REGISTRATION RIGHTS AGREEMENT

Exhibit 4.2

 

 

REGISTRATION RIGHTS AGREEMENT

 

dated as of December 21, 2004

 

among

 

GATEWAY, INC.,

 

GOLDMAN, SACHS & CO.

 

and

 

MORGAN STANLEY & CO. INCORPORATED,

 

as representatives of the Initial Purchasers

 

 

 

 

REGISTRATION RIGHTS AGREEMENT dated as of December 21, 2004 among Gateway, Inc., a Delaware corporation (the “Company” ), Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated, as representatives of the several initial purchasers listed on Schedule I (the “Initial Purchasers” ) to the Purchase Agreement dated December 16, 2004 (the “Purchase Agreement” ) with the Company. In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement.

 

The Company agrees with the Initial Purchasers, (i) for their benefit as Initial Purchasers and (ii) for the benefit of the beneficial owners (including the Initial Purchasers) from time to time of the Securities (as defined herein) and the beneficial owners from time to time of the Underlying Common Stock (as defined herein) issued upon conversion of the Securities (each of the foregoing a “Holder” and together the “Holders” ), as follows:

 

Section 1 .  Definitions.   Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

 

“Additional Interest Amount” has the meaning set forth in Section 2(e) hereof.

 

“Affiliate” means with respect to any specified person, an “affiliate,” as defined in Rule 144, of such person.

 

“Amendment Effectiveness Deadline” has the meaning set forth in Section 2(d) hereof.

 

“Business Day” means any day, except a Saturday, Sunday or legal holiday on which banking institutions in The City of New York are authorized or obligated by law or executive order to close.

 

“Common Stock” means the shares of common stock, $0.01 par value per share, of the Company, together with the Rights evidenced by such common stock to the extent provided in the Rights Plan, and any other shares of common stock as may constitute “Common Stock” for purposes of the Indenture, including the Underlying Common Stock.

 

“Conversion Price” has the meaning assigned such term in the Indenture.

 

“Deferral Notice” has the meaning set forth in Section 3(h) hereof.

 

“Deferral Period” has the meaning set forth in Section 3(h) hereof.

 

“Effectiveness Deadline” has the meaning set forth in Section 2(a) hereof.

 

“Effectiveness Period” means the period commencing on the first date that a Shelf Registration Statement is declared effective under the Securities Act hereof and ending on the date that all Securities and the Underlying Common Stock have ceased to be Registrable Securities.

 

2

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

 

“Filing Deadline” has the meaning set forth in Section 2(a) hereof.

 

“Holder” has the meaning set forth in the second paragraph of this Agreement.

 

“Indenture” means the Indenture dated as of December 21, 2004 between the Company and U.S. Bank National Association, as trustee, pursuant to which the Securities are being issued.

 

“Initial Purchasers” means the Initial Purchasers named in Schedule I to the Purchase Agreement.

 

“Interest Payment Date” means each June 30 and December 31.

 

“Issue Date” means the first date of original issuance of the Securities.

 

“Liquidated Damages Amount” has the meaning set forth in Section 2(e) hereof.

 

“Material Event” has the meaning set forth in Section 3(h) hereof.

 

“Notice and Questionnaire” means a written notice delivered to the Company containing substantially the information called for by the Selling Securityholder Notice and Questionnaire attached as Annex A to the Offering Memorandum of the Company dated December 16, 2004 relating to the Securities.

 

“Notice Holder” means, on any date, any Holder that has delivered a Notice and Questionnaire to the Company on or prior to such date.

 

“Prospectus” means a prospectus relating to a Shelf Registration Statement, as amended or supplemented, and all materials incorporated by reference in such Prospectus.

 

“Purchase Agreement” has the meaning set forth in the preamble hereof.

 

“Record Holder” means with respect to any Interest Payment Date relating to any Securities or Underlying Common Stock as to which any Additional Interest Amount or Liquidated Damages Amount has accrued, the registered holder of such Security or Underlying Common Stock on the June 15 or December 15 immediately preceding the Interest Payment Date.

 

“Registrable Securities” means the Securities until such Securities have been converted into or exchanged for the Underlying Common Stock and, at all times subsequent to any such conversion, the Underlying Common Stock and any securities into or for which such Underlying Common Stock has been converted or exchanged, and any security issued with respect thereto upon any stock dividend, split or similar event until, in the case of any such security, (A) the earliest of (i) its effective registration under the Securities Act and resale in accordance with a Shelf Registration Statement, (ii) expiration of the holding period that would be

 

3

applicable thereto under Rule 144(k) and (iii) its sale to the public pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the Securities Act, and (B) as a result of the event or circumstance described in any of the foregoing clauses (i) through (iii), the legend with respect to transfer restrictions required under the Indenture is removed or removable in accordance with the terms of the Indenture or such legend, as the case may be.

 

“Registration Default” has the meaning set forth in Section 2(e) hereof.

 

“Registration Default Period” has the meaning set forth in Section 2(e) hereof.

 

“Rights Plan” means the Preferred Share Purchase Rights Plan dated January 19, 2000 between the Company and UMB Bank, N.A., as rights agent.

 

“Rule 144” means Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

 

“Rule 144A” means Rule 144A under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

 

“SEC” means the Securities and Exchange Commission.

 

“Securities” means the 1.50% Senior Convertible Notes due 2009 and 2.00% Senior Convertible Notes due 2011 of the Company to be purchased pursuant to the Purchase Agreement, including any Securities purchased by the Initial Purchasers upon exercise of their option to purchase additional Securities.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder.

 

“Shelf Registration Statement” has the meaning set forth in Section 2(a) hereof, including amendments to such registration statement, all exhibits and all materials incorporated by reference in such registration statement.

 

“Special Counsel” means such counsel as shall be specified by the Holders of a majority of the Registrable Securities. For purposes of determining Holders of a majority of the Registrable Securities in this definition, Holders of Securities shall be deemed to be the Holders of the number of shares of Underlying Common Stock into which such Securities are or would be convertible as of the date the consent is requested.

 

“Trustee” means U.S. Bank National Association, the Trustee under the Indenture.

 

“Underlying Common Stock” means the Common Stock into which the Securities are convertible or issued upon any such conversion.

 

Section 2 .  Shelf Registration.   (a) The Company shall prepare and file or cause to be prepared and filed with the SEC, as soon as practicable but in any event

 

4

by the later of (i) March 31, 2005 and (ii) the date 90 days after the Issue Date (the “Filing Deadline” ), a registration statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act registering the resale from time to time by Holders of the Registrable Securities (a “Shelf Registration Statement” ). The Shelf Registration Statement shall be on Form S-3 or another appropriate form permitting registration of the Registrable Securities for resale by the Holders in accordance with the methods of distribution elected by the Holders and set forth in the Shelf Registration Statement. The Company shall use its reasonable efforts to cause a Shelf Registration Statement to be declared effective under the Securities Act as promptly as is practicable but in any event by the date (the “Effectiveness Deadline” ) that is 180 days after the Issue Date, and to keep a Shelf Registration Statement continuously effective under the Securities Act until the expiration of the Effectiveness Period. Each Holder that became a Notice Holder on or prior to the date ten Business Days prior to the initial Shelf Registration Statement is declared effective shall be named as a selling securityholder in the initial Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver the Prospectus to purchasers of Registrable Securities in accordance with applicable law. None of the Company’s security holders (other than the Holders) shall have the right to include any of the Company’s securities in a Shelf Registration Statement.

 

(b)    If a Shelf Registration Statement covering resales of the Registrable Securities ceases to be effective for any reason at any time during the Effectiveness Period (other than because all securities registered thereunder shall have been resold pursuant thereto or shall have otherwise ceased to be Registrable Securities), the Company shall use its reasonable efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, including, if reasonably necessary, amending the Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional Shelf Registration Statement so that all Registrable Securities outstanding as of the date of such filing are covered by a Shelf Registration Statement. If a new Shelf Registration Statement is filed, the Company shall use its reasonable efforts to cause the new Shelf Registration Statement to become effective as promptly as is practicable after such filing and to keep the new Shelf Registration Statement continuously effective until the end of the Effectiveness Period.

 

(c)    The Company shall amend and supplement the Prospectus and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or file a new Shelf Registration Statement, if required by the Securities Act, or any other documents necessary to name a Notice Holder as a selling securityholder pursuant to Section 2(d) below.

 

(d)    Each Holder may sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus only in accordance with this Section 2(d) and Section 3(h). Each Holder wishing to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus shall deliver a Notice and Questionnaire to the Company at least five Business Days prior to any intended distribution of Registrable Securities under the Shelf Registration Statement. From and after the date the initial Shelf Registration Statement is declared effective, the Company shall, as promptly as practicable after the date a

 

5

Notice and Questionnaire is delivered, and in any event within 20 Business Days after such date (excluding any Business Days within a Deferral Period):

 

(i)    if required by applicable law, file with the SEC a post-effective amendment to the Shelf Registration Statement or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file a new Shelf Registration Statement or any other required document so that the Holder delivering such Notice and Questionnaire is named as a selling securityholder in a Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of the Registrable Securities in accordance with applicable law and, if the Company shall file a post-effective amendment to a Shelf Registration Statement or shall file a new Shelf Registration Statement, the Company shall use its reasonable efforts to cause such post-effective amendment or new Shelf Registration Statement to be declared effective under the Securities Act as promptly as is practicable, but in any event by the date (the “Amendment Effectiveness Deadline” ) that is 90 days after the date such post-effective amendment or new Shelf Registration Statement is required by this clause to be filed;

 

(ii)    make available to such Holder copies of any documents filed pursuant to Section 2(d)(i); and

 

(iii)    notify such Holder as promptly as practicable after the effectiveness under the Securities Act of any new Shelf Registration Statement or post-effective amendment filed pursuant to Section 2(d)(i);

 

provided that if such Notice and Questionnaire is delivered during a Deferral Period, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in accordance with Section 3(h). Notwithstanding anything contained herein to the contrary, (i) the Company shall be under no obligation to name any Holder that is not a Notice Holder as a selling securityholder in any Shelf Registration Statement or related Prospectus, (ii) the Amendment Effectiveness Deadline shall be extended by up to ten Business Days from the expiration of a Deferral Period and (iii) the Company shall not be under any obligation to file a post-effective amendment to a Shelf Registration Statement or file a new Shelf Registration Statement pursuant to this Section 2(d) for the six months after the effective date of the Shelf Registration Statement or more than once in any six-month period thereafter.

 

(e)    The parties hereto agree that the Holders of Registrable Securities will suffer damages, and that it would not be feasible to ascertain the extent of such damages with precision, if:

 

(i)    a Shelf Registration Statement has not been filed on or prior to the Filing Deadline,

 

(ii)    a Shelf Registration Statement has not been declared effective under the Securities Act on or prior to the Effectiveness Deadline,

 

6

(iii)    the Company has failed to perform its obligations set forth in Section 2(d)(i) within the time period required therein,

 

(iv)    a new Shelf Registration Statement or a post-effective amendment to a Shelf Registration Statement filed pursuant to Section 2(d)(i) has not become effective under the Securities Act on or prior to the Amendment Effectiveness Deadline,

 

(v)    the aggregate duration of Deferral Periods in any period exceeds the number of days permitted in respect of such period pursuant to Section 3(h) hereof, or

 

(vi)    the number of Deferral Periods in any period exceeds the number permitted in respect of such period pursuant to Section 3(h) hereof.

 

Each event described in any of the foregoing clauses (i) through (vi) is individually referred to herein as a “ Registration Default .” For purposes of this Agreement, each Registration Default set forth above shall begin and end on the dates set forth in the table set forth below:

 

 

7

For purposes of this Agreement, Registration Defaults shall begin on the dates set forth in the table above and shall continue until the ending dates set forth in the table above.

 

Commencing on (and including) any date that a Registration Default has begun and ending on (but excluding) the next date on which there are no Registration Defaults that have occurred and are continuing (a “Registration Default Period” ), the Company shall pay to Record Holders of Registrable Securities in respect of each day in the Registration Default Period, (i) additional interest in respect of any Security, at a rate per annum equal to 0.25% of the aggregate principal amount of such Security for the first 90 days of such Registration Default and at a rate per annum equal to 0.50% of the aggregate principal amount of such Security thereafter (the “Additional Interest Amount” ) and (ii) liquidated damages in respect of each share of Underlying Common Stock at a rate per annum equal to 0.25% on the Conversion Price then in effect for the first 90 days of such Registration Default and at a rate per annum equal to 0.50% of the Conversion Price in respect of each share of Underlying Common Stock thereafter (the “Liquidated Damages Amount” ), as the case may be; provided that in the case of a Registration Default Period that is in effect solely as a result of a Registration Default of the type described in clause (iii) or (iv) of the preceding paragraph, such Additional Interest Amount or Liquidated Damages Amount, as applicable, shall be paid only to the Holders (as set forth in the succeeding paragraph) that have delivered Notices and Questionnaires that caused the Company to incur the obligations set forth in Section 2(d) the non-performance of which is the basis of such Registration Default. In calculating the Liquidated Damages Amount on shares of Underlying Common Stock on any date on which no Securities are outstanding, the Conversion Price used shall be based on the Conversion Price that would be in effect if the Securities were still outstanding. Notwithstanding the foregoing, no Additional Interest Amount or Liquidated Damages Amount shall accrue as to any Registrable Security from and after the earlier of (x) the date such security is no longer a Registrable Security and (y) expiration of the Effectiveness Period. The rate of accrual of the Additional Interest Amount or the Liquidated Damages Amount, as applicable, with respect to any period shall not exceed 0.50% per annum notwithstanding the occurrence of multiple concurrent Registration Defaults.

 

The Additional Interest Amount or the Liquidated Damages Amount, as applicable, shall accrue from the first day of the applicable Registration Default Period, and shall be payable on each Interest Payment Date during the Registration Default Period (and on the Interest Payment Date next succeeding the end of the Registration Default Period if the Registration Default Period does not end on a Interest Payment Date) to the Record Holders of the Registrable Securities entitled thereto; provided that any Additional Interest Amount or Liquidated Damages Amount, as applicable, accrued with respect to any Security or portion thereof purchased by the Company on a repurchase date or converted into Underlying Common Stock on a conversion date prior to the Interest Payment Date, shall, in any such event, be paid instead to the Holder who submitted such Security or portion thereof for purchase or conversion on the applicable repurchase date or conversion date, as the case may be, on such date (or promptly following the conversion date, in the case of conversion), unless the redemption date or the repurchase date, as the case may be, falls after June 1 or December 1 and on or prior to the corresponding Interest Payment Date; and provided further , that, in the

 

8

case of a Registration Default of the type described in clause (iii) or (iv) of the first paragraph of this Section 2(e) such Additional Interest Amount or Liquidated Damages Amount shall be paid only to the Holders entitled thereto by check mailed to the address set forth in the Notice and Questionnaire delivered by such Holder. The Trustee shall be entitled, on behalf of registered holders of Securities or Underlying Common Stock, to seek any available remedy for the enforcement of this Agreement, including for the payment of such Additional Interest Amount or Liquidated Damages Amount. Notwithstanding the foregoing, the parties agree that the sole damages payable for a violation of the terms of this Agreement with respect to which additional interest or liquidated damages are expressly provided shall be such additional interest or liquidated damages. Nothing shall preclude any Holder from pursuing or obtaining specific performance or other equitable relief with respect to this Agreement.

 

All of the Company’s obligations set forth in this Section 2(e) that are outstanding with respect to any Registrable Security at the time such security ceases to be a Registrable Security shall survive until such time as all such obligations with respect to such security have been satisfied in full (notwithstanding termination of this Agreement pursuant to Section 8(k)).

 

The parties hereto agree that the additional interest or liquidated damages provided for in this Section 2(e) constitute a reasonable estimate of the damages that may be incurred by Holders of Registrable Securities by reason of the failure of a Shelf Registration Statement to be filed or declared effective or available for effecting resales of Registrable Securities in accordance with the provisions hereof.

 

Section 3 .  Registration Procedures.   In connection with the registration obligations of the Company under Section 2 hereof, the Company shall:

 

(a)    Before filing any Shelf Registration Statement or Prospectus or any amendments or supplements thereto with the SEC, furnish to the Initial Purchasers and the Special Counsel, if any, of such offering, if any, copies of all such documents proposed to be filed at least three Business Days prior to the filing of such Shelf Registration Statement or amendment thereto or Prospectus or supplement thereto.

 

(b)    Subject to Section 3(h) prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration Statement as may be necessary to keep such Shelf Registration Statement continuously effective during the Effectiveness Period; cause the related Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and use its reasonable efforts to comply with the provisions of the Securities Act applicable to it with respect to the disposition of all securities covered by such Shelf Registration Statement during the Effectiveness Period in accordance with the intended methods of disposition by the sellers thereof set forth in such Shelf Registration Statement as so amended or such Prospectus as so supplemented.

 

(c)    As promptly as practicable give notice to the Notice Holders, the Initial Purchasers and the Special Counsel, if any, (i) when any Prospectus, prospectus supplement, Shelf Registration Statement or post-effective amendment to a Shelf Registration Statement has been filed with the SEC and, with respect to a Shelf

 

9

Registration Statement or any post-effective amendment, when the same has been declared effective, (ii) of any request, following the effectiveness of the initial Shelf Registration Statement under the Securities Act, by the SEC or any other federal or state governmental authority for amendments or supplements to any Shelf Registration Statement or related Prospectus or for additional information, (iii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of any Shelf Registration Statement or the initiation or threatening of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (v) of the occurrence of, but not the nature of or details concerning, a Material Event; provided , however, that no such notice shall be required pursuant to this clause (v) if the Company files a prospectus supplement or Current Report on Form 8-K or other appropriate Ex