TOUCHTUNES MUSIC CORP - DEF 14A - 20020419 - EXECUTIVE_COMPENSATION
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table below shows, for the years 1999 through 2001
(except as otherwise noted), the compensation paid or awarded to
Mr. Mastronardi, Vice-Chairman and Chief Executive Officer, and the five other
executive officers of the Company who were employed by the Company as of
December 31, 2001 (except for Mr. Plamondon, as noted below) and whose total
annual salary and bonus for fiscal 2001 exceeded $100,000 (collectively, the
"NAMED EXECUTIVES").
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
AWARDS
SECURITIES
UNDERLYING ALL OTHER
FISCAL SALARY BONUS OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (# OF SHARES) ($)**
Tony Mastronardi 2001 180,000 CDN -- 250,000 12,423 CDN
President and Chief 2000 150,000 CDN -- 51,000* 12,423 CDN
Executive Officer 1999 150,000 CDN -- -- 12,423 CDN
Guy Nathan(1) 2001 150,000 CDN -- 49,000 12,411 CDN
Senior Vice President and 2000 150,000 CDN 25,000 CDN 51,000* 12,411 CDN
Secretary 1999 150,000 CDN -- -- 9,842 CDN
Francois Plamondon(2) 2001 225,000 CDN -- 255,000 --
President and Chief 2000 225,000 CDN 112,500 CDN 745,000 --
Operating Officer 1999 -- -- -- --
John Margold(3) 2001 135,000 -- -- 7,200
Vice President, Sales and 2000 135,000 10,000 203,000* 7,200
Marketing 1999 135,000 20,000 -- 7,200
Linda Komorsky 2001 150,000 -- -- 7,200
Vice President, Business 2000 150,000 40,000 253,000* 7,200
Affairs, Music Rights and 1999 110,000 20,000 10,000* 7,200
Licenses
Richard Brayer(4) 2001 150,000 -- 50,000 4,800
Vice President, Advertising 2000 -- -- -- --
Revenue and Marketing 1999 -- -- -- --
* Options originally granted in 1998 and 1999 were cancelled and reissued on
April 19, 2000 under the 2000 Plan. The exercise price and terms of the
options granted under the 2000 Plan are the same as the exercise price and
terms of the options cancelled.
** Other compensation relates to automobile benefits.
(1) On March 15, 2002, Mr. Nathan's employment with the Company was terminated.
(2) Mr. Plamondon's employment with the Company was terminated on December 11,
2001.
(3) Mr. Margold's employment with the Company was terminated on March 15, 2002.
(4) For more information regarding his continued employment with the Company,
please see the discussion under "Employment Agreements -- Richard Brayer."
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STOCK OPTIONS
The following table sets forth further information regarding grants of
options to purchase Common Stock made by the Company during fiscal 2001 to the
Named Executives.
INDIVIDUAL OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
PERCENTAGE OF
NUMBER OF TOTAL OPTIONS/
SECURITIES SARS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE PRICE
OPTIONS/SARS IN FISCAL 2001 PER SHARE
NAME GRANTED (%) ($) EXPIRATION DATE
Tony Mastronardi 250,000 24.53% 1.135 March 16, 2011
Guy Nathan(1) 49,000 4.49% 1.135 March 16, 2011
Francois Plamondon(2) 255,000 23.36% 1.0312 March 16, 2011
John Margold(3) -- -- -- --
Linda Komorsky -- -- -- --
Richard Brayer(4) 50,000 4.58% 1.00 February 8, 2011
(1) On March 15, 2002, Mr. Nathan's employment with the Company was terminated.
(2) Mr. Plamondon's employment with the Company was terminated on December 11,
2001.
(3) Mr. Margold's employment with the Company was terminated on March 15, 2002.
(4) For more information regarding his continued employment with the Company,
please see the discussion under "Employment Agreements -- Richard Brayer."
The following table summarizes certain information regarding outstanding
options held by the Named Executives as of December 31, 2001.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
FISCAL YEAR END AT FISCAL YEAR END ($)(1)
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Tony Mastronardi -- -- 38,250 262,750 ** **
Guy Nathan(2) -- -- 38,250 61,750 ** **
Francois Plamondon(3) -- -- 725,990 274,010 ** **
John Margold(4) -- -- 117,250 85,750 ** **
Linda Komorsky -- -- 107,250 145,750 ** **
Richard Brayer(5) -- -- -- 50,000 ** **
(1) Value is calculated as the difference between the fair market value of a
share of Common Stock on December 31, 2001 ($ 0.34 per share) and the
exercise price of the options.
** None of the unexercised options were in-the-money.
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(2) On March 15, 2002, Mr. Nathan's employment with the Company was terminated.
(3) Mr. Plamondon's employment with the Company was terminated on December 11,
2001.
(4) Mr. Margold's employment with the Company was terminated on March 15, 2002.
(5) For more information regarding his continued employment with the Company,
please see the discussion under "Employment Agreements -- Richard Brayer."
EMPLOYMENT AGREEMENTS
TONY MASTRONARDI
On March 11, 1997, the Company entered into a five-year employment
agreement, effective January 1, 1997 with Tony Mastronardi, its President which
expired on December 31, 2001. Mr. Mastronardi entered into a non-competition and
confidentiality agreement with the Company that is effective during his
employment with the Company and for one-year thereafter. The non-competition
covenant will also remain in effect for so long as Mr. Mastronardi holds shares,
directly or indirectly, of the Company's capital stock. On August 31, 1998, the
Board of Directors set Mr. Mastronardi's annual base salary at $150,000 CDN. On
March 16, 2001, the Board of Directors increased Mr. Mastronardi's annual base
salary to $180,000 CDN, which was effective, retroactively, to January 1, 2001.
In addition, Mr. Mastronardi was granted options to purchase an aggregate of
261,000 shares of Common Stock at an exercise price of $2.78 per share, of which
options for 210,000 shares have expired and options for 38,250 shares of Common
Stock have already vested. The remaining options to purchase 12,750 shares of
Common Stock will vest on September 1, 2002. The term of the options is for ten
years and the shares acquired upon exercise will be restricted securities. The
Company is presently in negotiations with Mr. Mastronardi in respect of his
continued employment.
GUY NATHAN
On March 11, 1997, the Company also entered into a five-year employment
agreement, effective January 1, 1997 with Guy Nathan, to be Senior
Vice-President for Research and Development and Secretary. On August 31, 1998,
the Board of Directors fixed Mr. Nathan's annual base salary at $150,000 CDN
retroactively effective to January 1, 1998. In addition, Mr. Nathan was granted
options to purchase an aggregate of 261,000 shares of Common Stock at an
exercise price of $2.78 per share, of which options for 210,000 shares have
expired and options for 38,250 shares of Common Stock have already vested. The
remaining options to purchase 12,750 shares of Common Stock will vest on
September 1, 2002. The term of the options is for ten years and the shares
acquired upon exercise will be restricted securities.
The term of Mr. Nathan's employment agreement expired on December 31, 2001
and was not renewed by the Company's Board of Directors. On March 15, 2002, the
Company officially terminated Mr. Nathan's employment. Mr. Nathan is subject to
a non-competition and confidentiality agreement, which remains in effect for one
year after the termination of his employment with the Company and for so long as
Mr. Nathan holds shares, directly or indirectly, of the Company's capital stock.
The Company is currently in the process of negotiating the terms of
Mr. Nathan's severance package.
FRANCOIS PLAMONDON
On February 2, 2001, the Company entered into an employment agreement (the
"PLAMONDON AGREEMENT"), effective in the fiscal year ended December 31, 2000,
with Francois Plamondon to assume the responsibilities of Executive
Vice-President, Chief Operating Officer and Chief Financial Officer for an
indefinite term. On February 9, 2001, Mr. Plamondon was promoted to President
and Chief Operating Officer. The Plamondon Agreement provided for a minimum base
salary of $225,000 CDN a bonus of 50% of the base salary, to be approved by the
Board of Directors, six weeks paid vacation per fiscal year and other customary
benefits. In addition, the terms of the Plamondon Agreement confirmed the
previous grant of options to Mr. Plamondon to purchase 745,000 shares of Common
Stock at a price per share of $2.0625, in conformity with the TouchTunes Music
Corporation 2000 Long-Term Incentive Plan. Such
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options vest over a three-year period in equal monthly installments, commencing
on January 15, 2000. The Plamondon Agreement was terminable at any time by the
Company or by Mr. Plamondon upon three months prior written notice to the
Company.
On December 11, 2001, the Company terminated Mr. Plamondon's employment.
Under the terms of the Plamondon Agreement, in the event of termination by the
Company without cause, the Company shall pay Mr. Plamondon severance equal to
18 months of his base salary amounting to approximately $340,000 CDN. Also, the
options that would have vested during the 12-month period following the
effective date of a termination vested immediately on the date of termination.
The Company is currently negotiating the payment terms of Mr. Plamondon's
severance package. Mr. Plamondon is also subject to confidentiality, non-compete
and non-solicitation covenants, which were in effect during the term of
Mr. Plamondon's employment with the Company, and remain in effect for one year
thereafter.
JOHN MARGOLD
On August 31, 1998, the Board of Directors approved and confirmed the
employment of John Margold as the Company's Vice-President of Sales and
Marketing for an indefinite term at an annual base salary of $135,000.
Mr. Margold was granted options to purchase an aggregate of 93,000 shares of
Common Stock at $2.78 per share, of which options for 82,750 shares of Common
Stock have vested. The remaining options for 10,750 shares of Common Stock will
vest on September 1, 2002. The term of the options is for ten years and the
shares acquired upon exercise will be restricted securities.
Mr. Margold's employment with the Company was terminated on March 15, 2002.
The Company is currently in the process of negotiating the terms of
Mr. Margold's severance package.
LINDA KOMORSKY
On August 31, 1998, the Board of Directors approved and confirmed the
employment terms and conditions of Linda Komorsky as the Company's
Vice-President of Business Affairs, Music and Licensing. Her employment is for
an indefinite term. The amount of severance payable to Ms. Komorsky upon
termination of employment depends upon the length of her employment with the
Company. Currently, Ms. Komorsky receives an annual base salary of $150,000.
Depending upon her own performance and that of the Company, Ms. Komorsky will be
eligible for an annual bonus of up to 60% of her base salary. In addition,
Ms Komorsky was granted options to purchase an aggregate of 68,000 shares of
Common Stock at a price of $2.78 per share, of which options to purchase 53,500
shares of Common Stock have vested. The remaining options to purchase 14,500
shares of Common Stock will vest at a rate of 2,500 shares on May 26 of each of
2002 and 2003 and 9,500 shares which will vest on September 1, 2002. The term of
the options is for ten years and the shares acquired upon exercise will be
restricted securities.
RICHARD BRAYER
On January 18, 2001, the Company entered into an employment agreement with
Richard E. Brayer (the "Brayer Agreement") as the Company's Vice President
Marketing and Advertising for an indefinite term. The Brayer Agreement provides
for an annual base salary of $150,000 and other customary benefits. Depending
upon his performance and that of the Company, Mr. Brayer will be eligible for an
annual bonus of up to 50% of his base salary. In addition, Mr. Brayer was
granted options to purchase an aggregate of 50,000 shares of Common Stock at
$1.00 per share, vesting at a rate of 12,500 shares on April 1st of each of the
four years commencing in the year 2001. The Brayer Agreement is terminable at
any time by the Company or by Mr. Brayer upon three months prior written notice
to the Company. In the event of termination by the Company without cause, the
Company shall pay Mr. Brayer severance equal to six months of his base salary.
Mr. Brayer is subject to a permanent confidentiality agreement, and to
non-competition and non-solicitation covenants that are effective during the
term of Mr. Brayer's employment with the Company and for 18 months thereafter.
In December, 2001, the Company reached an understanding with Mr. Brayer
pursuant to which Mr. Brayer will continue in his current position as Vice
President, Advertising Revenue and Marketing and effective July 1, 2002,
Mr. Brayer will serve as a consultant to the Company. The Company and
Mr. Brayer have not yet entered into a definitive agreement concerning the
consulting services, but expect to do so in the near future.
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BENEFICIAL OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 28, 2002 (except as
otherwise noted in the footnotes) regarding the beneficial ownership of the
Company's voting securities of: (i) each of the Company's directors; (ii) each
person known by the Company to own beneficially more than 5% of the outstanding
Common Stock or the Voting Preferred Stock; (iii) each of the Named Executives;
and (iv) all current directors and executive officers of the Company as a group.
Except as otherwise specified, the named beneficial owner has the sole voting
and investment power over the shares listed.
NUMBER OF SHARES BENEFICIALLY
OWNED DIRECTLY OR INDIRECTLY
----------------------------------------------------------------------
TOTAL NUMBER OF
NAME AND ADDRESS OF VOTING PREFERRED VOTING PERCENT
BENEFICIAL OWNER COMMON STOCK STOCK(1) SECURITIES(20) OF CLASS*
------------------- --------------------- ---------------- --------------- ---------
CURRENT DIRECTORS
Tony Mastronardi........... 10,495,760(2)(3)(4) -- 10,495,760 25.7%
4973 Felix-McLearnan
Pierrefonds, Quebec
H8Y 3L2
Guy Nathan(16)............. 10,445,510(2)(3)(5) -- 10,445,510 25.6%
80 Berlioz, Apt. 1106
Nun's Island, Quebec
H3E 1N9
Joel Schoenfeld............ 10,000(14) -- 10,000 **
1177 High Ridge Road
Stamford, CT 06905
Sophie Forest.............. -- -- -- --
c/o CDP Sofinov
1801 McGill College Avenue,
13th Floor
Montreal, Quebec
H3A 2N4
Hubert Manseau............. -- -- -- --
c/o Societe Innovatech du
Grand Montreal Grand
Montreal
2020 University Street,
Suite 1527
Montreal, Quebec
H3A 2A5
Roland Ribotti............. -- -- -- --
c/o CDP Capital
Communications
2001 McGill College Avenue,
7th Floor
Montreal, Quebec
H3A 1G1
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NUMBER OF SHARES BENEFICIALLY
OWNED DIRECTLY OR INDIRECTLY
----------------------------------------------------------------------
TOTAL NUMBER OF
NAME AND ADDRESS OF VOTING PREFERRED VOTING PERCENT
BENEFICIAL OWNER COMMON STOCK STOCK(1) SECURITIES(20) OF CLASS*
------------------- --------------------- ---------------- --------------- ---------
Pierre Desjardins.......... 44,400(14) -- 44,400 **
700 Marie Le-Ber Road,
Apt. 201
Nun's Island, Quebec
H3E 1P2
5% BENEFICIAL OWNERS
Tonino Lattanzi............ 10,737,714(2)(3)(6) -- 10,737,714 26.3%
12 Rue Dubois
Clamart 92140 France
CDP Sofinov................ -- 11,457,996(7)(20) 12,569,107 30.8%
1981 McGill College Avenue
Montreal, Quebec H3A 3C7
Societe Innovatech du Grand -- 3,608,186(8)(20) 3,608,186 8.8%
Montreal..................
2020 University Street
Montreal, Quebec H3A 2A5
CDP Capital -- 6,666,667(9)(20) 10,000,000 24.5%
Communications............
1981 McGill College Avenue
Montreal, Quebec H3A 3C7
Techno Expres.............. 10,001,090(2)(20) -- 10,001,090 24.5%
36 rue du Marche
Alfortville, 94140 France
NAMED EXECUTIVES(15)
Francois Plamondon(17)..... 725,990(10) -- 725,990 1.8%
4450 Sherbrooke St.
Apt. 21
Westmount, Quebec
H3Z 1E6
John Margold(18)........... 133,500(11) -- 133,500 **
704 Patton Drive
Buffalo Grove IL 60089
Linda Komorsky............. 128,500(12) -- 128,500 **
1600 South Rexford Drive
Los Angeles, CA 90035
Richard Brayer(19)......... 12,500 -- 12,500 **
218 E. Lahon
Park Ridge, IL 60068
ALL CURRENT DIRECTORS AND 11,943,854(13) -- 11,943,854 29.2%
EXECUTIVE OFFICERS AS A
GROUP (9 PERSONS).........
* The Common Stock and Voting Preferred Stock vote together as a single class.
Percentage amounts based on all outstanding Common Stock, Series A Preferred
Stock, Series B Preferred Stock and options to purchase Common Stock which
are exercisable within 60 days of March 28, 2002.
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** Less than 1%.
(1) Voting Preferred Stock includes both Series A Preferred Stock and Series B
Preferred Stock. The holders of each share of Voting Preferred Stock are
entitled to a number of votes equal to the number of full shares of Common
Stock that can be acquired upon conversion of such Voting Preferred Stock.
(2) Messrs. Mastronardi, Nathan and Lattanzi each own 33% of the capital stock
of Techno Expres, SA, a French corporation with offices at 36, rue du
Marche, Alfortville 94140 France, which owns 10,001,920 shares of Common
Stock, which represents approximately 68.4% of the total number of shares of
Common Stock outstanding, and approximately 24.5% of the total number of the
Company's outstanding voting securities. These 10,001,920 shares of Common
Stock are subject to the Voting Trust and Limited Shareholders Agreement,
dated May 18, 2000, discussed below in footnote 20 to this beneficial
ownership table and under "Certain Relationships and Related Transactions."
(3) Messrs. Mastronardi, Nathan and Lattanzi own 50%, 16.67% and 33.33%,
respectively, of the capital stock of TouchTunes Juke Box Inc., a Canadian
corporation, with offices at 4973 Felix-McLearnan, Pierrefonds, Quebec,
H8Y 3L2. TouchTunes Juke Box Inc. holds 393,090 shares of Common Stock,
which represents approximately 2.7% of the total number of shares of Common
Stock outstanding, and approximately 0.97% of the total number of the
Company's outstanding voting securities.
(4) Includes options to purchase 100,750 shares of Common Stock that are
exercisable within 60 days of March 28, 2002.
(5) Includes options to purchase 50,500 shares of Common Stock that are
exercisable within 60 days of March 28, 2002.
(6) Mr. Lattanzi indirectly owns Neturba SRL, an Italian corporation with
offices at via Bonafica 26 63040 Malitignano, Italy. Neturba SRL holds
14,666 shares of Common Stock.
(7) Represents 9,235,774 shares of Series A Preferred Stock and 2,222,222 shares
of Series B Preferred Stock held by CDP Sofinov. The Series A Preferred
Stock is convertible share for share (subject to certain antidilutive
provisions) into Common Stock, at the option of the holder, within 60 days
of March 28, 2002. The Series B Preferred Stock is convertible into
3,333,333, shares of Common Stock.
(8) Represents 3,608,186 shares of Series A Preferred Stock held by Societe
Innovatech du Grand Montreal that are convertible share for share (subject
to certain antidilutive provisions) into Common Stock, at the option of the
holder, within 60 days of March 28, 2002.
(9) Represents 6,666,667 shares of Series B Preferred Stock held by CDP Capital
Communications that are convertible (subject to certain antidilutive
provisions) into 10,000,000 shares of Common Stock, at the option of the
holder, within 60 days of March 28, 2002.
(10) Represents 725,990 shares of Common Stock subject to certain options held
by Mr. Plamondon that are exercisable within 60 days of March 28, 2002.
(11) Represents 133,500 shares of Common Stock subject to options held by
Mr. Margold that are exercisable within 60 days of March 28, 2002.
(12) Represents 128,500 shares of Common Stock subject to options held by
Mrs. Komorsky that are exercisable within 60 days of March 28, 2002.
(13) Includes options to purchase 1,171,740 shares of Common Stock that are
exercisable within 60 days of March 28, 2002.
(14) Includes options to purchase 10,000 shares of Common Stock that are
exercisable with 60 days of March 28, 2002 and 33,400 common shares held
directly by Mr. Desjardins.
(15) Other than Tony Mastronardi and Guy Nathan, who are listed in the chart as
Directors.
(16) On March 15, 2002, Mr. Nathan's employment with the Company was terminated.
(17) Mr. Plamondon's employment with the Company was terminated on December 11,
2001.
(18) Mr. Margold's employment with the Company was terminated on March 15, 2002.
(19) For more information regarding his continued employment with the Company,
please see the discussion under "Employment Agreements -- Richard Brayer."
14
(20) These shares of Common Stock, Series A Preferred Stock and Series B
Preferred Stock are subject to a Voting Trust and Limited Shareholders
Agreement, dated May 18, 2000, among Techno Expres, CDP Sofinov, Societe
Innovatech du Grand Montreal, CDP Capital Communications and the Company.
For more information regarding this Voting Trust and Limited Shareholders
Agreement, please see the discussion under "Certain Relationships and
Related Transactions."
The reporting person Matthew Carson filed neither Form 3 upon becoming a
reporting person of the Company nor Form 4 to reflect the stock options granted
to him in fiscal 2001. Such reporting person, also, did not file Form 5 within
the prescribed time. The Form 5 of this reporting person will be filed in
April 2002. Matthew Carson does not own, directly or indirectly, any of the
Company's Common Stock or Preferred Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH 5% BENEFICIAL OWNERS
The Company's funding has come principally from a group of three investors:
Societe Innovatech du Grand Montreal, CDP Sofinov and CDP Capital Communications
(formerly known as Capital Communications CDPQ Inc). To date, they have
collectively invested approximately $43 million in the Company, which has
provided the Company with sufficient capital resources to finance its start-up
activities and to commence commercial operations.
In May 2000, the Company issued an aggregate of 8,888,889 shares of
Series B Preferred Stock to CDP Sofinov and CDP Capital Communications.
Specifically, the Company issued 2,222,222 shares of Series B Preferred Stock to
CDP Sofinov in exchange for the conversion of $5,000,000 in prior advances to
the Company. The remaining 6,666,667 shares of Series B Preferred Stock were
issued to CDP Capital Communications in exchange for proceeds consisting of
(i) $14,000,000 in cash and (ii) $1,000,000 previously advanced by CDP Capital
Communications to the Company. CDP Capital Communications received $136,370 as a
fee for its financial services with respect to this transaction among the
Company, CDP Sofinov and CDP Capital Communications.
In July 2001, the Company's Board of Directors approved an unsecured loan
facility (the "Unsecured Loan Facility"), provided by CDP Capital Communications
and CDP Sofinov, for up to a maximum of $5 million. CDP Capital Communications
and CDP Sofinov, subsidiaries of the Caisse de depot et placement du Quebec,
Canada's largest fund manager, provided $3 million and $2 million, respectively,
to the Unsecured Loan Facility. The parties entered into a binding term sheet
with respect to the Unsecured Loan Facility and expect to enter into a
definitive agreement in the near future.
The Unsecured Loan Facility must be repaid within 18 months of initial
drawdown and all amounts drawn and outstanding on the Unsecured Loan Facility
bear interest at the rate of 20% per annum. After an amount in excess of
$1.5 million has been drawn on the Unsecured Loan Facility, the rate at which
all outstanding shares of Series B Preferred Stock held by CDP Capital
Communications and CDP Sofinov that may be converted into shares of Common Stock
will be adjusted from $2.25 per share of Series B Preferred Stock (based upon
the original purchase price for shares of Series B Preferred Stock) for each
share of Common Stock to be issued to $1.50 per share of Series B Preferred
Stock for each share of Common Stock to be issued. In the event the Company
defaults on repayment of the Unsecured Loan Facility on January 3, 2003, the
amount of the Unsecured Loan Facility outstanding at the time of such default
shall be convertible, at the option of CDP Capital Communications and CDP
Sofinov, into shares of Common Stock at a conversion rate of $0.50 per share.
On February 26, 2002, the Company drew down over $1.5 million on the
Unsecured Loan Facility. As a result, the rate of which the shares of Series B
Preferred Stock are convertible into Common Stock was adjusted as described
above. Based on this new rate of conversion, in the event CDP Capital
Communications and CDP Sofinov convert their Series B Preferred Stock, the
Company would issue to them 13,333,334 shares of Common Stock, of which
4,444,445 shares represent the additional shares of Common Stock that would be
issued as a result of the adjustment to the rate of conversion described
15
above. As at April 18, 2002, the Company had drawn down principal in the amount
of $3,250,000 on the Unsecured Loan Facility.
Note that based upon the number of shares of Common Stock outstanding as of
March 28, 2002, upon the exchange (i) by CDP Sofinov and Societe Innovatech du
Grand Montreal of their 12,843,960 shares of Series A Preferred Stock into
12,843,960 shares of Common Stock and (ii) by CDP Sofinov and CDP Capital
Communications of their 8,888,889 shares of Series B Preferred Stock into
13,333,334 shares of Common Stock, CDP Sofinov, Societe Innovatech du Grand
Montreal, and CDP Capital Communications will collectively own approximately
55.3% of the outstanding shares of Common Stock.
The Company entered into a Voting Trust and Limited Shareholders Agreement,
dated May 18, 2000 (the "VOTING AGREEMENT"), with Techno Expres, CDP Sofinov,
Societe Innovatech du Grand Montreal, and CDP Capital Communications
(collectively, the "SHAREHOLDERS"). The Shareholders collectively hold
21,732,849 shares of the Voting Preferred Stock, which represents approximately
64.1% of the voting power of the Company's capital stock.
The voting rights and powers of the Shareholders under the Voting Agreement
include, but are not limited to, the following:
- SELECTION OF DIRECTORS: Pursuant to the terms of the Voting Agreement, the
Shareholders shall vote their shares of Common Stock and Voting Preferred
Stock to ensure that at least seven directors are elected to the Board of
Directors of the Company. Generally, of the seven directors: (i) three
shall be nominees of CDP Sofinov, Societe Innovatech du Grand Montreal and
CDP Capital Communications (collectively, the "Investors"), so long as the
Investors collectively own 15% of the outstanding voting securities of the
Company; (ii) two shall be nominees of Techno Expres, so long as Techno
Expres owns at least 20% of the outstanding voting securities of the
Company; and (iii) the remaining two shall be nominees of such five
nominees, but shall not be employees or persons related to or affiliated
with shareholders, directors or officers of the Company or of the
Investors.
- MATTERS SUBJECT TO THE APPROVAL OF TWO OF THE THREE INVESTORS: Until the
Company completes its next public offering, or for so long as the
Investors collectively own at least 15% of the voting securities of the
Company, the Shareholders agree to cause the Company to submit certain
corporate actions for the prior approval of at least two of the three
Investors. Such actions include: (i) establishing the annual budget;
(ii) hiring and firing any senior officers or employees; (iii) amending
the Articles of Incorporation or Bylaws; (iv) entering into loan
agreements, asset agreements, acquisition agreements or other transactions
not in the ordinary course of business; (v) creating subsidiaries; and
(vi) settling any legal proceedings.
- MATTERS SUBJECT TO THE APPROVAL OF ALL THREE INVESTORS: Until the Company
completes its next public offering, or for so long as the Investors
collectively own at least 15% of the voting securities of the Company, the
Shareholders agree to cause the Company to submit for the prior approval
of all three Investors any corporate action that would result in: (i) any
change in the capital stock of the Company; (ii) a merger, consolidation,
or sale of all or a substantial part of the assets of the Company; or
(iii) a declaration of dividends or the redemption of the Company's
capital stock, other than in conformity with its Articles of
Incorporation.
- FAILURE TO REDEEM SERIES B PREFERRED SHARES: Under the terms of the Voting
Agreement, in the event that the Company fails to redeem the shares of
Series B Preferred Stock held by the Shareholders in accordance with the
Company's Articles of Incorporation, the Shareholders may act to (i) sell
all of their shares of stock in the Company; (ii) sell all of the assets
of the Company, or (iii) dissolve or liquidate the Company.
The Voting Agreement terminates upon the happening of one of the following:
(i) all of the issued and outstanding shares of the Company are owned by one
person; (ii) the bankruptcy or dissolution (whether voluntary or involuntary) of
the Company; or (iii) by written consent of all of the Investors.
16
TRANSACTIONS WITH THE COMPANY'S EXECUTIVES
Reference is made to the employment agreements between the Company and the
Named Executives, as described above in the section entitled "Employment
Agreements" under Executive Compensation.
In addition, on June 1, 2001, the Company entered into an employment
agreement with Matthew Carson, the Company's Vice President, Finance and Chief
Financial Officer. The employment agreement provides for a base salary of
$175,000 CDN. Depending upon his performance and that of the Company,
Mr. Carson will be eligible for an annual bonus of up to 50% of his base salary.
In addition, Mr. Carson was granted options to purchase an aggregate of 175,000
shares of Common Stock at $1.13 per share vesting at the rate of 43,750 shares
on June 1 of each of the four years commencing in the year 2002. Mr. Carson's
employment is terminable at any time by either party upon three months prior
written notice to the Company. In the event of termination by the Company
without cause, the Company shall pay Mr. Carson severance equal to 9 months of
his base salary.
17
PROPOSAL 2 -- RATIFICATION OF INDEPENDENT AUDITORS
On April 19, 2002, the Board of Directors selected the firm of Ernst &
Young LLP as independent auditors of the Company for the fiscal year ending
December 31, 2002 ("FISCAL 2002"). This nationally known firm has no direct or
indirect financial interest in the Company.
The Board of Directors is submitting the selection of Ernst & Young LLP as
the Company's independent auditor for fiscal 2002 for ratification by the
stockholders at the Annual Meeting. If a majority of the shares of Common Stock,
together with the Voting Preferred Stock, represented in person or by proxy at
the meeting are not voted for ratification, the Board will reconsider its
appointment of Ernst & Young LLP as independent auditors for fiscal 2002.
A representative of Ernst & Young LLP will be present at the Annual Meeting
and will have the opportunity to make a statement if he desires to do so. It is
anticipated that such representative will be available to respond to appropriate
questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT
OF ERNST & YOUNG LLP AS AUDITORS FOR FISCAL 2002.
OTHER BUSINESS
The Company does not presently know of any matters that will be presented
for action at the meeting other than those set forth herein. If other matters
properly come before the meeting, proxies submitted on the enclosed form will be
voted by the persons named in the enclosed form of proxy in accordance with
their best judgment.
ANNUAL REPORTS
The Company also has filed with the SEC an Annual Report on Form 10-KSB, as
well as amendment thereto on Form 10-KSB/A, for fiscal 2001. The Company's
Form 10-KSB and Form 10-KSB/A are enclosed with this Proxy Statement. Copies of
the Form 10-KSB and Form 10-KSB/A are available upon written request to the
Company at c/o TouchTunes Digital Jukebox, Inc. 3 Commerce Place, 4th Floor,
Nuns' Island, Montreal, Quebec H3E 1H7, Attention: Matthew Carson, and also may
be accessed electronically by means of the SEC's home page on the Internet at
"HTTP://WWW.SEC.GOV".
18
2003 ANNUAL MEETING OF STOCKHOLDERS
It is presently contemplated that the annual meeting of stockholders
following fiscal 2002 (the "2003 ANNUAL MEETING") will be held on or about
May 15, 2003. Under the current rules of the Securities and Exchange Commission,
in order for any appropriate stockholder proposal to be considered for inclusion
in the proxy materials of the Company for the 2003 Annual Meeting, it must be
received by the Corporate Secretary of the Company, located at TouchTunes Music
Corporation, 1800 Sahara Avenue, Suite 107, Las Vegas, Nevada 89104, no later
than the close of business on December 23, 2002, by certified mail, return
receipt requested.
Pursuant to the proxy rules under the Securities Exchange Act of 1934, the
Company's stockholders are notified that the deadline for providing the Company
with timely notice of any stockholder proposal to be submitted outside of the
Rule 14a-8 process for consideration at the 2003 Annual Meeting will be
March 8, 2003. As to all such proposals about which the Company does not have
notice on or prior to that date, discretionary authority to vote on such
proposal shall be granted to the persons designated in the Company's proxy
statement related to the 2003 Annual Meeting. If notice of such a stockholder
proposal is received by the Company on or prior to such date, such proposal is
properly presented at the 2003 annual meeting and is not included in the
Company's proxy statement for such meeting, the proxies appointed by the Company
may exercise discretionary authority if, in such proxy statement, the Company
advises stockholders on the nature of such proposal and how the proxies
appointed by the Company intend to vote on such proposal, unless the stockholder
submitting such proposal satisfies certain requirements of the Securities and
Exchange Commission, including the mailing of a separate proxy statement to the
Company's stockholders.
By Order of the Board of
Directors,
[SIGNATURE]
Matthew Carson
CORPORATE SECRETARY
19
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
TOUCHTUNES MUSIC CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 2002
The undersigned hereby appoints Tony Mastronardi and Matthew Carson and
either of them, proxies of the undersigned, with full power of substitution, to
vote all shares of Common Stock, Series A Preferred Stock, and Series B
Preferred Stock of TouchTunes Music Corporation (the "Company") that the
undersigned is entitled to vote, at the Annual Meeting of Stockholders of the
Company to be held on May 22, 2002, and at any adjournments thereof with all
powers the undersigned would possess if personally present, as follows on the
reverse side of this proxy card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED IN ITEM 1,
AND FOR APPROVAL OF THE PROPOSAL LISTED IN ITEM 2. THIS PROXY WHEN PROPERLY
EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
(CONTINUED ON OTHER SIDE, PLEASE SIGN AND
DATE ON OTHER SIDE, AND RETURN IN ENCLOSED ENVELOPE)
PLEASE MARK YOUR VOTES AS INDICATED IN EXAMPLE /X/
Item 1. Election of Tony Mastronardi, Joel Schoenfeld, Pierre Desjardins, Hubert Manseau,
Sophie Forest and Roland Ribotti
For ____ Withhold Authority ____
Item 2. Proposal to ratify the appointment of Ernst & Young, LLP, as auditors for fiscal year ending December 31,
2002
For ____ Against ____ Abstain ____
Item 3. In their discretion, such other matters as may properly come before the meeting or adjournment thereof
For ____ Against____ Abstain____
Date: __________________________________ , 2002
Signature(s)
Signature(s)
Please sign here personally. Signature of stockholder(s) should correspond
directly with name(s) in which shares are registered. If the stock is registered
in more than one name, each joint owner or fiduciary should sign personally.
Only authorized officers should sign for a corporation.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE
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