<PAGE>
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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Coda Music Technology, Inc.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ 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:
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(2) Aggregate number of securities to which transaction applies:
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(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:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
CODA MUSIC TECHNOLOGY, INC.
------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------
The Annual Meeting of Shareholders of Coda Music Technology, Inc. will
be held on April 29, 1998, at 3:30 p.m. (Minneapolis time), at the Marriott
City Center Hotel, 30 South Seventh Street, Minneapolis, Minnesota, for the
following purposes:
1. To set the number of directors at seven (7).
2. To elect directors for the ensuing year.
3. To consider and act upon such other matters as may properly come
before the meeting and any adjournments thereof.
Only shareholders of record at the close of business on March 12, 1998,
are entitled to notice of and to vote at the meeting or any adjournment
thereof.
Your vote is important. We ask that you complete, sign, date and return
the enclosed proxy in the envelope provided for your convenience. The prompt
return of proxies will save the Company the expense of further requests for
proxies.
BY ORDER OF THE BOARD OF DIRECTORS
John W. Paulson
CHIEF EXECUTIVE OFFICER
Eden Prairie, Minnesota
March 23, 1998
<PAGE>
CODA MUSIC TECHNOLOGY, INC.
ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 1998
------------
PROXY STATEMENT
------------
INTRODUCTION
Your Proxy is solicited by the Board of Directors of Coda Music
Technology, Inc. ("the Company") for use at the Annual Meeting of
Shareholders to be held on April 29, 1998, at the location and for the
purposes set forth in the notice of meeting, and at any adjournment thereof.
The cost of soliciting proxies, including the preparation, assembly and
mailing of the proxies and soliciting material, as well as the cost of
forwarding such material to beneficial owners of stock, will be borne by the
Company. Directors, officers and regular employees of the Company may,
without compensation other than their regular remuneration, solicit proxies
personally or by telephone.
Any shareholder giving a proxy may revoke it at any time prior to its
use at the meeting by giving written notice of such revocation to the
Secretary of the Company. Proxies not revoked will be voted in accordance
with the choice specified by shareholders by means of the ballot provided on
the Proxy for that purpose. Proxies which are signed but which lack any such
specification will, subject to the following, be voted in favor of the
proposals set forth in the Notice of Meeting and in favor of the number and
slate of directors proposed by the Board of Directors and listed herein. If
a shareholder abstains from voting as to any matter, then the shares held by
such shareholder shall be deemed present at the meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
such matter, but shall not be deemed to have been voted in favor of such
matter. Abstentions, therefore, as to any proposal will have the same effect
as votes against such proposal. If a broker returns a "non-vote" proxy,
indicating a lack of voting instructions by the beneficial holder of the
shares and a lack of discretionary authority on the part of the broker to
vote on a particular matter, then the shares covered by such non-vote proxy
shall be deemed present at the meeting for purposes of determining a quorum
but shall not be deemed to be represented at the meeting for purposes of
calculating the vote required for approval of such matter.
The mailing address of the principal executive office of the Company is
6210 Bury Drive, Eden Prairie, Minnesota 55346-1718. The Company expects
that this Proxy Statement, the related proxy and notice of meeting will first
be mailed to shareholders on or about March 23, 1998.
-1-
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed March 12, 1998, as the
record date for determining shareholders entitled to vote at the Annual
Meeting. Persons who were not shareholders on such date will not be allowed
to vote at the Annual Meeting. At the close of business on March 12, 1998,
6,199,732 shares of the Company's Common Stock were issued and outstanding.
The Common Stock is the only outstanding class of capital stock of the
Company entitled to vote at the meeting. Each share of Common Stock is
entitled to one vote on each matter to be voted upon at the meeting. Holders
of Common Stock are not entitled to cumulative voting rights.
PRINCIPAL SHAREHOLDERS
The following table provides information concerning persons known to the
Company to be the beneficial owners of more than 5% of the Company's
outstanding Common Stock as of March 12, 1998. Unless otherwise indicated,
the shareholders listed in the table have sole voting and investment powers
with respect to the shares indicated.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED CLASS (1)
---------------- ---------------- ---------
<S> <C> <C>
Benson K. Whitney 1,250,681(2) 19.0%
821 Marquette Avenue
Minneapolis, MN 55402
J.M. Hixon Partners, LLC 1,153,847(3) 17.5%
821 Marquette Avenue
Minneapolis, MN 55402
Gordon F. Stofer 696,352(4) 11.1%
7601 France Avenue S.
Minneapolis, MN 55435
Cherry Tree Ventures IV 682,221(5) 10.9%
7601 France Avenue S.
Minneapolis, MN 55435
John W. Paulson 476,994(6) 7.5%
6210 Bury Drive
Eden Prairie, MN 55346
</TABLE>
- -------------
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person to acquire them as of March 12, 1998, or within sixty
days of such date are treated as outstanding only when determining the
percent owned by such individual and when determining the percent owned by
a group.
-2-
<PAGE>
(2) Includes (i) 1,000 shares issuable pursuant to a currently exercisable
warrant, (ii) 769,231 shares held by J.M. Hixon Partners, LLC ("Hixon
Partners"), (iii) 384,616 shares issuable pursuant to currently
exercisable warrants held by Hixon Partners, (iv) 65,834 shares held by
Gideon Hixon Ventures ("Hixon Ventures") and (v) 12,500 shares issuable
pursuant to currently exercisable warrants held by Hixon Ventures. Mr.
Whitney, as the managing member of the managing member of Hixon Partners,
has sole voting and dispositive power over the shares held by Hixon
Partners, and has shared voting and dispositive powers over the shares
held by Hixon Ventures.
(3) Includes 384,616 shares issuable pursuant to currently exercisable
warrants.
(4) Includes (i) 603,759 shares held by Cherry Tree Ventures IV, of which Mr.
Stofer is a general partner, and (ii) 78,462 shares issuable pursuant to
currently exercisable warrants held by Cherry Tree Ventures IV. Mr.
Stofer disclaims beneficial ownership in the securities held by Cherry
Tree Ventures IV.
(5) Includes 78,462 shares issuable pursuant to currently exercisable
warrants.
(6) Includes 126,494 shares which may be purchased upon exercise of options
which are exercisable as of March 12, 1998 or within 60 days of such date.
MANAGEMENT SHAREHOLDINGS
The following table sets forth the number of shares of Common Stock
beneficially owned as of March 12, 1998, by each executive officer of the
Company named in the Summary Compensation table, by each current director and
nominee for director of the Company and by all directors and executive
officers (including the named individuals) as a group. Unless otherwise
indicated, the shareholders listed in the table have sole voting and
investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL NUMBER OF SHARES PERCENT OF
OWNER OR IDENTITY OF GROUP BENEFICIALLY OWNED CLASS (1)
- -------------------------- ------------------ ---------
<S> <C> <C>
Benson K. Whitney 1,250,681(2) 19.0%
Gordon F. Stofer 696,352(3) 11.1%
John W. Paulson 476,994(4) 7.5%
David A. Henderson 237,300(5) 3.8%
Ronald B. Raup 65,500(6) 1.0%
Larry A. Pape 11,600(7) *
Karl T. Bruhn 14,500(8) *
Mark E. Dunn 47,791(8) *
Joan K. Berg 32,583(9) *
All officers and directors
as a group (10 persons) 2,849,834(10) 40.6%
</TABLE>
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-3-
<PAGE>
* Less than 1%
(1) See footnote (1) to preceding table.
(2) See footnote (2) to preceding table.
(3) See footnote (4) to preceding table.
(4) See footnote (6) to preceding table.
(5) Includes (i) 122,026 shares held by Founding Partners II Limited
Partnership and (ii) 25,000 shares issuable pursuant to currently
exercisable warrants held by Founding Partners II Limited Partnership.
Mr. Henderson is a managing partner of Founding Partners II Limited
Partnership, and thus shares voting and dispositive power over the shares
held by such entity.
(6) Includes 65,000 shares which may be purchased upon exercise of options
which are exercisable as of March 12, 1998 or within 60 days of such date.
(7) Includes 300 shares held by Mr. Pape's wife and 11,000 shares which may be
purchased upon exercise of options which are exercisable as of March 12,
1998 or within 60 days of such date.
(8) Such shares are not outstanding but may be purchased upon exercise of
options which are exercisable as of March 12, 1998 or within 60 days of
such date.
(9) Includes 24,583 shares which may be purchased upon exercise of options and
warrants which are exercisable as of March 12, 1998 or within 60 days of
such date.
(10) Includes 812,279 shares which may be purchased upon exercise of options
and warrants which are exercisable as of March 12, 1998 or within 60 days
of such date.
ELECTION OF DIRECTORS
(PROPOSALS #1 AND #2)
GENERAL INFORMATION
The Bylaws of the Company provide that the number of directors, which
shall not be less than one, shall be determined by the Board of Directors or
by the shareholders. The Board of Directors recommends that the number of
directors be set at seven and that seven directors be elected at the Annual
Meeting. Under applicable Minnesota law, approval of the proposal to set the
number of directors at seven, as well as the election of each nominee,
requires the affirmative vote of the holders of the greater of (1) a majority
of the voting power of the shares represented in person or by proxy at the
Annual Meeting with authority to vote on such matter or (2) a majority of the
voting power of the minimum number of shares that would constitute a quorum
for the transaction of business at the Annual Meeting.
-4-
<PAGE>
In the absence of other instructions, each proxy will be voted for each
of the nominees listed below. If elected, each nominee will serve until the
next annual meeting of shareholders and until his successor shall be elected
and qualified. If, prior to the meeting, it should become known that any of
the nominees will be unable to serve as a director after the meeting by
reason of death, incapacity or other unexpected occurrence, the proxies will
be voted for such substitute nominee as is selected by the Board of Directors
or, alternatively, not voted for any nominee. The Board of Directors has no
reason to believe that any nominee will be unable to serve.
The names and ages of all of the director nominees and the positions
held by each with the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
John W. Paulson 50 Chief Executive Officer and
Chairman of the Board of Directors
Ronald B. Raup 47 President, Chief Operating Officer
and Director
David A. Henderson (1)(2) 45 Director
Gordon F. Stofer (1)(2) 51 Director
Larry A. Pape 51 Director
Karl T. Bruhn 68 Director
Benson K. Whitney(1)(2) 41 Director
</TABLE>
- -----------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
JOHN W. PAULSON has been Chief Executive Officer and Chairman of the
Board of Directors of the Company since December 1990. From 1982 to 1990,
Mr. Paulson was Chairman of Springboard Software, Inc., a publicly-held
company he founded to develop and market educational and consumer software
products. Springboard was subsequently purchased by Spinnaker Software Corp.
Prior to founding Springboard, Mr. Paulson was a public school music teacher
for nine years during which time he taught band, keyboard and electronic
music classes. He has a Master of Arts in Music Education from the Eastman
School of Music, is a published composer, and has performed as a professional
musician for over ten years. Mr. Paulson also serves on the Board of
Directors of the National Association of Music Merchants ("NAMM").
RONALD B. RAUP has been President, Chief Operating Officer and a
director of the Company since January 1, 1996, and served as Executive Vice
President from August 1995 through December 1995. From 1977 through July
1995 Mr. Raup was employed by Yamaha Corporation of America, serving as
Senior Vice President of Sales and Marketing from 1989 until his departure.
Mr. Raup also served on Yamaha's Board of Directors from 1990 until 1995.
-5-
<PAGE>
DAVID A. HENDERSON has been a director of the Company since December
1990 and served as Secretary and Treasurer from December 1990 to May 1996.
Since April 1997, Mr. Henderson has been Managing Director of Cherry Tree &
Company, LLC, a registered broker-dealer and investment banking firm, and
since September 1992, has been a managing partner of Founding Partners II
Limited Partnership, a private venture capital partnership specializing in
early stage investment opportunities. From January 1991 until December 1992,
Mr. Henderson was employed as the Executive Vice President of Cherry Tree
Investments, Inc. From 1986 to 1989, Mr. Henderson was the President and
Chief Executive Officer of Corporate BancServices, Inc., a St. Paul-based
bank holding company. From 1982 to 1986, he held senior management
positions, including Chief Financial Officer and President, with Republic
Telcom Corporation, a telephone services company. Mr. Henderson is currently
a director of Destron Fearing Corporation, a publicly-held company.
GORDON F. STOFER has been a director of the Company since January 1993.
Mr. Stofer has been an active investor in the private equity investment
industry for 19 years. He is President and co-founder of Cherry Tree
Investments, Inc. and a Managing General Partner in the Cherry Tree Ventures
partnerships. Prior to founding Cherry Tree Investments, he was a Vice
President at Norwest Venture Capital Corporation. He is currently a director
of the following public companies: Ringer Corporation and Insignia Systems,
Inc.
LARRY A. PAPE has been a director of the Company since September 1993.
Mr. Pape is currently employed by Aprisa Multimedia, Inc., a multimedia
courseware development company, where he has been Chairman and Chief
Executive Officer since May 1993. From May 1992 until April 1993, he was
General Manager of the multimedia division of Radius, Inc., an Apple
Macintosh color publishing and multimedia peripherals company. He has also
held various management positions at Fluent, Inc. from September 1990 to
April 1992, Wicat Systems, Inc. from May 1990 to August 1990, Fourth Shift
Corporation from July 1983 to April 1990, Apple Computer, Inc. and Control
Data Corporation.
KARL T. BRUHN has been a director of the Company since December 1994.
Mr. Bruhn has been the Presidential Advisor to the American Music Therapy
Association since June 1993 and retired from over four years of service as
the Director of Marketing Development for NAMM. Prior to that, he was
employed by Yamaha Corporation of America, most recently as its Senior Vice
President of Marketing and Sales. He is also a director of Remo, Inc., a
manufacturer of percussion products.
BENSON K. WHITNEY has been a director of the Company since May 1997.
Mr. Whitney is the managing general partner of the Gideon Hixon Fund, a
private venture capital partnership. He also serves as Vice President and
Chief Executive Officer of Whitney Management Co., a family management
company. In these positions he has been involved in numerous early stage
investments and serves on several boards of directors. He formerly practiced
law with Popham, Haik, Schnobrich & Kaufman, specializing in regulated
industries such as medical services companies and cable television.
-6-
<PAGE>
OTHER INFORMATION
Pursuant to an Investor Rights Agreement among the Company, J.M. Hixon
Partners, LLC ("Hixon"), and certain shareholders of the Company entered into
at the time of Hixon's investment in the Company, Hixon has the right, so
long as it owns or controls 4% or more of the Company's Common Stock, to
designate an individual to serve on the Company's Board of Directors, and the
shareholders who are parties to the Agreement have agreed to vote shares of
Common Stock owned or controlled by them for such director designee. Mr.
Whitney is currently serving as the director designee under that Agreement.
There are no other arrangements or understandings between any of the
directors or any other person (other than arrangements or understandings with
directors acting as such) pursuant to which any person was selected as a
director or nominee of the Company. There are no family relationships among
the Company's directors.
COMMITTEE AND BOARD MEETINGS
The Company's Board of Directors has two standing committees, the Audit
Committee and the Compensation Committee. The Audit Committee is responsible
for reviewing the Company's internal control procedures, the quarterly and
annual financial statements of the Company, and reviewing with the Company's
independent public accountants the results of the annual audit. The Audit
Committee met twice during fiscal 1997. The Compensation Committee
recommends to the Board of Directors from time to time the salaries and
incentive compensation to be paid to executive officers of the Company and
administers the Company's stock option plan. The Compensation Committee met
once during fiscal 1997. Members of both of such Committees meet informally
from time to time throughout the year on Committee matters.
The directors and Committee members often communicate informally to
discuss the affairs of the Company and, when appropriate, take formal Board
and Committee action by unanimous written consent of all directors or
Committee members, in accordance with Minnesota law, rather than hold formal
meetings. During fiscal 1997, the Board of Directors held five formal
meetings. Each incumbent director attended 75% or more of the total number
of meetings (held during the period(s) for which he has been a director or
served on committee(s)) of the Board and of committee(s) of which he was a
member.
DIRECTORS FEES
Directors are not currently paid fees for attending Board or Committee
meetings. Founding Partners Development Corporation, an affiliate of Mr.
Henderson, receives a management fee of $2,000 per month. These fees are for
Mr. Henderson's participation in various management consultations and advice
to management on operating matters on an as-needed basis. In addition, under
the Company's 1992 Stock Option Plan each nonemployee director (excluding
persons who were nonemployee directors on the date such provision was adopted
by the Board) receives a nonqualified option to purchase 5,000 shares of the
Company's Common Stock upon his or her initial election as a director and a
nonqualified option to purchase 1,500 shares of Common Stock upon each
re-election thereafter. As of April 23, 1997, the date of the 1997 annual
meeting, Messrs. Karl T. Bruhn and Larry A. Pape each received an option for
the purchase of 1,500 shares at an exercise price of $1.70 per share.
-7-
<PAGE>
CERTAIN TRANSACTIONS
On May 29, 1997, the Company sold in a private placement an aggregate of
1,872,697 shares of Common Stock at a price of $1.30 per share and issued
warrants to purchase 936,357 shares of the Company's Common Stock. The
warrants are exercisable at $2.00 per share at any time on or prior to
November 28, 2000 at a price of $2.00 per share, subject to adjustment upon
the happening of certain specified events. Pursuant to certain registration
rights granted to investors in the offering, the Company has prepared and
filed a registration statement on Form S-3 covering resale of the shares
acquired in the private placement and shares which may be acquired upon
exercise of the private placement warrants. J.M. Hixon Partners, LLC, David
A. Henderson, Founding Partners II (an affiliate of Mr. Henderson), Cherry
Tree Ventures IV (an affiliate of Gordon F. Stofer) and Joan K. Berg
participated in the private placement by investing $1,000,000, $13,000,
$26,000, $100,000 and $6,500, respectively.
Under the terms of a separate Investor Rights Agreement entered into
with J.M. Hixon Partners, LLC in connection with its participation in the
private placement, the Company has granted to J.M. Hixon Partners, LLC a
right to purchase its pro rata share of any new issuances of securities by
the Company, excluding shares issued upon exercise of currently outstanding
warrants, pursuant to employee stock plans, pursuant to a registered public
offering or in connection with an acquisition. The Investor Rights Agreement
also gives J.M. Hixon Partners the right to designate an individual to serve
on the Company's Board of Directors (see "Election of Directors--Other
Information.")
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
compensation paid during each of the Company's last three fiscal years to the
Chief Executive Officer and each other executive officer of the Company (the
"Named Executive Officers") who received total salary and bonus compensation
in excess of $100,000 for 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
----------------------- -------------------
Securities
Name and Principal Salary Bonus Underlying Options
Position Year ($) ($) (# of shares)
-------------------------- ---- -------- ------- --------------
<S> <C> <C> <C> <C>
John W. Paulson, 1997 $134,946 $ 0 -0-(1)
Chief Executive Officer and Chairman 1996 $134,946 $13,627 75,000
1995 $130,157 $11,700 -0-
Ronald B. Raup, 1997 $154,677 $ 0 50,000(2)
President and Chief Operating 1996 $154,677 $15,000 50,000
Officer 1995 $ 55,628 $ 5,000 50,000
Joan K. Berg, 1997 $100,000 $ 0 15,000(3)
Chief Financial Officer 1996 $100,000 $ 7,500 7,500
1995 $ 92,868 $14,250 27,500
Mark E. Dunn, 1997 $105,177 $ 0 15,000(4)
Senior Vice President 1996 $105,177 $ 6,390 22,500
1995 $ 96,865 $10,000 -0-
</TABLE>
- -----------------
-8-
<PAGE>
(1) Does not include options for 137,500 shares which were granted in 1994 and
1996 and which were repriced in fiscal 1997.
(2) Does not include options for 100,000 shares which were granted in 1995 and
1996 and which were repriced in fiscal 1997.
(3) Does not include options for 35,000 shares which were granted in 1995 and
1996 and which were repriced in fiscal 1997.
(4) Does not include options for 60,000 shares which were granted in 1993,
1994 and 1996 and which were repriced in fiscal 1997.
EMPLOYMENT AGREEMENT
The Company has an Employment Agreement with Mr. Raup which provides for
a base salary (currently $157,500) subject to annual review, and a potential
bonus. The Employment Agreement provides that Mr. Raup may terminate his
employment at any time and that the Company may terminate such employment on
30 days written notice; provided, however, if the Company terminates Mr.
Raup's employment for any reason other than for cause, the Company will pay
him an amount equal to one year's base salary.
OPTION/SAR GRANTS DURING 1997 FISCAL YEAR
The following table sets forth information regarding stock options
granted to the Named Executive Officers during the fiscal year ended December
31, 1997. The Company has not granted stock appreciation rights.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/SARS GRANTED TO EXERCISE
GRANTED EMPLOYEES IN BASE RATE EXPIRATION
NAME (#)(1) FISCAL YEAR ($/SH) DATE
-------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C>
John W. Paulson 0 0% N/A N/A
Ronald B. Raup 50,000 (2) 28.8% $1.375 7/16/04
Joan K. Berg 15,000 (3) 8.6% $1.00 12/03/04
Mark E. Dunn 15,000 (3) 8.6% $1.00 12/03/04
</TABLE>
- --------------------
(1) See footnotes (1) through (4) to Summary Compensation Table.
(2) Such option is exercisable as to 5,000 shares on July 16, 1997 and
thereafter as to 833.33 shares per month commencing August 1, 1997.
(3) Such option is exercisable as to 250 shares per month commencing December
31, 1997.
AGGREGATED OPTION/SAR EXERCISES DURING 1997 FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
No options were exercised by the Named Executive Officers during fiscal
1997. The following table provides information related to the number and
value of options held at fiscal year ended by the Named Executive Officers:
-9-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
OPTIONS AT 12/31/97 MONEY OPTIONS AT 12/31/97(1)
------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John W. Paulson 72,727 64,773 $ 0 $ 0
Ronald B. Raup 53,334 96,666 $ 0 $ 0
Joan K. Berg 19,625 30,375 $ 0 $ 0
Mark E. Dunn 43,875 31,125 $ 0 $ 0
</TABLE>
- -----------------
(1) Value of exercisable/unexercisable in-the-money options is equal to the
difference between the market price of the Common Stock at fiscal year end
and the option exercise price per share multiplied by the number of shares
subject to options. The closing sale price as of December 31, 1997 on the
Nasdaq SmallCap Market was $1.00.
REPORT ON REPRICING OF OPTIONS
During fiscal 1997 the Compensation Committee, in order to preserve an
economic incentive for continued commitment to the Company's success,
authorized the repricing of all options then held by employees and directors
(other than options granted to directors pursuant to the automatic grant
provisions of the Company's 1992 Stock Option Plan) having an exercise price
in excess of current market value. The following options held by named
executive officers of the Company were amended to provide a new exercise
price of $1.375 per share, which was not less than the fair market value of
the Company's Common Stock on such date: John W. Paulson--option for 62,500
shares at $2.00 and option for 75,000 shares at $3.156; Ronald B.
Raup--option for 50,000 shares at $6.00 and option for 50,000 shares at
$3.156; Mark E. Dunn--option for 25,000 shares at $1.60, option for 12,500
shares at $2.00 and option for 22,500 shares at $3.156; and Joan K.
Berg--option for 27,500 shares at $2.40 and option for 7,500 shares at
$3.156. All other terms of the existing options remained the same, except
that the vesting provisions of Mr. Paulson's options were amended to conform
to the annual vesting limit required by Section 422 of the Internal Revenue
Code.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who own more than 10
percent of the Company's Common Stock, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than 10% shareholders ("Insiders") are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based on a review of the copies of such
reports furnished to the Company, during the fiscal year ended December 31,
1997 all Section 16(a) filing requirements
-10-
<PAGE>
applicable to Insiders were complied with except that three stock purchase
warrants were inadvertently omitted from Benson K. Whitney's Form 3.
INDEPENDENT PUBLIC ACCOUNTANT
Arthur Andersen LLP acted as the Company's independent public accountant
for fiscal 1997. Representatives of Arthur Andersen LLP are expected to be
present at the meeting, will be given an opportunity to make a statement
regarding financial and accounting matters of the Company if they so desire,
and will be available at the meeting to respond to appropriate questions from
the Company's shareholders.
OTHER BUSINESS
Management knows of no other matters to be presented at the meeting. If
any other matter properly comes before the meeting, the appointees named in
the proxies will vote the proxies in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 1999 annual meeting of shareholders must be
received by the Company by November 21, 1998, to be includable in the
Company's proxy statement and related proxy for the 1999 annual meeting.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1997, accompanies this notice of meeting and Proxy
Statement. No part of the Annual Report is incorporated herein and no part
thereof is to be considered proxy soliciting material.
FORM 10-KSB
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
BEING SOLICITED, UPON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31,
1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE
FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES THERETO. THE
COMPANY WILL FURNISH TO ANY SUCH PERSON ANY EXHIBIT DESCRIBED IN THE LIST
ACCOMPANYING THE FORM 10-KSB, UPON THE PAYMENT, IN ADVANCE, OF REASONABLE
FEES RELATED TO THE COMPANY'S FURNISHING SUCH EXHIBIT(S). REQUESTS FOR
COPIES OF
-11-
<PAGE>
SUCH REPORT AND/OR EXHIBITS(S) SHOULD BE DIRECTED TO MS. JOAN K. BERG, CHIEF
FINANCIAL OFFICER, AT THE COMPANY'S PRINCIPAL ADDRESS.
BY ORDER OF THE BOARD OF DIRECTORS
John W. Paulson
CHIEF EXECUTIVE OFFICER
Dated: March 23, 1998
Eden Prairie, Minnesota
-12-
<PAGE>
CODA MUSIC TECHNOLOGY, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 29, 1998
The undersigned hereby appoints JOHN W. PAULSON and RONALD B. RAUP, and
each of them, with full power of substitution, as Proxies to represent and vote,
as designated below, all shares of Common Stock of Coda Music Technology, Inc.
registered in the name of the undersigned at the Annual Meeting of Shareholders
of the Company to be held at the Marriott City Center Hotel, 30 South Seventh
Street, Minneapolis, Minnesota, at 3:30 p.m. (Minneapolis time) on April 29,
1998, and at any adjournment thereof, and the undersigned hereby revokes all
proxies previously given with respect to the meeting.
The Board of Directors recommends that you vote FOR each proposal below.
1. Set the number of directors at seven (7): // FOR // AGAINST // ABSTAIN
2. Elect directors: [Nominees: John W. Paulson, Ronald B. Raup, David A.
Henderson, Gordon F. Stofer, Larry A. Pape, Karl T. Bruhn and Benson K.
Whitney]
<TABLE>
<C> <C> <C> <C>
// FOR all nominees listed above // WITHHOLD AUTHORITY to vote for
(except those whose names have all nominees listed above
been written in below)
</TABLE>
To withhold authority to vote for any individual nominee write that
nominee's name on the line below
----------------------------------------------------------------------------
3. OTHER MATTERS. In their discretion, the Proxies are...// AUTHORIZED // NOT
AUTHORIZED...to vote upon such other business as may properly come before
the Meeting.
(PLEASE SIGN REVERSE SIDE)
<PAGE>
CODA MUSIC TECHNOLOGY, INC.
ANNUAL MEETING
Marriott City Center Hotel
30 South Seventh Street
Minneapolis, MN
APRIL 29, 1998
3:30 P.M. (MINNEAPOLIS TIME)
[LOGO]
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL, AND WILL BE
DEEMED TO GRANT AUTHORITY UNDER PROPOSAL NUMBER 3.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Date: _________________________, 1998
_____________________________________
_____________________________________
PLEASE DATE AND SIGN ABOVE exactly as
name appears at the left, indicating,
where appropriate, official position
or representative capacity. For stock
held in joint tenancy, each joint
owner should sign.
