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Gateway's Waitt takes options over pay

CEO Ted Waitt decided to forgo most of his salary for 2001 in lieu of a generous options package. Other executives made a pretty penny as they headed for the exits

Gateway CEO and founder Ted Waitt decided to forgo most of his salary for 2001 in lieu of a generous options package. Other executives made a pretty penny as they headed for the exits.

see special report: Gateway CEO's painful homecoming According to documents filed with the U.S. Securities and Exchange Commission, Waitt, who reassumed the top executive spot in February of last year, was entitled to $250,000. He took home $20,833 instead, saying "the company could offer the amount as incentive awards to employees for outstanding contributions to company performance."

Waitt was awarded 3 million stock options for the year, however. The grant was split into two pieces that have strike prices of $11.19 for 2,976,000 shares and $19 for 24,000 shares. Gateway shares currently trade below $7.

Waitt, who owns 31.7 percent of Gateway, exercised other options worth $1.6 million during the past year. In 2000 Waitt made $250,000 in salary and was awarded 24,000 options.

Former CEO Jeff Weitzen, who left the company after Waitt returned, received $198,718 in salary and $2,500 in matching payments to his 401(k) plan. But as part of his employment agreement, he received accelerated vesting of nearly 2.5 million stock options and a $5.64 million cash payment when he left the company. According to the filings, he did not exercise the options.

In 2000, Weitzen's salary was $1 million with an $880,000 bonus and a grant of 585,640 options. His other compensation in 2000 included $31,649 for personal use of a company airplane, $25,276 for use of financial planning services, and $5,610 of matching payments in his 401(k).

Weitzen wasn't the only employee who profited by leaving the company. Gateway gave Susan Parks, former senior vice president for U.S. business, $1.48 million in cash and accelerated vesting of 125,000 stock options when she left the company in December. She also agreed to sign an agreement not to solicit certain Gateway employees for new jobs for the next year. In exchange, she was granted an additional accelerated 375,000 options and an extension of her exercise rights until Dec. 31, 2002.

Gateway also agreed to pay Parks $936,646 to cover her "equity loss together with the carrying and maintenance costs, grossed up for taxes," related to a San Diego house she bought when she took the Gateway job in August 2000.

Two members of Gateway's board of directors, attorney George Krauss and former Gateway Chief Operating Officer Richard Snyder, are up for re-election. Gateway's board has three classes of directors who serve three-year terms staggered so that the only two members come up for re-election each year.

Among other items disclosed in Gateway's regulatory filings, the California Public Employees' Retirement System (CalPERS), which owns 1.16 million shares, or less than 1 percent of Gateway's shares, has proposed a motion that would reorganize the board into one class, with each board member standing for re-election every year.

"CalPERS believes that corporate governance procedures and practices, and the level of accountability they impose, are closely related to financial performance. It is intuitive that, when directors are accountable for their actions, they perform better," the motion reads.

"We--as one shareholder--are dissatisfied with the company's long-term financial performance. We seek to improve that performance through this structural reorganization of the board," the motion continues. "If the board acts on our proposal, shareholders would have the opportunity to register their views at each annual meeting--on performance of the board as a whole, and of each director as an individual."

Gateway recently announced a sharp decline in fourth-quarter sales and said it would cut additional jobs, close stores and reduce PC prices.

In the proxy filing, the board states that it opposed the motion, saying its current arrangement will make it more likely that directors will have more experience, "thereby providing solid knowledge of the business and industry, long-term strategic planning, informed oversight of corporate policies and orderly development of strategies and operations to enhance stockholder value."