EXHIBIT 10.2
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is
entered into as of this 26th day of May, 2000 by and among Coyote Network
Systems, Inc., a Delaware corporation ("Coyote"), Primary Knowledge, Inc., a
California corporation in the process of changing its name to HomeAccess
MicroWeb, Inc. (the "Company"), DQE Enterprises, Inc., a Pennsylvania
corporation ("Enterprises"), Barbara Conrad ("Conrad") and Jerry Conrad
("Employee").
WITNESSETH:
WHEREAS, Coyote, the Company, Enterprises, Conrad and Employee entered
into that certain Agreement and Plan of Merger dated as of May 10, 2000 (the
"Merger Agreement"); and
WHEREAS, the parties desire to amend the Merger Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual agreements and covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties agree as
follows:
1. Incorporation of Recitals; Definitions. The recitals set forth above are
incorporated herein by reference and are made a part hereof to the same extent
as if such recitals were set forth herein. Capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Merger Agreement.
2. Consideration.
(a) Section 2.7(b) of the Merger Agreement is hereby amended by replacing
the amount "$28,350,000" by "$31,893,750.00."
(b) Section 2.7(c) of the Merger Agreement is hereby amended by replacing
the number "1,230,380" by "1,384,178."
(c) Section 2.8(c)(iii) of the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
to Employee, Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) in
accordance with the terms of the Personal Services Agreement.
(d) Section 6.12(f) of the Merger Agreement is hereby amended by replacing
the number "3,200,000" by the number "3,600,000".
(e) The amount of the Loan pursuant to the Personal Services Agreement is
hereby increased from $2,000,000 to $2,250,000.
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3. Operations Pending Closing. The first paragraph of Section 6.1 of the
Merger Agreement is hereby amended and restated in its entirety to read as
follows:
6.1 Conduct of Business of the Company. Except as contemplated
by this Agreement or with the prior written consent of Coyote, which
consent shall not be unreasonably withheld, during the period from the
date of this Agreement to the Closing, the Company shall conduct its
operations only in the ordinary course of business and shall use its
reasonable best efforts to preserve intact the business organization
of the Company, to keep available the services of the present officers
and key employees of the Company, and to preserve the good will of
customers, suppliers and all other persons having business
relationships with the Company. Without limiting the generality of the
foregoing, and except as otherwise contemplated by this Agreement,
prior to the Closing, the Company shall not, without the prior written
consent of Coyote, which consent shall not be unreasonably withheld
and take into account the desire of the Parties to operate their
business independently if the transaction contemplated by this
Agreement is not consummated:
4. Options/Warrants. Section 5.2 of the Merger Agreement is hereby
amended by adding the following sentences after the last sentence of Section
5.2:
"Coyote has delivered to the Company and Shareholders a list, which is
true, correct and complete in all material respects, of each holder of
any option, warrant or other right to acquire any shares of Coyote
Common Stock (or any security convertible into or exchangeable for
Coyote Common Stock), and sets forth with respect to each such holder
the number of shares of Coyote Common Stock (or securities convertible
into or exchangeable for Coyote Common Stock) underlying each option,
warrant or other right held by that holder, the exercise or conversion
price of each such option, warrant or other right and the date of
grant or issuance of each such option, warrant or other right; except
as set forth on such list, or as otherwise contemplated by this
Agreement, no option, warrant or other right to acquire any shares of
Coyote Common Stock (or any security convertible into or exchangeable
for Coyote Common Stock) is issued and outstanding or has been
authorized for issuance as of the date of this Agreement."
5. Enterprises Investment. Section 6.11 of the Merger Agreement is hereby
amended by adding the following sentence after the last sentence of Section
6.11:
"Such purchase of securities may be in the form of a single purchase
or multiple purchases, and any such purchase or purchases made prior
to the Closing Date shall be aggregated for purposes of calculating
the Seven Million Dollar ($7,000,000) purchase price provided for in
this Section; provided, however, that in no event shall the
purchase(s) of securities prior to the Closing exceed Two Million
Dollars ($2,000,000) without the prior written consent of Coyote,
which consent shall not be unreasonably withheld."
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6. Associate Transactions.
(a) The Merger Agreement is hereby amended by adding the following to the
Merger Agreement as Section 6.14:
"6.14 Transactions with Associates. Prior to the Closing, and,
except as otherwise provided in this Section 6.14, Coyote shall not,
without the prior written consent of the Shareholders, which consent
may be withheld in each Shareholder's sole discretion, enter into or
modify any Contract or engage in any transaction with any Associate of
Coyote. Notwithstanding the foregoing, (i) Coyote may compensate KRJ,
LLC pursuant to the last two sentences of Section 3(b) of the
Consulting Agreement between Coyote and KRJ, LLC, dated January 26,
2000 and James R. McCullough pursuant to Section 3.3 of the Employment
Agreement between Coyote and James R. McCullough, dated January 26,
2000, provided that the consideration paid to KRJ, LLC and James R.
McCullough pursuant to such provisions shall not exceed that which is
set forth in Schedule 6.14 and (ii) 500,000 Coyote options at $7.00
per share and 500,000 restricted shares of Common Stock for directors,
officers or key employees (other than James R. McCullough or
principals of KRJ, LLC) as directed by the Board of Directors of
Coyote."
(b) A new Schedule 6.14 is hereby added to the Merger Agreement as set
forth in Schedule 6.14 attached to this Amendment.
7. Lock-up. The Merger Agreement is hereby amended by adding the
following to the Merger Agreement as Section 6.15:
"6.15 Lock-Up Agreement. From and after the date hereof until
the first anniversary of the Closing Date, none of (i) James R.
McCullough, (ii) KRJ, LLC or (iii) First Venture Leasing shall
directly or indirectly sell, dispose of, encumber, pledge, hypothecate
or otherwise transfer any shares of the capital stock of Coyote (or
any securities convertible into or exchangeable for shares of the
capital stock of Coyote); except in connection with (A) the sale or
merger of Coyote in a single transaction or a series of related
transactions (excluding the transaction contemplated at the Closing)
or (B) a tender offer pursuant to Regulation 13D-G, Regulation 14D or
Regulation 14E of the Exchange Act."
8. Amendment to Section 7.1 of the Merger Agreement. Section 7.1 of the
Merger Agreement is hereby amended by adding the following clause (i) to such
Section 7.1:
"(i) Resignation of Chief Executive Officer. James R.
McCullough shall have resigned as the Chief Executive Officer of Coyote."
9. Amendment to Section 10.12 of the Merger Agreement. Section 10.12 of
the Merger Agreement is hereby amended by adding the following sentence after
the last sentence of Section 10.12:
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"Notwithstanding the foregoing, no Party shall (and each Party shall
cause its Affiliates and Associates to not) issue any press release or
make any public statement that directly or indirectly refers to (i)
any other Party or any of its respective Affiliates (by name or
otherwise) without the prior written consent of such second Party,
which consent may be withheld in the sole discretion of such second
Party or (ii) the Company (by name or otherwise) without the prior
written consent of the Shareholders, which consent may be withheld in
the sole discretion of each Shareholder; provided, however, that a
Party may, without the prior written consent required above, issue
such press release or make such public statement as may upon the
advice of counsel be required by law or the Nasdaq National Market if
it has used reasonable efforts to consult with the other Party."
10. Amendment to Article I of the Merger Agreement. Article I of the Merger
Agreement is hereby amended by adding the following new definition:
"Agreement" shall mean this Agreement and Plan of Merger among Coyote
Network Systems, Inc., Primary Knowledge, Inc., DQE Enterprises, Inc.,
Barbara Conrad and Jerry Conrad, (including the Disclosure Schedules and
all Exhibits) as it may be amended from time to time.
11. Miscellaneous.
(a) Except as expressly amended or modified by this Amendment, the
terms and conditions of the Merger Agreement shall remain in full force and
effect.
(b) This Amendment may be executed in one or more counterparts, each of
which shall constitute an original but all of which shall constitute one and the
same instrument.
(c) This Amendment may be amended only by a writing signed by all of
the parties hereto.
(d) Coyote hereby reaffirms the representations set forth in Section
5.7 of the Merger Agreement, as it relates to the Merger Agreement, as amended
by this Amendment, and the transactions contemplated thereby and hereby.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first above written.
COYOTE NETWORK SYSTEMS, INC.
By: /s/ James R. McCullough
---------------------------
Name: James R. McCullough
Title: Chief Executive Officer
PRIMARY KNOWLEDGE, INC.
By: /s/ Jerry Conrad
---------------------------
Jerry Conrad
President
DQE ENTERPRISES, INC.
By: /s/ Thomas A. Hurkmans
---------------------------
Thomas A. Hurkmans
President
EMPLOYEE
/s/ Jerry Conrad
--------------------------
Jerry Conrad
CONRAD
/s/ Barbara Conrad
--------------------------
Barbara Conrad
<PAGE>
Schedule 6.14
1. Leave the balance of Mr. McCullough's options on the same vesting
schedule and strike price, and granting 750,000 additional options, with an
exercise price of $7.00 per share and which shall vest as follows: (A) 250,000
options shall vest once Coyote's common stock trades at a closing sales price of
$12.00 for 20 consecutive trading days, (B) 250,000 options shall vest once
Coyote's common stock trades at a closing sales price of $16.00 for 20
consecutive trading days, and (C) 250,000 options shall vest once Coyote's
common stock trades at a closing sales price of $20 for 20 consecutive trading
days, or (D) immediately on resignation for cause or change-of-control at the
shareholder level. His resignation at the time of Closing would not eliminate
the options nor accelerate the vesting.
2. Award 1,500,000 additional shares to KRJ on the same vesting
schedule as Mr. McCullough (except resignation for cause); award 1,000,000
additional shares to KRJ that shall vest once Coyote's common stock trades at a
closing sales price of $30.00 for 20 consecutive trading days; and grant
2,400,000 common stock purchase warrants with an exercise price of $7.00 per
share, vesting in tranches of 800,000, again on the same schedule as Mr.
McCullough; all shares would be unregistered and there would be no accelerated
vesting of earlier grants.
<PAGE>
JOINDER
James R. McCullough, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, intending to be legally bound,
hereby joins (i) the Agreement and Plan of Merger dated as of May 10, 2000 among
Coyote Network Systems, Inc., HomeAccess MicroWeb, Inc., DQE Enterprises, Inc.,
Jerry Conrad and Barbara Conrad and (ii) the First Amendment to the Merger
Agreement to which this Joinder is attached (collectively, the "Merger
Agreement"). By signing below, the undersigned hereby agrees to (a) be bound by
Section 6.6 of the Merger Agreement, (b) acknowledges and consents to Section
6.15 of the Merger Agreement and (c) execute and deliver the Voting Agreement at
the Closing.
Capitalized terms used but not defined herein have the meanings
ascribed to them in the Merger Agreement.
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James R. McCullough
Date: May , 2000
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JOINDER
KRJ, LLC, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, intending to be legally bound,
hereby joins (i) the Agreement and Plan of Merger dated as of May 10, 2000 among
Coyote Network Systems, Inc., HomeAccess MicroWeb, Inc., DQE Enterprises, Inc.,
Jerry Conrad and Barbara Conrad and (ii) the First Amendment to the Merger
Agreement to which this Joinder is attached (collectively, the "Merger
Agreement"). By signing below, the undersigned hereby agrees to (a) be bound by
the provisions of Section 6.6 and Section 6.15 of the Merger Agreement, as
amended, and (b) execute and deliver the Voting Agreement at the Closing.
Capitalized terms used but not defined herein have the meanings
ascribed to them in the Merger Agreement, as amended.
KRJ, LLC
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By:
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Name:
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Date: May , 2000
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JOINDER
First Venture Leasing, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, intending to be legally bound,
hereby joins (i) the Agreement and Plan of Merger dated as of May 10, 2000 among
Coyote Network Systems, Inc., HomeAccess MicroWeb, Inc., DQE Enterprises, Inc.,
Jerry Conrad and Barbara Conrad and (ii) the First Amendment to the Merger
Agreement to which this Joinder is attached (collectively, the "Merger
Agreement"). By signing below, the undersigned hereby agrees to (a) be bound by
the provisions of Section 6.6 and Section 6.15 of the Merger Agreement, as
amended, and (b) execute and deliver the Voting Agreement at the Closing.
Capitalized terms used but not defined herein have the meanings
ascribed to them in the Merger Agreement, as amended.
First Venture Leasing
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By:
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Name:
-----------------------
Date: May , 2000
