SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 18, 1999
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COYOTE SPORTS, INC.
(Exact name of registrant as specified in its charter)
Nevada 333-29077 88-0326730
(State or other jurisdiction of (Commission file number) (I.R.S. employer
incorporation or organization) identification no.)
2291 Arapahoe Avenue,
Boulder, Colorado 80302
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (303) 818-4626
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Item 5. Other Events.
On January 18, 1999, Coyote Sports, Inc. (the "Company") and Royal
Precision, Inc. ("RP") announced that their respective Boards of Directors
unanimously approved a letter of intent, dated January 18, 1999, pursuant to
which RP will combine with the Company.
Under the terms of the transaction, RP shareholders would receive one
share of a new class of 6% Convertible Preferred Stock of the Company for each
share of RP common stock they own. The 6% Convertible Preferred Stock would have
a 6% cumulative annual dividend, payable quarterly, a redemption price of $6.00
per share, and would be convertible into common stock of the Company
representing, in the aggregate, 50% of the Company's common stock outstanding on
the closing date of the transaction, after giving effect to such conversion.
Completion of the transaction is subject to the completion of the
parties' respective due diligence, the negotiation and execution of a definitive
agreement, required approvals of shareholders of both companies, the expiration
of any applicable waiting periods under the antitrust laws, registration of the
shares of the Company's preferred stock issuable in the transaction under the
securities laws, and other customary closing conditions. The transaction is
anticipated to close in the second quarter of 1999.
A copy of the letter of intent is attached as Exhibit 99.1 and is
incorporated herein by reference. A copy of the text of the joint press release
issued by the parties on January 18, 1999 is attached as Exhibit 99.2 and is
incorporated herein by reference. The foregoing description is qualified in its
entirety by reference to such exhibits.
Certain statements contained herein constitute "forward looking"
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such forward looking statements involve numerous assumptions, known and
unknown risks, uncertainties and other factors which may cause actual and future
performance or achievements of the Company, including with respect to the
proposed combination, to be materially different from any future results,
performance or achievements expressed or implied by such forward looking
statements. Such factors include, among other things, the following: achieving
sales levels to fulfill revenue expectations; the absence of presently
unexpected costs or charges, certain of which may be outside the control of the
Company; uncertainties involved in integrating the operations of the Company and
RP; general economic and business conditions; and industry competition.
Additional factors are detailed in the Company's public filings with the
Securities and Exchange Commission. The Company disclaims any responsibility to
update any forward-looking statement provided herein.
Item 7. Exhibits.
(c) Exhibits
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Exhibit No. Description
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99.1 Letter of Intent dated January 18, 1999 between the
Company and Royal Precision, Inc.
99.2 Joint press release issued by the Company and Royal
Precision, Inc. dated January 18, 1999.
2
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Coyote Sports, Inc. has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: January 26, 1999 COYOTE SPORTS, INC.
By: /s/ John P. McNeill
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John P. McNeill
Chief Financial Officer and Treasurer
3
EXHIBIT 99.1
Coyote Sports, Inc.
2291 Arapahoe Avenue
Boulder, Colorado 80302
January 18, 1999
CONFIDENTIAL
Royal Precision, Inc.
15170 North Hayden Road
Scottsdale, Arizona 89260
Ladies and Gentlemen:
This will confirm the mutual understanding between Coyote Sports, Inc.
("Coyote") and Royal Precision, Inc. ("Royal") regarding the proposed business
combination (the "Transaction") between Royal and a newly formed wholly owned
subsidiary of Coyote ("Newco"), or, at Coyote's option, Coyote itself.
1. Transaction. In the Transaction, Royal will combine with Newco (or,
at Coyote's option, Royal will combine directly with Coyote). The parties will
endeavor to structure the Transaction on a tax-free basis to the extent
practicable consistent with the other terms of their understanding.
2. Consideration. Pursuant to the Transaction, each share of Royal
common stock outstanding at the time of the combination will be converted into
the right to receive one share of a new class of Coyote Convertible Preferred
Stock (the "Preferred Stock").
3. Preferred Stock. The Preferred Stock (a) shall have a liquidation
preference and redemption price of $6.00 per share; (b) shall be entitled to a
quarterly cumulative cash dividend at a rate equal to 6% per annum; (c) shall be
convertible into Coyote common stock initially representing an aggregate of 50%
of the common stock outstanding at the effective time of the combination on a
primary share basis (before dilution for warrants attached to subordinated debt,
if any, or otherwise issued in connection with any financing, equity issued in a
contemplated further acquisition or agreed-upon employee stock options); and (d)
shall otherwise have substantially the terms set forth in the Summary of Terms
attached as Annex A hereto.
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4. Definitive Agreement. The parties shall negotiate in good faith with
a view to entering into a definitive agreement on terms and conditions mutually
acceptable to Coyote and to Royal (the "Definitive Agreement") as promptly as
possible, with the intention of doing so prior to January 28, 1999.
5. Shareholder Agreements. Holders of Royal common stock who are
directors, officers or affiliates represented on the Board of Directors,
representing a percentage of such common stock acceptable to Coyote's Board of
Directors, shall enter into agreements (the "Shareholder Agreements") mutually
acceptable to Coyote and such holders to vote all Royal shares beneficially
owned by them in favor of the Transaction and take certain related action. All
holders of Coyote common stock who are directors of Coyote shall enter into
similar agreements to vote all Coyote shares beneficially owned by them in favor
of the Transaction and take certain related action.
6. Timing. The parties anticipate seeking to (a) execute the Definitive
Agreement and the Shareholder Agreements within 10 days after the date hereof;
(b) file a joint proxy statement/prospectus with respect to the Transaction with
the SEC within 20 days after the date hereof; and (c) hold meetings of their
respective shareholders to approve the Transaction and consummate the
Transaction within 80 days after the date hereof.
7. Financing. It shall be a condition to the obligations of both Coyote
and Royal to complete the Transaction that Coyote have received sufficient
financing to satisfy ongoing working capital needs of Coyote and Royal following
the Transaction and to refinance existing indebtedness of both companies. Coyote
will use its reasonable best efforts to obtain such financing, and Royal will
use its reasonable best efforts to assist Coyote in doing so.
8. Due Diligence. Prior to entering into a Definitive Agreement, each
party hereto shall have been afforded the opportunity to conduct a due diligence
investigation of the other party hereto and each party hereto shall have been
satisfied, in the good faith exercise of its sole discretion, with its due
diligence investigation of the other party hereto.
9. Fairness Opinion. Prior to entering into a Definitive Agreement,
each of the Board of Directors of Coyote and the Board of Directors of Royal
shall have received an opinion of an investment bank acceptable to such Board (a
"Financial Advisor") that the consideration to be received by the stockholders
of such party (other than the other party and its subsidiaries and affiliates)
in the Transaction is fair to such stockholders from a financial point of view.
Such opinion shall be in form and substance satisfactory to such Board of
Directors.
10. Board Composition. The parties hereby agree that the Board of
Directors of Coyote following the Transaction shall consist of 8 individuals
including 4 individuals designated by directors of Coyote immediately prior to
the Transaction and
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Royal Precision, Inc.
January 18, 1999
Page 6
4 individuals designated by directors of Royal immediately prior to the
Transaction. Thereafter, there shall be a shareholders agreement with respect to
certain matters of corporate governance including composition of the Board of
Directors.
11. Public Announcements. To the extent practicable, Coyote and Royal
will consult with each other prior to issuing any press release or otherwise
making any public statements regarding this letter or the Transaction; provided
that after such consultation or attempted consultation as is reasonable under
the circumstances, any party hereto may make any statement or issue any press
release that is required by applicable law or by any applicable rule or
regulation (including, without limitation, the rules and regulations of the
National Association of Securities Dealers, Inc. or any other applicable
self-regulatory organization).
12. Standstill. Each party agrees that (except as specifically
contemplated by this letter or as otherwise agreed by the Board of Directors of
the other party) for a period of two years after the date hereof, such party
shall not, directly or indirectly, (a) acquire or offer or propose to acquire
any common stock or other security, or all or any significant portion of the
assets (other than in the ordinary course of business), of the other party, (b)
effect or offer or propose to effect any merger, acquisition, consolidation or
similar transaction involving the other party, (c) propose, participate in any
solicitation of proxies or consents with respect to, or otherwise initiate or
support any proposal regarding election of directors or other action to be taken
by shareholders or directors of the other party, or (d) attempt to induce,
advise or otherwise influence any other person with respect to any of the
foregoing.
13. Termination. This letter shall terminate and have no further force
and effect (except as to Section 12 hereof, which shall remain in effect in
accordance with its terms) unless the Definitive Agreement is entered into
within 90 days after the date hereof. In addition, this letter may be terminated
by either party hereto upon written notice to the other party to this letter at
any time after February 28, 1999. In the event that this letter is terminated
each party shall bear its own expenses in connection herewith.
14. Binding Effect. This letter is only a statement of the present
intentions of the parties and it is understood that this letter is not deemed
self-executing, that this letter is subject to the negotiation, execution and
delivery of the Definitive Agreement and that, subject to the proviso to this
sentence, the parties' respective legal obligations shall arise solely from the
Definitive Agreement, when and if executed; provided that
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Royal Precision, Inc.
January 18, 1999
Page 7
the provisions of Sections 4, 7, 11, and 12 hereof shall be binding on the
parties in accordance with their terms from and after the date hereof.
If the foregoing correctly reflects the mutual understanding between
us, please so indicate by signing and returning the enclosed copy of this
letter.
Very truly yours,
COYOTE SPORTS, INC.
By: /s/ James M. Probst
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James M. Probst
President and Chief Executive
Officer
Agreed and Accepted:
ROYAL PRECISION, INC.
By: /s/ Raymond J. Minella
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Raymond J. Minella
Chairman
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SUMMARY OF TERMS OF C PREFERRED STOCK
Issuance One share of new C preferred stock to be
issued for each share of R common stock
outstanding prior to C/R combination.
Liquidation Preference $6 per share, plus any accrued and
unpaid dividends.
Dividends Cumulative, payable quarterly in cash at
a rate equal to 6% per annum. To the
extent cash dividends are restricted by
terms of other financing, dividends
accrue until payment permitted.
Redemption Redeemable at Company's option at any
time or from time to time through third
anniversary of issue date, at redemption
price equal to $6 per share, plus any
accrued and unpaid dividends.
Determinations as to redemption and
other matters relating to preferred
stock shall be made by C board without
participation of directors designated by
holders of preferred. Notice of
redemption to be given in time
sufficient to permit conversion prior
thereto.
Conversion Rights Convertible at option of holder at any
time or from time to time into C common
stock representing, in the aggregate,
50% of the C common stock outstanding
after giving effect to such conversion
(but before dilution for warrants
attached to subordinated debt, if any,
or otherwise issued in connection with
any financing, equity issued in
contemplated further acquisition or
agreed-upon employee stock options). Any
accrued and unpaid dividends at time of
conversion will remain a liability of
Company, to be paid when permitted and
to bear interest at 6% per annum until
paid.
Voting Rights Preferred stock to vote (separately as a
class) as to matters materially
adversely affecting holders of preferred
stock, or to the extent otherwise
required by law. Notice of matters to be
submitted to vote of common stock to be
given in time sufficient to permit
conversion prior to
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record date for such vote. The parties
shall negotiate in good faith with
regard to such matters as to which the
common and preferred shall vote together
as a class.
Registration Rights Common stock issuable upon conversion
will be registered to extent necessary
for conversion and re-sale, subject to
customary limitations.
Affirmative Covenants Affirmative covenants will include
maintenance of corporate existence,
compliance with laws, payment of taxes,
and provision of annual and quarterly
financial information.
Negative Covenants Negative covenants will include
prohibition of issuance of additional
preferred stock senior to this class of
preferred stock or modification of terms
of preferred stock without consent of
holders of at least 66 2/3% of the
preferred stock then outstanding.
Anti-Dilution Protection Customary anti-dilution protection in
the event of recapitalizations, stock
splits, stock dividends and the like.
EXHIBIT 99.2
FOR IMMEDIATE RELEASE Contact Information:
Coyote Sports, Inc.
James M. Probst
932-8794
Royal Precision, Inc.
Raymond J. Minella
(602) 627-0200
Coyote Sports to Combine with Royal Precision Creating a Unique Platform in the
Golf Shaft Equipment Market
Boulder, Colorado and Scottsdale, Arizona
January 18, 1999
Coyote Sports, Inc. (NASDAQ: COYT) and Royal Precision, Inc. (NASDAQ:
RIFL) today announced that their respective Boards of Directors have unanimously
approved a letter of intent pursuant to which Royal Precision will combine with
Coyote Sports, joining two global leaders in the design and manufacture of steel
and graphite golf shafts. The combined companies had annual sales of
approximately $65 million in 1998.
Under the terms of the transaction, Royal Precision shareholders would
receive one share of a new class of Coyote Convertible Preferred Stock for each
share of Royal Precision common stock they own. The Convertible Preferred Stock
would have a redemption price of $6.00 per share and would be convertible into
Coyote common stock representing, in the aggregate, 50% of the Coyote common
stock outstanding on the closing date of the transaction, after giving effect to
such conversion.
James M. Probst, President and Chief Executive Officer of Coyote Sports
said: "The combination of Coyote Sports with Royal Precision will enhance the
combined entities' strategic position as a leading supplier of golf shafts. This
combination is a major step toward developing a unique platform in the golf club
shaft market, with strong positions in both the steel and graphite shaft markets
as well as in golf grips through Royal Grip. Further, the combination is a
significant step towards achieving our other strategic objectives of improving
profitability and stability of revenues and cash flows."
Raymond J. Minella, Chairman of Royal Precision said: "We are excited
about the opportunity to combine our two businesses. This transaction will
provide Royal Precision shareholders with a significant equity interest in a
larger and stronger combined entity with the accompanying improved long-term
growth potential. We look forward to working with Coyote Sports and its
management team to successfully
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integrate our two companies for the benefit of our shareholders, customers, and
employees."
Completion of the transaction is subject to the completion of the
parties' respective due diligence, the negotiation and execution of a definitive
agreement, required approvals of shareholders of both companies, the expiration
of any applicable waiting periods under the antitrust laws, registration of the
shares of Coyote Sports' preferred stock issuable in the transaction under the
securities laws, and other customary closing conditions. The transaction is
anticipated to close in the second quarter of 1999.
Coyote Sports, Inc. is a diversified sports manufacturing company that
specializes in golf shafts (Apollo(R) and Unifiber(R)), cycling (Reynolds(R)
premium cycle tubing), and the manufacture of advanced composite materials used
for sporting goods products.
Royal Precision, Inc. is the designer and manufacturer of the
high-quality and innovative Rifle(TM) golf club shaft, featuring the company's
Frequency Coefficient Matching(R) technology (FCM), designed to provide
consistent flex characteristics to all clubs in a golfer's bag. Royal Precision
is also the designer and distributor of Royal Grip(R) golf club grips, offering
a wide variety of standard and custom models, all of which feature a distinctive
feel, appearance and durability; and the manufacturer and distributor of the
high-quality Roxxi(R) athletic headwear product line.
Certain statements contained herein constitute "forward looking"
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such forward looking statements involve numerous assumptions, known and
unknown risks, uncertainties and other factors which may cause actual and future
performance or achievements of Coyote Sports or Royal Precision, including with
respect to the proposed combination, to be materially different from any future
results, performance or achievements expressed or implied by such forward
looking statements. Such factors include, among other things, the following:
achieving sales levels to fulfill revenue expectations; the absence of presently
unexpected costs or charges, certain of which may be outside the control of
Coyote Sports and Royal Precision; uncertainties involved in integrating the
operations of Coyote Sports and Royal Precision; general economic and business
conditions; and industry competition. Additional factors are detailed in Coyote
Sports' and Royal Precision's public filings with the Securities and Exchange
Commission. Coyote Sports and Royal Precision disclaim any responsibility to
update any forward-looking statement provided in this press release.
This release is neither an offer to sell nor a solicitation of an offer
to buy securities of Coyote Sports, Inc. or Royal Precision, Inc., nor a
solicitation of a proxy from any holder of securities of Coyote Sports, Inc. or
Royal Precision, Inc. Any such offer or solicitation will only be made in
compliance with applicable securities laws.
