Coyote Sports, Inc.
2291 Arapahoe Avenue
Boulder, CO 80302
April 20, 1998
To Our Stockholders:
You are cordially invited to attend the annual meeting of stockholders of
Coyote Sports, Inc. to be held at the law offices of Chrisman Bynum & Johnson,
1900 Fifteenth Street, Boulder, Colorado, on May 9, 1998, at 10:00 a.m..
Registration will begin at 9:00 a.m.
I believe that the annual meeting provides an excellent opportunity for
stockholders to become better acquainted with Coyote Sports, Inc., its directors
and its officers. I hope that you will be able to attend.
Whether or not you plan to attend, the prompt execution and return of your
proxy card will both assure that your shares are represented at the meeting and
minimize the cost of proxy solicitation.
Sincerely,
Mel S. Stonebraker
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
<PAGE>
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COYOTE SPORTS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 1998
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To the Stockholders of Coyote Sports, Inc.
The annual meeting of stockholders of Coyote Sports, Inc., a Nevada
corporation, will be held on May 9, 1998, at 10:00 A.M., Mountain Standard Time,
at the law offices of Chrisman Bynum & Johnson, 1900 Fifteenth Street, Boulder,
Colorado, for the following purposes:
1. To elect a Board of Directors for the ensuing year.
2. To transact such other business as may properly come before the meeting.
All stockholders are invited to attend the annual meeting. Stockholders
of record at the close of business on April 17, 1998, the record date fixed by
the Board of Directors, are entitled to notice of and to vote at the annual
meeting.
By Order of the Board of Directors
Mel S. Stonebraker
Chairman
Boulder, Colorado
April 20, 1998
Whether or not you intend to be present at the meeting, please sign and
date the enclosed proxy and return it in the enclosed envelope.
<PAGE>
COYOTE SPORTS, INC.
PROXY STATEMENT
The enclosed proxy statement is furnished by the Board of Directors of
Coyote Sports, Inc. ("Coyote" or the "Company") for use at the annual meeting of
stockholders to be held on May 9, 1998, and at any adjournment thereof (the
"Annual Meeting"). The Company expects to mail this proxy statement and the
enclosed proxy to stockholders on or about April 20, 1998.
The Company will bear the cost of solicitation of proxies. In addition
to the solicitation of proxies by mail, certain officers and employees of the
Company, without extra compensation, may also solicit proxies personally or by
telephone. The Company has retained Investors Relations Services, Inc. of New
Smyrna Beach, Florida to assist in the solicitation of proxies from nominees and
brokers. Copies of proxy solicitation materials will be furnished to
fiduciaries, custodians and brokerage houses for forwarding to the beneficial
owners of shares held in their names.
All valid proxies properly executed and received by the Company prior
to the Annual Meeting will be voted in accordance with the instructions
specified in the proxy. Where no instructions are given, shares will be voted
FOR the election of each of the named nominees for director.
A stockholder who executes the enclosed proxy has the power to revoke
it at any time before it is exercised by affirmatively electing to vote in
person at the meeting or by delivering to Micheal W. Sutton, General Counsel of
Coyote Sports, Inc., either an instrument of revocation or an executed proxy
bearing a later date.
VOTING SECURITIES
Holders of record of Coyote Sports, Inc. at the close of business on
April 17, 1998, will be entitled to vote at the Annual Meeting. On that date,
4,758,004 shares of Common Stock ("Common Stock") were issued and outstanding.
Each share of Common Stock is entitled to one vote on every matter submitted to
the stockholders at the Annual Meeting.
ELECTION OF DIRECTORS
Five directors will be elected to the Board of Directors of the Company
at the Annual Meeting. Four of the five nominees were directors prior to the
Company's initial public offering in September 1997. Directors will hold office
until the next annual meeting of stockholders or until their successors are
elected and qualified.
Mel S. Stonebraker, James M. Probst, Jeffrey T. Kates, Don A. Forte and
Mark Pappas are nominated by management for election by the holders of the
Company's Common Stock. THE BOARD OF DIRECTORS RECOMMEND THAT THE STOCKHOLDERS
VOTE FOR EACH NOMINEE FOR THE BOARD.
If a quorum is present, Directors are elected by a majority of the
votes cast by stockholders. Abstentions and broker non-votes will have no effect
on the results of the vote. Unless otherwise instructed, proxy holders will vote
the proxies they receive for the nominees listed herein. If any nominee becomes
unable to serve, the holders of the proxies may, in their discretion, vote their
shares for a substitute nominee or nominees designated by the Board of
Directors. Each nominee has expressed his intention to serve the entire term for
which election is sought.
Background information on the nominees as of March 31, 1998, appears
below:
Nominees for Election
Mel S. Stonebraker - Mr. Stonebraker, 45, a co-founder of the Company,
has been an officer and director of the Company since its incorporation in 1994
and is currently Chief Executive Officer and Chairman of the Board. From 1983 to
1994, Mr. Stonebraker was International Business Development Manager for
Schuller International Corporation, a wholly owned subsidiary of Manville
Corporation. In that position, he was responsible for corporate activities
throughout the Pacific Rim countries. He was a resident in Singapore from 1984
to 1989. Mr. Stonebraker received a B.A. degree from the University of Colorado
in 1977 and a Masters of International Administration from the American Graduate
School for International Management (Thunderbird) in 1983.
James M. Probst - Mr. Probst, 39, a co-founder of the Company, has been an
officer and Director of the Company since February 1995 and is currently
President and a Director. From 1986 to 1995, Mr. Probst was employed by Schuller
International Corporation, a wholly owned subsidiary of Manville Corporation.
During that time, Mr. Probst held several
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positions ranging from research and development Engineer to Business Manager of
a unit with approximately $30 million in revenues. Mr. Probst received a B.S.
degree in Mechanical Engineering from the University of Colorado, Denver in 1986
and an M.B.A. from the University of Denver in 1990.
Jeffrey T. Kates - Mr. Kates, 36, became a director of the Company in May
1997. From August 1996 to the present, Mr. Kates has been the Chief Operating
Officer of Plastics Research Corp. a firm with annual revenues of $35 million.
From October 1994 to August 1996, Mr. Kates was President and a director of
Harloc Incorporated, a subsidiary of the Tesa Group in Irun, Spain, which
attained annual revenues of $150 million. Mr. Kates received a B.S. degree in
Agricultural Engineering from the University of Illinois in 1984 and an M.B.A.
from the University of Denver in 1988.
Don A. Forte - Mr. Forte, 49, became a director of the Company in June
1997. For the past 25 years, Mr. Forte has been employed by Johns Manville (JM)
a leading manufacturer of building products. Mr. Forte has held numerous
positions in his career with JM. His present position is Vice President of
Manufacturing and Engineering for the Insulation Group. Mr. Forte is currently
responsible for 16 manufacturing plants located in North America which
manufacture fiberglass insulation products for residential and commercial
applications. Prior to this assignment, Mr. Forte was Vice President and General
Manager of JM's Filtration Division. The Filtration Division manufactures
products in four U.S. plant locations and distributes to customers worldwide.
Mr. Forte received his B.S. degree from Northern Illinois University in 1970 and
an M.B.A. degree from Xavier University in 1982.
Mark A. Pappas - Mr. Pappas, 36, became a director of the Company in March
1998. Mr. Pappas is the President of Paragon Management Group, Inc., a private
investment management firm located in Fort Worth, Texas. Prior to the formation
of Paragon Management Group, Inc. in June 1997, Mr. Pappas was employed in the
field of public accounting, five years as President of Pappas & Company, P.C.,
CPAs and two years with the national accounting firm of Ernst & Young, L.L.P.
Mr. Pappas also spent several years as the Chief Financial Officer of a national
home building company. Mr. Pappas received a B.B.A. degree in Accounting from
the University of Texas, Arlington in 1983 and has been a licensed Certified
Public Accountant in the State of Texas since 1985.
None of the directors hold directorships in any other public companies.
None of the directors are related to any of the other directors or officers of
the Company.
Board of Directors and Committees
The Board currently has an Audit Committee and a Compensation
Committee. The Board of Directors does not have a Nominating Committee and the
functions of such a committee are performed by the Board of Directors. There
were three meetings of the Board of Directors during the last fiscal year. Each
director attended all meetings of the Board of Directors.
The Compensation Committee makes recommendations to the Board with
respect to compensation of management employees. The Compensation Committee also
administers plans and programs relating to stock options, pension and other
retirement plans, employees benefits, incentives and compensation and determines
the eligibility and levels of participation under the Company's 1997 Stock
Option Plan (the "1997 Plan") and the Company's 1998 Stock Option Plan (the
"1998 Plan"). The Compensation Committee did not meet during the fiscal year
ended December 31, 1997. The first Compensation Committee meeting will take
place in 1998. Messrs. Kates, Stonebraker and Pappas are the current members of
the Company's Compensation Committee.
The Audit Committee reviews and makes recommendations to the Board
regarding services provided by the independent accountants, reviews with the
independent accountants the scope and results of their annual audit of the
Company's consolidated financial statements and any recommendations they may
have, and makes recommendations to the Board with respect to the engagement or
discharge of the independent accountants. The Audit Committee also reviews the
Company's internal procedures with respect to maintaining books and records, the
adequacy and implementation of internal auditing, accounting and financial
controls, and the Company's policies concerning financial reporting and business
practices. The Audit Committee did not meet during the fiscal year ended
December 31, 1997. The first Audit Committee meeting will be May 9, 1998.
Messrs. Kates, Pappas and Probst are the current members of the Company's Audit
Committee.
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Director Compensation
Messrs. Stonebraker and Probst do not receive additional compensation
for their services as directors. Outside directors are compensated in stock
options under the Company's 1997 Plan and 1998 Plan and reimbursed for travel
and other reasonable out-of-pocket expenses incurred in attending Board and
committee meetings. During fiscal year ended December 31, 1997, outside
directors received 50,000 stock options with an average exercise price of $5.10.
STOCK HOLDINGS OF CERTAIN OWNERS AND MANAGEMENT
The following table sets forth the number of shares of the Company's
Common Stock beneficially owned as of March 31, 1998 by (i) each person known to
the Company to be the beneficial owner of more than 5 percent of the Company's
Common Stock, (ii) each director of the Company, (iii) each executive officer
listed in the Summary Compensation Table ("Named Officers"), and (iv) all
nominees, Named Officers, and other executive officers as a group.
Name and Address Shares Beneficially Percent
of Beneficial Owner Owned (1) Of Class
Mel S. Stonebraker 1,430,000(2) 30.1%
2291 Arapahoe Avenue
Boulder, CO 80302
James M. Probst 1,170,000(2) 24.6%
2291 Arapahoe Avenue
Boulder, CO 80302
Jeffrey T. Kates 0 --
3200 Robert T. Longway Blvd.
Flint, MI 48506
Don A. Forte 0 --
717 Seventeenth Street
Denver, CO 80202
Mark Pappas 685,004(3) 14.4%
307 W. Seventh Street, Suite 1210
Fort Worth, Texas 76102
All directors and Named Officers
as a group (5 persons) 3,285,004(2) 69.0%
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(1) A person is considered to beneficially own any shares: (a) over which such
person exercises sole or shared voting or investment power, or (b) of which such
person has the right to acquire beneficial ownership at any time within 60 days
(i.e., through conversion of securities or exercise of stock options). Unless
otherwise indicated, voting and investment power relating to the above shares is
exercised solely by the beneficial owner or shared by such owner and such
owner's spouse or children. (2) These shares are pledged to Paragon Coyote Texas
Ltd. ("Paragon") as collateral for a loan made to the Company in March 1998. (3)
Represents 163,265 shares owned by Paragon and an option to purchase 521,739
shares of common stock which are currently owned by a third party. Mr. Pappas is
the President of Paragon Management Group, Inc., ("Paragon Management") the sole
general partner of Paragon. Because of his position as President of Paragon
Management, Mr. Pappas may, pursuant to Rule 13d-3 , be deemed to be the
beneficial owner of the shares. Mr. Pappas disclaims beneficial ownership of
these shares.
Compliance with Section 16(a)of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission and the Nasdaq Stock Exchange 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
percent stockholders are required by the regulations of the Securities and
Exchange Commission to furnish the Company with copies of all Section
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16(a) forms they file. To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, during the fiscal year ended December 31, 1997,
all Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
The following table discloses compensation awarded to, earned by, or
paid to the Company's Chief Executive Officer (the "Named Executive Officer").
No other executive officer of the Company received salary and bonus in excess of
$100,000 during the fiscal years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation Awards
Other Annual Securities Underlying
Name and Principal Year Salary ($) Bonus ($) Compensation ($) Options/SARs (#)
- ------------------ ---- ---------------- ----------------
Position
<S> <C> <C> <C> <C> <C>
Mel S. Stonebraker 1997 117,116 -0- 8,700 (1) 45,000
Chief Executive Officer 1996 115,000 -0- 6,529 (1) 0
1995 115,000 -0- 6,805 (1) 0
</TABLE>
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Includes annual cost of company car and life insurance.
1997 Plan
The Company's 1997 Plan provided for the grant of options to purchase
500,000 shares was adopted by the Board of Directors and stockholders on June
10, 1997. The Plan was amended by the Board of Directors and approved by a
majority of the stockholders on February 10, 1998. The amendment provided for a
total of 1,000,000 shares under the 1997 Plan. The shares of the Company's
Common Stock are intended to qualify as either incentive stock options within
the meaning of Section 422 of the Internal Revenue Code ("Incentive Stock
Options") or as options that are not intended to meet the requirements of such
section ("Nonstatutory Stock Options"). Options to purchase shares may be
granted under the Plan to persons who, in the case of Incentive Stock Options,
are employees (including officers of the Company or its subsidiaries), or, in
the case of Nonstatutory Stock Options, are employees (including officers of the
Company or its subsidiaries), non-employee directors or consultants of the
Company. As of March 31, 1998, 470,500 Incentive Stock Options and 95,000
Nonstatutory Stock Options had been granted under the 1997 Plan.
The 1997 Plan is administered by the Compensation Committee of the
Board of Directors. The Compensation Committee has full discretionary authority,
subject to certain restrictions, to determine the number of shares for which
Incentive Stock Options and Nonstatutory Stock Options may be granted and the
individuals to whom, and the times at which, and the exercise prices for which
options will be granted.
1998 Plan
The Company's 1998 Plan was adopted by the Board of Directors and
stockholders in March 1998. The Plan provides for the grant of options to
purchase up to 1,000,000 shares of the Company's Common Stock that are intended
to qualify as either incentive stock options within the meaning of Section 422
of the Internal Revenue Code ("Incentive Stock Options") or as options that are
not intended to meet the requirements of such section ("Nonstatutory Stock
Options"). Options to purchase shares may be granted under the Plan to persons
who, in the case of Incentive Stock Options, are employees (including officers
of the Company or its subsidiaries), or, in the case of Nonstatutory Stock
Options, are employees (including officers of the Company or its subsidiaries),
non-employee directors or consultants of the Company.
As of March 31, 1998, no options had been granted under the 1998 Plan.
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The 1998 Plan is administered by the Compensation Committee of the
Board of Directors. The Compensation Committee has full discretionary authority,
subject to certain restrictions, to determine the number of shares for which
Incentive Stock Options and Nonstatutory Stock Options may be granted and the
individuals to whom, and the times at which, and the exercise prices for which
options will be granted.
The following table presents information concerning individual grants
of options to purchase Common Stock made during the fiscal year ended December
31, 1997, to the Chief Executive Officer.
<TABLE>
<CAPTION>
OPTION GRANTS IN THE FISCAL YEAR ENDED DECEMBER 31, 1997
Potential Realizable Value at
% of Total Assumed Annual Rates of
Options Granted Exercise or Stock Price
Options to Employees Base Price Expiration Appreciation for Option Term
----------------------------
Name Granted in Fiscal Year ($/Share) Date 5% ($) 10% ($)
---- ------- -------------- --------- ---- ---------------
<S> <C> <C> <C> <C> <C> <C>
Mel S. Stonebraker 45,000 9.2 $5.50 9/18/04 69,098 190,962
</TABLE>
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Note: Assumed annual appreciation rates are set by the SEC and are not a
forecast of future appreciation. The actual realized value depends on the market
value of the Common Stock on the exercise date, and no gain to the optionees is
possible without an increase in the price of the Common Stock. All assumed
values are before taxes.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN THE FISCAL YEAR ENDED
DECEMBER 31, 1997 AND FISCAL YEAR-END OPTION VALUES
Value of Unexercised
Shares Number of Unexercised Options In-the Money
Acquired Value at Fiscal Year-End (#) Options at Fiscal Year-End
($)
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----
<S> <C> <C> <C> <C> <C> <C>
Mel S. -0- -0- -0- 45,000 -0- -0-
Stonebraker
<FN>
- ------------
(1) Based on a fair market value as of December 31, 1997 of $4 3/8 per share.
Values are stated on a pre-tax basis.
</FN>
</TABLE>
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE
COMPANY'S FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE
ACT OF 1934, THE FOLLOWING PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY
REFERENCE INTO ANY SUCH FILINGS AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER
SUCH ACTS.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
subject to the approval of the Board of Directors, determines the compensation
of the Company's executive officers, including the Chief Executive Officer, and
oversees the administration of executive compensation programs.
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Executive Compensation Policies and Programs
The Company's executive compensation programs are designed to attract
and retain highly qualified executives and to motivate them to maximize
stockholder returns by achieving both short and long-term strategic Company
goals. The programs link each executive's compensation directly to individual
and Company performance. A significant portion of each executive's total
compensation is variable and dependent upon the attainment of strategic and
financial goals, individual performance objectives, and the appreciation in
value of the Common Stock.
There are three basic components to the Company's "pay for performance"
system: base pay; annual incentive bonus; and long-term, equity-based incentive
compensation. Each component is addressed in the context of individual and
Company performance, competitive conditions and equity among employees. In
determining competitive compensation levels, the Company analyzes information
from several independent sources which include information regarding the general
industry as well as other consumer product companies.
Base pay
Base pay is designed to be competitive, although conservative as
compared to salary levels for equivalent executive positions at other comparable
companies. The executive's actual salary within this competitive framework will
vary based on responsibilities, experience, leadership, potential future
contribution, and demonstrated individual performance. The types and relative
importance of specific financial and other business objectives vary among the
Company's executives depending on their positions and the particular operations
or functions for which they are responsible. The Company's philosophy and
practice is to place a relatively greater emphasis on the incentive components
of compensation.
Annual Incentive Bonus
Each executive is eligible to receive an annual cash bonus. The
"target" level for that bonus, like the base salary level, is set with reference
to Company-wide bonus programs, as well as competitive conditions. These target
levels are intended to motivate the Company's executives by providing
substantial bonus payments for the achievement of financial goals within the
Company's business plan. An executive receives a percentage of his or her target
bonus depending on the extent to which the Company achieves financial
performance goals set by the Compensation Committee and the Board, as measured
by the respective subsidiary's operating income or the Company's net income
before taxes.
Long-term, Equity-based Incentive Compensation
The long-term equity-based compensation program is tied directly to
stockholder return. Under the current program, long-term incentive compensation
consists of stock options, which vest equally over three years after grant.
Stock options are awarded with an exercise price equal to the fair market value
of the Common Stock on the date of grant. Accordingly, the executive is rewarded
only if the market price of the Common Stock appreciates. Since options vest
over time the Company periodically grants new options to provide continuing
incentives for future performance. The size of previous grants and the number of
options held are considered by the Compensation Committee, but are not entirely
determinative of future grants. Like base pay, the grant is set with regard to
competitive considerations, and each individual's actual grant is based upon
individual performance measured against the criteria described in the preceding
paragraphs and the executive's potential for future contributions.
Stock options are designed to align the interests of the Company's
executives with those of stockholders by encouraging executives to enhance the
value of the Company and, hence, the price of the Common Stock and stockholders'
return. In addition, through deferred vesting, this component of the
compensation system is designed to create an incentive for the individual
executive to remain with the Company.
Other Plans
The Company maintains a 401(k) retirement plan, a defined contribution
and a defined benefit plan with the UK entities.
Under the 401(k) retirement plan, the Company contributes 3.5% of each
employees' earnings for pre-tax amounts deferred into the plan. The employer's
contribution vests 20% after three years of service, 50% after four years of
service
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and 100% after five years of service. Under the defined contribution plan, the
Company contributes 6.0% of each employee's earnings as contribution for pre-tax
amounts deferred into the plan.
The defined benefit plan is closed to any new members and was carried
over from the previous owner of Apollo Sports Technologies and Reynolds Cycle
Technologies. The Company's contributions are calculated by an independent
qualified actuary on the basis of initial actuarial assessment as of the
commencement date, based on the participants' years of service and projected
salary upon retirement.
Annual Reviews
Each year, the Committee reviews the executive compensation policies
with respect to the linkage between executive compensation and the creation of
stockholder value, as well as the competitiveness of the programs. The Committee
determines what changes, if any, are appropriate in the compensation programs
for the following year. In conducting the annual review, the Committee considers
information provided by the Company and uses surveys and independent reports.
Each year, the Committee, with the President, reviews the individual
performance of each of the other five most highly compensated executive
officers, including the Chief Executive Officer, and the President's
recommendations with respect to the appropriate compensation levels and awards.
The Committee sets performance and bonus targets and makes stock option grants.
The Committee makes recommendations to the Board of Directors for final approval
of all other compensation matters.
The annual review process will commence in fiscal year 1998.
Chief Executive Officer
The Company has entered into an employment agreement with Mr.
Stonebraker expiring on May 31, 2000, pursuant to which he is employed as the
Chief Executive Officer of the Company. As defined by the employment agreement,
Mr. Stonebraker's is paid an annual salary of $150,000. Mr. Stonebraker's
employment agreement will automatically renew for an additional two year period
unless the Company or Mr. Stonebraker does not renew the contract. In the
future, Mr. Stonebraker's salary will be based on performance and decided by the
Compensation Committee.
Members of the Compensation Committee as of December 31, 1997:
Jeffrey T. Kates
Mel S. Stonebraker
Personnel Committee Interlocks and Insider Participation
The members of the Compensation Committee of the Board of Directors during
the fiscal year ended December 31, 1997 are listed above. The Committee is
composed of a Board member and the Chief Executive Officer. Mr. Mark Pappas was
elected to the Compensation Committee in March 1998.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has entered into an employment agreement with Mr.
Stonebraker expiring on May 31, 2000, pursuant to which he is employed as Chief
Executive Officer of the Company. The agreement automatically renews for
additional two year periods unless either party notifies the other party that it
does not intend to renew the agreement. The employment agreement provides for
employment of Mr. Stonebraker on a full-time basis at an annual salary of
$150,000, beginning September 1, 1997. Mr. Stonebraker is entitled to receive a
bonus based on certain objectives to be established by the Board of Directors.
He received incentive stock options to purchase 45,000 shares over a seven year
term at $5.50 per share. The options vest over a three year period if the
Company achieves 90% of its targeted earnings before deduction of interest and
taxes. In February 1998, the Board of Directors approved to waive the specified
90% earnings target. Mr. Stonebraker may be terminated by the Company for cause,
which is defined as excessive unauthorized absenteeism, actual fraud or material
acts of dishonesty, destruction of material Company property; willful disclosure
of Company proprietary information, or a material violation of internal controls
or procedures. If Mr. Stonebraker voluntarily terminates prior to the end of the
original contract term, he is required to reimburse the Company up to $62,500,
on a pro-rata basis depending
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on the date of termination. If the Company terminates Mr. Stonebraker without
cause, he is entitled to 18 months' salary as a severance payment. If
termination without cause occurs after the end of the original contract term, he
is entitled to 12 months' salary. The employment agreement provides that Mr.
Stonebraker may not compete with the Company for a period of the greater of (i)
nine months subsequent to their termination date, or (ii) the severance pay
period. Mr. Stonebraker also has a change of control agreement with the Company
pursuant to which he is entitled to a continuation of salary benefits for 24
months if his employment is terminated by the Company without cause or by him
for good reason (such as a reduction in his compensation) within two years after
a change of control.
RELATED PARTY TRANSACTIONS
On March 19, 1998, the Company entered into a Six Million Dollar
($6,000,000) promissory note (the "Note") and loan agreement (the "Loan
Agreement") with Paragon. Paragon is an unrelated third party to the Company.
The Note is due September 19, 1999. Interest is payable quarterly at twelve
percent (12%) per annum.
In connection with the Note, Paragon received 163,265 shares of the
Company's common stock (the "Initial Consideration Shares"). The number of
Initial Consideration Shares may be adjusted in the future in certain events. In
the event that, on March 19, 1999, any principal of the Note remains unpaid and
the aggregate value of the Initial Consideration Shares (the "Aggregate First
Anniversary Reset Value"), based on the per-share closing price of the Common
Stock on the last trading day immediately preceding March 19, 1999, as quoted on
the NASDAQ Small Cap market system (the "Per- Share First Anniversary Reset
Value"), is less than $1,000,000, then the Company must deliver to Paragon, at
the Company's option, either (a) an amount in cash equal to (i) $1,000,000 less
(ii) the Aggregate First Anniversary Reset Value (the "Aggregate First
Anniversary Reset Value Difference") or (b), free of any and all encumbrances
(other than restrictions on transfer imposed by applicable securities laws),
such number of shares of Common Stock as are equal to (i) the Aggregate First
Anniversary Reset Value Difference divided by (ii) the Per-Share Anniversary
Reset Value. A similar adjustment to the Initial Consideration Shares may be
made at the Maturity Date (September 19, 1999) and on any date that the Note is
prepaid in full prior to the Maturity Date.
The Shares acquired by Paragon are subject to a registration rights
agreement providing that during a five year period beginning March 19, 1998, the
Company will pay for the registration of the Lender's shares with the Securities
and Exchange Commission.
The Loan Agreement provides that the Note is secured by 1,430,000
shares of the Company's common stock owned by Mel Stonebraker, Chief Executive
Officer, and by 1,170,000 shares of the Company's common stock owned by Jim
Probst, President. While the Note remains outstanding and the Company remains in
compliance with its term, Messrs.
Stonebraker and Probst will continue to vote their shares.
As a condition of the Loan Agreement, the Board of Directors has
appointed Mr. Mark Pappas, an affiliate of Paragon, to the Company's Board of
Directors.
STOCKHOLDER PROPOSALS
A proposal by a stockholder for inclusion in the Company's proxy
statement and form of proxy for the Company's next annual meeting of
stockholders must be received by Coyote Sports, Inc. at the Company's principal
executive offices not later than November 30, 1998. In order to curtail
controversy as to the date on which a proposal was received by the Company, it
is suggested that proponents submit their proposals by Certified Mail - Return
Receipt Requested.
OTHER MATTERS
As of the time this proxy statement was printed, management was unaware
of any proposals to be presented for consideration at the Annual Meeting other
than those set forth herein, but if other matters do properly come before the
Annual Meeting, the persons named in the proxy will vote the shares represented
by such proxy according to their best judgment.
A COPY OF COYOTE SPORTS' 1997 ANNUAL REPORT AND FORM 10-KSB FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1997, WILL BE AVAILABLE TO STOCKHOLDERS WITHOUT
CHARGE UPON WRITTEN REQUEST TO: INVESTORS RELATIONS SERVICES, INC., 490 N.
CAUSEWAY, NEW SMYRNA BEACH, FLORIDA 32169.
8
<PAGE>
PROXY CARD COYOTE SPORTS, INC. PROXY CARD
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD MAY 9, 1998
The undersigned hereby constitutes, appoints and authorizes Mel
Stonebraker or Jim Probst, the true and lawful attorney and Proxy of the
undersigned with full power of substitution and appointment, for and in the
name, place and stead of the undersigned to act for and vote as designated
below, all of the undersigned's shares of the $0.001 par value common stock of
Coyote Sports, Inc., a Nevada corporation, at the Annual Meeting of Stockholders
to be held at Chrisman, Bynum & Johnson, P.C., 1900 Fifteenth Street, Boulder,
CO 80302 at 10:00 a.m., Mountain Daylight Time, on May 9, 1998, and at any and
all adjournments thereof, for the following purposes:
1. To elect five (5) Directors to serve until the next Annual
Meeting of Stockholders and until their successors are duly
elected and qualified:
|_| For all nominees listed below (except as marked to the contrary):
Mel S. Stonebraker, James M. Probst, Jeffrey T. Kates, Don A. Forte, Mark Pappas
(INSTRUCTION: To withhold authority to vote for any individual nominee,
draw a line through or otherwise strike out his or her name. If authority to
vote for the election of any nominee is not withheld, the execution of this
Proxy shall be deemed to grant such authority.)
2. To transact such other business as may properly come before the
meeting, or any adjournment thereof.
|_| FOR |_| AGAINST |_| ABSTAIN
(Continued on reverse side.)
<PAGE>
The undersigned hereby revokes any Proxies as to said shares heretofore
given by the undersigned, and ratifies and confirms all that said attorneys and
Proxies may lawfully do by virtue hereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2. THIS PROXY CONFERS DISCRETIONARY AUTHORITY IN RESPECT TO
MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE MAILING OF THE NOTICE OF THE
ANNUAL MEETING OF Stockholders TO THE UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement furnished herewith.
Dated: __________________________________ ,1998
_________________________________________________
_________________________________________________
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s) shown
hereof. Executors, administrators, trustees, guardians
and attorneys should indicate when signing. Attorneys
should submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF COYOTE
SPORTS, INC. PLEASE SIGN AND RETURN THIS PROXY TO THE COMPANY. THE GIVING OF A
PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
