===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
May 27, 1999
COYOTE NETWORK SYSTEMS, INC.
_____________________________________________________
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-5486 36-2448698
____________________________ _______________________ ___________________
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4360 Park Terrace Drive
Westlake Village, CA 91361
______________________________________
Address of principal executive offices
(818) 735-7600
______________________________
Registrant's Telephone Number,
Including area code
================================================================================
<PAGE>
Item 5. Other Events
On May 27, 1999, the Company sold, pursuant to Rule 506 under Regulation D,
1,767,000 shares of common stock at $6.00 per share in a private placement with
new and existing domestic and international institutional investors. Sunrise
Securities Corp., the placement agent, received cash commissions of $352,000 and
commissions in the form of common stock aggregating 131,148 shares and five-year
warrants to purchase 176,700 shares at $6.00 per share. The net proceeds of
approximately $10.2 million are to be used for working capital and to redeem $4
million of the outstanding Convertible Preferred Stock. In connection with this
redemption, the conversion price of the remaining $6 million of Convertible
Preferred Stock was fixed at $6.00 per share and the Company issued the holder
of the Convertible Preferred Stock 18-month warrants to purchase 325,000 shares
of common stock at $6.00 per share. A copy of the press release is attached
hereto as Exhibit 99 and is hereby incorporated by reference herein.
The Company has agreed to use its best efforts to file a registration
statement as to the common stock issued in the private placement and underlying
the warrants and Convertible Preferred Stock referred to above.
Item 7. Financial Statements and Exhibits
(c) Exhibits
4.1 Form of Subscription Agreement
4.2 Share Purchase Warrant Agreement
4.3 Cross Receipt and Agreement
99. Press Release issued by
Coyote Network Systems, Inc. on May 28, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 3, 1999 COYOTE NETWORK SYSTEMS, INC.
By: /s/ Brian A. Robson
___________________________________
Brian A. Robson
Executive Vice President,
Chief Financial Officer & Secretary
<PAGE>
Coyote Network Systems, Inc.
SUBSCRIPTION AGREEMENT
Coyote Network Systems, Inc.
4360 Park Terrace Drive
Westlake Village, California 91361
Attn: James J. Fiedler, Chairman and CEO
Ladies and Gentlemen:
1. Subscription. The undersigned is hereby purchasing from Coyote Network
Systems, Inc., a Delaware corporation (the "Company"), ___________ shares (the
"Shares") of the Company's common stock, par value $1.00 per share (the "Common
Stock"), for a purchase price of $6.00 per share and an aggregate purchase price
of $ ________ (the "Purchase Price"). This Subscription is being made in
connection with the Company's private placement of the Shares solely to
"Accredited Investors" as that term is defined in Section 501(a) of Regulation D
under the Securities Act of 1933 (the "Act")(the "Offering"). The Terms of the
Offering are more specifically described on Annex A hereto.
2. Closing. On the date hereof (the "Closing"), payment of the Purchase Price is
being made by electronic wire transfer in accordance with the following
instructions:
Bank Name:
ABA #:
Credit:
Account #:
Further Credit:
Account #:
Attention:
or by delivery of a bank check or certified check made payable to "Coyote
Network Systems, Inc. Escrow Account," in either case against delivery to the
undersigned of a certificate representing the Shares. All checks should be
delivered, together with an executed copy of this Subscription Agreement, to
Sunrise Securities Corp., the Placement Agent for this Offering as follows:
Sunrise Securities Corp.
135 East 57th Street
11th floor
New York, New York
Attention: Alan Swerdloff, Vice President
1
<PAGE>
3. Representations and Warranties of the Company. To induce the undersigned to
enter into this Agreement and to purchase the Shares, the Company hereby
represents and warrants to the undersigned the following:
(1) Organization Standing, Etc. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to own or lease its
properties and to carry on its business as it is now being conducted. The
Company has the requisite corporate power and authority to issue the Shares and
to perform its obligations under this Subscription Agreement.
(2) Valid Issuance. The Shares, when issued and delivered pursuant to terms of
this Subscription Agreement, will be duly authorized, validly issued and
enforceable in accordance with their respective terms and the terms of this
Subscription Agreement.
(3) Corporate Acts and Proceedings. This Subscription Agreement and the Offering
have been duly authorized by all necessary corporate action on behalf the
Company. This Subscription Agreement has been duly executed and delivered by
authorized officers of the Company, is a valid and binding agreement on the part
of the Company and is enforceable against the Company in accordance with its
terms. All corporate actions necessary to the authorization, creation, issuance
and delivery of the Shares and the conducting of the Offering have been taken by
the Company.
(4) Compliance with Applicable Laws and Other Instruments. Neither the execution
or delivery of, nor the performance of or compliance with this Subscription
Agreement, the issuance of the Shares nor the consummation of the transactions
contemplated hereby will, with or without the giving of notice or passage of
time, result in any material breach of, or constitute a material default under,
or result in the imposition of any material lien or encumbrance upon any asset
or property of the Company pursuant to any material agreement or other
instrument to which the Company is a party or by which it or any of its
properties, assets or rights is bound or affected, and will not violate the
Company's Certificate of Incorporation or Bylaws.
(5) Securities Laws. Based in part upon the representations of the undersigned
in Section 5 hereof, no consent, authorization, approval, permit or order of or
filing with any governmental or regulatory authority is required under current
laws and regulations in connection with the execution and delivery of this
Agreement or the offer, issuance, sale or delivery of the Shares, other than (i)
the filing of a Form D pursuant to Regulation D under the Securities Act of
1933, as amended (the "Act"); (ii) the filing, if required, of any notice with
any state whose laws require such filing; and (iii) the qualification thereof,
if required, under other applicable state laws, which qualification has been or
will be effected as a condition of the Offering. Under the circumstances
contemplated by this Subscription Agreement, the offer, issuance, sale and
delivery of the Shares will not, under current laws and regulations, require
compliance with the prospectus delivery or registration requirements in the Act.
2
<PAGE>
(6) Capital Stock. The authorized capital stock of the Company consists of
30,000,000 shares of common stock, par value $1.00 per share (the "Common
Stock") of which 10,558,764 shares are issued and outstanding as of April 25,
1999, and 5,000,000 shares of preferred stock, par value $.01 per share (the
"Preferred Stock"). There are 700 shares of Series A Convertible Preferred Stock
outstanding, all or some of which are to be redeemed by the Company as a
condition of this Offering. Other than the Series A Preferred Stock to be
redeemed, there are no other shares of Preferred Stock outstanding. As of April
25, 1999, the Company has reserved for issuance 7,198,339 shares of Common Stock
underlying options, warrants and A and B Units of Coyote Technologies, LLC, and
has reserved 2,250,000 shares for issuance in connection with the contemplated
settlement of certain class action litigation. The issued and outstanding shares
of capital stock of the Company are duly authorized, validly issued, fully paid
and non-assessable. The Company has also reserved shares underlying Series A
Preferred Stock, which reservation shall be canceled when such Preferred Stock
is redeemed. The Company has escrowed 884,050 shares in contemplation of
acquiring additional interests in Systeam, S.p.A. and may issue shares beyond
the 884,050 in connection with such acquisition. A total of 3,400,000 shares
have been reserved and issued in the Company's name and are being held in
escrow. These shares are intended to be used as collateral for a contemplated
$10 million loan. Except as described above and in the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1998 (the "Form 10-K"), the
Quarterly Reports on Form 10-Q for the quarters ended June 30, 1998, September
30, 1998 and December 31, 1998, and the Current Reports on Form 8-K dated June
18, 1998 and October 15, 1998 (as amended on December 10, 1998) (collectively,
the "SEC Filings"), in each case as filed with the Securities and Exchange
Commission (the "Commission"), there are no outstanding subscriptions, options,
warrants, calls, contracts, demands, commitments, convertible securities or
other agreements or arrangements of any character or nature whatever, other than
in connection with the Offering, pursuant to which the Company is obligated to
issue any securities of any kind representing an ownership interest in the
Company. Neither the offer nor the issuance or sale of the Shares constitutes an
event under any anti-dilution provisions of any securities issued (or issuable
pursuant to outstanding rights, warrants or options) by the Company or any
agreements with respect to the issuance of securities by the Company, which will
either increase the number of securities issuable pursuant to such provisions or
decrease the consideration per share to be received by the Company pursuant to
such provisions. No holder of any securities of the Company is entitled to any
preemptive or similar rights to purchase any securities of the Company in
connection with the Offering.
(7) SEC Filings. The Company has furnished, or made available to the undersigned
through the EDGAR Internet web site of the Commission, to the undersigned, true
and complete copies of the SEC Filings and has furnished a description of
certain risk factors in Exhibit A attached hereto ("Risk Factors"). As of their
respective filing dates, the SEC Filings complied in all material respects with
the applicable requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act" ), and the rules and regulations promulgated thereunder.
None of the SEC Filings, as of their respective dates, and taken as a whole with
the Risk Factors, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading. (1)
3
<PAGE>
4. Transfer Restrictions.
(1) The undersigned realizes that the Shares are not registered under the Act or
any foreign or state securities laws. The undersigned agrees that the Shares
will not be sold, offered for sale, pledged, hypothecated or otherwise
transferred (collectively, "Transfer"), except in compliance with the Act and
applicable foreign and state securities laws. The undersigned understands that
the undersigned can only Transfer the Shares pursuant to registration under the
Act or pursuant to an exemption therefrom. The undersigned understands that to
Transfer the Shares may require in certain jurisdictions specific approval by
the appropriate governmental agency or commission in such jurisdiction. The
undersigned has been advised that, except as set forth in Section 6 hereof, the
Company has no obligation, and does not intend to cause the Shares to be
registered under the Act or the securities laws of any other jurisdiction or to
comply with the requirements for any exemption under the Act, including but not
limited to, those provided by Rule 144 and Rule 144A promulgated under the Act,
or under the securities laws of any other jurisdiction.
(2) To enable the Company to enforce the Transfer restrictions contained in
Section 4(a), hereof, the undersigned hereby consents to the placing of legends
upon the certificates representing the Shares, and the placing of stop transfer
orders with the transfer agent of the Common Stock with respect to the Shares.
5. Representations and Warranties of the Undersigned. To induce the Company to
accept the undersigned's subscription, the undersigned hereby represents and
warrants to the Company that:
(1) the undersigned, if an individual, has reached the age of majority in the
jurisdiction in which the undersigned resides, is a bona fide resident of the
jurisdiction contained in the address set forth on the signature page of this
Subscription Agreement, is legally competent to execute this Subscription
Agreement, and does not intend to change residence to another jurisdiction;
(2) the undersigned, if an entity, is duly authorized to execute this
Subscription Agreement and this Subscription Agreement, when executed and
delivered by the undersigned, will constitute a legal, valid and binding
obligation enforceable against the undersigned in accordance with its terms and
that the execution, delivery and performance of this Subscription Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate or other necessary action on the part of
the undersigned;
(3) the Shares subscribed for hereby are being acquired by the undersigned for
investment purposes only, for the account of the undersigned and not with the
view to any resale or distribution thereof, and the undersigned is not
participating, directly or indirectly, in a distribution of such Shares and will
not take, or cause to be taken, any action that would cause the undersigned to
be deemed an "underwriter" of such Shares as defined in Section 2(l1) of the
Act; (1)
4
<PAGE>
(4) the undersigned has had access to all materials, books, records, documents
and information relating to the Company which the undersigned has requested,
including the SEC Filings and the Company's Proxy Statement, dated February 20,
1998 (the "Proxy Statement"), and has been able to verify the accuracy of the
information contained therein;
(5) the undersigned acknowledges and understands that investment in the Shares
involves a high degree of risk, including without limitation, the risks set
forth in Exhibit A attached hereto;
(6) the undersigned acknowledges that the undersigned has been offered an
opportunity to ask questions of, and receive answers from, officers of the
Company concerning all material aspects of the Company and its business and the
Offering, and that any request, for such information has been fully complied
with to the extent that the Company possesses such information or can acquire it
without unreasonable effort or expense;
(7) the undersigned has such knowledge and experience in financial and business
matters that the undersigned is capable of evaluating the merits and risks of an
investment in the Company and can afford a complete loss of his investment in
the Company;
(8) the undersigned has, in connection with its decision to purchase the Shares,
relied solely upon the SEC Filings, the Proxy Statement, the Risk Factors and
the information disclosed herein;
(9) the undersigned represents and warrants to and covenants with the Company
that the undersigned has not engaged and will not engage in any sales of the
Shares prior to the effectiveness of the Resale Registration Statement (as
defined below in Section 6);
(10) the undersigned recognizes that no governmental agency has passed upon the
issuance of the Shares or made any finding or determination as to the fairness
of this Offering;
(11) if the undersigned is purchasing the Shares subscribed for hereby in a
representative or fiduciary capacity, the representations and warranties
contained herein shall be deemed to have been made on behalf of the person or
persons for whom such Shares are being purchased;
(12) the undersigned has not entered into any agreement to pay commissions to
any persons with respect to the purchase or sale of the Shares, except
commissions for which the undersigned will be responsible;
(13) the undersigned acknowledges that the Company will pay to Sunrise
Securities Corp. a commission with respect to the sale of the Shares by the
Company to the undersigned as provided in Annex A;
5
<PAGE>
(14) the undersigned is an "Accredited Investor" as that term is defined in
Section 501(a) of Regulation D promulgated under the Act. Specifically, the
undersigned is (check appropriate item(s)):
____ (i) a bank as defined in Section 3(a)(2) of the Act, or a savings and
loan association or other institution as defined in Section 3(a)(5)(A) of the
Act, whether acting in its individual or fiduciary capacity; a broker or dealer
registered pursuant to Section 15 of the Exchange Act; an insurance company as
defined in Section 2(13) of the Act; an investment company registered under the
Investment Company Act of 1940 (the "Investment Company Act") or a business
development company, as defined in Section 2(a)(48) of that Act; a small
business investment company licensed by the U.S. Small Business Administration
under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan
established and maintained by a state, its political subdivisions or any agency
or instrumentality of a state or its political subdivisions for the benefit of
its employees, if such plan has total assets in excess of $5,000,000; or an
employee benefit plan within the meaning of the Employment Retirement Income
Security Act of 1974 if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment advisor, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that are
Accredited Investors;
____ (ii) a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
____ (iii)a corporation, Massachusetts or similar business trust, or
partnership, or an organization described in Section 501(c)(3) of the Internal
Revenue Code, not formed for the specific purpose of acquiring the Shares, with
total assets in excess of $5,000,000;
____ (iv) a director or executive officer of the Company;
____ (v) a natural person whose individual net worth, or joint net worth with
that person's spouse, at the time of his or her purchase, exceeds $1,000,000;
____ (vi) a natural person who had an individual income (not including his or
her spouse's income) in excess of $200,000 in 1997 and 1998 or joint income with
his or her spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching such income level in 1999;
6
<PAGE>
____ (vii) a trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the Shares, whose purchase of the Shares is
directed by a person having such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and risks
entailed in the purchase of the Shares; or
____ (viii) an entity in which all of the equity owners are Accredited
Investors. (If this alternative is checked, the undersigned must identify each
equity owner and provide statements signed by each; demonstrating how each is
qualified as an Accredited Investor.)
(15) the undersigned understands and acknowledges that the contents of any
discussions with Coyote management and the matters included in the SEC Filings
and the Risk Factors include "forward looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. As such, those statements
involve known and unknown risks and uncertainties, which may cause the actual
results in future periods to be materially different from any future performance
Coyote presently anticipates or predicts. The undersigned has been cautioned not
to place undue reliance on any forward looking statements.
6. Registration of Shares under the Act.
(1) By its acceptance hereof, the Company agrees that it shall, at its expense,
(1) not later than 30 business days after the final closing of the Offering (the
"Filing Deadline") use its best efforts to file a registration statement or
amend an existing effective registration statement (in either case, the "Resale
Registration Statement") with the Commission to register under the Act the
resale by the undersigned of the Shares; (ii) use its best efforts to cause the
Resale Registration Statement to become effective under the Act as soon as
possible after it is filed; (iii) after the Resale Registration Statement is
declared effective under the Act, furnish the undersigned with such number of
copies of the final prospectus included in the Resale Registration Statement
(the "Prospectus") as the undersigned may reasonably request to facilitate the
resale of the Shares; and (iv) use its best efforts to cause such Registration
Statement to remain effective until such time as the undersigned becomes
eligible to resell the shares pursuant to Rule 144 of the Act.
(2) The Company will (i) prepare and file with the Commission such amendments
and Prospectus supplements, including post-effective amendments to the Resale
Registration Statement, as the Company determines may be necessary or
appropriate, and use its best efforts to have such post-effective amendments
declared effective as promptly as practicable; (ii) cause the Prospectus to be
supplemented by any Prospectus supplement, and as so supplemented, to be filed
with the Commission; and (iii) promptly notify the undersigned when a
Prospectus, and any Prospectus supplement or post-effective amendment must be
filed or has been filed (including any filing in response to a Sale Notice) and,
with respect to any post-effective amendment, when the same has become
effective.
7
<PAGE>
(3) In connection with the Resale Registration Statement, the undersigned shall
furnish the Company such information as the Company shall reasonably request.
(4) At any time the Company may refuse to permit the undersigned to resell any
Shares pursuant to the Resale Registration Statement; provided, however, that in
order to exercise this right, the Company must deliver a certificate in writing
to the undersigned to the effect that withdrawal of such Resale Registration
Statement is necessary because a sale pursuant to the Resale Registration
Statement in its then-current form could constitute a violation of the federal
securities laws. In such an event, the Company shall use its best efforts to
amend the Resale Registration Statement if necessary and take all other actions
necessary to allow such sale under the federal securities laws, and shall notify
the undersigned promptly after it has determined that such sale has become
permissible under the federal securities laws. The undersigned hereby covenants
and agrees that it will not sell any Shares pursuant to the Resale Registration
Statement during the periods the Resale Registration Statement is withdrawn as
set forth in this Section 6(d).
7. Indemnification.
(1) The undersigned understands the meaning and legal consequences of the
representations and warranties made by the undersigned in this Subscription
Agreement, and agrees to indemnify and hold harmless the Company and each of the
Company's directors, officers, stockholders, employees, counsel, agents,
successors and assignees from and against any and all losses, damages,
liabilities or expenses (including, without limitation, attorneys' fees), as and
when incurred, due to or arising out of (in such case in whole or in part) any
breach of any representation or warranty made by the undersigned set forth
herein or in any other agreement or other document furnished by the undersigned
to any of the foregoing in connection with the Offering, or any failure by the
undersigned to fulfill any of the covenants or agreements set forth herein, or
arising out of the resale or distribution by the undersigned of the Shares or
any portion thereof in violation of the Act or any applicable foreign or state
securities or "blue sky" laws.
(2) The Company understands the meaning and legal consequences of the
representations and warranties made by it in this Subscription Agreement, and
agrees to indemnify and hold harmless the undersigned and each of the
undersigned's directors, officers, stockholders, employees, counsel, agents,
successors and assigns from and against any and all losses, damages, liabilities
or expenses (including, without imitation, attorneys' fees), as and when
incurred, due to or arising out of (in each case in whole or in part) any breach
of any representation or warranty made by the Company set forth herein, or any
failure by the Company to fulfill any of its covenants or agreements set forth
herein.
8
<PAGE>
(3) To the extent permitted by law, the Company will indemnify and hold harmless
each holder of Shares included in the Resale Registration Statement (a
"Holder"), the directors, if any, of such Holder, the officers, if any, of such
Holder, and each person, if any, who controls such Holder within the meaning of
the Act or the Exchange Act, against, any losses, claims, damages, expenses or
liabilities to which any of them may become subject, under the Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages, expenses or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof, arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in the Resale
Registration Statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; or (iii) any violation or alleged
violation by the Company of the Act, the Exchange Act, any state securities laws
or any rule or regulation promulgated under the Act, the Exchange Act or any
state securities laws. The Company will reimburse the Holders and each such
controlling person, promptly, as such expenses are incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such losses, claims, damages, liabilities, actions or proceedings.
(4) To the extent permitted by law, each Holder, severally and not jointly, will
indemnify and hold harmless, to the same extent and in the same manner set forth
in Section 7(c), the Company, each of its directors and officers who have signed
the Resale Registration Statement, and each person, if any, who controls the
Company within the meaning of the Act or the Exchange Act, against any losses,
claims, damages or liabilities to which any of them may become subject, under
the Act, the Exchange Act or otherwise, insofar as such losses, claims, damages
or liabilities, actions or proceedings, whether commenced or threatened in
respect thereof, arise out of or are based upon any violation or alleged
violation by the Company of the Act, the Exchange Act, any state securities laws
or any rule or regulation promulgated under the Act, the Exchange Act or any
state securities laws, in each case to the extent (and only to the extent) that
such violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with the
Resale Registration Statement. Such Holder will reimburse such persons for any
legal or other expenses reasonably incurred by any of them in connection with
investigating or defending any such losses claims, damages, liabilities, actions
or proceedings.
(5) With respect to the indemnification set forth in Sections 7(c) or (d) above,
to the extent any indemnification by in indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under said
Sections 7(c) or (d) to the extent permitted by law, provided that (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in said
Sections 7(c) or (d) and (ii) no party guilty of fraudulent misrepresentation
(within the meaning of Section 11 of the Act) shall be entitled to contribution
from any party who was not guilty of such fraudulent misrepresentation.
9
<PAGE>
8. Reduction of Shares. The undersigned agrees that the Placement Agent or the
Company may, in its sole and absolute discretion, reduce the undersigned's
subscription to any number of shares that in the aggregate does not exceed the
number of shares hereby applied for without any prior notice to or further
consent by the undersigned. The undersigned hereby irrevocably constitutes and
appoints the Placement Agent and each officer of the Placement Agent, each of
the foregoing acting singly, in each case with full power of substitution, the
true and lawful agent and attorney-in-fact of the undersigned, with full power
and authority in the undersigned's name, place and stead, to amend this
Subscription Agreement, including in each case the undersigned's signature page
thereto, to effect any of the foregoing provisions of this Section.
9. Further Documents. The undersigned agrees that it will execute such other
documents as may be necessary or desirable in connection with the transactions
contemplated hereby.
10. Modification. Neither this Subscription Agreement nor any provisions hereof
shall be waived, modified, discharged or terminated except by an instrument in
writing signed by the party against whom any such waiver, modification,
discharge or termination is sought.
11. Notices. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or by Federal Express, Express Mail or similar overnight
delivery or courier service and delivered against receipt to the party to whom
it is to be given: (i) if to the Company, at the address set forth on the first
page hereof; (ii) if to the undersigned, at its address set forth on the
signature page hereto; or (iii) in either case, to such other address as the
party shall have furnished in writing in accordance with the provisions of this
Section 10. Notice to the estate of any party shall be sufficient if addressed
to the party as provided in Section 10. Any notice or other communication given
by certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address, which shall be deemed given at
the time of receipt thereof. Any notice given by other means permitted by this
Section 10 shall be deemed given at the time of receipt thereof.
12. Counterparts. This Subscription Agreement may be executed through the
execution of separate signature pages or in any number of counterparts, and each
such counterpart shall, for all purposes, constitute one agreement binding on
all parties, notwithstanding that all parties are not signatories to the same
counterpart.
13. Entire Agreement. This Subscription Agreement contains the entire agreement
of the parties with respect to the subject matter hereof and there are no
representations, covenants or other agreements except as stated or referred to
herein.
14. Severability. Each provision of this Subscription Agreements is intended to
be severable from every other provision, and the invalidity or illegality of any
portion hereof shall not affect the validity or legality of the remainder
hereof.
10
<PAGE>
15. Assignability. This Subscription Agreement is not transferable or assignable
by the undersigned.
16. Applicable Law. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the principles of conflicts of law thereunder.
17. Choice of Jurisdiction. Any action or proceeding arising directly,
indirectly or otherwise, in connection with, out of or from this Subscription
Agreement, any breach hereof or any transaction covered hereby shall be resolved
within New York, New York. Accordingly, the parties consent and submit to the
jurisdiction of the United States federal, and state courts located within New
York, New York.
18. Taxpayer Identification Number. The undersigned verifies under penalties of
perjury that any Taxpayer Identification Number or Social Security Number shown
on the signature page hereto is true, correct and complete.
19. Pronouns. Any personal pronoun shall be considered to mean the corresponding
masculine, feminine or neuter personal pronoun, as the context requires.
11
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this ___ day of _______________,1999.
Number of Shares Subscribed for: _____________ Shares
INDIVIDUAL SUBSCRIBER: ENTITY SUBSCRIBER:
__________________________ ____________________________________
(Signature of Subscriber) (Print Name of Subscriber)
__________________________ By:
(Typed or Printed Name) Name: _____________________________
Title: _____________________________
__________________________ ____________________________________
(Residence Address) (Address)
__________________________ ____________________________________
(City, State and Zip Code) (City, State and Zip Code)
__________________________ ____________________________________
(Telephone Number) (Telephone Number)
__________________________ ____________________________________
(Telecopier Number) (Telecopier Number)
__________________________ ____________________________________
(Tax I.D. or Social Security Number) (Tax I.D. or Social Security Number)
ACCEPTED:
Coyote Network Systems, Inc. For entities desiring that certificates for the
Shares be delivered to an address other than that
By: _____________________ set forth above, set for the delivery address:
Name: _____________________
Title: _____________________ _________________________________________________
Dated: ___________, 1999 (Address)
_________________________________________________
(City, State and Zip Code)
Warrant No. 1
Warrant to Purchase 325,000 Shares
SHARE PURCHASE WARRANT
To Purchase Shares of Common Stock (par value $1.00)
of
COYOTE NETWORK SYSTEMS, INC.
(Delaware corporation)
Expires December 30, 2001
<PAGE>
Warrant No. 1
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE
TRANSFERRED EXCEPT IN A TRANSACTION REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR WHICH IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THAT ACT.
VOID AFTER 5:00 P.M. NEW YORK TIME, ON DECEMBER 30, 2001
COYOTE NETWORK SYSTEMS, INC.
Warrant to Purchase Shares of Common Stock
325,000 Shares
THIS CERTIFIES that, for good and valuable consideration
received, JNC Opportunity Fund Ltd. (the "Holder"), is entitled to subscribe for
and purchase from COYOTE NETWORK SYSTEMS, INC., a Delaware corporation (the
"Company"), upon the terms and conditions set forth herein, at any time or from
time to time after May 30, 1999, until the earlier of 5:00 P.M. New York City
time on (i) December 30, 2001 or (ii) the date which this Warrant is redeemed as
set forth in Section 9 (the "Expiration Date"), all or any portion of 325,000
Shares of common stock of the Company, par value $1.00 per share, subject to
adjustment as provided herein (the "Warrant Shares"), at a price of $6.00 per
share, subject to adjustment as provided herein (the "Exercise Price"). This
Warrant shall be redeemable by the Company under the circumstances referred to
in Section 9. The term "Shares" as used herein shall mean the Company's Shares
of Common Stock, par value $1.00 per share. This Warrant may be sold,
transferred, assigned or hypothecated at any time and the term the "Holder" as
used herein shall include any transferee to whom this Warrant has been
transferred.
1. Method of Exercise. This Warrant may be exercised at any time prior to
the Expiration Date, as to the whole or any lesser number of Warrant Shares, by
the surrender of this Warrant (with the election at the end hereof duly
executed) to the Company at its office at 4360 Park Terrace Drive, Westlake,
California 91361 or at such other place as may be designated in writing by the
Company, together with a certified or bank cashier's check payable to the order
of the Company in an amount equal to the Exercise Price multiplied by the number
of Warrant Shares for which this Warrant is being exercised. In lieu of the
payment of the Exercise Price, the Holder shall have the right (but not the
obligation), during the Exercise Period, to require the Company to convert this
Warrant, in whole or in part, into the Warrant Shares as provided for in this
Section (the "Conversion Right"). Upon exercise of the Conversion Right, the
Company shall deliver to the Holder (without payment by the Holder of the
Exercise Price) that number of shares of Common Stock equal to (i) the number of
Warrant Shares issuable upon exercise of the portion of the Warrant being
converted, multiplied by (ii) the quotient obtained by dividing (x) the value of
the Warrant (on a per Warrant Share basis) at the time the Conversion Right is
exercised (determined by subtracting the Exercise Price from the Current Market
Price (as determined pursuant to Section 5(e) below), for the shares of Common
Stock issuable upon exercise of the Warrant immediately prior to the exercise of
the Conversion Right) by (y) the Current Market Price of one share of Common
Stock immediately prior to the exercise of the Conversion Right. The Conversion
Rights provided under this Section may be exercised in whole or in part and at
any time and from
1
<PAGE>
time to time while any Warrants remain outstanding. In order to exercise the
Conversion Right, the Holder shall surrender to the Company, at its offices,
this Warrant accompanied by the form of Subscription Agreement duly filled in
and signed and a duly completed Conversion Notice in the form attached hereto.
The presentation and surrender shall be deemed a waiver of the Holder's
obligation to pay all or any portion of the aggregate purchase price payable for
the Warrant Shares being issued upon such exercise of this Warrant. This Warrant
(or so much thereof as shall have been surrendered for conversion) shall be
deemed to have been converted immediately prior to the close of business on the
day of surrender of this Warrant for conversion in accordance with the foregoing
provisions. As promptly as practicable on or after the conversion date, the
Company shall issue and shall deliver to the Holder (i) a certificate or
certificates representing the largest number of whole Warrant Shares which the
Holder shall be entitled as a result of the conversion, and (ii) if such Warrant
is being converted in part only, a new Warrant exercisable for the number of
Warrant Shares equal to the unconverted portion of the Warrant. Upon any
exercise (which term, as used herein, shall include any exercise of the
Conversion Right) of this Warrant, in lieu of any fractional Warrant Shares to
which the Holder shall be entitled, the Company shall pay to the Holder cash in
accordance with the provisions of Section 5(d) hereof.
2. Issuance of Certificates. Upon each exercise of the Holder's rights to
purchase Warrant Shares, the Holder shall, as of the close of business on such
day, be deemed to be the holder of record of the Warrant Shares issuable upon
such exercise, notwithstanding that the transfer books of the Company shall then
be closed or certificates representing such Warrant Shares shall not then have
been actually delivered to the Holder. As soon as practicable after each such
exercise of this Warrant but in no event later than 10 days thereafter, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only, upon
surrender of this Warrant for cancellation, the Company shall execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the Warrant Shares (or portions thereof) subject to purchase hereunder.
2
<PAGE>
3. Recording of Transfer. Any warrants issued upon the transfer or exercise
in part of this Warrant shall be numbered and shall be registered in an Warrant
Register as they are issued. The Company shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Warrant shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by his or its duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an attorney,
executor, administrator, guardian or other legal representative, duly
authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new warrant or warrants to
the person entitled thereto. This Warrant may be exchanged, at the option of the
Holder hereof, for another warrant, or other warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares (or portions thereof), upon surrender
to the Company or its duly authorized agent. Notwithstanding the foregoing, the
Company shall have no obligation to cause this Warrant to be transferred on its
books to any person if counsel to the Company reasonably requests a legal
opinion that such transfer does not violate the provisions of the Securities Act
of 1933, as amended (the "Act"), and the rules and regulations thereunder,
unless such opinion is delivered.
4. Reservation of Shares. The Company shall at all times reserve and keep
available out of its authorized and unissued Shares, solely for the purpose of
providing for the exercise of the warrants, such number of shares of Shares as
shall, from time to time, be sufficient therefor. The Company covenants that all
shares of Shares issuable upon exercise of this Warrant, upon receipt by the
Company of the full payment therefor, shall be validly issued, fully paid,
nonassessable and free of preemptive rights.
3
<PAGE>
5. Exercise Price Adjustments. Subject to the provisions of this Section 5,
the Exercise Price in effect from time to time shall be subject to adjustment,
as follows:
(a) In case the Company shall at any time after the date hereof (i) declare
a dividend or make a distribution on the outstanding Shares payable in shares of
its capital stock or securities convertible into or exchangeable for capital
stock, (ii) subdivide the outstanding Shares, (iii) combine the outstanding
Shares into a smaller number of shares, or (iv) issue any shares by
reclassification of the Shares (other than a change in par value, or from par
value to no par value, or from no par value to par value), then, in each case,
the Exercise Price in effect, and the number of Shares issuable upon exercise of
the warrants outstanding, at the time of the record date for such dividend or at
the effective date of such subdivision, combination or reclassification, shall
be proportionately adjusted so that the holders of the warrants after such time
shall be entitled to receive upon exercise of the warrant the aggregate number
and kind of shares which, if such warrants had been exercised immediately prior
to such time, such holders would have owned upon such exercise and immediately
thereafter been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall distribute to all holders of Shares
(including any such distribution made to the stockholders of the Company in
connection with a consolidation or merger in which the Company is the surviving
or continuing corporation) evidences of its indebtedness or assets (other than
distributions and dividends payable as contemplated by Section 5(a) above), or
rights, options, or warrants to subscribe for or purchase Shares or securities
convertible into or exchangeable for Shares, then, in each case, the Exercise
Price shall be adjusted by multiplying the Exercise Price in effect immediately
prior to the record date for the determination of stockholders entitled to
receive such distribution by a fraction, the numerator of which shall be the
Current Market Price (as determined pursuant to Section 5(e) hereof) per Share
on such record date, less the fair market value (as determined in good faith by
the board of directors of the Company, whose determination shall be conclusive
absent manifest error) of the portion of the evidences of indebtedness or assets
so to be distributed, or of such rights, options, or warrants or convertible or
exchangeable securities, or the amount of such cash, applicable to one share,
and the denominator of which shall be such Current Market Price per Share. Such
adjustment shall become effective at the close of business on such record date.
4
<PAGE>
(c) Whenever there shall be an adjustment as provided in this Section 5,
the Company shall within 15 days thereafter cause written notice thereof to be
sent by registered mail, postage prepaid, to the Holder, at its address as it
shall appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Warrant Shares issuable
hereunder and the exercise price thereof after such adjustment and setting forth
a brief statement of the facts requiring such adjustment and the computation
thereof, which officer's certificate shall be conclusive evidence of the
correctness of any such adjustment absent manifest error.
(d) The Company shall not be required to issue fractions of Shares or other
shares of the Company upon the exercise of this Warrant. If any fraction of a
share would be issuable upon the exercise of this Warrant (or specified portions
thereof), the Company may issue a whole share in lieu of such fraction or the
Company may purchase such fraction for an amount in cash equal to the same
fraction of the Current Market Price of such Shares on the date of exercise of
this Warrant.
(e) The Current Market Price per Share on any date shall be deemed to be
the average of the daily closing prices for the five (5) consecutive trading
days immediately preceding the date in question. The closing price for each day
shall be the last reported sales price regular way or, in case no such reported
sale takes place on such day, the closing bid price regular way, in either case
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, the highest reported bid price
for the Common Stock as furnished by the National Association of Securities
Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is no longer
reporting such information. If on any such date the Common Stock is not listed
or admitted to trading on any national securities exchange and is not quoted by
NASDAQ or any similar organization, the fair value of a share of Common Stock on
such date, as determined in good faith by the Board of Directors of the Company,
whose determination shall be conclusive absent manifest error, shall be used.
5
<PAGE>
(f) No adjustment in the Exercise Price shall be required if such
adjustment is less than $0.01; provided, however, that any adjustments which by
reason of this Section 5 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest thousandth of a
share, as the case may be.
(g) Upon each adjustment of the Exercise Price as a result of the
calculations made in this Section 5, the warrants shall thereafter evidence the
right to purchase, at the adjusted Exercise Price, that number of Shares
(calculated to the nearest hundredth) obtained by dividing (i) the product
obtained by multiplying the number of Shares purchasable upon exercise of the
warrants prior to adjustment of the number of Shares by the Exercise Price in
effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in
effect after such adjustment of the Exercise Price.
6. (a) Consolidations and Mergers. In case of any consolidation with or
merger of the Company with or into another corporation (other than a merger or
consolidation in which the Company is the surviving or continuing corporation
and which does not result in any reclassification of the outstanding Shares or
the conversion of such outstanding Shares into shares of other stock or other
securities or property), or in case of any sale, lease or conveyance to another
corporation of the property and assets of any nature of the Company as an
entirety or substantially as an entirety (such actions being hereinafter
collectively referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of this Warrant (in lieu of the number of Shares
theretofore deliverable) the kind and amount of shares of stock or other
securities, cash or other property which would otherwise have been deliverable
to a holder of the number of Shares upon the exercise of this Warrant upon such
Reorganization if this Warrant had been exercised in full immediately prior to
such Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of the Company, shall be made
in the application of the provisions herein set forth with respect to the rights
and interests of the Holder so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any shares or
other property thereafter deliverable upon exercise of this Warrant. Any such
adjustment shall be made by and set forth in a supplemental agreement between
the Company, or any successor thereto, and the Holder and shall for all purposes
hereof conclusively be deemed to be an appropriate adjustment. The Company shall
not effect any such Reorganization unless upon or prior to the consummation
thereof the successor corporation, or if the Company shall be the surviving
corporation in any such Reorganization and is not the issuer of the shares of
stock or other securities or property to be delivered to holders of Shares
outstanding at the effective time thereof, then such issuer, shall assume by
written instrument the obligation to deliver to the Holder such shares of stock,
securities, cash or other property as the Holder shall be entitled to purchase
in accordance with the foregoing provisions.
6
<PAGE>
(b) In case of any reclassification or change of the Shares issuable upon
exercise of this Warrant (other than a change in par value or from no par value
to a specified par value, or as a result of a subdivision or combination, but
including any change in the shares into two or more classes or series of
shares), or in case of any consolidation or merger of another corporation into
the Company in which the Company is the continuing corporation and in which
there is a reclassification or change (including a change to the right to
receive cash or other property) of the Shares (other than a change in par value,
or from no par value to a specified par value, or as a result of a subdivision
or combination, but including any change in the shares into two or more classes
or series of shares), the Holder shall have the right thereafter to receive upon
exercise of this Warrant solely the kind and amount of shares of stock and other
securities, property, cash or any combination thereof receivable upon such
reclassification, change, consolidation or merger by a holder of the number of
Shares for which this Warrant might have been exercised immediately prior to
such reclassification, change, consolidation or merger. Thereafter, appropriate
provision shall be made for adjustments which shall be as nearly equivalent as
practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of Shares and to successive
consolidations, mergers, sales, leases, or conveyances.
7. Notice of Certain Events. In case at any time any of the following
occur:
(a) The Company shall take a record of the holders of its Shares for the
purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of current or retained earnings, as indicated by the accounting
treatment of such dividend or distribution on the books of the Company; or
(b) The Company shall offer to all the holders of its Shares any additional
shares of capital stock of the Company or securities convertible into or
exchangeable for shares of capital stock of the Company, or any option, right or
warrant to subscribe therefor; or
(c) The Company shall take any action to effect any reclassification or
change of outstanding Shares or any consolidation, merger, sale, lease or
conveyance of property, described in Section 6; or
(d) The Company shall take any action to effect any liquidation,
dissolution or winding-up of the Company or a sale of all or substantially all
of its property, assets and business;
7
<PAGE>
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least
fifteen (15) days prior to (i) the date as of which the holders of record of
Shares to be entitled to receive any such dividend, distribution, rights,
warrants or other securities are to be determined, (ii) the date on which any
such offer to holders of Shares is made, or (iii) the date on which any such
reclassification, change of outstanding Shares, consolidation, merger, sale,
lease, conveyance of property, liquidation, dissolution or winding-up is
expected to become effective and the date as of which it is expected that
holders of record of Shares shall be entitled to exchange their shares for
securities or other property, if any, deliverable upon such reclassification,
change of outstanding shares, consolidation, merger, sale, lease, conveyance of
property, liquidation, dissolution or winding-up. Nothing herein shall allow a
Holder to delay or prevent any of the foregoing actions.
8. Registration Rights. (a) If, at any time during the seven-year period
commencing on the date hereof the Company shall file a registration statement
(other than on Form S-4, Form S-8, or any successor form) with the Securities
and Exchange Commission (the "Commission") while any Warrants or Warrant Shares
are outstanding, the Company shall give all of the then holders of any Warrants
whose underlying Warrant Shares are not then covered by an effective
registration statement or saleable under Rule 144 (without regard to volume
limitations) (the "Eligible Holders") at least 45 days' prior written notice of
the filing of such registration statement. If requested by any Eligible Holder
in writing within 30 days after receipt of any such notice, the Company shall,
at the Company's sole expense (other than the fees and disbursements of counsel
for the Eligible Holders and the underwriting discounts, if any, payable in
respect of the Warrant Shares sold by any Eligible Holder), register or qualify
all or, at each Eligible Holder's option, any portion of the Warrant Shares of
any Eligible Holders who shall have made such request, concurrently with the
registration of such other securities, all to the extent requisite to permit the
public offering and sale of the Warrant Shares through the facilities of all
appropriate securities exchanges and the over-the-counter market, and will use
its best efforts through its officers, directors, auditors, and counsel to cause
such registration statement to become effective as promptly as practicable.
Notwithstanding the foregoing, if the managing underwriter of any such offering
shall advise the Company in writing that, in its opinion, the distribution of
all or a portion of the Warrant Shares requested to be included in the
registration concurrently with the securities being registered by the Company
would materially adversely affect the distribution of such securities by the
Company for its own account, then any Eligible Holder who shall have requested
registration of his or its Warrant Shares shall delay the offering and sale of
such securities (or the portions thereof so designated by such managing
underwriter) for such period, not to exceed 90 days, as the managing underwriter
shall request (the "Delay Period"); provided that if any securities of the
Company are included in such registration statement and are eligible for sale
during the Delay Period for the account of any person other than the Company, a
pro rata portion of the securities which were requested to be included and
eligible for sale during the Delay Period shall also be included in such
registration statement and shall be eligible for sale during the Delay Period.
8
<PAGE>
(b) If, on any two occasions during the five-year period commencing on the
date hereof, the Company shall receive a written request from Eligible Holders
who in the aggregate own (or upon exercise of all Warrants then outstanding
would own) a majority of the total number of shares of Common Stock then
included (or upon such exercises would be included) in the Warrant Shares (the
"Majority Holders"), to register the sale of all or part of the Warrant Shares,
the Company shall, as promptly as practicable, prepare and file with the
Commission a registration statement sufficient to permit the public offering and
sale of the Warrant Shares (whether covered by such request from the Majority
Holders or by any other written request from any Eligible Holder received within
30 days after such Eligible Holder's receipt of the Company's notice, as
described in the last sentence of this Section 8(b)) through the facilities of
all appropriate securities exchanges and the over-the-counter market, and will
use its best efforts through its officers, directors, auditors, and counsel to
cause such registration statement to become effective as promptly as
practicable; provided, that the Company shall only be obligated to file one such
registration statement for which all expenses incurred in connection with such
registration (other than the fees and disbursements of counsel for the Eligible
Holders and underwriting discounts, if any, payable in respect of the Warrant
Shares sold by the Eligible Holders) shall be borne by the Company. Within three
business days after receiving any request contemplated by this Section 8(b), the
Company shall give written notice to all the other Eligible Holders, advising
each of them that the Company is proceeding with such registration and offering
to include therein all or any portion of any such other Eligible Holder's
Warrant Shares, provided that the Company receives a written request to do so
from such Eligible Holder within 30 days after receipt by him or it of the
Company's notice.
(c) Notwithstanding anything herein to the contrary, in addition to the
registration rights under Sections 8(a) and 8(b) above, the Eligible Holder
shall be entitled to the same registration rights and rights included therein as
to the Warrant Shares as the purchasers of securities of the Company are
entitled to pursuant to the Subscription Agreements, dated as of the date
hereof, among the purchasers described therein and the Company.
(d) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall use its best efforts to cause the Warrant Shares so
registered to be registered or qualified for sale under the securities or blue
sky laws of such jurisdictions as the Holder or such holders may reasonably
request; provided, however, that the Company shall not be required to qualify to
do business in any state by reason of this Section 8(d) in which it is not
otherwise required to qualify to do business or otherwise subject itself to
general service of process in any such state.
9
<PAGE>
(e) The Company shall keep effective any registration or qualification
contemplated by this Section 8(a) or (b) and shall from time to time amend or
supplement each applicable registration statement, preliminary prospectus, final
prospectus, application, document and communication for such period of time as
shall be required to permit the Eligible Holders to complete the offer and sale
of the Warrant Shares covered thereby. The Company shall in no event be required
to keep any such registration or qualification in effect for a period in excess
of six months from the date on which the Eligible Holders are first free to sell
such Warrant Shares; provided, however, that, if the Company is required to keep
any such registration or qualification in effect with respect to securities
other than the Warrant Shares beyond such period, the Company shall keep such
registration or qualification in effect as it relates to the Warrant Shares for
so long as such registration or qualification remains or is required to remain
in effect in respect of such other securities.
(f) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish to each Eligible Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of copies
of each prospectus contained in such registration statement and each supplement
or amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Act and the rules and regulations thereunder,
and such other documents, as any Eligible Holder may reasonably request to
facilitate the disposition of the Warrant Shares included in such registration.
(g) In the event of a registration pursuant to the provisions of this
Section 8, the Company shall furnish each Eligible Holder of any Warrant Shares
so registered with an opinion of its counsel (reasonably acceptable to the
Eligible Holders) to the effect that (i) to its knowledge, the registration
statement has become effective under the Act and no order suspending the
effectiveness of the registration statement, preventing or suspending the use of
the registration statement, any preliminary prospectus, any final prospectus or
any amendment or supplement thereto has been issued, nor has the Commission or
any securities or blue sky authority of any jurisdiction instituted or
threatened to institute any proceedings with respect to such an order and (ii)
the registration statement and each prospectus forming a part thereof (including
each preliminary prospectus), and any amendment or supplement thereto, complies
as to form with the Act and the rules and regulations thereunder.
10
<PAGE>
(h) In the event of a registration pursuant to the provision of this
Section 8, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses and customary closing
conditions, including, without limitation, opinions of counsel and accountants'
cold comfort letters, with any underwriter who acquires any Warrant Shares.
(i) The Company agrees that until all the Warrant Shares have been sold
under a registration statement or pursuant to Rule 144 under the Act, it shall,
so long as it is so required by applicable law, timely file all reports,
statements and other materials required to be filed with the Commission to
permit holders of the Warrant Shares to sell such securities under Rule 144, for
a period of up to five years from the date hereof.
(j) The Company may delay any requested registration hereunder if the
Company's Board of Directors determines in good faith that a registration at
such time would be materially detrimental to the Company provided that any such
delay shall not exceed 30 days and Company cannot provide this notice more than
twice in any 12 month period.
(k) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees, agents and counsel, and each person, if any, who controls
any such person within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all loss, liability, charge, claim, damage and expense
whatsoever (which shall include, for all purposes of this Section 8, without
limitation, reasonable attorneys' fees and any and all expense whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), as and when incurred, arising out of,
based upon, or in connection with (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any registration statement,
preliminary prospectus or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, relating to the sale of
any of the Warrant Shares, or (B) in any application or other document or
communication (in this Section 8 collectively called an "application") executed
11
<PAGE>
by or on behalf of the Company or based upon written information furnished by or
on behalf of the Company filed in any jurisdiction in order to register or
qualify any of the Warrant Shares under the securities or blue sky laws thereof
or filed with the Commission or any securities exchange; or any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, unless such statement
or omission was made in reliance upon and in conformity with written information
furnished to the Company with respect to such Eligible Holder by or on behalf of
such person expressly for inclusion in any registration statement, preliminary
prospectus, or final prospectus, or any amendment or supplement thereto, or in
any application, as the case may be, or (ii) any breach of any representation,
warranty, covenant or agreement of the Company contained in this Warrant. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this Warrant. If
any action is brought against any Eligible Holder or any of its officers,
directors, partners, employees, agents or counsel, or any controlling persons of
such person (an "indemnified party") in respect of which indemnity may be sought
against the Company pursuant to the foregoing paragraph, such indemnified party
or parties shall promptly notify the Company in writing of the institution of
such action (but the failure so to notify shall not relieve the Company from any
liability other than pursuant to this Section 8(l) and shall not relieve the
Company from any liability pursuant to this Section 8(l) except to the extent
the Company has been prejudiced in any material respect by such failure) and the
Company shall promptly assume the defense of such action, including the
employment of counsel (reasonably satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless the employment of such counsel shall have been authorized in
writing by the Company in connection with the defense of such action or the
Company shall not have promptly employed counsel reasonably satisfactory to such
indemnified party or parties to have charge of the defense of such action or
such indemnified party or parties shall have reasonably concluded that there may
be one or more legal defenses available to it or them or to other indemnified
parties which are different from or additional to those available to the
Company, in any of which events such fees and expenses of one counsel shall be
borne by the Company, and the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties. Anything
in this Section 8 to the contrary notwithstanding, the Company shall not be
liable for any settlement of any such claim or action effected without its
written consent, which shall not be unreasonably withheld. The Company shall
not, without the prior written consent (which shall not be unreasonably
withheld) of each indemnified party that is not released as described in this
sentence, settle or compromise any action, or permit a default or consent to the
entry of judgment in or otherwise seek to terminate any pending or threatened
action, in respect of which indemnity may be sought hereunder (whether or not
any indemnified party is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of each indemnified
12
<PAGE>
party from all liability in respect of such action. The Company agrees promptly
to notify the Eligible Holders of the commencement of any litigation or
proceedings against the Company or any of its officers or directors in
connection with the sale of any Warrant Shares or any preliminary prospectus,
prospectus, registration statement or amendment or supplement thereto, or any
application relating to any sale of any Warrant Shares.
(l) Each of the Holder and any Eligible Holder agrees to indemnify and hold
harmless the Company, each director of the Company, each officer of the Company
who shall have signed any registration statement covering Warrant Shares held by
the Holder and any Eligible Holder, each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, and its or their respective counsel, to the same extent as the
foregoing indemnity from the Company to the Holder in Section 8(l), but only
with respect to statements or omissions, if any, made in any registration
statement or final prospectus, or any amendment or supplement thereto, or in any
application, in reliance upon and in conformity with written information
furnished to the Company with respect to the Holder by or on behalf of the
Holder or with respect to any Eligible Holder or by or on behalf of such
Eligible Holder expressly for inclusion in any such registration statement or
final prospectus, or any amendment or supplement thereto, or in any application,
as the case may be; provided, however, that the Holder and each Eligible Holder
shall be liable only for written information furnished to the Company by it or
on its own behalf for inclusion in a registration statement; and provided,
further, that no Eligible Holder shall be liable in an amount greater than the
net proceeds received by such Eligible Holder in connection with the applicable
registration. If any action shall be brought against the Company or any other
person so indemnified based on any such registration statement or final
prospectus, or any amendment or supplement thereto, or in any application, and
in respect of which indemnity may be sought against the Holder pursuant to this
Section 8(m), the Holder and each Eligible Holder, as the case may be, shall
have the rights and duties given to the Company, and the Company and each other
person so indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of Section 8(l).
13
<PAGE>
(m) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 8(l) or 8(m)
(subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the Eligible Holders of the Warrant
Shares included in such registration in the aggregate (including for this
purpose any contribution made by or on behalf of an indemnified party), as a
second entity, shall contribute to the losses, liabilities, claims, damages and
expenses whatsoever to which any of them may be subject, on the basis of
relevant equitable considerations such as the relative fault of the Company and
such Eligible Holders in connection with the facts which resulted in such
losses, liabilities, claims, damages and expenses. The relative fault, in the
case of an untrue statement, alleged untrue statement, omission or alleged
omission, shall be determined by, among other things, whether such statement,
alleged statement, omission or alleged omission relates to information supplied
by the Company or by such Eligible Holders, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, alleged statement, omission or alleged omission. The Company and the
Holder agree that it would be unjust and inequitable if the respective
obligations of the Company and the Eligible Holders for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses (even if the Holder and the other
indemnified parties were treated as one entity for such purpose) or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 8(n). In no case shall any Eligible Holder be responsible for
a portion of the contribution obligation imposed on all Eligible Holders in
excess of its pro rata share based on the number of shares of Common Stock owned
(or which would be owned upon exercise of all Warrants) by it and included in
such registration as compared to the number of shares of Common Stock owned (or
which would be owned upon exercise of all Warrants) by all Eligible Holders and
included in such registration nor shall any Eligible Holder be responsible for
an amount greater than the net proceeds received by such Eligible Holder in
connection with the applicable registration. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 8(n), each person, if any, who
controls any Eligible Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partner, employee,
agent and counsel of each such Eligible Holder or control person shall have the
same rights to contribution as such Eligible Holder or control person and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, each officer of the Company who shall
14
<PAGE>
have signed any such registration statement, each director of the Company and
its or their respective counsel shall have the same rights to contribution as
the Company, subject in each case to the provisions of this Section 8(n).
Anything in this Section 8(n) to the contrary notwithstanding, no party shall be
liable for contribution with respect to the settlement of any claim or action
effected without its written consent. This Section 8(n) is intended to supersede
any right to contribution under the Act, the Exchange Act or otherwise.
Notice of any redemption shall be given to the Holder(s) of the Warrant, by
the Company not less than five days and not more than 15 days prior to the date
established for such redemption (the "Redemption Date"), and such notice shall
be mailed to all registered holders. Each such notice of redemption will specify
the Redemption Date and that payment of the Redemption Price will be made by the
Company upon presentation and surrender of the Warrant at its office, and will
also state that the right to exercise the Warrants will terminate at 5:00 P.M.,
New York City time, on the business day immediately preceding the Redemption
Date.
9. Redemption. The Company may, at its option, redeem all or any portion of
the then outstanding Warrants at a call price of $.01 per Warrant (such price
hereinafter referred to as the "Redemption Price"), at any time provided that
the Warrant shares are then registered for pursuant to an effective Registration
Statement or would be freely tradeable under Rule 144 and the price per share of
the Common Stock, as reported by NASDAQ or the principal place of trading for
such Common Stock, shall have continuously exceeded $15.00, as adjusted pursuant
to Section 5 as if it were the Exercise Price, for any 10 consecutive days after
the date hereof.
Notice of any redemption shall be given to Holder(s) of the Warrants by the
Company not less than five days and not more than 15 days prior to the date
established for such redemption (the "Redemption Date"). Each such notice of
redemption will specify the Redemption Date and that payment of the Redemption
Price will be made by the Company upon presentation and surrender of the Warrant
Certificates representing such Warrants to the Company at its office, and will
also state that the right to exercise the Warrant will terminate at 5:00 P.M.,
New York City time, on the business day immediately preceding the Redemption
Date.
15
<PAGE>
10. Taxes. The issuance of any shares or other securities upon the exercise
of this Warrant and the delivery of certificates or other instruments
representing such shares or other securities shall be made without charge to the
Holder for any tax or other charge in respect of such issuance. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any certificate in a name
other than that of the Holder (except for any tax that is payable in respect of
any such transfer and any related exercise of this Warrant and that would be
payable pursuant to the first sentence of this Section 10 were such certificate
to be issued in the name of the Holder) and the Company shall not be required to
issue or deliver any such certificate unless and until the person or persons
requesting the issue thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that such tax
has been paid.
11 Legend. Unless registered pursuant to the provisions of Section 8
hereof, the certificate or certificates evidencing the Warrant Shares, shall
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR STATE SECURITIES LAWS, BUT HAVE BEEN ISSUED OR TRANSFERRED PURSUANT
TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT. NO
DISTRIBUTION, SALE, OFFER FOR SALE, TRANSFER, DELIVERY, PLEDGE, OR
OTHER DISPOSITION OF THESE SECURITIES MAY BE EFFECTED EXCEPT IN
COMPLIANCE WITH THE ACT, ANY APPLICABLE STATE LAWS, AND THE RULES AND
REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION AND STATE
AGENCIES PROMULGATED THEREUNDER."
In addition, if, after the Warrant Shares are registered pursuant to Section
8(c) hereof, the Holder wishes to have the original legend removed, then, unless
the Warrant Shares are registered pursuant to the provisions of Section 8(a) and
(b) hereof, the certificate or certificates evidencing the Warrant Shares shall
bear the following legend:
"THE RESALE OF THE SHARES REPRESENTED BY THIS CERTIFICATE HAS
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT
TO A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. HOWEVER, SUCH SHARES MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION
STATEMENT, UNLESS COUNSEL OF COMPANY ADVISES IN WRITING THAT SUCH
POST-EFFECTIVE AMENDMENT IS NOT REQUIRED, IN WHICH EVENT SUCH SHARES
MAY BE OFFERED PURSUANT TO THE ORIGINAL REGISTRATION STATEMENT
PURSUANT TO WHICH THESE SHARES HAVE BEEN REGISTERED, (ii) A SEPARATE
REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT."
16
<PAGE>
12.Replacement of Warrants. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of any Warrant (and upon
surrender of any Warrant if mutilated), and upon reimbursement of the Company's
reasonable incidental expenses and execution of a reasonable lost security
indemnification agreement, the Company shall execute and deliver to the Holder
thereof a new Warrant of like date, tenor and denomination.
13 No Rights as Stockholder. The Holder of any Warrant shall not have,
solely on account of such status, any rights of a stockholder of the Company,
either at law or in equity, or to any notice of meetings of stockholders or of
any other proceedings of the Company, except as provided in this Warrant.
14 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of this Warrant, to the address of such
Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth on the first page of this
Warrant or to such other address as the Company may designate by notice to the
Holder.
15 Successors. All the covenants, agreements, representations and
warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
16 Headings. The Article and Section headings in this Warrant are inserted
for purposes of convenience only and shall have no substantive effect.
17 Governing Law. This Warrant shall be construed in accordance with the
laws of the State of New York applicable to contracts made and performed within
such State, without regard to principles of conflicts of law.
18 Modification of Agreement. This Warrant shall not otherwise be modified,
supplemented or amended in any respect unless such modification, supplement or
amendment is in writing and signed by the Company and the Holder of this Warrant
and Holders of any portion of the Warrant subsequently assigned or transferred
in accordance with the terms of this Warrant.
17
<PAGE>
19 Consent to Jurisdiction. The Company and the Holder irrevocably consent
to the non-exclusive jurisdiction of the courts of the State of New York and of
any federal court located in such State in connection with any action or
proceeding arising out of or relating to this Warrant, any document or
instrument delivered pursuant to, in connection with or simultaneously with this
Warrant, or a breach of this Warrant or any such document or instrument. In any
such action or proceeding, the Company waives personal service of any summons,
complaint or other process and agrees that service thereof may be made in
accordance with Section 14 hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the date set forth below.
Dated: May 27, 1999 COYOTE NETWORK SYSTEMS, INC.
By: /s/ James J. Fiedler
____________________________________
Name: James J. Fiedler
Title: Chairman and Chief Executive Officer
18
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder
if such holder desires to transfer the attached Warrant.)
FOR VALUE RECEIVED, _______________________ hereby sells, assigns, and
transfers unto _________________, having an address at
___________________________ _______________________, the attached Warrant to the
extent of the right to purchase ____________ Shares of $1.00 par value per
share, of COYOTE NETWORK SYSTEMS, INC. (the "Company"), together with all right,
title, and interest therein, and does hereby irrevocably constitute and appoint
_________________ as attorney to transfer such Warrant on the books of the
Company, with full power of substitution.
Dated: _______________, _____
_______________________________
Print name of holder of Warrant
By: ___________________________
Name: ___________________________
Title: ___________________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
<PAGE>
To:
CASH EXERCISE FORM
The undersigned hereby exercises its rights to purchase
_________ Warrant Shares covered by the within Warrant and tenders payment
herewith in the amount of $_____________ in accordance with the terms thereof,
and requests that certificates for such securities be issued in the name of, and
delivered to:
________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:__________________ Name: ______________________________
(Print)
____________________________________
(Signature)
(Signature must conform to the name of
the Warrant Holder specified on the
face of the Warrant)
Address:
________________________
________________________
________________________
<PAGE>
To:
CASHLESS EXERCISE FORM
(To be executed upon conversion of the attached Warrant)
The undersigned hereby irrevocably elects to surrender its Warrant for the
number of Warrant Shares as shall be issuable pursuant to the cashless exercise
provisions of Section 1 of the within Warrant, in respect of ________ Warrant
Shares underlying the within Warrant, and requests that certificates for such
Warrant Shares be issued in the name of and delivered to:
________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the shares exchangeable
or purchasable under the within Warrant, that a new Warrant for the balance of
the Warrant Shares covered by the within Warrant be registered in the name of,
and delivered to, the undersigned at the address stated below.
Date:______________________________
Name:______________________________
(Print)
Address:___________________________
___________________________________
___________________________________
__________________________________
Signature
CROSS RECEIPT AND AGREEMENT
Agreement and cross receipt between JNC Opportunity Fund Ltd. ("JNC") and
Coyote Network Systems, Inc., a Delaware corporation (the "Company"). JNC hereby
acknowledges receipt of $4,000,000 and a warrant (the "Warrant") for 325,000
shares of the Company's common stock and the Company hereby acknowledges receipt
of the certificate for 700 shares of 5% Series A Convertible Preferred Stock
(the "Series A"), of which the Company will retire 100 shares. The Company
hereby agrees to promptly issue to JNC a certificate representing the 600 shares
of Series A remaining after the redemption of the 100 shares referred to above.
1. JNC and the Company hereby agree that, notwithstanding anything to the
contrary contained in the Certificate of Designations as to the Series A:
(a) JNC hereby waives any defaults under the Purchase Agreement and the
Registration Rights Agreement for purposes of Section 5(a)(ii);
(b) Sections 5(a) (iv) and 5(c)(i) of the Certificate of Designations
shall be of no further force or effect, the Conversion Price shall be
$6.00 per share and shall be subject to adjustment only for the events
referred to in Section 5(c)(ii), (iii) and (v) of the Certificate of
Designations (and shall not be subject to any other price adjustments,
including, without limitation, those set forth in Section 5(c)(i),
5(c)(iv) and 5(c)(x)(i)) and the Company shall only be required to
reserve an adequate number of shares for issuance upon conversion
based upon such price, as so adjusted, notwithstanding the
parenthetical in Section 5(d); and
(c) If, an event described in Section 8(b) of the Warrant occurs, JNC
shall have equivalent rights with respect to any subsequent conversion
of the Series A as it has with respect to exercise of the Warrant
under such Section 8(b).
(d) Section 7 of the Certificate of Designations shall be of no further
force and effect.
(e) All references to the Initial Conversion Price shall be deemed
references to $6.00 per share.
2. JNC agrees that it shall not sell, assign, transfer, give away or otherwise
dispose of the Series A, except to a party which expressly agrees in
writing to be bound by the provisions of this Agreement and JNC hereby
agrees to the placement of a legend on the certificate representing the
Series A to the foregoing effect.
3. Capitalized terms not otherwise defined herein shall have their meanings
from the Certificate of Designations.
<PAGE>
4. The Company agrees that JNC shall have the same registration rights as to
the shares underlying the Series A as it does for the shares of common
stock underlying the Warrant and that, in connection with any such
registration, JNC shall be entitled to receive and shall give to the
Company, the benefit of the indemnification and contribution provisions
contained in Section 5 of the Registration Rights Agreement referred to
below as if such registration was covered by such agreement.
5. The parties further hereby acknowledge and agree that the Registration
Rights Agreement between JNC and the Company, dated August 31, 1998, is
hereby terminated and of no further force and effect, except as set forth
in Section 4 above.
6. In connection with its receipt of the Warrant, JNC hereby represents and
warrants to the Company as follows:
(a) JNC is acquiring the Warrant for its own account (and not for the
account of others) for investment and not with a view to the
distribution or resale thereof;
(b) By virtue its position, JNC has access to the same kind of
information which would be available in a registration statement
filed under the Securities Act of 1933, as amended (the "Act");
(c) JNC is an "accredited investor" within the meaning of Regulation D
under the Act;
(d) JNC understands that it may not sell or otherwise dispose of the
Series A, the Warrant or the underlying common stock in the absence of
either a registration statement under the Act or an exemption from the
registration provisions of the Act; and
(e) The certificates representing the Series A and the Warrant may contain
a legend to the effect of (d) above.
7. The Company hereby restates to JNC the following representations and
warranties from the Convertible Preferred Stock Purchase Agreement between
JNC and the Company, dated August 31, 1998, as modified as set forth below,
as of the date hereof:
(a) The first sentence of Section 2.1(a);
(b) Sections 2.1(b) and 2.1(e) as if the Warrant and this Agreement were
the "Transaction Documents" referred to therein;
(c) The first and last sentence of Section 2.1(d) as if the "Warrant" and
the "Underlying Shares" referred to therein were the Warrant and the
shares of common stock underlying the Warrant.
<PAGE>
IN WITNESS WHEREOF, the parties hereby execute this cross receipt and
agreement as of this 27th day of May 1999.
COYOTE NETWORK SYSTEMS, INC.
By: /s/ Daniel W. Latham
______________________________
Daniel W. Latham
JNC OPPORTUNITY FUND LTD.
By: /s/ Neil T. Chau
_______________________________
Neil Chau, Director
COYOTE NETWORK SYSTEMS, INC. NEWS RELEASE
Contact: Tony Squeglia
Coyote Network Systems
(818) 735-5385
email: [email protected]
Coyote Network Systems Closes $10.6 Million Equity Private Placement
Conversion Price Fixed on Outstanding Convertible Preferred; Redeems Portion
Westlake Village, CA - May 28, 1999 - Coyote Network Systems, Inc. (Nasdaq:
CYOE) today announced it closed a $10.6 million equity private placement with
new and existing domestic and international institutional investors. The Company
sold 1,767,000 shares of unregistered Coyote common stock at $6.00 per share, an
approximately 13% discount to the 60-day moving average at the time of the deal.
The Company also issued 131,148 shares to the placement agent and granted
five-year warrants to purchase 176,700 shares at $6.00 per share.
The net proceeds of approximately $10.2 million are to be used for working
capital and to redeem $4 million of the outstanding Convertible Preferred Stock.
In connection with this redemption, the conversion price of the remaining $6
million of Convertible Preferred Stock was fixed at $6.00 per share and the
Company issued 18-month warrants to purchase 325,000 shares of common stock at
$6.00 per share.
"Our strategy for growth is to leverage our core technologies, international
long distance and network integration services, primarily to emerging carriers,
switchless resellers and affinity groups," said James J. Fiedler, chairman and
chief executive officer, Coyote Network Systems. "Completing this equity
financing will strengthen and simplify our capital structure and enable us to
more quickly implement our strategic growth plans."
About Coyote Network Systems
Based in Westlake Village, CA, Coyote Network Systems provides telecom
equipment, international long distance and network integration services. For
more information, please visit the Company's Web site: http://www.cyoe.com, or
call 1-818-735-5385.
The statements in this news release may be considered "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 and involve known and unknown risks and uncertainties, which may cause
the Company's actual results in future periods to be materially different from
any future performance suggested in this news release. Readers are cautioned not
to place undue reliance on these forward-looking statements that speak only as
of the date hereof. The Company undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. For more complete information, please refer
to the Company's Form 10-K, Form 10-Q and other filings with the SEC.
