<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[x] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material under Rule 14a-12
</TABLE>
WAVO Corporation
(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] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
WAVO
CORPORATION
April 3, 2000
Dear Shareholder:
You are cordially invited to attend the 2000 Annual Meeting of
Shareholders of WAVO Corporation on Monday, May 15, 2000, at 2:00 PM, Mountain
Standard Time, at the Phoenix Airport Marriott, 1101 N. 44th Street, Phoenix,
Arizona.
The Notice of Annual Meeting and Proxy Statement accompanying this
letter describe the business to be acted upon at the meeting. The Annual Report
to Shareholders for the year ended December 31, 1999, is also enclosed.
Please promptly vote, date, sign and return your proxy for the meeting
even though you plan to attend. You may vote in person at that time if you so
desire.
Sincerely,
David E. Deeds
Chairman and Chief Executive Officer
<PAGE> 3
WAVO CORPORATION
3131 E. CAMELBACK ROAD, SUITE 320
PHOENIX, ARIZONA 85016
(602) 952-5500
------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------------------------------------------
The Annual Meeting of Shareholders of WAVO Corporation will be held on
Monday, May 15, 2000, at 2:00 PM, Mountain Standard Time, at the Phoenix Airport
Marriott, 1101 N. 44th Street, Phoenix, Arizona, to take action on the following
matters:
1. To elect five Directors to serve until the next Annual Meeting
of Shareholders, or until their successors have been duly
elected and qualified.
2. To approve the issuance and sale of Series D Convertible
Preferred Shares and related warrants, and the reservation for
issuance and the issuance of Common Shares upon conversion of
the Series D Convertible Preferred Shares, as dividends
thereon, upon exercise of the related warrants, and otherwise
in accordance with the terms thereof.
3. To transact such other business as may properly come before
the meeting or any adjournment thereof. As of the date of this
notice, the Company knows of no other business to be brought
before the meeting.
The Board of Directors has fixed the close of business on March 31, 2000, as the
record date for the determination of Shareholders entitled to notice of, and to
vote at, the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Douglas J. Reich
Secretary
Dated: April 3, 2000
<PAGE> 4
WAVO CORPORATION
3131 E. CAMELBACK ROAD, SUITE 320
PHOENIX, ARIZONA 85016
(602) 952-5500
--------------------------------------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 15, 2000
---------------------------------------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of WAVO Corporation, an Indiana corporation (the
"Company"), of proxies for the Annual Meeting of Shareholders to be held on
Monday, May 15, 2000, at 2:00 PM, Mountain Standard Time, at the Phoenix Airport
Marriott, 1101 N. 44th Street, Phoenix, Arizona, and at any adjournment thereof.
These Proxy Materials are being mailed to Shareholders commencing approximately
April 10, 2000.
Sending in a signed proxy will not affect a Shareholder's right to
attend the meeting and vote in person. Any Shareholder giving a proxy has the
right to revoke it at any time before it is exercised by executing and returning
a proxy bearing a later date, by giving written notice of revocation to the
Secretary of the Company, or by attending the meeting and voting in person. All
properly executed proxies not revoked will be voted at the meeting in accordance
with instructions contained therein.
A proxy which is signed and returned by a Shareholder of record without
specification marked in the instruction boxes will be voted, as to proposals
specified in the proxy, in accordance with recommendations of the Board of
Directors as outlined in this Proxy Statement. If any other proposals are
properly brought before the meeting and submitted to a vote, all proxies will be
voted in accordance with the judgment of the persons voting the respective
proxies.
In connection with proxy soliciting material mailed to Shareholders,
employees of the Company may communicate with Shareholders personally or by
telephone, facsimile, telegraph or mail to solicit their proxies. The Company
will pay all expenses related to such solicitations of proxies. The Company will
request that brokers, custodians, nominees and fiduciaries forward proxy
materials to the beneficial holders, and solicit proxies from them, where
appropriate. The Company will reimburse such persons for reasonable
out-of-pocket expenses incurred in connection therewith.
<PAGE> 5
Shareholders of record at the close of business on March 31, 2000, are
eligible to vote at the meeting. As of the close of business on March 31, 2000,
the Company had outstanding 29,256,938 Common Shares. Each Common Share will
entitle the holder to one vote. Additional shares held in the Company's treasury
at March 31, 2000, totaling 506,000 Common Shares, will not be voted. Also as of
such date, the Company had outstanding a total of 503,263 Preferred Shares,
which are not entitled to vote on the election of Directors or Proposal 2.
A majority of the Common Shares entitled to vote, present in person or
represented by proxy, shall constitute a quorum for matters on which the holders
are entitled to vote at the Annual Meeting of Shareholders. Shares that are
present in person or represented by proxy but abstain from voting are counted
for purposes of establishing a quorum, as are shares where a broker holding
stock in street name votes the shares on some matters but not others.
With respect to the two matters expected to come before the
Shareholders at the Annual Meeting, assuming a quorum is present:
- Directors shall be elected by a plurality of the votes cast by
the Common Shares present at the meeting.
- The proposal to approve the issuance and sale of Series D
Convertible Preferred Shares and related warrants, and the
reservation for issuance and the issuance of Common Shares
upon conversion of the Series D Convertible Preferred Shares,
as dividends thereon, upon exercise of the related warrants,
and otherwise in accordance with the terms thereof, shall be
approved if a majority of the total votes cast by the holders
of the Common Shares on the matter favor the action.
If any other matter is properly brought before the meeting, which is
not expected to occur, it shall be approved if the votes cast favoring the
action exceed the votes cast opposing the action. With respect to the election
of Directors, only shares that are voted in favor of a particular nominee will
be counted toward such nominee's achievement of a plurality. Shares present at
the meeting that are not voted for a particular nominee, or shares present by
proxy where a Shareholder properly withholds authority to vote for such nominee,
or broker non-votes, will not be counted towards such nominee's achievement of a
plurality. With respect to the other matters to be voted upon, if a Shareholder
abstains from voting or directs his proxy to abstain from voting, the shares are
considered present at the meeting for such matter but, since they are not voted
for the matter, they are not counted in respect of such matter. With respect to
broker non-votes on any such matter, the shares are not considered present at
the meeting for such matter and they are, therefore, not counted in respect of
such matter. Such broker non-votes do have the practical effect of reducing the
number of affirmative votes required to achieve a majority for such matter by
reducing the total number of shares from which the majority is calculated.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of five members.
Members of the Company's Board of Directors hold office until the next Annual
Meeting of Shareholders and until their successors are elected and have been
qualified or their earlier resignation or removal.
2
<PAGE> 6
The Board of Directors has nominated David E. Deeds, Peter M. White,
Kenneth D. Swenson, Glenn Scolnik and J. Robert Collins for election as
Directors at the 2000 Annual Meeting of Shareholders. All of such persons
currently are Directors of the Company.
THE BOARD OF DIRECTORS, WITH EACH RESPECTIVE DIRECTOR ABSTAINING
AS TO HIS NOMINATION, UNANIMOUSLY RECOMMENDS A VOTE FOR THE
ELECTION AS DIRECTORS OF THE NOMINEES LISTED ABOVE.
Except where otherwise instructed, proxies will be voted for election
of all the nominees for Director. Should any nominee for Director be unwilling
or unable to serve as a Director, which is not anticipated, it is intended that
the persons acting under the proxy will have discretionary authority to vote for
the election of another person in such nominee's stead in accordance with their
judgment.
With respect to Directors who are Officers of the Company, the
following information concerning positions with the Company does not include
positions as Officers or Directors of subsidiaries of the Company which are part
of the responsibilities of such persons and for which such persons receive no
separate compensation.
The following information as to principal occupations during the last
five years, and other Directorships in companies with a class of securities
registered under Section 12 or subject to Section 15(d) of the Securities
Exchange Act of 1934, as amended, or registered as an investment company under
the Investment Company Act of 1940, as amended, is based upon information
furnished by each person and is correct to the best knowledge of the Company.
3
<PAGE> 7
NOMINEES FOR DIRECTORS
<TABLE>
<CAPTION>
DIRECTOR POSITIONS WITH THE COMPANY AND PRINCIPAL
NAME AGE SINCE OCCUPATIONS DURING THE LAST FIVE YEARS
---- --- ----- --------------------------------------
<S> <C> <C> <C>
David E. Deeds 58 1990 Chairman and Chief Executive Officer of the Company since
February 1990; President from February 1990 to July 1999.
Peter M. White 35 1999 President of the Company since July 1999, Director since
September 1999, and Chief Operating Officer since December 1999;
President of WavePhore NewsCast, Inc. since 1997; President of
Paracel Online Systems, Inc. from 1995 to 1997; Chief Executive
Officer of Carthage International, Inc. from 1993 to 1995.
Kenneth D. Swenson 50 1996 Executive Vice President of the Company since December 1996;
Chief Financial Officer and Treasurer of the Company since April
1995. Mr. Swenson was a partner with Ernst & Young, LLP, an
international accounting firm, from 1983 to 1995.
Glenn Scolnik 48 1995 Chief Executive Officer of Hammond, Kennedy, Whitney & Company,
Inc. (private capital firm), New York City, Chicago and
Indianapolis, since January 1999; President since January 1998;
Managing Director from 1993 to 1998; practicing attorney, Sommer
& Barnard, P.C., Indianapolis, Indiana, 1978-1993.
J. Robert Collins, Ph.D. 58 1995 Principal in the corporate finance group of Dillon Gage, Inc.,
Dallas, Texas, since January 2000, and a Distinguished Lecturer
in Entrepreneurship at Texas A&M University - Commerce since
September 1999. Dr. Collins was previously with E-Systems, Inc.,
a Raytheon Company (defense systems), Dallas, Texas, as
Corporate Vice President, Strategic Planning and Development,
from 1993 to 1998; Vice President, Business Development,
1991-1993; Product Line Vice President, 1985-1991; Program
Director, Program Manager and System Engineer, 1978-1985.
</TABLE>
4
<PAGE> 8
COMMITTEES OF THE BOARD AND MEETINGS
The Audit Committee of the Board of Directors recommends the engagement
or discharge of the Company's independent auditors, reviews year-end financial
statements prior to issuance, reviews the audit and non-audit services performed
by the independent auditors, and makes appropriate reports and recommendations
to the Board of Directors. During the last fiscal year, the Audit Committee
consisted of Messrs. Scolnik and Collins. The Audit Committee held three
meetings during 1999.
The Compensation/Incentive Plan Committee of the Board of Directors
reviews matters relating to compensation of the Executive Officers of the
Company and makes recommendations thereon to the Board of Directors. In
addition, the Compensation/Incentive Plan Committee determines Incentive Plan
Awards for Executive Officers of the Company. During the last fiscal year, the
Compensation/Incentive Plan Committee consisted of Messrs. Scolnik and Collins.
The Compensation/Incentive Plan Committee held two meetings during 1999.
The Company's Board of Directors has no nominating committee.
Nominations for Directors of the Company are considered by the entire Board of
Directors.
The Board of Directors held eight meetings during 1999. No Director
attended fewer than 75% of the aggregate of all meetings of the Board of
Directors and of the committees of the Board on which he served.
PROPOSAL 2 - TO APPROVE THE ISSUANCE AND SALE OF SERIES D CONVERTIBLE
PREFERRED SHARES AND RELATED WARRANTS, AND THE RESERVATION FOR ISSUANCE AND
ISSUANCE OF COMMON SHARES UPON CONVERSION OF THE SERIES D CONVERTIBLE
PREFERRED SHARES, AS DIVIDENDS THEREON, UPON EXERCISE OF THE RELATED WARRANTS,
AND OTHERWISE IN ACCORDANCE WITH THE TERMS THEREOF
On October 4, 1999, the Company issued 1,500 shares of Series D
Convertible Preferred Shares, $10,000 stated value per share (the "Series D
Preferred Shares") in a private placement to institutional investors. The net
proceeds of the offering, after expenses, were approximately $13,925,000. The
Company intends to use such proceeds for general corporate purposes, including
working capital.
In connection with the sale of the Series D Preferred Shares, the
Company issued warrants to purchase up to 900,000 Common Shares. The exercise
price of these warrants is $4.641 per share. These warrants expire on October 4,
2004. If all such warrants were exercised to purchase 900,000 Common Shares, the
Company would receive proceeds of $4,176,900. The exercise price and number of
shares purchasable upon exercise of the warrants are subject to adjustment upon
the occurrence of certain dilution events.
In accordance with Nasdaq Stock Market Rule 4460, which generally
requires shareholder approval of any transaction that would result in the
issuance of securities representing 20% or more of an issuer's outstanding
listed securities, the Company is not obligated to issue Common Shares
5
<PAGE> 9
upon conversion or the payment of dividends on the Series D Preferred Shares in
excess of 5,781,954 Common Shares, representing 19.99% of its outstanding Common
Shares on October 4, 1999, the date of issuance of the Series D Preferred
Shares. The terms of the Series D Preferred Shares also provide that the Company
must obtain shareholder approval of the issuance of the Series D Preferred
Shares and the related warrants, and the issuance of Common Shares upon
conversion or exercise thereof, and as dividends, by the earlier to occur of its
next annual meeting of shareholders or within 60 days of the day that the number
of Common Shares previously issued and then issuable upon conversion of the
Series D Preferred Shares equals or exceeds 15% of the shares of the Common
Shares outstanding on October 4, 1999. If the Company has not obtained
shareholder approval and is not obligated to issue shares because of the
exchange cap described above, it will be required to redeem all or a portion of
the Series D Preferred Shares if requested by the holders of the Series D
Preferred Shares. If the Company fails to redeem any Series D Preferred Shares
as requested, the holders of at least two-thirds of the outstanding Series D
Preferred Shares have the right to require that the Company voluntarily delist
its Common Shares from Nasdaq. In that event, trading in the Company's shares
would likely decrease substantially, and the price of its Common Shares may
decline. If the Company obtains shareholder approval, there is no limit on the
amount of shares that could be issued upon conversion or the payment of
dividends in lieu of cash on the Series D Preferred Shares.
Subject to certain conditions, the Company may require the holders to
convert the Series D Preferred Shares into Common Shares. In addition and
subject to certain conditions, the holders will have the right to convert the
Series D Preferred Shares into Common Shares. Regardless of whether the holders
elect to convert or the Company requires conversion, the number of Common Shares
to be issued upon conversion of a Series D Preferred Share is determined by
dividing the sum of $10,000 (the amount paid for that share), plus accrued and
unpaid dividends, by the applicable conversion price. The applicable conversion
price will be 100% of the lowest dollar-volume weighted average price of the
Company's Common Shares for any day during the six trading days ending on and
including the conversion date, provided that the conversion price may not exceed
$10.00 per share. The dollar-volume weighted average price is a calculated
number, which reflects an average of the prices at which the Common Shares trade
during a trading day, giving weight to the prices at which the Common Shares
trade based upon the number of shares traded at such prices. Thus, the larger
the number of shares which trade at a particular price, the greater the weight
that will be given to that price in calculating the average price for that day.
The dollar-volume weighted average price of the Common Shares for a trading day
will not necessarily equate to other frequently used measures of a stock's
price, such as the bid, ask, high, low or close prices. The lowest dollar-volume
weighted average price of the Company's Common Shares during the six trading
days ended March 17, 2000, was $7.08. The lower the applicable dollar-volume
weighted average price of the Company's Common Shares at the time of conversion,
the greater the number of Common Shares the holder will receive upon conversion.
To the extent the Series D Preferred Shares are converted or dividends
on the Series D Preferred Shares are paid in Common Shares rather than cash, a
significant number of additional Common Shares may be sold into the market,
which could decrease the price of the Common Shares. In that case, the Company
could be required to issue an increasingly greater number of Common Shares upon
future conversions of the Series D Preferred Shares, sales of which could
further depress the price of the Common Shares.
6
<PAGE> 10
If the sale of a large amount of Common Shares upon conversion of or
the payment of dividends in lieu of cash on the Series D Preferred Shares
results in a decline in the price of the Common Shares, this event could
encourage short sales by the holders or others. Short sales could place further
downward pressure on the price of the Common Shares.
The conversion of and the payment of dividends in Common Shares in lieu
of cash on the Series D Preferred Shares may result in substantial dilution to
the interest of other holders of the Common Shares. Even though no holder may
convert its Series D Preferred Shares into more than 4.99% of the then
outstanding Common Shares (excluding, for purposes of such determination, Common
Shares issuable upon conversion of Series D Preferred Shares which have not been
converted, and upon exercise of warrants which have not been exercised), this
restriction does not prevent a holder from selling a substantial number of
shares in the market. By periodically selling shares into the market, an
individual holder could eventually sell more than 4.99% of the Company's Common
Shares while never holding more than 4.99% at any specific time.
On March 10, 2000, a total of 200 Series D Preferred Shares with a
total stated value of $2 million were converted, at the Company's request, into
a total of 308,328 Common Shares, including accrued dividends, at the conversion
price of $6.611.
The following table sets forth the number of Common Shares the Company
would be required to issue upon conversion of all 1,300 Series D Preferred
Shares currently outstanding at an assumed conversion price of $7.08 per Common
Share as of March 17, 2000, and the resulting percentage of the Company's total
Common Shares outstanding after such a conversion. The table also sets forth the
number of Common Shares the Company would be required to issue assuming (i) an
increase of 25% in the assumed conversion price; (ii) the fixed conversion price
of $10.00, which is the maximum permitted conversion price; and (iii) decreases
of 25%, 50% and 75% in the assumed conversion price.
<TABLE>
<CAPTION>
NO. OF COMMON SHARES ISSUABLE PERCENTAGE OF OUTSTANDING COMMON
ASSUMED CONVERSION PRICE PER COMMON SHARE UPON CONVERSION(1) SHARES AFTER CONVERSION(1)
- ----------------------------------------- ------------------------------ --------------------------------
<S> <C> <C> <C>
$ 7.08 1,836,158 5.9%
$ 8.85 (+25%) 1,468,927 4.8%
$10.00 (Maximum) 1,300,000 4.3%
$ 5.31 (-25%) 2,448,211 7.7%
$ 3.54 (-50%) 3,672,316 11.2%
$ 1.77 (-75%) 7,344,633 20.1%
- -----------------------------------
</TABLE>
(1)The number of Common Shares issuable upon conversion and the percentage of
outstanding Common Shares after such conversion set forth above do not take into
account any Common Shares that may be issuable as dividends on the Series D
Preferred Shares, or upon exercise of the warrants issued in connection with the
sale of the Series D Preferred Shares. If the 1,300 Series D Preferred Shares
currently outstanding had been converted in full and the related warrants had
been fully exercised as of March 17, 2000, the Company would have been required
to issue an additional
7
<PAGE> 11
38,735 shares as payment for accrued dividends and an additional 900,000 shares
upon the exercise of the related warrants.
The Series D Preferred Shares carry a dividend rate of 10% per annum,
payable quarterly or upon conversion or redemption. At the Company's option, the
quarterly dividend may be paid in cash or Common Shares, subject to satisfaction
of certain conditions described below. If the Company chooses to pay dividends
in Common Shares, the number of shares to be issued in payment of the dividend
on the Series D Preferred Shares will be equal to the accrued dividends divided
by the applicable conversion price. For purposes of such calculation, the
applicable conversion price will be equal to the lowest weighted average price
of the Company's Common Shares during the six consecutive trading days ending on
and including the second trading day prior to the date of determination.
The Series D Preferred Shares mature on April 6, 2001, subject to
extension in certain circumstances, at which time the Series D Preferred Shares
must be redeemed or converted at the Company's option. If the Company elects to
redeem any Series D Preferred Shares outstanding on April 6, 2001, the amount
required to be paid will be equal to the liquidation preference of the Series D
Preferred Shares, which equals the price originally paid for such shares, plus
accrued and unpaid dividends. If the Company elects to convert any Series D
Preferred Shares outstanding on April 6, 2001, it will be required to issue
Common Shares in an amount determined as described above.
The Company also has the right, provided certain conditions are
satisfied, to redeem any outstanding Series D Preferred Shares prior to October
5, 2000, for cash, in whole or in part, at 110% of par plus accrued dividends.
If a triggering event, as described in the Articles of Amendment to the
Company's Articles of Incorporation which designated the Series D Preferred
Shares (the "Articles of Amendment"), occurs, or the Company fails to meet
certain other obligations imposed by the terms of the Series D Preferred Shares
and the related warrants, the holders of the Series D Preferred Shares will have
the right to require the Company to redeem all or a portion of any outstanding
Series D Preferred Shares for cash at 120% of par plus accrued dividends.
In the event of the Company's liquidation, the holders of the Series D
Preferred Shares will be entitled to a liquidation preference before any amounts
are paid to the holders of Common Shares. The liquidation preference is equal to
the amount originally paid for the Series D Preferred Shares, or $10,000 per
share plus accrued and unpaid dividends on any outstanding Series D Preferred
Shares. The holders' right to any assets available following a liquidation are
equal to the rights of the holders of the Company's Series 1994 Preferred
Shares.
Other than as required by law, the holders of the Series D Preferred
Shares have no voting rights except that the consent of holders of at least
two-thirds of the outstanding Series D Preferred Shares will be required to
effect any change in the Company's Articles of Incorporation that would change
any of the rights of the Series D Preferred Shares or to issue any other series
of preferred shares.
Complete copies of the Articles of Amendment, the related warrants, and
the Securities Purchase Agreement between the Company and the holders of the
Series D Preferred Shares are contained in the Company's Current Report on Form
8-K filed with the Securities and Exchange Commission on October 5, 1999.
In connection with the Company's issuance to the holders of the Series
D Preferred Shares and the related warrants, the Company filed a registration
statement on Form S-3
8
<PAGE> 12
with the Securities and Exchange Commission. That effective registration
statement covers the resale of the Common Shares from time to time on the Nasdaq
National Market or in privately negotiated transactions of Common Shares, which
are issuable upon conversion of the Series D Preferred Shares, in lieu of cash
dividends on the Series D Preferred Shares, and upon exercise of warrants that
the holders acquired from the Company in the private placement transaction.
The Company's Articles of Incorporation and the Indiana Business
Corporation Law contain provisions that could have the effect of delaying,
deferring, or preventing a change in control and the opportunity to sell the
Company's Common Shares at a premium over current market prices. Although
intended to protect the Company and its shareholders from unwanted takeovers,
their effect could hinder or prevent transactions in which holders might
otherwise receive a premium for their Common Shares over then-current market
prices, and may limit the holders' ability to approve transactions that may be
in their best interests. As a result, the mere existence of these provisions
could adversely affect the price of the Company's Common Shares.
The Company's Board of Directors has the authority to issue a total of
up to 25,000,000 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 shareholders, without any
further vote or action by the common shareholders. The rights of common
shareholders 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 the Company. 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 Shares. As a result, the existence and
issuance of preferred stock could have a material adverse effect on the market
value of the Common Shares. 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 Shares.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR APPROVAL OF THIS PROPOSAL.
9
<PAGE> 13
EXECUTIVE OFFICERS
The Executive Officers of the Company, their ages, positions with the
Company, and business experience, are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
David E. Deeds 58 Chairman of the Board and
Chief Executive Officer
Peter M. White 35 President, Chief Operating Officer and
Director
Kenneth D. Swenson 50 Executive Vice President, Chief
Financial Officer and Treasurer
Douglas J. Reich 56 Senior Vice President, General Counsel and
Secretary
Joseph A. Meza 45 Vice President - Human Resources
</TABLE>
DAVID E. DEEDS has been Chairman of the Board and Chief Executive of
the Company since February 1990. He was President from February 1990 to July
1999. He is also Chairman of the Board of Directors and Chief Executive Officer
of each of the Company's operating subsidiaries. Mr. Deeds was co-founder of
Conseco, Inc. ("Conseco"), a New York Stock Exchange-listed financial services
holding company, and was President, Co-chief Executive Officer and a Director of
Conseco from 1979 until retiring in 1988. Mr. Deeds has over 30 years of
executive level experience in management and finance of companies.
PETER M. WHITE has been President of the Company since July 1999, a
Director since September 1999, and its Chief Operating Officer since December
1999. He is also the President and a Director of each of the Company's
subsidiaries. Mr. White was a co-founder in 1993, and Chief Executive Officer of
Carthage International, Inc., which launched the first personalized information
service on the Internet in 1994. In 1995, that company was sold to Paracel,
Inc., and renamed Paracel Online Systems, Inc. Mr. White served as President of
Paracel Online Systems from 1995 to 1997, when that business was acquired by the
Company and renamed WavePhore NewsCast, Inc., with Mr. White as its President.
Since 1993, Mr. White has focused his career on efforts to utilize the Internet
for delivery of digital media to businesses and consumers. Mr. White received an
M.S. degree in Management Information Systems from the University of Arizona.
10
<PAGE> 14
KENNETH D. SWENSON has been Executive Vice President and Director of
the Company since December 1996, and its Chief Financial Officer and Treasurer
since April 1995. He is also Treasurer of each of the Company's subsidiaries.
Mr. Swenson, a CPA, was a partner with Ernest & Young, LLP, an international
professional services firm, from 1983 to 1995, with responsibilities that
included coordination of audit, tax and business consulting services. Mr.
Swenson received a B.B.A. degree in Accounting from the University of Notre
Dame.
DOUGLAS J. REICH has been Senior Vice President of the Company since
December 1996, and General Counsel and Secretary of the Company since July 1996.
He is also Secretary of each of the Company's subsidiaries. Mr. Reich, an
attorney, was a shareholder in the law firm of Krys Boyle Golz Reich Freeman and
Scott, P.C., from 1986 to June 1996. Mr. Reich received a B.S. degree in
Economics and a Juris Doctor degree from the University of Wisconsin, Madison.
JOSEPH A. MEZA has been Vice President of Human Resources of the
Company since August 1998. Prior thereto, Mr. Meza had 19 years of human
resource management experience with Bank of America in progressively more
responsible positions. Mr. Meza is a graduate of the Graduate School of Human
Resource Management through the American Bankers Association, which he completed
at the University of Colorado.
All executive officers serve at the discretion of the Board of
Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on a review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during the last fiscal year, its officers, directors and greater
than ten percent beneficial owners complied with applicable Section 16(a) filing
requirements.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth all compensation awarded to, earned by,
or paid to the Company's Chief Executive Officer and the four most highly
compensated Executive Officers other than the CEO (collectively, the "Named
Executive Officers") for all services rendered in all capacities to the Company
and its subsidiaries during the fiscal years ended December 31, 1999, 1998 and
1997.
11
<PAGE> 15
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
---------------------------------------- ---------------
Other Securities All
Name and Annual Underlying Other
Principal Position Year Salary Bonus Compensation Options/SARs(2) Compensation(3)
- ------------------ ---- ------ ----- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
David E. Deeds 1999 $ 292,000 $ 0 $ 0(4) 0 $ 2,381
Chief Executive Officer 1998 290,000 0 3,906(4) 1,100,000 3,833
1997 290,000 0 7,180(4) 0 1,534
Peter M. White 1999 195,058(5) 0 18,653(6) 1,050,000 2,771
President and 1998 151,612 0 0 150,000 7,395
and Chief Operating Officer 1997 129,985 0 0 150,000 927
Kenneth D. Swenson 1999 204,000 0 0 60,000 2,976
Executive Vice President, Chief 1998 200,000 0 0 550,000 3,022
Financial Officer and Treasurer 1997 200,000 0 0 75,000(7) 2,212
Douglas J. Reich 1999 154,000 0 0 60,000 3,292
Senior Vice President, 1998 150,000 0 0 125,000 3,400
General Counsel and Secretary 1997 150,000 0 0 122,000(8) 2,087
Joseph A. Meza 1999 83,308 0 0 10,000 1,928
Vice President 1998 33,173(9) 0 0 45,000 1,992
Human Resources
</TABLE>
- ----------
(1) Pursuant to the Rules of the Securities and Exchange Commission, certain
columns otherwise required by the table have been omitted where no compensation
has been awarded to, earned by, or paid to any of the Named Executive Officers
required to be reported in that column in any fiscal year covered by the table.
(2) Amounts shown represent the number of non-qualified stock options, without
tandem stock appreciation rights, granted each year.
(3) Amounts shown represent the Company's contribution to the Amended WAVO
Corporation Profit Sharing Plan and Trust ("401(k) Plan") and the taxable
benefit of excess group term life insurance for the benefit of such persons.
(4) This amount represents lease fees paid by the Company for a car used by Mr.
Deeds for business purposes.
(5) Mr. White became President of the Company in July 1999. His annualized
compensation for 1999 was $250,000.
(6) This amount represents relocation costs paid by the Company for Mr. White.
(7) Includes 25,000 shares underlying a 1995 option grant repriced in 1997.
(8) Includes 12,000 shares underlying a 1995 option grant and 100,000 shares
underlying a 1996 option grant, which were repriced in 1997.
(9) Mr. Meza became an employee of the Company in August 1998. His annualized
compensation for 1998 was $75,000.
12
<PAGE> 16
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
-----------------
<TABLE>
<CAPTION>
Number of Percentage of
Securities Total Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in Price Expiration Grant Date
Name Granted(1) Fiscal 1999 (per share) Date Present Value(2)
---- --------- ----------- --------- ---- ---------------
<S> <C> <C> <C> <C> <C>
David E. Deeds 0 0 %
Peter M. White 500,000(3) 21.6 % $ 4.00 July 26, 2009 $ 1,935,767
250,000(4) 10.8 % 10.00 July 26, 2009 1,192,034
250,000(4) 10.8 % 10.00 July 26, 2009 1,192,034
50,000(6) 2.2 % 4.00 Oct. 20, 2009 189,043
Kenneth D. Swenson 10,000(5) .4 % 4.00 Aug. 20, 2004 34,721
50,000(6) 2.2 % 4.00 Oct. 20, 2009 189,043
Douglas J. Reich 10,000(5) .4 % 4.00 Aug. 20, 2004 34,721
50,000(6) 2.2 % 4.00 Oct. 20, 2009 189,043
Joseph A. Meza 10,000(5) .4 % 4.00 Aug. 20, 2004 34,721
</TABLE>
- ----------
(1) Amounts shown represent the number of non-qualified stock options, without
tandem stock appreciation rights ("SARs"), granted in 1999. Payment must be made
in full upon exercise in cash or, with the consent of the Compensation/Incentive
Plan Committee, in Common Shares of the Company. With the consent of the
Compensation/Incentive Plan Committee, the option holder may elect to have
Common Shares issuable upon exercise of options withheld by the Company to pay
withholding taxes due.
(2) Grant date present value is based on the Black-Scholes option pricing model.
The estimated values under the model are based on arbitrary assumptions as to
variables, such as stock price volatility, projected future dividend yield and
interest rates. The estimated values use the following significant assumptions:
volatility was 84%; dividend yield equals 0%; risk-free interest rates (yield to
maturity of 30-year Treasury note at grant date) range from 5.98% to 6.26%. The
actual value, if any, an executive may realize will depend on the excess of the
stock price over the exercise price on the date the option is exercised. There
is no assurance that the value realized by an executive will be at or near the
value estimated using the Black-Scholes model.
(3) These options are presently exercisable as to 166,667 shares.
(4) These options are exercisable commencing on the earlier of (i) July 26,
2007, or (ii) the date certain performance objectives are met.
(5) These options are presently exercisable.
(6) These options are exercisable commencing on October 20, 2000.
13
<PAGE> 17
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-the-Money Options/SARs
Fiscal Year End(1) at Fiscal Year End
---------------------------------- ----------------------------------
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David E. Deeds 0 $ 0 1,300,000 0 $ 0 $ 0
Peter M. White 0 0 284,034 916,666 0 0
Kenneth D. Swenson 0 0 735,000 50,000 0 0
Douglas J. Reich 0 0 207,000 50,000 0 0
Joseph A. Meza 0 0 41,667 13,333 0 0
</TABLE>
- ----------
(1) No SARs were outstanding at December 31, 1999.
COMPENSATION OF DIRECTORS
The Company pays each non-employee director an annual retainer of
$10,000, plus $1,000 per Board meeting and $750 per Board Committee meeting held
on a date separate from a Board meeting. The Company also reimburses directors
for their expenses incurred in attending Board meetings. Pursuant to the 1995
Non-employee Director Stock Plan, non-employee directors of the Company are each
granted an option immediately following each annual meeting of shareholders of
the Company, which option may be exercised to purchase 10,000 Common Shares of
the Company, at a purchase price equal to 100% of the market price of such
shares on the date of grant. Such stock options are exercisable for a five-year
period commencing six months after the date of grant. In accordance with the
provisions of such Plan, on May 25, 1999, Glenn Scolnik and J. Robert Collins
were each granted an option to purchase 10,000 Common Shares of the Company,
exercisable at the price of $7.40 per share during the period commencing on
November 25, 1999, and expiring on November 25, 2004.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Collins and Scolnik are members of the Compensation/Incentive
Plan Committee of the Board of Directors of the Company. The
Compensation/Incentive Plan Committee reviews matters relating to compensation
of the executive officers of the Company and makes recommendations thereon to
the Board of Directors. In addition, the Compensation/Incentive Plan Committee
determines Incentive Plan awards for executive officers of the Company.
14
<PAGE> 18
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMMITTEE RESPONSIBILITIES
The Compensation Committee of the Board of Directors (the "Committee")
is comprised of two non-employee Directors. Committee responsibilities, with
respect to the compensation of executive officers, including the Named Executive
Officers of the Company, include the review and recommendations relative to the
following compensation elements:
- Base salary levels of the executive officers of the Company.
- The Company's performance-based compensation plan.
- The Company's stock-based compensation plan.
- All employment agreements and amendments thereof.
- All aspects of the Company's retirement plan.
- The process and substance of all other aspects of
compensation.
OVERALL COMPENSATION PHILOSOPHY
The Company's underlying compensation philosophy is to link key
executive compensation to corporate performance and returns to shareholders. To
this end, the Company has developed an overall compensation strategy and
specific compensation plans that tie a significant portion of executive
compensation to the Company's success in meeting specified performance goals and
to appreciation in the Company's Common Share price.
The overall objectives of the Company's executive compensation strategy
are:
- To attract and retain the best possible talent.
- To provide long-term incentives to these executives to achieve
the goals inherent in the Company's business strategy.
- To link executive and stockholder interests through
equity-based plans.
The basic elements of the Company's executive compensation packages are
base salary and long-term incentive compensation. The Committee's policies with
respect to each of these elements, including the basis for the compensation of
Mr. David E. Deeds, the Company's Chief Executive Officer, and the Named
Executive Officers, are discussed below. In addition, while the elements of
compensation described below are considered separately, the Committee takes into
account the full compensation package afforded by the Company to each
individual, including severance plans, insurance and other benefits. All actions
of the Committee with respect to executive compensation for 1999 were
subsequently unanimously approved by the Board of Directors.
15
<PAGE> 19
IRC SECTION 162(m)
The Committee has considered Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), regarding qualifying compensation paid to
the Company's executive officers for deductibility in structuring compensation
arrangements. The Committee intends to make every effort to ensure that
compensation awarded to the Company's executives is fully deductible. The
regulations implementing Section 162(m) have not required any changes in the
Company's current executive compensation program in order to maintain the
deductibility of executive compensation where the Company anticipates a
deduction. Pursuant to the recommendation of the Committee and the Board of
Directors, in 1997 the shareholders approved the adoption of an Executive
Management Incentive Plan, which provides for performance-based compensation of
the Company's executives in accordance with the provisions of Section 162(m) of
the Code.
BASE SALARIES
Individual salaries for specified executives are reviewed annually and
adjustments are made based on the Committee's subjective judgment as to
individual responsibilities and performance over time. In reviewing the
individual performance of executives other than the Chief Executive Officer, the
Committee takes into account the views of the Chief Executive Officer.
With respect to the fiscal year ended December 31, 1999, the Committee
reviewed the base salaries of its executive officers and recommended only
nominal increases in base salaries to the Named Executive Officers, except for
Mr. White, who received a 65% increase in his annual salary, reflecting his new
responsibilities as President and Chief Operating Officer, and Mr. Meza, who
received an 11% increase to make his annual salary more competitive in light of
his responsibilities. In the future, the Company's approach to base compensation
will be to continue to bring salaries into a competitive position where
appropriate. The effect of this strategy will be to control the fixed portion of
compensation costs, while placing significant emphasis on the "at-risk"
component, or long-term incentive compensation, as discussed below.
LONG-TERM INCENTIVE COMPENSATION
The Company maintains, for key executives of the Company, a stock-based
compensation plan, which allows the Committee to award non-qualified stock
options to the individuals it selects. Awards under the Company's stock-based
compensation plan directly link potential participant rewards to increases in
shareholder value.
The Company historically has provided the majority of its stock-based
compensation in the form of stock options. Stock options are granted with an
exercise price equal to the market price of the Company's Common Stock on the
date of the grant and become exercisable from the date of grant or in increments
over a one to three-year period thereafter. This approach is designed to
encourage the creation of shareholder value and the retention of the executives
over the long term, as this element of the compensation package has value only
to the extent that share price appreciation occurs.
16
<PAGE> 20
In May 1997, the Shareholders approved the 1997 Incentive Plan. The
Compensation/Incentive Plan Committee has the discretion to determine the terms
and conditions of options under the 1997 Incentive Plan. During 1999, the
Committee made the following new grants to Named Executive Officers:
David E. Deeds - None
Peter M. White - 550,000 options exercisable at $4.00; 500,000 options
exercisable at $10.00
Kenneth D. Swenson - 10,000 options exercisable at $4.00; 50,000
options exercisable at $4.00
Douglas J. Reich - 10,000 options exercisable at $4.00; 50,000 options
exercisable at $4.00
Joseph A. Meza - 10,000 options exercisable at $4.00
The exercise price of such options was equal to the fair market value of the
underlying Common Shares on the date of grant. The Committee considered the
amount of options already held by such executive officers in determining the
amount of the 1999 grants.
CEO COMPENSATION
From the date Mr. Deeds became Chief Executive Officer of the Company
in 1990 through the end of 1996, he chose not to receive any compensation from
the Company for his services. With the Company's transition from a research and
development company to an operating company in 1996, the Committee determined
that it was appropriate that Mr. Deeds receive a salary commencing on January 1,
1997, and that he participate in the Incentive Plan, consistent with the
salaries and stock-based compensation of the other senior executives of the
Company. Mr. Deeds received a salary of $292,000 for 1999, and was granted no
additional options to purchase the Company's Common Shares during the year.
CONCLUSION
Through the programs described above, a significant portion of the
Company's executive compensation is linked directly to individual and corporate
performance and stock price appreciation. The Committee intends to continue the
policy of linking executive compensation to corporate performance and returns to
shareholders, recognizing that the business cycle from time to time may result
in an imbalance for a particular period.
The Members of the
Compensation Committee
Glenn Scolnik
J. Robert Collins, Ph.D.
17
<PAGE> 21
TOTAL RETURN TO STOCKHOLDERS
(ASSUMES $100 INVESTMENT ON 12/30/94)
[LINE GRAPH]
<TABLE>
<CAPTION>
Total Return Analysis 12/30/94 12/29/95 12/31/96 12/31/97 12/31/98 12/31/99
- --------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Wavo Corporation $100 $320 $115 $155 $133 $ 64
Peer Group 100 195 109 74 179 117
Nasdaq Composite (US) 100 142 173 212 298 555
S&P High Tech Group 100 144 201 257 431 722
</TABLE>
Wavo Corporation Peer Group includes Data Broadcasting Corp. and NewsEdge, Inc.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Shares as of March 10, 2000, of (i)
each person known by the Company to beneficially own 5% or more of the
outstanding Common Shares, (ii) each current director and nominee for director
of the Company, (iii) each Named Executive Officer of the Company, 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. In certain cases, shares required under rules of the
Securities and Exchange Commission to be shown as beneficially owned are shares
as to which the indicated person holds only rights to acquire 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. Except as otherwise indicated below, the address for each holder
of more than 5% of the Company's
18
<PAGE> 22
outstanding Common Shares is the principal office of the Company. The indicated
percentages are based upon the number of Common Shares of the Company
outstanding as of March 10, 2000, plus, where applicable, the number of shares
that the indicated person or group had a right to acquire within 60 days of such
date.
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME OF SHARES OWNED
---- --------- -----
<S> <C> <C>
David E. Deeds 4,964,861(1) 16.0 %
Peter M. White 284,034(2) 1.0 %
Kenneth D. Swenson 735,200(3) 2.5 %
Douglas J. Reich 207,000(4) 0.7 %
Joseph A. Meza 41,667(5) 0.1 %
Glenn Scolnik 110,000(6) 0.4 %
J. Robert Collins 85,000(7) 0.3 %
All Officers and Directors as a group
(7 persons) 6,427,762(8) 19.8 %
</TABLE>
- ----------
(1) Includes 501,963 Common Shares issuable upon conversion of Series 1994
Preferred Shares and options to purchase 1,300,000 Common Shares.
(2) Includes options to purchase 284,034 Common Shares.
(3) 200 of these shares are held by his spouse. Includes options to purchase
735,000 Common Shares.
(4) Includes options to purchase 207,000 Common Shares.
(5) Includes options to purchase 41,667 Common Shares.
(6) 25,000 of these shares are jointly held with his spouse. Includes options to
purchase 85,000 Common Shares.
(7) Includes options to purchase 85,000 Common Shares.
(8) Includes options to purchase a total of 2,737,701 Common Shares, and 501,963
Common Shares issuable upon conversion of Series 1994 Preferred Shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
David E. Deeds, the Company's Chairman and Chief Executive Officer,
owns 501,963 shares of the Company's Series 1994 Preferred Shares. The Series
1994 Preferred Shares have a stated value of $11.00 per share, and are
convertible at any time into Common Shares equal to the aggregate value of the
Series 1994 Preferred Shares divided by the conversion price, as defined, which
was initially set at $11.00 per share and is subject to adjustment in certain
circumstances. The Series 1994 Preferred Shares are non-voting and accrue
cumulative dividends at the rate of 10% per annum, payable when, and if,
declared by the Board of Directors of the Company. The Company's Board of
Directors approved the declaration of a 10% per annum cash dividend upon the
Series 1994 Preferred Shares, payable as of April 28, 1999, and October 28,
1999. Pursuant to
19
<PAGE> 23
such dividend declarations, the Company paid or accrued a total of $552,162 in
dividends on Mr. Deeds' Series 1994 Preferred Shares during the fiscal year
ended December 31, 1999.
In 1999, the Company paid a total of $388,600 to an entity owned by Mr.
Deeds in connection with the Company's rental of certain equipment from such
entity.
During 1999, the Company purchased $250,000 of common stock for cash,
and $250,000 of common stock for future services from a company controlled by a
relative of the Company's President.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche, LLP, acted as the Company's independent public
accountants to audit the consolidated financial statements of the Company for
the fiscal year ended December 31, 1999. The Company's Board of Directors has
not yet appointed auditors to serve in such capacity for the current fiscal year
ending December 31, 2000.
A representative of Deloitte & Touche, LLP, is expected to be present
at the meeting. Such representative will have the opportunity to make a
statement if he or she so desires, and is expected to be available to respond to
appropriate questions.
OTHER MATTERS
As of the date hereof, the Company knows of no matter, other than those
referred to herein, which will be presented at the Annual Meeting of
Shareholders. If, however, any other appropriate business should properly be
presented at the meeting, the persons named in the enclosed form of Proxy will
vote the proxies in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Shareholder proposals intended to be presented at the
Company's Annual Meeting of Shareholders in 2001 must be received by the
Company's Secretary at the Corporation's executive offices no later than
December 12, 2000.
April 3, 2000
20
<PAGE> 24
P R O X Y
WAVO CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David E. Deeds, Peter M. White and Kenneth D.
Swenson Proxies, each with full power of substitution, and hereby authorizes
each of them to represent and to vote, as designated below, all of the Common
Shares of Wavo Corporation held of record by the undersigned on March 31, 2000,
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
to be held on May 15, 2000, and at any adjournment thereof.
<TABLE>
<CAPTION>
<S> <C>
1. ELECTION OF DIRECTORS.
FOR all nominees listed below (except as WITHHOLD AUTHORITY to vote
marked to the contrary below) [ ] for all nominees listed below [ ]
</TABLE>
DAVID E. DEEDS; PETER M. WHITE; KENNETH D. SWENSON; GLENN SCOLNIK; J.
ROBERT COLLINS
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, PRINT
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.
--------------------------------------------------
2. PROPOSAL TO APPROVE THE ISSUANCE AND SALE OF SERIES D CONVERTIBLE
PREFERRED SHARES AND RELATED WARRANTS, AND THE RESERVATION FOR
ISSUANCE AND THE ISSUANCE OF COMMON SHARES UPON CONVERSION OF THE
SERIES D CONVERTIBLE PREFERRED SHARES, AS DIVIDENDS THEREON, UPON
EXERCISE OF THE RELATED WARRANTS, AND OTHERWISE IN ACCORDANCE WITH
THE TERMS THEREOF.
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF THE NOMINEES AND IN FAVOR OF THE PROPOSAL LISTED ABOVE.
<TABLE>
<CAPTION>
<S> <C>
PLEASE SIGN HERE EXACTLY AS NAME APPEARS HEREON.
Dated:______________________, 2000 _______________________________________________
Signature
________________________________________________
Signature (if held jointly)
NOTE: Signatures should be identical with
the name(s) indicated hereon. Joint owners
should each sign personally. Persons signing
as attorney, executor, administrator,
trustee or guardian should give full title
as such. If a corporation, please sign in
full corporate name by President or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
</TABLE>
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
