SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or
Sec. 240.14a-12
INDENET, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than
the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14-a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) 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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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.
1) Amount previously paid:
2) Form, Schedule or Registration Statement Number:
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4) Date filed:
INDENET, INC.
1640 North Gower Street
Los Angeles, California 90028
______________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Notice is hereby given that a Special Meeting of Stock
holders of IndeNet, Inc. (the "Company") will be held at its
principal executive offices, located at 1640 North Gower
Street, Los Angeles, California 90028 on Monday, December 9,
1996, at 1:00 p.m., for the following purpose:
To approve the Company's proposed issuance of (i)
shares of the Company's new Series C Preferred
Stock in exchange for most of the currently out
standing shares of the Company's Series A Preferred
Stock, and (ii) warrants to purchase shares of the
Company's Common Stock in connection with the
foregoing exchange of Series A Preferred Stock.
Only holders of the Company's $.001 par value common
stock of record at the close of business on November 5, 1996,
will be entitled to notice of and to vote at the meeting and
at any adjournment or adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Robert W. Lautz, Jr.
Robert W. Lautz, Jr.,
Chief Executive Officer
Los Angeles, California
November 6, 1996
INDENET, INC.
1640 North Gower Street
Los Angeles, California 90028
_______________________
PROXY STATEMENT
_______________________
Special Meeting of Stockholders
December 9, 1996
INTRODUCTION
This Proxy Statement is first sent or given to stockhold
ers on or about November 6, 1996, in connection with the
solicitation of proxies by and on behalf of IndeNet, Inc. (the
"Company"). The proxies solicited hereby are to be voted at
a Special Meeting of Stockholders of the Company to be held at
the Company's principal executive offices, located at 1640
North Gower Street, Los Angeles, California 90028, on Monday,
December 9, 1996, at 1:00 p.m. (the "Special Meeting"). The
purpose of the Special Meeting is, as stated in the Notice of
Special Meeting, to consider and vote upon the proposed
issuance of shares of the Company's new Series C Preferred
Stock (the "Series C Preferred") to the holders of, and in
exchange for, most of the currently outstanding shares of the
Company's Series A Preferred Stock (the "Series A Preferred")
and, in connection with such exchange, the issuance of certain
warrants to purchase shares of the Company's $.001 par value
common stock (the "Common Stock"). The foregoing exchange and
issuance of warrants is herein collectively referred to as the
"Exchange." No business other than a vote on the Exchange
will be conducted at the Special Meeting.
The securities entitled to vote at the Special Meeting
consist of all of the issued and outstanding shares of Common
Stock. The close of business on November 5, 1996 has been
fixed by the Board of Directors of the Company as the record
date for the Special Meeting. Only stockholders of record as
of the record date may vote at the Special Meeting. As of the
record date, there were _______ shares of Common Stock issued
and outstanding.
Each stockholder will be entitled to one vote for each
share of Common Stock held as of the record date. The
presence at the Special Meeting of the holders of an amount of
shares of Common Stock and proxies representing the right to
vote a majority of the number of shares of the Common Stock
outstanding as of the record date will constitute a quorum for
transacting business. The affirmative vote of the holders of
a majority of the outstanding Common Stock will be required to
approve the action taken at the meeting. Accordingly,
abstentions and indications by brokers that they do not have
authority to vote certain shares will have the effect of
negative votes.
It is contemplated that the solicitation of proxies will
be made primarily by mail. Should it, however, appear
desirable to do so in order to ensure adequate representation
of shares at the Special Meeting, officers, agents and
employees of the Company may communicate with stockholders,
banks, brokerage houses and others by telephone, facsimile, or
in person to request that proxies be furnished. All expenses
incurred in connection with this solicitation will be borne by
the Company. In following up the original solicitation of
proxies by mail, the Company may make arrangements with
brokerage houses and other custodians, nominees and fiducia
ries to send proxies and proxy materials to the beneficial
owners of the shares eligible to vote at the Special Meeting
and will reimburse them for their expenses in so doing. The
Company has no present plans to hire special employees or paid
solicitors to assist in obtaining proxies, but reserves the
option of doing so if it should appear that a quorum otherwise
might not be obtained.
A form of proxy is enclosed for your use. The shares
represented by each properly executed unrevoked proxy will be
voted as directed by the stockholder executing the proxy. If
no direction is made, the shares represented by each properly
executed unrevoked proxy will be voted "FOR" the Exchange.
Any proxy given may be revoked at any time prior to the
exercise thereof by filing with Secretary of the Company an
instrument revoking such proxy or by the filing of a duly
executed proxy bearing a later date. Any stockholder present
at the meeting who has given a proxy may withdraw it and vote
his or her shares in person if such stockholder so desires.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHER
The following table sets forth certain information
regarding the beneficial ownership of the Common Stock, as of
November 1, 1996, of (i) each person known by the Company to
beneficially own 5% or more of the outstanding Common Stock,
(ii) each current director and nominee for director of the
Company, (iii) the Company's Chief Executive Officer and each
executive officer of the Company whose compensation during the
fiscal year ended March 31, 1996 exceeded $100,000, and (iv)
all current directors and executive officers as a group. Such
information is based upon information furnished by each such
person and is correct to the best knowledge of the Company.
Under the rules of the Securities and Exchange Commission, a
person is deemed to beneficially own certain if shares if the
person holds rights to acquire such shares within 60 days
through the exercise of stock options or otherwise. Unless
otherwise stated, the indicated persons have sole voting and
investment power with respect to the shares listed. The
indicated percentages are based upon the number of shares of
Common Stock outstanding as of November 1, 1996, plus, where
applicable, the number of shares that the indicated person or
group had a right to acquire within 60 days of such date.
Common
Name and Common Stock Amount of
Address of Stock Underlying Total Percent
Beneficial Current Exercisable Beneficial of
Owner Owned Options Ownership Class
Robert W. Lautz, Jr.
1640 North Gower
Street
Los Angeles, CA
90028 713,505 100,000 813,505 %
Thomas H. Baur
110 West Hubbard
Street
Chicago, IL
60610 1,587,030 100,000 1,687,030 %
Robert E. Derham
110 West Hubbard
Street
Chicago, IL
60610 56,780 235,000 291,780 %
Cary S. Fitchey
1640 North Gower
Street
Los Angeles, CA
90028 94,640 25,000 119,640 %
William A. Kunkel
554 Valley Road
New Canaan, CT
06940 41,633 25,000 66,633 %
Andre A. Blay
40300 Fairway III
Drive
Northville, MI
48167 188,195 45,833 234,028 %
William D. Killion
1640 North Gower
Street
Los Angeles, CA
90028 1,530,000 -0- 1,530,000 %
Graeme R. Jenner
1640 North Gower
Street
Los Angeles, CA
90028 71,101 200,000 271,101 %
Richard L. Schleufer
5475 Tech Center Dr.
Suite 300
Colorado Springs, CO
80919 53,427 125,000 178,427 %
Lewis K. Eisaguirre (1)
1640 North Gower
Street
Los Angeles, CA
90028 71,724 80,000 151,724 %
All Directors and
Officers as a
Group (Ten Persons) 4,498,035 935,833 5,343,868 %
(1) Mr. Eisaguirre resigned as an officer and a Director of
the Company effective March 15, 1996.
PROPOSAL TO AUTHORIZE ISSUANCE
OF SERIES C PREFERRED STOCK
AND WARRANTS
Background
On April 26, 1996, the Company sold 1,200 shares of its
Series A Preferred to 16 off-shore investors in an offering
that was exempt from registration pursuant to Regulation S
promulgated under the U.S. Securities Act of 1933, as amended.
The purchase price of each share of Series A Preferred was
$10,000.
The shares of Series A Preferred are convertible into
shares of Common Stock at a conversion price equal, in
general, to the lesser of (x) $7.00 or (y) 85% of the average
closing bid price of the Common Stock for the five trading
days immediately preceding the date on which the shares are
submitted for conversion. On April 26, 1996, the five-day
average closing bid price of the Common Stock was $6.45.
Based on the foregoing five-day average, on April 26, 1996 the
1,200 shares of Series A Preferred would have been convertible
into 2,189,781 shares of Common Stock, or 18% of the Common
Stock outstanding before the issuance. In order to prevent
the issuance of more than 2,394,605 shares of Common Stock (or
19.9% of the then outstanding shares of Common Stock) upon the
conversion of the Series A Preferred, the Company has the
power and authority to redeem all shares of Series A Preferred
tendered for redemption after 2,394,605 shares of Common Stock
have been issued. All shares of Common Stock issuable upon
conversion of the Series A Preferred have been registered with
the Securities and Exchange Commission for resale by the
issuees of such shares.
On August 6, 1996 the Company announced that it would no
longer convert the Series A Preferred into shares of Common
Stock. The Company took this action as a result of, what it
believed to be, highly unusual and suspicious trading activity
in its Common Stock, including the significant increase in
short positions in the Common Stock and a significant increase
in sell orders. (A short position is created when an investor
borrows stock in order to sell it, figuring the price of the
stock will decline. An investor is in a short position until
he acquires the stock, by purchase or conversion of convert
ible stock, to repay the lender.) The closing sales price of
the Common Stock on the day before the Company made the
foregoing announcement was $2.31 per share. As a result of
the decrease in the trading price of the Common Stock, the
holders of the Series A Preferred would have been entitled to
receive 4,308,017 shares of Common Stock on August 6, 1996, or
2,444,878 more than could have been issued based on the April
26, 1996 price. Prior to the Company's actions on August 6,
1996, a total of 179 shares (or $1,790,000 of the initial
$12,000,000 aggregate purchase price of the Series A
Preferred) had been converted into 664,303 shares of Common
Stock.
Following the Company's action to prevent further
conversions of the Series A Preferred, the Company held
negotiations with holders of the Series A Preferred to convert
the Series A Preferred into a security that was not immediate-
ly convertible into Common Stock and that had a more predict-
able conversion price. On September 30, 1996, the Company
reached an agreement with the holders (the "Holders") of 771
of the Series A Preferred (or 76% of the remaining outstanding
shares of the Series A Preferred) to effect an exchange of at
least 80% of the shares of Series A Preferred held by the
Holders into shares of a new series of the Company's preferred
stock. The new series was designated as "Series C Preferred
Stock" (the "Series C Preferred"). To date, the holders of
the remaining 250 shares of Series A Preferred have not agreed
to exchange their shares of Series A Preferred for Series C
Preferred.
Series C Preferred
Pursuant to the authority vested in the Board of Direc
tors under the Company's Certificate of Incorporation, the
Board has established the Series C Preferred and has filed
with the Secretary of State of Delaware the Certificate of
Designation of Series C Preferred Stock of IndeNet, Inc. (the
"Certificate of Designation"). A copy of the Certificate of
Designation is attached hereto as Appendix A. No shares of
Series C Preferred have yet been issued, and no shares will be
issued unless the stockholders approve the Exchange at the
Special Meeting. The following is a summary of the principal
terms of the Series C Preferred and a summary comparison
between Series A Preferred and the Series C Preferred of such
principal terms:
1. Designation and Amount. The Company has designated
1,200 shares of its preferred stock as Series C Preferred.
The Series C Preferred has a par value of $.0001 per share, an
original issue price of $10,000 per share, and, commencing on
January 1, 1997, an accretion rate of 8% per annum.
The Company has also designated 1,200 shares as Series A
Preferred, which shares also have a $.0001 par value and an
original issue price of $10,000 per share. The accretion rate
of the Series A Preferred is 6% per annum.
2. Rank. The Series C Preferred will rank on a parity
with the Series A Preferred and senior to the Common Stock, in
each case as to distributions of assets upon liquidation,
dissolution or winding up of the Company.
3. Dividends. The Series C Preferred will bear no
dividends. The Series A Preferred also bears no dividends.
4. Liquidation Preference. In the event of liquida
tion, dissolution or winding up of the Company. The Series C
Preferred will be entitled to receive, in preference to the
Common Stock and any other stock junior to the Series C
Preferred, an amount equal to the sum of the original issue
price ($10,000 per share) plus the accretion. At each
holder's option, the sale of all or substantially all of the
assets of the Company to a private entity, the common stock of
which is not publicly traded, may be deemed to be a liquida
tion of the Company.
The liquidation preference of the Series A Preferred is
substantially similar to that of the Series C Preferred.
5. Conversion. The Series C Preferred is not convert
ible into Common Stock until April 1, 1997. Commencing on
April 1, 1997, during each two-week period thereafter, each
Holder will be entitled to convert up to 5% of the aggregate
number of shares of Series C Preferred issued to such Holder
in the Exchange. Shares not converted during any two-week
period may be converted later, provided that no more than 10%
of the Holder's shares may be converted during any two-week
period. In the event that the closing bid price of the Common
Stock, as published by The Nasdaq Stock Market, exceeds $7.00
per share for any five consecutive trading days, the rate at
which the shares of Series C Preferred may be converted will
thereafter double to 10% per two-week period, and the aggre
gate maximum conversion rate per two week period will double
to 20%. The number of shares of Common Stock issuable upon
the conversion of a share of Series C Preferred Stock is equal
to (x) the sum of the original issue price of the share
($10,000) and the accretion (at 8% per annum beginning January
1, 1997) through the conversion date, (y) divided by $5.00.
The $5.00 price is subject to adjustment for stock splits,
stock dividends, reorganizations and other similar events.
But for the Company's actions to prevent conversions, all
of the shares of Series A Preferred would be currently
convertible into shares of Common Stock at a conversion price
equal, in general, to the lesser of (x) $7.00 or (y) 85% of
the average closing bid price of the Common Stock for the five
trading days immediately preceding the date on which the
shares are submitted for conversion. Accordingly, unlike the
Series C Preferred, the Series A Preferred is not limited in
the number of shares that can be converted at any time, nor is
the conversion price fixed. However, after a total of
2,394,605 shares of Common Stock are issued upon the conver
sion of the Series A Preferred, the Company has the right to
redeem for cash all shares thereafter tendered for conversion.
The Series C Preferred has no such limitation.
6. Redemption by the Company. Until March 31, 1997,
the Company may, at its option, redeem up to 50% of the Series
C Preferred held by each Holder. Should the Company desire to
redeem more than 50% of a Holder's shares, such additional
redemption shall require the Holder's consent.
The redemption price for each share of Series C Preferred
will be the original issue price ($10,000) plus the accretion
(at 8%) through the date of redemption. The redemption price
is payable in cash. As additional consideration for such a
redemption, in addition to the cash redemption price, the
Company is obligated to issue to each Holder warrants to
purchase a number of shares of Common Stock equal to the
redemption price divided by $5.00. The warrants will have a
five-year term and an exercise price of $7.00 per share.
Prior to April 27, 1997, the Company's right to redeem
any shares of Series A Preferred is limited to redeeming
shares of Series A Preferred that are tendered for conversion.
Such redemption right must be exercised by the Company within
one business day after it receives notice of conversion,
otherwise the redemption right with respect to the tendered
shares expires. Commencing on April 27, 1997, the Company has
the rights to redeem some or all of the outstanding shares of
Series A Preferred at a redemption price that varies based on
the time such shares are redeemed. In general, the redemption
price is 130% of the Stated Value during the first six-month
redemption period, 125% of the Stated Value during the next
six-month period, 120% of the Stated Value during the follow
ing six-month period, and 115% of the Stated Value thereafter.
The "Stated Value" of the Series A Preferred is the original
issue price ($10,000 per share) plus the accretion (at 6%)
through the date of redemption.
7. Redemption/Conversion at Request of Holder.
Beginning on October 1, 1997 and continuing during each of the
four calendar months through January 31, 1998, each Holder
shall have the non-cumulative right to require the Company to
redeem up to 25% of such Holder's initial allocation of Series
C Preferred. If a Holder does not during any of the four
months cause the Company to redeem that month's entire 25%
allocation, the redemption rights with respect to such shares
shall thereafter expire. The redemption price for such
redemptions (the "Required Redemption Price") shall be 105% of
the sum of the original issue price plus accretion through the
redemption date.
The Required Redemption Price is payable in cash.
However, the Required Redemption Price may be paid in shares
of Common Stock if the Company elects to pay the price in
stock or if the Company is financially unable or legally
prohibited from paying the price in cash. If the Required
Redemption Price is paid in Common Stock, the number of shares
issuable shall be equal to the Required Redemption Price
divided by the five-day average bid price of the Common Stock
immediately preceding the redemption date.
The holders of the Series A Preferred do not have any
rights to require the Company to redeem any of their shares.
8. Voting Rights. Neither the Series C Preferred nor
the Series A Preferred have any voting rights, except to the
extent required by the General Corporation Law of the State of
Delaware.
9. Protective Provisions. Without the consent of the
holders of 66.67% of the then outstanding shares of Series C
Preferred, the Company may not alter the rights of the Series
C Preferred, create a new class or series of stock having
preference over or on parity with the Series C Preferred, or
take any action that would result in taxation of the holders
of the Series C Preferred.
The Series A Preferred has substantially the same
protective provisions as the Series C Preferred.
The Exchange
Pursuant to Exchange Agreements entered into by the
Company and each of the Holders, the Company has agreed to
issue 1.1 shares of Series C Preferred for each share of
Series A Preferred tendered for exchange by the Holders. Each
Holder is required to exchange at least 80% of the number of
shares of Series A Preferred owned by such Holder for shares
of Series C Preferred. Of the remaining 20% of the Series A
Preferred, one half may, at the option on each Holder, be
converted into shares of Common Stock at any time up to
December 31, 1996, and the other half may be converted at any
time between January 1, 1997 and March 31, 1997. The conver
sion price for all such conversions has been fixed at $3.32.
In addition to receiving shares of Series C Preferred for
the shares of Series A Preferred in the Exchange, the Company
has agreed to issue to each of the Holders a warrant (the
"Warrants") to purchase shares of Common Stock at an exercise
price of $5.00 per share. The number of shares that can be
purchased under the Warrants will be equal to approximately
one share of Common Stock for each 10 shares that the Series
C Preferred is initially convertible into. Accordingly, in
connection with the Exchange, the Company will issue to the
Holders Warrants to purchase a total of 135,400 shares of
Common Stock. The Warrants are exercisable commencing on
April 1, 1997 until September 30, 2001.
The Company has also agreed with each of the Holders to
register with the Securities and Exchange Commission the
resale by the Holders of all of the shares of Common Stock
issuable form time to time upon (i) the conversion of the
Series C Preferred and (ii) the exercise of the warrants to be
issued in the Exchange or upon any redemption of the Series C
Preferred. Accordingly, the shares of Common Stock received
by the Holders will be freely tradeable.
All documents, stock certificates and warrants required
to effect the Exchange have been deposited into an escrow
account by the Company and the Holders. If the stockholders
approve the Exchange at the Special Meeting, the new shares of
Series C Preferred will be issued and the other closing
documents will be released. If the Exchange is not approved
by the stockholders, all documents held in escrow will be
returned, and the Exchange will not be effected. Upon the
exchange of the shares of Series A Preferred for the Series C
Preferred, all exchanged shares of Series A Preferred will be
cancelled.
In order to facilitate the conversion of the Series C
Preferred and the issuance of the shares of Common Stock upon
such conversions, the Company, each of the Holders and First
Union National Bank of Georgia (the "Custodian") have entered
into a Stock Custodian and Disbursement Agreement (the
"Custodian Agreement"). Pursuant to the Custodian Agreement,
the Custodian will act as the Series C Preferred conversion
and redemption agent. In order to enable the Custodian to
issue shares of Common Stock upon the conversion or redemption
of the Series C Preferred, the Company has deposited with the
Custodian certificates representing approximately 120% of the
number of shares of Common Stock that would be issuable if the
shares of Series C Preferred were to be exchanged by the
Holders at a conversion price of $3.00. The Company and its
transfer agent are required, from time to time at the request
of the Custodian, to replenish the number of Common Stock
stock certificates held by the Custodian. The Custodian
Agreement irrevocably instructs the Custodian to effect all
conversions and redemptions in accordance with the terms of
the Certificate of Designation. The Company has agreed to pay
all of the Custodians fees and expenses, and has agreed to
indemnify the Custodian for liabilities that may be imposed on
the Custodian in connection with the performance of its duties
under the Custodian Agreement.
Nasdaq Stockholder Approval Requirements
The Common Stock is currently traded on the Nasdaq
National Market. The rules of The Nasdaq Stock Market require
that the Company obtain stockholder approval in connection
with any private placement of securities if such securities
are convertible into or exercisable for Common Stock at less
than market value and if the total number of shares of Common
Stock issuable upon the conversion equals or exceeds 20% of
the number of shares of Common Stock outstanding before the
issuance. Because of the limitation contained in the Series
A Preferred charter documents on the issuance of more than
2,394,605 shares of Common Stock upon the conversion of the
Series A Preferred, the issuance of the Series A Preferred did
not violate the foregoing Nasdaq rule. However, because of
the structure of the proposed Exchange, under certain circum
stances, the conversion of both the Series A Preferred and
Series C Preferred and the exercise of the Warrants may result
in the issuance of more than 20% of the Common Stock outstand
ing as of April 26, 1996.
The actual number of shares of Common Stock that the
Company will ultimately issue upon the conversion of the
Series A Preferred and Series C Preferred and upon the
exercise of the Warrants cannot be presently determined. In
particular, the number of shares of Common Stock that the
Company may elect to issue, or may be required to issue, in
payment of the Required Redemption Price is based on the
market price of the shares of Common Stock at that time and,
therefore, cannot be currently estimated. Because the number
of shares that the Company may issue in payment of the
Required Redemption Price is based on the market price, the
number of shares issuable will vary inversely with the market
price of the Common Stock. In addition, since the Warrants
have an exercise price ($5.00 per share) that is less than the
fair market price of the Common Stock on April 26, 1996 ($6.88
per share), the number of shares of Common Stock issued upon
the exercise of the Warrants may be added to the total number
of shares of Common Stock issued upon the conversion of the
Series A Preferred and Series C Preferred. Accordingly, the
number of shares of Common Stock that could be issued in
connection with the conversion of the Series A Preferred or as
a result of the Exchange could, under certain circumstances,
equal to exceed 20% of the number of shares of Common Stock
outstanding prior to April 26, 1996. Therefore, in order to
assure continued compliance with the above-referenced Nasdaq
rules, the Company is requesting that the holders of the
Common Stock authorize the Company to enter into the Exchange
and to issue and deliver the Series C Preferred and the
Warrants. No further authorization or vote of the holders of
the Common Stock will be sought or required with respect to
the subsequent issuance of Common Stock upon the conversion of
the Series C Preferred or the exercise of the Warrants. The
issuance of such shares of Common Stock may be dilutive to the
interests of the holders of the currently outstanding shares
of Common Stock.
In the event that the stockholders do not approve the
Exchange, the Exchange will not be consummated and all
outstanding shares of the Series A Preferred owned by the
Holders will remain outstanding. Since the Company has
refused to permit the conversion of the Series A Preferred,
the failure by the stockholders to approve the Exchange would
require the Company to engage in further negotiations with the
Holders in an effort to restructure the terms of the outstand
ing shares of Series A Preferred. Failure to successfully
renegotiate the terms of the Series A Preferred could result
in protracted litigation between the Company and the Holders
of the Series A Preferred.
The Board of Directors of the Company recommends a vote
FOR approval of the proposal.
INCORPORATION BY REFERENCE OF FINANCIAL AND OTHER INFORMATION
The following information is hereby incorporated into
this Proxy Statement by reference: (a) the financial state
ments listed on Index to Consolidated Financial Statements,
page F-1, of the Company's Annual Report on Form 10-KSB for
the year ended March 31, 1996 (the "Form 10-KSB"); (b) the
information contained under the caption "Item 6. Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the Form 10-KSB; and (c) the Company's Quar
terly Report on Form 10-QSB for the fiscal quarter ended June
30, 1996 (the "Form 10-QSB"). Copies of the Form 10-KSB and
the Form 10-QSB are attached hereto as Appendix B and Appendix
C, respectively.
A representative of BDO Seidman, LLP, the Company's
independent auditors for the year ended March 31, 1996, is
expected to attend the Company's Special Meeting. The
representative of BDO Seidman, LLP will have the opportunity
to make a statement, if he or she desires to do so, and will
be available to respond to appropriate questions.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Robert W. Lautz, Jr.
Robert W. Lautz, Jr.,
Chief Executive Officer
Los Angeles, California
November 6, 1996
APPENDIX A
CERTIFICATE OF DESIGNATION OF
SERIES C PREFERRED STOCK
OF
INDENET, INC.
It is hereby certified that:
1. The name of the Company (hereinafter called the
"Company") is IndeNet, Inc., a Delaware corporation.
2. The certificate of incorporation of the Company
authorizes the issuance of Ten Million (10,000,000) shares of
preferred stock, $.0001 par value per share, and expressly
vests in the Board of Directors of the Company the authority
provided therein to issue any or all of said shares in one (1)
or more series and by resolution or resolutions to establish
the designation and number and to fix the relative rights and
preferences of each series to be issued.
3. The Board of Directors of the Company, pursuant to
the authority expressly vested in it as aforesaid, has
previously created a Series A Preferred Stock, $.0001 par
value, with 1,200 authorized shares and 1,021 shares outstand
ing and a Series B Preferred Stock, $.0001 par value, with
250,000 authorized shares and 216,667 shares outstanding, and
has adopted the resolutions set forth below creating a Series
C issue of Preferred Stock.
4. As required by Section 8 of the Certificate of
Designation of Series A Preferred Stock, the holders of at
least 66-2/3% of the then outstanding shares of Series A
Preferred Stock, and at least 66-2/3% of the holders of the
outstanding Series A Preferred Stock, have approved the
creation of the new class or series of stock specified in
Section 1 below, which approval was obtained pursuant to
Section 228 of the Delaware General Corporation Law. Notice
of the foregoing corporate action was provided to all stock
holders of the Corporation who have not consented in writing
to the corporate action.
RESOLVED, that One Thousand Two Hundred (1,200) of the
Ten Million (10,000,000) authorized shares of Preferred Stock
of the Company shall be designated Series C Preferred Stock,
$.0001 par value per share, and shall possess the rights and
preferences set forth below:
Section 1. Designation and Amount. The shares of
such series shall have a par value of $.0001 per share and
shall be designated as Series C Preferred Stock (the "Series
C Preferred Stock") and the number of shares constituting the
Series C Preferred Stock shall be One Thousand Two Hundred
(1,200). The Series C Preferred Stock shall be issued in
exchange for outstanding Series A Preferred Stock and shall be
deemed to have an original issue price per share equal to the
original issue price for the Series A Preferred Stock of Ten
Thousand Dollars ($10,000) per share (the "Original Series C
Issue Price"), with a eight percent (8%) per annum accretion
rate as set forth herein commencing January 1, 1997.
Section 2. Rank. The Series C Preferred Stock shall
rank: (i) junior to the Series B Preferred Stock (the "Senior
Securities"); (ii) prior to all of the Company's Common Stock,
$.001 par value per share ("Common Stock"); (iii) prior to any
class or series of capital stock of the Company hereafter
created not specifically ranking by its terms senior to or on
parity with any Series C Preferred Stock of whatever subdivi
sion (collectively, with the Common Stock, "Junior Securi
ties"); and (iv) on parity with the Series A Preferred Stock
and any class or series of capital stock of the Company
hereafter created specifically ranking by its terms on parity
with the Series C Preferred Stock ("Parity Securities") in
each case as to distributions of assets upon liquidation,
dissolution or winding up of the Company, whether voluntary or
involuntary (all such distributions being referred to collec
tively as "Distributions").
Section 3. Dividends. The Series C Preferred Stock
will bear no dividends, and the holders of the Series C
Preferred Stock ("Holders") shall not be entitled to receive
dividends on the Series C Preferred Stock.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or
winding up of the Company, either voluntary or involuntary,
the Holders of shares of Series C Preferred Stock shall be
entitled to receive, immediately after any distributions to
Senior Securities required by the Company's Certificate of
Incorporation or any certificate of designation, and prior in
preference to any distribution to Junior Securities but in
parity with any distribution to Parity Securities, an amount
per share equal to the sum of (i) $10,000 (the Original
Series C Issue Price ) for each outstanding share of Series C
Preferred Stock and (ii) as to each share of Series C Pre
ferred Stock, an amount equal to eight percent (8%) of the
Original Series C Issue Price per annum for the period that
has passed since the date of issuance ( Issue Date ) of such
Series C Preferred Stock from the Company, (such amount being
referred to herein as the "Premium"). If upon the occurrence
of such event, and after payment in full of the preferential
amounts with respect to the Senior Securities, the assets and
funds available to be distributed among the Holders of the
Series C Preferred Stock and Parity Securities shall be
insufficient to permit the payment to such Holders of the full
preferential amounts due to the Holders of the Series C
Preferred Stock and the Parity Securities, respectively, then
the entire assets and funds of the Company legally available
for distribution shall be distributed among the Holders of the
Series C Preferred Stock and the Parity Securities, pro rata,
based on the respective liquidation amounts to which each such
series of stock is entitled by the Company's Certificate of
Incorporation and any certificate(s) of designation relating
thereto.
(b) Upon the completion of the distribution
required by subsection 4(a), if assets remain in this Company,
they shall be distributed to holders of Junior Securities in
accordance with the Company's Certificate of Incorporation
including any duly adopted certificate(s) of designation.
(c) At each Holder s option, a sale, conveyance or
disposition of all or substantially all of the assets of the
Company to a private entity, the common stock of which is not
publicly traded, shall be deemed to be a liquidation, dissolu
tion or winding up within the meaning of this Section 4;
provided, however, that the liquidation preference in such
case shall be equal to one hundred five percent (105%) of the
sum of the Original Series C Issue Price plus the accrued
Premium; and provided further that an event described in the
prior clause that the Holder does not elect to treat as a
liquidation and a consolidation, merger, acquisition, or other
business combination of the Company with or into any other
company or companies shall not be treated as a liquidation,
dissolution or winding up within the meaning of this Section
4, but instead shall be treated pursuant to Section 5(e)
hereof (a Holder who elects to have the transaction treated as
a liquidation is herein referred to as a Liquidating
Holder ).
(d) Prior to the closing of a transaction described
in Section 4(c) which would constitute a liquidation event,
the Company shall either (i) make all cash distributions it is
required to make to the Liquidating Holders pursuant to the
first sentence of Section 4(a), (ii) set aside sufficient
funds from which the cash distributions required to be made to
the Liquidating Holder can be made, or (iii) establish an
escrow or other similar arrangement with a third party
pursuant to which the proceeds payable to the Company from a
sale of all or substantially all of the assets of the Company
will be used to make the liquidating payments to the Liquidat
ing Holders immediately after the consummation of such sale.
In the event that the Company has not fully complied with
either of the foregoing alternatives, the Company shall
either: (x) cause such closing to be postponed until such cash
distributions have been made, or (y) cancel such transaction,
in which event the rights of the Holders or other arrangements
shall be the same as existing immediately prior to such
proposed transaction.
Section 5. Conversion. The record Holders of this
Series C Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
(a) Right to Convert. Each record Holder of Series
C Preferred Stock shall be entitled (at the times and in the
amounts set forth below) and subject to the Company's right of
redemption set forth in Section 6(a), to convert whole or (if
necessary to convert the maximum amount allowable) fractional
shares of Series C Preferred Stock, for resale either pursuant
to an effective shelf registration statement for the Common
Stock issuable upon conversion of the Series C Preferred Stock
under the Securities Act of 1933, as amended (the Registra
tion Statement ) or, if the Registration Statement is not
effective, then pursuant to Regulation S or any other applica
ble exemptions, as follows:
Lock Up Period: The New Preferred shall not be
convertible into Common Stock until April 1, 1997
(the time from the Issue Date of the Series C
Preferred Stock through March 31, 1997 is referred
to as the Lock-up Period ).
Conversion Quota: Beginning on April 1, 1997, each
Holder shall accrue the right to convert into
Common Stock up to 5% of the aggregate number of
shares of New Preferred issued to such Holder, and
for each two week period that expires thereafter,
Holder shall accrue (the Accrual Rate ) the right
to convert an additional 5% shares of New
Preferred issued to such Holder into Common Stock
(the number of shares that may be converted at any
time, in the aggregate, is herein referred to as
the Conversion Quota ), all at the Conversion
Rate (as defined below). In the event that Holder
elects not to convert its full Conversion Quota
during any two week period, the unconverted amount
shall be carried forward and added to the
Conversion Quota.
Each Holder may, from time to time, convert any
portion of the Conversion Quota; provided,
however, that in no event shall Holder convert
more than 10% of the shares of New Preferred
issued to Holder during any two week period.
Conversion Acceleration: If the Closing Bid Price
of the Common Stock is $7.00 or greater for five
consecutive trading days anytime after the end of
the Lock-up Period, (i) each Holder s Accrual Rate
for each two week period shall thereafter double
(to 10%) and (ii) thereafter, the maximum amount
of the Conversion Quota that the Holder will be
able to convert during any two-week period will be
limited to 20% of the shares of New Preferred
issued to the Holder.
For purposes hereof, the term "Closing Bid Price" shall
mean the closing bid price on the Nasdaq National Market
System published by The Nasdaq Stock Market, or if no longer
traded on the Nasdaq National Market, the closing bid price on
the Nasdaq Small Cap Market, the over-the-counter market or
the principal national securities exchange on which the Common
Stock is so traded and if such closing bid prices are not
available, the mean of the high and low prices on the princi
pal national securities exchange, the over-the-counter market
or the Nasdaq Stock Market on which the Common Stock is so
traded.
The April 1, 1997 date and each subsequent 2-week period
referenced above are hereinafter referred to singularly as a
Conversion Gate and collectively as Conversion Gates. At
the applicable Conversion Gate and at any time thereafter, the
percentage of Series C Preferred Stock issued to such Holder
which is available for conversion as set forth above is
convertible into that number of fully-paid and non-assessable
shares of Common Stock of the Company calculated in accordance
with the following formula (the "Conversion Rate"):
Number of shares of Common Stock to be issued upon
conversion ( Conversion ) of one (1) share of Series C
Preferred Stock =
(.08)(N/365)(10,000) + 10,000
Fixed Conversion Price
where,
- N= the number of days between (i) January 1, 1997 and (ii)
the applicable Date of Conversion (as defined in Section
5(b)(iv) below) for the shares of Series C Preferred Stock
for which conversion is being elected, and
- Fixed Conversion Price = $5.00.
(b) Mechanics of Conversion. In order to convert
Series C Preferred Stock into full shares of Common Stock, the
Holder shall (i) fax, on or prior to 11:59 p.m., New York City
time (the Conversion Notice Deadline ) on the date of
conversion, a copy of a fully executed notice of conversion
("Notice of Conversion") to the Company and to First Union
National Bank of Georgia, the custodian of the Common Stock (the
Custodian ) (with a copy to the Company s designated transfer
agent (the Transfer Agent ) for the Series C Preferred Stock)
stating that the Holder elects to convert, which notice shall
specify the date of conver sion, the number of shares of Series C
Preferred Stock to be converted, the Conversion Rate and a
calculation of the number of shares of Common Stock issuable upon
such conversion (together with a copy of the front page of each
certificate to be converted) and (ii) surrender to a common
courier, for either overnight or two (2) day delivery to the
office of the Custodian, the original certificates representing
the Series C Preferred Stock being converted (the Preferred
Stock Certificates ), duly endorsed for transfer; provided,
however, that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon
such conversion unless either the Preferred Stock Certificates
are delivered to the Custodian as provided above, or the Holder
notifies the Company or the Custodian that such certificates have
been lost, stolen or destroyed (subject to the requirements of
subparagraph (i) below). In the case of a reasonable dispute as
to the calculation of the Conversion Rate, the Custodian shall
promptly issue to the Holder the number of Shares that are not
disputed and shall submit the disputed calculations to the
Company s outside accountant via facsimile within three (3)
business days of receipt of Holder s Notice of Conversion. The
Company shall cause the accountant to perform the calculations
and notify the Custodian, the Company and Holder of the results
no later than two (2) business days from the time it receives the
disputed calculations. Accountant s calculation shall be deemed
conclusive absent manifest error.
(i) Lost or Stolen Certificates. Upon receipt by
the Company of evidence of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing
shares of Series C Preferred Stock, and (in the case of loss,
theft or destruction) of indemnity or security reasonably
satisfactory to the Company, and upon surrender and cancellation
of the Preferred Stock Certificate(s), if mutilated, the Company
shall execute and deliver new Preferred Stock Certificate(s) of
like tenor and date.
However, Company shall not be obligated to re-issue such lost or
stolen Preferred Stock Certificates if Holder contemporaneously
requests Company to convert such Series C Preferred Stock into
Common Stock.
(ii) Delivery of Common Stock Upon Conversion. The
Company no later than 6:00 p.m. (New York City time) on the third
(3rd) business day (the Deadline ) after receipt by the
Custodian of all necessary documentation duly executed and in
proper form required for conversion, including the original
Preferred Stock Certificates to be converted (or after provision
for security or indemnification in the case of lost or destroyed
certificates, if required), shall issue and surrender or shall
cause the Custodian to issue and surrender to a common courier
for either overnight or (if delivery is outside the United
States) two (2) day delivery to the Holder at the address of the
Holder as shown on the stock records of the Company a certificate
for the number of shares of Common Stock to which the Holder
shall be entitled as aforesaid.
(iii) No Fractional Shares. If any conversion
of the Series C Preferred Stock would create a fractional share
of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the
number of shares of Common Stock issuable upon conversion, in the
aggregate, shall be the next higher number of shares.
(iv) Date of Conversion. The date on which
conversion occurs (the "Date of Conversion") shall be deemed to
be the date such Notice of Conversion is faxed to the Company and
the Custodian, provided that the advance copy of the Notice of
Conversion is faxed to the Company on or prior to 11:59 p.m., New
York City time, on the Date of Conversion. The original Preferred
Stock Certificates representing the shares of Series C Preferred
Stock to be converted shall be surrendered by depositing such
certificates with a common courier for either overnight or two
(2) day delivery, as soon as practicable following the Date of
Conversion. The person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated
for all purposes as the record Holder or Holders of such shares
of Common Stock on the Date of Conversion.
(c) Reservation Number of Stock Issuable Upon Conver
sion. The Company 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 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 then outstanding 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 Series C Preferred Stock, the Company will
take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(d) Automatic Conversion. Each share of Series C
Preferred Stock outstanding on September 30, 1999 (the Automatic
Conversion Date ) automatically shall be converted into Common
Stock on such date at the Conversion Rate then in effect (calcu
lated in accordance with the formula in Section 5(a) above), and
the Automatic Conversion Date shall be deemed the Date of Conver
sion with respect to such conversion.
(e) Adjustment to Conversion Rate.
(i) Adjustment to Fixed Conversion Price Due to
Stock Split, Stock Dividend, Etc. If, prior to the conversion of
all of the Series C Preferred Stock, the number of outstanding
shares of Common Stock is increased by a stock split, stock
dividend, or other similar event, the Fixed Conversion Price
shall be proportionately reduced, or if the number of outstanding
shares of Common Stock is decreased by a combination or
reclassification of shares, or other similar event, the Fixed
Conversion Price shall be proportionately increased.
(ii) Adjustment Due to Merger, Consolidation, Etc.
If, prior to the conversion of all Series C Preferred Stock,
there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a
result of which shares of Common Stock of the Company shall be
changed into the same or a different number of shares of the same
or another class or classes of stock or securities of the Company
or another entity or there is a sale of all or substantially all
the Company s assets that is not deemed to be a liquidation
pursuant to Section 4(c), then the Holders of Series C Preferred
Stock shall thereafter have the right to receive upon conversion
of Series C Preferred Stock, upon the basis and upon the terms
and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion,
such stock, securities and/or other assets which the Holder would
have been entitled to receive in such transaction had the Series
C Preferred Stock been converted immediately prior to such
transaction, and in any such case appropriate provisions shall be
made with respect to the rights and interests of the Holders of
the Series C Preferred Stock to the end that the provisions
hereof (including, without limitation, provisions for the
adjustment of the Conversion Price and of the number of shares
issuable upon conversion of the Series C Preferred Stock) shall
thereafter be applicable, as nearly as may be practicable in
relation to any securities thereafter deliverable upon the
exercise hereof. The Company shall not effect any transaction
described in this subsection 5(e)(ii) unless (a) it first gives
thirty (30) calendar days, prior notice of such merger,
consolidation, exchange of shares, recapitalization, reorganiza
tion, or other similar event (during which time the Holder shall
be entitled to convert its shares of Series C Preferred Stock
into Common Stock to the extent permitted hereby) and (b) the
resulting successor or acquiring entity (if not the Company)
assumes by written instrument the obligation of the Company under
this Certificate of Designation, including the obligation of this
subsection 5(e)(ii).
(iii) No Fractional Shares. If any adjustment
under this Section 5(e) would create a fractional share of Common
Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon conversion shall be the next
higher number of shares.
Section 6. Redemption by Company.
(a) Company's Right to Redeem at its Election Prior to
April 1, 1997. At any time, commencing on the date of issuance
of any Series C Preferred Stock and ending on March 31, 1997, the
Company shall have the right, in its sole discretion, to redeem
("Redemption at Company's Election"), from time to time, up to
fifty percent (50%) of the Series C Preferred Stock of each
Holder. If the Company elects to redeem any shares of the Series
C Preferred stock, it must redeem the same specified percentage
of shares of each Holder. Notwithstanding the foregoing, the
Company may offer to redeem more than 50% of each Holder s shares
of Series C Preferred Stock, and each Holder may, at its sole
option, elect to permit more than 50% of its shares to be
redeemed. Any such redemption in excess of 50% shall be offered
on a pro rata basis among the outstanding Series C Preferred.
(i) Redemption Price At Company s Election. The
"Redemption Price At Company's Election" shall be one hundred
percent (100%) of Stated Value, as that term is defined below, of
the Series C Preferred Stock redeemed pursuant to this Section
6(a). For each share of New Preferred redeemed at Company s
election, Holder shall receive a warrant or warrants (the Redemp
tion Warrant or Redemption Warrants ) to purchase a number of
shares of Common Stock equal to the Stated Value of the shares of
New Preferred so redeemed divided by $5.00. The Redemption
Warrants shall be exerciseable beginning April 1, 1997 at an
exercise price of $7.00 per share and shall have a five (5) year
term.
For purposes hereof, "Stated Value" shall mean the Original
Series C Issue Price (as defined in Section 4(a)) of the shares
of Series C Preferred Stock being redeemed pursuant to this
Section 6(b), together with the accrued but unpaid Premium for
such shares (as defined in Section 4(a)).
(ii) Mechanics of Redemption at Company s
Election. The Company shall effect each such Redemption at
Company s Election by giving at least five (5) days prior written
notice ( Notice of Redemption At Company s Election ) to (A) the
Holders of the Series C Preferred Stock selected for redemption,
at the address and facsimile number of such Holder appearing in
the Company s Series C Preferred stock register and (B) the
Transfer Agent, which Notice of Redemption At Company s Election
shall be deemed to have been delivered two (2) business days
after the Company s mailing (by overnight or two (2) day courier,
with a copy by facsimile) of such Notice of Redemption At Company
s Election. Such Notice of Redemption At Company s Election
shall indicate (i) the number of shares of Series C Preferred
Stock that have been selected for redemption, (ii) the date which
such redemption is to become effective (the Date of Redemption
At Company s Election ) (iii) the applicable Redemption Price At
Company s Election, as defined in subsection (b)(i) above, (iv)
detailed instructions as to the redemption procedure, including
but not limited to instructions regarding the time and place for
delivery of the Series C Preferred being redeemed, and (v)
certifying that the Company then complies with Section 6(c)
below.
(b) Holder s Right to Require Company to Redeem
Beginning October 1, 1997. Beginning October 1, 1997 and
continuing during each of the four calendar months ending January
31, 1998, each Holder shall have the right to require Company to
redeem (a Requested Redemption ) up to twenty five percent (25%)
per calendar month, of the Series C Preferred issued to such
Holder, at a redemption price of 105% of Stated Value. The
foregoing rights are non-cumulative and therefore any 25% portion
not redeemed during any calendar month shall not be available for
Requested Redemptions pursuant to this Section 6(b) in subsequent
calendar months. Company may either pay the redemption price in
cash or may alternatively convert (an Alternate Conversion )
such amount into Common Stock. If the Company does not meet the
requirements of Section 6(c) below, the Company must effect an
Alternate Conversion. In the event that the Company elects to
(or is required to) convert such amount into Common Stock, the
number of shares of Common Stock to be issued is calculated as
follows (the Alternate Conversion Rate ):
105% X Stated Value
5 Day Average Closing Bid Price,
where, the 5 Day Average Closing Bid Price equals the average
Closing Bid Price for the five (5) trading days immediately
preceding the date (the Date of Alternate Conversion ) of such
Requested Redemption.
(i) Mechanics of Required Redemption or Alternate
Conversion. The Holder shall effect a Requested Redemption by
giving notice ( Notice of Requested Redemption ) to the Company
and the Custodian on the date that such redemption is desired
(the Requested Redemption Date ). The Holder shall surrender to
a common courier, by no later than 5:00 p.m. New York City time
on the third business day following the Requested Redemption
Date, for either overnight or two (2) day delivery to the office
of the Custodian, the original Preferred Stock Certificates being
tendered for Requested Redemption. The Company shall give notice
( Re quested Redemption Confirmation ) to the Custodian and to
the Holder, by facsimile, within one (1) business day of receipt
of a Notice of Requested Redemption, verifying that the Company
intends to redeem in cash, and meets the requirements of Section
6(c) below. If the Custodian does not receive a Requested
Redemption Confirmation by the next business day, the Custodian
shall effect an Alternate Conversion, and issue the appropriate
number of shares of Common Stock to the Holder within three (3)
business days after the later of (i) the date of the Requested
Redemption, or (ii) the date the original Preferred Stock
Certificates being converted are received.
(c) Company Must Have Immediately Available Funds or
Credit Facilities. The Company shall not be entitled to send any
Redemption Notice or begin the redemption procedure under
Sections 6(a) or undertake any redemption for cash pursuant to
Section 6(b) unless, it has paid all dividends required to be
paid under the Series B Preferred Stock, and it has:
(i) the full amount of the redemption price in
cash, available in a demand or other immediately available
account in a bank or similar financial institution; or
(ii) immediately available credit facilities, in
the full amount of the redemption price with a bank or similar
financial institution; or
(iii) an agreement with a standby underwriter
willing to purchase from the Company a sufficient number of
shares of stock to provide proceeds necessary to redeem any stock
that is not converted prior to redemption; or
(iv) a combination of the items set forth in (i),
(ii) and (iii) above, aggregating the full amount of the
redemption price; provided that the above restrictions shall not
apply to an Alternate Conversion.
(d) Payment of Redemption Price. Each Holder
submitting Preferred Stock being redeemed under Section 6(a)
shall send their Series C Preferred Stock Certificates so
redeemed to the Company or its Transfer Agent no later than the
Date of Redemption at Company s election, and the Company shall
pay the applicable redemption price to that Holder within five
(5) business days of the Date of Redemption at Company s
Election. The redemption shall be deemed to have been
made on the Date of Redemption, and, if the Company pays the
applica ble redemption price to the Holder within the allotted
time, all rights of the Holders shall cease as of the Date of
Redemption with respect to such redeemed shares of Series C
Preferred Stock except for the right thereafter to receive the
redemption price in accordance herewith. Where a Holder has
requested redemption under Section 6(b) and the Company has
elected to pay the redemption in cash, the Company shall pay the
applicable redemption price to such Holder within five (5)
business days of the Requested Redemption Date. The Company shall
not be obligated to deliver the redemption price unless the
Preferred Stock Certificates so redeemed are delivered to the
Company or its Transfer Agent, or, in the event one or more
certificates have been lost, stolen, mutilated or destroyed, the
Holder has complied with Section 5(b)(i).
(e) Blackout Period. Notwithstanding the foregoing,
the Company may not either send out a redemption notice or effect
a redemption pursuant to Section 6(a) above during a Blackout
Period (defined as a period during which the Company s officers
or directors would not be entitled to buy or sell stock because
of their holding of material non-public information), unless the
Company shall first disclose the non-public information that
resulted in the Blackout Period, provided, however, that no
redemption shall be effected until at least ten (10) days after
the Company shall have given the Holder written notice that the
Blackout Period has been lifted.
Section 7. Voting Rights. The Holders of the Series C
Preferred Stock shall have no voting power whatsoever, except as
otherwise provided by the General Corporation Law of the State of
Delaware ("Delaware Law"), and no Holder of Series C Preferred
Stock shall vote or otherwise participate in any proceeding in
which actions shall be taken by the Company or the shareholders
thereof or be entitled to notification as to any meeting of the
shareholders.
Notwithstanding the above, Company shall provide Holder with
notification of any meeting of the shareholders regarding any
major corporate events affecting the Company. In the event of any
taking by the Company of a record of its shareholders for the
purpose of determining shareholders who are entitled to receive
payment of any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire any share of any
class or any other securities or property (including by way of
merger, consolidation or reorganiza tion), or to receive any
other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease
or conveyance of all or substantially all of the assets of the
Company, or any proposed liquidation, dissolution or winding up
of the Company, the Company shall mail a notice to Holder,
at least ten (10) days prior to the record date specified
therein, of the date on which any such record is to be taken for
the purpose of such dividend, distribution, right or other event,
and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known
at such time.
To the extent that under Delaware Law the vote of the
Holders of the Series C Preferred Stock, voting separately as a
class, is required to authorize a given action of the Company,
the affirmative vote or consent of the Holders of at least a
majority of the shares of the Series C Preferred Stock
represented at a duly held meeting at which a quorum is present
or by written consent of a majority of the shares of Series C
Preferred Stock (except as otherwise may be required under
Delaware Law) shall constitute the approval of such action by the
class. To the extent that under Delaware Law the Holders of the
Series C Preferred Stock are entitled to vote on a matter with
holders of Common Stock, voting together as one (1) class, each
share of Series C Preferred Stock shall be entitled to a number
of votes equal to the number of shares of Common Stock into which
it is then convertible using the record date for the taking of
such vote of stockholders as the date as of which the Conversion
Price is calculated. Holders of the Series C Preferred Stock
also shall be entitled to notice of all shareholder meetings or
written consents with respect to which they would be entitled to
vote, which notice would be provided pursuant to the Company's
by-laws and applicable statutes.
Section 8. Protective Provision. So long as shares of
Series C Preferred Stock are outstanding, the Company shall not
without first obtaining the approval (by vote or written consent,
as provided by Delaware Law) of the Holders of at least sixty-six
and two-thirds percent (66 2/3%) of the then outstanding shares
of Series C Preferred Stock, and at least sixty-six and
two-thirds percent (66 2/3%) of the then outstanding Holders:
(a) alter or change the rights, preferences or
privileges of the Series C Preferred Stock or any Senior
Securities so as to affect adversely the Series C Preferred
Stock;
(b) create any new class or series of stock
having a preference over or on parity with the Series C Preferred
Stock or increase the size of the authorized number of Series C
Preferred; or
(c) do any act or thing not authorized or contem
plated by this Certificate of Designation which would result in
taxation of the holders of shares of the Series C Preferred Stock
under Section 305 of the Internal Revenue Code of 1986, as
amended (or any comparable provision of the Internal Revenue Code
as hereafter from time to time amended).
In the event Holders of at least sixty-six and two thirds
percent (66 2/3%) of the then outstanding shares of Series C
Preferred Stock agree to allow the Company to alter or change the
rights, preferences or privileges of the shares of Series C
Preferred Stock, pursuant to subsection (a) above, so as to
affect the Series C Preferred Stock, then the Company will
deliver notice of such approved change to the Holders of the
Series C Preferred Stock that did not agree to such alteration or
change (the Dissenting Holders ) and Dissenting Holders shall
have the right for a period of thirty (30) days to convert
pursuant to the terms of this Certificate of Designation as they
exist prior to such alteration or change; notwithstanding the
otherwise applicable Conversion Quota, or continue to hold their
shares of Series C Preferred Stock.
Section 9. Status of Redeemed or Converted Stock. In
the event any shares of Series C Preferred Stock shall be
redeemed or converted pursuant to Section 5 or Section 6 hereof,
the shares so converted or redeemed shall be canceled, shall
return to the status of authorized but unissued Preferred Stock
of no designated series, and shall not be issuable by the Company
as Series C Preferred Stock.
Section 10. Preference Rights. Nothing contained herein
shall be construed to prevent the Board of Directors of the
Company from issuing one (1) or more series of Preferred Stock
with dividend and/or liquidation preferences junior to the
dividend and liquidation preferences of the Series C Preferred
Stock.
Signed on ____________________, 1996
________________________________,
President
Attest:
__________________________
_________________, Secretary
ANNUAL MEETING OF STOCKHOLDERS
INDENET, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT
The undersigned stockholder of IndeNet, Inc., a
Delaware corporation, hereby appoints Robert W. Lautz, Jr., Chief
Executive Officer and a Director of IndeNet, Inc., my proxy to
attend and represent me at the annual meeting of the stockholders
of the corporation to be held on Monday, December 9, 1996 at 1:00
p.m., and at any adjournment thereof, and to vote my shares on
any matter or resolution which may properly come before the
meeting and to take any other action which I could personally
take if present at the meeting.
The following proposal is to be voted on at the special
meeting:
To approve the Company's proposed issuance of (i)
shares of the Company's new Series C Preferred Stock in
exchange for most of the currently outstanding shares
of the Company's Series A Preferred Stock, and (ii)
warrants to purchase shares of the Company's Common
Stock in connection with the foregoing exchange of
Series A Preferred Stock.
FOR AGAINST ABSTAIN
PLEASE NOTE: Failure to check one of the boxes will give
management the authority to vote the proxy in its discretion.
Shares owned:
Dated this ______ day of _______________, 1996.
Stockholder
(Sign exactly as name appears
on certificate for shares.)
(When signing as attorney,
executor, administrator,
trustee or guardian, give full
title as such. If signer is a
corporation, sign full
corporate name by duly
authorized officer. If shares
are held in the name of two or
more persons, all should
sign.)
