<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Gateway 2000, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF GATEWAY 2000, INC.]
Gateway 2000, Inc.
610 Gateway Drive
P.O. Box 2000
North Sioux City, South Dakota 57049
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Gateway 2000, Inc., which will be held on Thursday, May 15, 1997 at 9:00 a.m.,
local time, at the Sioux City Convention Center, 801 Fourth Street, Sioux
City, Iowa. I appreciate your investment in the Company and am looking forward
to this opportunity to meet you personally.
The business to be conducted at the Annual Meeting is described in the
enclosed Proxy Statement and formal Notice of Meeting. Also enclosed is a
proxy card and the Company's 1996 Annual Report to Stockholders. Please read
these materials carefully.
I sincerely hope that you will attend the Annual Meeting in person.
Warmest regards,
/s/ Theodore W. Waitt
Theodore W. Waitt
Chairman of the Board and Chief
Executive Officer
April 8, 1997
<PAGE>
[LOGO OF GATEWAY 2000, INC.]
Gateway 2000, Inc.
610 Gateway Drive
P.O. Box 2000
North Sioux City, South Dakota 57049
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 15, 1997
To the Holders of Common Stock of Gateway 2000, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of Gateway
2000, Inc. (the "Company") will be held on Thursday, May 15, 1997 at the Sioux
City Convention Center, 801 Fourth Street, Sioux City, Iowa 51101, at 9:00
a.m., local time, for the following purposes:
1. To elect three Class I Directors of the Company, each to hold office
until the annual meeting of stockholders of the Company to be held in the
year 2000 and until a successor is duly elected and qualified;
2. To approve the amended and restated Gateway 2000, Inc. 1995 Employee
Stock Purchase Plan;
3. To consider a stockholder proposal concerning endorsement of the CERES
Principles, if presented;
4. To consider and transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
The close of business on Wednesday, March 19, 1997 is the date of record for
determining stockholders entitled to notice of and to vote at the Annual
Meeting and any adjournments thereof. A list of such stockholders will be
available for a period of 10 days prior to the Annual Meeting for examination
during normal business hours at the offices of Norwest Bank Iowa, N.A., 600
Fourth Street, Sioux City, Iowa 51101, Attention: Mell Taets, Vice President.
We encourage you to attend the Annual Meeting in person or to vote your
shares by proxy. REGARDLESS OF WHETHER YOU EXPECT TO ATTEND THE ANNUAL MEETING
IN PERSON, PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE AT YOUR EARLIEST CONVENIENCE. The proxy is revocable at
any time before it is voted. Returning the proxy will in no way limit your
right to vote at the Annual Meeting if you later decide to attend in person.
By Order of the Board of Directors
/s/ William M. Elliott
William M. Elliott
Senior Vice President, General
Counsel and Corporate Secretary
North Sioux City, South Dakota
April 8, 1997
<PAGE>
[Logo of Gateway 2000, Inc.]
Gateway 2000, Inc.
610 Gateway Drive
P.O. Box 2000
North Sioux City, South Dakota 57049
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 15, 1997
----------------
VOTING AT THE ANNUAL MEETING
The enclosed proxy is being solicited by the Board of Directors (the
"Board") of Gateway 2000, Inc., a Delaware corporation (the "Company"), for
use at the Company's Annual Meeting of Stockholders (the "Annual Meeting") to
be held on Thursday, May 15, 1997, at 9:00 a.m., local time, at the Sioux City
Convention Center, 801 Fourth Street, Sioux City, Iowa 51101, and any
adjournment thereof.
Holders of record of the Company's Common Stock, $.01 par value (the "Common
Stock"), at the close of business on Wednesday, March 19, 1997 are entitled to
vote at the Annual Meeting. As of that date, there were 76,799,784 shares of
Common Stock outstanding. Each share of Common Stock entitles the holder to
one vote.
The holders of a majority of the outstanding shares of Common Stock present
at the Annual Meeting in person or by proxy will constitute a quorum for the
transaction of business at the Annual Meeting. Abstentions and broker non-
votes will count in determining whether a quorum is present at the Annual
Meeting. However, abstentions and broker non-votes with respect to any
specific matter will be treated as shares not voted for purposes of
determining whether the requisite vote has been obtained. If a quorum is not
present, a majority of the stockholders entitled to vote who are present in
person or by proxy at the Annual Meeting will have the power to adjourn the
Annual Meeting from time to time, without notice other than an announcement at
the Annual Meeting, until a quorum is present. At any reconvened Annual
Meeting at which a quorum is present, any business may be transacted that
might have been transacted at the Annual Meeting as originally notified.
The Annual Report of the Company for the year ended December 31, 1996,
including financial statements, and this Proxy Statement and accompanying form
of proxy are being mailed commencing on or about April 8, 1997, to all
stockholders of record as of March 19, 1997.
Three matters are scheduled for stockholder consideration at the Annual
Meeting: (1) the election of three Class I Directors of the Company to hold
office until the annual meeting of stockholders of the Company to be held in
2000 and until successors are duly elected and qualified; (2) the approval of
the Gateway 2000, Inc. 1995 Employee Stock Purchase Plan; and (3) if
presented, consideration of a stockholder proposal concerning endorsement of
the CERES Principles.
In accordance with the Company's bylaws, the Directors will be elected by a
plurality of the votes of the shares of Common Stock present (or represented
by proxy) at the Annual Meeting and entitled to vote in the election of
Directors. Approval of the Employee Stock Purchase Plan and the stockholder
proposal requires the affirmative vote of a majority of the shares of Common
Stock present (or represented by proxy) and entitled to
<PAGE>
vote at the Annual Meeting. The Board of Directors knows of no matters, other
than those previously mentioned, to be presented for consideration at the
Annual Meeting. The persons named in the proxy may also, at their discretion,
vote the proxy to adjourn the Annual Meeting from time to time.
With respect to the election of three Class I Directors, you may vote for
the nominees as listed herein or withhold authority to vote for the nominees.
A direction to withhold authority to vote will have the effect of an
abstention. You may vote for, vote against or abstain from voting with respect
to the proposal to approve the Gateway 2000, Inc. 1995 Employee Stock Purchase
Plan and the stockholder proposal.
All properly executed, unrevoked proxy cards received pursuant to this
solicitation prior to the close of voting will be voted as directed therein.
You may revoke your proxy delivered pursuant to this solicitation at any time
prior to its use by executing and delivering a later proxy, by giving written
notice of the revocation to the Corporate Secretary of the Company at or
before the Annual Meeting, or by attending the Annual Meeting and voting in
person.
If a properly executed, unrevoked proxy which has been delivered pursuant to
this solicitation does not specifically direct the voting of the shares
covered thereby, the shares represented by the proxy will be voted (1) FOR the
election of the nominees for Class I Directors as listed herein; (2) FOR the
approval of the Gateway 2000, Inc. 1995 Employee Stock Purchase Plan; (3)
AGAINST the stockholder proposal; and (4) in accordance with the judgment of
the persons named in the proxy as to such other matters as may properly come
before the Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
The number of members of the Board has been set at seven. The Company's
certificate of incorporation divides the Board into three classes. All
Directors of the Company are elected to three-year terms and serve until the
annual meeting of stockholders held during the year in which their terms
expire and until their successors are duly elected and qualified, or until
their earlier resignation or removal. The current term of Class I Directors
will expire at the Annual Meeting of Stockholders to be held on Thursday, May
15, 1997; the current term of the Class II Directors will expire at the annual
meeting of stockholders held in 1998; and the current term of Class III
Directors will expire at the annual meeting of stockholders held in 1999.
The Board has nominated Theodore W. Waitt, Charles G. ("Chase") Carey and
James F. McCann, the incumbent Class I Directors, for reelection, each to hold
office until the annual meeting of stockholders held in 2000 and until a
successor is duly elected and qualified, subject to prior termination of
service in accordance with the Company's certificate of incorporation, bylaws
and applicable law. Messrs. Waitt, Carey and McCann have consented to continue
to serve as Class I Directors of the Company. In the event a candidate is
unable to serve, the persons listed in the enclosed proxy will vote for a
replacement nominee recommended by the Board. Certain information concerning
Messrs. Waitt, Carey and McCann, and the other members of the Board whose
terms do not expire at the Annual Meeting, is set forth below.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THEODORE
W. WAITT, CHARLES G. CAREY, AND JAMES F. MCCANN AS CLASS I DIRECTORS OF THE
COMPANY.
CLASS I DIRECTORS--TERM EXPIRING 1997
CHARLES G. ("CHASE") CAREY, DIRECTOR, age 43--Mr. Carey is the Chairman of
the Board and Chief Executive Officer of the Fox Television Division of Fox
Inc. and co-chief operating officer of News Corporation, located in Beverly
Hills, California. Mr. Carey has served in various executive capacities at Fox
since 1988. He received a B.A. from Colgate University and an M.B.A. from
Harvard University. Mr. Carey has been a Director of the Company since March
1996 and is a member of the Audit Committee.
2
<PAGE>
JAMES F. MCCANN, DIRECTOR, age 45--Mr. McCann has served as President of 1-
800-FLOWERS, located in Westbury, New York, since 1987. Mr. McCann also serves
on the boards of Hofstra University, Winthrop-University Hospital, Very
Special Arts, The National Retail Federation and is a member of the Dean's
Council of the John F. Kennedy School of Government at Harvard University. Mr.
McCann has been a Director of the Company since 1996 and is a member of the
Compensation Committee.
THEODORE W. WAITT, CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND
DIRECTOR, age 34--Mr. Waitt (herein sometimes referred to as Ted Waitt) co-
founded the Company in 1985, and since that time has served as the Company's
President until January 1996 and as a Director. He has served as Chief
Executive Officer and Chairman of the Board of Directors since February 1993.
His responsibilities include overseeing overall Company performance, setting
strategic direction and leading marketing and product development efforts. Mr.
Waitt is Chairman of the Board's Nominating Committee.
CLASS II DIRECTORS--TERM EXPIRING 1998
JAMES W. CRAVENS, DIRECTOR, age 77--Mr. Cravens is the Chairman of the Board
of Sanborn Savings Bank, Dickinson County Savings Bank and Ocheyedan Savings
Bank, all located in northwest Iowa. In addition, Mr. Cravens serves as
Chairman of the Dickinson County Memorial Hospital. He attended the University
of Iowa and graduated from Drake University. He has been a Director of the
Company since 1991. Mr. Cravens is a member of the Compensation and Audit
Committees.
DOUGLAS L. LACEY, DIRECTOR, age 49--Mr. Lacey is a partner in the accounting
firm of Nichols, Rise & Company, L.L.P. and managing partner of its Sioux
City, Iowa office. Mr. Lacey joined Nichols, Rise & Company, L.L.P. in 1973.
He received a B.A. degree from Briar Cliff College in 1973. He has been a
Director of the Company since 1989. Mr. Lacey is Chairman of the Audit
Committee.
CLASS III DIRECTORS--TERM EXPIRING 1999
GEORGE H. KRAUSS, DIRECTOR, age 55--Mr. Krauss has been an attorney with the
law firm of Kutak Rock in Omaha, Nebraska since 1972 and is engaged in the
firm's corporate, mergers and acquisitions, and regulatory practices. Mr.
Krauss became a partner in Kutak Rock in 1975 and became of counsel on January
1, 1997 and served as the firm's presiding partner from 1983 to 1994. Mr.
Krauss received B.S., M.B.A. and J.D. degrees from the University of Nebraska.
Mr. Krauss also serves on the Board of Directors of the general partner of
America First Financial Fund 1987-A Limited Partnership, which is a publicly-
traded limited partnership formed for the purpose of acquiring financial
institutions, and is a member of the Board of Directors of its subsidiary,
Eureka Savings Bank. Mr. Krauss has been a Director of the Company since 1991.
He is a member of the Nominating Committee and Chairman of the Compensation
Committee.
RICHARD D. SNYDER, PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR, age 38--
Mr. Snyder joined the Company in July 1991. Mr. Snyder served as Executive
Vice President of the Company from July 1991 until his election as President
of the Company in January 1996. Mr. Snyder served as Corporate Secretary of
the Company from July 1991 until May 1995. Mr. Snyder serves as President and
Chief Operating Officer of the Company and his responsibilities include
overseeing all aspects of the Company's operations and assisting in strategic
planning. Before joining the Company, Mr. Snyder was employed by Coopers &
Lybrand L.L.P., an international accounting firm, from 1982-1991, where he
became a partner in 1988 and was in charge of its Chicago mergers and
acquisition practice from 1989 through 1991. Mr. Snyder studied at the
University of Michigan, where he earned a B.G.S. with High Distinction in
1977, an M.B.A. with Distinction in 1979 and a J.D. in 1982. Mr. Snyder has
been a Director of the Company since 1991 and is a member of the Board's
Nominating Committee.
COMPOSITION AND MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended December 31, 1996, the Board met seven times.
The standing committees of the Board are the Compensation Committee, the Audit
Committee and the Nominating Committee.
3
<PAGE>
The Compensation Committee currently consists of Messrs. Krauss (Chairman),
Cravens and McCann. The Compensation Committee determines the compensation of
certain of the Company's elected officers and assists the Board in determining
compensation for the Company's other management employees. The full Board,
rather than the Compensation Committee, determines the compensation of the
Company's Chairman and Chief Executive Officer and President and Chief
Operating Officer. In 1996, the Compensation Committee met four times and
approved grants of options during 1996 under the Company's 1993 Stock Option
Plan for Key Employees and 1996 Long-Term Incentive Equity Plan (the "1996
Employee Plan") and reviewed the compensation of the Company's senior
management, as described above and in the "Report of the Compensation
Committee and the Board of Directors Regarding Executive Compensation" on page
13. The Compensation Committee administers the Company's stock option plans
and the Company's Employee Stock Purchase Plan (the "Stock Purchase Plan").
The Audit Committee consists of Messrs. Lacey (Chairman), Carey and Cravens.
It is responsible for retaining the Company's independent accountants and
consulting with them regarding the scope and timing of their audit, the
accountant's report concerning the Company's audited financial statements and
the Company's internal accounting controls. The Audit Committee met twice in
1996.
The Nominating Committee consists of Messrs. Waitt (Chairman), Krauss and
Snyder. This committee is responsible for reviewing and recommending to the
Board criteria for Board membership and for identifying, evaluating and
proposing to the Board nominees for membership on the Board. The Nominating
Committee met once in 1996.
The Nominating Committee will consider nominees recommended by stockholders.
Each stockholder must comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
regulations thereunder with respect to the nomination or proposal of nominees
for election as Directors of the Company.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company are compensated at the rate
of $6,000 per quarter, plus $1,000 per meeting of the Board, $500 per meeting
of any committee of the Board and $200 per telephonic meeting attended (up to
a maximum of $1,500 per day for all meetings attended). Directors are also
reimbursed for their expenses incurred in attending such meetings. Directors
who are employees of the Company receive no additional compensation for their
services as Directors of the Company.
Under the Company's 1996 Non-Employee Director Stock Option Plan (the "1996
Director Plan"), following the 1996 Annual Meeting each non-employee Director
who had served since December 31, 1995 received an option grant for 24,000
shares. Each other non-employee Director received an option grant for 12,000
shares following the 1996 Annual Meeting. Options under the 1996 Director Plan
are granted at an exercise price equal to the fair market value (as determined
under the plan) of a share of Common Stock on the date of grant. After 1996,
each non-employee Director will receive an annual stock option grant for 6,000
shares immediately following each annual meeting of stockholders.
PROPOSAL 2
APPROVAL OF THE GATEWAY 2000, INC. 1995 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has determined that certain improvements should be
made to the Gateway 2000, Inc. 1995 Employee Stock Purchase Plan (the "Stock
Purchase Plan") to make it more attractive to eligible employees of the
Company.
4
<PAGE>
The proposed improvements would permit all shares of Common Stock purchased
under the Stock Purchase Plan to be purchased at a 5% discount effective
February 1, 1997. The Stock Purchase Plan authorizes 1,000,000 shares of
Common Stock to be sold to eligible employees.
The affirmative vote of a majority in interest of the stockholders present
in person or by proxy at the Annual Meeting and entitled to vote will be
required to approve the amended Stock Purchase Plan, a quorum being present.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE STOCK PURCHASE PLAN.
THE GATEWAY 2000, INC. 1995 EMPLOYEE STOCK PURCHASE PLAN (THE "STOCK
PURCHASE PLAN").
Note that the amended Stock Purchase Plan has been approved by
the Board of Directors and will be voted upon at the Annual
Meeting. The operation of the amended plan is wholly contingent
upon the approval of the amended plan by the stockholders.
Summary. A summary of the Stock Purchase Plan is set forth below. The
summary is qualified in its entirety by reference to the full text of the
Stock Purchase Plan, which is attached to this Proxy Statement as Appendix A.
The Company's Stock Purchase Plan became effective on January 1, 1995 and is
intended to qualify under Section 423 of the Code. All employees of the
Company or any of its subsidiaries (other than employees owning or likely to
receive stock options in a given year) are eligible to participate on the
first day of any month after completing six months of employment if they are
regularly employed by the Company or any of its subsidiaries at least 20 hours
per week and five months per year.
Plan participants may have the Company deduct up to 20% of their base salary
(not to exceed $25,000 per year) each month and applied, on the last business
day of each month, to the purchase of shares of Common Stock. Purchases cannot
be made under the Plan which would result in a participant owning 5% or more
of the total combined voting power or value of all classes of stock of the
Company or any of its subsidiaries. The purchase price per share on the
purchase date equals either (1) 95% of the closing price per share of Common
Stock, as reported daily in The Wall Street Journal or similar readily
available public source; or (2) such other price as may be set by the Plan
Administrator, which must be at least 85% of the closing price per share of
Common Stock on either the purchase date or the first business day of the
month in which such date falls, whichever is less. The Company has made, and
plans to continue making, open market purchases of shares of Common Stock to
fulfill purchases under the Stock Purchase Plan.
Eligible employees may increase or decrease their deductions under the Stock
Purchase Plan as of the first day of any month. New employees who are
otherwise eligible to participate in the Stock Purchase Plan may enroll in the
Stock Purchase Plan on the first day of any month after they have completed
six months of employment with the Company or any of its subsidiaries. Although
a participant may withdraw from the Stock Purchase Plan upon 10 days' prior
written notice, such participant cannot rejoin the Plan until the beginning of
the seventh month following such participant's withdrawal.
The Stock Purchase Plan is administered by the Plan Administrator. The Plan
Administrator is one or more persons appointed by the Board of Directors of
the Company. The Plan may be amended by the Plan Administrator unless such
amendment would change the number of shares authorized for the Plan or cause
the Plan not to meet the requirements of Code Section 423(b). Any increase in
the number of shares authorized under the Plan must be approved by the
stockholders.
The Stock Purchase Plan will terminate automatically on the date no more
shares remain to be purchased under the Plan, unless sooner terminated by the
Board of Directors of the Company in its discretion.
5
<PAGE>
PROPOSAL 3
PROPOSED STOCKHOLDER RESOLUTION CONCERNING CERES PRINCIPLES
The Company has been advised that a representative of certain shareholders
intends to present the following resolution and supporting statement at the
Annual Meeting:
"WHEREAS WE BELIEVE,
"Responsible implementation of a sound, credible environmental policy
increases long-term shareholder value by raising efficiency, decreasing
clean-up costs, reducing litigation, and enhancing public image and product
attractiveness;
"Adherence to public standards for environmental performance gives a
company greater public credibility than standards created by industry
alone. For maximum credibility and usefulness, such standards should
specifically meet the concerns of investors and other stakeholders;
"Companies are increasingly being expected by investors to do meaningful,
regular, comprehensive and impartial environmental reports. Standardized
environmental reports enable investors to compare performance over time.
They also attract investment from investors seeking companies which are
environmentally responsible and which minimize risk of environmental
liability.
"WHEREAS:
"The Coalition for Environmentally Responsible Economies (CERES)--which
includes shareholders of this Company; public interest representatives, and
environmental experts--consulted with corporations to produce the CERES
Principles as comprehensive public standards for both environmental
performance and reporting. Fifty-four companies, including Sun [Sunoco],
General Motors, H.B. Fuller, Polaroid, and Bethlehem Steel, have endorsed
these principles to demonstrate their commitment to public environmental
accountability. Fortune-500 endorsers say that benefits of working with
CERES are public credibility; "value-added' for the company's environmental
initiatives.
"In endorsing the CERES Principles, a company commits to work toward:
<TABLE>
<S> <C> <C>
1. Protection of
the biosphere 5. Risk reduction 9. Management commitment
2. Sustainable
natural resource
use 6. Safe products and services 10. Audits and reports
3. Waste
reduction and
disposal 7. Environmental restoration
4. Energy
conservation 8. Informing the public
</TABLE>
"[Full text of the CERES Principles and accompanying CERES Report Form
obtainable from CERES, 711 Atlantic Avenue, Boston, MA 02110, tel: 617/451-
0927].
"CERES is distinguished from other initiatives for corporate environmental
responsibility, in being (1) a successful model of shareholder relations;
(2) a leader in public accountability through standardized environmental
reporting; and (3) a catalyst for significant and measurable environmental
improvement within firms.
"RESOLVED: Shareholders request the Company to endorse the CERES Principles
as a part of its commitment to be publicly accountable for its
environmental impact.
SUPPORTING STATEMENT
"Many investors support this resolution. Those sponsoring similar
resolutions at various companies have portfolios totaling $75 billion. The
number of public pension funds and foundations supporting this resolution
increases every year. The objectives are: standards for environmental
performance and disclosure; methods for measuring progress toward these
goals; and a format for public reporting of progress. We believe this is
comparable to the European Community regulation for voluntary participation
in verified and publicly-reported eco-management and auditing, and fully
compatible with ISO 14000 certification.
"Your vote FOR this resolution will encourage scrutiny of our Company's
environmental policies and reports and adherence to standards upheld by
management and stakeholders alike."
6
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE STOCKHOLDER PROPOSAL.
The Board of Directors believes that implementation of this proposal, though
well intentioned, would burden the Company and its shareholders with
additional requirements and cost without any offsetting added benefit to the
environment. The Company is not involved in heavy manufacturing or other
operations that might involve significant risks to the environment.
Moreover, members of management of the Company have addressed the potential
environmental impact of the Company's operations as they deem appropriate in
light of their detailed knowledge of the Company's operations. The Company
already has in place a recycling program for its corrugated box materials.
Employees in the United States have endorsed bottle recycling programs with
their voluntary participation in a program to recycle containers for soft
drinks consumed in the workplace.
The proposal would require, among other things, that the Company prepare a
lengthy and complex report every year. Management and your Board of Directors
do not believe any significant benefit to the environment would result from
this additional administrative effort and cost.
Accordingly, the Board of Directors recommends that you vote AGAINST the
proposal.
INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed the firm of Coopers & Lybrand L.L.P.,
independent accountants ("Coopers & Lybrand"), as the Company's independent
accountants to audit the Company's consolidated financial statements for the
fiscal year ending December 31, 1997. Coopers & Lybrand has served as the
Company's independent accountants since 1989. Representatives of Coopers &
Lybrand are expected to be present at the Annual Meeting and will have an
opportunity to make a statement on behalf of their firm if they wish. They
will also be available to respond to any appropriate questions of any
stockholder of the Company.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 1, 1997, regarding
the beneficial ownership of Common Stock and Class A Common Stock by (1) each
stockholder known by the Company to be the beneficial owner of more than 5% of
Common Stock; (2) by each Director of the Company; (3) by each elected officer
named in the Summary Compensation Table on page 11; and (4) by all elected
officers and Directors of the Company as a group. No shares of Class A Common
Stock are issued and outstanding. Except as indicated in the footnotes hereto,
each person named in the table has (or could have upon exercise of an option
vested or vesting within 60 days after March 1, 1997) sole voting and
investment power (or such power together with any spouse of such person, if
they are joint tenants) with respect to securities beneficially owned by such
person as set forth opposite such person's name:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL TITLE OF NUMBER OF PERCENT
OWNER(1) CLASS SHARES(3) OF CLASS(2)
- ------------------------------ -------- ---------- -----------
<S> <C> <C> <C>
Theodore W. Waitt Common Stock 35,552,500 45.6%
Norman W. Waitt, Jr. Trust (4) Common Stock 6,820,000 8.7%
P.O. Box 980
North Sioux City, SD 57049
Richard D. Snyder Common Stock 462,500
David J. McKittrick Common Stock 100,000
Robert N. Beck Common Stock 40,625
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF PERCENT
BENEFICIAL OWNER(1) TITLE OF CLASS SHARES(3) OF CLASS(2)
- ------------------- -------------------- ---------- -----------
<S> <C> <C> <C>
James A. Taylor Common Stock 16,250
Charles G. Carey Common Stock 500
James W. Cravens Common Stock 1,000
George H. Krauss Common Stock 2,500(5)
Douglas L. Lacey Common Stock 4,500(5)
James F. McCann Common Stock 3,000
All Directors and elected
officers as a group Common Stock 36,278,900 46.6%
(21 persons) Class A Common Stock 118,808**
</TABLE>
- --------
** Numbers of shares of Class A Common Stock shown in this table and related
percent of class numbers are expressed as the number or percentage, as
appropriate, of shares of Common Stock into which they are convertible.
Each share of Class A Common Stock subject to options is convertible upon
exercise into 273 shares of Common Stock.
(1) Unless otherwise indicated, the address of each beneficial owner listed
above is c/o Gateway 2000, Inc., 610 Gateway Drive, North Sioux City,
South Dakota 57049.
(2) Less than 1 percent unless otherwise indicated. With respect to each
individual, includes options to purchase Common Stock and Class A Common
Stock exercisable within 60 days from March 1, 1997.
(3) Includes beneficial ownership of shares of Common Stock which may be
acquired pursuant to employee stock options for Messrs. Waitt--52,500
shares, Snyder--462,500 shares, McKittrick--100,000 shares, Beck--40,625
shares and Taylor--16,250 shares.
(4) This information, and the information in this footnote, is based upon
third-party filings with the Securities and Exchange Commission (the
"SEC"), and the Company has not made further investigation or review of
such information. A Schedule 13G was filed by Norman W. Waitt, Jr., as
trustee and sole beneficiary under the Norman W. Waitt, Jr. Trust, a
predecessor trust and Norman W. Waitt, Jr., in his individual capacity, on
February 18, 1994, and amended through February 14, 1997.
(5) Includes beneficial ownership of 1,500 shares of Common Stock which may be
acquired pursuant to non-employee director stock options.
EXECUTIVE OFFICERS
The executive officers of the Company are its elected officers and serve for
terms of office determined by the Board. Biographical summaries of the
business experience of Messrs. Waitt, Chairman and Chief Executive Officer of
the Company, and Snyder, President and Chief Operating Officer, are included
under "Proposal 1--Election of Directors" on page 2. The names, ages, and
biographical information with respect to each other executive officer are as
follows:
ROBERT N. BECK, SENIOR VICE PRESIDENT, 57--Mr. Beck joined the Company in
June 1995 and has served as Senior Vice President since that time. His
responsibilities include managing worldwide human resource programs and
policies. From March 1992 to June 1995, Mr. Beck was employed by Abbott
Laboratories, Inc., an international health care company, where he served as
Senior Vice President of Human Resources. From August 1982 to February 1992,
he was Executive Vice President of Human Resources of BankAmerica Corporation,
a bank holding company. Mr. Beck was first elected an executive officer in
1995.
JAMES P. COLLAS, SENIOR VICE PRESIDENT, 36--Mr. Collas joined the Company in
June 1992 and was responsible for the Company's product development
department. He was promoted to Vice President of Product Development in
December 1992. In 1994, Mr. Collas changed responsibilities to oversee the
Company's technical services and support operations. In 1995, Mr. Collas was
named Senior Vice President responsible for global products. Before joining
the Company, Mr. Collas was the president of Anigma, Inc., a PC system board
and motherboard design and development company which he founded in 1987. Mr.
Collas received a B.S. degree in Electrical Engineering from the University of
California at Los Angeles in 1984. Mr. Collas was first elected an executive
officer in 1992.
8
<PAGE>
WILLIAM M. ELLIOTT, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE
SECRETARY, 62--Mr. Elliott joined the Company in May 1994 as Vice President
and General Counsel and was elected Corporate Secretary in May 1995. In
October 1995, Mr. Elliott was named Senior Vice President and his
responsibilities continued to include managing the Company's legal affairs and
acting as Corporate Secretary. Before joining the Company, Mr. Elliott spent
three years as Senior Vice President of International Telecharge, Inc., a
telecommunications company specializing in the public and private pay
telephone markets. From 1977 to 1990, Mr. Elliott was Senior Vice President
and General Counsel of Northrop Corporation, an aircraft manufacturing
corporation. Mr. Elliott received a B.A. degree in 1959 and a J.D. degree in
1962 from the University of Missouri at Kansas City and is a member of the bar
associations of four states and the District of Columbia. Mr. Elliott was
first elected an executive officer in 1994.
DAVID J. MCKITTRICK, SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND
TREASURER, 51--Mr. McKittrick joined the Company in March 1995 as Senior Vice
President and Chief Financial Officer and was elected Treasurer in July 1995.
Before joining the Company, Mr. McKittrick spent two years as Vice Chairman
and Chief Operating Officer of Collins & Aikman Group, Inc., a diversified
manufacturing and retail company. Before that, Mr. McKittrick was Senior Vice
President and Chief Financial Officer of James River Corporation, a paper and
consumer products manufacturer. Mr. McKittrick received a B.S. degree from
Hampden-Sydney College in 1967 and an M.B.A. degree from Rutgers University in
1968. Mr. McKittrick was first elected an executive officer in 1995.
ROBERT M. SPEARS, SENIOR VICE PRESIDENT, 37--Mr. Spears joined the Company
in 1990 and has served in a variety of administrative positions. Mr. Spears is
a Senior Vice President of the Company and is currently responsible for the
Company's Americas Group. From 1994 through 1995, Mr. Spears served as the
managing director of the Company's European operations. From 1992 through
1994, Mr. Spears served as Vice President of administration, responsible for
the Company's management information systems, human resources and other
projects involving the strategic direction of the Company. Before joining the
Company, Mr. Spears worked for America First Financial Corporation in San
Francisco from 1987 to 1990 and for the Bank of America from 1981 to 1985. He
received a B.A. degree from Dartmouth College in 1981, a Master's degree in
Business Taxation from the University of Southern California in 1985 and an
M.B.A. degree from Harvard University in 1987. Mr. Spears was first elected an
executive officer in 1990.
JAMES A. TAYLOR, SENIOR VICE PRESIDENT, 49--Mr. Taylor joined the Company in
March 1996 as Senior Vice President responsible for global marketing. Before
joining the Company, Mr. Taylor was Executive Managing Director and General
Manager of Hill & Knowlton's headquarters office in New York City, where he
was involved in corporate marketing, communications and reputation counseling
since 1994. From 1992 through 1994, he was Executive Director and Chief
Executive Officer of Yankelovich Partners Inc., and from 1988 through 1992 he
was a Partner and Worldwide Marketing Director of Ernst & Young LLP. He
received a B.A. degree from the University of California at Berkeley in 1973
and a Masters degree and a Ph.D. degree in Communication from Michigan State
University in 1975 and 1978, respectively. Mr. Taylor was first elected an
executive officer in 1996.
JOSEPH J. BURKE, VICE PRESIDENT, 39--Mr. Burke joined the Company in October
1995 as Vice President responsible for market development. Before joining the
Company, Mr. Burke spent eight years with Blockbuster Entertainment
Corporation, a worldwide home entertainment retailer. At Blockbuster, Mr.
Burke most recently served as Senior Vice President and Chief Financial
Officer of the International Division. He received a B.S. degree in Business
Administration from the University of Florida in 1978. Mr. Burke was first
elected an executive officer in 1995.
ROBERT J. CHENG, VICE PRESIDENT, 37--Mr. Cheng joined the Company in January
1991 as director of marketing. He was promoted to director of desktop PCs in
June 1994 and to Vice President responsible for desktops in May 1995. In
November 1995, Mr. Cheng became responsible for marketing operations in the
Company's Americas Group. In November 1996, he was promoted to Managing
Director of the Europe/Middle East/Africa division. Before joining the
Company, from 1981 to 1991, Mr. Cheng served in various capacities in
9
<PAGE>
the data systems group of Texas Instruments Incorporated, a computer and
electronics company, where he was involved in the sale of digital products in
Latin America. He received a B.S. degree in Operations Research and Industrial
Engineering from Cornell University in 1981 and an M.B.A. degree from the
University of Texas in 1986. Mr. Cheng was first elected an executive officer
in 1995.
JOHN D'AUGUSTE, VICE PRESIDENT, 46--Mr. d'Auguste joined the Company in April
1993 as director of manufacturing. He was Vice President of operations in the
Company's Americas Group from February 1994 through January 1997. In February
1997, Mr. d'Auguste was named Vice President of general sales. Before joining
the Company, from 1989 to 1993, Mr. d'Auguste was a Vice President of General
Railway Signal Corporation, a railway signaling equipment manufacturer. Mr.
d'Auguste's responsibilities with General Railway included management of
product operations. Mr. d'Auguste spent most of his early career with General
Electric Co., most recently as manager of materials sourcing. Mr. d'Auguste
received a B.S. degree in systems engineering from the Polytechnic Institute of
Brooklyn in 1972 and an M.S. degree in engineering management from the
Milwaukee School of Engineering in 1975. Mr. d'Auguste was first elected an
executive officer in 1994.
BERNARD F. EBERT, VICE PRESIDENT, 49--Mr. Ebert joined the Company in
February 1996 as Vice President responsible for global planning, procurement
and quality. In February 1997, Mr. Ebert was named Vice President of operations
in the Company's Americas Group. Before joining the Company, Mr. Ebert worked
for more than twenty years at Texas Instruments Incorporated. At Texas
Instruments, he served in numerous management capacities involving global
planning and procurement. Mr. Ebert received both his B.A. degree and his
M.B.A. degree from Louisiana State University. Mr. Ebert was first elected an
executive officer in 1996.
MICHAEL D. HAMMOND, VICE PRESIDENT, 35--Mr. Hammond co-founded the Company in
1985 with Ted Waitt and has been employed by the Company in various positions
since that time. He is currently responsible for the Company's Asia Pacific
Group. Mr. Hammond was first elected an executive officer in 1992.
TIMOTHY J. HAYES, VICE PRESIDENT, 38--Mr. Hayes joined the Company in March
1996 as Vice President responsible for the Company's Americas Group customer
support. Before joining the Company, Mr. Hayes was employed by Apple Computer,
Inc., for approximately fourteen years, where he served in a number of
capacities, most recently as Senior Director of Customer Service and Support.
Mr. Hayes received a B.A. degree from Middle Tennessee State University in
1984. Mr. Hayes was first elected an executive officer in 1996.
JOHN HEUBUSCH, VICE PRESIDENT, 38--Mr. Heubusch joined the Company in January
of 1997 as Vice President of Government Relations. Before joining the Company,
Mr. Heubusch was Executive Director of the National Republican Senatorial
Committee from 1995 to 1996. From 1991 to 1994, he was Vice President of the
American Red Cross, and from 1989 to 1991 he was Chief of Staff to Secretary of
Labor Elizabeth Dole. Mr. Heubusch received B.A. degrees in Political Science
and English from Virginia Polytechnic Institute and State University,
Blacksburg, Virginia and his M.A. degree in National Security Studies from
Georgetown University, Washington D.C. 1988. Mr. Heubusch was first elected an
executive officer in 1997.
WILLIAM G. SHEA, VICE PRESIDENT, 50--Mr. Shea joined the Company in October
1993 as the national sales manager. Mr. Shea is currently Vice President
responsible for the Company's Americas Group major accounts. Before joining the
Company, from 1991 to 1992, Mr. Shea was a Vice President, Sales and General
Manager of OPTA Corporation, a manufacturer of high-end computer graphics
cards. From 1973 to 1991, Mr. Shea held a number of management and executive
positions in sales and marketing capacities at IBM Corporation. At IBM, Mr.
Shea was involved in sales and marketing of mainframe and personal computer
products as well as channel management. He received a B.A. degree in
Mathematics from the University of Maine in 1968. Mr. Shea was first elected an
executive officer in 1995.
10
<PAGE>
EXECUTIVE COMPENSATION
The following table and related footnotes show the compensation paid during
1994, 1995 and 1996 to the Company's Chief Executive Officer and its four
other most highly compensated officers for services rendered to the Company
and its subsidiaries:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------- ------------
SECURITIES
NAME AND PRINCIPAL UNDERLYING ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
------------------ ---- ---------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Theodore W. Waitt, 1996 585,000 380,250 230,000
Chairman of the Board 1995 573,353 265,563 30,000
and CEO 1994 557,000 389,900 6,650(1)
Richard D. Snyder, 1996 422,396 253,558 156,000 2,375(2)
President and COO 1995 385,938 161,299 30,000 11,658(3)
1994 326,821 225,000 30,000 14,077(4)
David J. McKittrick, 1996 320,000 141,120 4,430(5)
Senior Vice President,
(6) 1995 266,667 94,647 200,000 770(2)
CFO and Treasurer 1994
Robert N. Beck, 1996 310,500 132,098 26,500 8,817(7)
Senior Vice President
(9) 1995 155,769 66,984 150,000 60,000(8)
Human Resources 1994
James A. Taylor (10) 1996 257,292 167,375 79,000 350,392(11)
Senior Vice President 1995
Global Marketing 1994
</TABLE>
- --------
(1) Amounts paid by the Company for term life and disability insurance
premiums.
(2) Amount of Company matching contributions pursuant to the Company's 401(k)
plan.
(3) Includes $9,348 paid by the Company for term life, medical and disability
benefits, professional association dues, country club membership dues and
other perquisites and $2,310 of Company matching contributions pursuant
to the Company's 401(k) plan.
(4) Includes $11,767 paid by the Company for term life, medical and
disability benefits, professional association dues, country club
membership dues and other perquisites and $2,310 of Company matching
contributions pursuant to the Company's 401(k) plan.
(5) Includes $1,575 of Company matching contributions pursuant to the
Company's 401(k) plan and $2,855 of imputed income from supplemental
group term life insurance.
(6) Mr. McKittrick's employment with the Company began on March 1, 1995.
(7) Includes $2,375 of Company matching contributions pursuant to the
Company's 401(k) plan and $6,442 of imputed income from supplemental
group term life insurance.
(8) Payment in lieu of lost incentive compensation from prior employer.
(9) Mr. Beck's employment with the Company began on June 26, 1995.
(10) Mr. Taylor's employment with the Company began on March 20, 1996.
(11) Includes $392 of imputed income from supplemental group life insurance
and $350,000 payment in lieu of lost incentive compensation from prior
employer.
Officers and management of the Company receive compensation in the form of
base salary, annual incentive awards and equity participation. Elected
officers of the Company also receive a severance benefit equal to twelve
months of their base salary. This severance benefit does not apply to
voluntary or for-cause termination. The
11
<PAGE>
benefit is paid in monthly installments for twelve months or until such
earlier time as the individual finds comparable employment elsewhere. See
"Report of the Compensation Committee and the Board of Directors Regarding
Executive Compensation" on page 13.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table and related footnotes set forth as of December 31, 1996
the number of securities underlying options held by the Company's Chief
Executive Officer and its four other most highly compensated officers and the
value thereof.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ON VALUE YEAR-END, FISCAL YEAR-END,
EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME (#) ($) (#)(1) ($)*
---- --------- ---------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Theodore W. Waitt....... 3,033,060 80,360,925 7,500/252,500 200,119/6,245,731
Richard D. Snyder....... 40,000 1,634,175 442,500/193,500 22,295,756/4,997,414
David J. McKittrick..... 50,000/150,000 1,759,125/5,277,375
Robert N. Beck.......... 37,500/139,000 1,113,094/3,872,993
James A. Taylor......... 0/ 79,000 0/1,941,368
</TABLE>
- --------
* Valuation of these options is based on the closing price of $53.56 for
Common Stock, as quoted on the NASDAQ National Market on December 31, 1996.
(1) The number of securities underlying exercisable and unexercisable options
is expressed in shares of Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO DATE
OPTIONS EMPLOYEES EXERCISE PRESENT
GRANTED IN FISCAL PRICE EXPIRATION VALUE
NAME (#) YEAR ($/SH) DATE** ($)*
---- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Theodore W. Waitt........... 110,000 7.17% $25.75 1/31/06 1,725,000
70,000 4.56 26.75 3/20/06 1,150,000
50,000 3.26 39.38 7/30/06 1,223,000
Richard D. Snyder........... 70,000 4.56 25.75 1/31/06 1,098,000
50,000 3.26 26.75 3/20/06 822,000
36,000 2.35 39.38 7/30/06 881,000
David J. McKittrick......... 0
Robert N. Beck.............. 12,500 0.81 26.75 3/20/06 205,000
14,000 0.91 39.38 7/30/06 343,000
James A. Taylor............. 65,000 4.24 26.75 3/20/06 1,068,000
14,000 0.91 39.38 7/30/06 342,000
</TABLE>
- --------
* The present value of each stock option is calculated using the Black-Scholes
Multiple Option valuation formula, assuming (1) a volatility of the
Company's stock price, as quoted on the NASDAQ National Market, equal to
0.6; (2) a range of risk-free rates of return of 5.2 to 6.8% per annum; (3)
zero dividends; and (4) 3 1/2 years from the date of vesting to the date of
exercise.
**Options granted vest 25% per year over four years.
12
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE AND
THE BOARD OF DIRECTORS REGARDING EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed entirely of
Directors who are not employees of the Company. The Compensation Committee is
responsible for setting and administering the policies and programs that govern
both annual compensation and stock ownership programs.
The foundation of the management compensation program is based on principles
designed to align compensation with the Company's business strategy, values and
management initiatives. The program:
. Integrates compensation programs with both the Company's annual and long-
term strategic planning and measurement processes.
. Supports a performance-oriented environment that rewards actual
performance that is related to both goals and performance of the Company
as compared to industry performance levels.
. Helps attract and retain key management critical to the long-term success
of the Company.
The key components of the compensation program are base salary, annual
incentive awards and equity participation. These components are administered
with the goal of providing total compensation that is competitive in the
marketplace, recognizing meaningful differences in individual performance,
fostering teamwork and offering the opportunity to earn above-average rewards
when merited by individual and corporate performance. The marketplace is
defined by comparing the Company to a group of corporations with similar
characteristics, including industry and technology emphasis.
Using compensation survey data from the comparison group, a target for total
compensation and each of its elements--base salary, incentive awards and
equity-based compensation--is established. The intent is to deliver total
compensation that will be in the mid to upper range of pay practices of peer
companies when merited by the Company's performance. To achieve this objective,
a substantial portion of management pay is delivered through performance-
related variable compensation programs which are based upon achievement of the
Company's goals. Each year, the Compensation Committee reviews the elements of
executive compensation to ensure that the total compensation program, and each
of its elements, meets the overall objectives discussed above.
In 1996, total compensation was paid to senior management on individual
performance and on the extent to which the business plans for individual areas
of responsibility were achieved or exceeded. Base compensation was determined
by an assessment of each executive's performance, current salary in relation to
the salary range designated for the job, experience and potential for
advancement as well as by the performance of the Company. While many aspects of
performance can be measured in financial terms, the Compensation Committee also
evaluated the success of the management team in areas of performance that
cannot be measured by traditional accounting tools, including the development
and execution of strategic plans, the development of management and employees
and the exercise of leadership within the industry and in the communities that
the Company serves. All of these factors were collectively taken into account
by management and the Compensation Committee in determining the appropriate
level of base compensation and base salary increases.
The Management Incentive Plan is designed to reward senior managers when the
Company achieves certain financial objectives and when each manager's area of
responsibility meets its predetermined goals. These goals include financial
elements such as profitability, total sales and earnings per share of Common
Stock and non-financial elements such as the achievement of selected strategic
goals and the successful development of human resources. Each year, individual
incentive targets are established for incentive plan participants based on
competitive survey data. As noted above, targets are set to deliver total
compensation in the mid to upper range of competitive practice as warranted by
performance of the Company. For 1996, the targeted incentive was earned based
on the Compensation Committee's overall assessment of each participant's
achievement of the predetermined goals discussed above and the achievement of a
specific earnings per share goal.
13
<PAGE>
For several years, the Company has provided forms of equity participation as
a key part of its total programs for motivating and rewarding managers. Grants
of stock options have provided an important part of the equity link to
stockholders. Through these vehicles, the Company has encouraged its management
to obtain and hold the Company's Common Stock and stock options. Targeted award
ranges for stock option grants are determined by taking into account
competitive practice among comparison companies. Equity participation targets
are set based on established salary ranges and level of performance. As noted
above, the target ranges are established such that equity participation
opportunities will be in the mid to upper range of pay practices of peer
companies when merited by Company and individual performance. Actual individual
awards are determined based on the established competitive target range and the
Compensation Committee's overall assessment of individual performance. The
Compensation Committee considers the amounts of options previously granted and
the aggregate size of current awards when deciding to award additional options.
The full Board rather than the Compensation Committee, determines the
compensation of the Company's Chairman and Chief Executive Officer. Based on
1996 performance, the Board granted Ted Waitt, the Company's Chairman and Chief
Executive Officer, a base salary increase of 5.1% effective January 1, 1997,
which was consistent with the Company's established merit increase program. As
reflected in the Company's financial statements, the Company's performance in
1996 included 37% growth in sales and 47% growth in earnings per share of
Common Stock. In light of this performance and an overall assessment of his
performance, the Board determined to grant Mr. Waitt an incentive payment and a
stock option. The Board will continue to determine and administer awards
granted to other eligible individuals under the 1993 Stock Option Plan for Key
Employees ("1993 Employee Plan") and the 1996 Long-Term Incentive Equity Plan
("1996 Employee Plan").
It is the Compensation Committee's policy to consider deductibility under
Section 162(m) of the Code in determining compensation arrangements for the
Company's "covered employees," and the Committee intends to optimize the
deductibility of compensation to the extent deductibility is consistent with
the objectives of the management compensation program. The Committee, however,
intends to weigh the benefits of full deductibility with the objectives of the
management compensation program and, if the Committee believes to do so is in
the best interests of the Company and its stockholders, will make compensation
arrangements which may not be fully deductible under Section 162(m). Grants of
stock options under the 1996 Employee Plan approved by stockholders, are
expected to qualify for deductibility under Section 162(m). The Committee
expects that the stock options granted in 1996 to the Company's elected
officers will, together with their 1996 salaries and any other compensation
paid to them in 1996, qualify for deductibility. Other awards under the 1996
Employee Plan may, but need not, qualify for deductibility as performance-based
compensation under Section 162(m).
THE COMPENSATION COMMITTEE, THE BOARD OF DIRECTORS,
James W. Cravens Theodore W. Waitt
George H. Krauss Richard D. Snyder
James F. McCann Charles G. Carey
James W. Cravens
George H. Krauss
Douglas L. Lacey
James F. McCann
14
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return on Common Stock
from the date on which Common Stock began trading on the NASDAQ National
Market, through December 31, 1996, with the S&P 500 Index and the S&P Computer
Manufacturers Index. The cumulative total return assumes that $100 was
invested in each of Common Stock, the S&P 500 Index and the S&P Computer
Manufacturers Index on December 8, 1993 (the date the Company's stock began
trading) and also assumes the reinvestment of any dividends. The Company's
index is calculated using the closing price of $19.25 for Common Stock on
December 8, 1993, as quoted on the NASDAQ National Market. Past financial
performance should not be considered a reliable indicator of future
performance, and investors should not use historical trends to anticipate
results or trends in future periods.
[GRAPH APPEARS HERE]
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG GATEWAY 2000, INC.,
S&P 500 INDEX AND S&P COMPUTER MANUFACTURERS INDEX
<TABLE>
<CAPTION>
Measurement Period [COMPANY S&P S&P COMPUTER
(Fiscal Year Covered) NAME HERE] 500 INDEX MANUFACTURERS INDEX
- --------------------- ---------- --------- -------------------
<S> <C> <C> <C>
Measurement Pt-
12/08/93 $100 $100 $100
FYE 12/31/93 $101.948 $101.080 $104.492
FYE 12/31/94 $112.338 $98.004 $114.764
FYE 12/31/95 $127.273 $139.728 $180.774
FYE 12/31/96 $278.247 $171.872 $242.745
</TABLE>
15
<PAGE>
CERTAIN TRANSACTIONS WITH RELATED PARTIES
Ted Waitt is the sole shareholder and director of GTN, Inc., a South Dakota
Corporation ("GTN"). Since 1994, GTN has made available to the Company an
aircraft, owned by GTN, for Company business travel. The Company reimburses
GTN for such use at the lesser of 200% of the cost of fuel, oil and other
lubricants used or $933 per flight hour, plus certain out-of-pocket expenses.
The Company paid GTN approximately $257,900 for the use of this aircraft in
1996. The Company believes its arrangement with GTN has been and remains less
costly than the purchase of identical services from an unaffiliated party.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on Company records, the Company believes that all its officers,
directors and greater than 10% beneficial owners complied with all applicable
filing requirements under Section 16 of the Securities Exchange Act of 1934
with respect to transactions during 1996.
OTHER INFORMATION
The Company has retained the services of Norwest Shareowner Services to
assist in the distribution of proxy materials for a fee of approximately
$25,000. The Company will bear the full expense of the preparation and mailing
of this Proxy Statement and accompanying materials. The Company will reimburse
brokers, fiduciaries and custodians for their expenses in forwarding proxy
materials to beneficial owners of Common Stock held in their names. The
solicitation of proxies will be made primarily by use of the mails, although
proxies also may be solicited personally by telephone or other means of
communication by officers, directors and employees of the Company (for which
they will receive no additional compensation).
Proposals of stockholders that are intended to be presented at the Company's
1998 annual meeting of stockholders must be received by the Company at its
principal executive offices no later than December 9, 1997 to be considered
for inclusion in the proxy statement and proxy relating to that meeting.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1996 WILL BE PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN
REQUEST TO INVESTOR RELATIONS, GATEWAY 2000, INC., MAIL DROP Y-11, 610 GATEWAY
DRIVE, P.O. BOX NO. 2000, NORTH SIOUX CITY, SOUTH DAKOTA 57049-2000.
By Order of the Board of Directors
/s/ William M. Elliott
William M. Elliott
Senior Vice President, General
Counsel and Corporate Secretary
North Sioux City, South Dakota
April 8, 1997
16
<PAGE>
GATEWAY 2000, INC. 1995 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 1, 1997)
The Gateway 2000, Inc. 1995 Employee Stock Purchase Plan, effective January
1, 1995, is amended and restated in its entirety as provided herein effective
February 1, 1997. The Plan provides Eligible Employees of Gateway 2000, Inc.,
a Delaware corporation (the "Company"), and its Subsidiaries an opportunity to
purchase shares of Common Stock of the Company on the terms and conditions set
forth below.
1. Definitions.
(a) Base Pay--for each Participant, the regular compensation and
commissions earned during each payroll period, before any deductions or
withholding, but excluding overtime pay, bonuses, amounts paid as
reimbursements of expenses and other additional compensation, under rules
uniformly applied by the Plan Administrator.
(b) Business Day--any day with respect to which NASDAQ quotations are
issued.
(c) Code--the Internal Revenue Code of 1986, as amended.
(d) Common Stock--the Company's Common Stock, par value $.01 per share.
(e) Eligible Employee--an employee who is eligible to participate in the
Plan pursuant to Section 3.
(f) Exercise Date--the last Business Day of each calendar month.
(g) Exercise Price--unless the Plan Administrator determines before a
Grant Date that a higher or lower price that complies with Code Section 423
shall apply, and subject to the following sentence, the Exercise Price of
the shares of Common Stock which are to be sold under the Plan on the
Exercise Date immediately following such Grant Date shall be 95% of the
Fair Market Value of Common Stock on such Exercise Date. In no event shall
the Exercise Price be less than the lesser of (x) 85% of the Fair Market
Value of a share of Common Stock on the Grant Date for the month in which
the Exercise Date falls, or (y) 85% of the Fair Market Value of a share of
Common Stock on the Exercise Date for that month.
(h) Fair Market Value--the closing price per share of the Company's
Common Stock as reported in The Wall Street Journal on the relevant
Business Day. If no sales of the Company's Common Stock were made on such
date, "Fair Market Value" shall mean the closing price per share of the
Company's Common Stock as reported in The Wall Street Journal for the
preceding day on which a sale of the Company's Common Stock occurred.
(i) Grant Date--the first Business Day of each calendar month.
(j) Participant--an Eligible Employee who is participating in the Plan
pursuant to Section 4.
(k) Plan--Gateway 2000, Inc. 1995 Employee Stock Purchase Plan, as
amended (known prior to February 1, 1997 as "Gateway 2000, Inc. 1993
Employee Stock Purchase Plan").
(l) Plan Account--an account maintained by the Company or its designated
record keeper for each Participant to which the Participant's payroll
deductions are credited, against which funds used to purchase shares of
Common Stock are charged and to which shares of Common Stock purchased are
credited.
(m) Plan Administrator--such person or persons, including a committee, as
may be appointed by the Board of Directors of the Company to administer the
Plan. The Board of Directors of the Company may at any time remove or
replace the Plan Administrator.
(n) Subsidiaries--all United States corporations (other than the Company)
in one or more unbroken chains of corporations beginning with the Company
if, on the Grant Date, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
2. Stock Subject to the Plan. Subject to Section 12, the aggregate number of
shares of Common Stock which may be sold under the Plan is 1,000,000. The
Company shall make open-market purchases to provide shares of
<PAGE>
Common Stock for purchase under the Plan. If sufficient shares are not
available through open market purchases, the Company shall sell Treasury
shares or issue authorized but unissued shares of Common Stock.
3. Eligible Employees. Each active employee of the Company or any of its
Subsidiaries who has been employed for at least 6 months and who is regularly
employed by the Company or any of its Subsidiaries for at least 20 hours per
week and more than 5 months per calendar year shall be eligible to participate
in the Plan. Notwithstanding the foregoing, an employee of the Company or any
of its Subsidiaries who is (i) highly compensated (within the meaning of Code
Section 414(q)) and (ii) is a participant in the 1996 Long-Term Incentive
Equity Plan or any other equity incentive plan established by the Company for
the benefit of executives and other key employees (collectively referred to
hereinafter as the "Non-qualified Plans") is not eligible to participate in
the Plan during the calendar year and the next subsequent calendar year that
such employee receives a grant under any of the Non-qualified Plans.
4. Participation in the Plan.
(a) An Eligible Employee may participate in the Plan by completing and
filing with the Company or its designated record keeper an election form
which authorizes payroll deductions from the Employee's pay. Such
deductions shall commence on the first day of the month following the end
of the Employee's 6 month eligibility period, or the first day of any month
thereafter as elected by the Employee, and shall continue until the
Employee terminates participation in the Plan or the Plan is terminated. An
Eligible Employee may participate in the Plan only through payroll
deductions. Other contributions will not be accepted.
(b) Notwithstanding the foregoing, an Eligible Employee shall not be
granted an option to purchase shares of Common Stock under this Plan on any
Grant Date if such employee, immediately after the option is granted, owns
stock possessing 5% or more of the total combined voting power or value of
all classes of stock of the Company or any Subsidiary. For purposes of this
paragraph, the rules of Code Section 424(d) shall apply in determining the
stock ownership of an individual, and stock which an employee may purchase
under outstanding options shall be treated as stock owned by the employee.
5. Payroll Deductions. Payroll deductions shall be made from the amounts
paid to each Participant for each payroll period in such amounts as the
Participant shall authorize in his election form. The minimum payroll
deduction shall be $10 per month and the maximum payroll deduction shall be
20% of the Participant's Base Pay; provided that no Eligible Employee may be
granted an option under the Plan which permits his rights to purchase Common
Stock under the Plan, and any other stock purchase plan of the Company or any
Subsidiary that is qualified under Section 423 of the Code, to accrue at a
rate which exceeds $25,000 of Fair Market Value of such stock (determined at
the time such option is granted) for each calendar year in which the option is
outstanding at any time. If a Participant's Base Pay is insufficient in any
pay period to allow the entire payroll deduction elected under the Plan, no
deduction shall be made for such pay period. Payroll deductions will resume
with the next pay period in which the Participant has pay sufficient to permit
the deduction. Payroll deductions under the Plan shall be made in any period
only after all other withholdings, deductions, garnishments and the like have
been made.
6. Changes in Payroll Deductions. Subject to the minimum and maximum
deductions set forth above, a Participant may change the amount of his payroll
deductions by filing a new election form with the Company or its designated
record keeper no later than 10 Business Days in advance of the next calendar
month. The change shall be effective until revoked in writing.
7. Termination of Participation in Plan. A Participant may, at any time and
for any reason, voluntarily terminate participation in the Plan by written
notification of withdrawal delivered to the appropriate payroll office at
least 10 Business Days before the next pay period. A Participant's
participation in the Plan shall be terminated upon termination of his or her
employment with the Company and its Subsidiaries for any reason. In the event
a Participant's participation in the Plan is voluntarily or involuntarily
terminated, payroll deductions under the Plan
A-2
<PAGE>
shall cease; provided, however, that any payroll deductions credited to such
Participant's Plan Account shall be used to purchase shares of Common Stock on
the next Exercise Date. An Eligible Employee whose participation in the Plan is
terminated may rejoin the Plan no earlier than the first day of the seventh
month following the date his participation in the Plan terminated.
8. Purchase of Shares.
(a) On each Grant Date, each Participant shall be deemed to have been
granted an option to purchase shares of Common Stock.
(b) On each Exercise Date, each Participant shall be deemed to have
exercised his or her option granted pursuant to Section 8(a). On each
Exercise Date, the Company shall apply the funds credited to each
Participant's Plan Account to the purchase (without commissions or fees) of
that number of whole shares of Common Stock determined by dividing the
Exercise Price into the balance in the Participant's Plan Account on the
Exercise Date. Any amount remaining shall be carried forward to the next
calendar month unless the Plan Account is closed.
(c) As soon as practicable after each Exercise Date, a statement shall be
delivered to each Participant which shall include the number of shares of
Common Stock purchased on the Exercise Date on behalf of such Participant
under the Plan.
(d) When requested, a stock certificate for whole shares of Common Stock
in a Participant's Plan Account purchased pursuant to the Plan shall be
issued in the Participant's name or in the name of the Participant and
another person as joint tenants with right of survivorship or as tenants in
common. When the Participant's employment terminates, a stock certificate
for whole shares of Common Stock in his Plan Account shall be issued in his
name or in his name and the name of another person as joint tenants with
right of survivorship or as tenants in common. A cash payment shall be made
for any fraction of a share in such account, if necessary to close the
account.
9. Rights as a Stockholder. As of the Exercise Date, a Participant shall be
treated as record owner of his shares purchased pursuant to the Plan.
10. Rights Not Transferable. Rights under the Plan are not transferrable by a
Participant other than by will or the laws of descent and distribution, and are
exercisable during the Participant's lifetime only by the Participant or by the
Participant's guardian or legal representative. No rights or payroll deductions
of a Participant shall be subject to execution, attachment, levy, garnishment
or similar process.
11. Application of Funds. All funds of Participant's received or held by the
Company under the Plan before purchase of the shares of Common Stock shall be
held by the Company without liability for interest or other increment.
12. Adjustments in Case of Changes Affecting Shares. In the event of a
subdivision or consolidation of outstanding shares of Common Stock of the
Company, or the payment of a stock dividend, the number of shares approved for
the Plan shall be increased or decreased proportionately, and such other
adjustment shall be made as may be deemed equitable by the Plan Administrator.
In the event of any other change affecting the Common Stock, such adjustment
shall be made as shall be deemed equitable by the Plan Administrator to give
proper effect to such event.
13. Administration of the Plan. The Plan shall be administered by the Plan
Administrator. The Plan Administrator shall have authority to make rules and
regulations for the administration of the Plan, and its interpretations and
decisions with regard to the Plan and such rules and regulations shall be final
and conclusive. It is intended that the Plan shall at all times meet the
requirements of Code Section 423, if applicable, and the Plan Administrator
shall, to the extent possible, interpret the provision of the Plan so as to
carry out such intent.
14. Amendments to the Plan. The Plan Administrator may, at any time, or from
time to time, amend or modify the Plan; provided, however, that no amendment
shall be made increasing or decreasing the number of
A-3
<PAGE>
shares authorized for the Plan (other than as provided in Section 12 or 15),
and that, except to conform the Plan to the requirements of the Code, no
amendment shall be made which would cause the Plan to fail to meet the
applicable requirements of Code Section 423.
15. Termination of the Plan. The Plan shall terminate upon the earlier of
(a) the termination of the Plan by the Board of Directors of the Company as
specified below, or (b) the date no more shares remain to be purchased under
the Plan. The Board of Directors of the Company may terminate the Plan as of
any date, and the date of termination shall be deemed an Exercise Date. If on
such Exercise Date Participants in the aggregate have options to purchase more
shares of Common Stock than are available for purchase under the Plan, each
Participant shall be eligible to purchase a reduced number of shares of Common
Stock on a pro rata basis, and any excess payroll deductions shall be returned
to Participants, all as provided by rules and regulations adopted by the Plan
Administrator.
16. Costs. All costs and expenses incurred in administering the Plan shall
be paid by the Company.
17. Governmental Regulations. The Company's obligation to sell and deliver
its Common Stock pursuant to the Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such stock.
18. Applicable Law. This Plan shall be interpreted under the laws of the
United States of America and, to the extent not inconsistent therewith, by the
laws of the State of South Dakota. This Plan is not to be subject to the
Employee Retirement Income Security Act of 1974, as amended, but is intended
to comply with Section 423 of the Code, if applicable. Any provisions required
to be set forth in this Plan by such Code section are hereby included as fully
as if set forth in the Plan in full.
19. Effect on Employment. The provisions of this Plan shall not affect the
right of the Company or any Subsidiary or any Participant to terminate the
Participant's employment with the Company or any Subsidiary.
20. Withholding. The Company reserves the right to withhold from stock or
cash distributed to a Participant any amounts which it is required by law to
withhold.
21. Sale of Company. In the event of a proposed sale of all or substantially
all of the assets of the Company or a merger of the Company with or into
another corporation, the Company shall require that each outstanding option be
assumed or an equivalent option be substituted by the successor or purchaser
corporation, unless the Plan is terminated.
22. Shareholder Approval. The Plan, as amended effective February 1, 1997,
shall become effective on the date it is adopted by the Board of Directors of
the Company, provided that the stockholders of the Company approve it within
12 months after such date.
A-4
<PAGE>
GATEWAY 2000, INC.
ANNUAL MEETING
Sioux City Convention Center
801 Fourth Street
Sioux City, Iowa
Thursday, May 15, 1997
9:00 a.m., Central Time
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[LOGO OF GATEWAY 2000, INC.]
Please promptly vote, sign and return the proxy
card in the postage-paid envelope provided.
cut or tear along perforated edge
- --------------------------------------------------------------------------------
THIS PROXY, SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WILL BE VOTED AS
DIRECTED. IF NO DIRECTION TO THE CONTRARY IS INDICATED, IT WILL BE VOTED (1)
FOR THE ELECTION OF NAMED NOMINEES AS DIRECTORS; (2) FOR APPROVAL OF THE
GATEWAY 2000, INC. EMPLOYEE STOCK PURCHASE PLAN; (3) AGAINST THE STOCKHOLDER
PROPOSAL CONCERNING THE ENDORSEMENT OF THE CERES PRINCIPLES; AND (4) IN
ACCORDANCE WITH THE JUDGMENT OF THE APPOINTED PROXIES AS TO SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
The undersigned ratifies all that the Appointed Proxies, or their
substitutes, may lawfully do by virtue hereof, and revokes any proxies
previously given to vote at the Annual Meeting or any adjournment thereof.
Dated:
--------------------------------------------
--------------------------------------------
(Signature)
--------------------------------------------
(Signature)
Please sign exactly as name(s) appear to the left.
When signing in fiduciary or representative
capacity, please add your full title. If shares
are registered in more than one name, all holders
must sign. If signature is for a corporation, the
handwritten signature and title of an authorized
officer are required, together with the full
corporate name.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE
<PAGE>
Gateway 2000, Inc.
Proxy for Annual Meeting of Stockholders, Thursday, May 15, 1997
This undersigned hereby appoints William M. Elliott and Stephanie G. Heim, or
either of them (the "Appointed Proxies"), with power of substitution to each,
to vote all shares of the undersigned at the annual meeting of stockholders of
Gateway 2000, Inc. to be held on Thursday, May 15, 1997 at 9:00 a.m., Central
Time (the "Annual Meeting"), or at any adjournment(s) thereof as follows:
1. Election of Directors:
[_] FOR the election of Theodore W. Waitt, Charles G. Carey and James F.
McCann as Class I directors of the Company for a term of three (3) years
(except as marked to the contrary below).
[_] WITHHOLD AUTHORITY
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
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The Board of Directors recommends a vote FOR electing each of the directors.
2. Approval of the Gateway 2000, Inc. Employee Stock Purchase Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
The Board of Directors recommends a vote FOR proposal 2.
3. Stockholder proposal concerning endorsement of CERES Principles.
[_] FOR [_] AGAINST [_] ABSTAIN
The Board of Directors recommends a vote AGAINST proposal 3.
If any other business is brought before the Annual Meeting or any
adjournment(s) thereof, this Proxy will be voted in the discretion of the
Appointed Proxies.
- -------------------------------------------------------------------------------
cut or tear along perforated edge
