-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RsDxfqviUr0mNJp9LwDfvGTTvim1VnQRxrVGvmE4l2TxSCayUk6q/rplvKOrXZ1R aa5MpiB0Pz0YCU34lq28CQ== 0000057201-00-000002.txt : 20000207 0000057201-00-000002.hdr.sgml : 20000207 ACCESSION NUMBER: 0000057201-00-000002 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000125 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COYOTE NETWORK SYSTEMS INC CENTRAL INDEX KEY: 0000057201 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 362448698 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-05486 FILM NUMBER: 523833 BUSINESS ADDRESS: STREET 1: 4360 PARK TERRACE DRIVE CITY: WESTLAKE VILLAGE STATE: CA ZIP: 91361 BUSINESS PHONE: 8187357600 MAIL ADDRESS: STREET 1: 4360 PARK TERRACE DRIVE CITY: WESTLAKE VILLAGE STATE: CA ZIP: 91361 FORMER COMPANY: FORMER CONFORMED NAME: DIANA CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FH INDUSTRIES CORP DATE OF NAME CHANGE: 19850814 FORMER COMPANY: FORMER CONFORMED NAME: SCOT LAD FOODS INC DATE OF NAME CHANGE: 19841202 8-K 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): January 25, 2000 COYOTE NETWORK SYSTEMS, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 1-5486 36-2448698 - ---------------------------- ----------------------- ------------------- (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 4360 Park Terrace Drive Westlake Village, CA 91361 -------------------------------------------------- Address of principal executive offices (818) 735-7600 ------------------------------ Registrant's Telephone Number, Including area code ================================================================================ Item 5. Other Events On January 26, 2000, we appointed James R. McCullough as our Chief Executive Officer to succeed James J. Fiedler. Mr. Fiedler will continue as Chairman. Mr. McCullough also became a member of the Board of Directors on February 2, 2000. We entered into a three-year Employment Contract with Mr. McCullough pursuant to which he will receive a salary of $160,000 per annum and options to purchase up to 750,000 shares of 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's principal occupation prior to joining us was as a co-president of Renwick Corporate Finance, Inc., a consulting company from 1996 to the present. From 1994 to 1997, Mr. McCullough was the general partner of an investment fund focusing on early stage technology companies. On January 25, 2000, we entered into a Financial Services Agreement with First Venture Leasing LLC ("First Venture"), pursuant to which an LLC was formed by First Venture to offer certain leasing and credit packages to our customers. First Venture is an entity in which Mr. McCullough had a 25% interest, which he relinquished effective upon his becoming a director of the Company on February 2, 2000. The terms of our agreement with First Venture were the result of arms' length negotiation in which Mr. McCullough did not participate. The Agreement with First Venture was approved by our Board of Directors. On January 26, 2000, we also entered into a Remarketing Agreement and two separate License Agreements with the LLC formed by First Venture, pursuant to which such LLC shall act as our agent in remarketing equipment leased to third parties upon the termination of such leases and shall have the right to use certain trademarks, service marks, trade names and other designations in connection with the services to be provided by the LLC. On January 26, 2000, we also entered into a Consulting Agreement with KRJ, LLC ("KRJ"). Pursuant to the Consulting Agreement, KRJ provided assistance in identifying strategic partners and business opportunities, making introductions to IP Telephony customers, introducing new management, restructuring vendor finance programs, investor relations, and identifying credit facilities. We issued to KRJ 2,000,000 shares of unregistered common stock, with no 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 12 months after the respective dates of delivery of any of such shares. Mr. McCullough has an approximately one-third interest in KRJ and the balance of KRJ is owned by affiliates of First Venture. The Consulting Agreement also provides that over the next three years, KRJ will 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 Consulting Agreement has been approved by our Board of Directors and the terms of our agreement with KRJ were the result of arms' length negotiation in which Mr. McCullough did not participate. In connection with the issuance of the 2,000,000 shares to KRJ, we anticipate recording a one-time, non-cash charge to earnings of approximately $10 million in the fourth quarter of Fiscal 2000. Item 7. Financials Statements and Exhibits (c) Exhibits 10.1 Employment Agreement by and between Coyote Network Systems, Inc. and James R. McCullough. 10.2 Consulting Agreement by and between Coyote Network Systems, Inc. and KRJ, LLC. 10.3 Financial Services Agreement by and among Coyote Network Systems, Inc., Coyote Technologies, LLC, First Venture Leasing, LLC and Coyote Leasing, LLC. 10.4 Master Remarketing Agreement by and among Coyote Network Systems, Inc., Coyote Technologies, LLC and Coyote Leasing, LLC 10.5 Coyote Technologies License Agreement by and between Coyote Technologies, LLC and Coyote Leasing, LLC. 10.6 Coyote License Agreement by and between Coyote Network Systems, Inc. and Coyote Leasing, LLC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: February 4, 2000 COYOTE NETWORK SYSTEMS, INC. By: /s/ Brian A. Robson ------------------------------------- Brian A. Robson Executive Vice President, Chief Financial Officer and Secretary Index to Exhibits Exhibit No. Description 10.1 Employment Agreement by and between Coyote Network Systems, Inc. and James R. McCullough. 10.2 Consulting Agreement by and between Coyote Network Systems, Inc. and KRJ, LLC. 10.3 Financial Services Agreement by and among Coyote Network Systems, Inc., Coyote Technologies, LLC, First Venture Leasing, LLC and Coyote Leasing, LLC. 10.4 Master Remarketing Agreement by and among Coyote Network Systems, Inc., Coyote Technologies, LLC and Coyote Leasing, LLC 10.5 Coyote Technologies License Agreement by and between Coyote Technologies, LLC and Coyote Leasing, LLC. 10.6 Coyote License Agreement by and between Coyote Network Systems, Inc. and Coyote Leasing, LLC. EX-10.1 2 JAMES R. MCCULLOUGH EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT THIS AGREEMENT, made as of this 26th day of January, 2000, is by and between COYOTE NETWORK SYSTEMS, INC., a Delaware corporation (the "Company"), and JAMES R. McCULLOUGH (the "Employee"). RECITALS WHEREAS, the Employee is willing to be employed by the Company upon the terms and conditions set forth in this Agreement. NOW, THEREFORE, in order to set forth the terms and conditions of the Employee's employment with the Company and in consideration of the covenants and agreements of the parties herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. EMPLOYMENT SERVICES Subject to the terms and conditions hereinafter set forth, the Company hereby employees the Employee as Chief Executive Officer commencing on January 14, 2000 and ending on the last day of the Term (as defined below). The Employee accepts such employment and agrees to perform all duties in a conscientious, reasonable and competent manner and to devote his reasonable best efforts to perform his duties pursuant to this Agreement and to further the business of the Company, as directed by the Board of Directors. Without further action of the Company, the Employee may engage in other business, consulting, financial and other activities during the employment hereunder subject to fulfilling his duties hereunder. The Employee has disclosed in Schedule 1 attached hereto the names of his other business affiliations as of the date hereof and agrees to promptly notify the Company of any additional affiliations. 2. TERM AND TERMINATION 2.1 TERM Subject to section 2.2 hereof, the employment of the Employee under this Agreement will commence on January 14, 2000 (the "Effective Date") and continue until the occurrence of the first of the following (the "Termination Date"): (a) January 14, 2003 (i.e., a term of three years); 1 (b) The Employee's death; or (c) The Employee's illness, physical or mental disability or other incapacity resulting in the Employee's inability to effectively perform his duties under this Agreement for an aggregate of thirty (30) days during any period of six (6) consecutive months. The period beginning on the Effective Date and ending on the Termination Date is referred to herein as the "Term." 2.2 TERMINATION The Employee may be terminated prior to the expiration of the Term with or without "Cause" at the sole discretion of the Board of Directors. "Cause" shall include any of the following occurrences: (a) The Employee's conduct involving fraud or moral turpitude or the Employee's dishonesty involving the Company's business; (b) The Employee's chronic absence from work other than by reason of illness, injury, vacation or business- related travel, which continues after the Employee has received a written notice from the Company to halt such chronic absence; (c) Conviction of any felony; (d) The Employee's conviction of any misdemeanor which is substantially related to the Employee's services hereunder; (e) The Employee's abuse of alcohol (whether or not on the job) after receiving a written notice from the Company to halt such usage or the Employee's conviction of a crime involving alcohol; (f) The Employee's use of illegal drugs or other illegal substance (whether or not on the job) after receiving a written notice from the Company to halt such usage or the Employee's conviction of a crime involving illegal drugs or other illegal substance, which impairs the Employee's ability to perform his duties under this Agreement or has an adverse effect (other than an insignificant effect) on the Company, its business or its relationship with any customer or supplier of the Company; 2 (g) Conduct either within or outside the scope of the Employee's employment which has an adverse effect (other than an insignificant effect) on the Company, its business or its relationship with any customer or supplier of the Company; (h) A breach by the Employee of his obligations under sections 7, 8 or 9 hereof; and (i) A material breach of any other provision of this Agreement by the Employee, following written notice and failure to cure within a reasonable time (which cure period shall be no less than five days after Employee's receipt of such notice). The Employee may resign and terminate this Agreement on five days prior written notice to the Company for no reason or any reason ("Voluntary Termination"). In addition, the Employee may terminate this Agreement if the Company has materially breached any provision of this Agreement and the Company has not cured such breach within a reasonable time (but no less than five days) after receipt of written notice of such breach ("Termination for Good Cause"). 2.3 EFFECT OF TERMINATION If the Employee is terminated for "Cause" as defined above, or the Employee effects a Voluntary Termination, then this Agreement shall terminate and the Employee shall not be entitled to any unearned compensation or benefits under this Agreement as of the date of termination and any unvested options as of the date of termination granted pursuant to section 3.2 shall be void and cancelled. If the Employee is terminated without "Cause" as defined above, or the Employee effects a Termination for Good Cause, then this Agreement shall terminate and the Employee shall nevertheless be entitled to six months of semi-monthly salary installments as set forth in section 3.1 and the stock options and vesting schedule of section 3.2 shall remain in effect. The Employee's obligations in sections 6, 7, 8, 9 and 10 hereof shall survive the termination of employment hereunder for any reason. 3 3. COMPENSATION 3.1 SALARY The Company agrees to pay the Employee for each full fiscal year of the term of this Agreement an annual salary, payable in 24 equal semi-monthly payments, at a rate equal to $160,000 per year. 3.2 STOCK OPTIONS The Employee shall be entitled to receive five-year stock options of the Company for 750,000 shares of the Company's common stock at an exercise price of $5.00/share (the "Options"), with vesting as set forth below: Number of Options/Shares Vesting 300,000 Immediate 100,000 January 14, 2001, provided, however, such vesting shall be accelerated if the closing price of the Company's common stock on the Nasdaq National Market is equal to or greater than $8.00/share for 20 consecutive trading days 150,000 January 14, 2002, provided, however, such vesting shall be accelerated if the closing price of the Company's common stock on the Nasdaq National Market is equal to or greater than $12.00/share for 20 consecutive trading days 200,000 January 14, 2003, provided, however, such vesting shall be accelerated if the closing price of the Company's common stock on the Nasdaq National Market is equal to or greater than $16.00/share for 20 consecutive trading days All Options must be exercised on or before the earlier of (i) January 14, 2006 or (ii) the date which is three (3) years after termination of the Employee's employment with the Company for any reason. 4 Notwithstanding the foregoing, all stock options granted to the Employee above shall immediately vest in the event of any transaction in which substantially all of the assets of the Company are acquired or 50% or more of the issued and outstanding common stock of the Company is acquired by a single person, entity or group of such persons or entities. The Employee hereby acknowledges that the stock options set forth above and the shares underlying such stock options have not been registered or qualified for sale under the Securities Act of 1933, as amended (the "Act"), or any state securities law and may not be sold, hypothecated, pledged, assigned or otherwise transferred, nor will any assignee, vendee or other transferee be recognized as having an interest in such stock options or shares of stock, unless a registration statement under the Act and any applicable state securities laws is then in effect with respect to such stock options or shares of stock or the availability of an exemption from such registration is established to the satisfaction of the Company. The Employee further acknowledges that the Company must amend its Certificate of Incorporation (the "Charter Amendment") to authorize the shares underlying such Options to permit the Employee to exercise any such Options. The Company will use all commercially reasonable efforts to obtain the approval of its stockholders and take such other actions as are necessary to effect the Charter Amendment. Subject to the effectiveness of the Charter Amendment, the Company shall at all times prior to by which all such options must be exercised reserve and keep available, solely for issuance and delivery upon the exercise of such Options, a number of authorized shares of common stock equal to the number of shares of common stock which may be purchased upon exercise of such Options. 3.3 ADJUSTMENT The Company and the Employee hereby agree that at the earlier of six (6) months from the date hereof or upon vesting of all of the options set forth in section 3.2 above, the Employee will meet with the Audit Committee of the Board of Directors for the purpose of increasing or adjusting the Employee's compensation hereunder. The focus of such meeting shall be an assessment of the granting of additional stock options and salary to the Employee. 5 3.4 ACKNOWLEDGEMENT The Company acknowledges (i) that the Options being granted hereunder are granted to the Employee in his individual capacity and not in payment of the Employee providing any finder, broker, dealer, placement agent or other investment banking or advisory services and (ii) the Options as awarded and vested are in no way dependent on the Employee introducing or causing any particular person or entity to invest in the Company or effect any given transaction with the Company. 4. REIMBURSEMENT FOR EXPENSES The Company agrees to reimburse the Employee for all reasonable business expenses incurred by him in connection with the performance of his obligations under this Agreement, subject to established reimbursement policies of the Company in effect from time-to-time regarding expense reimbursement, including, without limitation, reasonable travel, entertainment, cell phone, long distance charges and other customary expenses the Employee incurs in the performance of his duties hereunder, and to further reimburse the Employee for any reasonable legal or accounting fees incurred by Employee in connection with his entry into this Agreement or the performance of his duties up through the date hereof. 5. BENEFITS The Employee shall be entitled to the following benefits during the term of his employment under this Agreement, and shall be offered any additional benefits typically offered or provided any other executive officers of the Company. 5.1 VACATION The Employee shall be allowed three (3) weeks of vacation per year during the term of this Agreement, with full pay and without loss of any other compensation of benefits, in accordance with established Company policies. The Employee shall coordinate the schedule of his vacations with other executives and the personnel of the Company at its affiliates so as to provide sufficient managerial and executive coverage for the Company's operations. 6 5.2 MOVING ALLOWANCE The Employee shall be entitled to reimbursement from the Company in an aggregate amount of $20,000 for expenses relating to his initial relocation to the Company's headquarters. 5.3 OTHER BENEFITS The Employee may receive such other benefits, if any, as the Board of Directors may from time-to-time make available to the Employee in the Board of Directors' sole discretion; provided, however, the Employee shall be eligible for any benefits offered to any other member of the Company's senior executive team on terms no less favorable that those offered to other members of the senior executive team. 5.4 PAYMENTS All cash payments due to the Employee hereunder shall be paid promptly (no later than two business days after the due date) in immediately available funds to the account specified by the Employee or by check made payable to the order of the Employee. 6. DEFINITIONS (a) As used in this Agreement, the following words have the meanings specified: (b) "Proprietary Ideas" means ideas, suggestions, inventions and work relating in any way to the business and activities of the Company which may be subjects of protection under applicable laws, including common law, respective patents, copyrights, trade secrets, trademarks, service marks or other intellectual property rights. (c) "Invention" means inventions, designs, discoveries, improvements and ideas, whether or not patentable, including without limitation, upon the generality of the foregoing, novel or improved products, processes, machines, software, promotional and advertising materials, business data processing programs and systems, and other manufacturing and sales techniques, which either (a) relate to (i) the business of the Company as conducted from time-to-time or (ii) the Company's actual or demonstrably 7 anticipated research or development, or (b) result from any work performed by the Employee for the Company. (d) "Confidential Information" means Proprietary Ideas and also information related to the Company's business, whether or not in written or printed form, not generally known in the trade or industry of which the Employee has or will become informed during the period of employment by the Company, which may include but is not limited to product specifications, manufacturing procedures, methods, equipment, compositions, technology, formulas, trade secrets, know-how, research and development programs, sales methods, customer lists, mailing lists, customer usage and requirements, software and other confidential technical or business information and data; provided, however, that Confidential Information shall not include any information which is in the public domain by means other than disclosure by the Employee or which the Employee must disclose by operation of law or legal or administrative process. (e) As used in sections 7, 8, 9 and 10 only, the term "the Company" shall include all entities affiliated with the Company. 7. DISCLOSURE AND ASSIGNMENT OF INVENTIONS The Employee agrees to disclose to the Company, and hereby assigns to the Company all of the Employee's rights in and, if requested to do so, provide a written description of, any Inventions conceived or reduced to practice at any time during the Employee's employment by the Company, either solely or jointly with others and whether or not developed on the Employee's own time or with the Company's resources. The Employee agrees that Inventions first reduced to practice within one (1) year after termination of the Employee's employment by the Company shall be treated as if conceived during such employment unless the Employee can establish specific events giving rise to the conception which occurred after such employment. Further, the Employee disclaims and will not assert any rights in Inventions as having been made, conceived or acquired prior to employment by the Company except such as are specifically listed at the conclusion of this Agreement. The Employee shall cooperate with the Company and shall execute and deliver such documents and do such other acts and things as the Company may request, at the Company's expense, to obtain and maintain letters patent or registrations covering any Inventions and to vest in 8 the Company all rights therein free of all encumbrances and adverse claims. 8. CONFIDENTIAL INFORMATION The Employee shall not disclose to the Company or induce the Company to use any secret or confidential information belonging to persons not affiliated with the Company, including any former employer of the Employee. In addition to all duties of loyalty imposed on the Employee by law, the Employee shall maintain Confidential Information in strict confidence and secrecy and shall not at any time, during or at any time after termination of employment with the Company, directly or indirectly, use or disclose to others any Confidential Information, or use it for the benefit of any person or entity (including the Employee) other than the Company, without the prior written consent of any authorized officer of the Company (except for disclosures to persons acting on the Company's behalf with a need to know such information). The Employee shall carefully preserve any documents, records, tangible data relating to Inventions or Confidential Information coming into the Employee's possession and shall deliver the same and any copies thereof to the Company upon request and, in any event, upon termination of the Employee's employment by the Company. 9. NON-SOLICITATION (a) The Employee agrees that he will not, during the one-year period following termination of his employment with the Company, be connected in any way with the solicitation of any then current or potential (defined as persons or companies with pending quotes to or from the Company) customers or suppliers of the Company if such solicitation is likely to result in a loss of business for the Company. (b) The Employee agrees that he will not, during the one year period following termination of his employment with the Company, solicit for employment, employ or engage as a consultant any person who had been an employee of the Company at any time in the two year period prior to the Employee's termination of employment with the Company. (c) In the event the covenants set forth in this section 9 are found to be unenforceable or invalid by reason of being overly broad, the parties hereto intend that such covenants shall be limited to 9 such scope, geographic area and duration as shall make such covenants valid and enforceable. 10. ENFORCEMENT OF SECTION 7, 8 AND 9 Recognizing that compliance with the provisions of sections 7, 8 and 9 of this Agreement is necessary to protect the goodwill and other proprietary interests of the Company, and that breach of the Employee's agreements thereunder will result in irreparable and continuing damages to the Company for which there will be no adequate remedy at law, the Employee hereby agrees that in the event of any breach of such agreements, the Company shall be entitled to seek injunctive relief and such other and further relief, including damages, as may be proper. 11. LAWS, REGULATIONS AND CONTRACTS The Employee agrees to comply, and to do all things necessary for the Company to comply, with all federal, state, local and foreign laws and regulations which may be applicable to the business and operations of the Company, and with any contractual obligations, including, without limitation, confidentiality obligations, which may be applicable to the Company or Executive under any contracts between the Company and its customers, suppliers or third parties. 12. MISCELLANEOUS 12.1 AMENDMENT AND MODIFICATION The Company (by action of the Board of Directors) and the Employee may amend, modify and supplement this Agreement only in such manner as may be agreed upon by the Company and the Employee in writing. 12.2 ENTIRE AGREEMENT This instrument embodies the entire agreement between the parties hereto with respect to the employment relationship created hereby and supersedes and replaces any prior agreements pertaining to employment between the Employee and the Company. There have been and are no agreements, representations or warranties between the parties other than those set forth or provided for herein relating to such employment relationship. 10 12.3 ASSIGNMENT This Agreement shall not be assigned by the Employee without the written consent of the Company. Any attempted assignment without such written consent shall be null and void and without legal effect; provided, however, nothing herein shall prevent the Employee from assigning and of his rights to payment hereunder to any third company in full compliance with all state and federal laws. This Agreement may be assigned by the Company to a successor corporation or a good-faith purchaser of the Company's stock or assets only in connection with a sale of all or substantially all of the Company's assets or as a result of a merger or other business combination involving the Company and any such assignment shall not terminate or modify this Agreement, except that the employing party to which the Employee shall have been transferred shall, for the purposes of this Agreement, be construed as standing in the same place and stead as the Company as of the date of the assignment. 12.4 BINDING Subject to section 12.3 hereof, this Agreement shall be binding upon and insure to the benefit of the respective parties hereto and their successors, assigns, heirs, executors, administrators and personal representatives. The parties hereto shall be entitled, at their option, to the remedy of specific performance to enforce any of the provisions of this Agreement. 12.5 ARBITRATION Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach hereof, shall be settled by binding arbitration in Los Angeles, California administered by the American Arbitration Association under its Employment Dispute Resolution, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. 12.6 AGREEMENT SEVERABLE; WAIVER This is a severable Agreement and in the event that any part of this Agreement shall be held to be unenforceable, all other parts of this Agreement shall remain valid and fully enforceable as if the unenforceable part or parts had not been included herein. No waiver of any provision of this Agreement shall be binding unless executed in 11 writing by the party to be bound hereby. No waiver of a breach of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of a breach of any other provision of this Agreement, whether or not similar, nor shall such waiver constitute a continuing waiver of such breach unless otherwise expressly provided. No failure or delay in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. 12.7 NOTICES For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows: If to EMPLOYEE, to: James R. McCullough 69 Liberty Street Madison, CT 06943 If to COMPANY, to: Coyote Network Systems, Inc. Attn: President 4360 Park Terrace Drive Westlake Village, CA 91361 or to such other address as either party may have furnished to the other in writing in accordance herewith except that notices of a change of address shall be effective only upon receipt. 12.8 AFFILIATED PARTIES The Employee hereby represents to the Company that he has ownership interests in the companies or entities listed on Schedule 1 attached hereto which may from time to time enter into transactions or other business relationships with the Company. The Employee hereby agrees he will update Schedule 1 immediately if there are changes. No contract, transaction or other business relationship involving the Company and any such company or entity affiliated with Employee as of the date of such proposed contract, transaction or business relationship may be authorized solely by the Employee. 12 12.8 GOVERNING LAW This Agreement shall be governed and construed under the laws of the State of California. 12.9 INDEMNIFICATION; INSURANCE The Company represents and warrants to the Employee that it has and will maintain adequate directors and officers' liability insurance coverage and that it will indemnify the Employee to the full extent permitted by the General Corporation Law of the State of Delaware, as provided in the Certificate of Incorporation of the Company. 12.10 CORPORATE AUTHORITY; ENFORCEABILITY The Company represents and warrants to the Employee that it is a corporation duly organized and validly existing under the laws of the State of Delaware and that the execution and delivery of this Agreement, and the performance by the Company of its obligations hereunder, have been duly authorized by proper corporate action on the part of the Company. This Agreement is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. THE EMPLOYEE ACKNOWLEDGES HAVING READ, EXECUTED AND RECEIVED A COPY OF THIS AGREEMENT, INCLUDING THE FOLLOWING NOTICE, AND AGREES THAT, WITH RESPECT TO THE SUBJECT MATTER HEREOF, IT CONSTITUTES THE EMPLOYEE'S ENTIRE AGREEMENT WITH THE COMPANY, SUPERSEDING ANY PREVIOUS ORAL OR WRITTEN COMMUNICATIONS, REPRESENTATIONS, UNDERSTANDINGS OR AGREEMENTS WITH THE COMPANY OR ANY OF ITS OFFICIALS OR REPRESENTATIVES. Notwithstanding anything to the contrary in section 7 hereof, this Agreement does not apply to an Invention for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on the Employee's own time, unless (a) the Invention relates (i) to the business of the Company as conducted from time-to-time or (ii) to the Company's actual or demonstrably anticipated research or development, or (b) the Invention results from any work performed by the Employee for the Company. 13 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written. COYOTE NETWORK SYSTEMS, INC. BY: /s/ James J. Fiedler /s/ Daniel W. Latham -------------------- -------------------- James J. Fiedler Daniel W. Latham Chairman President /s/ James R. McCullough ----------------------- JAMES R. McCULLOUGH SCHEDULE 1 AFFILIATIONS OF JAMES R. McCULLOUGH IN OTHER BUSINESS VENTURES A. Ownership Interests: Name of Business Ownership Interest Renwick Corporate Finance, Inc. 50% First Venture Leasing 25% KJR, LLC 33-1/3% B. Directorships: None. C. Officer Positions in other Companies: None other than various positions with the entities listed in section A above. EX-10.2 3 CONSULTING AGREEMENT CONSULTING AGREEMENT THIS AGREEMENT is made and entered into as of January 26, 2000 by and between COYOTE NETWORK SYSTEMS, INC., a Delaware corporation (the "Company"), and KRJ, LLC, a Delaware limited liability company ("Consultant"). 1. Consultant's Duties. (a) Since January 14, 2000 ("the "Effective Date") Consultant has performed services for the benefit of the Company, specifically being instrumental in advising and assisting the Company on (i) identifying strategic partners and business opportunities; (ii) introductions to substantial IP Telephony customers; (iii) introduction of new management; (iv) restructuring of vendor finance programs; (v) investor relations; (vi) identifying credit facilities; and (vii) structuring a recapitalization of the Company; (viii) increasing foreign and domestic sales development; and (ix) seeking to achieve the continued viability of the Company and sustained earnings growth and shareholder value through 2000 and beyond; (b) From the date hereof, Consultant's duties under this Agreement will include continuing participation in the activities listed in subsection (a) above. (c) Consultant's duties hereunder have not to date, and shall not hereinafter, include introducing the Company to investors, promoting the Company's stock to third parties or placing (or advising on the placement of) the Company's equity or debt securities to any party. The Company acknowledges that all such services shall be performed by a registered broker-dealer. (d) Consultant agrees to use its reasonable best efforts to performing the duties set forth in subsection (b) above. 2. Term of Agreement. The initial term of this Agreement will commence on the Effective Date and terminate on third anniversary of the date hereof. The Company may terminate this Agreement for any reason upon 30 days' written notice to Consultant or Consultant may terminate this Agreement for any reason on 30 days' written notice to the Company, but Consultant shall nevertheless be entitled to the compensation set forth in section 3 below. 3. Compensation. As remuneration for Consultant's services set forth in section 1(a) above, the Company shall issue 2,000,000 shares of the Company's 1 Common Stock, par value $1.00 per share (the "Common Stock"), to Consultant and deliver such shares of the Common Stock to Consultant as follows: (a) 750,000 shares of Common Stock within fifteen days of the Effective Date; (b) 1,250,000 shares of Common Stock shall be placed in escrow, to be automatically delivered to Consultant as follows: (i) 416,666 shares of Common Stock within five days after the first anniversary of the date of this Agreement provided, however, the escrow agent shall accelerate the delivery if the closing price of the Common Stock on the Principal Market (as defined below) is equal to or greater than $8 per share for 20 consecutive trading days; (ii) 416,667 shares of Common Stock within five days after the second anniversary of the date of this Agreement provided, however, the escrow agent shall accelerate the delivery if the closing price of the Common Stock on the Principal Market is equal to or greater than $12 per share for 20 consecutive trading days; (iii) 416,667 shares of Common Stock within five days after the third anniversary of the date of this Agreement provided, however, the escrow agent shall accelerate the delivery if the closing price of the Common Stock on the Principal Market is equal to or greater than $16 per share for 20 consecutive trading days; or (iv) immediately upon any transaction in which substantially all of the assets of the Company are acquired or 50% or more of the issued and outstanding common stock of the Company is acquired by a single person, entity or group of such persons or entities (a "Change in Control"). Under the terms of the escrow agreement, Consultant shall retain all voting and dividend rights with respect to the shares of Common Stock held in escrow. The escrow agent shall comply with the delivery schedule set forth above, absent an order from a court of competent jurisdiction staying the delivery or otherwise directing delivery to another person. For purposes of this section 3, "Principal Market" means the Nasdaq National Market, the Nasdaq SmallCap Market, the OTC Bulletin Board, the American Stock Exchange or the New York Stock Exchange, whichever at the time is the principal trading exchange or market for the Common Stock. The Company and Consultant hereby agree that at the earlier of six (6) months from the date hereof or upon delivery to Consultant of all of the Common Stock as set forth 2 above, Consultant will meet with the Audit Committee of the Board of Directors for the purpose of further compensating Consultant for the services provided from January 26, 2000 to the date of the meeting. The focus of such meeting shall be an assessment of the granting of additional stock or warrants to Consultant sufficient to provide Consultant with reasonably equivalent economic value as set forth on Exhibit A attached hereto. 4. Trading Restrictions. Notwithstanding any other holding period or trading restrictions imposed by law, which restrictions Consultant agrees to follow, Consultant further agrees that it will not sell, pledge, hypothecate or otherwise transfer any of the shares granted under section 3 until 12 months from the date of delivery of the Common Stock by the Company or the escrow agent, as the case may be, to Consultant; provided, however, that in the event of a Change in Control these trading restrictions shall be lifted. 5. Status. During the term of this Agreement, the relationship of the Company and Consultant shall be that of independent contractor. This Agreement shall not in any way create a relationship of principal and agent or employer and employee between the Company and Consultant. 6. Expenses. The Company will reimburse Consultant for any reasonable business expenses incurred by Consultant in performance of its duties hereunder, provided that those expenses are approved in advance and in writing by the Company. The Company agrees to reimburse Consultant for legal and accounting expenses related to services rendered hereunder, not to exceed $15,000 in the aggregate. Any additional legal or accounting expenses Consultant incurs in connection with this Agreement or the performance of its duties hereunder shall be at Consultant's expense. 7. Confidential Information. In connection with the performance of its services under this Agreement, Consultant may receive information concerning the Company and its affiliates, including, without limitation, descriptive memoranda, appraisals, financial statements or summaries, correspondence, records or other specific financial, technical, commercial or other information regarding their businesses and affairs, whether or not such material is specifically marked or designated as confidential (the "Confidential Information"). The parties agree that the Confidential Information has been acquired, established and maintained at great expense, protected as confidential information and trade secrets and are of great value and will provide the Company with a substantial competitive advantage in its business. Therefore, Consultant agrees that it will not, directly or indirectly, either individually or as an employee, principal, agent, owner, trustee, beneficiary, distributor, partner, co-venturer, shareholder, consultant or in any other capacity, use or disclose, or cause to be used or disclosed, any of the Confidential Information, 3 whether such information was owned the Company prior to, or developed by the Company subsequent to, its relationship with Consultant, and regardless of the fact that Consultant may have participated in the discovery and development of that information; provided, however, Consultant may disclose such information to it members, its legal advisors and any other party directly involved in Consultant rendering its services hereunder so long as Consultant receives from such individuals or entities (except for Consultant's members, legal advisors and accountants) and provides to the Company a confidentiality agreement similar in scope to this Agreement. Nothing contained herein shall be construed as restricting or creating any liability for the disclosure, communication or use of the following information: (a) information which, at the time of disclosure hereunder, was published or known publicly or was otherwise in the public domain; (b) information which after disclosure hereunder, is published or becomes publicly known or otherwise in the public domain other than as a result of a breach of this Agreement; (c) information which was disclosed to the recipient in good faith by a third party who was not, and is not, under any obligation of confidence or secrecy to the other party hereto at the time of such disclosure; or (d) information if for which the disclosure is legally required, in the opinion of counsel to Consultant, to be made in a judicial, administrative or governmental proceeding or process. Consultant shall promptly notify the Company of Consultant being legally required to make such disclosure to allow the Company to oppose such compelled disclosure. 8. Consultant's Representations and Warranties. Consultant represents and warrants to the Company that: (a) Consultant is not a registered broker or dealer in securities under any federal or state securities laws; (b) Neither Consultant nor any of its affiliates, agents, officers or employees is currently subject to disciplinary action of any kind by the U.S. Securities and Exchange Commission, the National Association of Securities Dealers, Inc., any stock or commodities exchange or any state securities authority; (c) Neither Consultant nor any of its affiliates, agents, officers or employees has ever been found liable by, or is currently the subject of an injunction issued by, a court or arbitration board in connection with alleged securities law violations or improprieties; 4 (d) Consultant is acquiring the shares of Common Stock issuable pursuant to section 3 solely for its own account for investment purposes, and not with a view to the distribution thereof, and Consultant acknowledges that any certificate for the Common Stock may contain a legend in the form attached hereto as Exhibit B; (e) Consultant understands that the Common Stock has not been, and will not be, registered under the Securities Act of 1933, as amended (the "Securities Act"), or under any state securities laws, and are being offered and sold in reliance upon federal and state exemptions for transactions not involving any public offering; (f) Consultant is an accredited investor within the meaning of Rule 501(a) of Regulation D under the Securities Act; (g) Consultant and each natural person who, directly or indirectly, is a beneficial owner of an ownership interest in Consultant has received certain information concerning the Common Stock and the Company, including, without limitation, copies of the Company's filings with the Securities and Exchange Commission, and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the Common Stock; (h) Consultant and each natural person who, directly or indirectly, is a beneficial owner of an ownership interest in Consultant is able to bear the economic risk and lack of liquidity inherent in holding the Common Stock; (i) Consultant and each natural person who, directly or indirectly, is a beneficial owner of an ownership interest in Consultant acting on his or its own behalf or in conjunction with his or its duly authorized legal, financial or other advisors, has such knowledge and experience in financial and business matters that he or it is capable of evaluating the merits and risks of the prospective investment in the Shares; and (j) Consultant has relied solely upon its own knowledge and experience and the advice of its own legal, financial or other advisors with regard to the legal, investment, tax and other considerations involved in deciding to acquire the Company's Common Stock as compensation for its services. 9. The Company's Representations and Warranties. The Company represents and warrants to Consultant that the shares of Common Stock to be issued pursuant to this Agreement have been duly authorized and, when the shares of Common Stock 5 delivered as contemplated hereby, will be validly issued, fully paid and non-assessable and will not be subject to any preemptive or similar rights. The Company shall at all times during the term of this Agreement reserve and keep available, solely for issuance and delivery pursuant to this Agreement, a number of authorized shares of Common Stock equal to the number of shares of Common Stock which may issued pursuant to section 3. The Company further represents and warrants to Consultant that it is a corporation duly organized and validly existing under the laws of the State of Delaware and that the execution and delivery of this Agreement, and the performance by the Company of its obligations hereunder, have been duly authorized by proper corporate action on the part of the Company and that this Agreement is legal, valid and binding obligation of the Company, enforceable against the Company according to its terms. 10. Additional Covenants of Consultant. Consultant covenants to the Company that (a) the representations and warranties set forth in section 7(a), (b) and (c) will be true and correct as of the date of this Agreement and the date that the Common Stock is issued, and (b) the representations and warranties set forth in section 7(d), (e), (f), (g), (h), (i) and (j) will be true and correct at any time that the Company issues Common Stock pursuant to section 3. 11. Specific Performance. Consultant acknowledges and agrees that irreparable injury to the Company may result in the event Consultant breaches any covenant and agreement contained in section 6 and that the remedy at law for the breach of any such covenant will be inadequate. Therefore, if Consultant engages in any act in violation of the provisions of section 6, Consultant agrees that the Company shall be entitled, in addition to such other remedies and damages as may be available to it by law or under this Agreement, to injunctive relief to enforce the provisions of section 6; provided, however, nothing herein shall deprive Consultant of the right to contest the granting of any injunction. 12. Governing Law; Construction. This Agreement shall be governed by and construed in accordance with the laws of the State of California (regardless of such State's conflict of laws principles), and without reference to any rules of construction regarding the party responsible for the drafting thereof. This Agreement shall be construed without reference to any rules of construction regarding the party responsible for drafting thereof. 13. Waiver. The failure of any party to insist, in any one or more instances, upon performance of any of the terms or conditions of this Agreement, shall not be construed as a waiver or a relinquishment of any right granted hereunder for the future performance of any such term, covenant or condition. 14. Notice. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed to have been duly given 6 or made upon receipt, if delivered personally, on the third business day following deposit in the U.S. mail if mailed by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like changes of address) or the next business day following electronic transmission to the telecopier number specified below with receipt acknowledged: If to the Company: Coyote Network Systems, Inc. 4360 Park Terrace Drive Westlake Village, CA 91361 Attn: President Facsimile: 818-735-7633 If to Consultant: KRJ, LLC c/o Duval & Stachenfeld LLP Attn: Harsha Murthy, Esq. 300 East 42nd Street, 3rd Floor New York, NY 10017 Facsimile: 212-883-8883 15. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions of this Agreement or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Agreement is invalid or unenforceable, the parties hereto agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, to delete specific words or phrase or to replace any invalid or unenforceable term or provision with a term or provision that is valid or enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. 16. Miscellaneous. (a) This Agreement may be amended only by an agreement in writing signed by all of the parties hereto. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, assigns and beneficiaries in interest. Neither party may assign this Agreement without the prior written 7 consent of the other party; provided, however, nothing herein shall limit the ability of Consultant to assign its compensation hereunder to any third party subject to compliance under all applicable securities laws. (c) This Agreement may be executed in counterparts, each of which shall be deemed an original, but both of which taken together shall constitute one and the same instrument. (d) The Company will indemnify Consultant against any third party claims that might arise as a result of Consultant's authorized use of any information provided by the Company in connection herewith. IN WITNESS WHEREOF, this Agreement has been entered into as of the day and year first above written. COYOTE NETWORK SYSTEMS, INC. BY /s/ Daniel W. Latham --------------------------- Name Daniel W. Latham Its President KRJ, LLC BY /s/ Kevin O. Kelly --------------------------- Name Kevin O. Kelly Its Managing Member 8 ESCROW AND INDEMNIFICATION AGREEMENT THIS ESCROW AND INDEMNIFICATION AGREEMENT (the "Agreement") is made as of January 26, 2000 by and among REINHART, BOERNER, VAN DEUREN, NORRIS & RIESELBACH, P.C., as escrow agent (the "Escrow Agent"), COYOTE NETWORK SYSTEMS, INC., a Delaware corporation (the "Company") and KRJ, LLC, a Delaware limited liability company (the "the Consultant"). RECITAL The Company and the Consultant are parties to that certain Consulting Agreement dated as of January 26, 2000 (the "Consulting Agreement") and, pursuant thereto, the Company has issued to the Consultant, and the Consultant has agreed to place into escrow, 1,250,000 shares of the Company's Common Stock, par value $1.00 per share (the "Shares"), with delivery of the Shares to the Consultant to occur upon the occurrence of certain events set forth in section 3(b) of the Consulting Agreement. AGREEMENTS In consideration of the Recital and the mutual promises and agreements set forth herein, the parties hereto agree as follows: 1. Acknowledgment of Receipt of Consulting Agreement. The Escrow Agent hereby acknowledges receipt of a copy of the Consulting Agreement but, except for reference thereto for definitions of certain words or terms not defined herein, the Escrow Agent is not charged with any duties or responsibilities thereunder. Capitalized terms used herein without definition shall have the meanings designated for them in the Consulting Agreement unless the context requires otherwise. This Agreement shall become effective upon receipt by the Escrow Agent of the Shares. 2. Escrow. The Shares shall be deposited into escrow on or before February 10, 2000, and the Escrow Agent agrees to hold the Shares until such time as it is required to deliver or return the Shares in accordance herewith. The Escrow Agent shall release from escrow and deliver, by certified mail within five days, the Shares in whole or in part to the Consultant or its designee upon receipt by the Escrow Agent of a direction and/or certification signed by a manager of the Consultant (with a copy provided to the Company) that the 1 applicable condition(s) of section 3(b) of the Consulting Agreement have been satisfied. The Escrow Agent shall be under no duty to determine whether Consultant's certification is accurate, such duty being solely upon the Company to timely challenge in writing any such certification. The Escrow Agent shall return any remaining Shares to the Company or its designee upon receipt by the Escrow Agent of a direction and/or certification of a manager of the Consultant and an officer of the Company that such Shares shall be so returned to the Company or upon order of a court of competent jurisdiction. 3. Voting Rights and Dividends. The Consultant shall be entitled to exercise, in the Consultant's sole discretion, the voting power with respect to the Shares in respect of the election of directors and all other matters and to receive and retain for its own account any and all payments, proceeds, dividends, distributions, monies, compensation, property, assets, instruments or rights, paid, issued or distributed from time to time in respect of the Shares. 4. Provisions Relating to the Escrow Agent. (a) Standard of Care. The Escrow Agent shall have the duty to exercise reasonable care in the custody and preservation of any Shares in its possession, which duty shall be fully satisfied if the Escrow Agent maintains safe custody of such Shares. (b) Notification of Consultant. The Escrow Agent shall have no further obligation to ascertain the occurrence of, or to notify the Consultant with respect to, any events and shall not be deemed to assume any such further obligation as a result of the establishment by the Escrow Agent of any internal procedures with respect to any securities in its possession, nor shall the Escrow Agent shall be deemed to assume any other responsibility for, or obligation or duty with respect to, any Shares, or the use of any Shares, of any nature or kind, or any matter or proceedings arising out of or relating thereto, including any obligation or duty to take any action to collect, preserve or protect the Consultant's rights in the Shares, but the same shall be at the Consultant's sole risk and responsibility at all times. (c) Liability. In performing any duties under the Escrow Agreement, the Escrow Agent shall not be liable to any party for damages, losses, or expenses, except for gross negligence or willful misconduct on the part of the Escrow Agent. The Escrow Agent shall not incur any such liability for (i) any act or failure to act made or omitted in good faith, or (ii) any action taken or omitted in reliance upon any instrument, including any written statement or certification provided for in this Agreement that Escrow Agent shall in good faith believe to be genuine, nor will Escrow Agent be liable or responsible for 2 forgeries, fraud, impersonations, or determining the scope of any representative authority. In addition, Escrow Agent may consult with the legal counsel in connection with Escrow Agent's duties under this Agreement and shall be fully protected in any act taken, suffered, or permitted by Escrow Agent in good faith in accordance with the advice of counsel. Escrow Agent is not responsible for determining and verifying the authority of any person acting or purporting to act on behalf of any party to this Agreement. (d) Controversies. If any controversy arises between the parties to this Agreement, or with any other party, concerning the subject matter of this Agreement, its terms or conditions, Escrow Agent will not be required to determine the controversy or to take any action regarding it. Escrow Agent may hold all documents and funds and may wait for settlement of any such controversy by final appropriate legal proceedings or other means as, in Escrow Agent's discretion, Escrow Agent may be required, despite what may be set forth elsewhere in this Agreement. In such event, Escrow Agent will not be liable for interest or damage. Furthermore, Escrow Agent may at its option, file an action of interpleader requiring the Parties to answer and litigate any claims and rights among themselves. Escrow Agent is authorized to deposit with the clerk of the court all documents and funds held in escrow, except all costs, expenses, charges and reasonable attorney fees incurred by Escrow Agent due to the interpleader action and which the Parties jointly and severally agree to pay. Upon initiating such action, Escrow Agent shall be fully released and discharged of and from all obligations and liability imposed by the terms of this Agreement. (e) Release and Indemnification. The Company and the Consultant hereby release the Escrow Agent, and its officers, directors, employees and agents, from any claims, causes of action and demands at any time arising out of or with respect to this Escrow Agreement, the Shares and/or any actions taken or omitted to be taken by the Escrow Agent with respect thereto (except, in the case of the Escrow Agent, such claims, causes of action and demands arising from the gross negligence or willful misconduct of the Escrow Agent), and the Company and the Consultant hereby jointly and severally agree to hold the Escrow Agent and its officers, directors, employees and agents harmless from and with respect to any and all such claims, causes of action and demands (except such claims, causes of 3 action and demands arising from the gross negligence or willful misconduct of the Escrow Agent). The right of the Escrow Agent to indemnification hereunder shall survive its resignation or removal as Escrow Agent and shall survive the termination of this Agreement for any reason. (f) Resignation. Escrow Agent may resign at any time upon giving at least thirty (30) days' written notice to the parties; provided, however, that no such resignation shall become effective until the appointment of a successor escrow agent which shall be accomplished as follows: the parties shall use their best efforts to mutually agree on a successor escrow agent within thirty (30) days after receiving such notice. If the parties fail to agree upon a successor escrow agent within such time, Escrow Agent shall have the right to appoint a successor escrow agent. The successor escrow agent shall execute and deliver an instrument accepting such appointment and it shall, without further acts, be vested with all the estates, properties, rights, powers, and duties of the predecessor escrow agent as if originally named as escrow agent. Escrow Agent shall upon such appointment be discharged from any further duties and liability under this Agreement. 5. Fees. The Escrow Agent shall not be entitle to receipt of fees for the services rendered hereunder; provided, however, all out-of-pocket costs and expenses (excluding costs of litigation) of the Escrow Agent with respect to the services rendered hereunder shall be paid by the Company. The Escrow Agent shall invoice the Company directly for such cost and expenses. In the event that the Escrow Agent renders any service not provided for this Agreement, or if the parties request a substantial modification of its terms, or if any controversy arises, or if the Escrow Agent is made a party to, or intervenes in, any litigation pertaining to this escrow or its subject matter, the Escrow Agent shall be reasonably compensated for such extraordinary services and reimbursed for all costs, attorney's fees, including allocated costs of in-house counsel, and expenses occasioned by such controversy or litigation and the Escrow Agent shall have the right to retain all documents and/or other things of value at any time held by the Escrow Agent pursuant to this Agreement until such compensation, fees, costs, and expenses are paid. 6. Termination of Escrow. The Shares shall be retained by the Escrow Agent until distributed to the appropriate party or parties pursuant to the terms of this Agreement, at which time this Agreement shall be terminated. 7. Address for Notices. Any notice or other communication required or permitted to be given to the parties hereunder shall be in writing and shall be deemed to have been given if delivered in person by commercial courier, or two business days after mailing by Federal Express or similar express delivery 4 service, addressed as follows (or at such other address as the addressed party may have substituted by notice pursuant to this section): If to the Company: Coyote Network Systems, Inc. 4360 Park Terrace Drive Westlake Village, CA 91361 Attn: President Facsimile: 818-735-7633 If to Consultant: KRJ, LLC c/o Duval & Stachenfeld LLP Attn: Harsha Murthy, Esq. 300 East 42nd Street, 3rd Floor New York, NY 10017 Facsimile: 212-883-8883 If to the Escrow Agent: Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C. Attn: Timothy G. Atkinson, Esq. 1775 Sherman Street, Suite 2100 Denver, CO 80203 Facsimile: 303-831-4805 8. Successors and Assigns. This Agreement is binding upon and shall inure to the benefit of the respective parties hereto and their respective heirs, executors, administrators, successors and assigns; provided, however, that any heirs, executors, administrators, successors and assigns shall only be liable for any liabilities hereunder to the extent of the value of the property or assets received from their respective predecessor in interest. 9. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to conflicts of laws principles. 10. Amendments. Any provision of this Agreement may be amended only by agreement in writing signed by all of the signatories hereto. 11. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. 5 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COYOTE NETWORK SYSTEMS, INC. BY ______________________________ Name _________________________ Its _________________________ KRJ, LLC BY ______________________________ Name _________________________ Its _________________________ REINHART, BOERNER, VAN DEUREN, NORRIS & RIESELBACH, P.C. BY ______________________________ Name _________________________ Its _________________________ 6 EX-10.3 4 FINANCIAL SERVICES AGREEMENT FINANCIAL SERVICES AGREEMENT This Agreement (this "Agreement") is made as of this 25th day of January 2000, by and among Coyote Network Systems, Inc., a Delaware corporation with its principal office located in Westlake Village, California ("CNSI"), Coyote Technologies, LLC, a California limited liability company with its principal office located in Westlake Village, California ("CTL"), First Venture Leasing, LLC, a Delaware limited liability company with its principal office located in Stamford, Connecticut ("First Venture") and Coyote Leasing, LLC, a Delaware limited liability company with its principal office located in Stamford, Connecticut (the "Company"). R E C I T A L S WHEREAS, each of CNSI and CTL seeks to arrange financing under credit programs for their Customers; WHEREAS, each of CNSI and CTL seeks to form an alliance with another company possessing funding capabilities and expertise in the area of systems management, credit programs, design, licensing and leasing programs to maximize efficiencies and create economies of scale necessary to create and develop credit programs for their Customers; WHEREAS, First Venture is engaged in the business of designing and implementing U.S. and foreign vendor leasing and financing programs and desires to provide financing to CNSI and CTL Customers; WHEREAS, First Venture has formed the Company, which will offer certain leasing and credit programs to CNSI and CTL Customers and create and develop new financing facilities and programs to be offered to CNSI and CTL Customers and efficiently manage and operate such financing programs; NOW, THEREFORE, in consideration of these premises and the mutual covenants set forth herein, the parties hereby agree as follows: ARTICLE I DEFINITIONS The following terms shall have the following meanings for all purposes of this Agreement, and such meanings shall be equally applicable to both the singular and plural forms of the terms defined: "Affiliate" shall, with respect to a given Person, mean any other Person directly or indirectly controlled by or under direct or indirect common control with the Person specified. 1 "Agreement" shall have the meaning given to such term in the preamble hereto, as such agreement is amended and supplemented from time to time in accordance with its terms. "Business" shall have the meaning given to such term in Section 5.01 hereof. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banking institutions in Connecticut or California are authorized or required by Law to be closed. "Coyote Customers" shall mean any Person that is an end user of Products. "Coyote License Agreement" shall mean the Coyote License Agreement, dated as of the date hereof, among CNSI, CTL and the Company. "Finance Contracts" shall mean the agreements entered into by the Company in connection with the offering of various types of Services, including forms of leases, guarantees, financing statements, loan agreements, security agreements and other documents appropriate for the conducting of the Company's Business of providing Services. "First Venture Entities" shall mean First Venture or any of its Subsidiaries. "Information" shall have the meaning given to such term in Section 7.01 hereof. "Law" shall mean and include (a) any statute, decree, constitution, regulation, order, judgment or other directive of any Regulatory Authority; (b) any treaty, pact, compact or other agreement to which any Regulatory Authority is a party; (c) any judicial or administrative interpretation or application of any Law described in (a) or (b) above; and (d) any amendment or revision of any Law described in (a), (b) or (c) above. "Operating Agreement" shall mean the Operating Agreement of the Company. "Operative Documents" shall mean this Agreement, the Operating Agreement, the Coyote License Agreement, the Remarketing Agreement and any other agreements, documents or certificates executed and delivered in connection with the transactions contemplated under this Agreement. "Person" means any individual, partnership, joint venture, corporation, trust, unincorporated organization, government (and any department or agency thereof) or other entity. "Products" shall mean any products (including, without limitation, related software licenses, but not including real estate) and related installation and maintenance services provided, furnished, manufactured, sold and/or marketed by CNSI, CTL or any of their respective Affiliates which results in revenues or income to CNSI, CTL or any of their respective Affiliates, and such additional goods or services of CNSI, CTL or any of their respective Affiliates as the parties may from time to time agree. 2 "Regulatory Authorities" shall mean any national government, or political subdivision thereof or local jurisdiction therein, (b) any board, commission, department, division, organ, instrumentality, court, or agency of any entity described in (a) above, however constituted, and (c) any association, organization, or institution of which any entity described in (a) or (b) above is a member or to whose jurisdiction any such entity is subject or in whose activities any such entity is a participant but only to the extent that any of the preceding in clauses (a) - (c) have jurisdiction over the Products or its operations. "Remarketing Agreement" shall mean the Master Remarketing Agreement, dated as of the date hereof, among CNSI, CTL and the Company. "Services" shall mean the financing or leasing of Products to Coyote Customers. "Subsidiary" shall mean, with respect to any Person, any other Person Person which is directly or indirectly controlled by such Person. For purposes of this definition, "control", as applied to any Person, means the possession, directly or indirectly, of the power to vote a majority of the securities having voting power for the election of directors (or other Persons acting in similar capacities) of such Person or otherwise to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. ARTICLE II REPRESENTATIONS AND WARRANTIES OF FIRST VENTURE First Venture represents and warrants to CNSI, CTL and the Company as follows: 2.01. Organization. First Venture is a limited liability company, validly organized and existing under the laws of the jurisdiction of its organization and has due authority to conduct business in all jurisdictions where it conducts business. 2.02. No Conflict. The execution and delivery by First Venture of this Agreement and the other Operative Documents to which it is a party and the consummation of the transactions herein and therein contemplated do not violate or constitute a breach or default under the organizational documents of First Venture or under the terms and conditions of any documents, agreements or other writings to which First Venture is a party, or under any law, or any applicable order, which violation, breach or default could reasonably be expected to have a material adverse effect on First Venture or prohibit it from entering into, executing, delivering or performing its obligations under this Agreement. 2.03. Authority. First Venture has the power and authority to execute and deliver this Agreement and any Operative Document to which it is a party and to perform its obligations hereunder and thereunder. Such execution, delivery, performance and consummation have been duly authorized by all necessary limited liability company action on its part. This Agreement has been duly executed and delivered by its duly authorized managing member, and constitutes its valid and legally binding obligation enforceable against it in accordance with the terms hereof, except as the same may be limited by (i) applicable bankruptcy, 3 reorganization, insolvency, moratorium or other similar laws from time to time in effect affecting creditors' rights generally or (ii) equitable principles of general application. 2.04. Regulatory Authorities; Capabilities. First Venture possesses all licenses and permits and other authorizations by Regulatory Authorities necessary for the conduct of its respective business and to provide to the Company the services anticipated under the Operative Documents to which it is a party, except those the lack of which would not have a material adverse effect on its respective business or its ability to provide such services. First Venture has not received notice from any Regulatory Authority indicating that such Regulatory Authority would oppose or not grant or issue its consent, if required, with respect to the transactions contemplated by this Agreement and the other Operative Documents to which it is a party. 2.05. No Filings Required. No action of, or filing with, or consent of, any Regulatory Authority or any other third party is required by First Venture to authorize, or is otherwise required in connection with, the execution, delivery and performance by First Venture of this Agreement or the other Operative Documents to which it is a party. ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY The Company represents, warrants and covenants to CNSI, CTL and the First Venture Entities as follows: 3.01. Organization. The Company is a limited liability company, validly organized and existing under the laws of the jurisdiction of its organization and has due authority to conduct business in all jurisdictions where it conducts business. 3.02. No Conflict. The execution and delivery by the Company of this Agreement and the other Operative Documents to which it is a party and the consummation of the transactions herein and therein contemplated do not violate or constitute a breach or default under the organizational documents of the Company or under the terms and conditions of any documents, agreements or other writings to which the Company is a party, or under any law, or any applicable order, which violation, breach or default could reasonably be expected to have a material adverse effect on the Company or prohibit it from entering into, executing, delivering or performing its obligations under this Agreement. 3.03. Authority. The Company has the power and authority to execute and deliver this Agreement and any Operative Document to which it is a party and to perform its obligations hereunder and thereunder. Such execution, delivery, performance and consummation have been duly authorized by all necessary limited liability company action on its part. This Agreement has been duly executed and delivered by its duly authorized managing member, and constitutes its valid and legally binding obligation enforceable against it in accordance with the terms hereof, except as the same may be limited by (i) applicable bankruptcy, 4 reorganization, insolvency, moratorium or other similar laws from time to time in effect affecting creditors' rights generally or (ii) equitable principles of general application. 3.04. Regulatory Authorities; Capabilities. The Company possesses and shall obtain and maintain all licenses and permits and other authorizations by Regulatory Authorities necessary for the conduct of the Business, except those the lack of which would not have a material adverse effect on its respective business or its ability to provide such services. The Company has not received notice from any Regulatory Authority indicating that such Regulatory Authority would oppose or not grant or issue its consent, if required, with respect to the transactions contemplated by this Agreement and the other Operative Documents to which it is a party. 3.05. No Filings Required. No action of, or filing with, or consent of, any Regulatory Authority or any other third party is required by the Company to authorize, or is otherwise required in connection with, the execution, delivery and performance by the Company of this Agreement or the other Operative Documents to which it is a party. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CNSI AND CTL Each of CNSI and CTL represents and warrants to the First Venture Entities and the Company as follows: 4.01. Organization. CNSI is a corporation and CTL is a limited liability company, each validly organized and existing under the laws of the State of its incorporation or formation, as applicable, with due authority to conduct business in all jurisdictions where it conducts business. 4.02. No Conflict. The execution and delivery by each of CNSI and CTL of this Agreement and the other Operative Documents to which CNSI or CTL is a party and the consummation of the transactions herein and therein contemplated do not violate or constitute a breach or default under the organizational documents of CNSI or CTL or under the terms and conditions of any documents, agreements or other writings to which CNSI or CTL is a party, or under any Law, or any applicable order, which violation, breach or default could reasonably be expected to have a material adverse effect on CNSI or CTL or prohibit it from entering into, executing or performing its obligations under this Agreement. 4.03. Authority. Each of CNSI and CTL has the power and authority to execute and deliver this Agreement and any Operative Document to which it is a party and to perform its obligations hereunder and thereunder, and such execution, delivery, performance and consummation have been duly authorized by all necessary corporate action on its part. This Agreement has been duly executed and delivered by a duly authorized officer of each of CNSI and CTL, and constitutes the valid and legally binding obligation of each of CNSI and CTL enforceable against each in accordance with the terms hereof, except as the same may be limited by (i) applicable bankruptcy, reorganization, insolvency, 5 moratorium or other similar Laws from time to time in effect affecting creditors' rights generally or (ii) equitable principles of general application. 4.04. Regulatory Authorities. Each of CNSI and CTL possesses all licenses and permits and other authorizations by Regulatory Authorities necessary for the conduct of its business and to provide the services anticipated to be provided by it under the Operative Documents to which it is a party, except those licenses, permits and authorizations the lack of which would not have a material adverse effect on its business or its ability to provide such services. Each of CNSI and CTL has not received notice from any Regulatory Authority indicating that such Regulatory Authority would oppose or not grant or issue its consent, if required, with respect to the transactions contemplated by this Agreement and the other Operative Documents to which it is a party. No action of, or filing with, or consent of, any Regulatory Authority or any other third party is required by either CNSI or CTL to authorize, or is otherwise required by either CNSI or CTL in connection with, the execution, delivery and performance by either CNSI or CTL of this Agreement or the other Operative Documents to which either is a party. 4.05. Litigation. There is no Litigation that is pending, or, to the knowledge of CNSI or CTL, threatened, in or before any court, commission, arbitration tribunal, or judicial, governmental or administrative department, body, agency, administrator or official, grand jury or any other or forum for the resolution of grievances, against either CNSI or CTL. ARTICLE V FORMATION OF COMPANY AND RELATED MATTERS 5.01. Formation of Company. First Venture has formed the Company, whose purpose shall be to engage in the business of providing Services under identified credit programs to Coyote Customers in the U.S. and other countries around the world, to manage such credit programs (collectively, the "Business") and to engage in any such other legal purpose as agreed to from time to time by the Company's managing members. 5.02. Preferred Relationship. In consideration of First Venture having formed the Company and the Company engaging in the business of providing Services to Coyote Customers, and First Venture and the Company taking all such other actions as contemplated by this Agreement and the other Operative Documents, each of CNSI and CTL agrees that it will view the Company as its preferred source for providing Services to Coyote Customers. Each of CNSI, CTL and First Venture will work with the Company to develop the Business by offering Coyote Customers new credit programs for providing Services. All leasing opportunities for equipment sold by CNSI and CTL will be presented to the Company on a first right of refusal basis. The Company will either approve the financing opportunities presented within 20 days or Coyote will be free to pursue alternate sources. 5.03. Delivery and Execution of Certain Operative Documents. The parties hereto shall deliver or cause to be delivered to the other parties (as applicable), at or on the date of this Agreement, the Coyote License Agreement and the Remarketing Agreement. 6 ARTICLE VI INDEMNIFICATION AND LIMITATIONS ON LIABILITY 6.01. Indemnity Under This Agreement. From and after the date hereof, CNSI, CTL, First Venture and the Company shall each indemnify, defend and hold harmless the other parties to this Agreement and their respective members, officers, directors, agents, representatives and employees (with respect to any Claims relating to (i) below) and each of CNSI and CTL shall indemnify, defend and hold harmless the Company and its respective general partners, members, officers, agents, representatives and employees (with respect to any Claims relating to (ii) below; CNSI, CTL, First Venture and the Company are referred to respectively in this Section 6.01 as the case may be as the "Indemnifying Party" and the party to whom such indemnification obligation is owed is referred to in this Section 6.01 as the "Indemnified Party"), from and against any and all actions, claims, losses, costs, liabilities, and expenses (including reasonable attorneys' fees) resulting from or arising out of (i) any breach by the Indemnifying Party of any representation, warranty, or covenant by such Indemnifying Party in this Agreement or (ii) any third party claims arising from the manufacture, sale, delivery, maintenance, service or repair by either CNSI and CTL or any of its Affiliates of any of the Products, or the condition, possession, return, disposition, use, operation, performance or control of such Products (collectively, for purposes of this Section 6.01 only, "Claims"), and will promptly reimburse any Indemnified Party for all Claims as incurred in connection with the investigation of, preparation for, or defense of any pending or threatened action or proceeding (collectively, "Proceeding"), whether or not such Indemnified Party is a formal party to any such Proceeding; provided however, that any Claims asserted by third parties concerning Company's uses anywhere throughout the world of the Marks as permitted under the Coyote License Agreement shall only be brought pursuant to the terms of the Coyote License Agreement. Notwithstanding the foregoing, the Indemnifying Party shall not be liable (a) for any amount paid by or on behalf of an Indemnified Party in settlement of any Claim without the consent of the Indemnifying Party (which consent shall not be unreasonably withheld), (b) in respect of any losses, claims, damages, liabilities or expenses that a court of competent jurisdiction shall have determined by final judgment resulted primarily from the bad faith, negligence, or willful misconduct of an Indemnified Party or (c) any Claim, to the extent the same results from a breach by the Indemnified Party of its representations, warranties or covenants in this Agreement or the Coyote License Agreement. An Indemnified Party shall not, without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld), settle, compromise or consent to the entry of any judgment in any pending or threatened Proceeding in respect of which indemnification may be sought hereunder (whether or not the Indemnified Party is an actual or potential party to such Proceeding), provided, however, that the Indemnified Party may execute such settlement, compromise or consent to the entry of judgment in any pending or threatened Proceeding if the same includes an unconditional release of the Indemnifying Party hereunder from all liability arising out of such Proceeding. 6.02. Procedure. Promptly after a party to whom an indemnification obligation is owed hereunder (an "Indemnified Party") receives notice of the commencement of any Proceeding in respect of which indemnification may be sought 7 hereunder, the Indemnified Party will notify the party that is obligated to indemnify hereunder (an "Indemnifying Party"); but the omission to so notify the Indemnifying Party shall not relieve the Indemnifying Party from any obligation hereunder unless, and only to the extent that, such omission results in the Indemnifying Party's forfeiture of substantive rights or defenses. If any such Proceeding shall be brought against the Indemnified Party, the Indemnifying Party shall, upon written notice given reasonably promptly following the Indemnified Party's notice to the Indemnifying Party of any such Proceeding, be entitled to assume the defense thereof at its own expense with counsel chosen by the Indemnifying Party and reasonably satisfactory to the Indemnified Party; provided; however, that any Indemnified Party may, at its own expense, retain separate counsel to participate in such defense. 6.03. Limitation on Liability. IN NO EVENT SHALL ANY PARTY HERETO BE LIABLE TO THE OTHER UNDER ANY THEORY OF TORT, CONTRACT, STRICT LIABILITY, OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY LOST PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER ANY PARTY HERETO HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING DOES NOT PRECLUDE ANY PARTY FROM BEING INDEMNIFIED AGAINST THIRD-PARTY CLAIMS UNDER ANY OF THE FOREGOING THEORIES OR FOR ANY OF THE FOREGOING DAMAGES. 6.04. Sole Remedies. CNSI, CTL, First Venture and the Company, agree that from and after the date of this Agreement, their sole remedies for any breach of any representation, covenant or warranty contained in this Agreement shall be limited to the right of indemnification as and to the extent set forth in this Article VI, and in all events subject to all of the limitations herein, and the parties waive all and each other remedy available at Law or in equity, provided, however, that this limitation shall not apply in respect of any action brought for fraud with an actual intent to deceive or any right to remedies described in Section 9.13 hereof. ARTICLE VII CONFIDENTIAL INFORMATION; PUBLICITY 7.01. Confidential Information. (a) The parties agree that any and all technical, financial, operations or business information including, but not limited to, customer data, marketing plans, customer lists, customer information, customer account numbers, the status of any account, pricing information, computer access codes, instruction and/or procedural manuals, CNSI's or CTL's current operating policies and manuals, information prepared for or used in the preparation of any operating plan or credit, collections and operations manual of the Company, or financial data of any party ("Information") furnished or disclosed by any party to another party or obtained by any party as a result of its ownership interest in the Company shall be deemed the property of the disclosing party or the Company, as applicable, and when in tangible form, shall be returned by the 8 receiving party to the disclosing party or the Company upon request along with any copies as may be authorized herein. (b) "Information" shall not include: (i) information previously known to the receiving party free of any obligation to keep it confidential as evidenced by written records; (ii) information that has been or subsequently is made public, through no wrongful act of the receiving party or any third party; or (iii) information that is received from a third party without restriction and without breach of this Agreement, other than information provided to such party in connection with its performance of this Agreement or any other Operative Document. (c) Each party agrees that it shall hold Information in confidence and shall not make disclosure of Information to anyone except such of its employees or third party contractors or agents to whom such disclosure is necessary for the purpose of and as permitted in performance of this Agreement, except in the following circumstances: (i) to the extent necessary to comply with a specific applicable Law or the valid final order of a court of competent jurisdiction in which the party making the disclosure or communication shall notify the other party in writing and shall seek confidential and proprietary treatment of the information; (ii) as part of normal reporting or review procedures of such party's Board of Directors, or managing members, as applicable, parent company, auditors and attorneys; provided, however, that such persons or entities agree to be bound by the provisions of this paragraph; (iii) to enforce its rights legally under this Agreement in a court of competent jurisdiction; (iv) as is customary in connection with the sale, transfer, pledge, syndication, assignment and/or securitization of Finance Contracts (and/or any accounts receivable or collateral in connection therewith), so long as the party disclosing Information in such circumstances obtains from such Persons to whom such Information is disclosed, an agreement in the form of this Section 7.01, not to disclose such Information; or (v) such information as is part of the public domain through disclosure other than by or through such party. Each party shall appropriately notify each employee, contractor, or agent to whom Information is disclosed that any such disclosures are made in confidence and shall be kept in confidence by such employee, contractor, or agent, and shall require any third party contractor or agent to sign a written agreement to maintain the confidentiality of the Information. (d) The obligations of the parties hereunder shall survive and be enforceable by temporary and permanent injunctive relief against the breaching party and its employees, officers, directors, agents, representatives, and contractors notwithstanding any termination of this Agreement. 7.02. Confidentiality of Agreement; Publicity. (a) Except as required by Law, in connection with any offering of securities or otherwise, the parties shall keep confidential and not disclose, and shall cause their officers, employees, and agents to keep confidential and not disclose, any of the terms and conditions of this Agreement or any of the Operative Documents to any third party without the prior written consent of all other parties. 9 (b) The obligations of the parties hereunder shall survive and be enforceable by temporary and permanent injunctive relief against the breaching party and its employees, officers, directors, agents, representatives, and contractors notwithstanding any termination of this Agreement. (c) Each party will consult with each of the other parties prior to issuing any press release or otherwise making any public statement with respect to the transactions contemplated by this Agreement, and will not issue any such release or make any such statement over the reasonable objection of any of the other parties, except as required by Law or the rules and regulations of any relevant securities exchange or quotation system. ARTICLE VIII TERM AND TERMINATION 8.01. Term. This Agreement shall take effect on the date hereof and remain in effect for a period of twelve (12) months or until terminated pursuant to Section 8.02 hereof, provided, however, the terms of this Agreement shall remain in effect, as applicable, in relation to any Finance Contract which remains in effect after the end of the term of this Agreement pursuant to this Article VIII. 8.02. Termination. This Agreement and the transactions contemplated hereby may be terminated as follows: (a) By written consent of each of the parties hereto; or (b) The dissolution of the Company. 8.03. Effect of Termination. In the event of the termination of this Agreement pursuant to Section 8.02, this Agreement shall become void and have no effect, except in relation to any Finance Contract which remains in effect after such termination that the provisions of Articles 6 and 7, and any other provision necessary to give effect to such surviving provisions, shall survive any such termination. ARTICLE IX MISCELLANEOUS 9.01 Amendments and Waivers. Except as otherwise expressly provided herein, this Agreement shall not be amended or modified in any fashion except by an instrument in writing signed by the parties hereto. Waiver by a party of any condition, or any breach of this Agreement by any other party, shall not be effective unless in a writing signed by the waiving party, and no such waiver shall operate or be construed as the waiver of any conditions other than those expressly identified in the written waiver or of the same or another breach on a subsequent occasion. 10 9.02. Nonassignability. All terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement may not be assigned by any party; provided, however, that such consent shall not be required for the assignment by any party of its rights and privileges hereunder to an Affiliate wholly owned, directly or indirectly, by any of the parties, as the case may be (it being understood that no such assignment shall relieve the assigning party of its duties or obligations hereunder). 9.03. No Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns. This Agreement is not for the benefit of any other Person, other than CNSI, CTL, First Venture, the Company and their respective Subsidiaries, and no other Person, other than CNSI, CTL, First Venture, the Company and their respective Subsidiaries, shall have any rights against the parties hereunder. 9.04 Rules of Construction. The headings in this Agreement are inserted only as a matter of convenience and in no way affect the terms or intent of any provision of this Agreement. All defined phrases, pronouns, and other variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular, or plural, as the actual identity of the organization, person, or persona may require. No provision of this Agreement shall be construed against any parties hereto by reason of the extent to which such parties or its counsel participated in the drafting hereof. All references to dollars shall be to United States dollars. 9.05. CHOICE OF LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS MADE AND ENTERED INTO UNDER THE LAWS OF THE STATE OF CALIFORNIA, AND THE LAWS OF THAT STATE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY THEREUNDER (WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF) SHALL GOVERN THE VALIDITY AND INTERPRETATION HEREOF AND THE PERFORMANCE BY PARTIES HERETO OF THEIR RESPECTIVE DUTIES AND OBLIGATIONS HEREUNDER. Each party hereby irrevocably consents that any legal action or proceeding against it or any of its assets with respect to this Agreement may be brought in any jurisdiction where it or any of its assets may be found, or in any court of the State of California or any Federal court of the United States of America located in Los Angeles, California, or both, as the other party may elect, and by execution and delivery of this Agreement, each party hereby irrevocably submits to and accepts with regard to any such action or proceeding, for itself and in respect of its assets, generally and unconditionally, the jurisdiction of the aforesaid courts. Each party further agrees that final judgment against such party in any action or proceeding in connection with this Agreement shall be conclusive and may be enforced in any other jurisdiction within or outside the United States of America by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and the amount of such party's indebtedness. Each party hereby irrevocably waives, to the fullest extent permitted by Law, any objection which such party may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement brought in the State of California, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in the State of California has been brought in an inconvenient forum. 11 9.06. Severability of Provisions. If any provision of this Agreement shall be contrary to the internal laws of California or any other applicable Law, at the present time or in the future, such provision shall be deemed null and void, but shall not affect the legality of the remaining provisions of this Agreement. This Agreement shall be deemed to be modified and amended so as to be in compliance with applicable Law and this Agreement shall then be construed in such a way as will best serve the intention of the parties at the time of the execution of this Agreement. 9.07. Counterparts; Delivery. This Agreement may be executed in one or more counterparts. Each such counterpart shall be considered an original and all of such counterparts shall constitute a single agreement binding all the parties as if all had signed a single document. The parties acknowledge that delivery of executed counterparts of this Agreement may be effected by a facsimile transmission or other comparable means, with an original document to be delivered promptly thereafter via overnight courier. 9.08. Entire Agreement. This Agreement (including any schedules, exhibits or other attachments hereto), taken together with the other Operative Documents, constitute the entire agreement among the parties. This Agreement and the other agreements referred to in the preceding sentence supersede all prior and contemporaneous agreements, statements, understandings, and representations of the parties. There are no representations, warranties, agreements, arrangements, or understandings, oral or written between the parties relating to the subject matter of this Agreement which are not fully expressed herein or in the other Operative Documents. The parties agree that the traditional formulation of the parol evidence rule (whereby extrinsic evidence may not be used to vary or contradict the unambiguous terms of a document that represents a final and complete expression of the parties' agreement) shall govern in any action or proceeding that may ensue concerning this Agreement and/or the other Operative Documents. 9.09. Notices. All notices, requests, consents, or other communications required or permitted to be given under this Agreement shall be in writing, may be delivered in person by telex or telecopy, by overnight air courier, or by certified or registered mail (return receipt requested with all fees prepaid), and shall be deemed to have been duly given and to have become effective upon the date actually delivered to the parties or their assignees at the following addresses: If to CNSI or CTL: Coyote Network Systems, Inc. 4360 Park Terrace Drive Westlake Village, California 91361 Attention: President 12 If to First Venture: First Venture Leasing, LLC C/O Acorn Roseand & Management 777 Summer Street Stamford, Connecticut 06901 Attention: Mr. Robert Loonin If to the Company: Coyote Leasing, LLC 777 Summer Street Stamford, Connecticut 06901 Attention: Mr. Robert Loonin The persons or addresses to which mailings or deliveries shall be made may be changed from time to time by notice given pursuant to the provisions of this section. 9.10. Waiver of Jury Trial. The parties hereto hereby waive their respective right to trial by jury of any cause of action, claim, counterclaim or cross-complaint in any action, proceeding and/or hearing brought by any party hereto against another party hereto on any matter whatsoever relating to, resulting from, arising out of, or in any way connected with this Agreement, or any amendment or breach hereof, including, without limitation, any claim or injury or damage, or the enforcement of any remedy under any Law, statute, or regulation, emergency or otherwise, now or hereafter in effect. 9.11. Expenses. Each party shall bear and pay all direct costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including filing, registration and applicable fees, printing fees, and fees and expenses of its own financial or other consultants, investment bankers, accountants, and counsel. Notwithstanding the foregoing, any reasonable expenses incurred by First Venture on behalf of or for the benefit of the Company as contemplated hereunder shall be paid by the Company. 9.12. Further Assurances. The parties hereto from time to time after execution of this Agreement, without further consideration, shall execute and deliver, as appropriate, such documents and take such actions as may be reasonably necessary or proper to carry out and consummate the transactions contemplated by this Agreement. 9.13. Enforcement of Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions in Section 5.02 and Article VII of this Agreement was not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of Section 5.02 and Article VII of this Agreement and to enforce specifically such terms and provisions in any court of the United States or any state having jurisdiction; provided, however, that the foregoing shall not be construed as prohibiting any party from pursuing any other rights and remedies available to it for such breach or threatened breach. 13 9.14. Brokers and Finders. In the event of a claim by any broker or finder based upon his or its representing or being retained by or allegedly representing or being retained by any party, such party agrees to indemnify and hold each other party harmless of and from any liability in respect of such claim. 9.15. Relationship of Parties. Nothing contained in this Agreement shall be construed as constituting a partnership or agency relationship between the parties hereto. As of the date of this Agreement, the relationship of the parties one to another for all purposes shall be that of independent members of a limited liability company. 14 IN WITNESS WHEREOF the undersigned hereto execute this Agreement. COYOTE NETWORK SYSTEMS, INC. By: ------------------------- Name: Title: COYOTE TECHNOLOGIES, LLC By: ------------------------- Name: Title: FIRST VENTURE LEASING, LLC By: ------------------------- Name: Title: COYOTE LEASING, LLC By: ------------------------- Name: Title: FIRST AMENDMENT TO FINANCIAL SERVICES AGREEMENT This First Amendment to the parties Financial Services Agreement (the "Agreement") is made this 2nd day of February 2000, by and among Coyote Network Systems, Inc., a Delaware corporation with its principal office located in Westlake Village, California ("CNSI"), Coyote Technologies, LLC, a California limited liability company with its principal office located in Westlake Village, California ("CTL"), a First Venture Leasing, LLC, a Delaware limited liability company with its principal office located in Stamford, Connecticut ("First Venture") and Coyote Leasing, LLC, a Delaware limited liability company with its principal office located in Stamford, Connecticut (the "Company"). R E C I T A L S WHEREAS, each of CNSI, CTL, First Venture and the Company are parties to a Financial Services Agreement entered into on January 25, 2000 (the "Agreement"); WHEREAS, each of CNSI, CTL, First Venture and the Company wish to amend the Agreement; NOW, THEREFORE, in consideration of these premises and the mutual covenants set forth herein, the parties hereby agree as follows: Article V, Section 5.02 of the Agreement is replaced and superseded in its entirety with: 5.02. Preferred Relationship. In consideration of First Venture having formed the Company and the Company engaging in the business of providing Services to Coyote Customers, and First Venture and the Company taking all such other actions as contemplated by this Agreement and the other Operative Documents, each of CNSI and CTL agrees that it will view the Company as a preferred, but nonexclusive source for providing Services to Coyote Customers. Each of CNSI, CTL and First Venture will work with the Company to develop the Business by offering Coyote Customers new credit programs for providing Services. In all other respects, the Agreement is hereby ratified and affirmed. COYOTE NETWORK SYSTEMS, INC. By: ---------------------------- Name: Title: COYOTE TECHNOLOGIES, LLC By: ---------------------------- Name: Title: FIRST VENTURE LEASING, LLC By: ---------------------------- Name: Title: COYOTE LEASING, LLC By: ---------------------------- Name: Title: EX-10.4 5 MASTER REMARKETING AGREEMENT MASTER REMARKETING AGREEMENT This Agreement (this "Agreement") is made as of this 26th day of January, 2000, by and among Coyote Network Systems, Inc., a Delaware corporation with its principal address located at 4360 Park Terrace Drive, Westlake Village, California 91361 ("CNSI"), Coyote Technologies, LLC, a California limited liability company with its principal office located at 4360 Park Terrace Drive, Westlake Village, California 91361 ("CTL"), and Coyote Leasing, LLC, a Delaware limited liability company with its principal office located at 777 Summer Street, Stamford, Connecticut 06901 ("Owner"). WHEREAS, each of CNSI and CTL has agreed that Owner shall be its preferred source for providing certain leasing and credit programs to CNSI's and CTL's customers and create and develop new financing facilities and programs to be offered to CNSI's and CTL's customers pursuant to that certain Financial Services Agreement, dated as of the date hereof (the "Financial Services Agreement"), among CNSI, CTL, Owner and First Venture Leasing, LLC. Capitalized terms used but not defined herein shall have the meanings specified in the Financial Services Agreement; WHEREAS, Owner may purchase from time to time certain equipment (the "Equipment") from CNSI or CTL which will initially be leased by Owner to third parties pursuant to a User Lease (as defined below) and which Owner, CNSI and CTL desire to have remarketed upon the termination of any such User Lease pursuant to the terms hereof; WHEREAS, Owner desires to engage CNSI and CTL and each of CNSI and CTL desires to accept such engagement to participate with Owner in remarketing the Equipment on behalf of Owner under the terms and conditions set forth below; NOW, THEREFORE, Owner, CNSI and CTL agree as follows: 1. Appointment. Owner hereby appoints each of CNSI and CTL as its agent to remarket the Equipment on behalf of Owner, and each of CNSI and CTL accepts the appointment and agrees to use its commercially reasonable efforts to perform certain remarketing services as more fully described in this Agreement. Remarketing shall include the sale (including, without limitation, any installment or conditional sale, whether in the form of a lease or otherwise or any trade-in of Equipment), re-lease or renewal of any existing lease of the Equipment (such re-leases and existing leases are to be collectively referred to herein as the "User Leases") to either the person leasing the Equipment immediately prior to the remarketing or to a new user (collectively, the "Users"). Owner further appoints each of CNSI and CTL, upon prior written request by Owner to CNSI or CTL, as applicable, to use its commercially reasonable efforts to assist Owner to effect a transfer of Owner's right, title and interest in and to any Equipment which Owner has agreed to sell to a User, subject to the rights of the CNSI or CTL, as applicable, hereunder (including the right to be reimbursed for its Actual Costs (as defined below) incurred in providing such assistance), any prior User or any Senior Lienholder (as defined below) and each of CNSI and CTL hereby accepts such appointment. 1 2. Schedules; Availability of Equipment for Remarketing. Owner will from time to time, deliver to each of CNSI and CTL Remarketing Schedules (each, a "Remarketing Schedule") under this Agreement. Each Remarketing Schedule shall be substantially in the form of Exhibit A hereto, shall be consecutively numbered and shall set forth the description and location of the Equipment, the date such Equipment will be available for sale, re-lease or lease renewal (the "Availability Date"), and such other terms as required. Each Remarketing Schedule shall identify only Equipment which has been leased pursuant to one particular User Lease. 3. Remarketing Procedures, Services and Reimbursed Expenses. The procedure for remarketing the Equipment shall be as follows: (a) In the event that any User Lease is terminated prior to the expiration of its originally scheduled initial term (whether as a result of any default or event of default by any User thereunder or by such User exercising any early termination right thereunder, in either event, an "Early Termination"), upon receipt of a Remarketing Schedule which identifies Equipment which was subject to such User Lease, each of CNSI and CTL will promote and market such Equipment as equivalent to Similar Equipment (as defined below) and shall exert its best efforts to solicit firm offers ("Offers") from Users (which shall include, without limitation, each of CNSI's and CTL's current customers both in the U.S. and internationally) for the sale, re-lease or lease renewal of such Equipment. Each of CNSI and CTL shall assert its best efforts to solicit Offers for such Equipment. In addition to each of CNSI's and CTL's obligations in the preceding sentence to promote, market and solicit Offers for Equipment in priority to any Similar Equipment, in the event that any User Lease is terminated prior to the expiration of its originally scheduled initial term (whether as a result of any default or event of default by any User thereunder or by such User exercising any early termination right thereunder, in either event, an "Early Termination"), each of CNSI and CTL shall promote and market any Equipment which was subject to such User Lease as equivalent to Similar Equipment which is new. Each Offer shall identify the potential User and shall set out the basic terms and conditions of such Offer, including, without limitation, the proposed sale price for the sale of the Equipment or the proposed rent payment amounts and term for any re-lease or lease renewal of the Equipment. Each of CNSI and CTL will promptly inform Owner of any such Offers it receives. (b) Upon receipt of a Remarketing Schedule which identifies Equipment which was leased pursuant to a User Lease which was not subject to an Early Termination, each of CNSI and CTL will exert commercially reasonable efforts to promote and market such Equipment and solicit Offers for the sale, re-lease or lease renewal of such Equipment. Each of CNSI and CTL will promptly inform Owner of any such Offers it receives. In the event that Owner has not received written notice from either CNSI or CTL that either CNSI or CTL has received an Offer for such Equipment by the later of (i) 90 days after Owner has delivered to each of CNSI and CTL a Remarketing Schedule for such Equipment or (ii) 30 days prior to the Availability Date for such Equipment, Owner shall then have the right to promote and market such Equipment and solicit Offers directly from any Users (which shall include, without limitation, each of CNSI's and CTL's current customers both in the U.S. and internationally), for the sale, re-lease or lease renewal of such Equipment. The terms of any such marketing activity by Owner will be subject to the prior review and approval (not to be unreasonably 2 withheld) of CNSI or CTL, as applicable. Under no circumstances, other than as provided in this Section 3(b), shall Owner promote or market any Equipment or solicit Offers directly from Users for the sale, re-lease or lease renewal of such Equipment. (c) In the event that an existing User of Equipment does not renew an existing User Lease or purchase the Equipment upon the termination of such User Lease, Owner shall direct such User to ship such Equipment to CTL at such facility as directed by CTL by written notice to Owner from time to time ("CTL's Facility"), at such User's expense, in accordance with the terms of the applicable User Lease. In the event that any User does not comply with Owner's direction to ship any Equipment to CTL's Facility, Owner shall undertake to deinstall, insure and transport such Equipment to CTL's Facility at Owner's Actual Cost. Upon delivery of such equipment to CTL's Facility, CTL shall store, insure and maintain the Equipment, as required to preserve the value of such Equipment at CTL's Actual Cost (as defined below). Upon receipt by CTL of a purchase order from Owner to refurbish the Equipment, CTL shall promptly refurbish the Equipment (which may include the application of "Skins" decals, painting, and electronic and software upgrades) and perform any Equipment modifications (which may include standard board and software changes), so as to bring the Equipment to the highest release level as Owner and CTL shall agree will result in the realization of the maximum profit margin for the sale or re-lease of such Equipment (after accounting for the Actual Costs of any such refurbishment or modifications). Any of CTL's Actual Costs incurred in performing such refurbishment or modifications may be reimbursed as an Approved Expense in accordance with Section 6(a) hereof; provided, however, that in the event that the amount of Equipment Proceeds (as defined below) available from the sale, re-lease or lease renewal of Equipment is not sufficient to reimburse CTL for CTL's Actual Costs incurred in performing such refurbishment or modifications, Owner shall promptly reimburse CTL for any such shortfall upon Owner's reasonable determination of such insufficiency of Equipment Proceeds. "Actual Costs" for the purpose of this Agreement shall mean CNSI's, CTL's or Owner's, as applicable, actual cost (without mark-up), incurred in performing any remarketing services pursuant to this Agreement, determined as follows: (i) if such services are performed by a third party, then the actual cost shall be the actual charges of such third party paid by CNSI, CTL or Owner, as applicable (without markups or overhead by CNSI, CTL or Owner, as applicable), and (ii) if CNSI, CTL or Owner, as applicable, elects to perform such obligation itself, then the actual cost shall be such party's direct cost for labor and materials. (d) Owner, CNSI and CTL shall consider the terms and conditions of any Offer received by Owner, CNSI or CTL (including, without limitation, any purchase price, lease payments, lease term and credit worthiness of the proposed User), and Owner, CNSI and CTL shall mutually agree to the terms of (i) any Offer (or subsequent counter-offer from User) before accepting such Offer or (ii) the terms of any counter-offer before making such counter-offer to any proposed User. In the event that Owner, CNSI or CTL are unable to agree to the terms of an Offer (or subsequent counter-offer from a User) or with respect to the terms and conditions of any counter-offer to a User, within ten (10) days of receipt by Owner, CNSI or CTL of an Offer (or subsequent counter-offer from User), Owner shall upon notice to CNSI and CTL have the right to sell, re-lease or enter into a lease renewal for the applicable Equipment, without the agreement of CNSI or CTL; provided, however, that neither CNSL nor CTL shall be 3 responsible for the terms of any related Equipment servicing agreement, warranty or intellectual property rights provided to a User under such circumstances, other than as may be provided pursuant to Section 4 hereof. (e) Upon agreement by Owner and a User for the sale, re-lease or lease renewal of any Equipment, pursuant to the terms hereof, Owner will promptly prepare and arrange for the execution of commercially standard documentation for the sale, re-lease or lease renewal of such Equipment and CTL shall arrange for the packing, shipping and installation of such Equipment, which shall be accompanied by new manuals and any appropriate warranty cards and/or registration information, and all Actual Costs associated with the above may be reimbursed as an Approved Expense in accordance with Section 6 hereof. 4. Equipment Servicing; Warranties; Intellectual Property Rights; and Repurchase or Guarantee Agreements. (a) CTL shall offer to any User of Equipment which is subject to any sale, re-lease or lease renewal hereunder, the option to enter into a service agreement for such Equipment, upon similar terms and conditions as CTL generally offers to users of Similar Equipment. (b) Each of CNSI and CTL hereby consents to Owner's assignment to any User of any unexpired portion of any warranty on Equipment which is to be used by such User pursuant to a sale or re-lease of such Equipment hereunder. Each of CNSI and CTL shall provide such additional warranties, as required, so that all Equipment which is sold or re-leased, shall be subject to CNSI's and CTL's basic warranties for such Equipment for a minimum period of 90 days after the effective date of such sale or re-lease. In addition to any of the foregoing, each of CNSI and CTL shall provide such additional warranty coverage to Equipment which is subject to any Early Termination, which shall be equivalent to any warranty which each of CNSI and CTL provides for Similar Equipment which is new. The cost to each of CNSI and CTL of the additional warranties set forth in the preceding two sentences shall be agreed to by Owner and CNSI or CTL, as applicable, and shall be reimbursed to CNSI or CTL, as applicable, as an Approved Expense pursuant to Section 6(a) hereof. (c) Each of CNSI and CTL shall grant to any User of Equipment which is subject to any sale, re-lease or lease renewal hereunder all intellectual property rights and other rights that are necessary or reasonably appropriate for the use and operation of any such Equipment and subject to the CNSI's or CTL's, as applicable, standard terms and conditions for sale of Equipment. Such grant shall be free of any additional charge or fee to Owner or any User. (d) Each of CNSI and CTL shall assign to Owner any rights it has or may hereafter acquire in any agreement, including, without limitation, any OEM, distribution or re-seller agreement, relating to (i) any guaranty by any Person of payment for the lease or purchase of Equipment, or (ii) any obligation by any 4 Person to purchase Equipment upon the termination of a User Lease. 5. Administration; Billing and Collecting; Distribution of Equipment Proceeds. Owner shall: (a) timely invoice (i) Users under a re-lease or lease renewal of the Equipment for any rental payments and other sums due to be paid by them to Owner ("Equipment Lease Proceeds") and (ii) Users under a sale of the Equipment for all sale proceeds and other sums due to be paid to Owner ("Equipment Sale Proceeds," collectively with Equipment Lease Proceeds, "Equipment Proceeds"); (b) use its best efforts (subject to the rights of any party holding a lien or security interest in the Equipment and/or Equipment Proceeds superior to that of Owner (the "Senior Lienholder")) to collect the Equipment Proceeds; (c) distribute the Equipment Proceeds in accordance with Section 6 hereof; (d) file and pay, or cause any User to file and pay, all sales and/or use tax returns arising from a sale, re-lease or lease renewal of Equipment; and (e) to use reasonable efforts to enforce all remedies (including lawful repossession) in the event of any default or event of default by User under any re-lease or lease renewal or sale agreement relating to the Equipment, subject however, to the rights of a Senior Lienholder, if any. 6. Payment of Equipment Proceeds. All Equipment Proceeds, upon receipt of such Equipment Proceeds by Owner, shall be applied as follows (to the extent Equipment Proceeds are available therefor): (a) first, to the payment of or to reimburse CNSI or CTL, as applicable, for all "Approved Expenses" incurred in connection with the administration and remarketing of Equipment hereunder. "Approved Expenses" shall mean, for the purposes of this Agreement, any and all appropriate or necessary Actual Costs incurred and paid in connection with the performance by each of CNSI, CTL and Owner of its obligations hereunder, including, but not limited to, Actual Costs of installation and deinstallation, maintenance and service, refurbishing, modification, storage, salesmen's commissions paid to CNSI's or CTL's sales force (in accordance with CNSI's or CTL's standard sales compensation plan or as otherwise agreed to by Owner and CNSI or CTL, as applicable) for any sale or re-lease of Equipment to a new User, broker's fees paid to any third-party brokers (in such amount as mutually agreed to by Owner and CNSI or CTL, as applicable) for any sale or re-lease of the Equipment to a new User, legal fees paid to outside counsel, Equipment transportation, drayage and freight from and to points of installation and for any warranty or insurance, all of which shall be appropriately documented. Other than as specifically provided in the previous sentence, Approved Expenses for the remarketing of any item of Equipment shall not include any general overhead costs or expenses of CNSI, CTL, Owner, or either of their employees, or any travel expenses, or salesmen's commissions and brokerage fees not specifically included as Approved Expenses in the previous sentence, or any advertising, direct mail or similar costs incurred by CNSI, CTL or Owner in connection with its remarketing activities, hereunder. Except as specifically provided in Section 3(c) hereof, Approved Expenses shall be paid or reimbursed to CNSI or CTL solely from Equipment Proceeds, and notwithstanding anything herein to the contrary, Owner shall have no direct, personal, out-of-pocket liability for the payment thereof; (b) second, to the payment to Owner of any amounts which have not been paid by a User having leased the Equipment pursuant to a User Lease and which are payable pursuant to a User Lease, immediately prior to its remarketing to a 5 new User hereunder, including, without limitation, (i) all unpaid sums accrued and due to Owner pursuant to such User Lease (including, without limitation, any default interest or late charges), as of the date that Owner first receives any Equipment Proceeds under a sale or lease agreement with such a new User (the "Initial Payment Date") and (ii) an amount equal to the present value of rental payments and other sums which were to become due after the Initial Payment Date during any remaining portion of the initial term of such User Lease which is subject to Early Termination (which amount shall be discounted to present value as of the Initial Payment Date at the discount rate as provided in the remedies section of the applicable User Lease); provided, however, that in the event that Owner subsequently recovers from such prior User any amounts for which Owner has received payment pursuant to (i) and (ii) above, such recovered amounts shall be included as part of the Equipment Proceeds and distributed in accordance with this Section 6. Owner shall use its commercially reasonable efforts to collect all amounts which have not been paid by a User having leased the Equipment pursuant to a User Lease. Owner shall distribute any Equipment Proceeds which it may receive pursuant to this Section 6(b), in such manner as may be required pursuant to the terms and conditions, if any, of any then existing agreement between Owner and CNSI or CTL; (c) third, to reimburse Owner for all Approved Expenses incurred in connection with the administration and remarketing of Equipment hereunder; (d) fourth, twenty-five percent (25%) of the remainder thereof (the "Net Proceeds") shall be paid to the CNSI or CTL, as applicable, as a remarketing fee (the "Remarketing Fee"), provided that CNSI or CTL, as applicable, shall not be entitled to such Remarketing Fee if this Agreement has been terminated in accordance with Section 7 hereof; and (e) fifth, the remaining "Net Proceeds" to the Owner. 7. Termination. This Agreement shall terminate upon the mutual agreement of the parties hereto; provided, however, that Owner shall have the right to earlier terminate this Agreement prior to such date upon notice in writing to CNSI and CTL: (a) If CNSI or CTL shall have breached in any material respect any of its covenants, obligations, and agreements hereunder, if such breach shall be capable of' being cured, such breach shall have continued for thirty (30) days after CNSI or CTL receives a written notice thereof from Owner specifying the nature of the breach; or (b) If CNSI or CTL shall: (i) admit in writing its inability to pay or fail to pay its debts generally as they become due; (ii) file a voluntary petition in bankruptcy or a petition to take advantage of any insolvency, reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar arrangement, under any present or future law, statute or regulation or 6 file an answer admitting or failing to deny the material allegations of a petition filed against it in any such proceeding; (iii) make an assignment for the benefit of its creditors; (iv) consent to or acquiesce in the appointment of, or possession by, a receiver, trustee, liquidator or custodian for itself or for the whole or any substantial part of its property; (v) have a petition in bankruptcy or an involuntary petition for reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar arrangement under any present or future law, statute or regulation filed against it, and such proceeding or case shall continue undismissed or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect for a period of sixty (60) or more days or an order for relief against such party shall be entered in an involuntary case under any law with respect to bankruptcy, insolvency, liquidation, moratorium, reorganization or similar laws affecting creditors' rights generally; or (vi) cease doing business as a going concern; or (c) If a court of competent jurisdiction shall enter an order, judgment or decree appointing, with or without the consent of CNSI or CTL, a custodian for such party or the whole or any substantial part of its property, or approving a petition filed against it seeking reorganization or arrangement of such party under any bankruptcy or insolvency laws or any other state of federal law for the relief of debtors, and such order, judgment or decree shall not be vacated or set aside or stayed within sixty (60) days from the date of entry thereof; or (d) If, under the provisions of any other law for the relief of debtors, any court of competent jurisdiction or a custodian shall assume custody or control of CNSI or CTL or the whole or any substantial part of its property, with or without the consent of such party, and such custody or control shall not be terminated or stayed within sixty (60) days from the date of assumption of such custody or control; or (e) If any material representation by CNSI or CTL under any Operative Agreement (as defined in the Financial Services Agreement) or this Agreement shall have been untrue when made. In addition to any right which Owner may have to earlier terminate this Agreement pursuant to (a) through (e) above, Owner shall have the right to earlier terminate this Agreement upon notice in writing to CNSI or CTL if CNSI or CTL shall cease to be actively engaged in the business of remarketing equipment of the type similar to the Equipment or shall transfer or sell all or substantially all of its assets and such transferee or purchaser does not assume CNSI's or CTL's, as applicable, obligations hereunder. 7 8. Miscellaneous. 8.1 Representations and Warranties. Each of the parties hereto represents and warrants to the other that each has the power and authority to execute and to carry out the terms of this Agreement, the execution of which has been duly authorized by all requisite action of such party, and each makes for the benefit of the other the same representations and warranties as to its authority with respect to the subject matter hereof and the validity and enforceability of this Agreement as are made by them in the Financial Services Agreement. 8.2 Successors and Assigns. The rights and obligations of the parties hereunder shall inure to the benefit of, and be binding and enforceable upon, the respective successors, assigns and transferees of either party; provided, however, that neither party hereto may assign this Agreement (by operation of law or otherwise) without prior written consent of the other party which may be withheld in such party's sole discretion. 8.3 Notices. Any notice, request or other communication to either party by the other hereunder shall be given in writing and shall he deemed given (i) on the date the same is personally delivered, whether by hand delivery, facsimile transmission or overnight courier with receipt acknowledged or (ii) three (3) days following the date it is mailed by certified mail, return receipt requested, postage prepaid and addressed to the party for which it is intended at the address set forth at the head of this Agreement (or such other address of which notice has been given pursuant to the provisions of this Section 8.3) together with a copy thereof to one additional addressee as may be requested by notice hereunder. The place to which notices or copies of notices are to be given to either party may changed from time to time by such party by written notice to the other party. 8.4 Captions. Captions used herein are inserted for reference purposes only and shall not affect the interpretation or construction of this Agreement. 8.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. 8.6 Amendments. This Agreement may be amended or varied only by a document in writing executed by Owner, CNSI and CTL. 8.7 Relationship of Parties. By their respective actions in connection with this Agreement, the parties hereto do not intend to be and shall not be deemed partners or joint venturers with each other. 8.8 Indemnification. (a) Each of the parties hereto agrees to and hereby does indemnify and protect, defend and hold the other party and its subsidiaries, affiliates, successors, assigns, stockholders or partners, or any of its, or their, 8 directors, officers, agents, employees, stockholders or partners (the "Indemnitee") harmless from and against any and all claims, actions, suits or proceedings of any kind and nature whatsoever, including all damages, liabilities, penalties, costs, expenses and legal fees ("Losses") which such Indemnitee may incur based on, arising out of, connected with or resulting from any breach of or failure to fulfill any of the other party's covenants or agreements set forth in this Agreement. (b) In the event any claim for indemnification hereunder arises on account of a claim or action instituted by a third person against an Indemnitee, the Indemnitee shall notify the indemnifying party (the "Indemnitor") in writing promptly after the receipt of notice by the Indemnitee that such claim was made or that such action was commenced, provided, that failure to so notify the Indemnitor shall not relieve the Indemnitor of its obligations hereunder except to the extent such delay or failure resulted in increased Losses otherwise subject to indemnification under this Section 8.8. The Indemnitor shall be entitled to participate in or, at its option, assume the defense of any such claim or action by counsel of its own choosing, and if it assumes such defense, to control and settle the same. If the Indemnitor proposes to enter into a settlement of such a claim pursuant to which the Indemnitee will incur no obligation and will receive a general release of claims from the claimant, the Indemnitee will take all actions and execute all documents necessary to accomplish such settlement; such claims shall not be settled otherwise without the Indemnitee's prior written consent. If the Indemnitor shall only participate in the defense of any such claim or action, the same shall not be settled without its prior written consent (which consent shall not be unreasonably withheld or delayed). [Remainder of page intentionally left blank.] 9 8.9 Governing Law and Procedure. This Agreement shall be governed by the laws of the State of New York without giving effect to the conflicts of law principles of such state. For purposes of any action or proceeding hereunder, each of the parties hereto expressly submits to the jurisdiction of the federal and state courts located in the State of New York and City of New York, and waives any objection to venue therein, or based on the inconvenience of such forum. COYOTE LEASING, LLC Owner BY: ---------------------- ITS: COYOTE NETWORK SYSTEMS, INC. BY ----------------------- ITS: COYOTE TECHNOLOGIES, LLC BY ----------------------- ITS: EXHIBIT A REMARKETING SCHEDULE NO. ___ Dated __________, ____ Description of Equipment: Equipment Model/ Qty. Mfg. Type Feature Description Serial No. - ------- -------- ---------- --------- ------------------ ------------ Location of Equipment: ________________________________ Name ________________________________ Address ________________________________ City/State/Zip ________________________________ Contact Person/Telephone (Equipment Schedule No. __ dated _______, ___) Availability Date: __________, ____; or the first day following Termination Date of the User Lease if (i) an Early Termination Option or any similar option has been exercised by the User, or (ii) termination of the User Lease by Owner due to a default or event of default thereunder; in each case, as notified in writing from time to time by Owner to CNSI and CTL. This Remarketing Schedule is issued pursuant to the Master Remarketing Agreement dated as of January __, 2000 among CNSI, CTL and Owner and incorporates by reference all of the terms and conditions of that Agreement. COYOTE NETWORK SYSTEMS, INC. COYOTE LEASING, LLC BY: _______________________ BY: ___________________________ ITS: _______________________ ITS: ___________________________ DATE: _______________________ DATE: ___________________________ COYOTE TECHNOLOGIES, LLC BY: _______________________ ITS: _______________________ DATE: _______________________ EX-10.5 6 CTL LICENSE AGREEMENT COYOTE TECHNOLOGIES LICENSE AGREEMENT This Coyote Technologies License Agreement (this "Agreement") is made as of this 26th day of January, 2000 (the "Effective Date"), by and between Coyote Technologies, LLC, a California limited liability company with its principal office located at Westlake Village, California ("CTL") and Coyote Leasing, LLC, a Delaware limited liability company with its principal office located in Stamford, Connecticut (the "Licensee"). R E C I T A L S WHEREAS, CTL, Licensee, Coyote Network Systems, Inc., a Delaware corporation with its principal office located in Westlake Village, California ("CNSI"), and First Venture Leasing, LLC, a Delaware limited liability company with its principal office located in Stamford, Connecticut ("First Venture") have entered into that certain Financial Services Agreement (the "Financial Services Agreement"), and CNSI, CTL and Licensee have entered into that certain Master Remarketing Agreement, each dated as of the date hereof (collectively, the "FVL Agreements"); WHEREAS, the Licensee will offer certain leasing and credit programs to CNSI and CTL Customers and create and develop new financing facilities and programs to be offered to CNSI and CTL Customers; WHEREAS, CTL now uses and may hereafter adopt certain trademarks, service marks, trade names and other designations (collectively, the "Marks") in connection with its business including without limitation those Marks identified on Schedule A attached hereto; and WHEREAS, CTL desires to grant a license, and Licensee desires to accept a license, to use the Marks in connection with the Business and the Products and Services, pursuant to the terms of this Agreement. NOW, THEREFORE, in consideration of these premises and the mutual covenants set forth herein, the parties hereby agree as follows: 1. Definitions. Capitalized terms used but not defined herein shall have the meanings specified in the Financial Services Agreement. The following terms shall have the following meanings herein: "Affiliate" means with respect to a given Person, mean any other Person directly or indirectly controlled by or under direct or indirect common control with the Person specified. "Business" shall mean the business of providing the Services and of performing all other activities reasonably related thereto including without limitation leasing the Products, remarketing the Products in accordance with the Master Remarketing Agreement, and bundling the Products with non-Products. 1 "Person" means any individual, partnership, joint venture, corporation, trust, unincorporated organization, government (and any department or agency thereof) or other entity. "Products" shall mean any products (including, without limitation, related software licenses, but not including real estate) and related installation and maintenance services provided, furnished, manufactured, sold and/or marketed by CTL or any of its Affiliates now and in the future, and such additional goods or services of CTL or any of its Affiliates as the parties may from time to time agree. "Services" means the financing or leasing of Products to CTL customers. 2. Grant of License. CTL hereby grants to Licensee an exclusive, perpetual, sublicensable, worldwide, royalty-free right and license to use the Marks in connection with the Business and the Products and Services. Licensee acknowledges that, as between CTL and Licensee, CTL is the owner of the Marks as used in connection with the Business and the Products and Services. 3. Term and Termination. This Agreement and the license granted herein shall commence as of the Effective Date and shall be perpetual. Notwithstanding the foregoing, this Agreement shall terminate (subject to Section 8 hereof) as follows: (a) if either party materially breaches any of its obligations under this Agreement, the non-defaulting party may terminate this Agreement on thirty (30) days' written notice; provided that such notice of termination shall be of no further force or effect if the default is cured by the defaulting party to the reasonable satisfaction of the non-defaulting party within sixty (60) days after receipt of such notice; (b) immediately upon the dissolution of Licensee; or (c) immediately upon termination or expiration of the Financial Services Agreement. 4. Representations and Warranties. CTL represents and warrants to Licensee that (i) CTL exclusively owns or otherwise holds valid rights to the Marks and has the right to grant the licenses and rights it grants hereunder upon the terms and conditions provided herein; and (ii) the use of the Marks as permitted herein does not and will not violate any intellectual property, proprietary or other right of any Person. 5. (a) Indemnification. From and after the date hereof, CTL shall indemnify, defend and hold harmless Licensee and its general partners, members, officers, agents, representatives, and employees (with respect to any Claims relating to (i), (ii) or (iii) below, the party to whom such indemnification obligation is owed is referred to in this Section 5 as the "Indemnified Party"), from and against any and all actions, claims, losses, costs, liabilities, and expenses (including reasonable attorneys' fees) resulting from or arising out of (i) CTL's breach of representations, warranties, covenants or other provisions contained in this Agreement; (ii) claims asserted by third parties which, if 2 proven, would place CTL in breach of representations, warranties, covenants or other provisions contained in this Agreement; or (iii) claims asserted by third parties concerning Licensee's uses anywhere throughout the world of the Marks as permitted hereunder (collectively, "Claims") and will promptly reimburse any Indemnified Party for all Claims as incurred in connection with the investigation of, preparation for, or defense of any pending or threatened action or proceeding (collectively, "Proceeding"), whether or not such Indemnified Party is a formal party to any such Proceeding. An Indemnified Party shall not, without the prior written consent of CTL (which consent shall not be unreasonably withheld), settle, compromise or consent to the entry of any judgment in any pending or threatened Proceeding in respect of which indemnification may be sought hereunder (whether or not the Indemnified Party is an actual or potential party to such Proceeding), provided, however, that the Indemnified Party may execute such settlement, compromise or consent to the entry of judgment in any pending or threatened Proceeding if the same includes an unconditional release of CTL hereunder from all liability arising out of such Proceeding. (b) Procedure. Promptly after an Indemnified Party receives notice of the commencement of any Proceeding in respect of which indemnification may be sought hereunder, the Indemnified Party will notify CTL; but the omission to so notify CTL shall not relieve CTL from any obligation hereunder unless, and only to the extent that, such omission results in CTL's forfeiture of substantive rights or defenses. If any such Proceeding shall be brought against CTL, CTL shall, upon written notice given reasonably promptly following the Indemnified Party's notice to CTL of any such Proceeding, be entitled to assume the defense thereof at its own expense with counsel chosen by the Indemnifying Party and reasonably satisfactory to the Indemnified Party; provided; however, that any Indemnified Party may, at its own expense, retain separate counsel to participate in such defense. 6. Quality Control. Licensee agrees that the Products and Services that it renders in connection with the Marks shall equal or exceed reasonable standards hereafter identified by CTL to Licensee (provided that Licensee shall have six (6) months from the time that Licensee receives written notice of such identified reasonable standards to comply therewith). If CTL believes that the quality of Products or Services offered by Licensee under the Marks fails to meet the standard of quality set forth in this Section 6, then CTL shall so notify Licensee, specifying, in reasonable detail, the reason for such failure. Licensee will have sixty (60) days to cure the deficiency and, if such deficiency is not cured with respect to such Products and/or Services to CTL's reasonable satisfaction, then Licensee will not provide such Products and/or Services in connection with the Marks until the deficiency is cured to CTL's reasonable satisfaction. 7. Infringement. (a) Licensee shall promptly notify CTL of any violation of the Marks by a third party which may come to Licensee's attention. CTL shall have the initial right to determine whether or not any action shall be taken with respect to such violation, and the nature of the action to be taken. Licensee agrees to 3 cooperate in any reasonable manner with CTL in the conduct of such litigation, at CTL's expense. Any recovery obtained by CTL as a result of any such action brought under this Section 7 shall belong entirely to CTL. (b) In the event that CTL determines that litigation should not be commenced or otherwise fails, after a reasonable period of time, to take reasonable action to stop such infringement, Licensee may, upon CTL's written consent, do so in its own name, and CTL will cooperate in any reasonable manner with Licensee in the conduct of such litigation, at Licensee's expense. Any recovery obtained by Licensee as a result of any such action brought under this paragraph 7(b) shall belong entirely to Licensee. 8. Effect of Termination. Within six (6) months of the effective date of termination of this Agreement (the "Phase Out Period"), Licensee shall cease all uses of the Marks. Notwithstanding the foregoing sentence, Licensee shall be permitted to use the Marks beyond the Phase Out Period in connection with transactions consummated by Licensee as part of the Services prior to termination of this Agreement. Termination of this Agreement for any reason shall not affect (i) those obligations which have accrued as of the date of termination or (ii) those obligations which, from the context thereof, are intended to survive termination of this Agreement (including without limitation the provisions of Section 5 hereof). 9. General Provisions. (a) Amendments and Waivers. Except as otherwise expressly provided herein, this Agreement shall not be amended or modified in any fashion except by an instrument in writing signed by the parties hereto. Waiver by a party of any condition, or any breach of this Agreement by any other party, shall not be effective unless in a writing signed by the waiving party, and no such waiver shall operate or be construed as the waiver of any conditions other than those expressly identified in the written waiver or of the same or another breach on a subsequent occasion. (b) Successor and Assigns. All terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement may be assigned by either party without the prior written consent of the other party. (c) No Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns. Except as set forth in Article IX of the Financial Services Agreement, this Agreement is not for the benefit of any other Person, other than CTL, the First Venture Entities and their respective Subsidiaries, and no other Person, other than CTL, the First Venture Entities and their respective Subsidiaries, shall have any rights against the parties hereunder. (d) Rules of Construction. The headings in this Agreement are inserted only as a matter of convenience and in no way affect the terms or intent of any provision of this Agreement. All defined phrases, pronouns, and other variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular, or plural, as the actual identity of the organization, person, or persona may 4 require. No provision of this Agreement shall be construed against any parties hereto by reason of the extent to which such parties or its counsel participated in the drafting hereof. (e) CHOICE OF LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS MADE AND ENTERED INTO UNDER THE LAWS OF THE STATE OF NEW YORK, AND THE LAWS OF THAT STATE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY THEREUNDER (WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF) SHALL GOVERN THE VALIDITY AND INTERPRETATION HEREOF AND THE PERFORMANCE BY PARTIES HERETO OF THEIR RESPECTIVE DUTIES AND OBLIGATIONS HEREUNDER. Each party hereby irrevocably consents that any legal action or proceeding against it or any of its assets with respect to this Agreement may be brought in any jurisdiction where it or any of its assets may be found, or in any court of the State of New York or any Federal court of the United States of America located in New York, New York, or both, as the other party may elect, and by execution and delivery of this Agreement, each party hereby irrevocably submits to and accepts with regard to any such action or proceeding, for itself and in respect of its assets, generally and unconditionally, the jurisdiction of the aforesaid courts. Each party further agrees that final judgment against such party in any action or proceeding in connection with this Agreement shall be conclusive and may be enforced in any other jurisdiction within or outside the United States of America by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and the amount of such party's indebtedness. Each party hereby irrevocably waives, to the fullest extent permitted by Law, any objection which such party may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement brought in the State of New York, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in the State of New York has been brought in an inconvenient forum. (f) Severability of Provisions. If any provision of this Agreement shall be contrary to the internal laws of New York or any other applicable Law, at the present time or in the future, such provision shall be deemed null and void, but shall not affect the legality of the remaining provisions of this Agreement. This Agreement shall be deemed to be modified and amended so as to be in compliance with applicable Law and this Agreement shall then be construed in such a way as will best serve the intention of the parties at the time of the execution of this Agreement. (g) Counterparts; Delivery. This Agreement may be executed in one or more counterparts. Each such counterpart shall be considered an original and all of such counterparts shall constitute a single agreement binding all the parties as if all had signed a single document. The parties acknowledge that delivery of executed counterparts of this Agreement may be effected by a facsimile transmission or other comparable means, with an original document to be delivered promptly thereafter via overnight courier. (h) Entire Agreement. This Agreement (including any schedules, exhibits or other attachments hereto), taken together with the other Operative Documents, constitute the entire agreement among the parties. This Agreement and the other agreements referred to in the preceding sentence supersede all prior 5 and contemporaneous agreements, statements, understandings, and representations of the parties. There are no representations, warranties, agreements, arrangements, or understandings, oral or written between the parties relating to the subject matter of this Agreement which are not fully expressed herein or in the other Operative Documents. The parties agree that the traditional formulation of the parol evidence rule (whereby extrinsic evidence may not be used to vary or contradict the unambiguous terms of a document that represents a final and complete expression of the parties' agreement) shall govern in any action or proceeding that may ensue concerning this Agreement and/or the other Operative Documents. (i) Notices. All notices, requests, consents, or other communications required or permitted to be given under this Agreement shall be in writing, may be delivered in person by telex or telecopy, by overnight air courier, or by certified or registered mail (return receipt requested with all fees prepaid), and shall be deemed to have been duly given and to have become effective upon the date actually delivered to the parties or their assignees at the following addresses: If to CTL: Coyote Network Systems, Inc. 4360 Park Terrace Drive Westlake Village, California 91361 Attention: President If to First Venture: First Venture Leasing, LLC C/O Acorn Roseand & Management 777 Summer Street Stamford, Connecticut 06901 Attention: Mr. Robert Loonin The persons or addresses to which mailings or deliveries shall be made may be changed from time to time by notice given pursuant to the provisions of this section. (j) Waiver of Jury Trial. The parties hereto hereby waive their respective right to trial by jury of any cause of action, claim, counterclaim or cross-complaint in any action, proceeding and/or hearing brought by any party hereto against another party hereto on any matter whatsoever relating to, resulting from, arising out of, or in any way connected with this Agreement, or any amendment or breach hereof, including, without limitation, any claim or injury or damage, or the enforcement of any remedy under any Law, statute, or regulation, emergency or otherwise, now or hereafter in effect. (k) Further Assurances. The parties hereto from time to time after execution of this Agreement, without further consideration, shall execute and deliver, as appropriate, such documents and take such actions as may be reasonably necessary or proper to carry out and consummate the transactions contemplated by this Agreement. 6 (l) Enforcement of Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement was not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction; provided, however, that the foregoing shall not be construed as prohibiting any party from pursuing any other rights and remedies available to it for such breach or threatened breach. (m) Force Majeure. Neither party shall be liable for defaults or delays due to acts of God or the public enemy, acts or demands of government or any government agency, strikes, fires, flood, accident, or other unforeseeable causes beyond its control and not due to its fault or negligence. Any party desiring to excuse its default or delay for any such reason shall notify the other party of the cause of such default or delay within five (5) days after the beginning thereof. (n) Relationship of Parties. Nothing contained in this Agreement shall be construed as constituting a partnership or agency relationship between the parties hereto. On and after the Effective Date, the relationship of the parties one to another for all purposes shall be that of independent contractors. 7 IN WITNESS WHEREOF the undersigned hereto execute this Agreement. COYOTE TECHNOLOGIES, LLC By: ----------------------- Name: Title: CERTIFICATE OF ACKNOWLEDGMENT STATE OF CALIFORNIA ss.: COUNTY OF LOS ANGELES On this 26th day of January, 2000, before me, the undersigned, personally appeared Daniel W. Latham, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his/her signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. ---------------------------------- [NOTARY SEAL] 8 COYOTE LEASING, LLC By: -------------------------- Name: Title: 9 EX-10.6 7 CNS LICENSE AGREEMENT COYOTE LICENSE AGREEMENT This Coyote License Agreement (this "Agreement") is made as of this 26th day of January, 2000 (the "Effective Date"), by and between Coyote Network Systems, Inc., a Delaware corporation with its principal office located in Westlake Village, California ("CNSI"), and Coyote Leasing, LLC, a Delaware limited liability company with its principal office located in Stamford, Connecticut (the "Licensee"). R E C I T A L S WHEREAS, CNSI, Licensee, Coyote Technologies, LLC, a California limited liability company with its principal office located at Westlake Village, California ("CTL") and First Venture Leasing, LLC, a Delaware limited liability company with its principal office located in Stamford, Connecticut ("First Venture") have entered into that certain Financial Services Agreement (the "Financial Services Agreement"), and CNSI, CTL and Licensee have entered into that certain Master Remarketing Agreement, each dated as of the date hereof (collectively, the "FVL Agreements"); WHEREAS, the Licensee will offer certain leasing and credit programs to CNSI and CTL Customers and create and develop new financing facilities and programs to be offered to CNSI and CTL Customers; WHEREAS, CNSI now uses and may hereafter adopt certain trademarks, service marks, trade names and other designations (collectively, the "Marks") in connection with its business including without limitation those Marks identified on Schedule A attached hereto; and WHEREAS, CNSI desires to grant a license, and Licensee desires to accept a license, to use the Marks in connection with the Business and the Products and Services, pursuant to the terms of this Agreement. NOW, THEREFORE, in consideration of these premises and the mutual covenants set forth herein, the parties hereby agree as follows: 1. Definitions. Capitalized terms used but not defined herein shall have the meanings specified in the Financial Services Agreement. The following terms shall have the following meanings herein: "Affiliate" means with respect to a given Person, mean any other Person directly or indirectly controlled by or under direct or indirect common control with the Person specified. "Business" shall mean the business of providing the Services and of performing all other activities reasonably related thereto including without limitation leasing the Products, remarketing the Products in accordance with the Master Remarketing Agreement, and bundling the Products with non-Products. "Person" means any individual, partnership, joint venture, corporation, trust, unincorporated organization, government (and any department or agency thereof) or other entity. "Products" shall mean any products (including, without limitation, related software licenses, but not including real estate) and related installation and maintenance services provided, furnished, manufactured, sold and/or marketed by CNSI or any of its Affiliates now and in the future, and such additional goods or services of CNSI or any of its Affiliates as the parties may from time to time agree. "Services" means the financing or leasing of Products to CNSI customers. 2. Grant of License. CNSI hereby grants to Licensee an exclusive, perpetual, sublicensable, worldwide, royalty-free right and license to use the Marks in connection with the Business and the Products and Services. Licensee acknowledges that, as between CNSI and Licensee, CNSI is the owner of the Marks as used in connection with the Business and the Products and Services. 3. Term and Termination. This Agreement and the license granted herein shall commence as of the Effective Date and shall be perpetual. Notwithstanding the foregoing, this Agreement shall terminate (subject to Section 8 hereof) as follows: (a) if either party materially breaches any of its obligations under this Agreement, the non-defaulting party may terminate this Agreement on thirty (30) days' written notice; provided that such notice of termination shall be of no further force or effect if the default is cured by the defaulting party to the reasonable satisfaction of the non-defaulting party within sixty (60) days after receipt of such notice; (b) immediately upon the dissolution of Licensee; or (c) immediately upon termination or expiration of the Financial Services Agreement. 4. Representations and Warranties. CNSI represents and warrants to Licensee that (i) CNSI exclusively owns or otherwise holds valid rights to the Marks and has the right to grant the licenses and rights it grants hereunder upon the terms and conditions provided herein; and (ii) the use of the Marks as permitted herein does not and will not violate any intellectual property, proprietary or other right of any Person. 5. (a) Indemnification. From and after the date hereof, CNSI shall indemnify, defend and hold harmless Licensee and its general partners, members, officers, agents, representatives, and employees (with respect to any Claims relating to (i), (ii) or (iii) below, the party to whom such indemnification obligation is owed is referred to in this Section 5 as the "Indemnified Party"), from and against any and all actions, claims, losses, costs, liabilities, and expenses (including reasonable attorneys' fees) resulting from or arising out of (i) CNSI's breach of representations, warranties, covenants or other provisions contained in this Agreement; (ii) claims asserted by third parties which, if proven, would place CNSI in breach of representations, warranties, covenants or other provisions contained in this Agreement; or (iii) claims asserted by third parties concerning Licensee's uses anywhere throughout the world of the Marks as permitted hereunder (collectively, "Claims") and will promptly reimburse any Indemnified Party for all Claims as incurred in connection with the investigation of, preparation for, or defense of any pending or threatened action or proceeding (collectively, "Proceeding"), whether or not such Indemnified Party is a formal party to any such Proceeding. An Indemnified Party shall not, without the prior written consent of CNSI (which consent shall not be unreasonably withheld), settle, compromise or consent to the entry of any judgment in any pending or threatened Proceeding in respect of which indemnification may be sought hereunder (whether or not the Indemnified Party is an actual or potential party to such Proceeding), provided, however, that the Indemnified Party may execute such settlement, compromise or consent to the entry of judgment in any pending or threatened Proceeding if the same includes an unconditional release of CNSI hereunder from all liability arising out of such Proceeding. (b) Procedure. Promptly after an Indemnified Party receives notice of the commencement of any Proceeding in respect of which indemnification may be sought hereunder, the Indemnified Party will notify CNSI; but the omission to so notify CNSI shall not relieve CNSI from any obligation hereunder unless, and only to the extent that, such omission results in CNSI's forfeiture of substantive rights or defenses. If any such Proceeding shall be brought against CNSI, CNSI shall, upon written notice given reasonably promptly following the Indemnified Party's notice to CNSI of any such Proceeding, be entitled to assume the defense thereof at its own expense with counsel chosen by the Indemnifying Party and reasonably satisfactory to the Indemnified Party; provided; however, that any Indemnified Party may, at its own expense, retain separate counsel to participate in such defense. 6. Quality Control. Licensee agrees that the Products and Services that it renders in connection with the Marks shall equal or exceed reasonable standards hereafter identified by CNSI to Licensee (provided that Licensee shall have six (6) months from the time that Licensee receives written notice of such identified reasonable standards to comply therewith). If CNSI believes that the quality of Products or Services offered by Licensee under the Marks fails to meet the standard of quality set forth in this Section 6, then CNSI shall so notify Licensee, specifying, in reasonable detail, the reason for such failure. Licensee will have sixty (60) days to cure the deficiency and, if such deficiency is not cured with respect to such Products and/or Services to CNSI's reasonable satisfaction, then Licensee will not provide such Products and/or Services in connection with the Marks until the deficiency is cured to CNSI's reasonable satisfaction. 7. Infringement. (a) Licensee shall promptly notify CNSI of any violation of the Marks by a third party which may come to Licensee's attention. CNSI shall have the initial right to determine whether or not any action shall be taken with respect to such violation, and the nature of the action to be taken. Licensee agrees to cooperate in any reasonable manner with CNSI in the conduct of such litigation, at CNSI's expense. Any recovery obtained by CNSI as a result of any such action brought under this Section 7 shall belong entirely to CNSI. (b) In the event that CNSI determines that litigation should not be commenced or otherwise fails, after a reasonable period of time, to take reasonable action to stop such infringement, Licensee may, upon CNSI's written consent, do so in its own name, and CNSI will cooperate in any reasonable manner with Licensee in the conduct of such litigation, at Licensee's expense. Any recovery obtained by Licensee as a result of any such action brought under this paragraph 7(b) shall belong entirely to Licensee. 8. Effect of Termination. Within six (6) months of the effective date of termination of this Agreement (the "Phase Out Period"), Licensee shall cease all uses of the Marks. Notwithstanding the foregoing sentence, Licensee shall be permitted to use the Marks beyond the Phase Out Period in connection with transactions consummated by Licensee as part of the Services prior to termination of this Agreement. Termination of this Agreement for any reason shall not affect (i) those obligations which have accrued as of the date of termination or (ii) those obligations which, from the context thereof, are intended to survive termination of this Agreement (including without limitation the provisions of Section 5 hereof). 9. General Provisions. (a) Amendments and Waivers. Except as otherwise expressly provided herein, this Agreement shall not be amended or modified in any fashion except by an instrument in writing signed by the parties hereto. Waiver by a party of any condition, or any breach of this Agreement by any other party, shall not be effective unless in a writing signed by the waiving party, and no such waiver shall operate or be construed as the waiver of any conditions other than those expressly identified in the written waiver or of the same or another breach on a subsequent occasion. (b) Successor and Assigns. All terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement may be assigned by either party without the prior written consent of the other party. (c) No Third Party Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns. Except as set forth in Article IX of the Financial Services Agreement, this Agreement is not for the benefit of any other Person, other than CNSI, the First Venture Entities and their respective Subsidiaries, and no other Person, other than CNSI, the First Venture Entities and their respective Subsidiaries, shall have any rights against the parties hereunder. (d) Rules of Construction. The headings in this Agreement are inserted only as a matter of convenience and in no way affect the terms or intent of any provision of this Agreement. All defined phrases, pronouns, and other variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular, or plural, as the actual identity of the organization, person, or persona may require. No provision of this Agreement shall be construed against any parties hereto by reason of the extent to which such parties or its counsel participated in the drafting hereof. (e) CHOICE OF LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS MADE AND ENTERED INTO UNDER THE LAWS OF THE STATE OF NEW YORK, AND THE LAWS OF THAT STATE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY THEREUNDER (WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF) SHALL GOVERN THE VALIDITY AND INTERPRETATION HEREOF AND THE PERFORMANCE BY PARTIES HERETO OF THEIR RESPECTIVE DUTIES AND OBLIGATIONS HEREUNDER. Each party hereby irrevocably consents that any legal action or proceeding against it or any of its assets with respect to this Agreement may be brought in any jurisdiction where it or any of its assets may be found, or in any court of the State of New York or any Federal court of the United States of America located in New York, New York, or both, as the other party may elect, and by execution and delivery of this Agreement, each party hereby irrevocably submits to and accepts with regard to any such action or proceeding, for itself and in respect of its assets, generally and unconditionally, the jurisdiction of the aforesaid courts. Each party further agrees that final judgment against such party in any action or proceeding in connection with this Agreement shall be conclusive and may be enforced in any other jurisdiction within or outside the United States of America by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and the amount of such party's indebtedness. Each party hereby irrevocably waives, to the fullest extent permitted by Law, any objection which such party may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement brought in the State of New York, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in the State of New York has been brought in an inconvenient forum. (f) Severability of Provisions. If any provision of this Agreement shall be contrary to the internal laws of New York or any other applicable Law, at the present time or in the future, such provision shall be deemed null and void, but shall not affect the legality of the remaining provisions of this Agreement. This Agreement shall be deemed to be modified and amended so as to be in compliance with applicable Law and this Agreement shall then be construed in such a way as will best serve the intention of the parties at the time of the execution of this Agreement. (g) Counterparts; Delivery. This Agreement may be executed in one or more counterparts. Each such counterpart shall be considered an original and all of such counterparts shall constitute a single agreement binding all the parties as if all had signed a single document. The parties acknowledge that delivery of executed counterparts of this Agreement may be effected by a facsimile transmission or other comparable means, with an original document to be delivered promptly thereafter via overnight courier. (h) Entire Agreement. This Agreement (including any schedules, exhibits or other attachments hereto), taken together with the other Operative Documents, constitute the entire agreement among the parties. This Agreement and the other agreements referred to in the preceding sentence supersede all prior and contemporaneous agreements, statements, understandings, and representations of the parties. There are no representations, warranties, agreements, arrangements, or understandings, oral or written between the parties relating to the subject matter of this Agreement which are not fully expressed herein or in the other Operative Documents. The parties agree that the traditional formulation of the parol evidence rule (whereby extrinsic evidence may not be used to vary or contradict the unambiguous terms of a document that represents a final and complete expression of the parties' agreement) shall govern in any action or proceeding that may ensue concerning this Agreement and/or the other Operative Documents. (i) Notices. All notices, requests, consents, or other communications required or permitted to be given under this Agreement shall be in writing, may be delivered in person by telex or telecopy, by overnight air courier, or by certified or registered mail (return receipt requested with all fees prepaid), and shall be deemed to have been duly given and to have become effective upon the date actually delivered to the parties or their assignees at the following addresses: If to CNSI: Coyote Network Systems, Inc. 4360 Park Terrace Drive Westlake Village, California 91361 Attention: President If to First Venture: First Venture Leasing, LLC C/O Acorn Roseand & Management 777 Summer Street Stamford, Connecticut 06901 Attention: Mr. Robert Loonin The persons or addresses to which mailings or deliveries shall be made may be changed from time to time by notice given pursuant to the provisions of this section. (j) Waiver of Jury Trial. The parties hereto hereby waive their respective right to trial by jury of any cause of action, claim, counterclaim or cross-complaint in any action, proceeding and/or hearing brought by any party hereto against another party hereto on any matter whatsoever relating to, resulting from, arising out of, or in any way connected with this Agreement, or any amendment or breach hereof, including, without limitation, any claim or injury or damage, or the enforcement of any remedy under any Law, statute, or regulation, emergency or otherwise, now or hereafter in effect. (k) Further Assurances. The parties hereto from time to time after execution of this Agreement, without further consideration, shall execute and deliver, as appropriate, such documents and take such actions as may be reasonably necessary or proper to carry out and consummate the transactions contemplated by this Agreement. (l) Enforcement of Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement was not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction; provided, however, that the foregoing shall not be construed as prohibiting any party from pursuing any other rights and remedies available to it for such breach or threatened breach. (m) Force Majeure. Neither party shall be liable for defaults or delays due to acts of God or the public enemy, acts or demands of government or any government agency, strikes, fires, flood, accident, or other unforeseeable causes beyond its control and not due to its fault or negligence. Any party desiring to excuse its default or delay for any such reason shall notify the other party of the cause of such default or delay within five (5) days after the beginning thereof. (n) Relationship of Parties. Nothing contained in this Agreement shall be construed as constituting a partnership or agency relationship between the parties hereto. On and after the Effective Date, the relationship of the parties one to another for all purposes shall be that of independent contractors. IN WITNESS WHEREOF the undersigned hereto execute this Agreement. COYOTE NETWORK SYSTEMS, INC. By: /s/ Daniel W. Latham Name: Daniel W. Latham Title: President and COO CERTIFICATE OF ACKNOWLEDGMENT STATE OF CALIFORNIA ss.: COUNTY OF LOS ANGELES On this 26th day of January, 2000, before me, the undersigned, personally appeared Daniel W. Latham, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. ____________________ [NOTARY SEAL] COYOTE LEASING, LLC By: Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----