<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
GATEWAY 2000
- --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
[_] 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.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
GATEWAY, INC.
4545 TOWNE CENTRE COURT
SAN DIEGO, CA 92121
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Gateway, Inc., held this year on Thursday, May 18, 2000 in Sioux City, Iowa.
The meeting starts at 9:00 a.m., local time, at the Sioux City Convention
Center, 801 Fourth Street in downtown Sioux City. We will provide sign
interpretation for hearing-impaired stockholders. The Convention Center is
fully accessible for disabled persons.
The business we'll discuss at the Annual Meeting is described in the
enclosed Proxy Statement and formal Notice of Meeting. Also enclosed is the
Company's 1999 Annual Report to Stockholders.
I'm looking forward to telling everyone at the meeting how Gateway did in
1999 and why we're excited about our prospects in 2000. I appreciate your
investment in the Company. We're continuing to work hard to keep your trust.
Sincerely,
Theodore W. Waitt
Chairman of the Board
April 6, 2000
<PAGE>
GATEWAY, INC.
4545 TOWNE CENTRE COURT
SAN DIEGO, CA 92121
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 18, 2000
----------------
To the Holders of Common Stock of Gateway, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of Gateway,
Inc. (the "Company") will be held on Thursday, May 18, 2000 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;
2. To approve the Gateway, Inc. 2000 Equity Incentive Plan;
3. To consider and transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
The close of business on March 23, 2000 is the record date 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 by any
stockholder, for any purpose germane to the meeting, during normal business
hours at the law offices of Kent Vriezelaar, Esq., Vriezelaar, Tigges,
Edgington, Rossi, Bottaro & Boden, 421 Nebraska Street, Sioux City, Iowa
51101.
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 OR VOTE VIA THE INTERNET AT YOUR EARLIEST CONVENIENCE.
The proxy is revocable at any time before it is voted. Returning the proxy or
voting via the Internet 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
William M. Elliott
Senior Vice President, General
Counsel
and Secretary
San Diego, California
April 6, 2000
<PAGE>
GATEWAY, INC.
4545 TOWNE CENTRE COURT
SAN DIEGO, CA 92121
----------------
PROXY STATEMENT
----------------
GENERAL INFORMATION
The enclosed proxy is being solicited by the Board of Directors (the
"Board") of Gateway, 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 18, 2000, 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 March 23, 2000 are
entitled to vote at the Annual Meeting. As of that date, there were
321,183,184 shares of Common Stock outstanding. Each share of Common Stock
entitles the holder to one vote.
Two matters are scheduled for stockholder consideration at the Annual
Meeting: (i) 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
2003 or until successors are duly elected and qualified, and (ii) the approval
of the Gateway, Inc. 2000 Equity Incentive Plan. The Board 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 Directors (Proposal 1) and the proposed
2000 Equity Incentive Plan (Proposal 2), an abstention will have no effect on
the outcome of the vote therefore, abstentions are not offered as a voting
option. A broker non-vote with respect to either proposal will also have no
effect on the outcome of the vote on that proposal.
All properly executed, unrevoked proxies 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 is delivered pursuant to this
solicitation and does not specifically direct the voting of the shares covered
thereby, the shares represented by the proxy will be voted as follows:
PROPOSAL 1 (ELECTION OF DIRECTORS) - FOR THE NAMED NOMINEES
PROPOSAL 2 (APPROVAL OF 2000 EQUITY INCENTIVE PLAN) - FOR
If any other matters properly come before the Annual Meeting for a vote,
the shares will be voted in accordance with the judgment of the persons named
in the proxy.
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
1
<PAGE>
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.
This Proxy Statement and accompanying forms of proxy are first being mailed
to stockholders together with the Annual Report of the Company for the year
ended December 31, 1999, on or about April 6, 2000.
VOTING ELECTRONICALLY
Instead of submitting your vote by mail on the enclosed proxy card, you can
vote electronically via the Internet. Please note that there are separate
Internet voting arrangements depending on whether shares are registered in the
Company's stock records in the stockholder's name or in the name of a
brokerage firm or bank.
The Internet voting procedures are designed to authenticate stockholders'
identities, to allow stockholders to vote their shares and confirm that their
instructions have been properly recorded. Stockholders voting via the Internet
through either UMB Bank, n.a. or ADP Investor Communication Services should
understand that there may be costs associated with electronic access, such as
usage charges from Internet access providers and telephone companies, that
would be borne by the stockholder.
FOR SHARES REGISTERED DIRECTLY IN THE NAME OF THE STOCKHOLDER
Stockholders with shares registered directly in their name in the Company's
stock records maintained by our transfer agent, UMB Bank, n.a., may vote their
shares via the Internet in accordance with instructions set forth on the proxy
card.
FOR SHARES REGISTERED IN THE NAME OF A BROKERAGE FIRM OR BANK
A number of brokerage firms and banks are participating in a program
provided through ADP Investor Communication Services that offers Internet
voting options. That program is different from the program provided by UMB
Bank, n.a. for shares registered in the name of the Stockholder. If your
shares are held in an account at a brokerage firm or bank participating in the
ADP Program, you may vote those shares via the Internet or by telephone in
accordance with instructions set forth on the voting form, or by mailing your
signed proxy card.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated and Amended 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 18, 2000; the current term of Class II Directors will
expire at the annual meeting of stockholders held in 2001; and the current
term of the Class III Directors will expire at the annual meeting of
stockholders held in 2002.
In accordance with the Company's Bylaws, Directors are elected by a
plurality of the votes of shares of Common Stock present (or represented by
proxy) at the Annual Meeting and entitled to vote on the election of
Directors. As a result, the three incumbent Class I Directors nominated by the
Board will be elected if they receive more affirmative votes than any other
nominee.
2
<PAGE>
The Board has nominated the three incumbent Class I Directors, Messrs.
Charles G. Carey, James F. McCann, and Theodore W. Waitt, for re-election,
each to hold office until the annual meeting of stockholders held in 2003 or
until a successor is duly elected and qualified, subject to prior termination
of service in accordance with the Company's Restated and Amended Certificate
of Incorporation, Bylaws and applicable law. 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. The number of members of the
Board is currently set at eight. Certain information concerning Messrs. Carey,
McCann and Waitt, 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 CHARLES
G. CAREY, JAMES F. MCCANN, AND THEODORE W. WAITT AS CLASS I DIRECTORS OF THE
COMPANY.
CLASS I DIRECTORS - TERM EXPIRING 2000
CHARLES G. CAREY, DIRECTOR, 46 - 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 and the Fox Entertainment Group,
Inc., 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 and the Compensation Committee.
JAMES F. MCCANN, DIRECTOR, 48 - Mr. McCann has served as President of 1-
800-FLOWERS.com,Inc., located in Westbury, New York, since 1987. Mr. McCann
also serves on the boards of OfficeMax, Inc., Hofstra University, Winthrop-
University Hospital, Very Special Arts, The National Retail Federation and
Petco, Inc. 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, 37 - Mr. Waitt co-founded the
Company in 1985 and since that time served as a Director of the Company and as
the Company's President until January 1996. He served as Chief Executive
Officer of the Company and Chairman of the Board of Directors from February
1993 until December 31, 1999. Effective January 1, 2000, Mr. Waitt holds the
position of Chairman of the Board of the Company. Mr. Waitt is Chairman of the
Board's Nominating Committee.
CLASS II DIRECTORS - TERM EXPIRING 2001
DOUGLAS L. LACEY, DIRECTOR, 52 - 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.
JEFFREY WEITZEN, DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER, 43 - Mr.
Weitzen was first elected a Director, President and Chief Operating Officer of
the Company in January 1998. Effective January 1, 2000 Mr. Weitzen was elected
President and Chief Executive Officer of the Company. He was previously
employed by AT&T where he was Executive Vice President, Business Markets
Division of AT&T Corp. from January 1997 until January 1998. From 1994 until
1996 he was Vice President & General Manager - Global Services at AT&T Corp.
and from 1992 until 1994 he was President of AT&T's business and consumer
lines of business in the Asia-Pacific region. Mr. Weitzen is a member of the
Company's Nominating Committee.
CLASS III DIRECTORS - TERM EXPIRING 2002
ELIZABETH DOLE, DIRECTOR, 63 - Effective May 1, 2000 the Board elected
Elizabeth Dole as a Class III Director of the Company. Mrs. Dole most recently
served as President of the Red Cross from 1991 to 1999
3
<PAGE>
overseeing nearly 31,000 paid and 1.3 million volunteer staff at the largest
humanitarian organization in the world. She resigned in January 1999 to pursue
her own campaign for President of the United States. Mrs. Dole also served as
Secretary of Transportation, Secretary of Labor, and Deputy Assistant to the
President for Consumer Affairs. Mrs. Dole is a graduate from Duke University
and Harvard Law School; she also has a master's degree in education and
government from Harvard.
GEORGE H. KRAUSS, DIRECTOR, 58 - 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 is a consultant to America First Companies. 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 America First Mortgage
Investments, Inc., and Bay View Capital Corporation, which are each listed on
the New York Stock Exchange. 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, DIRECTOR, 41 - Mr. Snyder has been President of Avalon
Investments, Inc. in Ann Arbor, Michigan, a venture capital management
company, since September 1997. Mr. Snyder serves on the boards of various
portfolio companies of Avalon Investments, as well as publicly-held Launch
Media, Inc., the Michigan Strategic Fund, the University of Michigan College
of Engineering National Advisory Committee, and is Chairman of the Michigan
Economic Development Corporation. While at Gateway, Mr. Snyder served as
President and Chief Operating Officer of the Company from January 1996 until
his resignation in August 1997 and was Executive Vice President of the Company
from July 1991 until January 1996. Mr. Snyder has been a Director of the
Company since 1991 and is a member of the Board's Audit Committee.
COMPOSITION AND MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES MEETINGS
During the fiscal year ended December 31, 1999, the Board met seven times.
The standing committees of the Board are the Compensation Committee, the Audit
Committee and the Nominating Committee.
The Compensation Committee currently consists of Messrs. Krauss (Chairman),
Carey and McCann. The Compensation Committee determines the compensation of
the Company's elected officers other than the Chief Executive Officer whose
compensation the Committee recommends to the full Board for approval. In 1999,
the Compensation Committee met three times and approved grants of options
during 1999 under the Company's 1996 Long-Term Incentive Equity Plan (the
"1996 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 17. The
Compensation Committee administers the Company's annual bonus plan, the
Company's stock option plans and the Company's Employee Stock Purchase Plan
(the "Stock Purchase Plan").
The Audit Committee currently consists of Messrs. Lacey (Chairman), Carey
and Snyder. It is responsible for retaining the Company's independent
accountants and consulting with them regarding the scope and timing of their
audit, and the accountant's report concerning the Company's audited financial
statements and the Company's internal accounting controls. The Audit Committee
met twice in 1999.
The Nominating Committee consists of Messrs. Waitt (Chairman), Krauss and
Weitzen. 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 did not meet during 1999 apart from meetings of the full Board.
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, and the regulations
thereunder with respect to the nomination or proposal of nominees for election
as Directors of the Company.
4
<PAGE>
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
"Director Plan"), each non-employee Director will receive an annual stock
option grant for 24,000 shares immediately following each annual meeting of
stockholders. 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.
PROPOSAL 2
APPROVAL OF THE COMPANY'S
2000 EQUITY INCENTIVE PLAN
The Board of Directors has adopted, subject to stockholder approval, the
Gateway, Inc. 2000 Equity Incentive Plan (the "2000 Plan" or the "Plan"),
which provides for the grant of non-qualified stock options, stock
appreciation rights and stock awards to officers, directors, employees,
consultants and advisors of the Company and its subsidiaries. Initially 16
million shares of Common Stock will be reserved for issuance pursuant to
awards under the 2000 Plan. The number of shares reserved under the Plan will
be increased each January 1st without the need for further stockholder
approval by the lesser of (i) 5% of the total number of shares of Common Stock
outstanding on such date or (ii) an amount determined by the Compensation
Committee. As of the present date, no awards have been granted pursuant to the
Plan.
In addition, upon stockholder approval of the 2000 Plan, all remaining
shares available for issuance under the 1996 Plan and the Company's 1993 Stock
Option Plan (the "1993 Plan") will be transferred to the 2000 Plan. Any shares
of Common Stock underlying currently outstanding options under the 1996 Plan
or the 1993 Plan that expire without being exercised will also be transferred
to the 2000 Plan. As of March 1, 2000, there were approximately 37,600,000
shares of Common Stock underlying outstanding stock option awards under the
1996 Plan and 7,748,832 shares of Common Stock underlying outstanding stock
option awards under the 1993 Plan, and an additional 1,262,688 shares of
Common Stock available for future issuance under the 1996 Plan and 1,130,884
shares available for future issuance under the 1993 Plan.
The Board has adopted the 2000 Plan as part of its policy to further the
long-term success of the Company by strengthening its ability to attract and
retain high performing officers, directors, managers and other key employees,
consultants and advisors and to provide a means to encourage stock ownership
and proprietary interest in the Company on the part of substantially all
employees of the Company. The Board believes that the 2000 Plan reflects the
best interests of Gateway and recommends its approval by stockholders.
Set forth below is a brief summary of the material terms of the 2000 Plan,
a copy of which is attached as Appendix A to this Proxy Statement and
incorporated herein by this reference. This summary is qualified in its
entirety by reference to the full text of the 2000 Plan. Stockholders are
encouraged to read the 2000 Plan in its entirety for a more complete
description of the rights and obligations of the Company and participants
under the 2000 Plan.
5
<PAGE>
SUMMARY OF THE 2000 PLAN
Plan Overview. The 2000 Plan provides for the grant of non-qualified stock
options, stock appreciation rights ("SARs") and stock awards to officers,
directors, employees, consultants and advisors of the Company and its
subsidiaries. Grants of awards under the Plan are consistent with the
Company's goals of providing total employee 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. Any
officer, director, employee, consultant or advisor of the Company or of any
entity that is directly or indirectly controlled by the Company or in which
the Company has a significant equity interest may be designated by the
Compensation Committee to receive one or more awards under the 2000 Plan. As
of March 1, 2000, the Company and its subsidiaries had approximately 20,000
individuals eligible to receive awards. On March 1, 2000, the closing market
price of Gateway Common Stock as reported on the New York Stock Exchange was
$69.81 per share.
Plan Administration. The 2000 Plan is administered by the Compensation
Committee, which is comprised of non-employee directors who qualify as outside
directors under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") and Non-Employee Directors for purposes of Rule 16b-3
under the 1934 Securities Exchange Act. The Compensation Committee has full
and exclusive power to administer and interpret the 2000 Plan and its
provisions. This power includes, but is not limited to, selecting award
recipients, establishing all award terms and conditions, adopting procedures
and regulations governing awards and making all other determinations necessary
or advisable for the administration of the 2000 Plan. All decisions made by
the Compensation Committee are final and binding on all persons affected by
such decisions.
Securities Subject to the Plan. There will initially be 16 million shares
of Common Stock reserved and available for issuance pursuant to awards under
the 2000 Plan. The number of shares reserved under the Plan will be increased
each January 1st without the need for further stockholder approval by the
lesser of (i) 5% of the total number of shares of Common Stock outstanding on
such date or (ii) an amount determined by the Compensation Committee.
In addition, upon stockholder approval of the 2000 Plan, all remaining
shares available for issuance under the 1996 Plan and the 1993 Plan will be
transferred to the 2000 Plan. Any shares of Common Stock underlying currently
outstanding options under the 1996 Plan or the 1993 Plan that expire without
being exercised will also be transferred to the 2000 Plan. As of March 1,
2000, there were approximately 37,600,000 shares of Common Stock underlying
outstanding stock option awards under the 1996 Plan and approximately
7,748,832 shares of Common Stock underlying outstanding stock option awards
under the 1993 Plan, and an additional 1,262,688 shares of Common Stock
available for future issuance under the 1996 Plan and an additional 1,130,884
shares of Common Stock available for future issuance under the 1993 Plan.
The aggregate number of shares of Common Stock that may be covered by
awards granted to any single individual under the 2000 Plan may not exceed
3,000,000 shares per fiscal year of the Company. In addition, the Committee
may not award more than 50% of the total shares annually to employees in the
form of restricted and unrestricted stock awards.
In the event of a stock dividend, stock split, reorganization,
recapitalization, consolidation or other change affecting the Common Stock,
such proportionate adjustments, if any, as the Compensation Committee deems
appropriate, will be made with respect to (1) the aggregate number of shares
of Common Stock that may be issued under the Plan, (2) the number of shares
issuable pursuant to each outstanding award made under the Plan and (3) the
exercise price per share for any outstanding stock options, SARs or similar
awards under the Plan.
Stock Options. Any stock options granted under the Plan will be non-
qualified stock options. Subject to certain limited exceptions, the exercise
price of stock options granted under the Plan must be at least 100% of the
fair market value of a share of Common Stock on the date of grant. Subject to
the terms and conditions of
6
<PAGE>
the 2000 Plan, the exercise price, number of shares subject to the option,
vesting schedule, exercisability of options after a participant's termination
of employment or service and all other terms of the stock options will be
determined by the Compensation Committee. Options may be exercised by cash
payment, tendering shares of Common Stock held at least six months, third-
party broker transactions or any combination of these methods.
SARs. A SAR generally represents the right to receive a payment in cash
and/or shares of Common Stock equal in value to the excess of (1) the fair
market value of a specified number of shares of Common Stock on the date the
SAR is exercised over (2) the fair market value of such shares on the date the
SAR was granted, as set forth in the applicable award agreement. Subject to
the Plan, the Compensation Committee has the right to determine all terms and
conditions of SAR awards.
Stock Awards. A stock award represents a grant made or denominated in
shares of Common Stock or units equivalent in value to shares of Common Stock.
All or part of any stock award may be subject to conditions and restrictions
established by the Compensation Committee and set forth in the award
agreement, which may include, but are not limited to, continuous service with
the Company and/or the achievement of performance goals.
The performance criteria used by the Compensation Committee in granting
stock awards under the 2000 Plan which are intended to qualify as performance-
based compensation for purposes of Section 162(m) of the Code consist of
earnings, earnings per share, revenues, profit growth, profit-related return
ratios, cash flow or total stockholder return. The Compensation Committee may
select one criterion or multiple criteria for measuring performance, and the
measurement may be stated in absolute terms or relative to comparable
companies.
Dividend Equivalents. The Compensation Committee may provide for the
payment or crediting of dividend equivalents with respect to any awards
granted under the Plan. Such dividends or dividend equivalents may be paid
currently or may be credited to a participant's account. Any crediting of
dividends or dividend equivalents may be made subject to such restrictions and
conditions as the Compensation Committee may establish, including reinvestment
in additional shares or share equivalents.
Change of Control. Upon the occurrence of a "change of control" of Gateway
(as defined in the Plan), all employees (other than the Company's most senior
executive officers) who received a grant of options under the Plan in the
twelve months preceding the change of control will receive a grant of options
on the day preceding the change of control equal to the aggregate number of
options granted to such employee in such twelve-month period. Such grant will
be made regardless of whether there would otherwise be available shares under
the Plan. All options granted pursuant to the preceding sentence will vest
twenty-four months from the date of grant, unless accelerated as provided
below.
All outstanding options, including options granted pursuant to the
immediately preceding paragraph, will immediately vest and become exercisable
in full as of the date of a change of control, unless in the case of certain
merger and acquisition transactions the acquiring company has agreed in
writing to assume the option obligation by substituting comparable options. In
general, upon an Involuntary Termination (as defined in the Plan) of a
participant within 36 months following the effective date of a change of
control, such participant's then outstanding options will become exercisable
in full. However, the Compensation Committee has the discretion to vary the
effects of a change of control with respect to specific awards, and the
Compensation Committee has entered into agreements with certain senior
executive officers providing for immediate acceleration of stock awards upon
the occurrence of a change of control. See "Executive Compensation -
Employment Contracts and Change-in-Control Arrangements."
Transferability of Awards. Awards granted under the 2000 Plan are not
transferable or assignable except in certain limited circumstances.
Amendment and Termination of the Plan. The 2000 Plan may be amended by the
Compensation Committee as it deems necessary or appropriate, except for any
amendments which require stockholder approval pursuant to applicable law, rule
or regulation.
7
<PAGE>
The 2000 Plan will terminate on January 18, 2010 (ten years after approval
of the Plan by the Board), unless the Plan is terminated earlier by the Board.
Awards granted prior to termination of the Plan will remain outstanding in
accordance with their applicable terms and conditions.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES UNDER THE PLAN
In general, under the Code as presently in effect, a participant will not
recognize any income for federal income tax purposes at the time an option or
SAR is granted or a restricted stock award is made, nor will the Company be
entitled to a tax deduction at that time. However, when any part of an option
or SAR is exercised, when restrictions on restricted stock lapse or when an
unrestricted stock award is made, certain federal, state and local income tax
consequences may occur. Certain of the federal income tax consequences of
awards under the Plan are summarized as follows:
Stock Options. Upon exercise of a non-qualified stock option, the
participant will recognize ordinary income on the exercise date in an amount
equal to the excess, if any, of (i) the fair market value of the Common Stock
on the exercise date over (ii) the exercise price.
SARs. Upon exercise of a SAR, the participant will recognize ordinary
income on the exercise date in an amount equal to the value of any cash and
unrestricted Common Stock received.
Restricted Stock Awards. In the case of an award of restricted stock, the
immediate federal income tax effect for the recipient will depend on the
nature of the restrictions. Generally, the value of the Common Stock will not
be taxable to the recipient as ordinary income until the year in which his or
her interest in the stock is freely transferable or is no longer subject to a
substantial risk of forfeiture. However, the recipient may instead elect to
recognize income at the time the stock is received.
Unrestricted Stock Awards. Unrestricted stock awards will generally be
taxable as ordinary income to the recipient upon receipt.
Payment of Taxes. Plan participants are required, no later than the date as
of which the value of an award may first be included in the gross income of
the participant for federal income tax purposes, to pay to the Company, or
make arrangements satisfactory to the Compensation Committee regarding payment
of, any federal, state or local taxes of any kind required by law to be
withheld with respect to the award.
Tax Effects on Gateway. Upon the exercise of a non-qualified stock option
or SAR, the award of unrestricted stock, or the recognition of income on
restricted stock, the Company will generally be allowed an income tax
deduction equal to the ordinary income recognized by the employee. When a cash
payment is made pursuant to an award, the recipient will recognize the amount
of the cash payment as ordinary income, and the Company will generally be
entitled to a deduction in the same amount.
Limitations on Annual Deductible Compensation. The Company may not deduct
compensation of more than $1,000,000 that is paid in a taxable year to certain
"covered employees" as defined in Section 162(m) of the Code. The deduction
limit, however, does not apply to certain types of compensation, including
qualified performance-based compensation. The Company believes that
compensation attributable to option and SAR awards granted under the 2000 Plan
will generally be qualified performance-based compensation and therefore not
subject to the deduction limit. Other types of awards also may, but need not,
qualify as performance-based compensation for such purposes.
Limitation on Deductibility of Certain Change in Control Payments. Under
Section 280G of the Code, the Company may not deduct certain compensation
payable in connection with a change of control. The acceleration of existing
stock options and the grant of additional stock options described above in
"Change of Control" could give rise to non-deductible payments under Section
280G.
8
<PAGE>
REASONS FOR AUTHORIZATION AND VOTE REQUIRED
Reason for Authorization. The 2000 Plan is being submitted for stockholder
approval pursuant to Section 162(m) of the Code and the rules of the New York
Stock Exchange. It is intended that awards under the 2000 Plan may constitute
qualified performance based compensation for purposes of Section 162(m) of the
Code.
Vote Required. The affirmative vote of a majority of the votes present in
person or by proxy and entitled to vote at the Annual Meeting is required to
approve and adopt the 2000 Plan.
THE BOARD HAS DETERMINED THAT THE 2000 PLAN IS IN THE BEST INTERESTS OF
GATEWAY AND ITS STOCKHOLDERS AND HAS APPROVED THE 2000 PLAN. THE BOARD
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE 2000 PLAN.
INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed the firm of PricewaterhouseCoopers
L.L.P., independent accountants ("PricewaterhouseCoopers"), as the Company's
independent accountants to audit the Company's consolidated financial
statements for the fiscal year ending December 31, 2000.
PricewaterhouseCoopers served as the Company's independent accountants since
1989. Representatives of PricewaterhouseCoopers 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.
9
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 24, 2000, regarding
the beneficial ownership of Common Stock by each stockholder known by the
Company to be the beneficial owner of more than 5% of Common Stock; by each
Director of the Company; by each executive officer named in the Summary
Compensation Table on page 17; and by all executive officers and directors of
the Company as a group./1/ 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, 2000) 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>
NUMBER OF
SHARES OF % OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) COMMON STOCK(2) CLASS(3)
--------------------------------------- --------------- --------
<S> <C> <C>
Theodore W. Waitt................................... 115,572,238(4) 35.82
Legg Mason, Inc. ................................... 20,166,051(5) 6.28
100 Light Street
Baltimore, MD 21203
Amvescap PLC........................................ 19,054,800(6) 5.94
11 Devonshire Square
London EC2M 4YR
England
Jeffrey Weitzen..................................... 755,296
David J. Robino..................................... 115,000
R. Todd Bradley..................................... 10,000
Van M. Andrews...................................... 0
Charles G. Carey.................................... 72,000
George H. Krauss.................................... 72,000
Douglas L. Lacey.................................... 108,000
James F. McCann..................................... 72,000
Richard D. Snyder................................... 1,216,000
All directors and executive officers as a group (18
persons)........................................... 118,258,074 36.65
</TABLE>
- --------
(1) Unless otherwise indicated, the address of each beneficial owner listed
above is c/o Gateway, Inc., 4545 Towne Centre Court, San Diego, California
92121.
(2) Includes beneficial ownership of shares of Common Stock which may be
acquired pursuant to employee stock options for Messrs. Waitt- 1,452,500
shares, Weitzen - 720,000 shares, Robino - 115,000 shares, Bradley -
10,000 shares, and Snyder - 1,216,000 shares. Also includes beneficial
ownership of shares of Common Stock which may be acquired pursuant to non-
employee director stock options for Messrs. Carey - 72,000 shares,
Krauss - 72,000 shares, Lacey - 96,000 shares, and McCann - 72,000 shares.
Both employee and director stock option information includes options
exercisable at or within 60 days after March 1, 2000.
(3) Less than 1 percent unless otherwise indicated.
(4) Excludes 4,677,462 shares held by a foundation of which Mr. Waitt is a
director and as to which he disclaims beneficial ownership and 12,400
shares held in a trust for his children for which his spouse is the
trustee.
(5) Based on a Schedule 13G filed with the Securities and Exchange Commission
on February 13, 2000, Legg Mason, Inc. and certain subsidiaries reported
sole voting power over 16,085,740 shares; shared voting power with respect
to 4,080,311 shares, and shared dispositive power over 20,166,051 shares.
(6) Based on a Schedule 13G filed with the Securities and Exchange Commission
on February 4, 2000, Amvescap PLC and its affiliates, AVZ, Inc., AIM
Management Group, Inc., Amvescap Group Services, Inc., Invesco, Inc.,
Invesco North American Holdings, Inc., Invesco Capital Management, Inc.,
Invesco Funds Group, Inc., Invesco Management & Research, Inc., Invesco
Realty Advisers, Inc., and Invesco (NY) Asset Management, Inc., reported
shared voting and dispositive power over 19,054,800 shares.
10
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company are its senior elected officers and
serve for terms of office determined by the Board. Biographical summaries of
the business experience of Mr. Waitt, Chairman of the Company and Mr. Weitzen,
President and Chief Executive 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:
DAVID J. ROBINO, VICE CHAIRMAN, 40 - Mr. Robino joined the Company in
January 1998 when he was elected Executive Vice President and Chief
Administrative Officer. In January 2000, Mr. Robino was elected Vice Chairman
of the Company having responsibility for the Company's corporate strategy, new
ventures, legal, corporate communications, community relations, human
resources, government relations, compliance and ethics, and other corporate
administration functions. Before joining Gateway, Mr. Robino was with AT&T,
where he was most recently a Vice President in its Business Markets Division.
Prior to AT&T, Mr. Robino spent six years at ACNielsen where he was named a
Senior Vice President in its international business in 1993. Mr. Robino first
became an executive officer of the Company in 1998.
R. TODD BRADLEY, EXECUTIVE VICE PRESIDENT, GLOBAL OPERATIONS, 41 - Mr.
Bradley joined the Company in September 1998 when he was elected as Senior
Vice President and Regional Managing Director - Europe, Middle East and
Africa. In May 1999, Mr. Bradley was elected Senior Vice President, Consumer.
In January 2000, Mr. Bradley was elected to his current position with
responsibility for Gateway's operations in the Europe, Middle East and Africa
and in the Asia-Pacific regions. He also has responsibility for Business
Development, Manufacturing, Information Technology and Business Process
Simplification globally. From 1997 to 1998, he was with General Electric. He
served most recently as President and Chief Executive Officer of Transport
International Pool, a GE Capital Services company that is a global
transportation equipment leasing and rental business. From 1993 to 1997, Mr.
Bradley was with Dun & Bradstreet, most recently as President of NCH
Promotional Services, a Dun & Bradstreet subsidiary. Mr. Bradley first became
an executive officer of the Company in 1998.
VAN M. ANDREWS, SENIOR VICE PRESIDENT, GATEWAY BUSINESS, 48 - Mr. Andrews
joined the Company in September 1998 when he was elected as Senior Vice
President of Gateway Business. Mr. Andrews has responsibility for leading
initiatives in the business, education, government and channel sectors. Prior
to joining the Company, he was President of Admor Memory, where he managed
operations, sales, marketing, manufacturing, quality assurance and logistics.
From 1991 to 1998, he was with Toshiba America Information Systems, where he
was most recently Vice President and General Manager, Computer Systems
Division. Mr. Andrews first became an executive officer of the Company in
1998.
PETER B. ASHKIN, SENIOR VICE PRESIDENT, CHIEF TECHNOLOGY OFFICER, 48 - Mr.
Ashkin joined the Company in August 1998 as Vice President of Engineering. In
January 1999, he was elected as Senior Vice President of Gateway Products. In
January 2000, Mr. Ashkin was elected Senior Vice President & Chief Technology
Officer. He has responsibility for product platform initiatives, program
management, software, engineering, human factors and supply management. From
1993 to August 1998, Mr. Ashkin was with Toshiba America Information Systems,
most recently as Vice President and General Manager. Previously, he was
Director of Technology, Engineering and Architecture at Apple Computer, Inc.
Mr. Ashkin first became an executive officer of the Company in 1999.
JOSEPH J. BURKE, SENIOR VICE PRESIDENT, GLOBAL BUSINESS DEVELOPMENT, 42 -
Mr. Burke joined the Company in October 1995 as Vice President responsible
for market development. In 1997, Mr. Burke was elected as Senior Vice
President of Global Business Development. Before joining the Company, Mr.
Burke spent eight years with Blockbuster Entertainment Corporation. At
Blockbuster, Mr. Burke most recently served as Senior Vice President and Chief
Financial Officer of the International Division. Mr. Burke was first elected
an executive officer of the Company in 1995.
11
<PAGE>
WILLIAM M. ELLIOTT, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY,
65 - 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, he was Senior Vice President and General Counsel of Northrop
Corporation. Mr. Elliott was first elected an executive officer of the Company
in 1994.
MICHAEL D. HAMMOND, SENIOR VICE PRESIDENT, MANUFACTURING, 38 - Mr. Hammond
co-founded the Company in 1985 with Ted Waitt and has been employed by the
Company in various positions since that time. Mr. Hammond was elected Senior
Vice President of Manufacturing in 1997 with responsibility for product
manufacturing, logistics, materials management and inventory. His previous
position was Vice President of the Company's Asia-Pacific region. Mr. Hammond
was first elected an executive officer in 1992.
CLIFFORD S. HOLTZ, SENIOR VICE PRESIDENT, GATEWAY CONSUMER, 41 - Mr. Holtz
joined Gateway in February 2000 as Senior Vice President of Gateway Consumer.
Before joining Gateway, Mr. Holtz was employed by AT&T from 1986 to 1999 where
he served in a variety of marketing positions of increasing responsibility
including most recently President of AT&T's Small Business Division's Metro
Markets operation. From 1997 to 1998 Mr. Holtz served as Vice President of
Commercial Markets and from 1994 to 1996 he served as Vice President of Small
Business Markets and Consumer Sales. Mr. Holtz first became an executive
officer of the Company in 2000.
JAMES T. POLLARD, SENIOR VICE PRESIDENT, INFORMATION TECHNOLOGY, 53 - Mr.
Pollard joined the Company in June 1999 as Vice President of Global
Applications. In August 1999, he was elected Senior Vice President and Chief
Information Officer. Before joining the Company, Mr. Pollard spent one year as
Chairman, President and Chief Executive Officer for ECWerks, Inc., a
management and technology consulting company specializing electronic commerce.
From 1993 to 1997, Mr. Pollard was employed by Tech Data Corporation. His
final position was as Executive Vice President of Operations and Chief
Information Officer. Mr. Pollard first became an executive officer of the
Company in 1999.
JOHN M. RENFRO, SENIOR VICE PRESIDENT, HUMAN RESOURCES, 40 - Mr. Renfro
joined Gateway in June, 1998 as Vice President of Corporate Human Resources.
In January 2000 he was elected Senior Vice President of Human Resources.
Before joining Gateway, Mr. Renfro was Senior Vice President of Human
Resources and Administration for Zenith Electronics Corporation. From 1996 to
1998, Mr. Renfro was Vice President of Human Resources and Administration for
Ameritech's Small Business Services division. Earlier, he was Vice President
of Human Resources for ACNielsen's and Dun & Bradstreet's Consumer Marketing
Information Group's Asia-Pacific, Latin America and Africa operations. Mr.
Renfro first became an executive officer of the Company in 2000.
JOHN J. TODD, SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER, 39 - Mr. Todd
joined the Company in October 1998 when he was elected Senior Vice President
and Chief Financial Officer. Mr. Todd has responsibility for operational
finance, tax, audit, treasury, financial systems and reporting. From 1997 to
October 1998, he was with Allied Signal, Inc., most recently as Chief
Financial Officer, Allied Signal Engines. From 1996 to 1997, Mr. Todd was
Chief Financial Officer of the Boston Market operations of Boston Chicken,
Inc. From 1988 to 1996, Mr. Todd was with Pepsico, Inc., most recently as Vice
President - Portfolio Management, Pizza Hut, Inc. Mr. Todd first became an
executive officer of the Company in 1998.
12
<PAGE>
EXECUTIVE COMPENSATION
The following table and related footnotes show the compensation paid during
fiscal 1997, 1998 and 1999 to the Company's Chief Executive Officer, and its
four other most highly compensated officers as of the end of fiscal 1999 for
services rendered during such period to the Company and its subsidiaries. All
references to Gateway stock in this section have been adjusted for the
September 7, 1999 two-for-one stock split.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------- -----------------------------------------
AWARDS
-----------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) AWARD(S) ($) OPTIONS (#) COMPENSATION ($)
- --------------------------- ---- ---------- --------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Theodore W. Waitt, (1)..... 1999 1,000,000 900,000 320,000 324(2)
Chairman of the Board 1998 1,000,000 800,000 320,000 281(2)
1997 615,000 239,850 460,000
Jeffrey Weitzen,........... 1999 790,000 711,000 2,000,000 31,698(4)
President and 1998 707,692 600,000 600,000 2,000,000 1,543,145(5)
Chief Executive Officer (3)
David J. Robino,........... 1999 475,000 299,250 780,000 10,358(7)
Vice Chairman (6) 1998 424,615 234,000 400,000 628,340(8)
R. Todd Bradley,........... 1999 371,346 289,950 317,000 592,656(10)
Executive Vice President, 1998 116,667 56,000 350,000 564(11)
Global Operations (9)
Van M. Andrews,............ 1999 365,000 222,300 267,000 3,457(13)
Senior Vice President, 1998 85,032 42,000 300,000 350,000(14)
Gateway Business (12)
</TABLE>
- --------
(1) Effective January 1, 2000, Mr. Waitt resigned as Chief Executive Officer
and retained his position as Chairman of the Board.
(2) Amount of imputed income for group life insurance.
(3) Mr. Weitzen's employment with the Company began on January 22, 1998 when
he was elected President and Chief Operating Officer of the Company.
Effective January 1, 2000, he was elected President and Chief Executive
Officer.
(4) Includes $5,000 for Company matching contributions pursuant to the
Company's 401(k) plan, $26,338 for disability and life insurance premiums
and $360 of imputed income for group life insurance.
(5) Includes $1,400,000 for a sign-on bonus, $93,237 for relocation expenses,
$45,724 for disability and life insurance premiums, $3,750 for Company
matching contributions pursuant to the Company's 401(k) plan, and $434 of
imputed income for group life insurance.
(6) Mr. Robino's employment with the Company began on January 22, 1998 when
he was elected Executive Vice President and Chief Administrative Officer;
effective January 1, 2000 he was elected Vice Chairman.
(7) Includes $5,000 for Company matching contributions pursuant to the
Company's 401(k) plan, $4,998 for disability and life insurance premiums,
and $360 of imputed income for group life insurance.
(8) Includes $500,000 for a sign-on bonus, $118,513 for relocation expenses,
$9,546 for disability and term life insurance premiums, and $281 of
imputed income for group life insurance.
(9) Mr. Bradley's employment with the Company began on September 1, 1998;
effective January, 2000, he was elected Executive Vice President, Global
Operations.
(10) Includes a $500,000 sign-on bonus, $78,331 for relocation expenses,
$10,455 for mortgage subsidy, $3,150 for Company matching contributions
pursuant to the Company's 401(k) plan, and $720 for imputed income for
group life insurance.
13
<PAGE>
(11) Amount of imputed income for group life insurance.
(12) Mr. Andrews' employment with the Company began on October 5, 1998.
(13) Includes $2,917 of Company matching contributions pursuant to the
Company's 401(k) plan, and $540 of imputed income for group life
insurance.
(14) Sign-on bonus.
OPTION GRANTS IN LAST FISCAL YEAR
The following table and related footnotes set forth the number of
securities underlying options granted in the last fiscal year and held by the
Company's Chief Executive Officer and its four most highly compensated
officers and the value thereof.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES % OF TOTAL OPTIONS GRANT DATE
UNDERLYING OPTIONS GRANTED TO EMPLOYEES EXERCISE EXPIRATION PRESENT
NAME GRANTED(#) IN FISCAL YEAR PRICE($/SH) DATE (1) VALUE ($) (2)
- ---- -------------------- -------------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Theodore W. Waitt....... 110,000 1.54% 29.25 1/20/09 $1,913,656
210,000 32.88 7/21/09 4,206,935
Jeffrey Weitzen......... 80,000 9.60% 29.25 1/20/09 1,391,750
170,000 32.88 7/21/09 3,405,614
1,750,000 65.81 12/8/09 70,789,119
David J. Robino......... 60,000 3.74% 29.25 1/20/09 1,043,813
120,000 32.88 7/21/09 2,403,963
600,000(3) 44.00 9/30/09 14,980,320
R. Todd Bradley......... 40,000 1.52% 29.25 1/20/09 695,875
77,000 32.88 7/21/09 1,542,543
200,000 44.00 9/30/09 5,738,645
Van M. Andrews.......... 40,000 1.28% 29.25 1/20/09 695,875
77,000 32.88 7/21/09 1,542,543
150,000 44.00 9/30/09 4,033,984
</TABLE>
- --------
(1) Options granted vest 25% per year over four years unless otherwise
indicated.
(2) The present value of each stock option is calculated using the Black-
Scholes Multiple Option valuation formula, assuming (a) a volatility of
the Company's stock price, as quoted on the New York Stock Exchange
Composite index, equal to 0.6; (b) a range of risk-free rates of return of
4.535 to 6.202% per annum; (c) zero dividends; and (d) 3 years from the
date of vesting to the date of exercise. These amounts are reported
pursuant to Securities and Exchange Commission regulations, and do not
represent any prediction by the Company as to the value of its common
stock at any time. The actual value of the stock options will depend on a
number of factors, including the optionee's continued employment with
Gateway and actual stock price performance.
(3) Options granted vest 50% per year over two years.
14
<PAGE>
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, 1999
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, together with options exercised in 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE YEAR END AT FISCAL YEAR END,
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE (#)(1) EXERCISABLE/UNEXERCISABLE ($)(2)
- ---- ------------ ------------ -------------------------------- --------------------------------
<S> <C> <C> <C> <C>
1 Theodore W. Waitt..... -- -- 1,120,000/1,020,000 66,568,225/50,075,375
2 Jeffrey Weitzen....... 250,000 11,246,465 250,000/3,500,000 13,187,500/95,738,750
3 David J. Robino....... 100,000 5,947,049 0/1,080,000 0/38,130,000
4 R. Todd Bradley....... 87,500 3,409,512 0/579,500 0/21,823,500
5 Van M. Andrews........ 75,000 2,895,686 0/492,000 0/18,769,750
</TABLE>
- --------
(1) The number of securities underlying exercisable and unexercisable options
is expressed in shares of Common Stock.
(2) Valuation of these options is based on the closing price of $72.06 per
share of Common Stock, as quoted on the New York Stock Exchange composite
index on December 30, 1999.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS.
Jeffrey Weitzen. Effective December 8, 1999, the Company entered into an
employment agreement (the "1999 Agreement") with Mr. Weitzen, which provides
that, beginning January 1, 2000, he will serve as President and Chief
Executive Officer of the Company for an initial term of three years, subject
to renewal by mutual agreement. The 1999 Agreement supersedes Mr. Weitzen's
prior employment agreement with the Company. Under the new agreement, Mr.
Weitzen is entitled to an annual salary of $1,000,000 with an incentive bonus
target equal to 100% of his salary. Under the 1999 Agreement, Mr. Weitzen was
awarded an initial stock option grant of 1,750,000 option shares effective
December 8, 1999 and 250,000 option shares effective January 3, 2000. During
each calendar year of the 1999 Agreement, Mr. Weitzen is also entitled to
receive annual option grants having a Black Scholes value of $4,876,000. If
Mr. Weitzen's employment is terminated by the Company without cause or, by Mr.
Weitzen, for good reason, or in the event of a change in control, or if his
employment is not renewed after the initial term, his options will vest
immediately and he will be entitled to receive a lump sum equal to three times
the sum of his then current annual base salary and annual incentive bonus. As
of December 31, 1999, the amount of the lump sum payable to Mr. Weitzen in
such event was approximately $4,383,000.
In the event any payment made to Mr. Weitzen on a change of control of the
Company is subject to excise tax imposed by Section 4999 of the Internal
Revenue Code, the Company will pay Mr. Weitzen a one time amount equal to such
excise tax.
David J. Robino. The Company entered into an employment agreement with Mr.
Robino dated January 19, 1998, which provides that he would serve as Executive
Vice President and Chief Administrative Officer of the Company for an initial
term of three years, subject to renewal for successive one year periods by
mutual agreement of the parties. Pursuant to the agreement, Mr. Robino is
entitled to an annual salary of $450,000 which may be increased by the Board,
plus an incentive bonus, as determined by the Board of Directors or
Compensation Committee, of up to 100% of his salary targeted at 65%. In
connection with his employment by the Company, Mr. Robino received a signing
bonus of $500,000 in cash. In addition, Mr. Robino is entitled to receive
certain other benefits, including medical insurance and the Company is
obligated to maintain a term life and lump sum disability insurance policy in
the face amount of $1 million for the first year of his employment term and
$500,000 for each succeeding year of his employment term for his benefit. In
January 2000, Mr. Robino was elected Vice Chairman of the Company.
15
<PAGE>
Effective January 17, 1998, Mr. Robino received stock options to purchase
200,000 shares of Common Stock at $34 per share with a ten year term, subject
to vesting over four years. Mr. Robino was also eligible to receive additional
options starting in 1999, targeted at options to purchase 30,000 shares twice
a year based on a $30 stock price (subject to adjustment based on Black-
Scholes value), subject to approval of the Board of Directors or Compensation
Committee. If Mr. Robino's employment is terminated by the Company without
cause or by Mr. Robino, for good reason or in the event of a change in control
of the Company, or if his employment is not renewed after the initial term,
his options will vest immediately and he will be entitled to receive a lump
sum equal to three times the sum of his then current annual base salary and
annual incentive bonus. As of December 31, 1999, the amount of the lump sum
payable to Mr. Robino in such an event would be approximately $2,322,750.
In the event any payment made to Mr. Robino on a change of control of the
Company is subject to excise tax imposed by Section 4999 of the Internal
Revenue Code, the Company will pay Mr. Robino a one time amount equal to such
excise tax.
Messrs. Weitzen and Robino both signed Non-Competition Agreements that are
effective for the term of such individual's employment with the Company and
one year thereafter and which include a provision prohibiting the solicitation
for employment and employment of certain Company employees for a period of two
years following termination of employment. Messrs. Weitzen and Robino also
signed Non-Disclosure/Intellectual Property Agreements that restrict their use
of confidential and proprietary information for five years after the
termination of their employment with the Company. The Non-
Disclosure/Intellectual Property Agreements also confirm that the Company will
own any intellectual property either employee develops, relating to their
employment with the Company, for the term of such individual's employment with
the Company and one year thereafter.
CHANGE OF CONTROL COMPENSATION AGREEMENTS. In January 2000, the Board
approved change of control compensation agreements with each of the Company's
executive officers providing for the payment of certain compensation and
benefits by the Company in connection with a change of control. Except as
otherwise provided above for Mr. Weitzen and Mr. Robino, these payments and
benefits include:
. Immediate payment of a lump sum amount equal to 2.5 times the
executive's base salary plus target bonus;
. Immediate acceleration of stock options and any other stock-based
incentive awards; and
. If the executive's employment is involuntarily terminated following the
change of control, payment of a pro rata bonus for the year of
termination, immediate acceleration of any stock options granted after
the date of the change of control, and 30 months of continued insurance
benefits.
In addition, in the event any such payment or benefit is subject to the
excise tax under Section 4999 of the Internal Revenue Code, the Company will
pay the executive a one-time amount equal to the excise tax.
In exchange for these benefits, the executives have agreed to remain with
the Company in the event of a potential change of control generally for at
least six months or through the date of the change of control, whichever is
earlier. In addition, for a period of one year following any change of
control, the executives have agreed not to compete with the Company or solicit
its customers or employees.
A change of control is generally defined in the agreements to include the
occurrence of any one of the following:
. Any person acquires at least 30% of the voting securities of the
Company, but only if such person then controls at least the same
percentage of the voting securities then held by Mr. Waitt and his
affiliates and associates;
. A change in a majority of the Board, not counting directors appointed or
elected with the approval of the incumbent Board;
16
<PAGE>
. Any merger other than a merger whereby the Company's existing
stockholders continue to own at least 50% of the combined entity
following the merger; or
. The stockholders approve a plan of complete liquidation or dissolution
or an agreement is consummated for the sale or disposition of all or
substantially all of the Company's assets.
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 incentive awards.
The foundation of the management compensation program is based on
principles designed to align compensation with the Company's business
strategies, values and management initiatives. The program:
. Integrates compensation programs with both the Company's annual and
long-term strategic planning and performance management processes; and
. Helps attract and retain key management critical to the success of the
Company.
The key components of the compensation program are base salary, annual
incentive opportunity and equity participation. These components are
administered with the goal of providing total compensation that is competitive
in the marketplace, recognizes meaningful differences in individual
performance, fosters teamwork and offers the opportunity to earn above-average
rewards when merited by individual, business unit, 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 meets the overall objectives discussed above.
In 1999, total compensation was paid to senior management based on
individual performance and on the extent to which the business plans 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. These goals include
financial elements such as earnings per share, revenue, and the reduction of
sales, general, and administrative costs. Each year individual incentive
targets are established for incentive plan participants based on competitive
survey data. As noted earlier, targets are set to deliver total compensation
in the mid to upper range of competitive practice as warranted by performance
of the Company. For 1999, the incentive was earned based on the Compensation
Committee's overall assessment of the Company's performance against pre-
determined operating earnings and revenue goals. For 2000, the measures will
be similar financial targets related to Company performance.
17
<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 guidelines and level of performance.
Actual individual awards are determined based on the established competitive
target range and the Compensation Committee's overall assessment of individual
performance.
The full Board, rather than the Compensation Committee, determines the
compensation of the Company's Chief Executive Officer and President. Mr. Waitt
served as the Company's Chairman and Chief Executive Officer until December
31, 1999. During 1999, the Board awarded Mr. Waitt 320,000 stock options as a
long term incentive. The Board also awarded an incentive award of $900,000 to
Mr. Waitt in light of 1999 Company performance. The Board awarded 250,000
stock options to Mr. Weitzen, the Company's President and Chief Operating
Officer, as a long-term incentive. In addition, on December 8, 1999, the Board
granted Mr. Weitzen 1,750,000 stock options in recognition of his promotion,
effective January 1, 2000, to the role of Chief Executive Officer and
President. On January 1, 2000, the Board also increased Mr. Weitzen's annual
base salary to $1 million. In light of 1999 Company performance, the Board
granted Mr. Weitzen an incentive payment of $711,000.
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 interest 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 Plan and the 2000 Plan (when approved by the
stockholders) are expected to qualify for deductibility under Section 162(m).
The Committee expects that the stock options granted in 1999 to the Company's
elected officers will, together with their 1999 salaries and any other
compensation paid to them in 1999, qualify for deductibility. Other awards
under the 1996 Plan or the 2000 plan (when approved by stockholders) may, but
need not, qualify for deductibility as performance-based compensation under
Section 162(m). In addition, the payment of certain benefits in connection
with a change of control of the Company may not be fully deductible by the
Company. See "Executive Compensation - Employment Agreements and Change-in-
Control Arrangements."
<TABLE>
<S> <C> <C>
THE COMPENSATION COMMITTEE THE BOARD OF DIRECTORS
George H. Krauss, Chairman Theodore W. Waitt, Chairman James F. McCann
Charles G. Carey Charles G. Carey Richard D. Snyder
James F. McCann George H. Krauss Jeffrey Weitzen
Douglas L. Lacey
</TABLE>
18
<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, 1999, with the S&P 500 Index and the S&P Computer
Hardware Index. The cumulative total return assumes that $100 was invested in
each of Common Stock, the S&P Index and the S&P Computer Hardware 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 $9.63 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.
[PERFORMANCE GRAPH APPEARS HERE]
12/8/93 12/31/93 12/31/94 12/31/95
------- -------- -------- --------
Gateway................................... 100 106 114 127
S&P 500 Index............................. 100 100 98 132
S&P Computer Hardware Index............... 100 105 130 175
12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- --------
Gateway................................... 278 340 532 1,497
S&P 500 Index............................. 159 208 264 315
S&P Computer Hardware Index............... 236 335 584 890
19
<PAGE>
CERTAIN TRANSACTIONS WITH RELATED PARTIES
Theodore W. Waitt is the sole shareholder and director of Mesh, Inc., a
South Dakota Corporation previously known as GTN, Inc. ("Mesh"). Mesh has a
25% ownership interest and Gateway Companies, Inc., a wholly-owned subsidiary
of the Company ("GW Companies") has a 75% ownership interest in an aircraft
pursuant to a Joint Ownership and Joint Use Agreement. GW Companies is
responsible for the operation and maintenance of the aircraft but is
reimbursed for 25% of its fixed costs and expenses by Mesh. Mesh also
reimburses GW Companies 100% of the costs associated with the actual use of
the aircraft by Mesh. If the usage by either party of the aircraft exceeds
their respective ownership interests (i.e. 75% by GW Companies and 25% by
Mesh), the reimbursement of fixed costs and expenses will be adjusted
accordingly. Based upon a review of amounts paid to acquire comparable
aircraft provided by an independent third party, the Company believes that it
paid fair market value for its ownership interest in the aircraft. In
addition, the Company leases an aircraft from Mesh on an as-needed basis at a
cost of $1,100 per hour plus expenses. Based on a competitive analysis of
comparable leased aircraft the Company believes the rental rate is at least as
favorable to the Company as market rates otherwise available to the Company.
During 1999, the Company paid Mesh $196,020 for rental and expense
reimbursement. In addition, during 1999 GW Companies made rental payments
totalling $111,995 pursuant to a lease agreement with Avalon Enterprises
L.L.C. ("Avalon") for retail space in a shopping center located in North Sioux
City, South Dakota. All of the outstanding shares of Avalon are owned directly
or indirectly by Theodore W. Waitt and his wife. Gateway believes that it paid
fair market value for the lease based on the fact that several independent
third-party tenants pay comparable lease rental rates and have signed leases
with similar terms and conditions.
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,
as amended, with respect to transactions during 1999.
OTHER INFORMATION
The Company has retained the services of UMB Bank, n.a. to assist in the
distribution of proxy materials and the Company will reimburse UMB for its
expenses. 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 mail, 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 2001 annual meeting of stockholders must be received by the
Corporate Secretary of the Company at its principal executive offices no later
than December 7, 2000 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, 1999 WILL BE PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON
WRITTEN REQUEST TO INVESTOR RELATIONS, GATEWAY INC., MAIL DROP Y-15, 610
GATEWAY DRIVE, NORTH SIOUX CITY, SOUTH DAKOTA 57049-2000.
By Order of the Board of Directors
William M. Elliott
Senior Vice President, General
Counsel
and Corporate Secretary
San Diego, California
April 6, 2000
20
<PAGE>
APPENDIX A
GATEWAY, INC.
2000 EQUITY INCENTIVE PLAN
1. Purpose. The 2000 Equity Incentive Plan (the "Plan") is intended to
promote the long-term success of Gateway, Inc. (the "Company") and its
stockholders by strengthening the Company's ability to attract and retain
highly competent officers, directors, managers and other selected employees,
consultants and advisors and to provide a means to encourage stock ownership
and proprietary interest in the Company.
2. Term. The Plan shall become effective upon its ratification and approval
by the affirmative vote of the holders of a majority of the securities of the
Company present or represented, and entitled to vote at, a meeting of
stockholders of the Company, and shall terminate at the close of business on
January 18, 2010 unless terminated earlier by the Compensation Committee (as
defined in Section 3). After termination of the Plan, no future awards may be
granted, but previously granted awards shall remain outstanding in accordance
with their applicable terms and conditions and the terms and conditions of the
Plan.
3. Plan Administration. A committee (the "Compensation Committee")
appointed by the Board of Directors of the Company (the "Board") shall be
responsible for administering the Plan. The Compensation Committee shall be
comprised of two or more members of the Board who shall qualify as both (1)
"Non-Employee Directors" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor rules
and (2) "outside directors" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). The Compensation
Committee shall have full and exclusive power to interpret the Plan and to
adopt such rules, regulations and guidelines for carrying out the Plan as it
may deem necessary or proper, and such power shall be executed in the best
interests of the Company and in keeping with the objectives of the Plan. This
power includes but is not limited to selecting award recipients, establishing
all award terms and conditions and adopting modifications, amendments and
procedures, as well as rules and regulations governing awards under the Plan.
The interpretation and construction of any provision of the Plan or any option
or right granted hereunder and all determinations by the Compensation
Committee in each case shall be final, binding and conclusive with respect to
all interested parties. Notwithstanding the foregoing, in its absolute
discretion, the Board (or any committee selected by the Board) may at any time
and from time to time exercise any and all rights and duties of the Committee
under this Plan except with respect to matters which under Rule 16b-3 or
Section 162(m) of the Code, or any regulations or rules issued thereunder, are
required to be determined in the sole discretion of the Committee.
4. Eligibility. Any officer, employee, director, consultant or advisor of
the Company shall be eligible to receive one or more awards under the Plan.
"Company" includes for this purpose any entity that is directly or indirectly
controlled by the Company or any entity in which the Company has a significant
equity interest, as determined by the Compensation Committee.
5. Shares of Common Stock Subject to the Plan. Subject to the provisions of
Section 6 of the Plan, the aggregate number of shares of Common Stock, $.01
par value, of the Company ("Shares") which shall be reserved for issuance to
participants under the Plan shall be 16,000,000; provided; however, that on
January 1 of each fiscal year of the Company during which the Plan is
effective (commencing January 1, 2001), the aggregate number of shares
reserved for issuance to participants under the Plan shall be increased by the
lesser of (i) 5% of the total number of shares of Common Stock outstanding on
such date and (ii) an amount determined by the Compensation Committee.
In addition, upon and after stockholder approval of this Plan, (i) all then
remaining Shares reserved and available for issuance under the Company's 1996
Long-Term Incentive Equity Plan (the "1996 Plan") and the 1993 Stock Option
Plan (the "1993 Plan") and (ii) any Shares underlying outstanding awards under
the 1996 Plan and the 1993 Plan that expire without being exercised or would
otherwise again be available for issuance under the 1996 Plan or the 1993
Plan, shall in each case be transferred to this Plan and shall be reserved and
available for issuance hereunder.
A-1
<PAGE>
Subject to adjustment as provided in Section 6, no more than 50% of the
aggregate number of Shares issued pursuant to awards under the Plan annually
may be issued under awards pursuant to Section 8.3 of the Plan. The aggregate
number of Shares that may be covered by awards granted to any single
individual under the Plan shall not exceed 3,000,000 Shares per fiscal year of
the Company.
Shares subject to awards under the Plan which expire, terminate, or are
canceled prior to exercise or, in the case of awards granted under Section
8.3, do not vest, shall thereafter be available for the granting of other
awards. Shares which have been exchanged by a participant as full or partial
payment to the Company in connection with any award under the Plan, also shall
thereafter be available for the granting of other awards. In instances where a
stock appreciation right ("SAR") or other award is settled in cash, the Shares
covered by such award shall remain available for issuance under the Plan.
Likewise, the payment of cash dividends and dividend equivalents paid in cash
in conjunction with outstanding awards shall not be counted against the Shares
available for issuance. Any Shares that are issued by the Company, and any
awards that are granted through the assumption of, or in substitution for,
outstanding awards previously granted by an acquired entity shall not be
counted against the Shares available for issuance under the Plan.
Any Shares issued under the Plan may consist in whole or in part of
authorized and unissued Shares or of treasury Shares. No fractional Shares
shall be issued under the Plan. Cash may be paid in lieu of any fractional
Shares in settlements of awards under the Plan.
6. Adjustments. In the event of any stock dividend, stock split,
combination or exchange of Shares, merger, consolidation, spin-off,
recapitalization or other distribution (other than normal cash dividends) of
Company assets to stockholders, or any other change affecting the Shares or
the Share price, such proportionate adjustments, if any, as the Compensation
Committee in its discretion may deem appropriate to reflect such change shall
be made with respect to (1) the aggregate number of Shares that may be issued
under the Plan, the aggregate number of Shares that may be issued pursuant to
Section 8.3 of the Plan, and the aggregate number of Shares that may be
granted to any single individual under the Plan during any fiscal year of the
Company; (2) the number of shares issuable pursuant to each outstanding award
made under the Plan; and (3) the exercise price per Share for any outstanding
stock options, SARs or similar awards under the Plan. In connection with any
event described in this Section 6, the Compensation Committee may provide for
the cancellation of any outstanding awards upon payment in cash, securities or
other property therefor based on the then Fair Market Value of the Common
Stock.
7. Fair Market Value. "Fair Market Value," for all purposes under the Plan,
shall mean the closing price of a Share as reported daily in The Wall Street
Journal or similar, readily available public source for the date in question.
If no sales of Shares were made on such date, the closing price of a Share as
reported for the preceding day on which a sale of Shares occurred shall be
used. Notwithstanding the foregoing, the Committee may use any other
definition of Fair Market Value consistent with applicable tax, accounting and
other rules.
8. Awards. The Compensation Committee shall determine the type or types of
award(s) to be made to each participant. Awards may be granted singly, in
combination or in tandem. Awards also may be made in combination or in tandem
with, in replacement of, as alternatives to or as the payment form for grants
or rights under any other compensation plan or individual contract or
agreement of the Company including those of any acquired entity. The types of
awards that may be granted under the Plan are:
8.1 Stock Options. A stock option is a right to purchase a specified
number of Shares during a specified period as determined by the
Compensation Committee. The purchase price per Share for each stock option
shall be not less than 100% of Fair Market Value on the date of grant,
except if a stock option is granted retroactively in tandem with or as a
substitution for a SAR, the exercise price may be no lower than the Fair
Market Value of a Share as set forth in award agreements for such tandem or
replaced SAR. The price at which Shares may be purchased under a stock
option shall be paid in full by the optionee at the time of the exercise in
cash or such other method permitted by the Compensation Committee,
including (1) tendering Shares (with prior approval of the Chief Executive
Officer if Shares are owned less than six
A-2
<PAGE>
months); (2) authorizing a third party broker to sell the Shares (or a
sufficient portion thereof) acquired upon exercise of a stock option and
assigning the delivery to the Company of a sufficient amount of the sale
proceeds to pay for all the Shares acquired through such exercise; or (3)
any combination of the above.
8.2 SARs. A SAR is a right to receive a payment, in cash and/or Shares,
equal to the excess of the Fair Market Value of a specified number of
Shares on the date the SAR is exercised over the Fair Market Value on the
date the SAR was granted as set forth in the applicable award agreement;
except that if a SAR is granted retroactively in tandem with or in
substitution for a stock option, the designated Fair Market Value set forth
in the award agreement shall be no lower than the Fair Market Value of a
Share for such tandem or replaced stock option.
8.3 Stock Awards. A stock award is a grant made or denominated in Shares
or units equivalent in value to Shares. All or part of any stock award may
be subject to conditions and restrictions established by the Compensation
Committee, as set forth in the applicable award agreement, which may
include, but are not limited to, continuous service with the Company and/or
the achievement of performance goals. The performance criteria that may be
used by the Compensation Committee in granting a stock award contingent on
performance goals shall consist of earnings, earnings per share, revenues,
profit growth, profit-related return ratios, cash flow or total stockholder
return. The Compensation Committee may select one criterion or multiple
criteria for measuring performance, and the measurement may be stated in
absolute terms or relative to comparable companies.
Notwithstanding anything to the contrary contained in the Plan, the
Compensation Committee may grant a stock award which is not contingent on
performance goals or which is contingent on performance goals other than
those specified in this Section 8.3, provided the Compensation Committee
shall have determined that such award is not required to satisfy the
requirements for "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code.
9. Dividends and Dividend Equivalents. The Compensation Committee may
provide that any awards under the Plan earn dividends or dividend equivalents.
Such dividends or dividend equivalents may be paid currently or may be
credited to a participant's account. Any crediting of dividends or dividend
equivalents may be subject to such restrictions and conditions as the
Compensation Committee may establish, including reinvestment in additional
Shares or Share equivalents.
10. Deferrals and Settlements. Payment of awards may be in the form of
cash, stock, other awards or combinations thereof as the Compensation
Committee shall determine at the time of grant, and with such restrictions as
it may impose. The Compensation Committee also may require or permit
participants to elect to defer the issuance of Shares or the settlement of
awards in cash under such rules and procedures as it may establish under the
Plan. It also may provide that deferred settlements include the payment or
crediting of interest on the deferral amounts, or the payment or crediting of
dividend equivalents where the deferral amounts are denominated in Shares.
11. Transferability and Exercisability. Awards granted under the Plan shall
not be transferable or assignable other than (1) by will or the laws of
descent and distribution; (2) to the extent provided in any individual award
agreement, by gift or other transfer of an award to any trust or estate in
which the original award recipient or such recipient's spouse or other
immediate relative has a substantial beneficial interest, or to a spouse or
other immediate relative, provided that any such transfer is permitted by Rule
16b-3 under the Exchange Act as in effect when such transfer occurs and the
Board does not rescind this provision prior to such transfer; or (3) pursuant
to a qualified domestic relations order (as defined by the Code). However, any
award so transferred shall continue to be subject to all the terms and
conditions contained in the instrument evidencing such award.
In the event that a participant terminates employment with the Company to
assume a position with a governmental, charitable, educational or other non-
profit institution, the Compensation Committee may
A-3
<PAGE>
subsequently authorize a third party, including but not limited to a "blind"
trust, to act on behalf of and for the benefit of such participant regarding
any outstanding awards held by the participant subsequent to such termination
of employment. If so permitted by the Compensation Committee, a participant
may designate a beneficiary or beneficiaries to exercise the rights of the
participant and receive any distribution under the Plan upon the death of the
participant.
12. Award Agreements. Awards under the Plan shall be evidenced by
agreements as approved by the Compensation Committee that set forth the terms,
conditions and limitations for each award, which may include the term of an
award, the provisions applicable in the event the participant's employment
terminates, and the Compensation Committee's authority to unilaterally or
bilaterally amend, modify, accelerate the vesting of, suspend, cancel or
rescind any award. The Compensation Committee need not require the execution
of any such agreement, in which case acceptance of the award by the
participant shall constitute agreement to the terms of the award.
13. Foreign Participation. In order to assure the viability of awards
granted to participants employed in foreign countries, the Compensation
Committee may provide for such special terms as it may consider necessary or
appropriate to accommodate differences in local law, tax policy or custom.
Moreover, the Compensation Committee may approve such supplements to, or
amendments, restatements or alternative versions of the Plan as it may
consider necessary or appropriate for such purposes without thereby affecting
the terms of the Plan as in effect for any other purposes; provided that, no
such supplements, amendments, restatements or alternative versions shall
increase the Share limitations contained in Section 5 of the Plan.
14. Change of Control
(a) Additional Option Grant. If a Change of Control (as defined in
paragraph (d)) occurs, then, except as otherwise agreed by the Company and
any participant by separate contract or award, all employees who received
one or more grants of stock options under this Plan during the twelve
months immediately preceding the effective date of such Change of Control
shall receive an additional grant of stock options (the "Additional Grant
Option"), effective immediately prior to such Change of Control. The number
of Shares subject to the Additional Grant Option made to each such optionee
shall be equal to the total number of Shares subject to the grant(s) of
stock options made to such optionee during the twelve months immediately
preceding the effective date of such Change of Control, and the exercise
price of the Additional Grant Option shall be equal to the Fair Market
Value of the Shares immediately prior to such Change of Control. Such grant
shall be made regardless of whether there would otherwise be available
Shares under Section 5. All Additional Grant Options shall vest in full
twenty-four months following the date of such Change of Control, unless
vesting is accelerated as provided below.
(b) Accelerated Vesting of Awards upon a Change of Control. Except as
otherwise agreed by the Company and any participant by separate contract or
award, all outstanding options and SARS, including the Additional Grant
Options, shall become immediately exercisable and vested in full (and all
restrictions and conditions upon all stock awards shall immediately lapse
and be deemed satisfied) upon the occurrence of a Change of Control unless,
in the case of a Change of Control described in paragraph (d)(i) or (iii),
the acquiring or surviving entity shall have agreed in writing prior to the
date of such Change of Control to assume the award obligation by
substituting awards of its own which are comparable in all respects to the
outstanding awards under the Plan (including without limitation the
provisions of paragraph (c) below), with each such substituted award
equitably and appropriately adjusted in accordance with Section 6 above.
(c) Accelerated Vesting upon Involuntary Termination of
Employment. Notwithstanding anything to the contrary in this Plan, in the
event of a participants's Involuntary Termination (as defined in paragraph
(e)), in either case within three years following the date of a Change of
Control, all outstanding awards under the Plan held by the participant that
have not previously vested (or with respect to which restrictions have not
lapsed or conditions have not been satisfied ) shall become immediately
vested and exercisable in full as of the date of such termination of
employment (which shall include, without limitation, the immediate lapse of
all restrictions and deemed satisfaction of all conditions on stock
awards).
A-4
<PAGE>
(d) Definition of Change in Control. For purposes hereof, the term
"Change in Control" shall mean the first to occur of the following events:
(i) Any Person (as defined below) is or becomes the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing a percentage of
the combined voting power of the Company's then outstanding securities
that is at least equal to the greater of (x) 30% and (y) the percentage
of such combined voting power then owned by Theodore Waitt and his
affiliates and associates (within the meaning of Rule 12b-2 under the
Exchange Act); or
(ii) The following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on
the date hereof, constitute the Board and any new director (other than
a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for
election by the Company's stockholders was approved or recommended by a
vote of at least two-thirds of the directors then still in office who
either were directors on the date hereof or whose appointment, election
or nomination for election was previously so approved or recommended;
or
(iii) There is consummated a merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with any other
corporation, other than (A) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior to such merger or consolidation continuing to represent (either
by remaining outstanding or by being converted into voting securities
of the surviving entity or any parent thereof) at least 50% of the
combined voting power of the securities of the Company or such
surviving entity or any parent thereof outstanding immediately after
such merger or consolidation, or (B) a merger or consolidation effected
to implement a recapitalization of the Company (or similar transaction)
in which no Person is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing a percentage of
the combined voting power of the Company's then outstanding securities
that is at least equal to the greater of (x) 30% and (y) the percentage
of such combined voting power then owned by Theodore Waitt and his
affiliates and associates (within the meaning of Rule 12b-2 under the
Exchange Act); or
(iv) The stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than any such sale or
disposition to an entity, at least 50% of the combined voting power of
the voting securities of which are owned by stockholders of the Company
in substantially the same proportions as their ownership of the Company
immediately prior to such sale.
For purposes of this Section 14, "Person" shall have the meaning given
in Section 3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include (i)
Theodore Waitt or any of his affiliates or associates (within the meaning
of Rule 12b-2 under the Exchange Act), (ii) the Company or any of its
subsidiaries, (iii) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any of its affiliates (within
the meaning of Rule 12b-2 under the Exchange Act), (iv) an underwriter
temporarily holding securities pursuant to an offering of such securities,
or (v) a corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their ownership of
stock of the Company.
(e) Definition of Involuntary Termination. For purposes of the Plan,
"Involuntary Termination" of a participant's employment shall mean (x)
termination of the participant's employment by the Company other than by
reason of death or disability (within the meaning of the Company's long-
term disability plan) and other than for Cause or (y) the occurrence,
following a Change of Control, of any of the following acts or omissions by
the Company or changes in the terms and conditions of a participant's
employment or service with the Company without the participant's express
written consent:
A-5
<PAGE>
(i) The assignment to the participant of any duties inconsistent
with the participant's position with the Company or a substantial
adverse alteration in the nature or status of the participant's titles,
positions, status, duties, authorities, reporting relationships or
responsibilities from those in effect immediately prior to the Change
of Control;
(ii) A reduction by the Company in the participant's annual base
salary or hourly wage rate as in effect on the date of grant of the
award or as the same may be increased from time to time;
(iii) The relocation of the participant's principal place of
employment to a location more than 50 miles from the participant's
principal place of employment immediately prior to the Change of
Control or the Company's requiring the participant to be based anywhere
other than such principal place of employment (or permitted relocation
thereof) except for required travel on the Company's business to an
extent substantially consistent with the participant's business travel
obligations at the time of the Change of Control;
(iv) The failure by the Company to pay to the participant any
portion of the participant's current compensation, or to pay to the
participant any portion of an installment of deferred compensation
under any deferred compensation program of the Company, within seven
(7) days of the date such compensation is due;
(v) The failure by the Company to continue in effect any
compensation plan in which the participant participates immediately
prior to the Change of Control which is material to the participant's
total compensation, or any substitute plans adopted prior to the Change
of Control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue the participant's
participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount or
timing of payment of benefits provided and the level of the
participant's participation relative to other participants, as existed
immediately prior to the Change of Control; or
(vi) The failure by the Company to continue to provide the
participant with benefits substantially similar to those enjoyed by the
participant under any of the Company's pension, savings, life
insurance, medical, health and accident, or disability plans in which
the participant was participating immediately prior to the Change of
Control, the taking of any other action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive the participant of any material fringe benefit enjoyed by the
participant at the time of the Change of Control, or the failure by the
Company to provide the participant with the number of paid vacation
days to which the participant is entitled on the basis of years of
service with the Company in accordance with the Company's normal
vacation policy in effect at the time of the Change of Control.
The participant's continued employment shall not constitute consent
to, or a waiver of rights with respect to, any act or failure to act
constituting Involuntary Termination hereunder.
(f) Definition of Cause. For purposes of the Plan, "Cause" shall mean:
(i) The willful and continued failure by the participant to
substantially perform the participant's duties with the Company or an
affiliate (other than any such failure resulting from the participant's
incapacity due to physical or mental illness) that has not been cured
within 30 days after a written demand for substantial performance is
delivered to the participant by the Company, which demand specifically
identifies the manner in which the Company believes that the
participant has not substantially performed the participant's duties;
(ii) The willful engaging by the participant in conduct which is
demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise;
(iii) The commission of any act of fraud, embezzlement or dishonesty
by a participant; or
(iv) Any unauthorized use or disclosure by a participant of
confidential information or trade secrets of the Company or any
subsidiary.
A-6
<PAGE>
For purposes of clauses (i) and (ii) of this definition, no act, or
failure to act, on the part of the participant shall be deemed "willful"
unless done, or omitted to be done, by the participant not in good faith
and without reasonable belief that the participant's act, or failure to
act, was in the best interest of the Company.
(g) Parachute Payments. In the event that the aggregate present value of
payments to a participant under this Plan and/or under any other plan,
program, or arrangement maintained by the Company constitutes an "excess
parachute payment" (within the meaning of Code Section 280G(b)(1)) and the
excise tax on such payment would cause the net parachute payments (after
taking into account federal and state income and excise taxes) to which
such participant would otherwise be entitled to be less than what such
participant would have netted (after taking into account federal and state
income taxes) had the present value of such participant's total parachute
payments equaled $1.00 less than three times his or her "base amount"
(within the meaning of Code Section 280G(b)(3)(A)), unless the Company and
the affected individual(s) otherwise have agreed by separate contract or
award, his or her total "parachute payments" (within the meaning of Code
Section 280G(b)(2)(A)) shall be reduced (but by the minimum possible
amount) so that their aggregate present value equals $1.00 less than three
times such base amount. For purposes of this calculation, unless it would
be inequitable to a participant to do so, it shall be assumed that such
participant's tax rate will be the maximum marginal federal and state
income tax rate on earned income, with such maximum federal rate to be
computed with regard to Code Section 1(g), if applicable. In the event that
the participant and the Company are unable to agree as to the amount of the
reduction described above, if any, the participant shall select a law firm
or accounting firm from among those regularly consulted (during the twelve-
month period immediately prior to the relevant change of control) by the
Company regarding federal income tax matters, and such law firm or
accounting firm shall determine the amount of such reduction and such
determination shall be final and binding upon the participant and the
Company.
15. Plan Amendment. The Plan may be amended by the Compensation Committee
as it deems necessary or appropriate to better achieve the purposes of the
Plan. Shareholder approval shall be required as a condition of such action
only to the extent required by applicable law, regulation or rule. The Board
may suspend the Plan or terminate the Plan at any time; provided, that no such
action adversely affects any outstanding award. Any Shares authorized under
Section 5 (or any amendment thereof) with respect to which no award is granted
prior to termination of the Plan, or with respect to which an award is
terminated, forfeited or canceled after termination of the Plan, shall
automatically be transferred to any subsequent long-term incentive equity plan
for employees of the Company.
16. Tax Withholding. The Company shall have the right to deduct from any
settlement of an award made under the Plan, including the delivery or vesting
of Shares, up to the minimum amount necessary to cover withholding of any
federal, state or local taxes required by law, or to take such other action as
may be necessary to satisfy any such withholding obligations. The Compensation
Committee may, in its discretion and subject to such rules as it may adopt,
permit participants to use Shares to satisfy the minimum required tax
withholding (with prior approval of the Company's Chief Executive Officer if
Shares are owned less than six months) and such Shares shall be valued at the
Fair Market Value as of the settlement date of the applicable award.
17. Registration of Shares. Notwithstanding any other provision of the
Plan, the Company shall not be obligated to offer or sell any Shares unless
such Shares are at that time effectively registered or exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act") and the offer and sale of such Shares are otherwise in compliance with
all applicable federal and state securities laws and the requirements of any
stock exchange or similar agency on which the Company's securities may then be
listed or quoted. The Company shall have no obligation to register the Shares
under the federal securities laws or take any other steps as may be necessary
to enable the Shares to be offered and sold under federal or other securities
laws. Prior to receiving Shares, a Plan participant may be required to furnish
representations or undertakings deemed appropriate by the Company to enable
the offer and sale of the Shares or subsequent transfers of any interest in
such Shares to comply with the Securities Act and other applicable securities
laws. Certificates evidencing Shares shall bear any legend required by, or
useful for the purposes of compliance with, applicable securities laws, this
Plan or award agreements.
A-7
<PAGE>
18. Other Benefit and Compensation Programs. Unless otherwise specifically
determined by the Compensation Committee, settlements of awards received by
participants under the Plan shall not be deemed a part of a participant's
regular, recurring compensation for purposes of calculating payments or
benefits from any Company benefit plan, severance program or the severance pay
law of any country. Further, the Company may adopt other compensation
programs, plans or arrangements as it deems appropriate or necessary.
19. Unfunded Plan. Unless otherwise determined by the Compensation
Committee, the Plan shall be unfunded and shall not create (or be construed to
create) a trust or a separate fund or funds. The Plan shall not establish any
fiduciary relationship between the Company and any participant or other
person. To the extent any person holds any rights by virtue of an award
granted under the Plan, such rights shall be no greater than the rights of an
unsecured general creditor of the Company.
20. Use of Proceeds. The cash proceeds received by the Company from the
issuance of Shares pursuant to awards under the Plan shall constitute general
funds of the Company.
21. Regulatory Approvals. The implementation of the Plan, the granting of
any award under the Plan, and the issuance of Shares upon the exercise or
settlement of any award shall be subject to the Company's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the awards granted under it or the Shares issued pursuant to
it.
22. Employment Rights. The Plan does not constitute a contract of
employment, and participation in the Plan will not give a participant the
right to continue in the employ of the Company on a full-time, part-time or
any other basis. Participation in the Plan will not give any participant any
right or claim to any benefit under the Plan, unless such right or claim has
specifically accrued under the terms of the Plan.
23. Governing Law. The validity, construction and effect of the Plan and
any actions taken relating to the Plan shall be determined in accordance with
the laws of the State of Delaware and applicable federal law.
24. Successors and Assigns. The Plan shall be binding on all successors and
assigns of a participant, including, without limitation, the estate of such
participant and the executor, administrator or trustee of such estate, or any
receiver or trustee in bankruptcy or representative of the participant's
creditors.
A-8
<PAGE>
GATEWAY, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, THURSDAY, MAY 18, 2000
The 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, Inc. to be held on Thursday, May 18, 2000 at 9:00 a.m.,
Central Time (the "Annual Meeting"), or at any adjournment(s) thereof.
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 the named nominees as directors; (2) for approval of the
2000 Equity Incentive Plan; and (3) 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.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Cut or tear along perforated edge
GATEWAY, INC.
ANNUAL MEETING
Sioux City Convention Center
801 Fourth Street
Sioux City, Iowa
Thursday, May 18, 2000
9:00 a.m., Central Time
VOTE BY INTERNET
Your Internet vote is quick, convenient and your vote is immediately
submitted. Just follow these easy steps:
1. Read the accompanying Proxy Statement.
2. Visit our Internet voting site at http://www.umb.com/proxy and
------------------------
follow the instructions on the screen.
Your Internet vote authorizes the named proxies to vote your shares to
the same extent as if you marked, signed, dated and returned the proxy card.
Please note that all votes cast by Internet must be submitted prior to 5:00 p.m.
Central Time, May 16, 2000.
If you vote by Internet, please do not return your proxy by mail.
THANK YOU FOR YOUR VOTE.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTING EACH OF THE DIRECTORS.
FOR WITHHELD
1. Election of Directors [_] [_]
Nominees:
--------
Charles G. Carey, James F. McCann and Theodore W. Waitt as Class I directors
of the Company for a term of three (3) years.
________________________________________________________________________________
(Except nominee(s) written above.)
FOR AGAINST ABSTAIN
2. Approval of 2000 Equity Incentive Plan [_] [_] [_]
If any other business is brought before the Annual Meeting of any adjournment(s)
thereof, this Proxy will be voted in the discretion of the Appointed Proxies.
________________________________________________________________________________
Participant's Signature
________________________________________________________________________________
Date
(Please complete, date and sign exactly as your name appears. RETURN CARD
PROMPTLY IN ACCOMPANYING ENVELOPE.)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL OF THE 2000 EQUITY PLAN.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
CUT OR TEAR ALONG PERFORATED EDGE
VOTE BY INTERNET
Your Internet vote is quick, convenient and your vote is immediately
submitted. Just follow these easy steps:
1. Read the accompanying Proxy Statement.
2. Visit our Internet voting site at http://www.umb.com/proxy and
------------------------
follow the instructions on the screen.
Your Internet vote authorizes the named proxies to vote your shares to
the same extent as if you marked, signed, dated and returned the proxy card.
Please note that all votes cast by Internet must be submitted prior to 5:00 p.m.
Central Time, May 16, 2000.
If you vote by Internet, please do not return your proxy by mail.
<PAGE>
GATEWAY, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, THURSDAY, MAY 18, 2000
The 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, Inc. to be held on Thursday, May 18, 1999 at 9:00 a.m.,
Central Time (the "Annual Meeting"), or at any adjournment(s) thereof.
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 the named nominees as directors; (2) for approval of the
2000 Equity Incentive Plan; and (3) in accordance with the judgement 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.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Cut or tear along perforated edge
GATEWAY, INC.
ANNUAL MEETING
Sioux City Convention Center
801 Fourth Street
Sioux City, Iowa
Thursday, May 18, 2000
9:00 a.m., Central Time
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTING EACH OF THE DIRECTORS.
Election of Directors --
Nominees: Charles G. Carey, James F. McCann and Theodore W. Waitt as Class I
directors of the Company for a term of three (3) years.
FOR WITHHELD
[_] [_]
________________________________________________________________________________
(Except nominee(s) written above.)
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.
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.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Cut or tear along perforated edge
<PAGE>
GATEWAY, INC.
4545 Towne Centre Court, San Diego, CA 92121
VOTING INSTRUCTIONS TO: NORWEST BANK MINNESOTA, N.A., AS
TRUSTEE OF THE GATEWAY INC. RETIREMENT
SAVINGS PLAN ("PLAN")
I hereby direct that the voting rights pertaining to shares of Common
Stock of Gateway Inc. held by the Trustee and attributable to my account in the
above-described plan shall be exercised at the Annual Meeting of Stockholders of
the Company to be held May 18, 2000, or at any adjournment of such meeting, in
accordance with instructions below, to vote upon Proposals 1 and 2 and on other
business that may properly come before the meeting.
If the instruction card is not returned or if no direction is given when
the duly executed instruction card is returned, the shares credited in the
participant's Gateway Common Stock Fund Account will be voted on each ballot
item in accordance with the terms of the plan.
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS INSTRUCTION CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE
(Continued and to be signed on reverse side.)
<PAGE>
FOR WITHHELD
1. Election of Directors [_] [_]
Nominees:
--------
Charles G. Carey, James F. McCann and Theodore W. Waitt as Class I directors
of the Company for a term of three (3) years.
____________________________________________________________________________
(Except nominee(s) written above.)
FOR AGAINST ABSTAIN
2. Approval of 2000 Equity Incentive Plan [_] [_] [_]
If any other business is brought before the Annual Meeting of any adjournment(s)
thereof, this Proxy will be voted in the discretion of the Appointed Proxies.
________________________________________________________________________________
Participant's Signature
________________________________________________________________________________
Date
(Please complete, date and sign exactly as your name appears. RETURN CARD
PROMPTLY IN ACCOMPANYING ENVELOPE.)
