I have a question that I can't seem to wrap my hea

I have a question that I can't seem to wrap my head around.

The company borrowed money in a horribly toxic financing from Magna to take out Discover. And the company publicly announced that - Discover was the impediment to moving forward, and now that they are gone, we can move forward.

Some people took that statement to mean that Discover was the bad guy.

In my mind, the deal with Discover was a good one.

The company got $5 million. Discover got the Series G Preferred which was convertible at a fixed price of $9.00 per share, with no ratchet anti-dilution provisions. (That means that if the stock price goes down, the conversion price stays at $9.00 regardless.)

The Series G had an annual dividend rate of 8.25%, subject to credit risk adjustment based on the price of the Company's common stock measured over a specific time period.

No warrants were issued to any parties in connection with this investment.

Discover agreed to 'no shorting' provisions.

So the flaw in the deal was that if the market price of the stock went down, the dividend rate on the Series G would increase. And boy did it ever. It increased so much that Discover almost controlled the company.

But Discover didn't do anything wrong. It couldn't short. It couldn't convert at $9.00 and dump, because they would lose tons of money doing that.

What did Discover do (if anything)? And if they did short the stock, why don't we sue them for breach of contract?

Anyone have any insights? What am I missing?

I guess my main question is what caused the price to take such a dive following the issuance of the Series G if it wasn't Discover? It certainly wasn't the fundamentals.