EXECUTION COPY Exhibit 4.1
THE SECURITIES SUBSCRIBED FOR HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR
SOLD IN THE UNITED STATES (AS DEFINED IN REGULATION S
UNDER THE ACT) OR TO OR FOR THE ACCOUNT OR BENEFIT OF
U.S. PERSONS (AS DEFINED IN REGULATION S) EXCEPT
PURSUANT TO REGISTRATION UNDER OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT.
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
This Offshore Securities Subscription Agreement (the
"Agreement"), dated December __, 1997, is entered into
by and between Coyote Network Systems, Inc., a company
incorporated in the state of Delaware (the "Company"),
and ___________________ (the "Buyer").
The Company has offered for sale outside the United
States (as that term is defined in Regulation S
("Regulation S") under the Act up to $6,000,000 of an
8% Convertible Note due December __, 2000 (the
"Securities") convertible into common stock of the
Company. Buyer has been offered $_____________ in
principal amount of the Securities. Interest on the
Securities will be payable as provided in the form of
Convertible Note attached hereto as Annex A. The terms
on which the Securities may be converted into shares of
the Company's common stock (such shares underlying the
Securities being referred to herein as "Shares") and
the other terms of the Securities are set forth in the
Form of Convertible Note attached as Annex A.
Capitalized terms used herein and not defined herein
shall have the meanings given to them in Regulation S
as the same may be amended from time to time.
The parties hereto agree as follows:
1. Purchase and Sale of Securities. Upon the basis
of the representations and warranties, and subject to
the terms and conditions, set forth in this Agreement,
the Company covenants and agrees to sell to the Buyer
on the Closing Date (as hereinafter defined)
$______________ in principal amount of the Securities
at a price of 100% of the original principal amount,
and upon the basis of the representations and
warranties, and subject to the terms and conditions,
set forth in this Agreement, the Buyer covenants and
agrees to purchase from the Company, on the Closing
Date $__________ in principal amount of the Securities
of the Company at 100% of the original principal
amount.
2. Closing Instructions to Escrow Agent. (a)
The closing of the purchase and sale of the Securities
pursuant to Section 1 hereof shall take place on or
before December __, 1997 (the "Closing Date") after the
Company has delivered to the offices of First Bermuda
Securities Limited (the "Escrow Agent") located at
Chevron House, 00 Xxxxxx Xxxxxx, Xxxxxxxx, XX 11
Bermuda, __ Convertible Notes (each a "Convertible
Note") representing the Securities in denominations of
not less than $25,000, registered in the name of the
Buyer (representing the maximum amount of Securities to
be purchased by the Buyer hereunder).
(b) The Company and the Buyer agree that they shall
instruct the Escrow Agent as provided in Annex B and as
provid in Annex B and as follows:
(i) On the Closing Date, for each
Convertible Note subscribed for and delivered to the
Escrow Agent pursuant to paragraph 2(a) above, the
Escrow Agent shall, upon confirmation in the form of a
federal funds wire number that First Bermuda Securities
Limited has wired payment of the aggregate purchase
price for the Securities (less any fees the Company has
authorized Escrow Agent to deduct) in immediately
available funds to the Company's account as provided in
the escrow instructions attached as Annex B, release
the Securities described in paragraph 2(a) above. The
Escrow Agent shall return to the Company any
Convertible Notes that the Buyer does not purchase on
the Closing Date. If the closing shall not have taken
place by December __, 1997, this Agreement shall
terminate.
(ii) The Escrow Agent will make delivery of
the number of Convertible Notes set forth in clause
2(a) above in accordance with the instructions of the
Buyer subject to customary settlement procedures upon
confirmation of the wiring of funds to the Company as
described in clause 2(b)(i) above, except that all such
Convertible Notes shall be delivered to a location
outside the United States and none of the Convertible
Notes shall be delivered to a U.S. Person (as defined
in Regulation S).
3. Representations and Warranties of the Buyer: The
Buyer understands and represents and warrants to, and
agrees with the Company that:
(a) The Buyer understands that no federal or
state agency has passed on, or made any recommendation
or endorsement of the Securities.
(b) The Buyer acknowledges that, in making the
decision to purchase the Securities, it has relied
solely upon independent investigations made by it and
not upon any representations made by the Company with
respect to the Company or the Securities, except for
the representations and warranties in this Agreement,
the Convertible Note, the Registration Rights Agreement
and the Officer's Certificate (as defined below),
except that the Buyer has received, reviewed and relied
upon the Opinion of Counsel (as defined below) and
copies of the report on Form 10-Q for the quarter ended
September 30, 1997, the report on Form 10-K for the
year ended March 30, 1997, filed by the Company
pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and all other filings,
including filings on Form 8-K, under the Exchange Act
since March 30, 1997, which, together with any filings
by Company after the date hereof and prior the Closing,
are defined as "Exchange Act Reports".
(c) The Buyer understands that the Securities are
being offered and sold to it in reliance on specific
exemptions from or non-application of the registration
requirements of federal and state securities laws and
that the Company is relying upon the truth and accuracy
of the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set
forth herein in order to determine the applicability of
such exemptions and the suitability of the Buyer to
acquire the Securities.
(d) The Buyer is not a U.S. Person (as defined in
Regulation S) and is not and will not be an affiliate
(as defined in the Exchange Act) of the Company. To
enable the Company to avoid withholding interest paid,
the Buyer certifies under penalty of perjury
that it is neither a citizen nor a resident of the United
States and that its address set forth in the Escrow Agreement
is correct.
(e) No public offer or solicitation of the
Securities or the Shares issuable on conversion of the
Securities was made to the Buyer and no offer of the
Securities or the Shares issuable on conversion of the
Securities was made to the Buyer while the Buyer was
present in the United States.
(f) At the time the buy order for the Securities
was originated the Buyer was located outside the United
States and is outside the United States on the date of
the execution and delivery of this agreement and will
be outside the United States on the Closing Date.
(g) The Buyer is aware that the Securities and
the Shares issuable upon exercise of conversion rights
have not been and will not be registered under the Act
(except as may be required under the Registration
Rights Agreement) and may only be offered or sold
pursuant to registration under the Act or an available
exemption therefrom and Buyer has not, and will not,
engage in any public offering or distribution of the
Securities or the Shares.
(h) The Buyer (i) will not, during the period
commencing on the Closing Date and ending 40 days after
the Closing Date (the "Restricted Period"), offer or
sell or agree to sell the Securities in the United
States, to a U.S. Person or for the account or benefit
of a U.S. Person or other than in accordance with Rule
903 or 904, as applicable, of Regulation S, and (ii)
will, after the expiration of the Restricted Period,
offer, sell, pledge or otherwise transfer the
Securities or the common stock issuable upon the
exercise of conversion rights only pursuant to
registration under the Act or an available exemption
therefrom and, in any case, in accordance with
applicable federal and state securities laws.
(i) The Buyer and its affiliates have been
advised of and are familiar with, have complied, and
will comply, with the offering restrictions, and any
other requirements, of Regulation S.
(j) The transactions contemplated by this
Agreement (i) have not been pre-arranged by the Buyer
with a purchaser located in the United States which is
a U.S. Person, and (ii) are not part of a plan or
scheme by the Buyer to evade the registration
provisions of the Act.
(k) The Buyer is an "accredited investor" as
defined in the Act and will be purchasing the
Securities for its account for the purpose of
investment and not (i) with a view to, or for sale in
connection with, any distribution thereof or (ii) for
the account or on behalf of any U.S. Person.
(l) Neither the Buyer nor any of its affiliates
has entered, has the intention of entering, or will
during the Restricted Period, directly or indirectly,
enter into, with any U.S. Person, any put option, short
position or other similar instrument or position
(including hedging positions) with respect to the
Securities or securities into which the Securities are
convertible or participate in any other attempt
designed to lower the trading prices of the Company's
common stock.
(m) The Buyer shall indemnify the Company against
any loss, cost or damages (including reasonable
attorney's fees and expenses) incurred as a result of
the Buyer's breach of any representation, warranty,
covenant or agreement in this Agreement.
4. Registration Rights. On or prior to the Closing
Date, the Company and Buyer agree to execute a
Registration Rights Agreement (the "Registration Rights
Agreement") in the form substantially set out in Annex
C attached hereto, respectively.
5. Conversion of Securities The Securities may be
converted into the Shares, as herein defined, at the
option of the holder thereof under the terms set forth
in the Form of Convertible Note, attached hereto as
Annex A.
6. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees
with, the Buyer that:
(a) The Company has been duly incorporated and is
validly existing as a corporation in good standing
under the laws of Delaware.
(b) This Agreement has been duly authorized,
executed and delivered by the Company and is a valid
and binding agreement enforceable in accordance with
its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or
affecting creditors' rights generally and to general
principles of equity; and the Company has full
corporate power and authority necessary to enter into
this Agreement and to perform its obligations
thereunder.
(c) No consent, approval, authorization or order
of any court, governmental agency or body or arbitrator
having jurisdiction over the Company or any of its
affiliates is required for execution of this Agreement,
including, without limitation, the issuance and sale of
the Securities, or the performance of its obligations
hereunder.
(d) Neither the sale of Securities pursuant to,
nor the performance of its obligations under this
Agreement by the Company will (i) violate, conflict
with, result in a breach of, or constitute a default
(or an event which with the giving of notice or the
lapse of time or both would be reasonably likely to
constitute a default) under (A) the certificate of
incorporation, charter or by-laws of the Company or any
of its affiliates, (B) any decree, judgment, order,
law, treaty, rule, regulation or determination
applicable to the Company or any of its affiliates of
any court, governmental agency or body, or arbitrator
having jurisdiction over the Company or any of its
affiliates or over the properties or assets of the
Company or any of its affiliates, (C) the terms of any
bond, debenture, note or any other evidence of
indebtedness, or any material agreement, stock option
or other similar plan, indenture, lease, mortgage, deed
of trust or other material instrument to which the
Company or any of its affiliates is a party, by which
the Company or any of its affiliates is bound, or to
which any of the properties of the Company or any of
its affiliates is subject, or (D) the terms of any
"lock-up" or similar provision of any underwriting or
similar agreement to which the Company or any of its
affiliates is a party to; or (ii) result in the
creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of
the Company or any of its affiliates.
(e) The Company has an authorized capitalization
consisting of 15,000,000 shares of common stock, par
value $1.00 per share (the "Common Stock"), and
5,000,000 shares of Preferred Stock, par value $.01 per
share ("Preferred Stock"). The Company has issued and
outstanding __________ shares of Common Stock and nil
shares of Preferred Stock as of December __, 1997. All
of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are
fully paid and non-assessable; prior to the Closing
Date, the authorized capitalization shall include the
Shares to be issued upon conversion of the Securities.
The shares of Common Stock issuable upon conversion of
the Securities, when issued and delivered in accordance
with the terms of the Securities, will be duly and
validly issued, fully paid and non-assessable. The
issuance of the Shares will not be in violation of any
preemptive or similar rights of the holders of any
securities of the Company. The Securities (i) are free
and clear of any security interests, liens, claims or
other encumbrances, (ii) have been duly and validly
authorized and on the Closing Date will be duly and
validly issued, fully paid and non assessable, (iii)
will not have been, individually and collectively,
issued or sold in violation of any preemptive or other
similar rights of the holders of any securities of the
Company and (iv) will not subject the holders thereof
to personal liability by reason of being such holders.
The Common Stock underlying the Securities is quoted
on, and will be, following the completion of the
Restricted Period (if sold in accordance with the
provisions of this Agreement, applicable securities law
and Regulation S as then in effect), eligible for
trading on, The National Association of Securities
Dealers Inc. Electronic Bulletin Board ("NASDAQ").
(f) The Company is a Reporting Issuer (as defined
in Regulation S) because it has a class of securities
registered pursuant to Section 12(g) of the Exchange
Act and has filed all the material required to be filed
pursuant to Section 13(a) of the Exchange Act for a
period of at least twelve (12) months preceding the
date of this Agreement. The Common Stock is quoted on
NASDAQ and the Company has received no notice, oral or
written, with respect to its continued eligibility for
such listing. The Company hereby agrees, promptly
following the Closing of the transactions contemplated
by this Agreement, to take such action as is necessary
to cause the Shares issued upon exercise of conversion
rights under the Convertible Notes to be quoted on
NASDAQ upon such conversion following expiration of the
Restricted Period (subject, if required, to notice to
NASDAQ of the actual number of shares issued). The
Company further agrees, if the Company applies to have
the Common Stock traded on any other principal stock
exchange or market, it will include in such application
the Shares and will take such other action as is
necessary or desirable to cause the Shares to be listed
on such other exchange or market upon expiration of the
Restricted Period.
(g) The Exchange Act Reports are the only filings
made by the Company since March 31, 1997 pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange
Act, and the Company will cause its Common Stock to
continue to be registered under Section 12(g) or 12(b)
of the Securities Exchange Act of 1934, will comply in
all respects with its reporting and filing obligations
under said Act, and will not take any action or file
any document (whether or not permitted by said Act or
the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting
and filing obligations under said Act. The Company
will take all action necessary to continue the quoting
and trading of its Common Stock on NASDAQ and will
comply in all respects with the Company's reporting,
filing and other obligations under the by-laws or rules
of the NASD and NASDAQ.
(h) The Company has the requisite corporate power
to own its properties and to carry on its business as
now being conducted. The Company is duly qualified as
a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes
such qualification necessary other than those in which
the failure so to qualify would not have a Material
Adverse Effect. "Material Adverse Effect" means any
adverse effect on the business, operations, properties,
prospects, or financial condition of the entity with
respect to which such term is used and which is
material to such entity.
(i) The Company has furnished or made available
to the Buyer true and correct copies of the Company's
Certificate of Incorporation as in effect on the date
hereof (the "Certificate of Incorporation"), and the
Company's By-Laws, as in effect on the date hereof (the
"By-Laws").
(j) The Company has delivered or made available
to the Buyer true and complete copies of the Exchange
Act Reports (including, without limitation, proxy
information and solicitation materials excluding any
preliminary proxy not distributed). The Company has
not provided to the Buyer any information which,
according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which
has not been so disclosed. As of their respective
dates, the Exchange Act Reports complied in all
material respects with the requirements of the Exchange
Act and the rules and regulations of the SEC
promulgated thereunder and other federal, state and
local laws, rules and regulations applicable to such
Exchange Act Reports, and none of the Exchange Act
Reports contained any untrue statement of a material
fact or omitted to state a material fact required to be
stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading. The financial
statements of the Company included in the Exchange Act
Reports comply as to form in all material respects with
applicable accounting requirements and the published
rules and regulations of the SEC or other applicable
rules and regulations with respect thereto. Such
financial statements have been prepared in accordance
with generally accepted accounting principles applied
on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or
summary statements) and fairly present in all material
respects the financial position of the Company as of
the dates thereof and the results of operations and
cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit
adjustments).
(k) Except as set forth in the financial
statements and other documents filed by the Company
under the Exchange Act, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent
to September 30, 1997 and (ii) obligations under
contracts and commitments incurred in the ordinary
course of business, which in either case are required
under generally accepted accounting principles to be
reflected in such financial statements, which
individually or in the aggregate, are material to the
financial condition or operating results of the
Company. The Company has not provided to the Buyer any
information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the
Company but which has not been so disclosed.
(l) Since September 30, 1997 there has been no
material adverse change and no material adverse
development in the business, properties, operations,
financial condition, results of operations or prospects
of the Company, except as disclosed in accordance with
the Exchange Act Reports.
(m) There is no material action, suit,
proceeding, inquiry or to the knowledge of the Company
or any of its subsidiaries, investigation before or by
any court, public board, government agency, self-
regulatory organization or body pending, or to the
knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company or any of
its subsidiaries other than as set forth in the
Exchange Act Reports.
(n) Neither the Company, nor any or its
affiliates, nor any person acting on its or their
behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy
any security, under circumstances that would require
registration of the Securities under the Act.
(o) The Company has taken no action which would
give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments by the
Buyer relating to this Agreement or the transactions
contemplated hereby, except for dealings with First
Bermuda Securities Limited, whose commissions and fees
will be paid for by the Company.
(p) As of the date hereof, the Company has
reserved and the Company shall continue to reserve and
keep available at all times, free of preemptive rights,
shares of Common Stock for the purpose of enabling the
Company to satisfy any obligation to issue shares of
its Common Stock upon conversion of the Securities;
provided, however, that the number of shares so
reserved shall at all times be at least 1,250,000 in
aggregate for purposes of conversion of the Securities.
On the Closing Date, such shares of Common Stock, with
restrictive legend, shall be deposited with the Escrow
Agent (as herein defined). The number of shares so
reserved may be reduced by the number of shares
actually delivered pursuant to the conversion of the
Securities (provided that in no event shall the number
of shares so reserved be less than the number required
to satisfy the remaining conversion rights on the
unconverted Securities) and the number of shares so
reserved shall be increased to reflect stock splits and
stock dividends and distributions.
(q) No legend has been or shall be placed on the
Securities or share certificates representing the
Securities or Shares and no note or stock transfer
instructions have been or shall be given to the
Company's transfer agent with respect thereto other
than as set forth in Section 10.
(r) Based upon the truth and accuracy of the
representations and warranties made by the Buyer, the
sale of the Securities pursuant to this Agreement will
be made in accordance with the provisions and
requirements of Regulation S and applicable state law.
(s) No offer to sell the Securities was made by
the Company to any person in the United States.
(t) None of the Company, any affiliate of the
Company, or any person acting
on behalf of the Company or any such affiliate has
engaged, or will engage, in any Directed Selling Efforts
as that term is defined in Regulation S with respect
to the Securities nor any general solicitation of the
Securities.
(u) The transactions contemplated by this
Agreement (i) have not been pre-arranged with a
purchaser who is in the United States or is a U.S.
Person, and (ii) are not part of a plan or scheme to
evade the registration provisions of the Act.
(v) The Company undertakes and agrees to make all
necessary filings in connection with this offering as
required by the laws and regulations of all appropriate
jurisdictions and securities exchanges in the United
States of America.
(w) The Company shall indemnify the Holder
against any loss, cost or damages (including reasonable
attorney's fees and expenses) incurred as a result of
the Company's breach of any representation, warranty,
covenant or agreement in this Agreement.
7. Offering Materials. All offering materials and
documents used in connection with the offers and sales
of the Securities prior to the expiration of the
Restricted Period shall include statements to the
effect that the Securities and the Shares issuable upon
the exercise of conversion rights have not been
registered under the Act and that the Buyer, may not
directly or indirectly offer or sell the Securities or
such shares in the United States or to a U.S. Persons
(other than distributors) unless the Securities or
shares are registered under the Act, or an exemption
from the registration requirements of the Act is
available. Such statements shall appear (1) on the
cover of any prospectus or offering circular used in
connection with the offer or sale of the Securities and
(2) in the placement section of any prospectus or
offering circular used in connection with the offer or
sale of the Securities. Buyer represents that all
offering materials and documents received by it in
connection with the offers and sales of the Securities
prior to the Closing of the transactions contemplated
herein have complied with the foregoing. Nothing
contained in this Section 7 shall negate or detract
from any of the representations, warranties and
agreements of Buyer contained in Section 3 above.
8. Covenants of the Company. (a) The Company
covenants and agrees that during the period beginning
on the date hereof and ending 90 days following the
Closing Date, the Company will not, without the prior
written consent of a "Majority-in-interest" of the
Buyers, negotiate or contract with any party to obtain
additional equity financing (including debt financing
with an equity component) pursuant to the exemption
from the registration requirements of Regulation S (the
"Future Offerings"). In addition, the Company will not
conduct any Future Offerings during the period
beginning on the 90th day following the date hereof and
ending 180 days following the Closing Date unless it
shall have first delivered to the Buyer at least ten
(10) business days prior to the closing of such Future
Offering, written notice describing the proposed Future
Offering, including the terms and conditions thereof,
and providing the Buyer an option during such ten (10)
day period to purchase all or any portion of its "pro-
rata" share of the securities being offered in the
Future Offerings on the same terms as contemplated by
such Future Offering (the limitations referred to in
this and the immediately preceding sentence are
collectively referred to as the "Capital Raising
Limitation"). The Capital Raising Limitation shall not
apply to any transaction involving the Company's
commercial banking arrangements or
issuances of securities in connection with a merger,
consolidation or sale of assets, or in connection with
any strategic partnership or joint venture (the primary
purpose of which is not to raise equity capital), or in
connection with the disposition or acquisition of a
business, product or license by the Company (so long
as the securities so issued are "restricted securities"
within the meaning of Rule 144 under the 1933 Act and do
not carry registration or piggy back rights for at least
360 days from the date of this Agreement), the issuance
of securities to settle securities litigation, the
exercise of outstanding warrants or exercise of options
or conversion of Coyote Technologies LLC membership
units by or the grant of performance shares to
employees, consultants or directors. The terms (i)
"majority-in-interest" means Holders of 8% Convertible
Notes holding more than 50% of the Common Stock
underlying the Securities (treating the Securities on
an as converted basis) and (ii) "pro-rata share" means
the principal amount of the Securities initially
purchased divided by the aggregate principal amount of
all Securities sold hereunder.
(b) The parties shall use their best efforts
timely to satisfy each of the conditions described in
Section 9 of this Agreement.
(c) So long as the Buyer beneficially owns any of
the Securities, the Company shall timely file all
reports required to be filed with the SEC pursuant to
the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under
the Exchange Act even if the Exchange Act or the rules
and regulations thereunder would permit such
termination, except in the event of a merger,
consolidation or sale of all or substantially all of
the Company's assets, as long as the surviving or
successor entity in such transaction (i) assumes the
Company's obligations hereunder and under the
agreements and instruments entered into in connection
herewith and (ii) is a publicly traded corporation
whose Common Stock is listed for trading on the AMEX,
the NYSE or the NASDAQ.
(d) At Buyer's request, the Company agrees to
send the following reports to Buyer until Buyer
transfers, assigns, or sells all of the Securities: (i)
within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its Quarterly
Reports on Form 10-Q and any Current Reports on Form 8-
K; and (ii) within two (2) business days after release,
copies of all press releases issued by the Company or
any of its subsidiaries.
(e) The Company shall at all times have
authorized, and reserved for the purpose of issuance, a
sufficient number of shares of Common Stock to provide
for the full conversion of the outstanding Securities
and issuance of the Shares in connection therewith
(based on the conversion price of the Securities in
effect from time to time). In that regard, on the
Closing Date, the Company shall have at least 1,250,000
shares reserved for issuance upon conversion of the
Securities (subject to adjustment in order to comply
with the immediately preceding sentence); provided that
the Company shall not reduce the number of shares of
Common Stock reserved for issuance upon conversion of
the Securities without the consent of a majority-in-
interest of the buyers of the Securities, which consent
will not be unreasonably withheld.
(f) So long as the Buyer beneficially owns any
Securities, the Company shall maintain its corporate
existence, except in the event of a merger,
consolidation or sale of all or substantially all of
the Company's assets, as long as the surviving or
successor entity
in such transaction (i) assumes the Company's obligations
hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly
traded corporation whose Common Stock is listed for trading
on the AMEX, the NYSE or the NASDAQ.
(g) The Company and the Buyer agree that the
Closing Date, when certified by Escrow Agent as the
Closing shall be deemed to be a conclusion of the
offering of the Securities contemplated hereby. The
Company acknowledges and agrees that, for purposes of
clarifying and specifying the applicable Restricted
Period under Regulation S, the Buyer intends to observe
as the Restricted Period (as defined in Regulation S)
for the Securities, the period of 40 days commencing on
the Closing Date and ending 40 days thereafter.
(h) The Shares issued upon conversion of the
Securities and the certificates evidencing the same
shall at all times be free of legends (except as
provided in Section 10 below), "stock transfer
restrictions," or other restrictions, except as
expressly set forth in this Agreement and the
Convertible Note.
9. Conditions Precedent to the Buyer's Obligation.
The obligations of the Buyer hereunder are subject to
the performance by the Company of the following
additional conditions precedent:
(a) The Buyer shall receive, on the Closing Date,
an opinion of counsel to the Company, dated the Closing
Date, as to the representations made by the Company in
Sections 6(a) through and including 6(f) and in
Sections 6(m) and 6(n) hereof, and such other matters
as Buyer reasonably requests (collectively, the
"Opinion of Counsel"). The form of the Opinion of
Counsel shall be as set forth in Exhibit 1 hereof.
(b) Delivery of the notes representing the
Securities with restrictive legend to the Escrow Agent
as set forth herein.
(c) The Company shall have delivered to the Buyer
a certificate (the "Officer Certificate") in form and
substance reasonably satisfactory to the Buyer,
executed by an executive officer of the Company, to the
effect that all the conditions to the Closing shall
have been satisfied and the representations and
warranties of the Company herein are true and correct
as of the date when made and as of the Closing Date,
and certifying as to the Company's Certificate of
Incorporation, By-Laws, resolutions authorizing
transaction, and incumbency of Company officers.
(d) The Company and the Buyer shall have entered
into the Registration Rights Agreement as contemplated
by Section 4.
10. Legends. (a) The certificates representing the
Securities, and the Shares issued during the Restricted
Period, shall bear the following legend (the "Legend"):
"The securities represented hereby have been
issued pursuant to Regulation S promulgated under
the Securities Act of 1933, as amended (the "1933
Act"), and have not been registered under the 1933
Act. Such securities may not be transferred,
offered or sold prior to the end of the forty (40)
day period (the "Restricted Period") commencing on
December __, 1997 unless such transfer,
offer or sale is made in an "offshore transaction"
and not to or for the account of or benefit of
a "U.S. Person" (as such terms are defined in
Regulation S) and is otherwise in accordance
with the requirements of Regulation S. Following
the expiration of the Restricted Period, the
securities represented hereby may not be offered,
sold or otherwise transferred in the United States
or to a U.S. Person unless the securities are
registered under the 1933 Act and applicable state
securities laws, or such offers, sales and
transfers are made pursuant to an available
exemption or safe-harbor from the registration
requirements of those laws."
(b) Following the expiration of the Restricted
Period, and subject to Section 10(d) below, the Company
will remove or will promptly instruct its transfer
agent to remove the Legend from the Shares issued
during the Restricted Period (and will instruct its
transfer agent to issue without the Legend, the Shares
issuable upon any conversion or exercise occurring
after the Restricted Period), if the Buyer holding such
Securities or any other person in whose name the
certificates have been or are to be validly and legally
issued shall have delivered a certificate (a "Removal
Certificate") to the Company to the following effect:
"The undersigned acknowledges that the securities
to which this certificate relates have not been
registered under Securities Act of 1933, as
amended (the "1933 Act") and that offers, sales or
other transfer of such securities must be made in
compliance with Regulation S promulgated under the
1933 Act, pursuant to an effective registration
statement under the 1933 Act or pursuant to an
available exemption from registration, and the
undersigned certifies that the undersigned has not
made, nor will the undersigned make or cause to be
made, any offer, sale or other transfer of such
securities, in violation of the 1933 Act, other
applicable securities laws or the rules and
regulations of the Securities and Exchange
Commission."
(c) Upon the submission, at any time after the
expiration of the Restricted Period, by Buyer of a
written request for legend removal for the purpose of a
bona fide pledge or deposit of the Shares with a margin
account, together with the certificates for which the
legend removal is being requested and a Removal
Certificate signed by both the Buyer and the pledgee or
other holder of the Shares, the Company will reissue or
will promptly instruct its transfer agent to reissue
the certificates representing the Shares to be so
pledged or deposited without the Legend.
(d) Notwithstanding the provisions of this
Section 10, if with respect to the Company's receipt of
a Removal Certificate from any person, prior to any
removal of the Legend, there shall have been after the
date hereof any amendment to the Act or Regulation S or
any no action letter, interpretative release or other
advice from the Securities and Exchange Commission
after the date hereof, which disallows the removal of
the Legend under the circumstances in which the request
that it be removed is being made or otherwise indicates
that the Securities would be restricted, then the
Company shall have no obligation to remove or to
instruct its transfer agent to remove the Legend,
unless the Company shall have received from the person
requesting such removal a written letter of counsel to
such person reasonably acceptable to the Company and
its counsel confirming that the Legend may be so
removed or share certificates may be so issued without
the Legend without violation of the Act. If the person
requesting a removal of the Legend is unable to supply
the legal opinion referred to above then the Company
shall, upon demand of such person, be obligated to
register the Common Stock for resale pursuant to the
terms of the Registration Rights Agreement.
11. Transfer Agent Instructions. The Company's
transfer agent will be instructed to reserve for
issuance such number of shares of the Company's Common
Stock as would be issuable if the Convertible Notes
were converted on the Closing Date and such additional
number of shares as, from time to time, shall be
necessary to provide for the issuance of Shares upon
the conversion of the Convertible Notes. Additionally,
the Company shall deliver to its transfer agent
promptly after closing irrevocable instructions
substantially in the form set forth in Annex E attached
hereto, pursuant to which the transfer agent shall be
instructed to issue upon conversion the number of
shares provided for in the Convertible Note being
converted on the terms provided for therein without
restrictive legend, registered in the names provided by
the Holders, subject to the terms and conditions in
this Agreement and in the Convertible Note. The
Company warrants and covenants that no instructions
restricting the transferability of the Shares other
than the instructions in the immediately preceding
sentence and instructions for a "stop transfer"
instruction until the end of the Restricted Period have
been given, or shall be given, to the transfer agent,
and that the Shares shall otherwise be freely
transferable on the books and records of the Company,
subject to the restrictions in this Agreement and in
the Convertible Note. Nothing in this section,
however, shall affect in any way the obligations and
agreement of the Buyer to comply with all applicable
federal, state and foreign securities laws upon resale
of the Securities.
12. Miscellaneous. (a) This Agreement may be
executed in one or more counterparts and it is not
necessary that signatures of all parties appear on the
same counterpart, but such counterparts together shall
constitute but one and the same agreement.
(b) Notices. Any notice or other
communication given or permitted under this Agreement
shall be in writing and shall be deemed to have been
duly given if personally delivered or sent by
registered or certified mail, return receipt requested,
postage prepaid or by air courier, (a) if to Buyer, at
its address hereinabove set forth, (b) if to the
Company, at its address hereinabove set forth, and (c)
if to a holder other than Buyer, at the address thereof
furnished by like notice to the Company, or (d) to any
such addresses at such other address or addresses as
shall be so furnished to the other parties by like
notice..
(c) This agreement shall inure to the benefit of
and be binding upon the parties hereto, their
respective successors, and no other person shall have
any right or obligation hereunder. This Agreement
shall not be assignable by either party without the
prior written consent of the other, and any assignment
in violation hereof shall be void. Notwithstanding the
foregoing, the Buyer may assign its rights in this
Agreement subject to the terms and conditions of this
Agreement and the Convertible Note, and the provisions
of this Agreement shall then inure to the benefit of,
and be enforceable by, any transferee of any of the
Securities or Shares.
(d) This Agreement together with the Convertible
Note and the Registration Rights Agreement constitutes
the entire agreement of the parties with respect to the
subject matter hereof and supersedes all prior oral or
written proposals or agreements related
thereto. This Agreement may not be amended or any
provision hereof waived, in whole or in part, except
by a written amendment signed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have
duly executed and delivered this Agreement, all as of
the day and year above written.
COYOTE NETWORK SYSTEMS, INC.
By: _____________________________________________
Xxxxx X. Xxxxxxx, Chairman & Chief Executive Officer
[BUYER]
By: _____________________________________________
