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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D/A
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 1)*
ESOFT, INC.
(Name of Issuer)
COMMON STOCK, $0.01 PAR VALUE
(Title of Class of Securities)
296904105
(CUSIP Number)
WILLIAM M. ELLIOTT, ESQ.
GATEWAY COMPANIES, INC.
4545 TOWNE CENTRE COURT
SAN DIEGO, CA 92121
(858)799-3401
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
SEPTEMBER 15, 2000
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), Rule 13d-1(f) or Rule 13d-1(g),
check the following box. / /
NOTE: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. SEE Rule 13d-7(b) for
other parties to whom copies are to be sent.
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* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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CUSIP NO. 296904105 13D PAGE _____ OF ______ PAGES
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
GATEWAY COMPANIES, INC.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS* WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR
2(e) / /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE
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NUMBER OF SHARES 7 SOLE VOTING POWER 2,377,159
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON WITH
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8 SHARED VOTING POWER -0-
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9 SOLE DISPOSITIVE POWER 2,377,159
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10 SHARED DISPOSITIVE POWER -0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,377,159
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.3%
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14 TYPE OF REPORTING PERSON* CO
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* SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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This Amendment No. 1 amends and supplements the statement on Schedule 13D, and
the cover page thereto, filed on May 8, 2000 (the "Schedule 13D") by Gateway
Companies, Inc., a Delaware corporation ("Gateway"), with respect to its
beneficial ownership of common stock, $0.01 par value (the "Common Stock"), of
eSoft, Inc., a Delaware corporation (the "Issuer").
Item 1. Security and Issuer.
On April 26, 2000, Gateway acquired 640,796 shares of Common Stock, a warrant to
acquire an additional 600,000 shares of Common Stock (the "Initial Warrant") and
a right to acquire an additional 640,795 shares of Common Stock (the "Additional
Shares"). On September 15, 2000, Gateway and the Issuer agreed that Gateway
would relinquish its rights to the Initial Warrant and the Additional Shares,
and instead Gateway provided a loan to the Issuer which is convertible into a
maximum of 1,136,363 shares of Common Stock within 60 days of this Schedule
13D/A and a new warrant to acquire an additional 600,000 shares of Common Stock
which, subject to the satisfaction of certain performance milestones, is
exerciseable within 60 days of this Schedule 13D/A. The principal executive
offices of the Issuer are located at 295 Interlocken Boulevard, Suite 500,
Broomfield, Colorado 80021.
Item 2. Identity and Background.
This statement is being filed by Gateway, which is a corporation organized under
the laws of the State of Delaware. Its principal business and executive office
is located at 4545 Towne Centre Court, San Diego, California 92121. Information
in this schedule is also being disclosed by (i) the directors and executive
officers of Gateway, (ii) Gateway, Inc., a Delaware corporation and 100% parent
of Gateway ("Gateway, Inc."), and (iii) the directors and executive officers of
Gateway, Inc., all of whom are set forth on Appendix A attached hereto and
incorporated herein by reference. Gateway, Inc.'s principal business and
executive office is located at 4545 Towne Centre Court, San Diego, California
92121.
Gateway is a leading direct marketer of personal computers and related products
and services. Gateway develops, manufactures, markets and supports a broad line
of desktop and portable PCs, servers and workstations used by individuals,
families, businesses, government agencies and educational institutions. Gateway
also offers diversified products and services "beyond the box," such as
software, peripherals, Internet access services, training programs, support
programs and financing programs.
None of Gateway nor any other person disclosed in response to this Item 2 has
during the last five years been (i) convicted in a criminal proceeding, or (ii)
a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to judgment,
decree and final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
On April 26, 2000, pursuant to a Stock and Warrant Purchase and Investor Rights
Agreement (the "Stock Purchase Agreement"), Gateway acquired 640,796 shares of
Common Stock for $19.507 per share (subject to adjustment upon the occurrence of
certain events) or an aggregate total amount of
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$12,500,000. On September 15, 2000, pursuant to the First Amendment to the Stock
Purchase Agreement (the "Amendment"), Gateway loaned $12,500,000 to the Issuer
and received a 7% Convertible Subordinated Promissory Note evidencing such loan
(the "Promissory Note"). At any time during the four-year term of the Promissory
Note, the Promissory Note is convertible at Gateway's election into shares of
the Issuer's Common Stock at the then-fair market value of the Common Stock,
with a maximum conversion rate of $19.507 and a minimum conversion rate of
$11.00 per share (subject to adjustment upon the occurrence of certain events).
The source of the funds for the purchase price and the loan was Gateway's
working capital. Gateway did not acquire any of the Common Stock or the
Promissory Note with borrowed funds.
Pursuant to the Stock Purchase Agreement as amended by the Amendment, Gateway
also acquired a warrant (the "Gateway Warrant") exerciseable for 600,000 shares
of Common Stock at $11.00 per share (subject to adjustment upon the occurrence
of certain events).
The foregoing description of the Stock Purchase Agreement is qualified in its
entirety by the text of such agreement which is attached as Exhibit 1 to the
Schedule 13D, and which is incorporated herein by this reference. The foregoing
descriptions of the Amendment, the Warrant and the Promissory Note are qualified
in their entirety by the text of such agreements which are attached hereto as
Exhibits 2, 3 and 4, respectively, and which are incorporated herein by this
reference.
Item 4. Purpose of Transaction.
Gateway acquired the Common Stock and if exercised, the Common Stock issuable
upon exercise of the Gateway Warrant and conversion of the Promissory Note, as
an investment. The persons other than Gateway described in Item 2 do not own any
shares of the Issuer.
Except as set forth in this Item 4, neither Gateway nor any other person
disclosed in response to Item 2 has any current plans or proposals which relate
to or would result in any of the events described in clauses (a) through (j) of
the instructions to Item 4 of Schedule 13D. Gateway expects to evaluate on an
ongoing basis the Issuer's financial condition, business operations and
prospects, the market price of the Issuer's Common Stock, conditions in the
securities markets generally, general economic and industry conditions and other
factors. Accordingly, Gateway reserves the right to change its plans and
intentions at any time, as it deems appropriate. In particular, Gateway may,
subject to applicable securities laws, at any time and from time to time acquire
additional shares of the Issuer's Common Stock or securities convertible or
exchangeable for the Issuer's Common Stock in public or private transactions;
dispose of shares of the Issuer's Common Stock or other securities convertible
or exchangeable for the Issuer's Common Stock in public or private transactions;
and/or enter into privately negotiated derivative transactions with one or more
parties to hedge the market risk of some or all of its positions in the Issuer's
Common Stock or such other securities. Any such transactions may be effected at
any time and from time to time.
Item 5. Interest in Securities of the Issuer.
On April 26, 2000, pursuant to the Stock Purchase Agreement, Gateway acquired
640,796 shares of Common Stock for $19.507 per share (subject to adjustment upon
the occurrence of certain events) or an aggregate total amount of $12,500,000.
On September 15, 2000, pursuant to the Amendment, Gateway loaned $12,500,000 to
the Issuer and received a 7% convertible
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subordinated Promissory Note evidencing such loan. In connection with the
transaction, the Issuer granted Gateway the Gateway Warrant to acquire an
additional 600,000 shares at a price per share of $11.00 (subject to adjustment
upon the occurrence of certain events). Due to the possibility that it may
convert the Promissory Note and/or exercise the Gateway Warrant, Gateway may be
deemed to presently be the beneficial owner of shares of the Common Stock
obtainable upon conversion of the Promissory Note and upon exercise of the
Gateway Warrant pursuant to Exchange Act Rule 13d-3(d)(1)(i)(B). Gateway's
beneficial ownership of the Common Stock represents approximately 14.3% of the
Issuer's outstanding Common Stock (including the Common Stock that may be deemed
to be beneficially held by Gateway as a result of conversion of the Promissory
Note and exercise of the Gateway Warrant) based upon the outstanding shares of
Common Stock set forth in the Issuer's Form 10-K filed with the Securities and
Exchange Commission for the Company's fiscal year ended December 31, 1999. Other
than Gateway, Inc. through its ownership of Gateway, no other person disclosed
in response to Item 2 beneficially owns any shares of the Issuer's Common Stock.
Gateway has sole voting power and sole dispositive power of the Common Stock
that it holds, and, upon conversion of the Promissory Note and exercise of the
Gateway Warrant, will have sole voting and dispositive power of the Common Stock
it holds as a result of such conversion and/or exercise. In the last sixty days,
none of Gateway nor any other person disclosed in response to Item 2 has been a
party to any transaction in the Common Stock. Gateway knows of no other person
that has the right to receive or the power to direct the receipt of the
dividends from, or the proceeds from the sale of, the Common Stock.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Under the Stock Purchase Agreement as amended by the Amendment, Gateway received
the Promissory Note, the Gateway Warrant and a right of first refusal with
respect to future issuances of securities by the Issuer. The Issuer also gave
Gateway certain demand and piggy-back registration rights with respect to the
Common Stock issued to Gateway under the Stock Purchase Agreement as amended by
the Amendment and the Common Stock issuable to Gateway upon conversion of the
Promissory Note and exercise of the Gateway Warrant.
Except as disclosed in this Item 6, none of Gateway nor any other person
disclosed in response to Item 2 is a party to any contracts, arrangements,
understandings or relationships with respect to any securities of the Issuer,
including but not limited to the transfer or voting of any of the securities,
finder's fees, joint ventures, loan or option agreements, puts or calls,
guarantees of profits, division of profits or loss, or the giving or withholding
of proxies.
The foregoing descriptions of the Stock Purchase Agreement and the Amendment are
qualified in their entirety by the text of such agreements which are attached as
Exhibit 1 to the Schedule 13D and as Exhibit 2 to this Schedule 13D/A,
respectively, and which are incorporated herein by this reference.
Item 7. Material to Be Filed as Exhibits.
The information set forth in the Exhibit Index is incorporated herein
by reference.
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SIGNATURES
After reasonable inquiry and to the best of the undersigned's knowledge
and belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: September 22, 2000 GATEWAY COMPANIES, INC.
By: /s/ William M. Elliott
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William M. Elliott
Senior Vice President and
Secretary
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SCHEDULE 13D
ESOFT, INC.,
ISSUER
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APPENDIX A
NAME PRESENT PRINCIPAL OCCUPATION GATEWAY, INC. GATEWAY, INC. GATEWAY GATEWAY
CITIZENSHIP(1) EXEC. OFFICER DIRECTOR COMPANIES, INC. COMPANIES, INC.
ADDRESS(2) EXEC. OFFICER DIRECTOR
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THEODORE W. WAITT Chairman of the Board X
JEFFREY WEITZEN President and X X X X
Chief Executive Officer
DAVID J. ROBINO Vice Chairman X X
R. TODD BRADLEY Executive Vice President, X
Global Operations
PETER B. ASHKIN Senior Vice President, X
Chief Technology Officer
JOSEPH J. BURKE Senior Vice President, X
Global Business Development
JACK N. DOLLARD Senior Vice President, X
Manufacturing
WILLIAM M. ELLIOTT Senior Vice President, X X X
General Counsel and
Secretary
MICHAEL D. HAMMOND Senior Vice President, X
Business Process
Simplification
CLIFFORD S. HOLTZ Senior Vice President, X
Gateway Consumer
SUSAN B. PARKS Senior Vice President, X
Gateway Business
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JAMES T. POLLARD Senior Vice President, X
Chief Information Officer
JOHN M. RENFRO Senior Vice President, X
Human Resources
MIKE SWALWELL Senior Vice President, X
Regional Managing Director
- EMEA
JOHN J. TODD Senior Vice President and X X X
Chief Financial Officer
GEORGE H. KRAUSS Director X
(attorney with law firm of
Kutak Rock)
RICHARD D. SNYDER Director X
(President - Avalon
Investments, Inc.)
DOUGLAS L. LACEY Director X
(Partner in accounting firm
of Nichols, Rise & Company,
L.L.P.)
CHARLES G. CAREY Director X
(Chairman of the Board and
Chief Executive Officer of
Fox Television Division of
Fox Inc. and Co-Chief
Operating Officer of News
Corporation)
JAMES F. MCCANN Director X
(President of 1-800-FLOWERS)
ELIZABETH DOLE Director X
(former President of the
Red Cross)
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(1) All are United States citizens.
(2) All addresses are 4545 Towne Centre Court, San Diego, CA 92121.
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Exhibit Index
1. Stock and Warrant Purchase and Investor Rights Agreement dated April
26, 2000 (previously filed as Exhibit 1 to the Schedule 13D filed by
Gateway Companies, Inc. on May 8, 2000).
2. First Amendment to Stock and Warrant Purchase and Investor Rights
Agreement dated September 15, 2000.
3. Warrant to Purchase Common Stock dated September 15, 2000.
4. Convertible Subordinated Promissory Note dated September 15, 2000.
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