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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)*
FlashNet Communications, Inc.
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(NAME OF ISSUER)
Common Stock, no par value
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(TITLE OF CLASS OF SECURITIES)
338527 10 4
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(CUSIP NUMBER)
M. Scott Leslie, 3001 Main, Suite 100,
Fort Worth, Texas 76137 (817) 759-4851
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(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS)
September 14, 1999
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(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and
is filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box / /.
Check the following box if a fee is being paid with the statement / /.
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that
section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
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CUSIP No. 338527 10 4 SCHEDULE 13D Page 1 of 4 Pages
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(1) Names of Reporting Persons. S.S. or I.R.S. Identification Nos. of Above
Persons
John B. Kleinheinz
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(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) / /
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(3) SEC Use Only
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(4) Source of Funds*
Not Applicable -- see Item 3
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
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(6) Citizenship or Place of Organization
United States
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(7) Sole Voting
Power 814,879
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Number of Shares (8) Shared Voting
Beneficially Owned Power 0
by Each Reporting --------------------------------------------------
Person With (9) Sole Dispositive
Power 814,879
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(10) Shared Dispositive
Power 0
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person
814,879
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares*
/X/
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(13) Percent of Class Represented by Amount in Row (11)
5.7%
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(14) Type of Reporting Person*
IN
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*SEE INSTRUCTION BEFORE FILLING OUT!
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SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to the common stock, no par value ("Common
Stock"), of FlashNet Communications, Inc. ("FlashNet"). The address
of the principal executive offices of FlashNet is:
3001 Meacham Blvd. Suite 100
Fort Worth, Texas 76137
ITEM 2. IDENTITY AND BACKGROUND.
(a) NAME:
John B. Kleinheinz
(b) BUSINESS ADDRESS:
201 Main Street, Suite 2001, Fort Worth, Texas 76102
(c) PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND THE NAME,
PRINCIPAL BUSINESS AND ADDRESS WHERE EMPLOYMENT OCCURS:
Mr. Kleinheinz is the President of Kleinheinz Capital Partners,
Inc., located at 201 Main Street, Suite 2001, Fort Worth,
Texas 76102.
Mr. Kleinheinz is also a director of FlashNet, located at
3001 Meacham, Suite 100, Fort Worth, Texas 76137.
(d) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS:
Mr. Kleinheinz has not been convicted in a criminal proceeding
during the previous five years. Mr. Kleinheinz has not been a
party in a civil or administrative proceeding involving an
alleged violation of any state or federal securities laws
during the previous five years.
(e) CITIZENSHIP:
Mr. Kleinheinz is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
A total of 103,937 shares of FlashNet Common Stock was distributed
to Mr. Kleinheinz by ISP Investors, L.P. on September 14, 1999.
Shares were distributed on such date to the partners of ISP Investors,
L.P. in proportion to their partnership interest.
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ITEM 4. PURPOSE OF TRANSACTION.
On September 14, 1999, ISP Investors, L.P. distributed all shares of
FlashNet common stock owned by it to its partners, including Mr.
Kleinheinz. As part of the distribution, ISP Investors, L.P.
distributed 103,937 shares to Mr. Kleinheinz.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Mr. Kleinheinz is the beneficial owner of 814,879 shares of
FlashNet's Common Stock (or approximately 5.7% of its outstanding
shares). Mr. Kleinheinz has the sole power to vote and dispose of
all these shares.
Mr. Kleinheinz is the sole director, officer and shareholder of
Kleinheinz Capital Partners, Inc., which holds 16,664 shares of
FlashNet's Common Stock. Mr. Kleinheinz holds the sole power to vote
and dispose of all these shares as director and primary officer. He
disclaims beneficial ownership of the 16,664 shares of FlashNet's
Common Stock owned by Kleinheinz Capital Partners, Inc., except to
the extent of his pecuniary interest in them arising from his
ownership interest as director, officer, and shareholder of
Kleinheinz Capital Partners, Inc.
Mr. Kleinheinz is the sole director, officer and shareholder of
Kleinheinz Capital Partners LDC, the general partner of Global
Undervalued Securities Fund, L.P., which holds 1,081,973 shares of
FlashNet's Common Stock. Mr, Kleinheinz holds the sole power to
vote and dispose of all these shares as director and primary officer
of the general partner of Global Undervalued Securities Fund, L.P.
He disclaims beneficial ownership of the 1,081,973 shares of
FlashNet's Common Stock owned by Global Undervalued Securities
Fund, L.P., except to the extent of his pecuniary interest in them
arising from his ownership interest as the general partner of Global
Undervalued Securities Fund, L.P.
Together, Mr. Kleinheinz's shares, Kleinheinz Capital Partners LDC's
shares, and Global Undervalued Securities Fund, L.P.'s shares of
FlashNet Common Stock represent 13.4% of the total issued and
outstanding shares.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Except as described in the second paragraph of this Item 6, no
contracts, arrangements, understandings or relationships (legal or
otherwise) exist among the person named in Item 2 or between such
persons and any other persons with respect to any securities of
FlashNet, including, but not limited to transfer or voting of such
securities, finders' fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of property, division of
profits or loss, or the giving or withholding of proxies.
On November 5, 1999, all of the executive officers and directors of
FlashNet and their affiliates who own FlashNet common stock,
including Mr. Kleinheinz,
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Kleinheinz Capital Partners, Inc., and Global Undervalued Securities
Fund, L.P., each entered into a separate stockholder agreement with
Prodigy Communications Corporation relating to a proposed merger of
a Prodigy subsidiary into FlashNet, with FlashNet continuing as the
survivor and as a wholly-owned subsidiary of Prodigy. In each
stockholder agreement, the FlashNet shareholders agreed to vote all
of the FlashNet shares of common stock over which it exercises
voting control in favor of the merger and against any competing
proposal.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following document is filed as an exhibit:
1. Stockholder Agreement, dated as of November 5, 1999, by and
among Prodigy Communication Corporation and John B. Kleinheinz.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete
and correct.
Date: December 23, 1999
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/s/ John B. Kleinheinz
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John B. Kleinheinz
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EXECUTION VERSION
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of November 5,1999 (this
"Agreement"), by the stockholders listed on the signature page(s) hereto
(collectively, "Stockholders" and each individually, a "Stockholder") to and
for the benefit of Prodigy Communications Corporation, a Delaware corporation
("Acquiror"). Capitalized terms used and not otherwise defined herein shall
have the respective meanings assigned to them in the Merger Agreement
referred to below.
WHEREAS, as of the date hereof, the Stockholders collectively own of
record and beneficially shares of capital stock of FlashNet Communications,
Inc., a Texas corporation (the "Company"), as set forth on Schedule I hereto
(such shares or any other voting or equity of securities of the Company,
hereafter acquired by any Stockholder prior to the termination of this
Agreement, being referred to herein collectively as the "Shares");
WHEREAS, concurrently with the execution of this Agreement, Acquiror
and the Company are entering into an Agreement and Plan of Merger, dated as
of the date hereof (the "Merger Agreement"), pursuant to which, upon the
terms and subject to the conditions thereof, a subsidiary of Buyer will be
merged with and into the Company, and the Company will be the surviving
corporation (the "Merger"); and
WHEREAS, as a condition to the willingness of the Company and
Acquiror to enter into the Merger Agreement, Acquiror has requested that the
Stockholders agree, and in order to induce Acquiror to enter into the Merger
Agreement, the Stockholders are willing to agree to vote in favor of adopting
the Merger Agreement and approving the Merger, upon the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereby agree, severally and not jointly, as follows:
Section 1. VOTING OF SHARES. Each Stockholder covenants and agrees
that until the termination of this Agreement in accordance with the terms
hereof, at the Company Meeting or any other meeting of the stockholders of
the Company, however called, and in any action by written consent of the
stockholders of the Company, such Stockholder will vote, or cause to be
voted, all of his, her or its respective Shares (a) in favor of adoption of
the Merger Agreement and approval of the Merger contemplated by the Merger
Agreement, as the Merger Agreement may be modified or amended from time to
time in a manner not adverse to the Stockholders, and (b) against any other
Alternative Transaction. In addition, such Stockholder agrees that it will,
upon request by Acquiror furnish written confirmation, in form and substance
reasonably acceptable to Acquiror, of such Stockholder's vote in favor of the
Merger Agreement and the Merger. Each Stockholder covenants and agrees to
deliver to Acquiror upon request prior to any vote contemplated by the first
sentence of this Section 1, a proxy substantially in the form attached hereto
as ANNEX A (a "Proxy"), which
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Proxy shall be irrevocable during the term of this Agreement to the extent
permitted under Texas law, and Acquiror agrees to vote the Shares subject to
such Proxy in favor of the approval and adoption of the Merger Agreement and
the Merger. Each Stockholder acknowledges receipt and review of a copy of the
Merger Agreement. Each Stockholder acknowledges and agrees that this proxy,
if and when given, shall be coupled with an interest, shall constitute, among
other things, an inducement for Acquiror to enter into the Merger Agreement,
shall be irrevocable and shall not be terminated by operation of law or
otherwise upon the occurrence of any event and that no subsequent proxies
with respect to such Shares shall be given (and if given shall not be
effective); provided however that any such proxy shall terminate
automatically and without further action on behalf of the Stockholders upon
the termination of this Agreement. In the event that a Stockholder does not
provide the Proxy upon request of Acquiror, such Stockholder hereby grants
Buyer a power of attorney to execute and deliver such Proxy for and behalf of
such Stockholder, which power of attorney is coupled with an interest and
shall survive any death, disability, bankruptcy or any other such impediment
of such Stockholder. Upon the execution of this Agreement by each
Stockholder, such Stockholder hereby revokes any and all prior proxies or
powers of attorney given by such Stockholder with respect to the Shares.
Section 2. TRANSFER OF SHARES. Each Stockholder covenants and agrees
that such Stockholder will not directly or indirectly, (a) sell, assign,
transfer (including by merger, testamentary disposition, interspousal
disposition pursuant to a domestic relations proceeding or otherwise by
operation of law), pledge, encumber or otherwise dispose of any of the
Shares, (b) deposit any of the Shares into a voting trust or enter into a
voting agreement or arrangement with respect to the Shares or grant any proxy
or power of attorney with respect thereto which is inconsistent with this
Agreement or (c) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect sale, assignment, transfer
(including by merger, testamentary disposition, interspousal disposition
pursuant to a domestic relations proceeding or otherwise by operation of law)
or other disposition of any Shares; provided, however, that a Stockholder may
transfer Shares to an entity controlled by the Stockholder, and Applied
Telecommunications Technologies, Inc. may transfer Shares to its
stockholders, in each case on the condition that each such transferee enter
into this agreement and agree unconditionally to bound by the terms hereof.
Section 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder on its own behalf hereby severally represents and warrants to
Acquiror with respect to itself and its or her ownership of the Shares as
follows:
(a) Ownership of Shares. On the date hereof, the Shares are owned
beneficially by Stockholder or its nominee. Stockholder has sole voting
power, without restrictions, with respect to all of the Shares.
(b) Power, Binding Agreement. Stockholder has the legal capacity,
power and authority to enter into and perform all of its obligations, under
this Agreement. The execution, delivery and performance of this Agreement by
Stockholder will not violate any material agreement to which Stockholder is a
party, including, without limitation, any voting agreement, stockholders'
agreement, partnership agreement or voting trust. This Agreement has been
duly and validly executed and delivered by Stockholder and constitutes a
valid and binding obligation of Stockholder, enforceable
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against Stockholder in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(c) No Conflicts. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not,
conflict with or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, any provision of any loan or credit agreement, note,
bond, mortgage, indenture, lease, or other agreement, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Stockholder or any of its
properties or assets, other than such conflicts, violations or defaults or
terminations, cancellations or accelerations which individually or in the
aggregate do not materially impair the ability of Stockholder to perform its
obligations hereunder.
Section 4. NO SOLICITATION. Prior to the termination of this
Agreement in accordance with its terms, each Stockholder agrees, in its
individual capacity as a stockholder of the Company that (i) it will not, nor
will it authorize or permit any of its employees, agents and representatives
to, directly or indirectly, (a) initiate, solicit or encourage any inquiries
or the making of any Acquisition Proposal (as defined in the Merger
Agreement), (b) enter into any agreement with respect to any Acquisition
Proposal, or (c) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal, and (ii) it will notify Acquiror as soon as possible if any such
inquiries or proposals are received by, any information or documents is
requested from, or any negotiations or discussions are sought to be initiated
or continued with, it or any of its affiliates in its individual capacity;
provided, that, notwithstanding the foregoing, each Stockholder shall not be
prohibited from taking any such actions to the extent that the Company or its
Board of Directors is permitted to take such actions under the Merger
Agreement.
Section 5. TERMINATION. This Agreement shall terminate upon the
earliest to occur of (i) the Effective Time (as such term is defined in the
Merger Agreement) or (ii) any termination of the Merger Agreement in
accordance with the terms thereof; PROVIDED that no such termination shall
relieve any party of liability for a willful breach hereof prior to
termination.
Section 6. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or in equity.
Section 7. FIDUCIARY DUTIES. Each Stockholder is signing this
Agreement solely in such Stockholder's capacity as an owner of his, her or
its respective Shares, and nothing herein shall prohibit, prevent or preclude
such Stockholder from taking or not taking any action in his or her capacity
as an officer or director of the Company, to the extent permitted by the
Merger Agreement.
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Section 8. LEGEND ON CERTIFICATE. Each Stockholder agrees to present
the certificates representing the Shares presently owned or hereafter
acquired by such Stockholder to the Secretary of the Company and to cause the
Secretary to stamp on the certificate in a prominent manner the following
legend:
"The shares represented by this certificate are
subject to transfer restrictions and an irrevocable
proxy pursuant to a Stockholder Agreement and
Irrevocable Proxy, each dated as of November 5, 1999
(the "Agreements"). Copies of the Agreements are
available for inspection during normal business hours
at the principal executive office of this
corporation."
Section 9. MISCELLANEOUS.
(a) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, both written and oral, between the
parties with respect thereto. This Agreement may not be amended, modified or
rescinded except by an instrument in writing signed by each of the parties
hereto.
(b) If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law, or public policy,
all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in a mutually acceptable manner in
order that the terms of this Agreement remain as originally contemplated to
the fullest extent possible.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to the principles of
conflicts of law thereof.
(d) This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one
and the same instrument.
[Signature Page to follow]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed individually or by its respective duly authorized
officer as of the date first written above.
PRODIGY COMMUNICATIONS CORPORATION
By: /s/ Andrea S. Hirsch
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Name: Andrea S. Hirsch
Title: Executive Vice President
and General Counsel
STOCKHOLDERS:
/s/ John B. Kleinheinz
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John B. Kleinheinz
