UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
COYOTE NETWORK SYSTEMS, INC.
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(Name of Issuer)
Common Stock (par value $1.00 per share)
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(Title of Class of Securities)
22406P108
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(CUSIP Number)
KRJ, LLC
c/o Duval & Stachenfeld, LLP
300 East 42nd Street, 3rd Floor
New York, NY 10017
Attention: Harsha Murthy, Esq.
(212)883-1700
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
January 26, 2000
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(Date of event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box: [ ]
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP No. 22406P108
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1 Name of Reporting Person KRJ, LLC
S.S. or I.R.S. Identification No.
of Above Person
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2 Check the Appropriate Box if (a) [ X ]
a Member of a Group (b) [ ]
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds OO
- -------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization Delaware
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7 Sole Voting Power 0
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Number of Shares 8 Shared Voting Power 2,000,000
Beneficially Owned by -----------------------------------------------
Reporting Person With
9 Sole Dispositive Power 0
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10 Shared Dispositive Power 2,000,000
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11 Aggregate Amount Beneficially
Owned By Each Reporting Person 2,000,000
- -------------------------------------------------------------------------------
12 Check box if the aggregate Amount in Row (11) Excludes Certain Shares [ ]
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13 Percent of Class Represented Amount in Row (11) 12.4%
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14 Type of Reporting Person OO
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CUSIP No. 22406P108
- -------------------
1 Name of Reporting Person Robert Loonin
S.S. or I.R.S. Identification No.
of Above Person
- -------------------------------------------------------------------------------
2 Check the Appropriate Box if (a) [ X ]
a Member of a Group (b) [ ]
- -------------------------------------------------------------------------------
3 SEC Use Only
- -------------------------------------------------------------------------------
4 Source of Funds OO
- -------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------
6 Citizenship or Place of Organization U.S.A.
- -------------------------------------------------------------------------------
7 Sole Voting Power 0
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Number of Shares 8 Shared Voting Power 2,000,000
Beneficially Owned by -----------------------------------------------
Reporting Person With
9 Sole Dispositive Power 0
-----------------------------------------------
10 Shared Dispositive Power 2,000,000
-----------------------------------------------
11 Aggregate Amount Beneficially
Owned By Each Reporting Person 2,000,000
- -------------------------------------------------------------------------------
12 Check box if the aggregate Amount in Row (11) Excludes Certain Shares [ ]
- -------------------------------------------------------------------------------
13 Percent of Class Represented Amount in Row (11) 12.4%
- -------------------------------------------------------------------------------
14 Type of Reporting Person IN
- -------------------------------------------------------------------------------
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Item 1. Security and Issuer.
The title of the class of equity securities to which this statement relates
is the common stock, par value $1.00 per share (the "Common Stock"), of Coyote
Network Systems, Inc., a Delaware corporation (the "Company"). The principal
executive offices of the Company are located at 4360 Park Terrace Drive,
Westlake Village, California, 91361.
The percentage of beneficial ownership reflected in this Schedule is based
upon a voting power equivalent to 16,169,311 shares of Common Stock outstanding
as of January 26, 2000, which number was provided by the Company.
Item 2. Identity and Background.
(a) The name of the persons (the "Reporting Persons") filing this Schedule
13D are KRJ, LLC ("KRJ") and Robert Loonin.
(b) The business address of the Reporting Persons is c/o Duval &
Stachenfeld, LLP, 300 East 42nd Street, 3rd Floor, New York, New York, 10017,
Attention: Harsha Murthy, Esq.
(c) Mr. Loonin is the managing member of KRJ and is the Managing Member of
First Venture Leasing, LLC located at 777 Summer Street, Stamford, Connecticut
06927.
(d) None of the Reporting Persons has been convicted during the past five
years in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) None of the Reporting Persons has been, during the last five years, a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and has not and is not subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
(f) Mr. Loonin is a citizen of the United States and KRJ is a Delaware
limited liability company.
Item 3. Source and Amount of Funds or Other Consideration.
KRJ received 2,000,000 shares of Common Stock of the Company pursuant to a
consulting agreement between KRJ and the Company dated January 26, 2000 (the
"Consulting Agreement"). Pursuant to the Consulting Agreement, KRJ will provide
assistance in identifying strategic partners and business opportunities, making
introductions to IP Telephony customers, introducing new management candidates,
restructuring vendor finance programs, and identifying credit facilities. In
consideration for its consulting services, KRJ received 2,000,000 shares of
unregistered Common Stock, without registration rights. Of such shares,
1,250,000 will be held in escrow to be released to KRJ in three equal annual
installments, subject to acceleration if certain common stock price targets are
met and sustained. In addition, unless there is a Change of Control of the
Company (as defined in the Consulting Agreement), KRJ has agreed not to sell,
pledge, hypothecate or otherwise transfer any of the 2,000,000 shares for a
period of 12 months after the respective dates of delivery of any such shares.
The Consulting Agreement also provides that over the next three years, KRJ will
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provide assistance in further identification of additional business
opportunities both in the domestic and international markets. Compensation for
these additional services will be specifically negotiated at a future date. The
members of KRJ are Mr. Kevin O. Kelley, Mr. Robert Loonin and Mr. James R.
McCullough, the Chief Executive Officer and a director of the Company, each of
whom own a one-third membership interest in KRJ. Mr. McCullough's ownership
interest in KRJ and the securities reported hereby is disclosed in the Schedule
13D filed by Mr. McCullough on February 7, 2000 (the "McCullough 13D"). The
Consulting Agreement has been approved by the Company's board of directors and
the terms of the agreement were the result of an arms' length negotiation in
which Mr. McCullough did not participate.
Mr. McCullough was appointed as the Company's Chief Executive Officer on
January 26, 2000, at which time the Company and Mr. McCullough entered into a
three-year Employment Agreement (the "Employment Agreement") pursuant to which
he will receive a salary of $160,000 per annum and options to purchase up to
750,000 shares of the Company's Common Stock at $5.00 per share, vesting over
three years, subject to acceleration if certain common stock price targets are
met and sustained. Mr. McCullough was elected to the Company's board of
directors on February 2, 2000.
Item 4. Purpose of Transaction.
On January 26, 2000, KRJ received 2,000,000 shares of Common Stock as
consideration for consulting services provided to the Company, pursuant to the
Consulting Agreement, the terms of which are described above in Item 3.
Except as provided herein, the Reporting Persons have no plans or proposals
which would relate to or would result in:
(a) the acquisition by any person of additional securities of the Company,
or the disposition of securities of the Company;
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company;
(c) a sale or transfer of a material amount of assets of the Company;
(d) any change in the present board of directors or management of the
Company;
(e) any material change in the present capitalization or dividend policy of
the Company;
(f) any other material change in the Company's business or corporate
structure;
(g) changes in the Company's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control of the
Company by any person;
(h) causing a class of securities of the Company to be delisted from a
national securities exchange or cease to be authorized to be quoted on an
inter-dealer quotation system of a registered national securities association;
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(i) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities Act
of 1933; or
(j) any action similar to those enumerated above.
The transactions referred to herein, as well as other transactions, are
reported in the Company's Current Report on Form 8-K filed on February 4, 2000.
Item 5. Interest in Securities of the Issuer.
(a) The equity securities to which this statement relates consists of
2,000,000 shares of Common Stock owned by KRJ, of which Mr. Kelley, Mr. Loonin
and Mr. McCullough each own a one-third membership interest. Such securities are
subject to the terms described above in Item 3. These equity securities
represent approximately 12.4% of the outstanding shares of Common Stock of the
Company.
(b) The Reporting Persons identified in Item 2(a) collectively share power
with respect to each other to vote and dispose of the 2,000,000 shares of Common
Stock held by KRJ.
(c) During the 60 days preceding the filing of this report, the only
transactions involving Common Stock were those described in Items 3 of this
Schedule 13D and in the McCullough 13D.
(d) Each of Mr. Kelley, Mr. Loonin and Mr. McCullough has the right to
receive the percentage of the proceeds of the sale of the 2,000,000 shares of
Common Stock held by KRJ to which they are each entitled pursuant to the Limited
Liability Company Agreement of KRJ.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
1. Reference is made to the Consulting Agreement, a copy of which is
incorporated by reference to the Company's 8-K filed February 4, 2000.
The terms of KRJ's receipt of the shares of Common Stock reported
hereby, and Mr. McCullough's beneficial ownership thereof, are
described above in Items 3 and 4.
2. Reference is made to the Employment Agreement, a copy of which is
incorporated by reference to the Company's 8-K filed February 4, 2000.
The terms of Mr. McCullough's receipt of the Options pursuant to the
Employment Agreement are described above in Item 3.
Item 7. Materials to be Filed as Exhibits.
1. The Consulting Agreement, a copy of which is incorporated by reference
to the Company's 8-K filed with the SEC on February 4, 2000.
2. The Employment Agreement, a copy of which is incorporated by reference
to the Company's 8-K filed with the SEC on February 4, 2000.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
correct and complete.
Dated: February 7, 2000 KRJ, LLC
By: /s/ Robert Loonin
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Robert Loonin, Managing Member
/s/ Robert Loonin
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ROBERT LOONIN
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