<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 8, 1999
REGISTRATION STATEMENT NO. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
WAVEPHORE, INC.
(Exact name of registrant as specified in its Charter)
INDIANA 86-0491428
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3311 NORTH 44TH STREET
PHOENIX, ARIZONA 85018
(602) 952-5500
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
-------------------------------
DAVID E. DEEDS, CHIEF EXECUTIVE OFFICER
WAVEPHORE, INC.
3311 NORTH 44TH STREET
PHOENIX, ARIZONA 85018
(602) 952-5500
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
--------------------------------
COPY TO: COPY TO:
DOUGLAS J. REICH, ESQ. STEVEN D. PIDGEON, ESQ.
WAVEPHORE, INC. SNELL & WILMER L.L.P.
3311 NORTH 44TH STREET ONE ARIZONA CENTER
PHOENIX, ARIZONA 85018 PHOENIX, ARIZONA 85004-0001
(602) 952-5500 (602) 382-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.[ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered(1) Per Share Offering Price Registration Fee
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares 164,580 Shares $7.9375(2) $1,306,353.70 $363.17
-------------- ------ ------------- ------
Total 164,580 Shares $1,306,353.70 $363.17
================ ====== =========== ======
</TABLE>
(1) In the event of a stock split, stock dividend, or similar transaction
involving the common stock of the Company, in order to prevent dilution, the
number of shares registered will be automatically increased to cover the
additional shares in accordance with Rule 416(a) under the Securities Act of
1933.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based upon the average of the high and low prices of
the common stock on April 1, 1999, as reported by the Nasdaq National Market.
----------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. PARACEL
ONLINE MAY NOT SELL THE SECURITIES OFFERED BY THIS PROSPECTUS UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
PROSPECTUS
WAVEPHORE, INC.
164,580 Common Shares
Paracel Online Systems, Inc. is offering to sell up to 164,580
outstanding shares of common stock of Wavephore, Inc. Paracel Online may sell
some or all of the common stock to new purchasers. Paracel Online may sell the
common stock through ordinary brokerage transactions, directly to market makers
of our shares, or through any of the other means described in the section
entitled "Plan of Distribution" beginning on page 12.
Paracel Online will receive all of the proceeds from the sale of the
common stock, less any brokerage or other expenses of sale incurred by them. We
are paying for the costs of registering the shares covered by this prospectus.
Our common stock is traded on Nasdaq National Market under the symbol
"WAVO."
We are an Indiana corporation, formed on November 13, 1990. Our
principal executive offices are located at 3311 N. 44th Street, Phoenix, Arizona
and our telephone number is (602) 952-5500.
-----------------------------
BEFORE PURCHASING ANY OF THE SHARES COVERED BY THIS PROSPECTUS,
CAREFULLY READ AND CONSIDER THE RISK FACTORS INCLUDED IN THE SECTION ENTITLED
"RISK FACTORS" BEGINNING ON PAGE 2. YOU SHOULD BE PREPARED TO ACCEPT ANY AND ALL
OF THE RISKS ASSOCIATED WITH PURCHASING THE SHARES, INCLUDING A LOSS OF ALL OF
YOUR INVESTMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE SALE OF THE COMMON STOCK OR DETERMINED THAT THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS ILLEGAL FOR ANY
PERSON TO TELL YOU OTHERWISE.
The date of this prospectus is April , 1999.
-------------------------
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
WAVEPHORE........................................................................................................ 1
RISK FACTORS..................................................................................................... 2
USE OF PROCEEDS.................................................................................................. 8
SELLING SECURITY HOLDER.......................................................................................... 8
DESCRIPTION OF SECURITIES........................................................................................ 9
PLAN OF DISTRIBUTION............................................................................................. 11
LEGAL OPINIONS................................................................................................... 11
EXPERTS ......................................................................................................... 12
WHERE YOU CAN FIND MORE INFORMATION.............................................................................. 12
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND IN ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. NO
ONE HAS BEEN AUTHORIZED TO PROVIDE YOU WITH DIFFERENT INFORMATION.
THE COMMON STOCK IS NOT BEING OFFERED IN ANY JURISDICTION WHERE THE
OFFER IS NOT PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THE DOCUMENTS.
i
<PAGE> 5
WAVEPHORE
WavePhore provides technologies, products, and services that enable
people and enterprises to more efficiently receive, manage and productively use
all types of information. Our technologies and services aggregate, filter,
customize and distribute content in text, graphics, audio, and video form using
a wide range of television, radio, and satellite broadcast infrastructures and
the Internet.
We currently operate in four service and product areas.
WAVETOP: WaveTop is an Internet-like consumer-based entertainment and
programming service that is broadcast to personal computers, or PCs, in the
home. WaveTop is a free service that offers a variety of "channels", including
broadcast news, sports, games, family, and other popular information content.
WaveTop operates by transmitting data directly to the users' home PCs via
television signals that are received by TV tuner cards installed in the PCs. By
using existing television signals rather than telephone lines or cable, WaveTop
can provide large streaming multimedia content, including audio, video, software
and real-time data, without the bandwidth limitations of traditional Internet
transmission methods. We began offering WaveTop in April 1998. We generate
revenues for WaveTop
- primarily from advertiser-sponsors and content
provider-sponsors for our various channels; and seek to
generate additional revenue through:
- revenue-sharing opportunities with on-line service providers
and electronic commerce vendors;
- licensing our WaveTop-related technology;
- creating subscriber-based premium channels; and
- pay-per-view downloads.
NEWSCAST: Our Newscast(TM) service delivers personalized business
information from over 4,500 sources to more than 200,000 of our customers'
employees, associates, and members, through the Internet, extranets, and
corporate intranets. Newscast uses patented filtering and pattern matching
technology to filter over 30,000 articles per day from leading national and
international sources and deliver customized news and information to our
customers on a real time basis. Throughout the day this data and information is
transmitted directly to our customers' computers, or internal systems, for
immediate and easy access. For example, we provide our customers in banking and
financial services with real-time news and information about the economy and our
customers in manufacturing with real-time news and information about supplies,
transportation, and other stories that affect their industry. Our Newscast
service saves our customers time and resources by searching thousands of sources
to retrieve the specific information they need. In addition to maintaining our
current customers, we are focused on increasing our market share by targeting
Fortune 2000 companies.
NETWORKS: Our Networks service provides end-to-end satellite, FM radio
signal, and land-based data broadcast communications solutions to companies that
send all types of information, from stock quotes and sports scores to digital
background music, to their customers. Our customers include the Associated
Press, Business Wire, Dow Jones, Knight-Ridder/Tribune, PR Newswire, Reuters and
Thomson Financial Services. Networks also sells satellite receiver equipment and
builds data broadcast systems that enable customers, such as the Muzak DBS
Division, Standard & Poor's ComStock and AEI Music Network, to create their own
communication networks. In January 1998, we announced the creation of
"WINDS"(TM), which stands for WavePhore Internet News Delivery Service. WINDS
transmits data for customers through the Internet. We expect WINDS to complement
Network's FM and satellite data broadcasting systems by reaching end users who
may not currently be accessible via FM signals.
eWATCH: Our eWatch service provides a comprehensive Internet monitoring
service to our customers. We monitor the Internet, including public discussion
bulletin boards and web sites, for information requested by our customers. We
deliver the filtered results of the monitoring to our customers daily via E-mail
or the Internet. We currently monitor approximately 250,000 Internet postings
per day. Typically, monitoring involves messages and information related to the
customer and its business, or that of others, such as their competitors. We have
more than 600 customers for whom we provide this service.
1
<PAGE> 6
RISK FACTORS
BEFORE PURCHASING ANY OF THE SHARES COVERED BY THIS PROSPECTUS, YOU
SHOULD CAREFULLY READ AND CONSIDER THE RISK FACTORS SET FORTH BELOW. YOU SHOULD
BE PREPARED TO ACCEPT ANY AND ALL OF THE RISKS ASSOCIATED WITH PURCHASING THE
SHARES, INCLUDING A LOSS OF ALL OF YOUR INVESTMENT.
WE HAVE A HISTORY OF LOSSES AND MAY NEVER BECOME PROFITABLE
We have generated relatively limited revenues from operations and
incurred significant expenses in developing our products and services. As a
result, we have realized net losses each year since our inception in November
1990. We incurred net losses of approximately $8.6 million for the fiscal year
1996, approximately $19.8 million for the fiscal year 1997, and approximately
$28.5 million for the fiscal year 1998. As of December 31, 1998, we had an
accumulated deficit of approximately $96.3 million. We expect to incur
significant operating losses through the end of 1999 and may continue to incur
operating losses after 1999. Given our history of losses, limited revenues from
operations and significant expenses, we may never become profitable.
IF WE DO NOT GENERATE WIDESPREAD CONSUMER DEMAND FOR WAVETOP WE MAY NEVER
BECOME PROFITABLE
To become profitable, we need to generate broad based market acceptance
for our WaveTop service. The market for our WaveTop service is new and evolving
and the demand for this service is highly uncertain. In addition to achieving
widespread consumer demand, the success of our WaveTop service depends on our
ability to meet the following objectives, none of which we may achieve.
- attracting and retaining the most popular information
providers;
- including our WaveTop software and technology in products
manufactured by others, including personal computers, TV tuner
boards, set top boxes and other consumer products; and
- generating significant revenues through e-commerce, technology
licensing and other opportunities.
IF WE DO NOT SIGNIFICANTLY EXPAND THE MARKET FOR NEWSCAST WE MAY NEVER
BECOME PROFITABLE
Our profitability also depends on expanding the market for our Newscast
service. The market for our Newscast service also is relatively new and
evolving. Increasing our share of this market depends on meeting the following
objectives, none of which we may achieve.
- demonstrating a technological or economic advantage over our
competitors;
- providing strong customer service to support Newscast;
- attracting and retaining information providers; and
- increasing sales through our direct sales force.
OUR PRODUCTS AND SERVICES MAY BECOME OBSOLETE UNLESS WE ADAPT TO RAPID
TECHNOLOGICAL CHANGE AND FREQUENT NEW PRODUCT INTRODUCTIONS BY OUR COMPETITORS
The markets for our products and services experience rapid
technological change, frequent new product introductions, and evolving industry
standards. Rapid technological change and new product introduction could render
one or more of our products or services obsolete or place us at a competitive
disadvantage. Accordingly, we believe that our success depends upon our ability
to anticipate changes in consumer preferences, develop and market products and
services that incorporate new technologies, and enhance and expand our existing
product lines and services to keep pace with competing products. We will need to
spend significant amounts of capital to develop, market and enhance our products
and services to meet and take advantage of technological changes. Our failure to
anticipate or adapt to technological change or evolving industry standards, and
to successfully introduce new products and services, could materially and
adversely affect our business.
2
<PAGE> 7
WE MAY NOT SUCCEED UNLESS WE ARE ABLE TO SUCCESSFULLY ADDRESS THE DIFFERENT
COMPETITIVE CHALLENGES IN EACH OF OUR MARKETS
Each of the markets in which we compete presents different competitive
challenges. For example, we currently offer our WaveTop service primarily to PC
users at home and provide our Newscast service primarily to business users. We
must respond to different competitive challenges and compete with a different
set of competitors in each of our markets. In addition, with the rapid expansion
of the Internet, the number of companies that can provide similar products and
services in each of our markets is growing significantly. As a result, we expect
that more competitors will enter the markets in which we operate. Increased
competition may result in price reductions, reduced gross margins and loss of
market share.
The data broadcasting and information services industry is intensely
competitive, rapidly changing and significantly affected by new product
introductions and other market activities. Each of the markets in which we
operate includes numerous competitors with well recognized brand names that
provide products and services that compete with those we offer, including, but
not limited to:
- the regional Bell operating companies, AP SatNet and Data
Broadcasting Corporation in the data broadcasting business;
- Reed Elsevier, Inc.'s LEXIS/NEXIS(R), and NewsEDGE corporation
in the electronic information access and processing business
market;
- America Online, @Home, Compuserve, and Yahoo!, in the
Internet-based consumer information and entertainment market;
and
- Scientific-Atlanta, Inc., in the satellite equipment business.
Many of our competitors have longer operating histories and greater
presence in key markets, greater name recognition, access to larger customer
bases and significantly greater financial, sales, marketing, distribution,
technical and other resources. Given these competitive disadvantages, we may not
be able to compete effectively against these competitors. Our inability to
compete would have a material adverse effect on our business. These competitors
may be able to adapt to new or emerging technologies and changes in customer
requirements more quickly than we can. They might also be able to devote greater
resources to the development, promotion and sale of competing products and
services.
WE MAY LOSE THE EXCLUSIVE RIGHT TO USE TECHNOLOGY REQUIRED TO OPERATE NEWSCAST
OPENING THE WAY FOR DIRECTLY COMPETITIVE PRODUCTS
A portion of the technology critical to the operation of Newscast,
including the Fast Data Finder technology that filters information from vast
amounts of data, is licensed from third parties. Under a license from Paracel,
Inc., we have been granted exclusive rights to software associated with the use
of the Fast Data Finder and the Newscast technologies through May 29, 2002, and
non-exclusive rights after that time. After May 29, 2002, Paracel could license
its technology, including Fast Data Finder technology, to other parties. If this
were to occur, these other parties may compete with us or offer similar
products. This would likely have a material adverse effect on our business.
THIRD PARTY INFORMATION PROVIDERS MAY TERMINATE OR CHOOSE NOT TO RENEW
AGREEMENTS TO PROVIDE CONTENT WHICH WOULD ADVERSELY AFFECT OUR SERVICE
OFFERINGS
We currently rely on a number of content and information providers to
supply entertainment, news, and other information we offer through our WaveTop
and Newscast services. Our agreements with information providers are generally
for a term of one or more years. The termination of or failure to renew one or
more significant information provider agreements would decrease the available
news and information that we can offer our customers. Many of the agreements
automatically renew unless notice of termination is provided before the end of
the term by either party. However, most of these agreements may be terminated by
the information provider if we fail to fulfill our obligations under the
agreement and some agreements are terminable at will. We cannot guarantee that
an information provider will not terminate its agreement with us or that it will
choose to renew the agreement at the end of its term.
3
<PAGE> 8
ANY PROBLEMS WITH MICROSOFT'S WINDOWS 98 OPERATING SYSTEM ARE LIKELY TO
ADVERSELY AFFECT THE SUCCESS OF WAVETOP
We believe that the success of WaveTop depends significantly upon our
relationship with Microsoft Corporation. Microsoft is bundling and distributing
our WaveTop software with its Windows 98 operating system. We currently are
relying on this arrangement as a method of distributing the WaveTop software and
introducing the WaveTop service to consumers. On May 18, 1998, the United States
Department of Justice and the attorneys general of 20 states filed suit against
Microsoft seeking to prevent alleged anti-competitive behavior by Microsoft in
connection with, among other things, Windows 98. If the continued availability
of Windows 98 is adversely affected by the lawsuit, or otherwise, Windows 98
does not maintain acceptance in the marketplace, or Microsoft is not allowed to
our ceases to bundle our WaveTop software with its Windows 98 operating system,
we could incur significant delays and costs in distributing and marketing our
WaveTop software and service.
PBS NATIONAL DATACAST, INC. MAY TERMINATE OUR AGREEMENT TO BROADCAST WAVETOP
WHICH COULD PRECLUDE US FROM OFFERING THIS KEY SERVICE
The success of our WaveTop service also will depend to a large degree
on our relationship with PBS National Datacast, Inc. We have entered into an
agreement with PBS National Datacast under which the WaveTop service will be
broadcast through the television signals transmitted by PBS member stations. If
PBS National Datacast were to terminate our agreement, we likely would not be
able to broadcast the WaveTop service without interruption, if at all. The
agreement expires on January 1, 2002. We have an option to extend the term for
an additional five years. However, PBS National Datacast may terminate the
agreement if we fail to comply with the provisions of the agreement, breach the
agreement, or are in default under the agreement. We do not have any
arrangements with other television broadcasters to provide alternative
transmission of WaveTop and do not currently intend to enter into any other
alternative arrangements. Alternative methods of transmission may present
significant barriers we would have to overcome in order to make use of them. Any
alternative broadcaster would likely be unable to offer the same geographic
coverage of transmission as PBS.
FAILURE OR DISRUPTION OF OUR TELECOMMUNICATIONS SYSTEMS MAY DISRUPT OUR
OPERATIONS AND SERVICE OFFERINGS TO OUR CUSTOMERS
Our customers rely on our ability to provide and distribute information
24 hours a day seven days a week without failures. As a result, our business
depends to a significant extent on our ability to maintain continuous operation
of our computer and telecommunications systems. Any damage to or loss of our
computer and telecommunications networks, including our network operations
centers, or damage to or loss of any third party controlled systems, including
satellites or those operated by Internet service providers, could have a
material adverse effect on our business. Our systems may suffer damage or
disruption from fire, natural disaster, power loss, telecommunications failure,
or similar events. Our operations also depend in significant part on our network
operations centers in Phoenix, Arizona, Dallas, Texas, and Salt Lake City, Utah.
Although we have arranged for off-site back-up for our network control, this
arrangement does not eliminate the significant risk to our operations from a
natural disaster or system failure. In addition, growth of our customer base may
strain the capacity of our computer and telecommunications systems or lead to
degradations in performance or system failure.
ANY DISRUPTION IN RECEIVING INFORMATION FROM THIRD PARTY INFORMATION PROVIDERS
WILL DISRUPT OUR ABILITY TO PROVIDE TIMELY INFORMATION TO OUR CUSTOMERS
We depend on the timely receipt of information feeds and computer
downloads from third parties. Any loss, interruption or disruption of the
transmission of this information to our news consolidation facility would result
in delay, loss, interruption or disruption of the transmission to the end users.
In addition to affecting customers of our information providers, these events
would adversely affect customers of our Newscast service. These disruptions
could result in those customers terminating, or failing to renew, their
contracts with us. In either case, our business could be materially and
adversely affected.
We also depend largely on the integrity, capability, and maintenance of
third party controlled systems, including satellites and the Internet. The loss
or disruption of any facility or equipment, or the interruption of any
facility's or equipment's transmission capabilities, could adversely affect our
ability to broadcast services and information. It could also cause one or more
of our customers to terminate their contracts with us or fail to renew their
contracts. Our Networks service uses a third party shared satellite uplink
facility in Raleigh, North Carolina, as well as third party FM radio
transmission facilities. Similarly, our WaveTop service uses PBS member station
television broadcast facilities to broadcast and deliver WaveTop information and
services. We do not control any of these facilities or equipment.
4
<PAGE> 9
WE MAY EXPERIENCE DIFFICULTIES AND DELAYS IN MIGRATING OUR TECHNOLOGY TO THE
NEW ADVANCED TELEVISION SYSTEM FORMAT WHICH COULD RESULT IN AN INABILITY TO
TRANSMIT DATA AND A CONSEQUENTIAL LOSS OF CUSTOMERS
The broadcast industry is in the process of migrating to a new advanced
television system format. This format will enable television broadcasters to
transmit digital programming and non-programming related data at high speeds
using a digital television signal. We may experience unanticipated difficulties
and delays in adapting our analog signal-based data broadcasting products and
services, such as WaveTop, to the digital-based advanced television system
format when it becomes available. Most U.S. and other television broadcasters,
including PBS member stations, currently use analog signals. When the
digital-based advanced television system format achieves widespread
implementation, we will be required to adapt our analog signal-based data
broadcasting products and services to be compatible. If we experience
significant difficulties or delays in migrating to the digital format, it could
result in a loss of customers or an inability to transmit data, which could have
a material adverse effect our business.
THE FCC MAY REVOKE OR NOT RENEW LICENSES UPON WHICH WE DEPEND TO PROVIDE
OUR SERVICES TO CUSTOMERS
We must comply with regulations issued by the Federal Communications
Commission. Specifically, the FCC requires broadcasters in television, radio and
other media to obtain and maintain licenses to transmit information. As
described below, the FCC has the right to revoke a license and may elect not to
renew a license after its expiration. If WavePhore or any third party
broadcaster on which we rely fails to maintain any required FCC licenses, our
ability to provide our services may be disrupted.
TELEVISION. In the United States, broadcast transmissions are subject
to regulation by the FCC. Although we are not currently required to hold an FCC
license to provide our broadcasting services, third parties on which we rely are
or may be required to obtain or maintain FCC licenses to provide their services
to us. In addition, the services we provide may require us to obtain an FCC
license in the future. If we or a third party on which we rely fails to obtain
or maintain any required FCC license, we may be unable to provide our broadcast
services on a continuous basis.
FM SUBCARRIERS. We have entered into contracts with various FM
licensees to lease their subcarriers to broadcast data. An FM license is granted
for a period of seven years and may be renewed by the FCC for like terms.
However, there is no guarantee that the licenses for the FM stations we use will
be renewed. Although we believe that adequate alternative FM stations would be
available for our use, any delay in finding alternative stations, or the terms
upon which they would be willing to supply their services, could adversely
affect our business. We are not currently required to hold an FCC license to act
as a private carrier to use FM subcarrier channels. If in the future we are
required to hold an FCC license in order to use these FM subcarriers, there is
no assurance we will be granted one.
SATELLITE UPLINKS. We currently hold two FCC licenses for satellite
uplinks in Salt Lake City, Utah. Our satellite uplink licenses are subject to
renewal. There can be no assurance that these licenses will be renewed upon
their expiration on October 23, 2002, and January 16, 2008. These licenses may
be revoked for cause. Failure to renew, or revocation of, either or both of our
FCC licenses for satellite uplinks could have a material adverse affect on our
business. We also share a satellite uplink facility in Raleigh, North Carolina.
This facility is required to hold a license from the Federal Communications
Commission in order to broadcast information via satellite transmission. If this
transmission facility were to fail to obtain any required license from the FCC,
fail to maintain its license, or fail to have a required license renewed by the
FCC, we would be unable to transmit information using this facility.
ADVANCED TELEVISION SYSTEM FORMAT. While Congress specifically
authorized the use of the advanced television system format in the legislation
adopting the format, the FCC has not issued final regulations regarding the
transmission of non-programming related content in the format. If we migrate our
analog signal-based data broadcasting services to the new digital format, we
will become subject to any regulations adopted by the FCC governing transmission
of content in that format.
5
<PAGE> 10
WE MAY NOT BE ABLE TO RAISE THE SUBSTANTIAL ADDITIONAL CAPITAL REQUIRED
TO EXECUTE OUR BUSINESS PLAN
We expect to continue to incur significant capital expenses in
continuing to develop and market our products and services. Although we believe
currently available funds and capital resources will be sufficient to meet
anticipated needs for capital through 1999, we expect that we will need
substantial additional capital to fully implement our business plan beyond 1999.
We also may need to raise additional funds in order to acquire complementary
businesses, products, or technology. Additional financing may not be available
on terms favorable to us, or at all. If adequate funds are not available or are
not available on acceptable terms, we may not be able to execute our business
plan or take advantage of our business opportunities. In addition, if we elect
to raise capital by issuing additional shares of stock, existing stockholders
may incur dilution.
OUR BUSINESS IS LIKELY TO BE HURT IF WE ARE UNABLE TO KEEP OUR SENIOR EXECUTIVE
OFFICERS AND KEY EMPLOYEES
We rely considerably on the abilities of our founder and Chief
Executive Officer, David Deeds. We also depend to a significant extent upon the
performance of our other senior executive officers. We have not entered into
employment agreements with any of our senior executive officers and are not the
beneficiary of life insurance on any of them. Although we have agreements with
some members of management not to compete with us, there can be no assurance
that these agreements will be enforceable or effective in retaining these
individuals. As a result, we may lose one or more key individuals to resignation
or death and may be unable to adequately replace these individuals. In addition,
our products and services are highly technical and require key employees with
high levels of technical expertise. Demand for these individuals, particularly
in the locations where we operate, is very high. The loss of the services of any
of our key employees, or the failure to attract and retain qualified personnel
to replace them, could have a material adverse effect on our business.
A LARGE PORTION OF OUR REVENUE COMES FROM A SMALL NUMBER OF CUSTOMERS, THE LOSS
OF WHICH COULD MATERIALLY AND ADVERSELY AFFECT OUR OPERATING RESULTS
A significant percentage of our revenue comes from a relatively small
group of customers. Although we believe that our current relationships with our
customers are generally good, the loss of one or more of our major customers
could have a material adverse effect on our operating results.
AS AN INTERNET-BASED COMPANY OUR COMMON STOCK PRICE IS UNUSUALLY VOLATILE, WHICH
MAY IMPAIR OUR ABILITY TO RAISE CAPITAL, AND CAUSE OUR INVESTORS TO LOSE MONEY
The market price of our common stock, like the stock of many other
technology companies, particularly those involved in Internet-related businesses
and e-commerce, has been highly volatile. In addition, we have experienced, and
may continue to experience, significant fluctuations in revenues and operating
results from period to period, which tends to increase the volatility of our
common stock price. Factors that affect volatility include:
- unexpected fluctuations in our operating results;
- announcements of technological innovations and new products by
us or our competitors;
- increases in governmental regulation;
- developments or changes in legislation affecting the
industries in which we operate;
- developments in our patent or other proprietary rights or
those of our competitors;
- analyst reports, media stories, news broadcasts, and
interviews; and
- market conditions for technology and Internet-related stocks
in general.
WE MAY ISSUE ADDITIONAL SHARES AND DILUTE YOUR OWNERSHIP PERCENTAGE
Certain events over which you have no control could result in the
issuance of additional shares of our common stock, which would dilute your
ownership percentage in WavePhore. We may issue additional shares of common
stock or preferred stock:
- to raise additional capital or finance acquisitions;
6
<PAGE> 11
- upon the exercise or conversion of outstanding options,
warrants and shares of convertible preferred stock; or
- in lieu of cash payment of dividends.
There are currently outstanding convertible preferred shares, warrants,
and options to acquire up to 7,724,386 additional shares of common stock at
prices ranging from $4.125 to $18.15 per share. If converted or exercised, these
securities will dilute your percentage ownership of common stock. These
securities, unlike the common stock, provide for antidilution protection upon
the occurrence of stock splits, redemptions, mergers, reclassifications,
reorganizations and other similar corporate transactions, and, in some cases,
major corporate announcements. If one or more of these events occurs, the number
of shares of common stock that may be acquired upon conversion or exercise would
increase.
OUR GOVERNING DOCUMENTS AND INDIANA LAW CONTAIN PROVISIONS THAT COULD PREVENT
TRANSACTIONS IN WHICH YOU WOULD RECEIVE A PREMIUM FOR YOUR STOCK
Our Articles of Incorporation and the Indiana Business Corporation Law
contain provisions that could have the affect of delaying, deferring, or
preventing a change in control and the opportunity to sell your shares at a
premium over current market prices. Although intended to protect WavePhore and
its shareholders from unwanted takeovers, their effect could hinder or prevent
transactions in which you might otherwise receive a premium for your common
stock over then-current market prices, and may limit your ability to approve
transactions which may be in your best interests. As a result, the mere
existence of these provisions could adversely affect the price of our common
stock.
WE MAY ISSUE ADDITIONAL SHARES OF PREFERRED STOCK WITHOUT SHAREHOLDER APPROVAL
THAT HAVE RIGHTS SENIOR TO THOSE OF COMMON STOCKHOLDERS
Our Board of Directors has the authority to issue a total of up to
10,000,000 shares of preferred stock and to fix the rates, preferences,
privileges, and restrictions, including voting rights, of the preferred stock,
which typically are senior to the rights of the common stockholders, without any
further vote or action by you and the other common stockholders. Your rights
will be subject to, and may be adversely affected by, the rights of the holders
of the preferred stock that have been issued, or might be issued in the future.
Preferred stock also could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of WavePhore.
This could delay, defer, or prevent a change in control. Furthermore, holders of
preferred stock may have other rights, including economic rights, senior to the
common stock. As a result, their existence and issuance could have a material
adverse affect on the market value of the common stock. We have in the past
issued, and, may from time to time in the future issue, preferred stock for
financing or other purposes with rights, preferences, or privileges senior to
the common stock.
WE ARE SUBJECT TO RESTRICTIONS ON DIVIDENDS AND REDEMPTIONS AND DO NOT INTEND
TO PAY ANY DIVIDENDS
We have not paid any dividends on the common stock, and do not plan to
pay any dividends on the common stock for the foreseeable future. The provisions
of the Series 1994 Preferred Shares prohibit the payment of dividends on the
common stock unless the dividends on those preferred shares are first paid. In
addition, although our credit facility does not include any specific
prohibitions on the payment of dividends, it does include various financial
covenants that could have the effect of limiting cash dividend or redemption
payments. The Indiana Business Corporation Law includes limitations on the
ability of corporations to pay dividends on or to purchase or redeem their own
stock. Accordingly, you should not expect that dividends will be paid on your
common stock.
7
<PAGE> 12
WE RELY ON COMPUTER HARDWARE, SOFTWARE, AND INTERNET-BASED TECHNOLOGY THAT
COULD HAVE YEAR 2000 PROBLEMS AND ADVERSELY AFFECT THE DELIVERY OF OUR SERVICES
TO CUSTOMERS
We rely extensively on computer hardware, software and related
technology, together with data, in the operation of our business. This
technology and data are used in creating and delivering our products and
services, and in our internal operations, such as billing and accounting. We
have initiated an enterprise-wide program to evaluate the technology and data
used in the creation and delivery of our products and services, and in our
internal operations. If we fail to complete the implementation of our Year 2000
plan prior to the commencement of the Year 2000, or our customers and suppliers
fail to successfully remediate their own Year 2000 issues, it could materially
adversely affect us. The program utilizes a Year 2000 "team" which includes
executive officers. The team must identify Year 2000 issues and develop and
implement a plan to handle them. The plan includes resolving any Year 2000
issues that are related to our customers and suppliers. However, there can be no
assurances that these third parties will successfully remediate their own Year
2000 issues over which we have no control.
WE MAKE FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS THAT MAY NOT PROVE TO BE
ACCURATE
This prospectus contains or incorporates forward-looking statements
including statements regarding, among other items, our business strategy, growth
strategy, and anticipated trends in our business. We may make additional written
or oral forward-looking statements from time to time in filings with the
Securities and Exchange Commission or otherwise. When we use the words
"believe," "expect," "anticipate," "project" and similar expressions, this
should alert you that this is a forward-looking statement. Forward-looking
statements speak only as of the date the statement is made. These
forward-looking statements are based largely on our expectations. They are
subject to a number of risks and uncertainties, some of which cannot be
predicted or quantified and are beyond our control. Future events and actual
results could differ materially from those set forth in, contemplated by, or
underlying the forward-looking statements. Statements in this prospectus, and in
documents incorporated into this prospectus, including those set forth in "Risk
Factors" and "The Company", describe factors, among others, that could
contribute to or cause these differences. In light of these risks and
uncertainties, there can be no assurance that the forward-looking information
contained in this prospectus will in fact transpire or prove to be accurate. All
subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by this
section.
USE OF PROCEEDS
Paracel Online will receive all of the proceeds from the sale of the
common stock offered under this prospectus.
SELLING SECURITY HOLDER
The following table provides information regarding Paracel Online's
beneficial ownership of common stock as of April 1, 1999, and as adjusted to
reflect the sale of the securities offered under this prospectus. Unless we have
indicated otherwise, to our knowledge, Paracel Online has sole voting and
investment power with respect to its securities.
<TABLE>
<CAPTION>
COMMON SHARES COMMON SHARES
NAME OF SELLING BENEFICIALLY OWNED TO BE SOLD
SECURITY HOLDER PRIOR TO THE OFFERING IN THE OFFERING
--------------- --------------------- ---------------
<S> <C> <C>
Paracel Online Systems, Inc. 164,580 164,580
</TABLE>
As of the date of this prospectus, Paracel Online does not hold any
securities of WavePhore other than the shares being offered under this
prospectus.
8
<PAGE> 13
DESCRIPTION OF SECURITIES
We are authorized to issue up to 50,000,000 shares of common stock and
10,000,000 preferred shares. As of April 8, 1999, 29,111,458 shares of common
stock were issued, of which 28,605,458 shares were outstanding and 506,000 were
held in our treasury; and a total of 501,963 preferred shares were issued and
outstanding.
Our Board of Directors has the authority, without further action by the
shareholders, to issue a total of up to 10,000,000 preferred shares in one or
more series and to fix the rights, preferences, privileges and restrictions
granted to or imposed upon any series of unissued preferred shares and to
determine the number of shares constituting any series and the designation of
the series, without any further vote or action by the shareholders.
The following summary of certain provisions of the common stock and
preferred shares does not purport to be complete and is subject to, and is
qualified in its entirety by, our amended Articles of Incorporation, Restated
Code of Bylaws, and by the provisions of applicable law.
COMMON STOCK
The holders of our common stock are entitled to one vote per share on
all matters on which shareholders are entitled to vote. Subject to the rights of
holders of any class or series of shares, including preferred shares, having a
preference over the common stock as to dividends or upon liquidation, the
holders of our common stock are also entitled to dividends as may be declared by
our Board of Directors out of funds that are lawfully available, and are
entitled upon liquidation to receive pro rata the assets that are available for
distribution to holders of common stock. Holders of the common stock have no
preemptive, subscription, or conversion rights. The common stock is not subject
to assessment and have no redemption provisions.
PREFERRED STOCK
SERIES 1994 PREFERRED SHARES
We have authorized, issued and outstanding 501,963 of our Series 1994
Cumulative Convertible Preferred Shares. These shares have a stated value of
$11.00 per share and are convertible at any time into common stock at $11.00 per
share. The conversion provisions are subject to adjustment if there is a stock
split, dividend, distribution, reorganization, reclassification, merger,
consolidation, share exchange, or other similar corporate transaction.
Cumulative dividends on the shares accrue at the rate of 10% per annum and are
payable when declared by the Board of Directors. We may not pay dividends on the
common stock or other series junior to these preferred shares unless all accrued
dividends have been paid on the latter. On liquidation, the holder of the
preferred shares will be entitled to receive, before any distribution to holders
of our common stock or other series junior to the preferred shares, liquidation
distributions equal to the stated value of $11.00 per preferred share, plus
accrued and unpaid dividends. We may redeem the preferred shares at any time, on
at least 30 days written notice, at the redemption price of $11.00 per share,
plus accrued and unpaid dividends, provided that the redemption has been
approved by a majority of the Board of Directors who are not holders of the
preferred shares. The preferred shares have no voting rights except as otherwise
provided by law or the Articles of Incorporation. David E. Deeds, the Chairman,
Chief Executive Officer and President, owns all of the Series 1994 Preferred
Shares.
SERIES A, SERIES B, AND SERIES C PREFERRED SHARES
We were authorized to issue, and in the past did issue, three separate
series of convertible preferred shares called the Series A, Series B, and Series
C Convertible Preferred Shares, all with varying provisions. All of these
preferred shares have been converted into common stock and are no longer
outstanding.
WARRANTS
We have issued various warrants, including the following which are
still outstanding:
9
<PAGE> 14
REPRESENTATIVE'S WARRANTS
We issued warrants to our underwriters in connection with our initial
public offering in October 1994. These warrants enable the underwriters, or
other holders, to purchase an aggregate of 165,000 shares of common stock at a
purchase price of $18.15 per share. The exercise price and number of shares
purchasable upon exercise of the warrants are subject to adjustment upon the
occurrence of a stock split, reverse stock split, or distribution to
stockholders. The warrants expire on October 20, 1999.
WARRANTS RELATED TO SERIES C PREFERRED SHARES
We also issued warrants to purchasers of our Series C Preferred Shares.
Warrants to purchase up to 545,454 additional shares of common stock remain
outstanding. The exercise price of these warrants is $8.80 per share, which is
equal to 115% of the average of the closing sale prices of the common stock for
the five trading days immediately preceding the date we issued the Series C
Preferred Shares. These warrants expire on July 24, 2000.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is American
Securities Transfer & Trust, Inc.
CHARTER PROVISIONS AND EFFECTS OF INDIANA LAW
Our Articles of Incorporation require that proposals for consideration
at a meeting of shareholders must be submitted to the Secretary not later than
the earlier of:
- 270 days after the adjournment of the previous annual meeting;
or
- the close of business on the seventh day following the date on
which notice of the meeting is given to shareholders.
Under the Indiana Business Corporation Law, any person who acquires 10%
of the voting power of the common stock of a corporation is considered an
"interested shareholder." For a period of five (5) years after an acquisition,
certain business combinations between WavePhore and the interested shareholder
are prohibited, unless prior to the acquisition of that common stock by the
interested shareholder, the Board of Directors approves the acquisition of
common stock or the business combination. After the five-year period, only the
following three types of business combinations between WavePhore and the
interested shareholder are permitted:
- a business combination approved by the Board of Directors
before the acquisition of common stock by the interested
shareholder;
- a business combination approved by holders of a majority of
the common stock not owned by the interested shareholder; and
- a business combination in which the shareholders receive a
price for their common stock at least equal to a formula price
based on the highest price per share paid by the interested
shareholder.
In addition, under Indiana law, a party acquiring WavePhore common stock may
lose the right to vote some or all of those shares if the acquisition results in
that party holding greater than 20%, 33%, or 50% of the outstanding shares of
WavePhore. An acquiring party can avoid the loss of the right to vote these
shares if the right to vote is approved by shareholders holding a majority of
the "disinterested" common stock, and, if authorized by a provision of our
Articles of Incorporation or Bylaws adopted before the time that party became an
interested shareholder, permit the redemption of the acquiring party's common
stock. We have not adopted this kind of a redemption provision.
10
<PAGE> 15
PLAN OF DISTRIBUTION
We are registering the common stock covered by this prospectus for
Paracel Online. As used in this prospectus, "Paracel Online" includes the
pledgees, donees, transferees, or other successors in interest who later hold
Paracel Online's interests. We are paying the costs and fees of registering the
common stock, but Paracel Online will pay any brokerage commissions, discounts
or other expenses relating to the sale of the common stock. We have also agreed
to indemnify Paracel Online and certain related persons against certain
liabilities, including liabilities under the Securities Act.
Paracel Online may sell the common stock at market prices prevailing at
the time of sale, at prices related to the prevailing market prices, at
negotiated prices, or at fixed prices, which may be changed. Paracel Online may
sell some or all of their common stock through:
- ordinary brokers' transactions which may include long or short
sales;
- transactions involving cross or block trades or otherwise on
the Nasdaq National Market;
- purchases by brokers, dealers, or underwriters as principal
and resale by those purchasers for their own accounts under
this prospectus;
- "at the market" to or through market makers or into an
existing market for the common stock;
- in other ways not involving market makers or established
trading markets, including direct sales to purchasers or sales
effected through agents;
- through transactions in options, swaps or other derivatives;
or
- any combination of the foregoing, or by any other legally
available means.
Paracel Online may enter into hedging transactions with broker-dealers who may
engage in short sales of common stock in the course of hedging the positions
they assume. Paracel Online also may enter into option or other transactions
with broker-dealers that require the delivery by those broker-dealers of the
common stock. The shares may then be resold under this prospectus. In its
selling activities, Paracel Online will be subject to applicable provisions of
the Securities Exchange Act of 1934 and its rules and regulations, including
without limitation, Regulation M, which may limit the timing of purchases and
sales of any of the shares of common stock by Paracel Online.
Paracel Online may negotiate and pay broker-dealers commissions,
discounts or concessions for their services. Broker-dealers engaged by Paracel
Online may allow other broker-dealers to participate in resales. Paracel Online
and any broker-dealers involved in the sale or resale of the common stock may
qualify as "underwriters" within the meaning of Section 2(11) of the Securities
Act. In addition, the broker-dealers' commissions, discounts or concession may
qualify as underwriters' compensation under the Securities Act. If Paracel
Online or any broker-dealer qualifies as an "underwriter," they will be subject
to the prospectus delivery requirements of Rule 153 of the Securities Act, which
may include delivery through the facilities of the NASD. In conjunction with
sales to or through brokers, dealers or agents, Paracel Online may agree to
indemnify them against liabilities arising under the Securities Act. We know of
no existing arrangements between Paracel Online, any other shareholder, broker,
dealer, underwriter or agent relating to the sale or distribution of the common
stock.
In addition to selling their common stock under this prospectus,
Paracel Online may:
- transfer its common stock in other ways not involving market
makers or established trading markets, including by gift,
distribution, or other transfer; or
- sell their common stock under Rule 144 of the Securities Act
rather than under this prospectus, if the transaction meets
the requirements of Rule 144.
LEGAL OPINIONS
Barnes & Thornburg, of Indianapolis, Indiana, will pass upon the
validity of the common stock offered under this prospectus.
11
<PAGE> 16
EXPERTS
The consolidated financial statements of WavePhore, Inc. appearing in
our Annual Report (Form 10-K) for the years ended December 31, 1998 and 1997,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference.
These consolidated financial statements are incorporated herein by reference in
reliance upon the report given upon the authority of Ernst & Young LLP, as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
GOVERNMENT FILINGS: We file annual, quarterly and special reports and
other information with the Securities and Exchange Commission. You may read and
copy any document that we file at the Commission's Public Reference Room at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Please call the Commission at 1-800-SEC-0330 for more
information about the Public Reference Rooms. Most of our filings are also
available to you free of charge at the Commission's web site at
http://www.sec.gov.
STOCK MARKET: Our common stock is listed on the Nasdaq National Market
and similar information can be inspected and copied at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
REGISTRATION STATEMENT: We have filed a registration statement under
the Securities Act with the Commission with respect to the common stock offered
under this prospectus. This prospectus is a part of the registration statement.
However, it does not contain all of the information contained in the
registration statement and its exhibits. You should refer to the registration
statement and its exhibits for further information about WavePhore and the
common stock offered under this prospectus.
INFORMATION INCORPORATED BY REFERENCE: The Commission allows us to
"incorporate by reference" the information we file with it, which means that we
can disclose important information to you by referring you to those documents.
The information incorporated by reference is an important part of this
prospectus, and information that we file later with the Commission will
automatically update and supersede this information. We have filed the following
documents with the Commission and they are incorporated by reference into this
prospectus:
- our Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
- our Proxy Statement for the 1998 Annual Meeting of
Securityholders, dated March 23, 1998;
- our Current Report on Form 8-K, and its Exhibits, filed
January 12, 1999; and
- the description of our capital stock contained in our
registration statement on Form 8-A, including all amendments
or reports filed for the purpose of updating the description.
Please note that all other documents and reports filed under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act following the date of this prospectus and
prior to the termination of this offering will be deemed to be incorporated by
reference into this prospectus and to be made a part of it from the date of the
filing of our reports and documents.
You may request free copies of these filings by writing or telephoning
us at the following address:
Investor Relations
WavePhore, Inc.
3311 North 44th Street
Phoenix, Arizona 85018
(602) 952-5500.
12
<PAGE> 17
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION
The following are the estimated expenses in connection with the
issuance and distribution of the securities being registered, all of which will
be paid by WavePhore:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $ 363
Nasdaq Listing Fee $ 3,292
Legal Fees and Expenses $ 5,000
Accounting Fees and Expenses $ 1,000
Transfer Agent Fees and Expenses $ 500
Miscellaneous $ 1,000
-----------
TOTAL $ 11,155
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Unless limited by the Articles of Incorporation, the Indiana Business
Corporation Law (the "IBCL") requires that a corporation indemnify a director
who was successful, on the merits or otherwise, in the defense of any proceeding
to which the director was a party because the director is or was a director of
the corporation, against reasonable expenses incurred by the director in
connection with the proceeding. The IBCL permits a corporation to indemnify an
individual, made a party to a proceeding because the individual is or was a
director, against liability incurred in the proceeding if: (1) the individual's
conduct was in good faith; and (2) the individual reasonably believed: (A) in
the case of conduct in the individual's official capacity with the corporation,
that the individual's conduct was in its best interest; and (B) in all other
cases, that the individual's conduct was at least not opposed to its best
interests; and (3) in the case of any criminal proceeding, the individual
either: (A) had reasonable cause to believe the individual's conduct was lawful;
or (B) had no reasonable cause to believe the individual's conduct was unlawful.
Unless a corporation's articles of incorporation provide otherwise, an officer
of the corporation, whether or not a director, is entitled to mandatory and
court-ordered indemnification to the same extent as a director; and the
corporation may indemnify an officer, employee or agent of the corporation,
whether or not a director, to the same extent as a director, and to the extent,
consistent with public policy, that may be provided by its articles of
incorporation, bylaws, general or specific action of its board of directors, or
contract. The indemnification provisions of the IBCL are not exclusive of any
other rights to indemnification that a person may have under the corporation's
articles of incorporation or bylaws, a resolution of the board of directors or
of the shareholders, or any other authorization, whenever adopted, after notice,
by a majority vote of all of the voting shares then issued and outstanding.
The IBCL provides that a director is not liable for any action taken as
a director, or any failure to take any action, unless: (1) the director has
breached or failed to perform the duties of the director's office in compliance
with Section 23-1-35-1 of the IBCL; and (2) the breach or failure to perform
constitutes willful misconduct or recklessness. Section 23-1-35-1 of the IBCL
provides that a director shall, based upon the facts then known to the director,
discharge the duties as a director, including the director's duties as a member
of a committee: (a) in good faith; (b) with the care an ordinarily prudent
person in a like position would exercise under similar circumstances; and (c) in
a manner the director reasonably believes to be in the best interests of the
corporation. In discharging the director's duties, a director is entitled to
rely upon information, opinions, reports, or statements, including financial
statements and other financial data, if prepared or presented by: (1) one or
more officers or employees of the corporation whom a director reasonably
believes to be reliable and competent in the matters presented; (2) legal
counsel, public accountants, or other persons as to matters the director
reasonably believes are within the person's professional or expert competence;
or (3) a committee of the board of directors of which the director is not a
member if the director reasonably believes the committee merits confidence. A
director is not acting in good faith if the director has knowledge concerning
the matter in question that makes reliance otherwise permitted by the foregoing
provisions unwarranted. A director may, in considering the best interests of a
corporation, consider the effects of
13
<PAGE> 18
any action on shareholders, employees, suppliers, and customers of the
corporation, and communities in which offices or other facilities of the
corporation are located, and any other factors the director considers pertinent.
WavePhore's Articles of Incorporation provide that the corporation must
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including any action or suit
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, to
the maximum extent permitted under the IBCL. Such indemnification shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any statute, bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise.
WavePhore's Restated Code of Bylaws provide that the corporation must
indemnify any individual who is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a director, officer,
partner or trustee of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or enterprise whether or not for
profit, against liability and expenses, including attorneys fees, incurred by
him in any action, suit or proceeding, whether civil, criminal, administrative,
investigative, and whether formal or informal, in which he has been made or
threatened to be made a party by reason of being or having been in any such
capacity, or arising out of his status as such, except
- in the case of any action, suit, or proceeding terminated by
judgment, order or conviction, in relation to matters as to
which he is adjudged to have breached or failed to perform the
duties of his office and the breach or failure to perform
constituted a willful misconduct or recklessness; and
- in any other situation, in relation to matters as to which it
is found by a majority of a committee composed of all
directors not involved in the matter in controversy (whether
or not a quorum) that the person breached or failed to perform
the duties of his office and the breach or failure to perform
constituted willful misconduct or recklessness.
The directors and officers of WavePhore are covered by an insurance
policy indemnifying against certain liabilities which arise from their
activities performed on behalf of WavePhore, including liabilities under the
Securities Act of 1933 in certain circumstances.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that, in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
3.1 Restated Articles of Incorporation (incorporated by
reference to Exhibit 4 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1994).
3.2 Articles of Amendment to the Company's Articles of
Incorporation dated December 27, 1995 (incorporated
by reference to Exhibit 3 to the Company's Current
Report on Form 8-K dated December 27, 1995).
3.3 Articles of Amendment to the Company's Articles of
Incorporation dated February 7, 1996 (incorporated by
reference to Exhibit 4.3 to WavePhore's Registration
Statement No. 333-1198 on Form S-3).
3.4 Articles of Amendment to the Company's Articles of
Incorporation dated July 23, 1997 (incorporated by
reference to Exhibit 3.1 to WavePhore's Current
Report on Form 8-K filed as of August 1, 1997).
3.5 Restated Code of Bylaws (incorporated by reference to
Exhibit 4.2 to WavePhore's Registration Statement No.
33-80343 on Form S-8).
</TABLE>
14
<PAGE> 19
<TABLE>
<S> <C>
5 Opinion of Barnes & Thornburg regarding legality.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Barnes & Thornburg (included in Exhibit 5).
24 Power of Attorney (included on signature page of
registration statement).
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement to include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's Annual Report under Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report under Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
15
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Phoenix, State of Arizona, on April 7, 1999.
WAVEPHORE, INC.
/s/ David E. Deeds
-----------------------------------------
David E. Deeds, Chairman,
Chief Executive Officer and President
Know all men by these presents, that each person whose signature
appears below constitutes and appoints David E. Deeds, R. Glenn Williamson
Kenneth D. Swenson, and Douglas J. Reich, and each of them, his true and lawful
attorneys-in-fact and agent, with full powers of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign any and all amendments to this registration statement on
Form S-3 and to sign any registration statement for the same offering that is
to be effective upon filing pursuant to Rule 462(b) of the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith with the Securities and Exchange Commission, granting
under said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully and to all intents and
purposes as he might or could do in person hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ David E. Deeds Chairman of the Board, Chief Executive Officer and April 7, 1999
________________________________ President (Principal Executive Officer)
David E. Deeds
/s/ R. Glenn Williamson Executive Vice President, Chief Operating Officer April 7, 1999
________________________________ and Director
R. Glenn Williamson
/S/ Kenneth D. Swenson Executive Vice President, Chief Financial Officer, April 7, 1999
________________________________ Treasurer (Principal Financial Officer and
Kenneth D. Swenson Principal Accounting Officer) and Director
/S/ C. Roland Haden Director April 7, 1999
________________________________
C. Roland Haden
/S/ Glenn Scolnik Director April 7, 1999
________________________________
Glenn Scolnik
Director April 7, 1999
/S/ J. Robert Collins
________________________________
J. Robert Collins
</TABLE>
16
<PAGE> 21
w INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
<S> <C>
3.1 Restated Articles of Incorporation (incorporated by reference to Exhibit 4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1994).
3.2 Articles of Amendment to the Company's Articles of Incorporation dated December 27, 1995
(incorporated by reference to Exhibit 3 to the Company's Current Report on Form 8-K dated
December 27, 1995).
3.3 Articles of Amendment to the Company's Articles of Incorporation dated February 7, 1996
(incorporated by reference to Exhibit 4.3 to WavePhore's Registration Statement No. 333-1198 on
Form S-3).
3.4 Articles of Amendment to the Company's Articles of Incorporation dated July 23, 1997
(incorporated by reference to Exhibit 3.1 to WavePhore's Current Report on Form 8-K filed as of
August 1, 1997).
3.5 Restated Code of Bylaws (incorporated by reference to Exhibit 4.2 to WavePhore's Registration
Statement No. 33-80343 on Form S-8).
5 Opinion of Barnes & Thornburg regarding legality.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Barnes & Thornburg (included in Exhibit 5).
24 Power of Attorney (included on signature page of registration statement).
</TABLE>
<PAGE> 1
Exhibit 5
April 7, 1999
WAVEPHORE, INC.
3311 North 44th Street
Phoenix, Arizona 85018
Re: Issuance of Common Stock
Gentlemen:
We have acted as special Indiana counsel to WavePhore, Inc., an
Indiana corporation (the "Company"), in connection with its Registration
Statement on Form S-3 (the "Registration Statement") filed under the Securities
Act of 1933, as amended (the "1933 Act"), relating to the registration of up to
164,580 of the Company's Common Shares, without par value (the "Shares"), for
resale by Paracel Online Systems, Inc., a California corporation ("Paracel"),
which have been acquired by Paracel as of March 31, 1999 pursuant to that
certain Agreement for the Purchase and Sale of Assets dated May 29, 1997, as
amended by that certain Amendment No. 1 thereto dated January 12, 1998, by and
among the Company, WavePhore Newscast, Inc., a Delaware corporation, Paracel
and Paracel, Inc., a California corporation (the "Agreement").
In rendering the opinions set forth herein, we have limited our factual
inquiry to (i) reliance on a certificate of the Secretary of the Company, (ii)
reliance on the facts and representations contained in the Registration
Statement, including without limitation those relating to the number of the
Company's Common Shares, without par value, which are authorized, issued
or reserved for issuance upon conversion or exercise of preferred shares,
warrants and options, and (iii) such documents, corporate records and
other instruments as we have deemed necessary or appropriate as a basis
for the opinions expressed below, including without limitation a certificate
issued by the Secretary of State of the State of Indiana dated March 26, 1999,
attesting to the corporate existence of the Company in the State of Indiana,
and telephonic verification with such Secretary of State with respect to the
Company's continued valid existence as of the date hereof.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as certified or
photostatic copies, and the authenticity of the originals of such copies. In
rendering the opinion expressed below, we have assumed that the shares (i) will
conform in all material respects to the description thereof set forth in the
Registration Statement, (ii) were issued and delivered in accordance with the
terms of the Agreement, and (iii) were issued pursuant to an exemption from the
registration requirements of the 1933 Act pursuant to Section 4(2) of the 1933
Act.
Based upon the foregoing, and subject to the qualifications set forth
herein, we are of the opinion that the Shares are validly issued, fully paid
and nonassessable.
<PAGE> 2
The foregoing opinion is limited to the current internal laws of the
State of Indiana (without giving effect to any conflict of law principles
thereof), and we have not considered, and express no opinion on, the laws of any
other jurisdiction. This opinion is based on the laws in effect and facts in
existence on the date of this letter, and we assume no obligation to revise or
supplement this letter should the law or facts, or both, change.
This opinion is intended solely for the use of the Company in
connection with the registration of the Shares. It may not be relied upon by
any other person or for any other purpose, or reproduced or filed publicly by
any person, without the written consent of Barnes & Thornburg; provided,
however, that we hereby consent to the filing of this opinion as Exhibit 5
to the Registration Statement and to the references to Barnes & Thornburg
contained in the Registration Statement.
Very truly yours,
/s/Barnes & Thornburg
<PAGE> 1
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related prospectus of WavePhore, Inc.
for the registration of 164,580 shares of its common stock and to the
incorporation by reference therein of our report dated January 25, 1999, with
respect to the consolidated financial statements of WavePhore, Inc. included in
its Annual Report (Form 10-K) for the year ended December 31, 1998, filed with
the Securities and Exchange Commission
/s/ Ernst & Young LLP
Phoenix, Arizona
April 7, 1999
