SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-22784
GATEWAY 2000, INC.
(Exact name of registrant as specified in its charter)
Delaware 42-1249184
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
610 Gateway Drive
P.O. Box 2000
North Sioux City, South Dakota 57049
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (605) 232-20
00
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No .
As of November 6, 1997, there were 154,065,157 shares of the
Common Stock of the Company, $.01 par value per share,
outstanding. As of November 6, 1997, there were no shares of the
Company's Class A Common Stock, $.01 par value per share,
outstanding.
I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Gateway 2000, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended September 30, 1996 and 1997
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Net Sales $ 1,202,933 $ 1,504,851 $ 3,482,398 $ 4,316,845
Cost of goods sold 979,555 1,309,601 2,840,518 3,595,444
Gross profit 223,378 195,250 641,880 721,401
Selling, general and 135,621 219,258 412,820 570,680
administrative expenses
Nonrecurring expenses - 113,842 - 113,842
Operating income (loss) 87,757 (137,850) 229,060 36,879
Other income, net 6,087 5,612 19,086 20,195
Income (loss) before income 93,844 (132,238) 248,146 57,074
taxes
Provision (benefit) for income 33,148 (25,125) 85,610 40,187
taxes
Net income (loss) $ 60,696 $ (107,113) $ 162,536 $ 16,887
Share and per share information:
Net income (loss) per share $ 0.39 $ (0.68) $ 1.04 $ 0.11
Weighted average shares 156,276 156,875 155,945 156,373
outstanding
</TABLE>
<TABLE>
<CAPTION>
Gateway 2000, Inc.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and September 30, 1997
(in thousands, except share and per share amounts)
(Unaudited)
December 31, September 30,
1996 1997
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 516,360 $ 273,987
Marketable securities - 21,403
Accounts receivable, net 449,723 492,660
Inventory 278,043 376,648
Other 74,216 165,378
Total current assets 1,318,342 1,330,076
Property, plant and equipment, net 242,365 311,269
Software costs, net 77,073 39,965
Intangibles, net 9,869 87,350
Other assets 25,762 63,971
$ 1,673,411 $ 1,832,631
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of $ 15,041 $ 12,997
long-term obligations
Accounts payable 411,788 462,286
Accrued liabilities 190,762 235,234
Accrued royalties payable 125,270 130,362
Income taxes payable 40,334 15,029
Other current liabilities 16,574 28,210
Total current liabilities 799,769 884,118
Long Term obligations, net of current maturities 7,244 5,741
Warranty and other liabilities 50,857 101,912
Total liabilities 857,870 991,771
Contingencies (Note 9)
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 - -
shares authorized; none issued and
outstanding
Class A Common Stock, nonvoting, $.01 par - -
value, 1,000,000 shares authorized; none
issued and outstanding
Common Stock, $.01 par value, 220,000,000
shares authorized; 153,511,968 shares and
154,057,207 shares issued and outstanding,
in 1996 and 1997 respectively 1,535 1,541
Additional paid-in capital 288,745 298,363
Cumulative translation adjustment 549 (745)
Unrealized gain on available-for-sale
securities - 102
Retained earnings 524,712 541,599
Total stockholders' equity 815,541 840,860
$ 1,673,411 $ 1,832,631
</TABLE>
<TABLE>
<CAPTION>
Gateway 2000, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1996 and 1997
(in thousands)
(Unaudited)
Nine Months Ended
September 30,
1996 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 162,536 $ 16,887
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 41,844 63,268
Provision for uncollectible accounts 13,760 2,422
receivable
Deferred income taxes 6,148 (63,749)
Other, net 2,034 256
Nonrecurring items - 113,842
Changes in operating assets and liabilities:
Accounts receivable (10,058) (20,665)
Inventory (1,476) (83,524)
Other current assets (4,928) (63,679)
Accounts payable 99,123 41,891
Accrued liabilities 11,410 12,184
Accrued royalties (8,796) 5,092
Customer prepayments (7,141) (1,251)
Income taxes payable 12,288 (29,297)
Other liabilities 21,335 36,894
Net cash provided by operating 338,079 30,571
activities
Cash flows from investing activities:
Capital expenditures (79,564) (94,094)
Software costs, internal use (22,615) (11,130)
Purchases of available-for-sale securities - (32,286)
Proceeds from maturities of available-for- - 8,985
sale securities
Proceeds from sales of available-for-sale
securities - 2,000
Payment received on note 5,000 -
Acquisitions, net of cash acquired - (142,320)
Other, net (4,739) (2,944)
Net cash used in investing activities (101,918) (271,789)
Cash flows from financing activities:
Proceeds from issuance of notes payable 10,297 10,000
Principal payments on long-term obligations
and notes payable (12,543) (13,972)
Stock options exercised 1,780 5,171
Net cash provided by (used in) financing
activities (466) 1,199
Foreign exchange effect on cash and cash
equivalents (966) (2,354)
Net increase (decrease) in cash and cash
equivalents 234,729 (242,373)
Cash and cash equivalents, beginning of period 166,397 516,360
Cash and cash equivalents, end of period $ 401,126 $ 273,987
</TABLE>
1. General:
The accompanying unaudited consolidated financial statements
of Gateway 2000, Inc. (the Company) as of September 30, 1997 have
been prepared on the same basis as the audited consolidated
financial statements for the year ended December 31, 1996, except
as follows. Beginning in 1997, certain expenses related to the
fulfillment of parts warranties have been reclassified from
selling, general and administrative expenses to cost of goods
sold. Prior year amounts have been restated to conform with this
reclassification. In the opinion of management, the unaudited
consolidated financial statements as of September 30, 1997
reflect all adjustments necessary to fairly state the
consolidated financial position, and the consolidated results of
operations and cash flows for the interim period. All
adjustments are of a normal, recurring nature, except for the
nonrecurring expenses described below in Note 2. The results for
the interim period are not necessarily indicative of results to
be expected for any other interim period or the entire year.
These financial statements should be read in conjunction with the
Company's audited consolidated financial statements and notes
thereto for the year ended December 31, 1996, which are included
in the Company's 1996 Annual Report to the Securities and
Exchange Commission on Form 10-K. The preparation of the
consolidated financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities, and the reported amounts of sales and expenses
during the reported period. Actual results could differ from
those estimates.
2. Nonrecurring Expenses:
The Company recorded several nonrecurring pretax charges
during the third quarter of 1997 totaling $113.8 million. Of the
nonrecurring charges, $59.7 million was for the write-off of in-
process research and development acquired in the purchases of
Advanced Logic Research, Inc. (ALR) and certain assets of Amiga
Technologies. Also included in the nonrecurring charges was a
non-cash write-off of $45.2 million resulting from the
abandonment of a capitalized internal-use software project and
certain computer equipment. In addition, $8.6 million was
recorded for severance of employees and the closing of a foreign
office as part of the Company's ongoing global reorganization.
3. Acquisition:
During the third quarter of 1997, the Company completed the
acquisition of substantially all of the outstanding shares of
common stock of Advanced Logic Research, Inc. (ALR), a
manufacturer of network servers and personal computers, for a
final cash purchase price of $196.4 million. Of the purchase
price, $58.6 million was allocated to in-process research and
development costs and expensed during the quarter. These costs
were expensed as the technological feasibility of the in-process
research and development had not yet been established and the
technology had no alternative use. The acquisition was accounted
for as a purchase business combination. Beginning July 23, 1997,
the results of ALR have been included in the Company's
consolidated financial statements. ALR's operating results for
periods prior to the acquisition date were not material to the
Company's consolidated results of operations.
4. Stock Split:
On May 15, 1997, the Board of Directors authorized a
two-for-one stock split which was distributed on or about June
16, 1997, to shareholders of record on June 2, 1997. All
references in the financial statements to number of shares and
per share amounts of the Company's common stock have been
retroactively restated to reflect the increased number of common
shares outstanding.
5. Share and Per Share Information:
Net income (loss) per share has been computed using net
income (loss) for the three and nine months ended September 30,
1996 and 1997 and the weighted average number of common shares
and, as appropriate, common share equivalents outstanding during
the period. Common share equivalents considered outstanding
relate to stock options and have been calculated using the
treasury stock method for all periods presented.
6. Accounting Policy for Derivatives:
In the normal course of business, the Company enters
into foreign currency forward contracts to hedge foreign currency
transactions and probable anticipated foreign currency
transactions. These forward contracts are designated as a hedge
of international sales by U.S. dollar functional currency
entities and intercompany purchases by certain foreign
subsidiaries. The principal currencies hedged are the German
Mark, the British Pound, the French Franc and the Japanese Yen
over periods ranging from one to six months. Forward contracts
are accounted for on a mark-to-market basis, with realized and
unrealized gains or losses recognized currently. Gains or losses
from forward contracts which are effective as a hedge are
included in the basis of the designated transaction. The related
receivable or liability with counterparties to the forward
contracts is recorded in the consolidated balance sheet. Cash
flows from settlements of forward contracts are included in
operating activities in the consolidated statements of cash
flows.
7. Financing Agreements:
On September 25, 1997, the bank credit agreement (the
Agreement), which provides for unsecured loans of up to $225
million, was amended. The amendment removed the requirement of
the Company to maintain minimum quick ratios.
8. Selected Balance Sheet Information:
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
(in thousands)
(Unaudited)
<S> <C> <C>
Accounts receivable, net:
Accounts receivable $ 468,691 $ 511,890
Less allowance for uncollectible (18,968) (19,230)
accounts
$ 449,723 $ 492,660
Inventory:
Components and subassemblies $ 269,959 $ 346,330
Finished goods 8,084 30,318
$ 278,043 $ 376,648
</TABLE>
9. Contingencies:
The Company is a party to various lawsuits and
administrative proceedings arising in the ordinary course of its
business. The Company evaluates such lawsuits and proceedings on
a case-by-case basis, and its policy is to vigorously contest any
such claims which it believes are without merit. The Company's
management believes that the ultimate resolution of such pending
matters will not materially adversely affect the Company's
business, financial position, results of operations or cash
flows.
The Company is party to agreements with numerous state tax
authorities pursuant to which it collects and remits applicable
sales or use taxes in such states. The Company entered into
these agreements in response to inquiries of taxing authorities
in those states concerning whether the Company's alleged contacts
required the collection of sales and use taxes from customers in
those states. These agreements generally limit the liability of
the Company for non-collection of sales taxes prior to such
agreements' effective dates. These agreements do not address
income taxes. Taxing authorities in other states have made
similar inquiries concerning the Company's alleged contacts with
those states and, in the future, could make specific assessments.
The Company has not collected or remitted any sales or use taxes
in such states for any prior periods, nor has it established
significant reserves for the payment of such taxes. There can be
no assurance that the amount of any sales or use taxes the
Company might ultimately be required to pay for prior periods
would not materially and adversely affect the Company's business,
consolidated financial position, results of operations or cash
flows.
The Company currently pays state income taxes in the states
where it has a physical presence. The Company has not paid
income taxes in any other state, nor has it established
significant reserves for the payment of such taxes. Management
believes that the amount of any income tax the Company might
ultimately be required to pay for prior periods would not
materially and adversely affect the Company's business,
consolidated financial position, results of operations or cash
flows.
10. Income Taxes:
The nonrecurring expenses relating to the write-off of in-
process research and development arising in connection with the
acquisitions of ALR and certain assets of Amiga Technologies
during the third quarter were nondeductible for income tax
purposes. As a result, the Company's effective tax (benefit)
rate was (19.0%) and 70.4% for the three and nine months ended
September 30, 1997, with the third quarter rate representing the
income tax benefit due to the net loss reported for the quarter.
11. Stock Option Plans:
During the third quarter of 1997, the Company introduced the
Gateway GoldShares stock option program and awarded stock options
pursuant to the Company's 1996 Long-Term Incentive Equity Plan to
eligible employees based on length of service and pay level.
Under the GoldShares program, eligible employees were granted
options to purchase approximately 1,300,000 shares of common
stock at $32.63 per share in September 1997. Options granted
under the plan vest at the rate of 25% per year from the grant
date and expire, if not exercised, ten years from the date of
grant.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The following table sets forth, for the periods indicated, certain data
derived from the Company's consolidated statements of operations,
expressed as a percentage of net sales:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1997 1996 1997
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 81.4% 87.0% 81.6% 83.3%
Gross profit 18.6% 13.0% 18.4% 16.7%
Selling, general and administrative
expenses 11.3% 14.6% 11.8% 13.2%
Nonrecurring items - 7.6% - 2.6%
Operating income (loss) 7.3% (9.2)% 6.6% 0.9%
Other income, net 0.5% 0.4% 0.5% 0.4%
Income (loss) before income taxes 7.8% (8.8)% 7.1% 1.3%
Provision (benefit) for income taxes 2.8% (1.7)% 2.4% 0.9%
Net income (loss) 5.0% (7.1)% 4.7% 0.4%
Sales Sales increased 25% in the third quarter of 1997 to
$1.50 billion from $1.20 billion in the third quarter of 1996 and
increased 8% over sales in the second quarter of 1997. For the
nine months ended September 30, sales increased 24% to $4.32
billion from $3.48 billion in the comparable period of 1996. The
increase in sales for the third quarter of 1997 over the third
quarter of 1996 resulted from continued demand growth in the Asia
Pacific and the Americas regions and the acquisition of Advanced
Logic Research, Inc. (ALR). Sales during the first nine months
of 1997 increased over the comparable period of 1996 due to the
continued growth in all of the Company's markets and accelerated
growth in sales of the Company's portable products.
Sales in the Americas region for the quarter increased to
$1.30 billion, an increase of 27% over the $1.02 billion recorded
in the third quarter of 1996 and an increase of 14% over the
second quarter of 1997. For the nine month period ended
September 30, 1997, sales in the Americas region grew 23% over
1996 levels to $3.60 billion. International sales in the third
quarter of 1997 increased 17% to $208.1 million from $178.4
million in the third quarter of 1996, but decreased from the
second quarter of 1997 by 17%. For the first nine months of
1997, international sales increased 31% to $714.5 million from
$544.7 million in the first nine months of 1996. Sales in the
quarter from the Company's European region were $127.2 million,
an increase of approximately 10% from the third quarter last year
but a decrease of approximately 22% from the second quarter of
this year, which is generally a seasonally stronger quarter in
the region. Sales for the first nine months of 1997 in the
Company's European region were $467.6 million, an increase of
approximately 23% over the comparable period of 1996. Sales in
the Company's Asia Pacific region were $80.9 million in the third
quarter of 1997, an increase of 29% over the third quarter of
1996, but a decrease of 7% from the second quarter of 1997, which
is generally a seasonally stronger quarter in the region. Sales
for the first nine months of 1997 in the Company's Asia Pacific
region totaled $246.8 million, an increase of 51% over the first
nine months of 1996.
Unit shipments in the third quarter of 1997 increased 31% to
approximately 622,000 from 474,000 in the third quarter of 1996
and increased 12% from unit shipments in the second quarter of
1997. For the nine months ended September 30, 1997, unit
shipments increased 34% to approximately 1,736,000 from
approximately 1,298,000 in the first nine months of 1996. Unit
shipments in the Company's Americas region grew 31% over the
third quarter of 1996 and increased 17% over the second quarter
of 1997. For the nine months ended September 30, 1997, unit
shipments in the Americas region increased 31% over the first
nine months of 1996. Unit shipments in the Company's European
region grew 5% over the third quarter of 1996, but decreased 21%
from the second quarter of 1997, which is generally a seasonally
stronger quarter in the region. For the nine months ended
September 30, 1997, unit shipments in the European region
increased 30% over the first nine months of 1996. Unit shipments
for the third quarter of 1997 in the Company's Asia Pacific
region grew 41% over the third quarter of 1996 but decreased 13%
over the second quarter of 1997, which is generally a seasonally
stronger quarter in the region. For the nine months ended
September 30, 1997, unit shipments in the Asia Pacific region
increased 87% over the comparable period of 1996.
Weighted average unit prices (AUP) in the third quarter of
1997 were 4.3% lower than prices in the third quarter of 1996 and
3.8% lower than prices in the second quarter of 1997. The
primary cause for the decrease in the AUP during the third
quarter was an increase in the mix of sub-$2,000 priced PC's sold
in the quarter. For the first nine months of 1996, AUP was 7.3%
below levels for the first nine months of 1996. In addition to
the mix shift previously mentioned, the comparatively lower AUP
is primarily due to unusually high selling prices experienced in
the first six months of 1996. The Company has generally sought to
offset such decreasing unit prices by adding or improving product
features and by introducing new products based on newer
technology at higher unit prices. In 1995, significant new
technology was introduced, outpacing the normal rate of component
cost declines, and as a result, prices gradually increased
throughout the year. Average unit selling prices maintained
these abnormally high levels through the first quarter of 1996.
Beginning in the second quarter of 1996, in addition to the
normal component cost declines, significant cost declines were
experienced in Dynamic Random Access Memory (DRAM) prices. These
declines in component costs were generally passed on to customers
through price decreases. In addition, the rate of new technology
introduced in 1996 slowed, and was not substantial enough to
offset the declines in component prices, also contributing to the
decline in average unit prices.
Gross Profit Gross profit in the third quarter of 1997
decreased 12.6% from the third quarter of 1996. In the first
nine months of 1997, gross profit increased 12.4% over the
comparable periods of 1996. As a percentage of sales, gross
profit for the third quarter and the first nine months of 1997
decreased to 13.0% and 16.7% from 18.6% and 18.4% for the
comparable periods of 1996, and decreased in comparison to the
18.7% levels in the second quarter of 1997. Operating results
for the third quarter of 1997 were adversely impacted by the
effects of excess inventories. During the third quarter, there
were significant declines in the market value of many inventory
components. In order to promptly mitigate the impact of these
excess inventories, the Company sold product with profit margins
below targeted levels. In addition, reserves were recorded
against excess and obsolete inventories still on hand at the end
of the third quarter.
Selling, General and Administrative Expenses Selling,
general and administrative expenses for the third quarter and
first nine months of 1997 increased approximately 61.7% and
38.2%, respectively, over the comparable periods of 1996. As a
percentage of sales, in the third quarter and first nine months
of 1997, these expenses increased to approximately 14.6% and
13.2%, respectively, from 11.3% and 11.8% in the comparable
periods of 1996. These increases are primarily the result of
increases in marketing communications and personnel expenses, the
inclusion of the operating expenses of Advanced Logic Research,
Inc. (ALR) which was acquired during the third quarter of 1997,
the impact of the United Parcel Service (UPS) strike on freight
costs, and other increases in credit card and telephone expenses.
Nonrecurring Expenses As previously indicated, the Company
recorded several nonrecurring pretax charges totaling $113.8
million for the third quarter of 1997. Of the nonrecurring
charges, $59.7 million was for the write-off of in-process
research and development acquired in the purchase of ALR and
certain assets of Amiga Technologies. Also included in the
nonrecurring charges was a non-cash write-off of $45.2 million
resulting from the abandonment of a capitalized internal-use
software project and certain computer equipment. In addition,
$8.6 million was recorded for severance of employees and the
closing of a foreign office as part of the Company's ongoing
global reorganization.
Operating Income (Loss) Due to the factors discussed above,
the operating loss in the third quarter of 1997 was
$137.9 million as compared to the $87.8 million of operating
income in the third quarter of 1996. Operating income for the
nine months ended September 30, 1997 decreased 83.9% to $36.9
million from $229.1 million in the first nine months of 1996.
Other Income, Net Other income, net includes other income
net of expenses, such as interest income and expense, lease
financing commissions, referral fees for on-line services and
foreign exchange transaction gains and losses. Other income, net
decreased to $5.6 million from $6.1 million in the third quarter
of 1996, due to decreases in interest income. With the
acquisition of ALR being funded through the Company's cash
reserves, the third quarter experienced a decrease in
availability of additional cash and marketable securities from
the previous year's quarter causing decreases in additional
interest income. This decrease was partially offset by foreign
exchange transaction gains recognized during the third quarter of
1997. For the nine months ended September 30, 1997, other
income, net increased to $20.2 million from $19.1 million during
the first nine months of 1996. The principal cause for the
increase was additional interest income as a result of the
availability of additional cash and marketable securities, on
average, during the first nine months of 1997 as compared to the
same period of time in 1996. This increase was partially offset
by foreign exchange transaction losses and decreases in referral
commissions from internet providers over the nine month period.
Income Taxes The nonrecurring expenses relating to the
write-off of in-process research and development arising in
connection with the acquisitions of ALR and certain assets of
Amiga Technologies during the third quarter were nondeductible
for income tax purposes. As a result, the Company's effective
tax (benefit) rate was (19.0%) and 70.4% for the three and nine
months ended September 30, 1997, with the third quarter rate
representing the income tax benefit due to the net loss reported
for the quarter. The Company's effective rate was 35.3% and
34.5% for the three and nine months ended September 30, 1996.
Liquidity and Capital Resources
The Company has financed its operating and capital
expenditure requirements to date principally through cash flow
from its operations. At September 30, 1997, the Company had cash
and cash equivalents of $274.0 million, marketable securities of
$21.4 million and an unsecured committed credit facility with
certain banks of $225 million, consisting of a revolving line of
credit facility and a sub-facility for letters of credit. At
September 30, 1997, no amounts were outstanding under the
revolving line of credit. Approximately $4.2 million was
committed to support outstanding standby letters of credit.
Management believes the Company's current sources of working
capital, including amounts available under existing credit
facilities, will provide adequate flexibility for the Company's
financial needs for at least the next 12 months.
The Company generated $30.6 million in cash from operations
during the first nine months of the year. Net income adjusted
for non-cash items totaled $132.7 million, including $113.8
million in nonrecurring items and increases in deferred tax
assets of $63.7 million. An increase in inventory levels
consumed approximately $83.5 million in cash, but was partially
offset by an increase in accounts payable of $41.9 million and
other liabilities of $36.9 million. The timing of federal income
tax payments in the first nine months consumed $29.3 million in
cash. The Company used approximately $271.8 million in cash from
investing activities as a result of the $142.3 million purchase
of ALR, net of cash acquired, the Company's continued investment
in facilities, and a $21.3 million net investment in marketable
securities .
At September 30, 1997, the Company had long-term
indebtedness and capital lease obligations of approximately $18.7
million. These obligations relate primarily to the Company's
expansion of international operations and its investments in
equipment and facilities. Borrowings, exclusive of capital lease
obligations, bear fixed and variable rates of interest currently
ranging from interest free (for certain incentive funds from the
Industrial Development Authority of the City of Hampton,
Virginia) to 8.87% and have varying maturities through 2001. The
Company's capital lease obligations relate principally to its
computer and telephone system equipment.
On July 23, 1997, the Company completed the acquisition of
Advanced Logic Research, Inc. (ALR). The acquisition was funded
through the Company's cash reserves for $142.3 million, net of
cash acquired. Of the purchase price, $58.6 million was
allocated to in-process research and development projects. The
Company expects ALR to continue to develop these projects into
commercially viable products in the normal course of business
over the next 1 to 5 years.
The Company anticipates that it will retain all earnings in
the foreseeable future for development of its business and will
not distribute earnings to its stockholders as dividends.
Factors That May Affect Future Results
This Report includes forward-looking statements made in good
faith based on current management expectations pursuant to the
safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These statements are not guarantees of future
performance and actual outcomes may differ materially from what
is expressed or forecasted.
Factors that could cause future results to differ from these
expectations include the following: growth in the personal
computer industry; competitive factors and pricing pressures;
component supply shortages; inventory risks due to shifts in
market demand; the outcome of pending and future litigation;
changes in government regulation; foreign currency fluctuations;
risks of acquired businesses; and general domestic and
international economic conditions.
In addition to other information contained in this Report,
the following factors, among others, sometimes have affected, and
in the future could affect, the Company's actual results, and
could cause future results to differ materially from those
expressed in any forward looking statement made by, or on behalf
of the Company.
Management of rapid growth of the Company, including
problems with respect to the size of its work force and
production facilities and the adequacy of its management
information and other systems, purchasing and inventory controls,
and the forecasting of component part needs and pricing changes
have the potential to affect results. These problems can result
in high backlog of product orders, delays in customer support
response times and increased expense levels.
Short product life cycles characterize the PC industry,
resulting from rapid changes in technology and consumer
preferences and declining product prices. The Company's in-house
engineering personnel work closely with PC component suppliers
and other technology developers to evaluate the latest
developments in PC-related technology. There can be no assurance
that the Company will continue to have access to new technology
or will be successful in incorporating such new technology in its
products or features in a timely manner.
Certain key management employees, particularly Ted Waitt,
Chairman and Chief Executive Officer and a founder of the
Company, have been instrumental in the success of the Company.
The Company has not entered into an employment agreement with Ted
Waitt. The loss of Ted Waitt's services could materially and
adversely affect the Company.
The Company is party to agreements with numerous state tax
authorities pursuant to which it collects and remits applicable
sales or use taxes in such states. The Company entered into
these agreements in response to inquiries of taxing authorities
in those states concerning alleged Company contacts with such
states and whether such alleged contacts required the collection
of sales and use taxes from customers and/or the payment of
income tax in those states. These agreements generally limit the
liability of the Company for non-collection of sales taxes prior
to such agreements' effective dates. These agreements do not
address income taxes. Taxing authorities in other states have
made similar inquiries or asserted similar claims concerning the
Company's alleged contacts with those states and in the future
could make specific assessments. The Company has not collected
or remitted any sales or use taxes in such states for any prior
period, nor has it established significant reserves for the
payment of such taxes. There can be no assurance that the amount
of any sales or use taxes the Company might ultimately be
required to pay for prior periods would not materially and
adversely affect the Company's business, consolidated financial
position, results of operations or cash flows.
The Company currently pays state income taxes in the few
states where it has a physical presence. The Company has not
paid income taxes in other states, nor has it established
significant reserves for the payment of such taxes. Management
believes that the amount of any income tax the Company might
ultimately be required to pay for prior periods would not
materially and adversely affect the Company's business,
consolidated financial position, results of operations or cash
flows.
II. OTHER INFORMATION
1Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Description of Exhibits
No.
10.13 1997 Amended and Restated Credit Agreement dated as of
September 25, 1997 among the Company, the banks party
thereto, Norwest Bank Iowa, N.A., as Administrative Agent
and Bank of America National Trust and Savings
Association as Documentation Agent, filed herewith.
10.14 Consultation and Noncompetition Agreement dated as of
August 28, 1997 between the Company and Richard D.
Snyder, filed herewith.
27.1 Financial Data Schedule, filed herewith.
(b) Reports on Form 8-K:
No Reports on Form 8-K were filed by the Company during the
quarter ended September 30, 1997
SIGNATURE
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, thereunto duly authorized.
Gateway 2000, Inc.
Date: November 13, 1997
By: /s/David J. McKittrick
David J. McKittrick
Senior Vice President, Chief
Financial Officer and
Treasurer (authorized officer
and chief accounting officer)
Exhibit INDEX TO EXHIBITS
No.
10.13 1997 Amended and Restated Credit Agreement dated as of
September 25, 1997 among the Company, the banks party thereto
Norwest Bank Iowa, N.A., as Administrative Agent and Bank
of America National Trust and Savings Association as
Documentation Agent, filed herewith.
10.14 Consultation and Noncompetition Agreement dated as of August
28, 1997 between the Company and Richard D. Snyder, filed
herewith.
27.1 Financial Data Schedule, filed herewith.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GATEWAY 2000,
INC.'S CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 273,987
<SECURITIES> 21,403
<RECEIVABLES> 511,890
<ALLOWANCES> 19,230
<INVENTORY> 376,648
<CURRENT-ASSETS> 1,330,076
<PP&E> 489,179
<DEPRECIATION> 137,945
<TOTAL-ASSETS> 1,832,631
<CURRENT-LIABILITIES> 884,118
<BONDS> 5,741
0
0
<COMMON> 1,541
<OTHER-SE> 839,319
<TOTAL-LIABILITY-AND-EQUITY> 1,832,631
<SALES> 4,316,845
<TOTAL-REVENUES> 4,316,845
<CGS> 3,595,444
<TOTAL-COSTS> 3,595,444
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,422
<INTEREST-EXPENSE> 577
<INCOME-PRETAX> 57,074
<INCOME-TAX> 40,187
<INCOME-CONTINUING> 16,887
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,887
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0
</TABLE>
1997 AMENDED AND RESTATED CREDIT AGREEMENT
This 1997 Amended and Restated Credit Agreement (the
"Agreement") is entered into as of September 25, 1997 among
Gateway 2000, Inc., a Delaware corporation (the "Company"), the
several financial institutions from time to time party to this
Agreement (collectively, the "Banks"; individually, a "Bank"),
Norwest Bank Iowa, National Association as Issuing Bank and
Administrative Agent, and Bank of America National Trust and
Savings Association, as Documentation Agent for the Banks.
WHEREAS, the Company, the banks party thereto, the
Administrative Agent and the Documentation Agent entered into a
Credit Agreement dated as of December 27, 1995, (as in effect as
of the date of this Agreement, the "1995 Credit Agreement");
WHEREAS, Mellon Bank, N.A. and The First National Bank
of Chicago will each be executing this Agreement as a Bank and
from and after the Effective Date of this Agreement will each be
a Bank hereunder;
WHEREAS, Nationsbank, N.A., PNC Bank, National
Association, NBD Bank, and Toronto Dominion (Texas) Inc. are
withdrawing from the 1995 Credit Agreement;
WHEREAS, the parties hereto (other than the banks
named in the immediately preceding WHEREAS clause) desire to
amend the 1995 Credit Agreement as set forth herein and to
restate the 1995 Credit Agreement in its entirety to read as set
forth in the 1995 Credit Agreement with the amendments specified
below;
NOW, THEREFORE, for valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Definitions; References.
(a) Unless otherwise specifically defined herein, each term
used herein which is defined in the 1995 Credit Agreement shall
have the meaning assigned to such term in the 1995 Credit
Agreement. The term "Notes" defined in the 1995 Credit Agreement
shall include from and after the date hereof the Notes delivered
under this Agreement. The term "Agreement" defined in the 1995
Credit Agreement means, from and after the date hereof, this
Agreement. The term "Banks" and each reference to a "Bank"
defined in the 1995 Credit Agreement means, from and after the
date hereof, the Banks and each Bank party to this Agreement.
(b) Each reference to "hereof", "hereunder", "herein" and
"hereby" and each other similar reference and each reference to
"this Agreement" and each other similar reference contained in
the 1995 Credit Agreement and in the other Loan Documents to the
1995 Credit Agreement shall from and after the date hereof refer
to the 1995 Credit Agreement as amended and restated hereby.
2. Amendments to the 1995 Credit Agreement.
(a) Amendments to Article I of the 1995 Credit Agreement.
(1) The table in the definition of "Applicable Facility Fee"
is amended in its entirety to provide as follows:
"Leverage Ratio Applicable FacilityFee
less than 0.75 to 1.00 0.1000%
Greater than or equal to 0.75 to 1.00
but less than or equal to 1.25 to 1.00 0.1350%
Greater than 1.25 to 1.00 0.1875%"
(2) The table in the definition of "Applicable Margin" is
amended in its entirety to provide as follows:
"Leverage Ratio ApplicableMargin
less than 0.75 to 1.00 0.2250%
Greater than or equal to 0.75 to 1.00
but less than or equal to 1.25 to 1.00 0.2650%
Greater than 1.25 to 1.00 0.3625%"
(3) The definition of "Revolving Termination Date" is amended
in its entirety to provide as follows:
"'Revolving Termination Date' means the earlier to
occur of:
(a) September 25, 2000; and
(b) the date on which the Commitments otherwise
terminate in accordance with the provisions of this
Agreement."
(b) Amendment to Article II of the 1995 Credit Agreement.
Subsection 2.12(b) of the 1995 Credit Agreement is amended by
inserting "(1)" immediately prior to the text in such subsection
and inserting the following after such text:
(2) Notwithstanding any provision to the contrary
contained in clause (1) of this subsection, the Company
shall pay to the Administrative Agent on September 25, 1997
the accrued facility fee calculated for the period ending on
such date (but excluding such date), with the immediately
following quarterly payment being calculated on the basis of
the period from and including September 25, 1997 to such
quarterly payment date.
(c) Amendment to Article III of the 1995 Credit Agreement.
Subsection 3.08(a) of the 1995 Credit Agreement is amended by
inserting "(1)" immediately prior to the text in such subsection
and inserting the following after such text:
(2) Notwithstanding any provision to the contrary
contained in clause (1) of this subsection, the Company
shall pay to the Administrative Agent on September 25, 1997
the accrued letter of credit fee calculated for the period
ending on such date (but excluding such date), with the
following quarterly payment being calculated on the basis of
the period from and including September 25, 1997 to such
quarterly payment date.
(d) Amendments to Article VIII of the 1995 Credit Agreement.
(1) Subsection (g) of Section 8.04 is hereby amended by
replacing "$15,000,000" with "$25,000,000".
(2) Section 8.15 is amended in its entirety to provide as
follows:
"8.15 Deliberately left blank."
(e) Amendment to Schedule 2.01 of the 1995 Credit Agreement.
Schedule 2.01 of the 1995 Credit Agreement is deleted in its
entirety and replaced with Schedule 2.01 of this Agreement.
(f) Amendment to Schedule 3.03 of the 1995 Credit Agreement.
Schedule 3.03 of the 1995 Credit Agreement is deleted in its
entirety and replaced with Schedule 3.03 of this Agreement.
3. Representations and Warranties. The Company hereby
represents and warrants to the Administrative Agent and the Banks
as follows:
(a) No Default or Event of Default has occurred and is
continuing.
(b) The execution, delivery and performance by the Company of
this Agreement and the 1995 Credit Agreement as amended and
restated by this Agreement have been duly authorized by all
necessary corporate and other action and do not and will not
require any registration with, consent or approval of, notice to
or action by, any Person (including any Governmental Authority)
in order to be effective and enforceable. The 1995 Credit
Agreement as amended and restated by this Agreement and the Loan
Documents constitute the legal, valid and binding obligations of
the Company, enforceable against it in accordance with its
respective terms, without defense, counterclaim or offset.
(c) All representations and warranties of the Company
contained in the 1995 Credit Agreement are true and correct.
(d) The Company is entering into this Agreement on the basis
of its own investigation and for its own reasons, without
reliance upon the Administrative Agent, the Documentation Agent,
and the Banks or any other Person.
4. Effective Date.
(a) This Agreement will become effective as of September 25,
1997 (the "Effective Date"), provided that each of the following
conditions precedent is satisfied on or before such date:
(1) The Documentation Agent shall have received:
(A) from the Company, each of the Banks, and each of
the banks named in the third Whereas clause of this
Agreement, a duly executed original (or, if elected by the
Documentation Agent, an executed facsimile copy) of this
Agreement; and
(B) from the Company, executed Committed Loan Notes
for each Bank substantially in the form of Exhibit I to the
1995 Credit Agreement and dated the Effective Date; and
(C) from the Company, executed Bid Loan Notes for each
Bank requesting such Note substantially in the form of
Exhibit J to the 1995 Credit Agreement and dated the
Effective Date.
The Administrative Agent shall ask each of the Banks to return
the notes received under the 1995 Credit Agreement to the
Administrative Agent. Upon receipt of such notes, the
Administrative Agent shall mark such notes "Superseded" and
return such Notes to the Company.
(2) The Documentation Agent shall have received from the
Company a copy of a resolution passed by the board of directors
of the Company, certified by the Secretary or an Assistant
Secretary of such corporation as being in full force and effect
on the date hereof, authorizing the execution, delivery and
performance of this Agreement.
(3) The Documentation Agent shall have received an opinion of
the general counsel of the Company, dated the Effective Date, and
addressed to the Documentation Agent, the Administrative Agent
and the Banks, substantially in the form of Exhibit G of the 1995
Credit Agreement with appropriate changes to refer to this
Agreement.
(4) The Documentation Agent shall have received all other
documents it may reasonably request relating to any matters
relevant hereto, all in form and substance satisfactory to the
Documentation Agent.
(5) The Documentation Agent shall have received evidence,
satisfactory to it, that the Administrative Agent has been paid,
for the account of the banks entitled thereto:
(a) all letter of credit and facility fees due
and payable under the 1995 Credit Agreement; and
(b) all other sums then due and payable under
the 1995 Credit Agreement.
(6) The Documentation Agent shall have received certification
from the Administrative Agent that there are no outstanding Loans
and no unreimbursed drawings under the Letters of Credit
outstanding under the 1995 Credit Agreement.
(b) From and after the Effective Date, the 1995 Credit
Agreement is amended as set forth herein and is restated in its
entirety to read as set forth in the 1995 Credit Agreement with
the amendments specified herein.
5. Release of Banks. The Company hereby (a) releases each of
Nationsbank, N.A.; PNC Bank, National Association, NBD Bank, and
Toronto Dominion (Texas) Inc. from its respective commitment to
extend credit under the 1995 Credit Agreement and (b)
acknowledges and agrees that its indemnification obligations to
these banks under the 1995 Credit Agreement survives such
termination.
6. Miscellaneous.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and thereto and their respective
successors and assigns.
(b) This Agreement shall be governed by and construed in
accordance with the law of the State of New York.
(c) Each Bank executing this Agreement consents to, concurs,
approves, accepts, and is satisfied with each document or other
written material sent by the Documentation Agent to such Bank for
consent, concurrence, approval, acceptance, and satisfaction.
(d) Each Bank agrees to return to the Administrative Agent the
Committed Loan Note it received under the 1995 Credit Agreement.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all
such counterparts together shall constitute but one and the same
instrument. Each of the parties hereto understands and agrees
that this document (and any other document required herein) may
be delivered by any party thereto either in the form of an
executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy
original, and that receipt by the Documentation Agent of a
facsimile transmitted document purportedly bearing the signature
of a Bank or the Company shall bind such Bank or the Company,
respectively, with the same force and effect as the delivery of a
hard copy original. Any failure by the Documentation Agent to
receive the hard copy executed original of such document shall
not diminish the binding effect of receipt of the facsimile
transmitted executed original of such document of the party whose
hard copy page was not received by the Documentation Agent. This
Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the
parties and are the product of all the parties. BofA, as
Documentation Agent, shall not have any right, power, obligation,
liability, responsibility or duty under this Agreement other than
those applicable to all Banks as such. Without limiting the
foregoing, BofA shall not have or be deemed to have any fiduciary
relationship with the Administrative Agent or any Bank. Each
Bank acknowledges that it has not relied, and will not rely, on
BofA in deciding to enter into this Agreement or in taking or not
taking action hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
GATEWAY 2000, INC.
By: /s/David J. McKittrick
Name: David J. McKittrick
Title:Senior Vice President, Chief Financial Officer and Treasurer
NORWEST BANK IOWA, NATIONAL
ASSOCIATION, as Administrative Agent,
Issuing Bank and a Bank
By: /s/John Wagner
Name: John Wagner
Title: Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Documentation Agent and as a Bank
By: /s/Kevin McMahon
Name: Kevin McMahon
Title: Managing Director
THE BANK OF NOVA SCOTIA
By:/s/F.C.H. Ashby
Name:F.C.H. Ashby
Title: Senior Manager Loan Operations
FLEET NATIONAL BANK (formerly known as
Fleet National Bank of Massachusetts)
By:/s/Frank Beneth
Name: Frank Beneth
Title: Vice President
MELLON BANK, N.A.
By:/s/Christine Plumb
Name: Christine Plumb
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/Thomas A. Levasseur
Name: Thomas A. Levasseur
Title: Vice President
UMB BANK, N.A.
By:/s/Terry Dierks
Name: Terry Dierks
Title: Senior Vice President
ABN-AMRO Bank, N.V.
By: /s/John E. Robertson
Name: John E. Robertson
Title: Vice President
BANQUE NATIONALE DE PARIS - CHICAGO BRANCH
By: /s/Arnaud Collin du Bocage
Name: Arnaud Collin du Bocage
Title: Executive Vice President & General Manager
DEUTSCHE BANK AG
By: /s/Belinda J. Wheeler
Name: Belinda J. Wheeler
Title: Vice President
THE FUJI BANK, LIMITED
By: /s/Peter L. Chinnici
Name: Peter L. Chinnici
Title: Joint General Manager
September 25, 1997
Each of the undersigned banks acknowledges and agrees that:
(a) Such bank is withdrawing from the 1995 Credit
Agreement;
(b) All principal, interest, and fees due to such bank
under the 1995 Credit Agreement have been paid in full; and
(c) Such bank's obligations to the Administrative Agent
under Sections 10.07 and 10.10 of the 1995 Credit Agreement
arising prior to September 25, 1997 remain in full force and
effect.
Each of the undersigned banks agrees to return to the
Administrative Agent the Notes such Bank has received under the
1995 Credit Agreement and authorizes the Administrative Agent to
mark such Note "Cancelled" and return such Note to the Company.
Each of the undersigned banks owns a risk participation (a "Risk
Participation") in each of the Letters of Credit outstanding
under the 1995 Credit Agreement. Each of the undersigned banks
hereby assigns, without recourse, to each of the Banks listed in
Schedule 2.01 of the foregoing 1997 Amended and Restated Credit
Agreement (the "1997 Agreement") an undivided participation
interest in the assigning bank's Risk Participation. The
assigned participation interest in each such Risk Participation
shall be a percentage such that each of such assignee Bank's risk
participation in the Letters of Credit is equal to the percentage
set forth as such Bank's Pro Rata Share in such Schedule 2.01.
Each of the undersigned banks acknowledges and agrees that as a
result of the foregoing assignments such bank shall no longer
have a Risk Participation in the Letters of Credit outstanding
under the 1995 Agreement and the 1997 Agreement, and from and
after
September 25, 1997, each of the undersigned banks shall no longer
be entitled to facility fees and letter of credit fees accruing
from and after September 25, 1997 under the 1995 Agreement and
the 1997 Agreement.
NATIONSBANK, N.A.
By: /s/Sharon M. Ellis
Name: Sharon M. Ellis
Title: Vice President
NBD BANK
By: /s/Thomas A. Levasseur
Name: Thomas A. Levassuer
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By:/s/James A. Wiehe
Name: James A. Wiehe
Title: Assistant Vice President
TORONTO DOMINION (TEXAS), INC.
By:/s/Dylan T. Mackenzie
Name: Dylan T. Mackenzie
Title: Managing Director
SCHEDULE 2.01
Commitments
Banks Commitment Pro Rata Share
Norwest Bank Iowa, National $31,000,000 13.777777777%
Association
Bank of America National Trust
and Savings Association $31,000,000 13.777777777%
The Bank of Nova Scotia $20,000,000 8.888888889%
Fleet National Bank $20,000,000 8.888888889%
Mellon Bank, N.A. $20,000,000 8.888888889%
The First National Bank of $20,000,000 8.888888889%
Chicago
UMB Bank, N.A. $20,000,000 8.888888889%
ABN AMRO Bank N.V. $18,000,000 8.000000000%
Banque Nationale de Paris -
Chicago Branch $15,000,000 6.666666667%
Deutsche Bank AG $15,000,000 6.666666667%
The Fuji Bank, Limited $15,000,000 6.666666667%
TOTAL $225,000,000 100.000000000%
SCHEDULE 3.03
Existing Norwest Letters of Credit
BENEFICIARY LOC# AMOUNT ISSUE DATE MATURITY
South Dakota Board of
Economic Development* S300261 $1,592,769.00 9-29-93 9-30-98
South Dakota Board of
Economic Development** S300324 $767,580.00 4-1-94 9-30-98
The Federal Insurance S300258 $2,000,000.00 10-30-97 10-30-97
Company***
____________________________
* It is a condition of this letter of credit that it is
automatically extended without amendment in one year
increments, until 9-30-98.
** It is a condition of this letter of credit that it is
automatically extended without amendment in one year
increments, until 9-30-98.
***It is a condition of this letter of credit that it will be
automatically extended for an additional year to 10/30/98.
COMMITTED LOAN NOTE
$31,000,000 September 25, 1997
FOR VALUE RECEIVED, the undersigned, Gateway 2000, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to
the order of NORWEST BANK IOWA, NATIONAL ASSOCIATION, as
Administrative Agent pursuant to the Credit Agreement referred to
below for Norwest Bank Iowa, National Association (the "Bank"),
the principal sum of THIRTY ONE MILLION DOLLARS ($31,000,000) or,
if less, the aggregate unpaid principal amount of all Committed
Loans made by the Bank to the Company pursuant to the 1997
Amended and Restated Credit Agreement dated as of September 25,
1997 (as extended, renewed, amended or restated from time to
time, the "Credit Agreement") among the Company, certain Banks
which are signatories thereto, including the Bank, Norwest Bank
Iowa, National Association, as Administrative Agent and Issuing
Bank, and Bank of America National Trust and Savings Association,
as Documentation Agent, on the dates and in the amounts and as
otherwise provided in the Credit Agreement. The Company further
promises to pay interest on the unpaid principal amount of the
Committed Loans evidenced hereby from time to time at the rates,
on the dates, and otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on
which each Committed Loan is made, the maturity date therefor and
each payment of principal with respect thereto on the schedules
annexed hereto and made a part hereof, or on continuations
thereof which may be attached hereto and shall be made a part
hereof; provided, that any failure to endorse such information on
such schedule or continuation thereof shall not in any manner
affect any obligation of the Company under the Credit Agreement
and this Promissory Note (the "Note"). Terms defined in the
Credit Agreement are used herein with their defined meanings
therein unless otherwise defined herein.
This Note is one of the Committed Loan Notes referred to in,
is made pursuant to, and is entitled to the benefits of, the
Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments
on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
Advances under this Note, to the total principal sum stated
above, may be made by the holder as provided in the Credit
Agreement. Any such advance shall be conclusively presumed to
have been made to or for the benefit of the Company when the
Administrative Agent or the Bank believes in good faith that a
Borrowing has been requested by a Person authorized by the
Company to make such request or when such advance is deposited to
the credit of any account of the Company with the Administrative
Agent or the Bank, regardless of the fact that Persons other than
those authorized to request Borrowings may have authority to draw
against such account.
This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely within
such State.
GATEWAY 2000, INC.
By: /s/David J. McKittrick
Title: Senior Vice President, Chief Financial
Officer and Treasurer
COMMITTED LOAN NOTE
$31,000,000 September 25, 1997
FOR VALUE RECEIVED, the undersigned, Gateway 2000, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to
the order of NORWEST BANK IOWA, NATIONAL ASSOCIATION, as
Administrative Agent pursuant to the Credit Agreement referred to
below for Bank Of America National Trust And Savings Association
(the "Bank"), the principal sum of THIRTY ONE MILLION DOLLARS
($31,000,000) or, if less, the aggregate unpaid principal amount
of all Committed Loans made by the Bank to the Company pursuant
to the 1997 Amended and Restated Credit Agreement dated as of
September 25, 1997 (as extended, renewed, amended or restated
from time to time, the "Credit Agreement") among the Company,
certain Banks which are signatories thereto, including the Bank,
Norwest Bank Iowa, National Association, as Administrative Agent
and Issuing Bank, and Bank of America National Trust and Savings
Association, as Documentation Agent, on the dates and in the
amounts and as otherwise provided in the Credit Agreement. The
Company further promises to pay interest on the unpaid principal
amount of the Committed Loans evidenced hereby from time to time
at the rates, on the dates, and otherwise as provided in the
Credit Agreement.
The Bank is authorized to endorse the amount and the date on
which each Committed Loan is made, the maturity date therefor and
each payment of principal with respect thereto on the schedules
annexed hereto and made a part hereof, or on continuations
thereof which may be attached hereto and shall be made a part
hereof; provided, that any failure to endorse such information on
such schedule or continuation thereof shall not in any manner
affect any obligation of the Company under the Credit Agreement
and this Promissory Note (the "Note"). Terms defined in the
Credit Agreement are used herein with their defined meanings
therein unless otherwise defined herein.
This Note is one of the Committed Loan Notes referred to in,
is made pursuant to, and is entitled to the benefits of, the
Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments
on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
Advances under this Note, to the total principal sum stated
above, may be made by the holder as provided in the Credit
Agreement. Any such advance shall be conclusively presumed to
have been made to or for the benefit of the Company when the
Administrative Agent or the Bank believes in good faith that a
Borrowing has been requested by a Person authorized by the
Company to make such request or when such advance is deposited to
the credit of any account of the Company with the Administrative
Agent or the Bank, regardless of the fact that Persons other than
those authorized to request Borrowings may have authority to draw
against such account.
This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely within
such State.
GATEWAY 2000, INC.
By:/s/David J. McKittrick
Title: Senior Vice President, Chief Financial
Officer and Treasurer
COMMITTED LOAN NOTE
$20,000,000 September 25, 1997
FOR VALUE RECEIVED, the undersigned, Gateway 2000, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to
the order of NORWEST BANK IOWA, NATIONAL ASSOCIATION, as
Administrative Agent pursuant to the Credit Agreement referred to
below for The Bank of Nova Scotia (the "Bank"), the principal sum
of TWENTY MILLION DOLLARS ($20,000,000) or, if less, the
aggregate unpaid principal amount of all Committed Loans made by
the Bank to the Company pursuant to the 1997 Amended and Restated
Credit Agreement dated as of September 25, 1997 (as extended,
renewed, amended or restated from time to time, the "Credit
Agreement") among the Company, certain Banks which are
signatories thereto, including the Bank, Norwest Bank Iowa,
National Association, as Administrative Agent and Issuing Bank,
and Bank of America National Trust and Savings Association, as
Documentation Agent, on the dates and in the amounts and as
otherwise provided in the Credit Agreement. The Company further
promises to pay interest on the unpaid principal amount of the
Committed Loans evidenced hereby from time to time at the rates,
on the dates, and otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on
which each Committed Loan is made, the maturity date therefor and
each payment of principal with respect thereto on the schedules
annexed hereto and made a part hereof, or on continuations
thereof which may be attached hereto and shall be made a part
hereof; provided, that any failure to endorse such information on
such schedule or continuation thereof shall not in any manner
affect any obligation of the Company under the Credit Agreement
and this Promissory Note (the "Note"). Terms defined in the
Credit Agreement are used herein with their defined meanings
therein unless otherwise defined herein.
This Note is one of the Committed Loan Notes referred to in,
is made pursuant to, and is entitled to the benefits of, the
Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments
on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
Advances under this Note, to the total principal sum stated
above, may be made by the holder as provided in the Credit
Agreement. Any such advance shall be conclusively presumed to
have been made to or for the benefit of the Company when the
Administrative Agent or the Bank believes in good faith that a
Borrowing has been requested by a Person authorized by the
Company to make such request or when such advance is deposited to
the credit of any account of the Company with the Administrative
Agent or the Bank, regardless of the fact that Persons other than
those authorized to request Borrowings may have authority to draw
against such account.
This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely within
such State.
GATEWAY 2000, INC.
By:/s/David J. McKittrick
Title: Senior Vice President, Chief Financial
Officer and Treasurer
COMMITTED LOAN NOTE
$20,000,000 September 25, 1997
FOR VALUE RECEIVED, the undersigned, Gateway 2000, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to
the order of NORWEST BANK IOWA, NATIONAL ASSOCIATION, as
Administrative Agent pursuant to the Credit Agreement referred to
below for Fleet National Bank (the "Bank"), the principal sum of
TWENTY MILLION DOLLARS ($20,000,000) or, if less, the aggregate
unpaid principal amount of all Committed Loans made by the Bank
to the Company pursuant to the 1997 Amended and Restated Credit
Agreement dated as of September 25, 1997 (as extended, renewed,
amended or restated from time to time, the "Credit Agreement")
among the Company, certain Banks which are signatories thereto,
including the Bank, Norwest Bank Iowa, National Association, as
Administrative Agent and Issuing Bank, and Bank of America
National Trust and Savings Association, as Documentation Agent,
on the dates and in the amounts and as otherwise provided in the
Credit Agreement. The Company further promises to pay interest
on the unpaid principal amount of the Committed Loans evidenced
hereby from time to time at the rates, on the dates, and
otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on
which each Committed Loan is made, the maturity date therefor and
each payment of principal with respect thereto on the schedules
annexed hereto and made a part hereof, or on continuations
thereof which may be attached hereto and shall be made a part
hereof; provided, that any failure to endorse such information on
such schedule or continuation thereof shall not in any manner
affect any obligation of the Company under the Credit Agreement
and this Promissory Note (the "Note"). Terms defined in the
Credit Agreement are used herein with their defined meanings
therein unless otherwise defined herein.
This Note is one of the Committed Loan Notes referred to in,
is made pursuant to, and is entitled to the benefits of, the
Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments
on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
Advances under this Note, to the total principal sum stated
above, may be made by the holder as provided in the Credit
Agreement. Any such advance shall be conclusively presumed to
have been made to or for the benefit of the Company when the
Administrative Agent or the Bank believes in good faith that a
Borrowing has been requested by a Person authorized by the
Company to make such request or when such advance is deposited to
the credit of any account of the Company with the Administrative
Agent or the Bank, regardless of the fact that Persons other than
those authorized to request Borrowings may have authority to draw
against such account.
This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely within
such State.
GATEWAY 2000, INC.
By:/s/David J. McKittrick
Title:Senior Vice President, Chief Financial
Officer and Treasurer
COMMITTED LOAN NOTE
$20,000,000 September 25, 1997
FOR VALUE RECEIVED, the undersigned, Gateway 2000, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to
the order of NORWEST BANK IOWA, NATIONAL ASSOCIATION, as
Administrative Agent pursuant to the Credit Agreement referred to
below for Mellon Bank, N.A. (the "Bank"), the principal sum of
TWENTY MILLION DOLLARS ($20,000,000) or, if less, the aggregate
unpaid principal amount of all Committed Loans made by the Bank
to the Company pursuant to the 1997 Amended and Restated Credit
Agreement dated as of September 25, 1997 (as extended, renewed,
amended or restated from time to time, the "Credit Agreement")
among the Company, certain Banks which are signatories thereto,
including the Bank, Norwest Bank Iowa, National Association, as
Administrative Agent and Issuing Bank, and Bank of America
National Trust and Savings Association, as Documentation Agent,
on the dates and in the amounts and as otherwise provided in the
Credit Agreement. The Company further promises to pay interest
on the unpaid principal amount of the Committed Loans evidenced
hereby from time to time at the rates, on the dates, and
otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on
which each Committed Loan is made, the maturity date therefor and
each payment of principal with respect thereto on the schedules
annexed hereto and made a part hereof, or on continuations
thereof which may be attached hereto and shall be made a part
hereof; provided, that any failure to endorse such information on
such schedule or continuation thereof shall not in any manner
affect any obligation of the Company under the Credit Agreement
and this Promissory Note (the "Note"). Terms defined in the
Credit Agreement are used herein with their defined meanings
therein unless otherwise defined herein.
This Note is one of the Committed Loan Notes referred to in,
is made pursuant to, and is entitled to the benefits of, the
Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments
on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
Advances under this Note, to the total principal sum stated
above, may be made by the holder as provided in the Credit
Agreement. Any such advance shall be conclusively presumed to
have been made to or for the benefit of the Company when the
Administrative Agent or the Bank believes in good faith that a
Borrowing has been requested by a Person authorized by the
Company to make such request or when such advance is deposited to
the credit of any account of the Company with the Administrative
Agent or the Bank, regardless of the fact that Persons other than
those authorized to request Borrowings may have authority to draw
against such account.
This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely within
such State.
GATEWAY 2000, INC.
By:/s/David J. McKittrick
Title:Senior Vice President, Chief Financial
Officer and Treasurer
COMMITTED LOAN NOTE
$20,000,000 September 25, 1997
FOR VALUE RECEIVED, the undersigned, Gateway 2000, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to
the order of NORWEST BANK IOWA, NATIONAL ASSOCIATION, as
Administrative Agent pursuant to the Credit Agreement referred to
below for The First National Bank of Chicago (the "Bank"), the
principal sum of TWENTY MILLION DOLLARS ($20,000,000) or, if
less, the aggregate unpaid principal amount of all Committed
Loans made by the Bank to the Company pursuant to the 1997
Amended and Restated Credit Agreement dated as of September 25,
1997 (as extended, renewed, amended or restated from time to
time, the "Credit Agreement") among the Company, certain Banks
which are signatories thereto, including the Bank, Norwest Bank
Iowa, National Association, as Administrative Agent and Issuing
Bank, and Bank of America National Trust and Savings Association,
as Documentation Agent, on the dates and in the amounts and as
otherwise provided in the Credit Agreement. The Company further
promises to pay interest on the unpaid principal amount of the
Committed Loans evidenced hereby from time to time at the rates,
on the dates, and otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on
which each Committed Loan is made, the maturity date therefor and
each payment of principal with respect thereto on the schedules
annexed hereto and made a part hereof, or on continuations
thereof which may be attached hereto and shall be made a part
hereof; provided, that any failure to endorse such information on
such schedule or continuation thereof shall not in any manner
affect any obligation of the Company under the Credit Agreement
and this Promissory Note (the "Note"). Terms defined in the
Credit Agreement are used herein with their defined meanings
therein unless otherwise defined herein.
This Note is one of the Committed Loan Notes referred to in,
is made pursuant to, and is entitled to the benefits of, the
Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments
on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
Advances under this Note, to the total principal sum stated
above, may be made by the holder as provided in the Credit
Agreement. Any such advance shall be conclusively presumed to
have been made to or for the benefit of the Company when the
Administrative Agent or the Bank believes in good faith that a
Borrowing has been requested by a Person authorized by the
Company to make such request or when such advance is deposited to
the credit of any account of the Company with the Administrative
Agent or the Bank, regardless of the fact that Persons other than
those authorized to request Borrowings may have authority to draw
against such account.
This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely within
such State.
GATEWAY 2000, INC.
By:/s/David J. McKittrick
Title:Senior Vice President, Chief Financial
Officer and Treasurer
COMMITTED LOAN NOTE
$20,000,000 September 25, 1997
FOR VALUE RECEIVED, the undersigned, Gateway 2000, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to
the order of NORWEST BANK IOWA, NATIONAL ASSOCIATION, as
Administrative Agent pursuant to the Credit Agreement referred to
below for UMB Bank, N.A. (the "Bank"), the principal sum of
TWENTY MILLION DOLLARS ($20,000,000) or, if less, the aggregate
unpaid principal amount of all Committed Loans made by the Bank
to the Company pursuant to the 1997 Amended and Restated Credit
Agreement dated as of September 25, 1997 (as extended, renewed,
amended or restated from time to time, the "Credit Agreement")
among the Company, certain Banks which are signatories thereto,
including the Bank, Norwest Bank Iowa, National Association, as
Administrative Agent and Issuing Bank, and Bank of America
National Trust and Savings Association, as Documentation Agent,
on the dates and in the amounts and as otherwise provided in the
Credit Agreement. The Company further promises to pay interest
on the unpaid principal amount of the Committed Loans evidenced
hereby from time to time at the rates, on the dates, and
otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on
which each Committed Loan is made, the maturity date therefor and
each payment of principal with respect thereto on the schedules
annexed hereto and made a part hereof, or on continuations
thereof which may be attached hereto and shall be made a part
hereof; provided, that any failure to endorse such information on
such schedule or continuation thereof shall not in any manner
affect any obligation of the Company under the Credit Agreement
and this Promissory Note (the "Note"). Terms defined in the
Credit Agreement are used herein with their defined meanings
therein unless otherwise defined herein.
This Note is one of the Committed Loan Notes referred to in,
is made pursuant to, and is entitled to the benefits of, the
Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments
on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
Advances under this Note, to the total principal sum stated
above, may be made by the holder as provided in the Credit
Agreement. Any such advance shall be conclusively presumed to
have been made to or for the benefit of the Company when the
Administrative Agent or the Bank believes in good faith that a
Borrowing has been requested by a Person authorized by the
Company to make such request or when such advance is deposited to
the credit of any account of the Company with the Administrative
Agent or the Bank, regardless of the fact that Persons other than
those authorized to request Borrowings may have authority to draw
against such account.
This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely within
such State.
GATEWAY 2000, INC.
By:/s/David J. McKittrick
Title:Senior Vice President,Chief Financial
Officer and Treasurer
COMMITTED LOAN NOTE
$18,000,000 September 25, 1997
FOR VALUE RECEIVED, the undersigned, Gateway 2000, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to
the order of NORWEST BANK IOWA, NATIONAL ASSOCIATION, as
Administrative Agent pursuant to the Credit Agreement referred to
below for ABN AMRO Bank N.V. (the "Bank"), the principal sum of
EIGHTEEN MILLION DOLLARS ($18,000,000) or, if less, the aggregate
unpaid principal amount of all Committed Loans made by the Bank
to the Company pursuant to the 1997 Amended and Restated Credit
Agreement dated as of September 25, 1997 (as extended, renewed,
amended or restated from time to time, the "Credit Agreement")
among the Company, certain Banks which are signatories thereto,
including the Bank, Norwest Bank Iowa, National Association, as
Administrative Agent and Issuing Bank, and Bank of America
National Trust and Savings Association, as Documentation Agent,
on the dates and in the amounts and as otherwise provided in the
Credit Agreement. The Company further promises to pay interest
on the unpaid principal amount of the Committed Loans evidenced
hereby from time to time at the rates, on the dates, and
otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on
which each Committed Loan is made, the maturity date therefor and
each payment of principal with respect thereto on the schedules
annexed hereto and made a part hereof, or on continuations
thereof which may be attached hereto and shall be made a part
hereof; provided, that any failure to endorse such information on
such schedule or continuation thereof shall not in any manner
affect any obligation of the Company under the Credit Agreement
and this Promissory Note (the "Note"). Terms defined in the
Credit Agreement are used herein with their defined meanings
therein unless otherwise defined herein.
This Note is one of the Committed Loan Notes referred to in,
is made pursuant to, and is entitled to the benefits of, the
Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments
on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
Advances under this Note, to the total principal sum stated
above, may be made by the holder as provided in the Credit
Agreement. Any such advance shall be conclusively presumed to
have been made to or for the benefit of the Company when the
Administrative Agent or the Bank believes in good faith that a
Borrowing has been requested by a Person authorized by the
Company to make such request or when such advance is deposited to
the credit of any account of the Company with the Administrative
Agent or the Bank, regardless of the fact that Persons other than
those authorized to request Borrowings may have authority to draw
against such account.
This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely within
such State.
GATEWAY 2000, INC.
By:/s/David J. McKittrick
Title:Senior Vice President, Chief Financial
Officer and Treasurer
COMMITTED LOAN NOTE
$15,000,000 September 25, 1997
FOR VALUE RECEIVED, the undersigned, Gateway 2000, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to
the order of NORWEST BANK IOWA, NATIONAL ASSOCIATION, as
Administrative Agent pursuant to the Credit Agreement referred to
below for Banque Nationale de Paris - Chicago Branch (the
"Bank"), the principal sum of FIFTEEN MILLION DOLLARS
($15,000,000) or, if less, the aggregate unpaid principal amount
of all Committed Loans made by the Bank to the Company pursuant
to the 1997 Amended and Restated Credit Agreement dated as of
September 25, 1997 (as extended, renewed, amended or restated
from time to time, the "Credit Agreement") among the Company,
certain Banks which are signatories thereto, including the Bank,
Norwest Bank Iowa, National Association, as Administrative Agent
and Issuing Bank, and Bank of America National Trust and Savings
Association, as Documentation Agent, on the dates and in the
amounts and as otherwise provided in the Credit Agreement. The
Company further promises to pay interest on the unpaid principal
amount of the Committed Loans evidenced hereby from time to time
at the rates, on the dates, and otherwise as provided in the
Credit Agreement.
The Bank is authorized to endorse the amount and the date on
which each Committed Loan is made, the maturity date therefor and
each payment of principal with respect thereto on the schedules
annexed hereto and made a part hereof, or on continuations
thereof which may be attached hereto and shall be made a part
hereof; provided, that any failure to endorse such information on
such schedule or continuation thereof shall not in any manner
affect any obligation of the Company under the Credit Agreement
and this Promissory Note (the "Note"). Terms defined in the
Credit Agreement are used herein with their defined meanings
therein unless otherwise defined herein.
This Note is one of the Committed Loan Notes referred to in,
is made pursuant to, and is entitled to the benefits of, the
Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments
on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
Advances under this Note, to the total principal sum stated
above, may be made by the holder as provided in the Credit
Agreement. Any such advance shall be conclusively presumed to
have been made to or for the benefit of the Company when the
Administrative Agent or the Bank believes in good faith that a
Borrowing has been requested by a Person authorized by the
Company to make such request or when such advance is deposited to
the credit of any account of the Company with the Administrative
Agent or the Bank, regardless of the fact that Persons other than
those authorized to request Borrowings may have authority to draw
against such account.
This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely within
such State.
GATEWAY 2000, INC.
By:/s/David J. McKittrick
Title:Senior Vice President, Chief Financial
Officer and Treasurer
COMMITTED LOAN NOTE
$15,000,000 September 25, 1997
FOR VALUE RECEIVED, the undersigned, Gateway 2000, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to
the order of NORWEST BANK IOWA, NATIONAL ASSOCIATION, as
Administrative Agent pursuant to the Credit Agreement referred to
below for Deutsche Bank AG (the "Bank"), the principal sum of
FIFTEEN MILLION DOLLARS ($15,000,000) or, if less, the aggregate
unpaid principal amount of all Committed Loans made by the Bank
to the Company pursuant to the 1997 Amended and Restated Credit
Agreement dated as of September 25, 1997 (as extended, renewed,
amended or restated from time to time, the "Credit Agreement")
among the Company, certain Banks which are signatories thereto,
including the Bank, Norwest Bank Iowa, National Association, as
Administrative Agent and Issuing Bank, and Bank of America
National Trust and Savings Association, as Documentation Agent,
on the dates and in the amounts and as otherwise provided in the
Credit Agreement. The Company further promises to pay interest
on the unpaid principal amount of the Committed Loans evidenced
hereby from time to time at the rates, on the dates, and
otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on
which each Committed Loan is made, the maturity date therefor and
each payment of principal with respect thereto on the schedules
annexed hereto and made a part hereof, or on continuations
thereof which may be attached hereto and shall be made a part
hereof; provided, that any failure to endorse such information on
such schedule or continuation thereof shall not in any manner
affect any obligation of the Company under the Credit Agreement
and this Promissory Note (the "Note"). Terms defined in the
Credit Agreement are used herein with their defined meanings
therein unless otherwise defined herein.
This Note is one of the Committed Loan Notes referred to in,
is made pursuant to, and is entitled to the benefits of, the
Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments
on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
Advances under this Note, to the total principal sum stated
above, may be made by the holder as provided in the Credit
Agreement. Any such advance shall be conclusively presumed to
have been made to or for the benefit of the Company when the
Administrative Agent or the Bank believes in good faith that a
Borrowing has been requested by a Person authorized by the
Company to make such request or when such advance is deposited to
the credit of any account of the Company with the Administrative
Agent or the Bank, regardless of the fact that Persons other than
those authorized to request Borrowings may have authority to draw
against such account.
This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely within
such State.
GATEWAY 2000, INC.
By:/s/David J. McKittrick
Title:Senior Vice President, Chief Financial
Officer and Treasurer
COMMITTED LOAN NOTE
$15,000,000 September 25, 1997
FOR VALUE RECEIVED, the undersigned, Gateway 2000, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to
the order of NORWEST BANK IOWA, NATIONAL ASSOCIATION, as
Administrative Agent pursuant to the Credit Agreement referred to
below for The Fuji Bank, Limited (the "Bank"), the principal sum
of FIFTEEN MILLION DOLLARS ($15,000,000) or, if less, the
aggregate unpaid principal amount of all Committed Loans made by
the Bank to the Company pursuant to the 1997 Amended and Restated
Credit Agreement dated as of September 25, 1997 (as extended,
renewed, amended or restated from time to time, the "Credit
Agreement") among the Company, certain Banks which are
signatories thereto, including the Bank, Norwest Bank Iowa,
National Association, as Administrative Agent and Issuing Bank,
and Bank of America National Trust and Savings Association, as
Documentation Agent, on the dates and in the amounts and as
otherwise provided in the Credit Agreement. The Company further
promises to pay interest on the unpaid principal amount of the
Committed Loans evidenced hereby from time to time at the rates,
on the dates, and otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on
which each Committed Loan is made, the maturity date therefor and
each payment of principal with respect thereto on the schedules
annexed hereto and made a part hereof, or on continuations
thereof which may be attached hereto and shall be made a part
hereof; provided, that any failure to endorse such information on
such schedule or continuation thereof shall not in any manner
affect any obligation of the Company under the Credit Agreement
and this Promissory Note (the "Note"). Terms defined in the
Credit Agreement are used herein with their defined meanings
therein unless otherwise defined herein.
This Note is one of the Committed Loan Notes referred to in,
is made pursuant to, and is entitled to the benefits of, the
Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments
on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein specified.
Advances under this Note, to the total principal sum stated
above, may be made by the holder as provided in the Credit
Agreement. Any such advance shall be conclusively presumed to
have been made to or for the benefit of the Company when the
Administrative Agent or the Bank believes in good faith that a
Borrowing has been requested by a Person authorized by the
Company to make such request or when such advance is deposited to
the credit of any account of the Company with the Administrative
Agent or the Bank, regardless of the fact that Persons other than
those authorized to request Borrowings may have authority to draw
against such account.
This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed entirely within
such State.
GATEWAY 2000, INC.
By:/s/David J. McKittrick
Title:Senior Vice President, Chief Financial
Officer and Treasurer
CONSULTATION AND NONCOMPETITION AGREEMENT
AGREEMENT, entered into as of this 28th of
August, 1997, by and between Gateway 2000, Inc., a Delaware
corporation (the "Company") and Richard D. Snyder (the
"Consultant").
WHEREAS, Consultant has been employed by the
Company since 1991 and currently serves as President, Chief
Operating Officer and a member of the Board of Directors (the
"Board") of the Company; and
WHEREAS, the Company and Consultant have mutually
agreed that Consultant shall resign and terminate his employment
as an employee, effective as the opening of business on September
1, 1997 (the "Effective Date");
WHEREAS, the Company wishes to insure that it can
avail itself of Consultant's substantial expertise and knowledge
of the Company's affairs following the termination of his
employment by consulting with him as the Company deems necessary
or desirable, that Consultant will not compete with the Company,
and that Consultant will not disclose trade secrets or
confidential information, as hereinafter described;
NOW, THEREFORE, for good and valuable
consideration, the adequacy of which hereby is acknowledged, the
Company and Consultant agree as follows:
1. Resignation/Continuation as Board Member. Consultant
agrees to serve as a member of the Board through the 1999 Annual
Meeting, and, subject to nomination by the Board and reelection
by Stockholders, for any period thereafter for which he is
nominated and reelected, and shall be entitled to such
compensation as is generally provided to the Company's other non-
management directors. Consultant hereby resigns, effective as of
the Effective Date, from all of his other positions as an
employee or officer with the Company or any of its subsidiaries
and affiliated companies and ventures (the "Affiliates"), as a
director of any Affiliate, and from any other position held by
Consultant at the request of the Company or any Affiliate,
including, without limitation, President and Chief Operating
Officer of the Company and as a member of the Board of Gateway
2000 International Limited. The Company and Consultant agree
that Consultant shall have no right to compensation, past,
present, or future, or any other rights, claims or causes of
action arising in connection with his past or present employment
by the Company and its Affiliates and the termination thereof,
except as expressly provided herein.
2. Consultation Agreement. Except as otherwise provided
herein, from and after the Effective Date and until August 31,
2000 (the "Consultation Period"), Consultant shall serve as a
senior advisor to the Company, provided that, the Company and
Consultant may, by mutual agreement, prior to or on August 31,
2000, extend this Agreement until August 31, 2001. (If the
Agreement is so extended, references to the "Consultation Period"
shall be deemed to include the entire period ending on August 31,
2001; references to the "Initial Consultation Period" shall be
deemed to refer to the period ending on August 31, 2000.) As
such, Consultant shall make himself available to render
consulting services to the Company from time to time as
hereinafter provided on such project(s) relating to the business,
affairs and management of the Company and its Affiliates as may
be assigned to him by the Board and/or the Company's Chief
Executive Officer. It is expressly understood between the
parties that Consultant shall be an independent contractor during
the Consultation Period.
To the extent practicable, any services to be provided by
Consultant shall be performed at such times as are reasonably
convenient to Consultant. The Company acknowledges that
Consultant will have other activities, obligations and
engagements that will command his time and attention, subject to
the provisions of Sections 5, 6 and 7 hereof. In no event shall
the period of consultation exceed an average of sixteen (16)
hours per week calculated on a monthly basis, including what may
be required in connection with Consultant's obligations under
Section 9 hereof. In addition to any other consulting activities
hereunder, Consultant acknowledges that the Company may also call
upon Consultant to represent it before such persons and on such
occasions as are consistent with his knowledge and stature in
respect of the Company, including, without limitation,
participation in Company planning and educational conferences,
appearances before governmental officials and bodies and
participation in programs in the public and private sectors that
enhance the Company's position or potential.
3. Compensation and Expenses. Subject to Section 4,
each year during the Consultation Period, the Company will pay
Consultant Two Hundred Thousand Dollars ($200,000) during the
Consultation Period (the "Consulting Fee"), payable monthly
promptly upon receipt of Consultant's invoice. The Company also
shall reimburse Consultant, in accordance with its standard
policies from time to time in effect, for such reasonable and
necessary out-of-pocket expenses as may be incurred by Consultant
during the Consultation Period in the performance of the duties
and responsibilities assigned to Consultant under this Agreement.
4. Termination of Consulting Agreement.
Notwithstanding anything herein to the contrary, either party
shall have the right by 90 days prior written notice to the other
to terminate the consulting arrangement set forth herein.
5. Agreement Not to Compete.
(a) Without the prior written consent of the
Company, Consultant hereby agrees that during the Consultation
Period and for the one year period following the expiration of
this Agreement or termination of this Agreement by Consultant, or
the ninety day period following termination of this Agreement by
the Company, he shall not, for any reason, directly or
indirectly, (i) engage in, (ii) hold more than 5% of the
outstanding stock of, (iii) accept employment with any business
that Competes with the Company or any of its Affiliates or (iv)
offer advisory or consulting services to assist any such entity
to Compete with the Company. As used herein, the term "Compete"
or "Competes" with the Company or any of its Affiliates shall
mean competing with any of the business conducted by the Company
or any of its Affiliates as of the Effective Date or any time
during the Consultation Period wherever the Company does
business.
(b) The Company and Consultant agree that the
duration and area for which the covenant not to compete set forth
in this Section 5 is to be effective are reasonable. In the
event that any court determines that the time period or the
geographic areas provided for in this Section 5, or both of them,
are unreasonable and that such covenant is to that extent
unenforceable, such covenant shall remain in full force and
effect for the greatest time period and in the greatest
geographical area that would not render it unenforceable. The
Company and Consultant intend that this covenant shall be deemed
to be a series of separate covenants, one for each and every
county of each and every state or other political subdivision of
the United States of America and for any other country in the
world where this covenant is intended to be effective.
(c) As used in Sections 5, 6 and 7, "Affiliates"
shall mean any person who directly or indirectly through one or
more intermediaries controls, is controlled by, or is under
common control with, such specified person (and shall be deemed
to include the Company).
6. Agreement Not to Solicit. During the Consultation
Period, Consultant shall not, acting in any capacity, directly or
indirectly, without the prior consent of the Company: (a)
solicit, offer employment to, otherwise attempt to hire, or
assist in the hiring of, any person employed by the Company or
its Affiliates within the ninety day period preceding any such
action, or (b) encourage or induce, directly or indirectly, any
such person to leave the employment by the Company or its
Affiliates.
7. Nondisclosure of Confidential Information.
(a) "Confidential and Proprietary Information" as used
herein shall include, but is not limited to oral, written or
documentary information of a special and unique nature or value
relating to Gateway's business. Such information shall include,
but is not limited to, the names and addresses of Gateway
employees, customers and potential customers, records concerning
customer contacts and customer purchases, the identity of
customers' key employees, information concerning Gateway's
products, policies, methods of operation, procedures, manuals,
pricing, forecasts, projects, projections, strategic plans,
technical information, product development and methodologies.
(b) "Trade Secrets" as used herein shall mean
Confidential and Proprietary Informationthat derives economic
value, actual or potential, from not being generally known to and
not being readily ascertainable by proper means by other persons
who can obtain economic value from its disclosure or use; and is
subject of efforts that are reasonable under the circumstances to
maintain its secrecy from disclosure to third parties.
Consultant agrees that all such information acquired during the
course of employment as an employee or as a Consultant of the
Company, whether such information is communicated in written or
verbal form and whether such information is kept in recorded or
unrecorded form, shall constitute Trade Secrets of the Company.
(c) "Intellectual Property" as used in this Agreement
shall mean inventions, of any kind, discoveries, know-how, or
improvements, whether or not patentable including works of
authorship.
(d) Consultant acknowledges and agrees that the
misappropriation, unauthorized use or unauthorized disclosure of
the Company's Confidential and Proprietary Information, Trade
Secrets or Intellectual Property would cause irreparable harm to
the Company.
(e) With respect to any Trade Secrets, Consultant
covenants and agrees not to use for any purpose whatsoever or
disclose the Trade Secrets at any time during or after the term
of his employment with the Company in any capacity until such
Trade Secrets become generally available to the public by
independent discovery, development or publication. The rights to
protection of Trade Secrets in this Agreement are in addition to
the rights under common or statutory law for the protection of
Trade Secrets.
(f) With respect to Confidential and Proprietary
Information, Consultant covenants and agrees that during the
Consultation Period and for a period of three years after the
termination of the Consultation Period, Consultant will not use
Confidential and Proprietary Information for any purpose
whatsoever, and will avoid and prevent disclosure of Confidential
and Proprietary Information to any third party, except as
specifically authorized by the Company.
(g) Consultant agrees that his violation of this
Agreement shall entitle the Company to
injunctive relief. The Company shall be entitled to any and all
other remedies and rights available at law or equity. The term
of the covenants herein as they relate to Confidential and
Proprietary Information shall be tolled during any violation
thereof by Consultant; such tolling shall be without prejudice to
the Company's rights to specifically enforce this Agreement or
seek other remedies.
8. Specific Performance. Consultant acknowledges that
the Company would sustain irreparable injury in the event of a
violation by Consultant of any of the provisions of Sections 5, 6
or 7 hereof, and by reason thereof Consultant consents and agrees
that if he violates any of the provisions of said Sections, in
addition to any other remedies available, the Company shall be
entitled to a decree specifically enforcing such provisions, and
shall be entitled to a temporary and permanent injunction
restraining Consultant from committing or continuing any such
violation, from any court of competent jurisdiction, without the
necessity of proving actual damages, posting any bond, or seeking
arbitration in any forum. The provisions of this Section 8 shall
survive the termination or expiration of this Agreement and the
Consultation Period.
9. Cooperation.
(a) Consultant shall cooperate fully with the
Company in the prosecution or defense, as the case may be, of any
and all actions, governmental inquiries or other legal
proceedings in which his assistance may be reasonably requested
by the Company. Such cooperation shall include, among other
things, making relevant documents in his custody or control
available to the Company or its counsel, making himself available
for interviews by the Company or its counsel, and making himself
available to appear as a witness, at deposition, trial or
otherwise. Any reasonable out-of-pocket expenses incurred by
Consultant in fulfilling his obligations under this Section 9(a)
shall be reimbursed by the Company. Such Company requests shall
be reasonable and recognize the other business and personal
activities of the Consultant undertaken not in violation hereof.
(b) The Company will reimburse the consultant for
reasonable legal fees and expenses he incurs in cooperating in
the prosecution or defense of the matters referenced in Section
9(a).
(c) The provisions of this Section 9 shall survive
the termination or expiration of this Agreement and the
Consultation Period only for so long as Consultant shall serve as
a member of the Board of Directors of the Company.
10. Additional Consultant Rights
(a) Consultant shall be indemnified and held
harmless by the Company against all legally indemnifiable
expense, liability and loss reasonably incurred or suffered by
Consultant while acting on behalf of the Company pursuant to this
Agreement on the same terms as and to the fullest extent,
provided to directors or executive officers under the Company's
Restated Certificate of Incorporation.
(b) The Company and Consultant agree that in the
event that, during the Consultation Period, the Company amends
its outstanding stock option plans to provide for the
acceleration or assumption of or substitution for unvested stock
options upon the occurrence of a "Change of Control" or similar
event of the Company, such amendment shall apply, on the same
terms and conditions, to the stock options previously granted the
Consultant and outstanding as of such date.
(c) For the longer of the Consultation Period or his
service as a member of the Board, Consultant shall be entitled to
use, at Consultant's own cost, the travel service of the Company
and its relocation service.
11. Notices. All notices required or permitted
hereunder shall be given in writing by personal delivery; by
confirmed facsimile transmission; by express delivery via
reputable express courier service; or by registered or certified
mail, return receipt requested, postage prepaid, in each case
addressed to the parties at the respective addresses set forth
below their signatures hereto, or at such other address as may be
designated in writing by either party to the other in the manner
set forth herein. Notices which are delivered personally, by
confirmed facsimile transmission, or by courtier as aforesaid,
will be effective on the date of delivery. Notices delivered by
mail will be deemed effectively given upon the fifth calendar day
subsequent to the postmark date thereof.
12. Miscellaneous.
(a) The failure of either party hereto at any time to
require performance by the other party of any provision hereunder
will in no way affect the right of that party thereafter to
enforce the same, nor will it affect any other party's right to
enforce the same, or to enforce any of the other provisions in
this Agreement; nor will the waiver by either party of the breach
of any provision thereof be taken to be a waiver of any prior or
subsequent breach of such provision or as a waiver of the
provision itself.
(b) This Agreement constitutes the entire agreement
between the parties with respect to its subject matter. It
supersedes any prior agreement or understanding between them, and
it may not be modified or amended except by a writing executed by
both parties.
(c) This Agreement shall be governed by and
interpreted in accordance with the laws of the State of South
Dakota without regard to its conflict of law provisions.
(d) Each provision of this Agreement
shall be considered severable and if a provision is for any
reason held to be invalid, all remaining provisions shall be
enforceable. If any provision of this Agreement is held to
impose a restriction upon Consultant which is unenforceable in
scope but could be made enforceable by limiting the scope,
Consultant and the Company agree to a modification of the invalid
or unenforceable provision to the extent required for
enforceability.
(e) This agreement shall be binding and inure to
the benefit of the parties and their respective successors in
interest of any kind whatsoever, provided that, because this
Agreement is a personal contract calling for the provision of
unique services by Consultant, Consultant's rights and
obligations hereunder may not be sold, transferred, assigned,
pledged or hypothecated by Consultant. The rights and
obligations of the Company hereunder will be binding upon and run
in favor of the successors and assigns of the Company, but no
assignment by the Company shall release the Company from its
obligations hereunder, and the Company shall not assign this
Agreement to any entity other than an Affiliate.
The parties have agreed to and executed this Agreement as
of the date first set forth above.
Signature and Notice Address: Signature and Notice Address:
Gateway 2000, Inc. Richard D. Snyder
610 Gateway Drive 917 S. Highland
North Sioux City, SD 57049-2000 Dearborn, MI 48124
Attn: Senior Vice President,
General Counsel & Secretary
By:/s/Theodore W. Waitt /s/Richard D. Snyder
Name: Theodore W. Waitt
