants. Otherwise, and except in their capacity as shareholders, no person
who has served as a director or executive officer of the Company since the
beginning of the Company’s last fiscal year and no associate of any of them, has
any interest, direct or indirect, by security holdings or otherwise, in the
amendment to the Articles of Incorporation referenced herein which is not shared
by the majority of the shareholders.
Mr.
Ullman, a former Chief Executive Officer and President of the Company, and the
current Chairman of the Company’s Board of Directors, voluntarily agreed to
accept 135,000 shares of Series B-1 Stock instead of 914,813 shares of Series
B-1 Stock that would have been issued if he exchanged his 914,813 shares of
Series B Stock for Series B-1 Stock on a one-for-one basis. Mr.
Ullman has voluntarily reduced his equity position in the Company over the past
two years to reflect his reduced role in the day-to-day management of the
Company and to assist the Company in its efforts to reduce the number of shares
of capital stock required to be authorized to cover the conversion of
outstanding serial preferred stock and outstanding options and
warrants.
ADDITIONAL
INFORMATION
The
Company files annual, quarterly and current reports, information statements and
other information with the SEC. You may read and copy any reports, statements or
other information that the Company has filed at the SEC’s public reference rooms
at 100 F Street, NE, Washington, D.C., 20549. Please call the commission at
(800) SEC-0330 for further information on the public reference rooms. The
Commission also maintains a web site at www.sec.gov which reports information
statements and other information (including this Information Statement)
regarding the Company.
The Common Stock is quoted
on the Over the Counter Bulletin Board under the trading symbol
“CHDO.OB.”
The SEC
has adopted rules that permit companies and intermediaries, such as brokers, to
satisfy delivery requirements for proxy and information statements with respect
to two or more shareholders sharing the same address by delivering a single
proxy or information statement, as applicable, addressed to those shareholders.
This process, which is commonly referred to as “householding,” potentially
provides extra convenience for shareholders and cost savings for companies. The
Company and some brokers household proxy and information materials, delivering a
single proxy or information statement, as applicable, to multiple shareholders
sharing an address unless contrary instructions have been received from the
affected shareholders. Once you have received notice from your broker or the
Company’s transfer agent, Corporate Stock Transfer, Inc., that they or the
Company will be householding materials to your address, householding will
continue until you are notified otherwise or until you revoke your consent.
However, the Company will deliver promptly upon written or oral request a
separate copy of this Information Statement to a shareholder at a shared address
to which a single copy of this Information Statement was delivered. If, at any
time, you no longer wish to participate in householding and would prefer to
receive a separate proxy or information statement, or if you are receiving
multiple proxy or information statements and would like to request delivery of a
single proxy or information statement, please notify your broker if your shares
are held in a brokerage account or Corporate Stock Transfer, Inc. if you hold
registered shares. You can notify Corporate Stock Transfer, Inc. by sending a
written request to Corporate Stock Transfer, Inc., 3200 Cherry Creek South Dr #
430, Denver, Colorado 80209-3246, Telephone: (303) 282-4800.
|
Exhibit
A: Form of Amended and Restated Articles of
Incorporation of CHDT
Corporation
|
|
ARTICLE
IV OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OF CHDT
CORPORATION, A FLORIDA
CORPORATION
|
ARTICLE
IV. AUTHORIZED SHARES
Section 1.
Authorized
Shares
. The maximum number of shares which the Corporation is
authorized to issue is
900,000,000
shares,
of which
850,000,000
shares
shall be Common Stock par value $0.0001 per share (the “Common Stock”), and
50,000,000
shares of Preferred Stock (the “Preferred Stock”).
Exhibit
B: Amended and Restated Articles of
Incorporation,
AMENDED
AND RESTATED
ARTICLES
OF INCORPORATION
OF
CHDT
CORPORATION
In
accordance with Section 607.1007 of the Florida Statutes, the articles of
incorporation of CHDT Corporation, a Florida corporation, are hereby amended and
restated (the “Amended and Restated Articles of Incorporation”) to read in their
entirety as follows:
ARTICLE
I. NAME
The name
of the corporation is CHDT Corporation (the “Corporation”).
ARTICLE
II. PURPOSE
The
general purpose of the Corporation shall be the transaction of any and all
lawful business for which corporations may be incorporated under the Florida
Business Corporation Act.
ARTICLE
III. REGISTERED OFFICE AND AGENT; PRINCIPAL PLACE OF
BUSINESS
The street
address of the registered office of the Corporation shall be 350 Jim Moran
Blvd., Suite 120, Deerfield Beach, Florida 33442, and the registered agent of
the Corporation at such address shall be Gerry McClinton. The
principal place of business of the Corporation shall be 350 Jim Moran Blvd.,
Suite 120, Deerfield Beach, Florida 33442.
ARTICLE
IV. AUTHORIZED SHARES
Section 1.
Authorized
Shares
. The maximum number of shares which the Corporation is
authorized to issue is 700,000,000 shares, of which 600,000,000 shares shall be
Common Stock par value $0.0001 per share (the “Common Stock”), and 100,000,000
shares of Preferred Stock (the “Preferred Stock”).
Section
2.
Preferred
Stock
.
(a) Preferred
Stock shall be entitled to preference over Common Stock in the distribution of
dividends or assets, in such manner and to such extent, if any, as may be
determined, from time to time by the Board of Directors. The shares of Preferred
Stock may be divided into or issued in series. The Board of Directors is
expressly vested with and shall have authority to establish from time to time
the number of shares to be included in each series and, within the limitations
of law and the provisions of these Articles of Incorporation, to fix and
determine the voting rights and other designations, preferences, rights,
qualifications, limitations, and restrictions, if any, of each such
series. All shares of Preferred Stock of the same series shall be
identical with each other in all respects.
(b) The
authority of the Board of Directors with respect to each series shall include,
but not be limited to, determination of the following:
The number
of shares constituting such series and the distinctive designation of such
series;
The
preferences and relative, participating, optional or other special rights, if
any, and the qualifications, limitations or restrictions on, with respect to any
series;
The
dividend rate on the shares of each series, the dates at which dividends, if
declared, shall be payable, the conditions upon which such dividends are
payable, whether dividends shall be cumulative, non-cumulative, or partially
cumulative and, if cumulative or partially cumulative, from which date or dates,
and the relative rights of priority, if any, of payment of dividends on shares
of such series;
Whether
the shares of such series shall have voting rights in addition to any voting
rights and/or class voting rights that may be provided by law and, if so, the
terms and duration of such voting rights, including the number of votes per
share in any such series, which number may be more or less than one vote per
share, as the Board of Directors may determine;
Whether
the shares of such series shall have conversion or exchange privileges, and, if
so, the terms and conditions of such conversion or exchange, including the
amount and type of consideration per share payable in case of conversion or
exchange, the conversion price or prices or ratio or ratios or the rate or rates
at which such conversion or exchange may be effected, and provision for
adjustments of the conversion rate in such events as the Board of Directors
shall determine;
Whether or
not the shares of such series shall be redeemable, and, if so, the terms and
conditions of redemption, including the date or dates upon or after which the
shares of such series shall be redeemable and the amount and type of
consideration per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
Whether
the shares of such series shall be subject to the operation of retirement or
sinking funds to be applied to the redemption or purchase of shares of that
series for retirement, and if such retirement or sinking fund or funds be
established, the amount thereof and the terms and provisions relative to the
operation thereof;
The rights
of the shares of such series in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, and the relative
rights of priority, if any, of payment of shares of such series;
Such other
special rights and protective provisions with respect to any series as the Board
of Directors may deem advisable; and
Any other
relative rights, preferences and limitations of such series.
The shares
of each series of the Preferred Stock may vary from the shares of any other
series thereof in any or all of the foregoing respects. The Board of Directors
may increase the number of shares of Preferred Stock designated for any existing
series by a resolution adding to such series authorized and unissued shares of
the Preferred Stock not designated for any other series. The Board of Directors
may decrease the number of shares of the Preferred Stock designated for any
existing series by a resolution, subtracting from such series unissued shares of
the Preferred Stock designated for such series, and the shares so subtracted
shall become authorized, unissued and undesignated shares of the Preferred
Stock.
Section
3.
Series
B-1 Convertible Preferred Stock
.
(a)
Designation
. The
distinctive serial designation of this series shall be “Series B-1 Convertible
Preferred Stock, $0.0001 par value per share” (hereinafter called “Series B-1
Preferred Stock”).
(b)
Authorized Shares
.
The number of shares in this Series B-1 Preferred Stock shall initially be
2,108,813, which number may from time to time be decreased (but not below the
number then outstanding), but not increased, by the Board of Directors. Shares
of this Series B-1 Preferred Stock purchased by the Corporation shall be
canceled and shall revert to authorized but unissued shares of Preferred Stock
undesignated as to series. Shares of this Series B-1 Preferred Stock may be
issued in fractional shares, which fractional shares shall entitle the holder,
in proportion to such holder’s fractional share, to all rights of a holder of a
whole share of this Series. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Series B-1 Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series B-1 Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series B-1 Preferred Stock,
the Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to the Corporation’s Articles
of Incorporation.
(c)
Dividends.
The
holders of full or fractional shares of this Series B-1 Preferred Stock shall
not be entitled to any dividends or other distributions.
(d)
Conversion
. Each
share of the Series B-1 Preferred Stock that is issued and outstanding may be
converted into 66.66 shares of Common Stock (as such number may be adjusted
pursuant to Section 3(i) below) (the “Series B-1 Conversion Shares”) by the
holder thereof upon written demand to the Corporation and upon compliance with
any reasonable administrative requirements of the Corporation for such
conversion.
(e)
Merger
. In the event
of any merger, reorganization (other than a recapitalization, subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
Section 3(i) below), or consolidation of the Corporation with or into another
corporation (other than a liquidating event described in Section 3(f) below),
then in any such case the shares of this Series shall automatically be converted
into a number of shares of Common Stock equal to the Series B-1 Conversion
Shares, and such conversion shall be consummated prior to the record date for
holders of the shares of Common Stock for any such merger, reorganization, or
consolidation.
(f)
Liquidation and
Dissolution
. In the event of any liquidation, dissolution or winding up
of the affairs of the Corporation, whether voluntary or involuntary, the holders
of full and fractional shares of this Series shall be entitled, before any
distribution or payment is made on any date to the holders of the Common Stock,
but after all distributions are made in full to all other series of issued and
outstanding shares of preferred stock, to be paid in full an amount per whole
share of this Series equal to $1.00, together with accrued dividends to such
distribution or payment date, whether or not earned or declared. If such payment
shall have been made in full to all holders of shares of this Series, the
holders of shares of this Series B-1 Preferred Stock as such shall have no right
or claim to any of the remaining assets of the Corporation. In the event the
assets of the Corporation available for distribution to the holders of shares of
this Series upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in full all
amounts to which such holders are entitled pursuant to the first paragraph of
this Section 3(f), no such distribution shall be made on account of any shares
of any other class or series of Preferred Stock ranking on a parity with the
shares of this Series upon such liquidation, dissolution or winding up unless
proportionate distributive amounts shall be paid on account of the shares of
this Series, ratably in proportion to the full distributable, amounts for which
holders of all such parity shares are respectively entitled upon such
liquidation, dissolution or winding up.
Upon the
liquidation, dissolution or winding up of the Corporation, the holders of shares
of this Series B-1 Preferred Stock then outstanding shall be entitled to be paid
out of assets of the Corporation available for distribution to its shareholders
all amounts to which such holders are entitled pursuant to the first paragraph
of this Section 3(f) before any payment shall be made to the holders of Common
Stock or any other stock of the Corporation ranking junior upon liquidation to
this Series.
For the
purposes of this Section 3(f), the consolidation or merger of, or binding share
exchange by, the Corporation with any other corporation shall not be deemed to
constitute a liquidation, dissolution or winding up of the
Corporation.
(g)
Preferences
. This
Series B-1 Preferred Stock shall rank (i) junior to all other series or
classes of Preferred Stock of the Corporation, now existing or hereafter
created, as to payment of dividends and the distribution of assets, unless the
terms of any such other series or class shall provide otherwise; and
(ii) pari passu with the Series C Preferred Stock.
(h)
Voting Rights
. The
shares of the Series B-1 Preferred Stock shall have no voting rights unless
applicable law requires otherwise.
(i)
Adjustments
.
(i)
Adjustment Upon Common Stock
Event
. At any time or from time to time after the date on
which the first share of Series B-1 Preferred Stock was issued by the
Corporation (the “Series B-1 Original Issue Date”), upon the happening of a
Series B-1 Common Stock Event (as hereinafter defined), the Series B-1
Conversion Shares shall, simultaneously with the happening of such Series B-1
Common Stock Event, be adjusted proportionately by multiplying the Series B-1
Conversion Shares immediately prior to such Series B-1 Common Stock Event by a
fraction, (A) the numerator of which shall be the number of shares of Common
Stock issued and outstanding immediately prior to such Series B-1 Common Stock
Event, and (B) the denominator of which shall be the number of shares of Common
Stock issued and outstanding immediately after such Series B-1 Common Stock
Event, and the product so obtained shall thereafter be the Series B-1 Conversion
Shares. The Series B-1 Conversion Shares shall be readjusted in the same manner
upon the happening of each subsequent Series B-1 Common Stock
Event. As used herein, the term the “Series B-1 Common Stock Event”
shall mean (A) the issue by the Corporation of additional shares of Common Stock
as a dividend or other distribution on outstanding Common Stock, (B) a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock, or (C) a combination of the outstanding shares of Common
Stock into a smaller number of shares of Common Stock.
(ii)
Adjustments for Other
Dividends and Distributions
. If at any time or from time to
time after the Series B-1 Original Issue Date the Corporation pays a dividend or
makes another distribution to the holders of the Common Stock payable in
securities of the Corporation, other than an event constituting a Series B-1
Common Stock Event, then in each such event provision shall be made so that the
holders of the Series B-1 Preferred Stock shall receive upon conversion thereof,
in addition to the number of shares of Common Stock receivable upon conversion
thereof, the amount of securities of the Corporation which they would have
received had their Series B-1 Preferred Stock been converted into Common Stock
on the date of such event (or such record date, as applicable) and had they
thereafter, during the period from the date of such event (or such record date,
as applicable) to and including the conversion date, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this
Section 3
(i) with respect to the rights of the
holders of the Series B-1 Preferred Stock or with respect to such other
securities by their terms.
(iii)
Adjustment for
Reclassification, Exchange and Substitution
. If at any time or
from time to time after the Series B-1 Original Issue Date the Common Stock
issuable upon the conversion of the Series B-1 Preferred Stock is changed into
the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than by a
Series B-1 Common Stock Event or a stock dividend provided for elsewhere in this
Section 3
(i)), then in any such event each
holder of Series B-1 Preferred Stock shall have the right thereafter to convert
such stock into the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification or other change by
holders of the number of shares of Common Stock into which such shares of Series
B-1 Preferred Stock could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
(iv)
Certificate of
Adjustment
. In each case of an adjustment or readjustment of
the Series B-1 Conversion Shares, the Corporation, at its expense, shall cause
its chief financial officer (or other executive officer) to compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
the Series B-1 Preferred Stock at the holder’s address as shown in the
Corporation’s books.
(v)
Fractional
Shares
. No fractional shares of Common Stock shall be issued
upon any conversion of Series B-1 Preferred Stock. In lieu of any
fractional share to which the holder would otherwise be entitled, the
Corporation shall pay the holder cash equal to the product of such fraction
multiplied by the Common Stock’s fair market value as determined in good faith
by the Board as of the date of conversion.
(j)
No Impairment
. The
Corporation shall not avoid or seek to avoid the 4(g)(ii) observance or
performance of any of the terms to be observed or performed hereunder by the
Corporation, but shall at all times in good faith assist in carrying out all
such action as may be reasonably necessary or appropriate in order to protect
the rights, preferences and privileges of the holders of the Series B-1
Preferred Stock against impairment. This Section 3(j) is intended to prevent the
Corporation from any intentional violation of any of the express rights,
preferences and privileges of the Series B-1 Preferred Stock
herein.
Section
4.
Series C
Convertible Preferred Stock
.
(a)
Designation
. The
distinctive serial designation of this series shall be “Series C Convertible
Preferred Stock, $1.00 par value per share” (hereinafter called “Series C
Preferred Stock”).
(b)
Authorized Shares
.
The number of shares in this Series C Preferred Stock shall initially be 1,000,
which number may from time to time be decreased (but not below the number then
outstanding), but not increased, by the Board of Directors. Shares of this
Series C Preferred Stock purchased by the Corporation shall be canceled and
shall revert to authorized but unissued shares of Preferred Stock undesignated
as to series. Shares of this Series C Preferred Stock may be issued in
fractional shares, which fractional shares shall entitle the holder, in
proportion to such holder’s fractional share, to all rights of a holder of a
whole share of this Series.
(c)
Dividends
. The
holders of full or fractional shares of this Series C Preferred Stock shall not
be entitled to any dividends or other distributions.
(d)
Conversion
. The
holders of the Series C Preferred Stock shall have, and be subject to, the
following conversion rights:
(i) Each
share of the Series C Preferred Stock that is issued and outstanding may be
converted, at any time or from time to time, into 67,979.425 shares of Common
Stock (as such number may be adjusted pursuant to Section 4(i) below) (the
“Conversion Shares”) by the holder thereof upon written demand to the transfer
agent (or to the Corporation if the Corporation serves as its own transfer
agent) or as otherwise provided herein.
(ii) The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series C Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series C Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series C Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval of any necessary amendment to the
Corporation’s Articles of Incorporation.
(iii) Before
any holder of Series C Preferred Stock shall be entitled to convert shares of
Series C Preferred Stock into shares of Common Stock, the holder shall surrender
the certificate for such shares of Series C Preferred Stock (or, if such
registered holder alleges that such certificate has been lost, stolen or
destroyed, a lost certificate affidavit and agreement reasonably acceptable to
the Corporation to indemnify the Corporation against any claim that may be made
against the Corporation on account of the alleged loss, theft or destruction of
such certificate), at the office of the transfer agent for the Series C
Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice that
such holder elects to convert all or any number of the shares of the Series C
Preferred Stock represented by such certificate and, if applicable, any event on
which such conversion is contingent. The notice shall state the
holder’s name or the names of the nominees in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. If required
by the Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
reasonably satisfactory to the Corporation, duly executed by the registered
holder or his, her or its attorney duly authorized in writing.
(iv) In
the event less than all the shares represented by a certificate are converted,
the Corporation shall promptly issue to the holder thereof a new certificate
representing the unconverted shares.
(v) The
conversion time shall be the date notice is provided by the holder of Series C
Preferred Stock to the Corporation in accordance with Section 4(d)(i)
above.
(e)
Merger
. In the event
of any merger, reorganization (other than a recapitalization, subdivision,
combination, reclassification or exchange of shares provided for elsewhere in
Section 4(i) below) or consolidation of the Corporation with or into another
corporation (other than a Liquidation Event (as described in Section 4(f)
below)), then in any such case the shares of this Series shall automatically be
converted into a number of shares of Common Stock equal to the Conversion
Shares, and such conversion shall be consummated prior to the record date for
holders of the shares of Common Stock for any such merger, reorganization, or
consolidation.
(f)
Liquidation and
Dissolution
.
(i) In
the event of any liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary (a “Liquidation Event”), the
holders of full and fractional shares of this Series shall be entitled, before
any distribution or payment is made on any date to the holders of the Common
Stock, but after all distributions are made in full to all other series of
issued and outstanding shares of Preferred Stock with a liquidation preference
senior to Series C Preferred Stock, to be paid in full an amount per whole share
of this Series equal to $700.00 (the “Series C Preferred Stock Liquidation
Preference”), together with accrued dividends to such distribution or payment
date, whether or not earned or declared. If such payment shall have been made in
full to all holders of shares of this Series that have not converted to Common
Stock in accordance with this Section 4, the holders of shares of this Series C
Preferred Stock as such shall have no right or claim to any of the remaining
assets of the Corporation. In the event the assets of the Corporation available
for distribution to the holders of shares of this Series upon a Liquidation
Event shall be insufficient to pay in full all amounts to which such holders are
entitled pursuant to this Section 4(f), no such distribution shall be made on
account of any shares of any other class or series of Preferred Stock ranking on
a parity with the shares of this Series upon such liquidation, dissolution or
winding up unless proportionate distributive amounts shall be paid on account of
the shares of this Series, ratably in proportion to the full distributable,
amounts for which holders of all such parity shares are respectively entitled
upon such liquidation, dissolution or winding up.
(ii) Upon
a Liquidation Event, the holders of shares of this Series C Preferred Stock then
outstanding shall be entitled to be paid out of assets of the Corporation
available for distribution to its shareholders all amounts to which such holders
are entitled pursuant to this Section 4(f) before any payment shall be made to
the holders of Common Stock or any other stock of the Corporation ranking junior
upon liquidation to this Series.
(iii) For
the purposes of Section 4(f)(i) above, the consolidation or merger of, or
binding share exchange by, the Corporation with any other corporation shall not
be deemed to constitute a Liquidation Event.
(iv) Prior
to the occurrence of a Liquidation Event, and in any event not less than twenty
(20) calendar days prior to any payment date or ten (10) calendar days prior to
any record date for distributions or dividends to holders of record of Common
Stock, if earlier, with respect thereto, the Corporation will furnish each
holder of the Series C Preferred Stock written notice; together with a
certificate prepared by the chief financial officer (or any other executive
officer) of the Corporation describing in detail the facts of such Liquidation
Event, stating in detail the amount(s) per share of the Series C Preferred Stock
each holder of the Series C Preferred Stock would receive pursuant to the
provisions of this Section 4(f) and stating in detail the basis upon which such
amounts were determined. Notwithstanding the preceding, the holder or
holders of not less than a majority of the outstanding shares of Series C
Preferred Stock may, at any time upon written notice to the Corporation, reduce
the time, but not below five (5) business days, for notice pursuant to any
notice provisions specified herein for the benefit of such holders, and any such
reduction of time shall be binding upon all holders of such
securities.
(v) Notwithstanding
anything contained herein to the contrary, prior to the payment date with
respect to a Liquidation Event, each holder of Series C Preferred Stock shall
have the right to convert its shares of Series C Preferred Stock into Common
Stock in accordance with this Section 4.
(g)
Preferences
. So
long as any
shares
of Series C Preferred Stock remain outstanding, the Corporation shall not (by
merger, consolidation or otherwise), without the approval, by vote or written
consent, of the holders of at least a majority of the Series C Preferred Stock
then outstanding (i) adversely alter or change the rights, preferences, or
privileges of, or restrictions provided for the benefit of, the
Series C Preferred
Stock; or (ii) authorize or issue (by reclassification or otherwise) any
security having rights or preferences senior to or being on a parity with the
Series C Preferred Stock; provided, however, that the foregoing Section 4(g)(ii)
shall not apply to any issuance of preferred stock senior to the Series C
Preferred Stock that is either approved in advance by the two directors elected
by the Series C Preferred Stock or issued to an “accredited investor” (as
defined in Rule 501(a) or Regulation D under the Securities Act of 1933 as
amended) in return for $5,000,000 or more in net cash offering proceeds to the
Corporation. Notwithstanding the preceding, the Corporation may issue other
series or classes of Preferred Stock with rights as to payment of dividends that
are senior to Series C Preferred Stock. Except as otherwise provided herein,
Series C Preferred Stock shall rank pari passu with the Series B-1 Preferred
Stock. The foregoing shall not impair the ability of the Corporation
to issue shares of its Common Stock.
(h)
Voting Rights
. Except
as otherwise provided herein or otherwise required by applicable law, the shares
of the Series C Preferred Stock shall have no voting rights.
(i)
Adjustments.
(i)
Adjustment Upon Common Stock
Event
. At any time or from time to time after the date on
which the first share of Series C Preferred Stock was issued by the Corporation
(the “Series C Original Issue Date”), upon the happening of a Series C Common
Stock Event (as hereinafter defined), the Conversion Shares shall,
simultaneously with the happening of such Series C Common Stock Event, be
adjusted proportionately by multiplying the Conversion Shares immediately prior
to such Series C Common Stock Event by a fraction, (A) the numerator of which
shall be the number of shares of Common Stock issued and outstanding immediately
prior to such Series C Common Stock Event, and (B) the denominator of which
shall be the number of shares of Common Stock issued and outstanding immediately
after such Series C Common Stock Event, and the product so obtained shall
thereafter be the Conversion Shares. The Conversion Shares shall be readjusted
in the same manner upon the happening of each subsequent Series C Common Stock
Event. As used herein, the term the “Series C Common Stock Event”
shall mean (A) the issue by the Corporation of additional shares of Common Stock
as a dividend or other distribution on outstanding Common Stock, (B) a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock, or (C) a combination of the outstanding shares of Common
Stock into a smaller number of shares of Common Stock.
(ii)
Adjustments for Other
Dividends and Distributions
. If at any time or from time to
time after the Series C Original Issue Date the Corporation pays a dividend or
makes another distribution to the holders of the Common Stock payable in
securities of the Corporation, other than an event constituting a Series C
Common Stock Event, then in each such event provision shall be made so that the
holders of the Series C Preferred Stock shall receive upon conversion thereof,
in addition to the number of shares of Common Stock receivable upon conversion
thereof, the amount of securities of the Corporation which they would have
received had their Series C Preferred Stock been converted into Common Stock on
the date of such event (or such record date, as applicable) and had they
thereafter, during the period from the date of such event (or such record date,
as applicable) to and including the conversion date, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 4(i) with respect
to the rights of the holders of the Series C Preferred Stock or with respect to
such other securities by their terms.
(iii)
Adjustment for
Reclassification, Exchange and Substitution
. If at any time or
from time to time after the Series C Original Issue Date the Common Stock
issuable upon the conversion of the Series C Preferred Stock is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (
other
than
by a Series C
Common Stock Event or a stock dividend provided for elsewhere in this
Section 4(i)), then in any such event each holder of Series C Preferred
Stock shall have the right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the number of
shares of Common Stock into which such shares of Series C Preferred Stock could
have been converted immediately prior to such recapitalization, reclassification
or change, all subject to further adjustment as provided herein or with respect
to such other securities or property by the terms thereof.
(iv)
Certificate of
Adjustment
. In each case of an adjustment or readjustment of
the Conversion Shares, the Corporation, at its expense, shall cause its chief
financial officer (or other executive officer) to compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of the Series C
Preferred Stock at the holder’s address as shown in the Corporation’s
books.
(v)
Fractional
Shares
. No fractional shares of Common Stock shall be issued
upon any conversion of Series C Preferred Stock. In lieu of any
fractional share to which the holder would otherwise be entitled, the
Corporation shall pay the holder cash equal to the product of such fraction
multiplied by the Common Stock’s fair market value as determined in good faith
by the Board as of the date of conversion.
(j)
Election of
Directors
.
(i) So
long as any Series C Preferred Stock is outstanding, (A) the holders of record
of the shares of Series C Preferred Stock, exclusively and as a separate class,
shall be entitled to elect two (2) directors of the Corporation (the “Series C
Director”), and (B) the holders of record of the shares of Common Stock and of
any other class or series of voting stock, voting together as a single class,
shall be entitled to elect the remaining five (5) directors of the
Corporation. Any director elected as provided in the preceding
sentence may be removed without cause by, and only by, the affirmative vote of
the holders of the shares of the class or series of stock entitled to elect the
director voting together as a single class, given either at a special meeting of
such shareholders duly called for that purpose or pursuant to a written consent
of shareholders. Section 2 of Article V below shall govern the
removal of directors for cause.
(ii) At
any meeting held for the purpose of electing a director, the presence in person
or by proxy of the holders of a majority of the outstanding shares of the class
or series entitled to elect the director will constitute a quorum for electing
the director. A vacancy in any directorship filled by the holders of
any class or series will be filled only by vote or written consent in lieu of a
meeting of the holders of such class or series or by any remaining director or
directors elected by the holders of such class or series pursuant to this
Section 4(j).
(k)
No Impairment
. The
Corporation shall not avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
shall at all times in good faith assist in carrying out all such action as may
be reasonably necessary or appropriate in order to protect the rights,
preferences and privileges of the holders of the Series C Preferred Stock
against impairment. This Section 4(k) is intended to prevent the
Corporation from any intentional violation of any of the express rights,
preferences and privileges of the Series C Preferred Stock herein.
(l)
Limitation on
Conversion
. In no event shall the holder be entitled to
convert the number of Series C Preferred Stock, which when those converted added
to the sum of the number of shares of Common Stock previously beneficially owned
(as such term is defined under Section 13(d) and Rule 13d-3 of the Securities
Exchange Act of 1934 (the “Exchange Act”)), by the holder, would exceed 4.99% of
the shares of Common Stock outstanding, as determined in accordance with Rule
13d-1(j) of the Exchange Act; provided, however, such limitation shall not apply
with respect to: (i) a mandatory conversion pursuant to Section 4(e) or (ii) an
election to convert in connection with a Liquidation Event pursuant to Section
4(f).
ARTICLE
V. DIRECTORS
Section
1.
Number
. The
business and affairs of the Corporation shall be managed under the direction of
the Board of Directors which shall consist of seven members of Directors, acting
by not less than a majority of the directors then in office.
Section
2.
Removal
. Any
director or the entire Board of Directors of the Corporation may be removed only
for cause. At any annual meeting of shareholders of the Corporation or at any
special meeting of shareholders of the Corporation, the notice of which shall
state that the removal of a director or directors is among the purposes of the
meeting, the holders of eighty percent (80%) or more of the combined voting
power of the then outstanding shares of capital stock entitled to vote thereon,
present in person or by proxy, may remove such director or directors for
cause.
Section
3.
Vacancies
. Any
vacancies in the Board of Directors (other than Series C Directors) resulting
from death, resignation, retirement, disqualification, removal from office or
other cause shall be filled solely by the Board of Directors, acting by not less
than a majority of the directors then in office, even if less than a quorum. Any
director so chosen shall hold office only until the next election of directors
by the shareholders.
ARTICLE
VI. AMENDMENTS
Unless
otherwise required by applicable laws or the provisions of these Amended and
Restated Articles of Incorporation, these Amended and Restated Articles of
Incorporation shall be amended only by the affirmative vote of the holders of a
majority of the shares entitled to vote on such amendment, voting as a single
class.
ARTICLE
VII. WRITTEN CONSENT
The power
of the shareholders of the Corporation to consent in writing, without a vote at
an annual or special meeting of shareholders of the Corporation, to the taking
of any action by the Corporation is specifically granted.
ARTICLE
VIII. OWNERSHIP OF STOCK BY THE CORPORATION
If the
Corporation acquires its own shares, such shares shall belong to the Corporation
and shall constitute treasury shares unless disposed of or canceled by the
Corporation.
ARTICLE
IX. CONTROL SHARE ACQUISITION
The
Control Share Acquisition provisions of the Florida General Corporation Act,
found in Title XXXVI, Chapter 607, Section 607.0902 of said act, shall not apply
to the Corporation.
CHDT
CORPORATION
/s/ Stewart Wallach
By:
Stewart
Wallach Chief Executive Officer &
President
CERTIFICATE
TO AMENDED AND RESTATED
ARTICLES
OF INCORPORATION
OF
CHDT
CORPORATION
The
undersigned,
Stewart Wallach,
Chief Executive Officer and President
of CHDT Corporation, a Florida
corporation (the “Corporation”), does hereby certify as follows:
1. The
amendment and restatement of the Corporation’s articles of incorporation as
attached hereto requires approval of the holders of the Corporation’s Common
Stock and the holders of the Corporation’s Series B Convertible Preferred
Stock.
2. The
board of directors of the Corporation recommended by unanimous written consent
dated July 9, 2009 that the holders of Common Stock of the Corporation and the
holders of Series B Convertible Preferred Stock of the Corporation approve the
amendment and restatement of the Corporation’s articles of
incorporation. The amendment and restatement of the Corporation’s
articles of incorporation was approved by the holders of Common Stock of the
Corporation by written consent dated as of July 9, 2009 because the number of
Common Stock votes cast for the amendment was sufficient for
approval. The amendment and restatement of the Corporation’s articles
of incorporation was approved by the holders of Series B Convertible Preferred
Stock of the Corporation by written consent dated as of July 9, 2009 because the
number of Series B Convertible Preferred Stock votes cast for the amendment was
sufficient for approval.
3. The
undersigned officer of the Corporation has been duly authorized to submit these
Amended and Restated Articles of Incorporation of the Corporation to the Florida
Department of State for filing in accordance with Section 607.1007, Florida
Statutes.
CHDT
CORPORATION
/s/ Stewart Wallach
By:
_____________________
Stewart
Wallach
Chief Executive Officer &
President
ACCEPTANCE OF REGISTERED
AGENT
Having
been named as Registered Agent and to accept service of process for the above
stated corporation at the place designated in this Certificate, I hereby accept
the appointment as Registered Agent and agree to act in this
capacity. I further agree to comply with the provisions of all
statutes relating to the proper and complete performance of my duties, and I am
familiar with and accept the obligations of my position as Registered
Agent.
Date: July
9, 2009
/s/ Gerry McClinton
_____________________________
Gerry
McClinton