================================================================================
SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[X] Filed by the Registrant [ ] Filed by a Party other than the
Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(c)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional
Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
COYOTE NETWORK SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)
COYOTE NETWORK SYSTEMS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: ________
(2) Aggregate number of securities to which transaction applies: ________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined): ___________________________
(4) Proposed maximum aggregate value of transaction: _______________________
(5) Total fee paid: _________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: _________________________________________________
(2) Form, Schedule or Registration Statement No.: ____________________________
(3) Filing Party: ___________________________________________________________
(4) Date Filed: ___________________________________________________________
================================================================================
<PAGE>
COYOTE NETWORK SYSTEMS, INC.
4360 Park Terrace Drive
Westlake Village, California 91361
(818) 735-7600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Coyote Network Systems, Inc.:
The Annual Meeting of Stockholders of Coyote Network Systems, Inc. (the
"Company") will be held at the Radisson Hotel, 30100 Agoura Road, Agoura Hills,
CA 91301 at 11:00 a.m., Pacific Daylight Time, on September 28, 1999 for the
following purposes:
1. To elect two directors for three year terms each and one director for
a two year term.
2. To authorize an amendment to the Company's certificate of
incorporation to increase the authorized number of shares of Common
Stock from 30,000,000 to 60,000,000.
3. To ratify the appointment of Arthur Andersen, LLP as the independent
auditors and accountants for the Company for the year ending March 31,
2000.
4. To transact such other business as may properly come before the
meeting.
All stockholders are invited to attend the meeting. Stockholders of record at
the close of business on August 16, 1999, the record date fixed by the Board of
Directors, are entitled to notice of and to vote at the meeting. A complete list
of stockholders entitled to notice of and vote at the meeting will be open to
examination by stockholders beginning ten days prior to the meeting for any
purpose germane to the meeting during normal business hours at the office of the
Secretary of the Company at 4360 Park Terrace Drive, Westlake Village,
California 91361.
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.
By Order of the Board of Directors
/s/ Brian A. Robson
__________________________________
Brian A. Robson
Secretary
Westlake Village, California
August 6, 1999
<PAGE>
COYOTE NETWORK SYSTEMS, INC.
4360 Park Terrace Drive
Westlake Village, California 91361
(818) 735-7600
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
The accompanying proxy is solicited by the Board of Directors of Coyote Network
Systems, Inc. (the "Company") for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at 11:00 a.m., Pacific Daylight Time, on September
28, 1999 at the Radisson Hotel, 30100 Agoura Road, Agoura Hills, California
91301 and any adjournment thereof.
VOTING SECURITIES; PROXIES
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 remuneration, may also solicit proxies personally by telefax and
by telephone. In addition to mailing copies of this material to stockholders,
the Company may request persons, and reimburse them for their expenses in
connection therewith, who hold stock in their names or custody or in the names
of nominees for others to forward such material to those persons for whom they
hold stock of the Company and to request their authority for execution of the
proxies.
The holders of a majority of the outstanding shares of Common Stock, par value
$1.00 per share (the "Common Stock"), present in person or represented by proxy
shall constitute a quorum at the Annual Meeting. The approval of an affirmative
vote of the majority of the outstanding shares of Common Stock present in person
or represented by proxy at the Annual Meeting is required for election of the
nominees as directors and for the adoption of all other matters.
The form of proxy solicited by the Board of Directors affords stockholders the
ability to specify a choice among approval of, disapproval of, or abstention
with respect to each matter to be acted upon at the Annual Meeting. Shares of
Common Stock represented by the proxy will be voted, except as to matters with
respect to which authority to vote is specifically withheld. Where the solicited
stockholder indicates a choice on the form of proxy with respect to any matter
to be acted upon, the shares will be voted as specified. Abstentions and broker
non-votes will not have the effect of votes in opposition to a director or
"against" any other proposal to be considered at the Annual Meeting.
All shares of Common Stock represented by properly executed proxies which are
returned and not revoked will be voted in accordance with the instructions, if
any, given therein. If no instructions are provided in a proxy, the shares of
Common Stock represented by such proxy will be voted FOR the Board's nominees
for director, FOR the approval of Proposal 2 and FOR the approval of Proposal 3
and in accordance with the proxy-holder's best judgment as to any other matters
raised at the Annual Meeting. Under Delaware law, stockholders are not entitled
to dissenter's rights of appraisal with respect to Proposals 1, 2, or 3.
A stockholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice of such revocation to the Secretary of the
Company, executing and delivering to the Company a later dated proxy reflecting
contrary instructions or appearing at the Annual Meeting and taking appropriate
steps to vote in person.
At the close of business on August 16, 1999, ___________ shares of Common Stock
were outstanding and eligible for voting at the meeting. Each stockholder of
record is entitled to one vote for each share of Common Stock held on all
matters that come before the Annual Meeting. Only stockholders of record at the
close of business on August 16, 1999 are entitled to notice of, and to vote at,
the Annual Meeting. All share and per share numbers included herein have been
retroactively adjusted to reflect a stock dividend paid on November 4, 1998 to
holders of record as of October 21, 1998 (the "1998 Stock Dividend").
This proxy material is first being mailed to stockholders commencing on or about
August 20, 1999.
1
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
The Board of Directors is divided into three classes of directors, consisting of
three classes of two members each or six members in the aggregate. The term of
each class is three years. The Board of Directors currently consists of four
members, James J. Fiedler, Daniel W. Latham, Jack E. Donnelly and Stephen W.
Portner. The number of directors to be elected at the Annual Meeting to
constitute the Board of Directors has been fixed at three. Two of the nominees
have agreed to stand for re-election at the Annual Meeting to hold office for a
period of three years, the third nominee has agreed to stand for election at the
Annual Meeting to hold office for a period of two years, and in any event until
a successor is elected and qualified. It is intended that the accompanying proxy
will be voted in favor of the following persons to serve as directors, unless
the stockholder indicates to the contrary on the proxy.
The persons named in the accompanying proxy intend to vote for the election as
director of the nominees listed herein. Each nominee has consented to serve if
elected. The Board of Directors has no reason to believe that any nominee will
not serve if elected, but if any of them should become unavailable to serve as a
director, and if the Board of Directors designates a substitute nominee or
nominees, the persons named as proxies will vote for the substitute nominee or
nominees designated by the Board of Directors.
The following table sets forth certain information with respect to each person
who is currently a director of the Company and the individuals nominated and
recommended to be elected to the Board of Directors of the Company and is based
on the records of the Company and information furnished to it by such persons.
Reference is made to "Security Ownership of Certain Beneficial Owners and
Management" for information pertaining to stock ownership by each director and
executive officer of the Company and the nominees.
Name Age Position
---- --- --------
Jack E. Donnelly 64 Director
James J. Fiedler 52 Chairman of the Board, Chief Executive Officer
and Director
Daniel W. Latham 51 President, Chief Operating Officer and Director
J. Thomas Markley 66 Director
Stephen W. Portner 47 Director
NOMINEES FOR ELECTION AS DIRECTORS WITH TERMS EXPIRING IN 2002
Daniel W. Latham, age 51, has been a director of the Company since November
1996. He has been President and Chief Operating Officer of the Company since
November 1996 and President of Coyote Technologies, LLC ("CTL") since September
1995. Prior to his association with CTL, Mr. Latham was the President of
Frontier Communications Long Distance Company.
Jack E. Donnelly, age 64, has been a director of the Company since November
1991. Since 1986, he has been a principal of Bailey & Donnelly Associates, Inc.,
an investment company.
2
<PAGE>
NOMINEE FOR ELECTION AS DIRECTOR WITH TERM EXPIRING IN 2001
J. Thomas Markley, age 66, has served as an advisor to the Company's Board of
Directors. Mr. Markley is President of JTM, Inc., a consulting firm specializing
in senior management consulting for telecommunications, data communications and
electric utilities. Previously, Mr. Markley was President of Raytheon Worldwide,
a leading diversified technology company, as well as Corporate Vice President
and President of Raytheon Data Systems. Prior to Raytheon, Mr. Markley was
Deputy Program Manager of NASA's Apollo Program. Mr. Markley has served on the
President's Science Advisory Council, as a member of the Space Defense
Initiative Committee and as an examiner for the Malcolm Baldridge National
Quality Award. Mr. Markley also was Senior Vice President Telecommunication
Operation and Planning for Salient3 Communications, Inc., a telecom equipment
company.
DIRECTORS WITH TERMS EXPIRING IN 2000
James J. Fiedler, age 52, has been a director of the Company since August 1996.
He has been Chairman and Chief Executive Officer of the Company since November
1996 and Chairman and Chief Executive Officer of CTL since September 1995.
Previously, Mr. Fiedler was a principal in the consulting firm of Johnson &
Fiedler. From November 1992 to September 1994, Mr. Fiedler was Vice President of
Sales and Marketing and subsequently President and Director of Summa Four, Inc.,
a telecom switching company. From June 1989 to July 1992, Mr. Fiedler was
Executive Vice President and Chief Operating Officer of Timeplex, a subsidiary
of Unisys engaged in the business of manufacturing data and telecommunications
equipment. Prior to June 1989, Mr. Fiedler held executive positions with Unisys
Corporation and Sperry Corporation (subsequently acquired by Unisys
Corporation). He has been a director of Entree Corporation since November 1996.
Stephen W. Portner, age 47, has been a director of the Company since August
1997. He is the Managing Director of European Projects for JMJ Associates, a
global management consulting company, and has served in various capacities at
JMJ Associates from January 1994 to the present. From December 1991 to January
1994, Mr. Portner held positions in plant and project management and was
Director of Quality at Air Products Incorporated, an industrial chemicals
company.
Stockholder Vote Required
Election of each director requires a majority of the votes of the shares of
Common Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors.
The Board of Directors Recommends a Vote FOR the Election of Each of
the Nominees to the Board of Directors of the Company.
Committees of the Board - Board Meetings
The Board of Directors has established an audit committee and an executive
committee to assist it in the discharge of its responsibilities. The principal
responsibilities of each committee and the members of each committee are
described in succeeding paragraphs. Actions taken by any committee of the Board
of Directors are reported to the Board of Directors, usually at its next meeting
or by written report.
The Audit Committee of the Board of Directors currently consists of Jack E.
Donnelly and Stephen W. Portner. The Audit Committee held one meeting during the
fiscal year ended March 31, 1999. The Audit Committee is responsible for
recommending the appointment of a firm of independent public accountants to
3
<PAGE>
examine the financial statements of the Company and its subsidiaries for the
coming year. In making this recommendation, the Audit Committee reviews the
nature of audit services rendered, or to be rendered, to the Company and its
subsidiaries. The Audit Committee reviews with representatives of the
independent public accountants the auditing arrangements and scope of the
independent public accountants' examination of the financial statements, results
of those audits, their fees and any problems identified by the independent
public accountants regarding internal accounting controls, together with their
recommendations. The Audit Committee also meets with the Company's Chief
Financial Officer to review reports on the functioning of the Company's programs
for compliance with its policies and procedures regarding financial controls and
internal auditing. This includes an assessment of internal controls within the
Company and its subsidiaries based upon the activities of the Company's internal
auditing personnel as well as an evaluation of the performance. The Audit
Committee is also prepared to meet at any time upon request of the independent
public accountants or the Chief Financial Officer to review any special
situation arising in relation to any of the foregoing subjects. The Audit
Committee held one meeting during the fiscal year ended March 31, 1999.
The Executive Committee of the Board of Directors currently consists of James J.
Fiedler, Daniel W. Latham and Jack E. Donnelly. The Executive Committee has and
may exercise all of the powers of the Board of Directors in the management of
the business and affairs of the corporation during intervals between meetings of
the Board of Directors, except with respect to amendments to the Certificate of
Incorporation or by-laws, merger, consolidation, sale of all or substantially
all of the corporation's assets, dissolution, declaration of dividends,
authorization of issuance of stock, or filling vacancies on the Board of
Directors. The Executive Committee did not meet during the fiscal year ended
March 31, 1999. All issues were discussed and reviewed by the Board of
Directors.
The Board of Directors does not have a nominating committee or a compensation
committee. These functions are performed by the Board of Directors as a whole.
The Board of Directors met or acted by unanimous written consent on nine
occasions during the fiscal year ended March 31, 1999. All directors attended at
least 89% of the meetings held by the Board of Directors and committees of which
they are members.
There are no family relationships among any of the directors or executive
officers of the Company. The Company's executive officers serve in such capacity
at the pleasure of the Board of Directors.
4
<PAGE>
Executive Compensation
- ----------------------------------------------
All shares and per share numbers included herein have been retroactively
adjusted to give effect to a 5% stock dividend which was paid on November 4,
1998 to holders of record as of October 21, 1998.
The following table sets forth, for the three fiscal years ended March 31, 1999,
the total annual compensation paid to, or accrued by the Company for the account
of, James J. Fiedler, Daniel W. Latham and Brian A. Robson (the "Named
Executives") serving as such at March 31, 1999 and one former executive officer:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
----------------------------------- ----------------------------------------
Other Restricted Securities Long-term All
Name and Annual Stock Underlying Incentive Plan Other
Principal Position Year Salary Bonus Compensation(5) Award(s) Options Layouts Compensation
------------------ ---- -------- ------- --------------- -------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James J. Fiedler (1) 1999 $300,000 $ 9,335 $20,000 --- 94,500 (6) --- $ 7,200 (8)
Chairman, CEO 1998 $200,000 $19,746 $15,000 --- --- --- $ 7,200 (8)
and Director 1997 $200,000 --- $ 3,720 --- --- --- ---
Daniel W. Latham (2) 1999 $300,000 $ 9,335 $20,000 --- 94,500 (6) --- $ 7,200 (8)
President, COO 1998 $175,000 $19,746 $15,000 --- --- --- $ 7,200 (8)
and Director 1997 $175,000 --- $ 3,750 --- --- --- $170,197 (9)
Brian A. Robson (3) 1999 $152,487 $12,875 --- --- 98,125 (7) --- ---
Executive Vice President 1998 $139,907 --- --- --- 2,100 --- $ 21,921 (10)
CFO and Secretary 1997 $ 56,250 --- --- --- 11,025 --- $ 13,041 (10)
Edward Beeman (4) 1999 $ 79,526 --- --- --- --- --- $ 53,548 (11)
<FN>
(1) On November 29, 1996, Mr. Fiedler was appointed Chairman and Chief
Executive Officer of the Company. Mr. Fiedler also remained as Chairman and
Chief Executive Officer of CTL (see Employment Agreements).
(2) On November 29, 1996, Mr. Latham was appointed President and Chief
Operating Officer of the Company. Mr. Latham also remained as President of
CTL (see Employment Agreements).
(3) On October 31, 1996, Mr. Robson was appointed Vice President and Controller
of the Company. On December 15, 1998, Mr. Robson was appointed Executive
Vice President, Chief Financial Officer and Secretary of the Company.
5
<PAGE>
(4) On June 1, 1998, Mr. Beeman was appointed Executive Vice President, Chief
Financial Officer and Secretary of the Company. In November 1998, Mr.
Beeman's employment with the Company was terminated.
(5) Director's fees paid to officers.
(6) Pursuant to their employment agreements, on April 1, 1998, Messrs. Fiedler
and Latham were each granted stock options to purchase a total of 450,000
shares of the Company's common stock over a period of five years, to vest
in increments of 90,000 shares annually, at various exercise prices for
each 90,000 share increment. As adjusted for the stock dividend, each
90,000 share increment has been adjusted to a 94,500 share increment, and
the exercise price of each of the five 94,500 share increments is $3.81,
$7.62, $11.43, $15.24 and $19.05, respectively.
(7) Stock options to purchase 13,125 shares of common stock were granted on
June 1, 1997 at $2.86 per share; 8,750 of these options are exercisable as
of June 1, 1999. Stock options to purchase 13,125 shares of common stock
were granted on June 1, 1998 at $3.90 per share; 4,375 of these options are
exercisable as of June 1, 1999. Stock options to purchase 85,000 shares of
common stock were granted on December 11, 1998 at $6.56 per share; these
options are not currently exercisable.
(8) Represents automobile allowance.
(9) Represents relocation assistance and $98,000 paid to Mr. Latham to cover
his loss on a personal residence and related real estate commissions and
selling expenses.
(10) Represents relocation assistance paid by the Company.
(11) Represents automobile allowance and relocation assistance paid by the
Company.
</FN>
</TABLE>
The table below provides information regarding stock options granted during the
fiscal year ended March 31, 1999 to the Named Executives:
<TABLE>
OPTIONS GRANTED IN LAST FISCAL YEAR
Individual Grants
---------------------------------------------------------------------------------------
Number of % of Total Potential Realizable Value
Shares Options Granted at Assumed Annual Rate of
Underlying to Employees Exercise Expiration Stock Price Appreciation
Options Granted in Fiscal Year Price Date for Option Term(3)
--------------- -------------- -------- ---------- --------------------------
5% 10%
--- ---
<S> <C> <C> <C> <C> <C> <C>
James J. Fiedler 94,500 9.3% $ 3.81 04/01/08 $226,430 $573,819
Daniel W. Latham 94,500 9.3% $ 3.81 04/01/08 $226,430 $573,819
Brian A. Robson 13,125 (1) 1.3% $ 3.90 06/01/03 $ 14,142 $ 31,250
85,000 (2) 8.3% $ 6.56 12/11/03 $154,055 $340,420
<FN>
(1) These options vest annually in one-third increments commencing June 1, 1999.
(2) These options vest annually in one-third increments commencing December 11,
1999.
(3) The dollar amounts under these columns are the results of calculations at
the 5% and 10% rates set by the Securities and Exchange Commission. The
potential realizable values are not intended to forecast possible future
appreciation, if any, in the market price of the common stock.
</FN>
</TABLE>
6
<PAGE>
Aggregated Option Exercises During the Fiscal Year
Ended March 31, 1999 and Fiscal Year End Option Values
- --------------------------------------------------------------------------------
The table below provides information regarding the value of the in-the-money
stock options held by the Named Executives at March 31, 1999. The Named
Executives did not exercise any stock options during the fiscal year.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised In-the-Money
Options at March 31, 1999 Options at March 31, 1999(1)
----------------------------- ----------------------------------
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
James J. Fiedler --- 94,500 --- $195,615
Daniel W. Latham --- 94,500 --- $195,615
Brian A. Robson 4,375 106,875 $13,212 $ 52,412
<FN>
(1) Value based on the closing price of $5.88 of the common stock on The Nasdaq
National Market on March 31, 1999, less the option exercise price.
</FN>
</TABLE>
Stock Option Plans
- -------------------------------------------------------------------------------
On December 11, 1986, the Board of Directors adopted the Company's 1986
Non-Qualified Stock Option Plan (the "1986 Plan"). The 1986 Plan, as amended,
provides for the grant of options to purchase up to 832,963 shares of Common
Stock to executive officers, key officers, employees, directors and consultants
of the Company and its subsidiaries. In February 1998, the Board of Directors
adopted the Company's Non-Employee Director Stock Option Plan (the "Director
Plan"). The Director Plan provides for the grant of options to purchase up to
157,500 shares of Common Stock to non-employee directors of the Company. In
March 1996, the Board of Directors adopted the Employees Non-Qualified Stock
Option Plan of CTL (the "CTL Plan"). The CTL Plan provides for the grant of
options to purchase up to 2,100,000 shares of Common Stock to executive
officers, key employees, directors, consultants and advisors of the Company, its
affiliates and subsidiaries.
As of March 31, 1999, options to purchase 592,463, 63,000 and 1,178,074 shares
of Common Stock have been granted under the 1986 Plan, the Director Plan and the
CTL Plan, respectively. As of March 31, 1999, 442,956, 0 and 105,713 shares of
Common Stock have been issued pursuant to the exercise of options under the 1986
Plan, the Director Plan and the CTL Plan, respectively. Any unexercised options
that expire or terminate upon a director's resignation or an employee's ceasing
to be employed by the Company, its affiliates or subsidiaries become available
again for issuance under the 1986 Plan, the Director Plan or the CTL Plan, as
the case may be.
In April 1998, stock options to purchase 10,500 shares of the Company's common
stock were granted to each of the non-employee members of the Board of Directors
pursuant to the Director Plan. These options have an exercise price of $3.42 per
share.
7
<PAGE>
Employment Agreements
- --------------------------------------------------------------------------------
On April 1, 1998, the Company entered into employment agreements, expiring on
March 31, 2003, with Mr. Fiedler and Mr. Latham. Pursuant to each of their
employment agreements, Messrs. Fiedler and Latham (the "Executive") will receive
a guaranteed minimum annual salary of $300,000 or an amount based on a
percentage of the Company's pre-tax income, whichever is greater; however, the
Executive's annual salary shall not exceed $4.5 million. The Executive shall
also receive deferred compensation for five years following his five-year
employment term (the "Employment Term") based on a percentage of the Company's
pre-tax income during each year of the Employment Term; however, deferred
compensation shall not exceed $600,000 per year. The employment agreements also
provide that the Executive will not compete with the Company for one year
following the termination of his employment.
Compensation of Directors
- --------------------------------------------------------------------------------
Directors receive an annual fee of $15,000, paid on a monthly basis. Directors
are also reimbursed for travel expenses. In addition, directors receive up to
$1,250 per day for each meeting attended (board or committee). Non-employee
directors (including retired directors as determined by the Board) receive
supplemental medical reimbursement to pay all medical expenses for them and
their immediate families (spouses and unemancipated children) up to a limit of
$25,000 per year.
Report on Repricing of Options
- --------------------------------------------------------------------------------
The Company did not adjust or amend the exercise price of stock options
previously awarded to the Named Executives during the fiscal year ended March
31, 1999, except to reflect the 5% stock dividend issued on November 4, 1998 to
stockholders of record as of October 21, 1998.
Compensation Committee Interlocks and Insider Participation
- --------------------------------------------------------------------------------
The Board of Directors does not have a compensation committee because executive
compensation decisions are made by the full Board. Recommendations on executive
compensation with regard to Messrs. Fiedler and Latham are made by the outside
non-employee directors when requested to do so by the full Board. All directors
participate in the deliberations.
Mr. Fiedler is the Company's Chairman and Chief Executive Officer. Mr. Latham is
the Company's President and Chief Operating Officer. Messrs. Fiedler's and
Latham's fiscal 1999 compensation and employment contracts were previously
described above.
8
<PAGE>
Performance Graph
- ------------------------------------------------------------------------
The graph below compares the cumulative total stockholder return on the Common
Stock for the last five fiscal years with the cumulative total return on the
Nasdaq Telecom Index and Standard & Poor's Midcap 400 Stock Index over the same
period (assuming the investment of $100 in the Common Stock, the Nasdaq Telecom
Index and Standard & Poor's Midcap 400 Stock Index on April 1, 1994, and the
reinvestment of all dividends).
<TABLE>
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURNS*
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Coyote Network Systems, Inc. $100 $ 50 $309 $ 68 $ 47 $ 70
S & P Midcap 400 $100 $108 $139 $154 $230 $222
Nasdaq Telecom $100 $101 $133 $120 $242 $388
<FN>
* Total return based on $100 initial investment and reinvestment of dividends
</FN>
</TABLE>
9
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------------------------
The following table sets forth certain information as of July 12, 1999 regarding
the beneficial ownership of the Company's Common Stock by (a) each person known
by the Company to own beneficially more than 5% of the Company's Common Stock,
(b) each director and officer of the Company, including Messrs. Fiedler, Latham
and Robson, and (c) all directors and executive officers of the Company as a
group. Except as otherwise indicated and subject to community property laws
where applicable, the persons named in the table below have sole voting and
dispositive power with respect to the shares of Common Stock shown as
beneficially owned by them. Information as to Alan J. Andreini and Comdisco,
Inc. was derived from the Schedules 13G and/or 13D filed by each such
stockholder, and for Kiskiminetas Springs School, information was derived from
the Schedules 13D and 13G filed by Alan J. Andreini. Information as to Richard
L. Haydon was derived from the Schedule 13D filed by Mr. Haydon on July 28,
1997, as well as information provided to the Company by Mr. Haydon. Except for
the percentage of ownership, the information set forth below reflects the
information contained in the Schedule 13G and/or 13D as of the date such
Schedule 13G or 13D was filed.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent of
of Beneficial Owner Beneficially Owned Outstanding Shares
<S> <C> <C>
Jack E. Donnelly (1)................................... 42,245 (2) *
James J. Fiedler (1)...................................642,288 (3) 5.0%
Daniel W. Latham (1)...................................232,312 (4) 1.8 %
Stephen W. Portner (1)..................................47,250 (5) *
Brian A. Robson (1).....................................13,125 (6) *
Alan J. Andreini (7).................................1,134,335 (8) 8.9%
Comdisco, Inc. (9).....................................708,390 (10) 5.5%
Richard L. Haydon (11)...............................1,528,400 (12) 11.4%
Kiskiminetas Springs School (13).....................1,010,210 (14) 8.0%
All directors and executive officers of the
Company as a group (5 persons).........................977,220 (2)(3) 7.4%
(4)(5)(6)(15)
<FN>
* Less than 1%
(1) The address of the stockholder is: c/o Coyote Network Systems, Inc., 4360
Park Terrace Drive, Westlake Village, CA 91361.
(2) Includes 33,763 shares of Common Stock issuable upon exercise of stock
options which are currently exercisable.
(3) Includes 94,500 shares of Common Stock issuable upon exercise of stock
options and 183,750 shares of Common Stock issuable upon exercise of
warrants which are currently exercisable. Includes 192,938 shares of Common
Stock received by the stockholder upon conversion of Class B Units of
Coyote Technologies, LLC ("CTL") on June 24, 1999. Does not include 94,500
shares of Common Stock issuable upon exercise of stock options not
currently exercisable.
10
<PAGE>
(4) Includes 94,500 shares of Common Stock issuable upon exercise of stock
options which are currently exercisable. Includes 21,000 shares of Common
Stock received by the stockholder upon conversion of Class B Units of CTL
on July 7, 1999. Includes 95,812 shares of Common Stock issuable upon
conversion of additional Class B Units of CTL. Does not include 94,500
shares of Common Stock issuable upon exercise of stock options not
currently exercisable.
(5) Includes 26,250 shares of Common Stock issuable upon exercise of stock
options and 10,500 shares of Common Stock issuable upon exercise of
warrants which are currently exercisable.
(6) Includes 13,125 shares of Common Stock issuable upon exercise of stock
options which are currently exercisable. Does not include 98,125 shares
issuable upon exercise of stock options not currently exercisable.
(7) The address of Alan J. Andreini is: 395 Hudson Street, New York, NY 10014.
(8) Includes 877,710 shares of Common Stock held by Mr. Andreini for his own
account. Includes 145,700 shares held in the account of Kiskiminetas
Springs School (the "School"), 24,150 shares held in the account of John D.
Andreini and Blanche M. Andreini (the "Parents"), 84,150 shares held in the
account of The Andreini Foundation (the "Foundation") and 2,625 shares held
for the benefit of Alan J. Andreini, Jr. (the "Son"), of which Mr. Andreini
may be deemed to be the beneficial owner. Mr. Andreini disclaims beneficial
ownership of all shares of Common Stock except those shares held by him for
his own account. Mr. Andreini has sole voting and dispositive power over
964,485 shares of Common Stock (includes 877,710 shares held by Mr.
Andreini for his own account, 84,150 shares held in the account of the
Foundation and 2,625 shares held in the account of the Son). Mr. Andreini
has shared voting and dispositive power over 169,850 shares of Common Stock
(includes 145,700 shares held in the account of the School and 24,150
shares held in the account of the Parents).
(9) The address of Comdisco, Inc. is: 6111 N. River Road, Rosemont, IL 60018.
(10) Includes 192,990 shares of Common Stock issuable upon exercise of warrants
which are currently exercisable.
(11) The address of Richard L. Haydon is: 1114 Avenue of the Americas, New York,
NY 10036.
(12) Includes 872,150 shares of Common Stock held in various managed
discretionary accounts of which Mr. Haydon may be deemed to be the
beneficial owner. Includes 656,250 shares of Common Stock issuable upon
exercise of warrants which are currently exercisable, held by various
discretionary accounts, of which Mr. Haydon may be deemed to be the
beneficial owner. Based upon information supplied by this stockholder (in
addition to the information derived from Mr. Haydon's Schedule 13D, filed
on July 28, 1997), Mr. Haydon has sole voting and dispositive power over
1,528,400 shares of Common Stock.
(13) The address of Kiskiminetas Springs School is: 1888 Brett Lane, Saltsburg,
PA 15681.
(14) According to the Schedule 13D filed on May 14, 1999, by Alan J. Andreini,
the School beneficially owns 1,010,210 shares of Common Stock.
(15) Includes 262,138 shares of Common Stock issuable upon exercise of stock
options and 194,250 shares of Common Stock issuable upon exercise of
warrants which are currently exercisable. Does not include 287,125 shares
of Common Stock issuable upon exercise of stock options not currently
exercisable.
</FN>
</TABLE>
11
<PAGE>
Certain Relationships and Related Transactions
- ------------------------------------------------------------------------
In January 1998, the Board of Directors of the Company approved an interest-free
loan to Daniel W. Latham for a maximum amount of $500,000 to be used solely for
the purpose of providing partial down payments on his purchase of a residence in
California. The funding is to be secured by the residential property and is for
a five-year term unless specifically extended by the Board of Directors. Earlier
repayment of the loan will be demanded in the event of either (1) sale or
refinancing of the property; (2) termination of Mr. Latham's employment by the
Company either voluntarily or for cause; or (3) sale by Mr. Latham of all, or
substantially all, of his stock in the Company. As of March 31, 1999, $421,000
was funded to Mr. Latham under this agreement. In October 1998, the Company
amended the terms of the loan, and in agreement with Mr. Latham established an
annual interest rate of 6.5% to be applied to the loan and which is payable at
the completion of the term.
Section 16(a) Beneficial Ownership Reporting Compliance
- --------------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's directors and executive officers, and persons who
beneficially own more than ten percent of a registered class of the Company's
equity securities, to file with the Securities and Exchange Commission (the
"Commission") initial reports of ownership and reports of changes in ownership
of Common Stock and the other equity securities of the Company. Officers,
directors, and persons who beneficially own more than ten percent of a
registered class of the Company's equities are required by the regulations of
the Commission to furnish the Company with copies of all Section 16(a) forms
they file. To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company, during the fiscal year ended March 31,
1999, all Section 16(a) filing requirements applicable to its officers,
directors, and greater than ten percent beneficial owners were complied with,
except that transactions that should have been reported on Forms 5 for the
fiscal years ended March 31, 1997 and/or March 31, 1998 were reported on Forms 5
for the fiscal year ended March 31, 1999 for each of Stephen W. Portner, Sydney
B. Lilly, Jack E. Donnelly, Brian A. Robson and James J. Fiedler, and
transactions that should have been reported on Forms 3 and 4 during the fiscal
years ended March 31, 1997 and March 31, 1998 for Alan J. Andreini were reported
on Form 5 for the fiscal year ended March 31, 1999. In addition, the Form 3 that
should have been filed by Alan J. Andreini during the fiscal year ended March
31, 1997 was filed on April 5, 1999.
12
<PAGE>
PROPOSAL 2
APPROVAL OF AMENDMENT
OF CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED SHARE CAPITAL
General
The Board of Directors has determined that it would be advisable to amend
Article IV of the Company's Certificate of Incorporation to increase the
authorized capital stock of the Company such that the aggregate number of shares
which the Company shall have the authority to issue shall be increased from
35,000,000 to 65,000,000, of which 5,000,000 shares shall be designated
"Preferred Stock" and 60,000,000 shares shall be designated "Common Stock".
The Board of Directors has unanimously adopted and declared it advisable and
unanimously recommends to the Company's shareholders that Article IV of the
Company's Certificate of Incorporation be amended as described. A copy of
Article IV of the Company's Certificate of Incorporation, as proposed to be
amended by the resolution adopted by the Board of Directors, is attached as
Annex A.
INCREASE IN NUMBER OF AUTHORIZED SHARES OF CAPITAL STOCK
The Board of Directors has approved, subject to shareholder approval at the 1999
Annual Meeting of Shareholders, an increase in the number of authorized shares
of Common Stock from 30,000,000 to 60,000,000. The Company's Certificate of
Incorporation currently authorizes the issuance of 30,000,000 shares of Common
Stock and 5,000,000 shares of Preferred Stock. As of August 16, 1999, the record
date for the Annual Meeting (the "Record Date"), _________ shares of Common
Stock were outstanding (exclusive of 708,692 shares held by the Company as
treasury stock), _______ shares were reserved for issuance under the Company's
stock option plans and _______ shares are reserved for issuance in relation to
outstanding options and warrants. Accordingly, there are only _______ authorized
shares of Common Stock unissued and not reserved for future issuance. Six
hundred (600) shares of Series A Convertible Preferred Stock are currently
outstanding.
The Board of Directors considers the proposed authorization of an additional
30,000,000 shares of Common Stock desirable because it would provide the Company
with the ability to take advantage of future opportunities for the issuance of
equity in connection with financings, possible future acquisitions, other
programs to facilitate expansion and growth and for other general corporate
purposes, including stock dividends, stock splits and employee benefit plans,
without the delay and expense incident to the holding of a special meeting of
shareholders to consider any specific issuance. Such additional shares could
also be issued in a public offering or privately placed in order to raise
capital for various purposes. Authorized but unissued shares may be issued at
such time or times, to such person or persons and for such consideration as the
Board of Directors determines to be in the best interests of the Company,
without further authorization from the shareholders except as may be required by
the rules of Nasdaq or any stock exchange on which the Common Stock is then
listed. The authorization of additional shares of Common Stock will not, by
itself, have any effect on the rights of holders of existing shares. Any new
shares of Common Stock, when issued, would have the same rights and privileges
as the shares of Common Stock presently outstanding, and would be available for
issuance at such time and on such terms as the Board of Directors may consider
appropriate. Depending on the circumstances, issuance of additional shares of
Common Stock could affect the existing holders of shares by diluting the voting
power of the outstanding shares. The shareholders do not have pre-emptive rights
to purchase additional shares of Common Stock nor will they as a result of this
proposal.
13
<PAGE>
Currently, the Company is not engaged in any negotiations concerning the
issuance of any shares of Common Stock or Preferred Stock, nor are there any
plans, commitments, agreements or understandings relating to the issuance of any
additional shares of Common Stock or Preferred Stock.
Shareholder Vote Required
An affirmative vote of the holders of a majority of the outstanding Common Stock
entitled to vote at the Annual Meeting is required to adopt Proposal 2.
Accordingly, abstentions and broker non-votes could have a significant effect on
the outcome of this proposal. Proxies solicited by the Board of Directors will
be voted in favor of the adoption of Proposal 2 to amend Article IV of the
Certificate of Incorporation unless otherwise indicated thereon.
14
<PAGE>
PROPOSAL 3
RATIFICATION OF INDEPENDENT ACCOUNTANTS
Arthur Andersen, LLP has served as independent accountants for the Company since
fiscal year 1998.
The Board of Directors of the Company has appointed Arthur Andersen, LLP as
independent accountants for fiscal year 2000 and to render other professional
services as required.
The appointment of Arthur Andersen, LLP is being submitted to stockholders for
ratification.
Representatives of Arthur Andersen, LLP will not be present at the Annual
Meeting.
Stockholder Vote Required
The affirmative vote of a majority of the shares of the Company's voting Common
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote with respect thereto is required to ratify the appointment of
public accountants.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended March 31, 1999 is
being mailed to stockholders with this proxy statement.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be considered for inclusion in the proxy
statement for presentation at the Company's 2000 Annual Meeting of Stockholders
must be received at the Company's offices at 4360 Park Terrace Drive, Westlake
Village, California 91361, no later than 120 days prior to the Company's next
Annual Meeting, for inclusion in the Company's proxy statement and form of proxy
relating to such meeting. All proposals must comply with applicable Securities
and Exchange Commission rules and regulations.
OTHER MATTERS
The Board of Directors is not aware of any other matter other than those set
forth in this proxy statement that will be presented for action at the Annual
Meeting. If other matters properly come before the Annual Meeting, the persons
named as proxies intend to vote the shares they represent in accordance with
their best judgment in the interest of the Company.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended March 31, 1999 is
incorporated herein by reference.
THE COMPANY UNDERTAKES TO PROVIDE ITS STOCKHOLDERS WITHOUT CHARGE A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES FILED THEREWITH. WRITTEN REQUESTS FOR SUCH REPORT SHOULD BE ADDRESSED
TO THE OFFICE OF THE SECRETARY, COYOTE NETWORK SYSTEMS, INC., 4360 PARK TERRACE
DRIVE, WESTLAKE VILLAGE, CALIFORNIA 91361.
15
<PAGE>
ANNEX A
PROPOSED AMENDMENT TO ARTICLE IV OF THE COMPANY'S CERTIFICATE OF INCORPORATION
AMENDS THE FIRST PARAGRAPH OF ARTICLE IV BY REPLACING THE FIRST PARAGRAPH IN ITS
ENTIRETY WITH THE FOLLOWING:
The total number of shares of stock of all classes which the
corporation shall have authority to issue is 65,000,000, of which 5,000,000
shares shall be shares of Preferred Stock, $.01 par value per share, and
60,000,000 shares shall be shares of Common Stock, $1.00 par value per
share.
<PAGE>
PROXY
COYOTE NETWORK SYSTEMS, INC.
Annual Meeting of Stockholders - September 28, 1999
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY.
The undersigned stockholder of Coyote Network Systems, Inc. ("Company") hereby
constitutes and appoints James J. Fiedler and Daniel W. Latham and each of them,
his true and lawful attorneys and proxies, with full power of substitution in
and for each of them, to vote all shares of the Company which the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held at the
Radisson Hotel, 30100 Agoura Road, Agoura Hills, California 91301, on Tuesday,
September 28, 1999 at 11:00 a.m., Pacific Daylight Time, or at any postponement
or adjournment thereof, on any and all of the proposals contained in the Notice
of the Annual Meeting of Stockholders, with all of the powers the undersigned
would possess if present personally at said meeting, or at any postponement or
adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE NOMINEES LISTED ON THE REVERSE SIDE AND FOR THE APPROVAL OF PROPOSALS 2
AND 3.
(Continued and to be signed and dated on the reverse side)
<PAGE>
[X] Please mark your votes as
indicated in this example.
THE DIRECTORS RECOMMEND A VOTE FOR THE NOMINEES AND PROPOSALS 2 AND 3.
Plan to attend meeting [_]
FOR All nominees WITHHOLD AUTHORITY
listed (except as to vote for all
marked to the nominees listed at
contrary, see left
instruction below)
(1) Election of Directors [_] [_]
Jack E. Donnelly, Daniel W. Latham,
J. Thomas Markley
INSTRUCTION: To withhold authority to vote for any individual nominee,
line through the name of the nominee above.
FOR AGAINST ABSTAIN
(2) Proposal to approve and amend the Company's
Certificate of Incorporation, to
increase the authorized shares of Common Stock. [_] [_] [_]
(3) Proposal to ratify Arthur Andersen, LLP as
independent auditors. [_] [_] [_]
________ ________
| | The above named proxies are granted the
authority, in their discretion,to act upon
such other matters as may properly come
before the meeting or any postponement or
adjournment thereof.
Dated: _______________________ , 1999
Signature(s) ______________________________
______________________________
Please sign exactly as your name appears in
the records of the Company and return this
proxy immediately in the enclosed stamped
|________ ________| self-addressed envelope.
