NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
COYOTE NETWORK SYSTEMS, INC.
WARRANT
Dated: May 27, 1999
Coyote Network Systems, Inc., a Delaware corporation (the "Company"),
hereby certifies that, for value received, JNC Opportunity Fund Ltd., or its
registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company up to a total of 325,000 shares of Common
Stock, $1.00 par value per share (the "Common Stock"), of the Company (each such
share, a "Warrant Share" and all such shares, the "Warrant Shares") at an
exercise price equal to $6.00 per share (as adjusted from time to time as
provided in Section 8, the "Exercise Price"), at any time and from time to time
from and after the date hereof and through and including the earlier of the date
this Warrant is redeemed pursuant to Section 3(d) or December 30, 2000 (the
"Expiration Date"), and subject to the following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, and the Company
shall not be affected by notice to the contrary.
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2. Registration of Transfers and Exchanges.
(a) This Warrant may not be offered or sold except in accordance with the
legend on the first page hereof and subject to compliance with such
legend. The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with
the Form of Assignment attached hereto duly completed and signed, to
the Transfer Agent or to the Company at the office specified in or
pursuant to Section 3(b). Upon any such registration or transfer, a
new warrant to purchase Common Stock, in substantially the form of
this Warrant (any such new warrant, a "New Warrant"), evidencing the
portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Warrant by the
transferee thereof shall be deemed the acceptance of such transferee
of all of the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the Holder
to the office of the Company specified in or pursuant to Section 3(b)
for one or more New Warrants, evidencing in the aggregate the right to
purchase the number of Warrant Shares which may then be purchased
hereunder. Any such New Warrant will be dated the date of such
exchange.
3. Duration and Exercise of Warrants; Redemption.
(a) This Warrant shall be exercisable by the registered Holder on any
business day before 5:30 P.M., Eastern time, at any time and from time
to time on or after the date hereof to and including the Expiration
Date. At 5:30 P.M., Eastern time on the Expiration Date, the portion
of this Warrant not exercised prior thereto shall be and become void
and of no value. Prior to the Expiration Date, the Company may not
call or otherwise redeem this Warrant without the prior written
consent of the Holder, except as provided in Section 3(d).
(b) Subject to Sections 2(b), 6 and 9, upon surrender of this Warrant,
with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in
Section 11 and upon payment of the Exercise Price multiplied by the
number of Warrant Shares that the Holder intends to purchase
hereunder, in lawful money of the United States of America, in cash or
by certified or official bank check or checks, all as specified by the
Holder in the Form of Election to Purchase, the Company shall promptly
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(but in no event later than 3 business days after the Date of
Exercise) issue or cause to be issued and cause to be delivered to or
upon the written order of the Holder and in such name or names as the
Holder may designate, a certificate for the Warrant Shares issuable
upon such exercise, free of restrictive legends other than as required
by applicable law. Any person so designated by the Holder to receive
Warrant Shares shall be deemed to have become holder of record of such
Warrant Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company shall have
received (i) this Warrant (or any New Warrant, as applicable), with
the Form of Election to Purchase attached hereto (or attached to such
New Warrant) appropriately completed and duly signed, and (ii) payment
of the Exercise Price for the number of Warrant Shares so indicated by
the holder hereof to be purchased.
(c) This Warrant shall be exercisable, either in its entirety or, from
time to time, for a portion of the number of Warrant Shares. If less
than all of the Warrant Shares which may be purchased under this
Warrant are exercised at any time, the Company shall issue or cause to
be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares for which no exercise
has been evidenced by this Warrant.
(d) The Company may, at its option, redeem all or any portion of this
Warrant at a call price of $.01 per Warrant Share (such price
hereinafter referred to as the "Redemption Price"), at any time
provided that the Warrant Shares are then registered and may be sold
at all times during the five trading day and 15 trading day period
referred to below 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 8 as if it were the Exercise
Price, for any 10 consecutive trading days after the date hereof.
Notice of any redemption shall be given to Holder(s) by the Company
not less than five trading days and not more than 15 trading 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.
4. Piggyback Registration Rights. During the term of this Warrant, the Company
may not file any registration statement with the Securities and Exchange
Commission (other than registration statements of the Company filed on Form
S-8 or Form S-4, each as promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to which the Company is
registering securities pursuant to a Company employee benefit plan or
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pursuant to a merger, acquisition or similar transaction including
supplements thereto, but not additionally filed registration statements in
respect of such securities) at any time when there is not an effective
registration statement covering the resale of the Warrant Shares and naming
the Holder as a selling stockholder thereunder, unless the Company provides
the Holder with not less than 20 days notice of its intention to file such
registration statement and provides the Holder the option to include any or
all of the applicable Warrant Shares therein. The piggyback registration
rights granted to the Holder pursuant to this Section shall continue until
all of the Holder's Warrant Shares have been sold in accordance with an
effective registration statement or upon the Expiration Date. The Company
will pay all registration expenses in connection therewith. In addition,
the Holder shall be entitled to the same registration rights as to the
Warrant Shares as the purchasers of shares of Common Stock in a private
placement completed in May 1999 have as to such shares of Common Stock
pursuant to their Subscription Agreement.
5. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name
other than that of the Holder, and the Company shall not be required to
issue or cause to be issued or deliver or cause to be delivered the
certificates for Warrant Shares unless or until the person or persons
requesting the issuance 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. The Holder shall be responsible for all other
tax liability that may arise as a result of holding or transferring this
Warrant or receiving Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and indemnity, if requested, satisfactory to it. Applicants for
a New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable charges
as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant as herein provided, the number
of Warrant Shares which are then issuable and deliverable upon the exercise
of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into
account the adjustments and restrictions of Section 8). The Company
covenants that all Warrant Shares that shall be so issuable and deliverable
shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly and validly authorized, issued
and fully paid and nonassessable.
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8. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time
to time as set forth in this Section 8. Upon each such adjustment of the
Exercise Price pursuant to this Section 8, the Holder shall thereafter
prior to the Expiration Date be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of Warrant Shares obtained by
multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of this
Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(a) If the Company, at any time while this Warrant is outstanding, shall
(i) pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a
stated divided rate) or otherwise make a distribution or distributions
on shares of its Common Stock (as defined below) or on any other class
of capital stock and not the Common Stock) payable in shares of Common
Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock
into a smaller number of shares, the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding
after such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and shall
apply to successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock, any consolidation
or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or
any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, then the Holder
shall have the right thereafter to exercise this Warrant only into the
shares of stock and other securities and property receivable upon or
deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share
exchange, and the Holder shall be entitled upon such event to receive
such amount of securities or property equal to the amount of Warrant
Shares such Holder would have been entitled to had such Holder
exercised this Warrant immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange. The terms of
any such consolidation, merger, sale, transfer or share exchange shall
include such terms so as to continue to give to the Holder the right
5
to receive the securities or property set forth in this Section 8(b)
upon any exercise following any such reclassification, consolidation,
merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is outstanding, shall
distribute to all holders of Common Stock (and not to holders of this
Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to
in Sections 8(a), (b) and (d)), then in each such case the Exercise
Price shall be determined by multiplying the Exercise Price in effect
immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of
which the denominator shall be the Exercise Price determined as of the
record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at
such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of
Common Stock as determined by the Company's independent certified
public accountants that regularly examines the financial statements of
the Company (an "Appraiser").
(d) If, at any time while this Warrant is outstanding, the Company shall
issue or cause to be issued rights or warrants to acquire or otherwise
sell or distribute shares of Common Stock to all holders of Common
Stock for a consideration per share less than the Exercise Price then
in effect, then, forthwith upon such issue or sale, the Exercise Price
shall be reduced to the price (calculated to the nearest cent)
determined by multiplying the Exercise Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the sum
of (i) the number of shares of Common Stock outstanding immediately
prior to such issuance, and (ii) the number of shares of Common Stock
which the aggregate consideration received (or to be received,
assuming exercise or conversion in full of such rights, warrants and
convertible securities) for the issuance of such additional shares of
Common Stock would purchase at the Exercise Price, and the denominator
of which shall be the sum of the number of shares of Common Stock
outstanding immediately after the issuance of such additional shares.
Such adjustment shall be made successively whenever such an issuance
is made.
(e) For the purposes of this Section 8, the following clauses shall also
be applicable:
(i) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (A)
to receive a dividend or other distribution payable in Common
Stock or in securities convertible or exchangeable into shares of
Common Stock, or (B) to subscribe for or purchase Common Stock or
securities convertible or exchangeable into shares of Common
Stock, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have
6
been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
(g) Whenever the Exercise Price is adjusted pursuant to Section 8(c)
above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser
(which shall be a nationally recognized accounting firm), in which
case the adjustment shall be equal to the average of the adjustments
recommended by each of the Appraiser and such appraiser. The Holder
shall promptly mail or cause to be mailed to the Company, a notice
setting forth the Exercise Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date
mentioned above.
(h) If:
(i) the Company shall declare a dividend (or any other distribution)
on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash dividend on
or a redemption of its Common Stock; or
(iii)the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights; or
(iv) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock of
the Company, any consolidation or merger to which the Company is
a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or
property; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the Company,
7
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 30 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Payment of Exercise Price. The Holder may pay the Exercise Price in one of
the following manners:
(a) Cash Exercise. The Holder shall deliver immediately available funds;
or
(b) Cashless Exercise. The Holder shall surrender this Warrant to the
Company together with a notice of cashless exercise, in which event
the Company shall issue to the Holder the number of Warrant Shares
determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
A = the average of the closing sale prices of the Common
Stock for the five (5) trading days immediately prior to
(but not including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
10. Fractional Shares. The Company shall not be required to issue or cause to
be issued fractional Warrant Shares on the exercise of this Warrant. The
number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of
8
Warrant Shares purchasable on exercise of this Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this
Section 10, be issuable on the exercise of this Warrant, the Company shall
pay an amount in cash equal to the Exercise Price multiplied by such
fraction.
11. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on
the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section prior to 4:30 p.m. (New York City time) on a
business day, (ii) the business day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 4:30 p.m. (New York
City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the business day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The
addresses for such communications shall be: (i) if to the Company, to 0000
Xxxx Xxxxxxx Xxxxx, Xxxxxxxx Xxxxxxx, XX 00000, Attention: Chief Financial
Officer, or to facsimile no. (000) 000-0000, or (ii) if to the Holder, to
the Holder at the address or facsimile number appearing on the Warrant
Register or such other address or facsimile number as the Holder may
provide to the Company in accordance with this Section 11.
12. Warrant Agent.
(a) The Company shall serve as warrant agent under this Warrant. Upon
thirty (30) days' notice to the Holder, the Company may appoint a new
warrant agent.
(b) Any corporation into which the Company or any new warrant agent may be
merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services
business shall be a successor warrant agent under this Warrant without
any further act. Any such successor warrant agent shall promptly cause
notice of its succession as warrant agent to be mailed (by first class
mail, postage prepaid) to the Holder at the Holder's last address as
shown on the Warrant Register.
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13. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
This Warrant may be amended only in writing signed by the Company and
the Holder.
(b) Subject to Section 13(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under
this Warrant. This Warrant shall inure to the sole and exclusive
benefit of the Company and the Holder.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant
shall not in any way be affected or impaired thereby and the parties
will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant. (1)
[REMAINDER OF XXXX INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.
COYOTE NETWORK SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxx
-----------------------------
Title: President and COO
-----------------------------
11
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Coyote Network Systems, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $1.00 par value per share, of Coyote
Network Systems, Inc. and , if such Holder is not utilizing the cashless
exercise provisions set forth in this Warrant, encloses herewith $________ in
cash, certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the Warrant) for the number of shares of
Common Stock to which this Form of Election to Purchase relates, together with
any applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
________________________________
___________________________________________________________________________
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is entitled
to purchase in accordance with the enclosed Warrant, the undersigned requests
that a New Warrant (as defined in the Warrant) evidencing the right to purchase
the shares of Common Stock not issuable pursuant to the exercise evidenced
hereby be issued in the name of and delivered to:
___________________________________________________________________________
(Please print name and address)
___________________________________________________________________________
___________________________________________________________________________
Dated:__________,____ Name of Xxxxxx:
(Print) ____________________________
(By:) ____________________________
(Name:)
(Title:)
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Coyote Network
Systems, Inc. to which the within Warrant relates and appoints ________________
attorney to transfer said right on the books of Coyote Network Systems, Inc.
with full power of substitution in the premises.
Dated:
_________________ ____
____________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
____________________________________________________
Address of Transferee
____________________________________________________
____________________________________________________
In the presence of:
_______________________
