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 ss.240.14a-11(c) or ss.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:
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>
CODA MUSIC TECHNOLOGY, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders of Coda Music Technology, Inc. will
be held on June 30, 1999, at 3:30 p.m. (Minneapolis time), at the Company
offices located at 6210 Bury Drive, Eden Prairie, Minnesota 55346, for the
following purposes:
1. To approve a 350,000 share increase in the number of shares
reserved for issuance under the Company's 1992 Stock Option
Plan, principally in order to permit the Company's board of
directors to grant "target price" options to officers and
employees of the Company.
2. To consider and act upon such other matters as may properly
come before the meeting and any adjournment or postponement,
including a proposal to adjourn or postpone the Special
Meeting.
Only shareholders of record at the close of business on May 25, 1999,
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
June 1, 1999
<PAGE>
CODA MUSIC TECHNOLOGY, INC.
Special Meeting of Shareholders
June 30, 1999
PROXY STATEMENT
INTRODUCTION
Your Proxy is solicited by the Board of Directors of Coda Music
Technology, Inc. ("the Company") for use at a Special Meeting of Shareholders to
be held on June 30, 1999, 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 proposal set forth in the
Notice of Meeting. If a shareholder abstains from voting on the proposal, 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 the 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 the
proposal, 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 June 1, 1999.
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed May 25, 1999, as the
record date for determining shareholders entitled to vote at the Special
Meeting. Persons who were not shareholders on such date will not be allowed to
vote at the Special Meeting. At the close of business on May 25, 1999, 6,194,732
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.
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 May 25, 1999. Unless otherwise indicated, the
shareholders listed in the table have sole voting and investment powers with
respect to the shares indicated.
Name and Address of Number of Shares Percent of
Beneficial Owner Beneficially Owned Class (1)
---------------- ------------------ ---------
Benson K. Whitney 1,250,681(2) 19.0%
821 Marquette Avenue
Minneapolis, MN 55402
J.M. Hixon Partners, LLC 1,158,847(3) 17.6%
821 Marquette Avenue
Minneapolis, MN 55402
Gordon F. Stofer 681,352(4) 10.9%
7601 France Avenue S.
Minneapolis, MN 55435
Cherry Tree Ventures IV 667,221(5) 10.7%
7601 France Avenue S.
Minneapolis, MN 55435
John W. Paulson 488,833(6) 7.7%
6210 Bury Drive
Eden Prairie, MN 55346
- ---------------------
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person to acquire them as of May 25, 1999, 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.
<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) 5,000 shares issuable
pursuant to a currently exercisable option held by Hixon Partners, (v)
65,834 shares held by Gideon Hixon Ventures ("Hixon Ventures") and (vi)
7,500 shares issuable pursuant to a currently exercisable warrant held
by Hixon Ventures. Mr. Whitney, as 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 (i) 384,616 shares issuable pursuant to currently exercisable
warrants and (ii) 5,000 shares issuable pursuant to a currently
exercisable option.
(4) Includes (i) 603,759 shares held by Cherry Tree Ventures IV, of which
Mr. Stofer is a general partner, and (ii) 63,462 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 63,462 shares issuable pursuant to currently exercisable
warrants.
(6) Includes 138,333 shares which may be purchased upon exercise of
options which are exercisable as of May 25, 1999 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 May 25, 1999, by each executive officer of the Company
named in the Summary Compensation table, by each current 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.
Name of Beneficial Number of Shares Percent of
Owner or Identity of Group Beneficially Owned Class (1)
--------------------------- ------------------ ----------
Benson K. Whitney 1,250,681 (2) 19.0%
Gordon F. Stofer 681,352 (3) 10.9%
John W. Paulson 488,833 (4) 7.7%
Ronald B. Raup 101,333 (5) 1.6%
Larry A. Pape 8,100 (6) *
Mark E. Dunn 58,333 (7) *
All officers and directors
as a group (8 persons) 2,614,299 (8) 37.5%
- ----------------------
* Less than 1%
(1) See footnote (1) to preceding table.
(2) See footnote (2) to preceding table.
<PAGE>
(3) See footnote (4) to preceding table.
(4) See footnote (6) to preceding table.
(5) Includes 100,833 shares which may be purchased upon exercise of options
which are exercisable as of May 25, 1999 or within 60 days of such
date.
(6) Includes 300 shares held by Mr. Pape's wife and 7,500 shares which may
be purchased upon exercise of options which are exercisable as of May
25, 1999 or within 60 days of such date.
(7) Such shares are not outstanding but may be purchased upon exercise of
options which are exercisable as of May 25, 1999 or within 60 days of
such date.
(8) Includes 782,244 shares which may be purchased upon exercise of options
and warrants which are exercisable as of May 25, 1999 or within 60 days
of such date.
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 $100,000 for 1998.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-term
Annual Compensation Compensation
------------------- ------------
Securities
Name and Principal Salary Bonus Underlying Options
Position Year ($) ($) (# of shares)
------------------ ---- ------ ----- ------------------
<S> <C> <C> <C> <C>
John W. Paulson, 1998 $141,597 $42,930 0
Chief Executive Officer and Chairman 1997 134,946 0 0(1)
1996 134,946 13,627 75,000
Ronald B. Raup, 1998 $161,997 $47,250 0
President and Chief Operating 1997 154,677 0 50,000(2)
Officer 1996 154,677 15,000 50,000
Mark E. Dunn, 1998 $110,496 $25,200 0
Senior Vice President 1997 105,177 0 15,000(3)
1996 105,177 6,390 22,500
</TABLE>
- ---------------------
(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 60,000 shares which were granted in 1993,
1994 and 1996 and which were repriced in fiscal 1997.
<PAGE>
Employment Agreement
The Company has an Employment Agreement with Mr. Raup which provides
for a base salary (currently $163,000) 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 1998 Fiscal Year
No stock options or stock appreciation rights were granted to the Named
Executive Officers during the fiscal year ended December 31, 1998.
Aggregated Option/SAR Exercises During 1998 Fiscal Year
and Fiscal Year End Option/SAR Values
No options were exercised by the Named Executive Officers during fiscal
1998. The following table provides information related to the number and value
of options held at fiscal year end by the Named Executive Officers:
<TABLE>
<CAPTION>
Number of Unexercised
Securities Underlying Value of Unexercised In-the-
Options at 12/31/98 Money Options at 12/31/98(1)
--------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John W. Paulson 133,786 3,714 $0 $0
Ronald B. Raup 84,167 65,833 $0 $0
Mark E. Dunn 53,875 21,125 $1,016 $3,672
</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,
1998 on the Nasdaq SmallCap Market was $1.3125.
Directors' Fees
Directors are not currently paid fees for attending Board or Committee
meetings. Argus Management Ltd., an affiliate of Mr. Whitney, received a
consulting fee of $3,575 per month for four months of 1998. These fees were for
Mr. Whitney's participation in various management consultations and services
rendered on a special project. During fiscal 1998, the Company granted an option
to J.M. Hixon Partners, LLC ("Hixon") to purchase 5,000 shares at an exercise
price of $1.125 per share, in consideration of consulting services rendered by
<PAGE>
Benson K. Whitney through Hixon. 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 and excluding
Benson K. Whitney, who has waived his rights under such provision) 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 27,
1999, the date of the 1999 annual meeting, Larry A. Pape received an option for
the purchase of 1,500 shares at an exercise price of $1.4375 per share.
APPROVAL OF INCREASE IN SHARES RESERVED UNDER
1992 STOCK OPTION PLAN
General
The Board of Directors has adopted, subject to shareholder approval, an
increase in the number of shares of the Company's Common Stock reserved for
issuance under the Company's 1992 Stock Option Plan (the "Plan") from 975,000 to
1,325,000 shares. The principal purpose of increasing the number of shares
reserved for the Plan is to permit the Board to grant the "target" price options
described in the table and footnote below.
A general description of the Plan is set forth below, but such
description is qualified in its entirety by reference to the full text of the
Plan, a copy of which may be obtained without charge upon written request to the
Company's Chief Financial Officer.
Description of Plan
Purpose. The purpose of the Plan is to promote the success of the
Company by facilitating the employment and retention of competent personnel and
by furnishing incentive to directors, officers and employees upon whose efforts
the success of the Company will depend to a large degree.
Term. Incentive stock options may be granted under the Plan for a
period of ten years from the date of adoption of the Plan by the Board of
Directors. Nonqualified stock options may be granted pursuant to the Plan until
the Plan is discontinued or terminated by its Board.
Administration. The Plan is administered by the Compensation Committee
of the Board of Directors (the "Committee"). The Plan gives broad powers to the
Committee to administer and interpret the Plan, including the authority to
select the individuals to be granted options and to prescribe the particular
form and conditions of each option granted.
Eligibility. All employees of the Company or any subsidiary are
eligible to receive incentive stock options pursuant to the Plan. All employees,
directors and officers of, and consultants and advisors to, the Company or any
subsidiary are eligible to receive nonqualified stock options. As of May 25,
1999, the Company had approximately 46 employees (of which five are officers),
three directors who are not employees and 18 consultants and advisors.
<PAGE>
Options. When an option is granted under the Plan, the Committee at its
discretion specifies the option price, the type of option (either "incentive" or
"nonqualified") to be granted, and the number of shares of Common Stock which
may be purchased upon exercise of the option. The exercise price of an incentive
stock option may not be less than 100% of the fair market value of the Company's
Common Stock and, unless otherwise determined by the Committee, the option price
of a nonqualified option will not be less than 100% of the fair market value of
the Company's Common Stock on the date of grant. The market value of the
Company's Common Stock on May 25, 1999 was $1.75. The term during which the
option may be exercised and whether the option will be exercisable immediately,
in stages or otherwise are set by the Committee, but the term of an incentive
stock option may not exceed ten years from the date of grant. Optionees may pay
for shares upon exercise of options with cash, certified check or Common Stock
of the Company valued at the stock's then fair market value. Each incentive
stock option granted under the Plan is nontransferable during the lifetime of
the optionee. Each outstanding option under the Plan may terminate earlier than
its stated expiration date in the event of the optionee's termination of
employment or directorship.
In addition to other options which may be granted under the Plan, each
nonemployee director of the Company (excluding persons who were nonemployee
directors on the date such provision was adopted by the Board) will
automatically be granted a nonqualified option for 5,000 shares of Common Stock
upon his or her initial election as a director and for 1,500 shares upon each
re-election thereafter. Each such option will be exercisable at any time for a
period of five years, unless earlier terminated in accordance with the Plan, at
an exercise price per share equal to 100% of the fair market value of the Common
Stock on the date of grant. Options to purchase 18,500 shares are currently
outstanding as a result of the nonemployee director automatic option provisions
of the Plan.
Amendment. The Board of Directors may from time to time suspend or
discontinue the Plan or revise or amend it in any respect; provided, (i) no such
revision or amendment may impair the terms and conditions of any outstanding
option to the material detriment of the optionee without the consent of the
optionee except as authorized in the event of merger, consolidation or
liquidation of the Company, (ii) the provisions relating to the formula grant to
nonemployee directors may not be amended more than once every six months except
to conform to certain changes in the laws, and (iii) the Plan may not, without
the approval of the shareholders, be amended in any manner that will (a)
materially increase the number of shares subject to the Plan except as provided
in the case of stock splits, consolidations, stock dividends or similar events;
(b) change the designation of the class of employees eligible to receive
options; (c) decrease the price at which options will be granted; or (d)
materially increase the benefits accruing to optionees under the Plan.
Federal Income Tax Consequences of the Plan. Under present law, an
optionee will not realize any taxable income on the date a nonqualified option
is granted pursuant to the Plan. Upon exercise of the option, however, the
optionee must recognize, in the year of exercise, ordinary income equal to the
difference between the option price and the fair market value of the Company's
Common Stock on the date of exercise. Upon the sale of the shares, any resulting
<PAGE>
gain or loss will be treated as capital gain or loss. The Company will receive
an income tax deduction in its fiscal year in which nonqualified options are
exercised, equal to the amount of ordinary income recognized by those optionees
exercising options, and must withhold income and other employment-related taxes
on such ordinary income.
Incentive stock options granted under the Plan are intended to qualify
for favorable tax treatment under Section 422 of the Internal Revenue Code.
Under Section 422, an optionee recognizes no taxable income when the option is
granted. Further, the optionee generally will not recognize any taxable income
when the option is exercised if he or she has at all times from the date of the
option's grant until three months before the date of exercise been an employee
of the Company. The Company ordinarily is not entitled to any income tax
deduction upon the grant or exercise of an incentive stock option. Certain other
favorable tax consequences may be available to the optionee if he or she does
not dispose of the shares acquired upon the exercise of an incentive stock
option for a period of two years from the granting of the option and one year
from the receipt of the shares.
Plan Benefits. The table below shows the total number of stock options
that have been received by the following individuals and groups under the Plan
as of May 25, 1999, without taking into account exercises or cancellations, and
"target price" stock options that the Compensation Committee intends to
immediately grant to executive officers if the share increase is approved by the
shareholders. Because additional future grants of options are subject to the
discretion of the Compensation Committee, the future benefits that may be
received by these individuals or groups under the Plan cannot be determined at
this time, except for the automatic option grants to outside directors as
described above.
<TABLE>
<CAPTION>
Total Number of Options to
Name and Position/Group Options Received be Granted (1)
- ----------------------- ---------------- --------------
<S> <C> <C>
John W. Paulson, Chairman and Chief
Executive Officer 162,500 75,000
Ronald B. Raup, President and
Chief Operating Officer 175,000 50,000
Mark E. Dunn, Senior Vice President 75,000 20,000
Barbara S. Remley, Chief Financial Officer 55,000 15,000
Glenna A. Dibrell, Vice President, Marketing 35,000 10,000
Current Executive Officer Group 502,500 170,000
Current Non-executive Officer Director Group 12,500 --
Current Non-executive Officer Employee Group 144,500 --
</TABLE>
(1) The Board contemplates as of the date of this Proxy Statement that each
such option will be for a term of seven years, will have an exercise
price equal to the market value of the Company's stock on the date of
grant and will become exercisable on the sixth anniversary of the date
of grant; provided, that the option will become exercisable earlier:
(a) to the extent of 50% of the total number of shares in the event
that prior to July 1, 2002 the reported closing price of the Company's
Common Stock is $3.00 or higher for 60 consecutive days or the Company
is sold, merged or liquidated in a transaction with a value of $3.00
per share or higher; and (b) to the extent of the balance of the total
number shares in the event that prior to July 1, 2002 the reported
closing price is $6.00 or higher for 60 calendar days or the Company is
sold, merged or liquidated in a transaction with a value of $6.00 per
share or higher. The Board may vary these terms depending upon
circumstances at the date of grant.
<PAGE>
Vote Required
Because of the employees' positive response to the Plan and because of
its belief that making a greater number of shares available to employees,
directors and advisors is an effective means to insure the future growth and
development of the Company, the Board of Directors recommends that the
shareholders approve the increase in the number of shares reserved under the
Plan to 1,325,000 shares. Approval of such increase requires the affirmative
vote of the greater of (i) a majority of the shares represented at the meeting
with authority to vote on such matter or (ii) a majority of the voting power of
the minimum number of shares that would constitute a quorum for the transaction
of business at the meeting.
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 FOR 2000 ANNUAL MEETING
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 2000 annual meeting of shareholders must be
received by the Company by November 20, 1999, to be considered for inclusion in
the Company's proxy statement and related proxy for the 2000 annual meeting.
Also, if a shareholder proposal intended to be presented at the 2000
annual meeting but not included in the Company's proxy statement and proxy is
received by the Company after February 5, 2000, then management named in the
Company's proxy form for the 2000 annual meeting will have discretionary
authority to vote shares represented by such proxies on the shareholder
proposal, if presented at the meeting, without including information about the
proposal in the Company's proxy materials.
John W. Paulson
Chief Executive Officer
Dated: June 1, 1999
Eden Prairie, Minnesota
<PAGE>
CODA MUSIC TECHNOLOGY, INC.
6210 Bury Drive
Eden Prairie, MN 55346-1718
PROXY
This proxy is solicited by the Board of Directors for use at a Special
Meeting of shareholders on June 30, 1999.
The shares of stock you hold in your account will be voted as you
specify below.
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 Special Meeting of Shareholders
of the Company to be held at the Company offices located at 6210 Bury Drive,
Eden Prairie, Minnesota 55346, at 3:30 p.m. (Minneapolis time) on June 30, 1999,
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. Approve a 350,000 share increase in the number of shares reserved for
issuance under the Company's 1992 Stock Option Plan:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. OTHER MATTERS. In their discretion, the Proxies are . . .
[ ] AUTHORIZED [ ] NOT AUTHORIZED . . .
to vote upon such other business as may properly come before the
Meeting or any adjournment or postponement, including a proposal to
adjourn or postpone the Special Meeting.
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 2.
Date: __________________, 1999
_________________________________
_________________________________
Please sign exactly as your
name(s) appear on Proxy. If held
in joint tenancy, all persons must
sign. Trustees, administrators,
etc. should include title and
authority. Corporations should
provide full name of corporation
and title of authorized officer
signing the proxy.
<PAGE>
CODA MUSIC TECHNOLOGY, INC.
1992 STOCK OPTION PLAN
(As Amended Through May 28, 1999)
SECTION 1.
DEFINITIONS
As used herein, the following terms shall have the meanings indicated below:
(a) The "Company" shall mean Coda Music Technology, Inc., a Minnesota
corporation.
(b) A "Subsidiary" shall mean any corporation of which fifty percent (50%) or
more of the total voting power of outstanding stock is owned, directly or
indirectly in an unbroken chain, by the Company.
(c) "Common Stock" shall mean the Common Stock of the Company, subject to
adjustment as described in Section 12.
(d) The "Plan" shall mean the Coda Music Technology, Inc. 1992 Stock Option
Plan, as amended hereafter from time to time, including the forms of Option
Agreements as they may be modified by the Board from time to time.
(e) The "Optionee" for purposes of Section 9 is an employee of the Company or
any Subsidiary to whom an incentive stock option has been granted under the
Plan. For purposes of Section 10, the "Optionee" is the officer, employee,
advisor or consultant of the Company or any Subsidiary to whom a nonqualified
stock option has been granted.
(f) "Committee" shall mean a Committee composed of not fewer than the minimum
number of persons required by Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended from time to time, who may
be appointed by, and serve at the pleasure of the Board and shall have such
powers and authority as are granted to it by the Board, including, without
limitation, the authority to grant stock options hereunder. Each of the members
of the Committee shall be a "disinterested" person within the meaning of Rule
16b-3, as then in effect. As of the date hereof, a "disinterested" person under
Rule 16b-3 means a person who, among other things, has not at any time within
one year prior to appointment to the Committee been granted or awarded equity
securities pursuant to the Plan or any other plan of the Company or its
affiliates, except to the extent such participation does not disqualify such
director from being a disinterested person under Rule 16b-3.
(g) The "Internal Revenue Code" is the Internal Revenue Code of 1986, as amended
from time to time.
<PAGE>
SECTION 2.
PURPOSE
The purpose of the Plan is to promote the success of the Company and
its Subsidiaries by facilitating the employment and retention of competent
personnel and by furnishing incentive to officers, directors, employees and
consultants upon whose efforts the success of the Company and its Subsidiaries
will depend to a large degree.
It is the intention of the Company to carry out the Plan through the
granting of stock options which will qualify as "incentive stock options" under
the provisions of Section 422 of the Internal Revenue Code, and through the
granting of nonqualified stock options pursuant to Section 10 of this Plan.
Adoption of this Plan shall be and is expressly subject to the condition of
approval by the shareholders of the Company within twelve (12) months before or
after the adoption of the Plan by the Board of Directors.
SECTION 3.
EFFECTIVE DATE OF PLAN
The Plan shall be effective as of the date it is adopted by the Board
of Directors of the Company.
SECTION 4.
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(the "Board") or, to the extent empowered by the Board, by a Stock Option
Committee (hereinafter referred to as the "Committee" and as defined in Section
1(f) of this Plan) which may be appointed by the Board from time to time. The
Board shall have all of the powers vested in it under the provisions of the
Plan, including but not limited to exclusive authority (where applicable and
within the limitations described herein) to determine, in its sole discretion,
whether an incentive stock option or nonqualified stock option shall be granted,
the individuals to whom, and the time or times at which, options shall be
granted, the number of shares subject to each option and the option price, terms
and conditions of each option. The Committee shall have such powers as are
granted to it by the Board. The Board, or the Committee if so empowered by the
Board, shall have full power and authority to administer and interpret the Plan,
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to make and amend rules, regulations and guidelines for administering the Plan,
to prescribe the form and conditions of the respective stock option agreements
(which may vary from Optionee to Optionee) evidencing each option and to make
all other determinations necessary or advisable for the administration of the
Plan. The Board's interpretation of the Plan, or the Committee's interpretation
if so empowered by the Board, and all actions taken and determinations made by
the Board pursuant to the power vested in it hereunder, or by the Committee to
the extent empowered by the Board, shall be conclusive and binding on all
parties concerned. No member of the Board or the Committee shall be liable for
any action taken or determination made in good faith in connection with the
administration of the Plan.
In the event the Board appoints a Committee as provided hereunder, any
action of the Committee with respect to the administration of the Plan shall be
taken pursuant to a majority vote of the Committee members or pursuant to the
written resolution of all Committee members.
SECTION 5.
PARTICIPANTS
The Board, or the Committee if so empowered by the Board, shall from
time to time, at its discretion and without approval of the shareholders,
designate those directors, officers, employees, consultants or advisors of the
Company or of any Subsidiary to whom nonqualified stock options shall be
granted; provided, however, that consultants or advisors shall not be eligible
to receive stock options hereunder unless such consultant or advisor renders
bona fide services to the Company or Subsidiary and such services are not in
connection with the offer or sale of securities in a capital-raising
transaction. The Board, or the Committee if so empowered by the Board, shall
also designate those employees of the Company or of any Subsidiary to whom
incentive stock options shall be granted.
The Board, or the Committee if so empowered by the Board, may grant
additional incentive stock options or nonqualified stock options to some or all
participants then holding options or may grant such options solely or partially
to new participants. In designating participants, the Board, or the Committee if
so empowered by the Board, shall also determine the number of shares to be
optioned to each such participant.
SECTION 6.
STOCK
The Stock to be optioned under this Plan shall consist of authorized
but unissued shares of Common Stock. One Million Three Hundred Twenty-five
Thousand (1,325,000) shares of Common Stock shall be reserved and available for
options under the Plan; provided, however, the total number of shares of Common
Stock reserved for options under this Plan shall be subject to adjustment as
provided in Section 12 of the Plan. In the event that any outstanding option
granted under the Plan for any reason expires or is terminated prior to the
exercise thereof, the shares of Common Stock allocable to the unexercised
portion of such option shall continue to be reserved for options under the Plan
and may be optioned hereunder.
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SECTION 7.
DURATION OF PLAN
Incentive stock options may be granted pursuant to this Plan from time
to time during a period of ten (10) years from the earlier of the date the Plan
is approved by the Board of Directors or the date it is approved by the
shareholders of the Company. Nonqualified stock options may be granted pursuant
to the Plan from time to time after the date the Plan is adopted by the Board of
Directors and until the Plan is discontinued or terminated by the Board.
SECTION 8.
PAYMENT
Optionees may pay for shares upon exercise of options granted pursuant
to this Plan with cash, certified check or Common Stock of the Company valued at
such stock's then "fair market value" as defined in Section 9 below.
SECTION 9.
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
Each incentive stock option granted pursuant to the Plan shall be
evidenced by a written stock option agreement (the "Option Agreement"). The
Option Agreement shall be in such form as may be approved from time to time by
the Board or the Committee (if so empowered by the Board) and may vary from
Optionee to Optionee; provided, however, that each Optionee and each Option
Agreement shall comply with and be subject to the following terms and
conditions:
(a) Number of Shares and Option Price. The Option Agreement
shall state the total number of shares covered by the incentive stock
option. The option price per share shall not be less than one hundred
percent (100%) of the fair market value of the Common Stock per share
on the date the Board, or the Committee if so empowered by the Board,
grants the option; provided, however, that, if an Optionee owns stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of its parent or any
Subsidiary, the option price per share of an incentive stock option
granted to such Optionee shall not be less than one hundred ten percent
(110%) of the fair market value of the Common Stock per share on the
date of the grant of the option. For purposes hereof, if such stock is
then reported in the national market system or is listed upon an
established exchange or exchanges, "fair market value" of the Common
Stock per share shall be the highest closing price of such stock in
such national market system or on such stock exchange or exchanges on
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the date the option is granted or, if no sale of such stock shall have
occurred on that date, on the next preceding day on which there was a
sale of stock. If such stock is not so reported in the national market
system or listed upon an exchange, "fair market value" shall be the
mean between the "bid" and "asked" prices quoted by a recognized
specialist in the Common Stock of the Company on the date the option is
granted, or if there are no quoted "bid" and "asked" prices on such
date, on the next preceding date for which there are such quotes. If
such stock is not publicly traded as of the date the option is granted,
the "fair market value" of the Common Stock shall be determined by the
Board, or the Committee if so empowered by the Board, in its sole
discretion by applying principles of valuation with respect to all such
options. The Board, or the Committee if so empowered by the Board,
shall have full authority and discretion in establishing the option
price and shall be fully protected in so doing.
(b) Term and Exercisability of Incentive Stock Option. The
term during which any incentive stock option granted under the Plan may
be exercised shall be established in each case by the Board, or the
Committee if so empowered by the Board, but in no event shall any
incentive stock option be exercisable during a term of more than ten
(10) years after the date on which it is granted. The Option Agreement
shall state when the incentive stock option becomes exercisable and
shall also state the maximum term during which the option may be
exercised. In the event an incentive stock option is exercisable
immediately, the manner of exercise of the option in the event it is
not exercised in full immediately shall be specified in the Option
Agreement. The Board, or the Committee if so empowered by the Board,
may accelerate the exercise date of any incentive stock option granted
hereunder which is not immediately exercisable as of the date of grant.
(c) Other Provisions. The Option Agreement authorized under
this Section 9 shall contain such other provisions as the Board, or the
Committee if so empowered by the Board, shall deem advisable. Any such
Option Agreement shall contain such limitations and restrictions upon
the exercise of the option as shall be necessary to ensure that such
option will be considered an "Incentive Stock Option" as defined in
Section 422 of the Internal Revenue Code or to conform to any change
therein.
(d) Holding Period. The sale or other disposition of any
shares of Common Stock acquired by an Optionee pursuant to the exercise
of an option described above shall be eligible for the favorable
taxation treatment of Section 421(a) of the Internal Revenue Code if no
disposition of such shares is made by the Optionee within two (2) years
from the date of the granting of the option under which the shares were
acquired nor within one year after the acquisition of such shares
pursuant to the exercise of such option, or such other periods as may
be prescribed by the Internal Revenue Code. In the event of an
Optionee's death, such holding period shall not be applicable pursuant
to Section 421 (c)(l) of the Internal Revenue Code.
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SECTION 10.
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
Each nonqualified stock option granted pursuant to the Plan shall be
evidenced by a written Option Agreement. The Option Agreement shall be in such
form as may be approved from time to time by the Board or the Committee (if so
empowered by the Board), and may vary from Optionee to Optionee; provided,
however, that each Optionee and each Option Agreement shall comply with and be
subject to the following terms and conditions:
(a) Number of Shares and Option Price. The Option Agreement
shall state the total number of shares covered by the nonqualified
stock option. Unless otherwise determined by the Board of Directors, or
the Committee if so empowered by the Board, the option price per share
shall be equal to one hundred percent (100%) of the fair market value
of the Common Stock per share on the date the Board or the Committee
grants the option. For purposes hereof, the "fair market value" of a
share of Common Stock shall have the same meaning as set forth under
Section 9(a) herein.
(b) Term and Exercisability of Nonqualified Stock Option. The
term during which any nonqualified stock option granted under the Plan
may be exercised shall be established in each case by the Board, or the
Committee if so empowered by the Board. The Option Agreement shall
state when the nonqualified stock option becomes exercisable and shall
also state the maximum term during which the option may be exercised.
In the event a nonqualified stock option is exercisable immediately,
the manner of exercise of the option in the event it is not exercised
in full immediately shall be specified in the stock option agreement.
The Board, or the Committee if so empowered by the Board, may
accelerate the exercise date of any nonqualified stock option granted
hereunder which is not immediately exercisable as of the date of grant.
(c) Withholding. In the event the Optionee is required under
the Option Agreement to pay to the Company, or make arrangements
satisfactory to the Company respecting payment of, any federal, state,
local or other taxes required by law to be withheld with respect to the
option's exercise, the Board or the Committee may, in its discretion
and pursuant to such rules as it may adopt, permit the Optionee to
satisfy such obligation, in whole or in part, by electing to have the
Company withhold shares of Common Stock otherwise issuable to the
Optionee as a result of the option's exercise equal to the amount
required to be withheld for tax purposes. Any stock elected to be
withheld shall be valued at its "fair market value," as provided under
Section 9(a) hereof, as of the date the amount of tax to be withheld is
determined under applicable tax law. The Optionee's election to have
shares withheld for this purpose shall be made on or before the date
the option is exercised or, if later, the date that the amount of tax
to be withheld is determined under applicable tax law. Such election
shall also comply with such rules as may be adopted by the Board or the
Committee to assure compliance with Rule 16b-3, as then in effect, of
the General Rules and Regulations under the Securities Exchange Act of
1934, if applicable.
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(d) Other Provisions. The Option Agreement authorized under
this Section 10 shall contain such other provisions as the Board, or
the Committee, as the case may be, shall deem advisable.
SECTION 11.
TRANSFER OF OPTION
No option shall be transferable, in whole or in part, by the Optionee
other than by will or by the laws of descent and distribution and, during the
Optionee's lifetime, the option may be exercised only by the Optionee. If the
Optionee shall attempt any transfer of any option granted under the Plan during
the Optionee's lifetime, such transfer shall be void and the option, to the
extent not fully exercised, shall terminate.
SECTION 12.
RECAPITALIZATION, SALE, MERGER, EXCHANGE
CONSOLIDATION OR LIQUIDATION
In the event of an increase or decrease in the number of shares of
Common Stock resulting from a subdivision or consolidation of shares or the
payment of a stock dividend or any other increase or decrease in the number of
shares of Common Stock effected without receipt of consideration by the Company,
the number of shares of Common Stock covered by each outstanding option and the
price per share thereof shall be equitably adjusted by the Board of Directors to
reflect such change. Additional shares which may be credited pursuant to such
adjustment shall be subject to the same restrictions as are applicable to the
shares with respect to which the adjustment relates.
In the event of the sale by the Company of substantially all of its
assets and the consequent discontinuance of its business, or in the event of a
merger, exchange, consolidation or liquidation of the Company, the Board of
Directors shall, in its sole discretion, in connection with the Board's adoption
of the plan for sale, merger, exchange, consolidation or liquidation, provide
for one or more of the following: (i) the acceleration of the exercisability of
any or all outstanding options; (ii) the complete termination of this Plan and
cancellation of outstanding options not exercised prior to a date specified by
the Board (which date shall give Optionees a reasonable period of time in which
to exercise the options prior to the effectiveness of such sale, merger,
exchange, consolidation or liquidation); and (iii) the continuance of the Plan
with respect to the exercise of options which were outstanding as of the date of
adoption by the Board of such plan for sale, merger, exchange, consolidation or
liquidation and provide to Optionees holding such options the right to exercise
their respective options as to an equivalent number of shares of stock of the
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corporation succeeding the Company by reason of such sale, merger, exchange,
consolidation or liquidation. The grant of an option pursuant to the Plan shall
not limit in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, exchange or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
SECTION 13.
INVESTMENT PURPOSE
No shares of Common Stock shall be issued pursuant to the Plan unless
and until there has been compliance, in the opinion of the Company's counsel,
with all applicable legal requirements, including without limitation, those
relating to securities laws and stock exchange listing requirements. As a
condition to the issuance of Common Stock to an Optionee, the Board, or the
Committee if so empowered by the Board, may require an Optionee to (a) represent
that the shares of Common Stock are being acquired for investment and not resale
and to make such other representations as the Board, or the Committee if so
empowered by the Board, shall deem necessary or appropriate to qualify the
issuance of the shares as exempt from the Securities Act of 1933 and any other
applicable securities laws, and (b) represent that the Optionee shall not
dispose of the shares of Common Stock in violation of the Securities Act of 1933
or any other applicable securities laws. The Company reserves the right to place
a legend on any stock certificate issued upon exercise of an option granted
pursuant to the Plan to assure compliance with this Section 13.
SECTION 14.
RIGHTS AS A SHAREHOLDER
An Optionee (or the Optionee's successor or successors) shall have no
rights as a shareholder with respect to any shares covered by an option until
the date of the issuance of a stock certificate evidencing such shares (except
as otherwise provided in Section 12 above). No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is prior to
the date such stock certificate is actually issued (except as otherwise provided
in Section 12).
SECTION 15.
AMENDMENT OF THE PLAN
The Board of Directors of the Company may from time to time, insofar as
permitted by law, suspend or discontinue the Plan or revise or amend it in any
respect; provided, however, that no such revision or amendment shall impair the
terms and conditions of any option which is outstanding on the date of such
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revision or amendment to the material detriment of the Optionee without the
consent of the Optionee. Notwithstanding the foregoing, no such revision or
amendment shall, (i) materially increase the number of shares subject to the
Plan except as provided in Section 12 hereof, (ii) change the designation of the
class of employees eligible to receive options, (iii) decrease the price at
which options may be granted, or (iv) materially increase the benefits accruing
to Optionees under the Plan, unless such revision or amendment is approved by
the shareholders of the Company. Furthermore, the Plan may not, without the
approval of the shareholders, be amended in any manner that will cause incentive
stock options to fail to meet the requirements of "Incentive Stock Options" as
defined in Section 422 of the Internal Revenue Code.
SECTION 16.
NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the Optionee
to exercise such option. Further, the granting of an option hereunder shall not
impose upon the Company or any Subsidiary any obligation to retain the Optionee
in its employ or as a director for any period.
From time to time the shareholders of the Company may authorize or
approve the granting under this plan of non-qualified options to Non-Employee
Directors of the Company and establish the terms and conditions of such options.
SECTION 17.
GRANTING OF OPTIONS TO NONEMPLOYEE DIRECTORS
Each nonemployee director of the Company (excluding persons who are
nonemployee directors on the date this Section 17 is adopted by the Board of
Directors) shall, upon his or her initial election as a director, automatically
be granted a nonqualified option, as of the date of such election, to purchase
5,000 shares of the Company's Common Stock, and, upon each re-election
thereafter, shall automatically be granted an option to purchase 1,500 shares of
Common Stock as of the date of such re-election. Such options shall be granted
at an option price per share equal to 100% of the fair market value (as defined
in Section 9) of the Company's Common Stock on the date of grant. Each such
nonqualified option shall be fully exercisable at all times and shall expire on
the earlier of (i) three months after the Optionee ceases to be a director
(other than by reason of disability or death) and (ii) five (5) years after the
date of grant. Notwithstanding the foregoing, in the event the nonemployee
director ceases to be a director as a result of death or disability of such
director, any option granted to such nonemployee director hereunder may be
exercised until (i) twelve months after such death or disability or (ii) the
date on which the option, by its terms, expires, whichever is earlier.
