Document:

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                                                                    EXHIBIT 10.9

              SOFTWARE DEVELOPMENT, SERVICE AND LICENSE AGREEMENT

     THIS SOFTWARE DEVELOPMENT, SERVICE AND LICENSE AGREEMENT (the "Agreement")
is entered into as of the date of the execution of this agreement between
VIRTGAME.COM CORP., a Delaware corporation ("Virtgame"), and COAST HOTELS AND
CASINOS, INC., a Nevada corporation ("Coast").  The Agreement shall not be
effective unless and until approved by the Board of Directors of Coast at its
January 17, 2000 meeting.

                                    RECITALS
                                    --------

     A.   Virtgame is engaged in the business of offering over the Internet
casino-style gaming operations and has successfully developed a web-based
software platform that allows Virtgame to accept sports wagers over the internet
from citizens of countries other than the United States of America.

     B.   Coast is engaged in the business of operating land-based casinos
licensed by the Nevada Gaming Commission ("Commission").

     C.   Coast wishes to engage Virtgame to develop a web-based software
platform and client interface that can be combined with Coast's existing and
future sportsbook network and operating procedures in order to allow Coast to
operate a closed loop intranet sports wagering system for individuals who are
using computers located in the State of Nevada.

     D.   Coast also wishes to obtain a non-exclusive 20 year license from
Virtgame for the developed system and to enter into an agreement with Virtgame
guaranteeing Coast that Virtgame will service (repair, upgrade and integrate)
the software for a ten year period at a specified price.

     NOW THEREFORE, in consideration of the mutual covenants and promises of the
parties, the sufficiency of which is hereby acknowledged, the parties agree as
follows:

      1. The Service.  Virtgame hereby agrees to develop, implement and install
         -----------
on behalf of Coast a web-based software platform and client interface that can
be combined with Coast's existing and future sportsbook network and operating
procedures in order to allow Coast to operate a closed loop intranet sports
wagering system for individuals who are using computers located in the state of
Nevada. ("the Service").  Virtgame shall make available to Coast (at Virtgame's
wholesale cost), certain data processing machines and associated hardware and a
nonexclusive license to Virtgame's proprietary PrimeLine\\(Tm)\\ ticket
writer/cashier, administration, and server executable software for the Service
(herein referred to as the "PrimeLine Software").  All machines and hardware
made part of the Service shall be purchased at Coast's expense and, upon payment
thereof by Coast, shall be the property of Coast.  It is currently estimated
that the cost of this hardware will be $45,000.

      2.   License.  In connection with its provision of the Service, Virtgame
hereby grants Coast a nonexclusive and non-assignable 20 year license to the
PrimeLine Software.  Coast shall have the right to utilize the PrimeLine "source
code" as necessary to make modifications to the
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                                                   DRAFT DATED NOVEMBER 17, 1999

system to further the business goals of Coast but shall have no right to
disseminate the source code to any third party other than as necessary to modify
the software platform to further the business goals of Coast.  Any disclosure to
a third party of the source code shall be accompanied by a "confidentiality
agreement" to be supplied by Virtgame and agreed to by Coast.  The "source code"
shall be kept in escrow at Virtgame's attorneys' office at Oppenheimer, Wolff
and Donnelly in Newport Beach, California, using a standard software escrow
agreement provided by Virtgame and agreed to by Coast.  Agreement with respect
to the escrow agreement shall be a condition precedent to the effectiveness of
this contract.

     3.   Duties and Responsibilities of Virtgame.
          ---------------------------------------

     3.1  General Description of the Service.  Virtgame shall be responsible for
          ----------------------------------
developing a web-based software platform to allow Coast to operate a closed loop
intranet sports wagering system for individuals who are using computers located
in the State of Nevada under performance standards that are at least equivalent
to services currently offered by "Sports Xction" which operates at the Union
Plaza Hotel in Las Vegas Nevada.  Virtgame shall also be responsible for
obtaining approval from the Nevada Gaming Commission to have such software
installed for gaming licensees in the State of Nevada.  Reports must be
generated which comply with the requirements of the Nevada Gaming Control Board.
Virtgame shall also assist Coast, at no additional charge, in integrating the
closed loop intranet sports wagering system with any other software system used
by Coast to operate writer/cashier and administration facilities.

Virtgame shall provide the following services:

     a.   General Features

            1.   Internet Portal with Coast Storefront (interface with current
                 homepage)

            2.   Server based homepage

            3.   User/Client Internet Interfaces and Accounts

            4.   Access Screening; Nevada Residents Only

            5.   Windows NT based Implementation

     b.   Internet Fixed-Odds Sports Portal

            1. Real-Time Update to sporting event with lines displayed/updated
            and selectable

            2.   User account definition and maintenance

            3.   Wagering and verification operating through a standard browser:
            Netscape or Explorer

            4.   One Write feature that changes odds for both sides of a game
                 (or total on game) with one push of a button

                                      -2-
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                                                   DRAFT DATED NOVEMBER 17, 1999

                 5.   Must be able to take bets on round robins and parlays.

          c.   Back Office and Book Database

                 1.   Fixed-Odds Sports Betting Back Office and Database

                 2.   PC Windows NT-based hardware configurations

                 3.   Full suite of Gaming Control Board approved reports

                 4.   CD ROM report backup

                 5.   Graphic Users Interface

     The Service will be developed as described above, in accordance with the
various standards and models, as may be modified by mutual written agreement of
the parties.  The relevant portions of Paragraph 3.1 may be superseded, as
applicable, by the detailed specifications for each module of the Service as the
parties may agree in writing from time to time.

     3.2  Services of Virtgame.  Virtgame agrees to:
          --------------------

                 (a)  develop, test and implement a real-time interface between
                      the PrimeLine Software, on the one hand, and Coast's
                      existing or future ticket writer/cashier and
                      administration facilities, on the other hand;

                 (b)  provide overall monitoring of the volume of activity on
                      the Service and related network connections to anticipate
                      and facilitate provision of additional equipment as may be
                      required from time to time; and

                 (c)  provide technical and application level support to Coast
                      in connection with its use of the Service.

     3.3. Timeline. Virtgame will perform the Services described in this
        paragraph and agree to have a working system installed for testing by
        the Nevada Gaming Control Board no later than June 15, 2000.

     4.   Duties and Responsibilities of Coast. Coast shall be responsible for
          ------------------------------------
procuring all governmental approvals and licenses to utilize the PrimeLine
software in the acceptance of wagers and ensuring that the Service and its
operation complies with all applicable Federal and state gaming laws.  In
addition, Coast shall:

                 (a)  provide to Virtgame reasonable access to Coast's existing
                 ticket writer/cashier and administration facilities throughout
                 the term of this Agreement;

                 (b)  provide Virtgame with the technical and other details
                 about Coast's existing and future ticket writer/cashier and
                 administration facilities and

                                      -3-
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                                                   DRAFT DATED NOVEMBER 17, 1999

                 reasonable Coast staff resources necessary to allow Virtgame to
                 design a client interface for its PrimeLine Software programs
                 and combine that software platform with Coast's existing ticket
                 writer/cashier and administration facilities;

                 (c)   purchase additional equipment after the date of
                 commencement of the Services, as necessary, according to the
                 volumes of usage of the Service;

                 (d)   verify and authorize all users of the Service for
                 purposes of ensuring compliance with all applicable Federal and
                 state gaming laws;

                 (e)   develop and implement a marketing plan to promote the
                 Service to existing and prospective Coast customers; and

                 (f)   Permit Virtgame to conduct all "tests" required by the
                 Gaming Control Board at one of the hotel-casino properties
                 operated by Coast.

     In addition to the foregoing, Coast shall use its best efforts to assist
Virtgame in marketing software systems similar to the Service to other land-
based casinos.  In connection therewith, Coast shall allow other land-based
casinos access to the Service, upon reasonable advance notice, for purposes of
observing the Service and its operation.  In consideration of Coast's efforts
under this paragraph, Virtgame shall pay to Coast ten percent (1 0%) of all
software license fees received by Virtgame from Nevada land-based casinos up to
an amount equal to the total amount of the Software Development and License Fees
paid by Coast under Section 5. 1.

     5.   Fees and Expenses.  In consideration of its services hereunder, Coast
          -----------------
shall pay Virtgame the following:

     5.1  Software Development and License Fee. A software development and
          ------------------------------------
license fee in the amount of $175,000 only upon the occurrence of the following
conditions:

          (a)   successful installation of the system by Virtgame;

          (b)   written acceptance of the system by Coast; and

          (c)   Coast being licensed to operate the system by the Nevada Gaming
     Commission.

     If the system does not operate as required by paragraph 3 herein, Coast has
no obligation to make any payment to Virtgame and Virtgame shall not be entitled
to any sums from Coast under any legal or equitable theory until such time as
the system supplied by Virtgame, complies with the specifications set forth in
paragraph 3.1 and the requirements of paragraph 5.1 herein.

     5.2  Monthly Maintenance Fees.  A monthly maintenance and servicing fee of
          ------------------------
$800 payable on the 15th day of each month after installation and acceptance.
Virtgame shall be obligated to provide the monthly maintenance and servicing for
the sum of $800 per month for a ten year period and may increase such amount on
an annual basis by no more than the percentage

                                     -4-
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                                                   DRAFT DATED NOVEMBER 17, 1999

increase in the Consumer Price Index for the Las Vegas metropolitan area.  If
Virtgame wishes to increase the service fee, written notice of such increase,
within the parameters set forth herein, must be given to Coast at least 60 days
before the fee increase.  Coast may cancel the maintenance and service contract
at any time upon 30 day written notice to Virtgame.

     6.   Termination A party may terminate this Agreement immediately upon
          -----------
giving written notice of termination to the other party upon the occurrence of
any of the following events: (i) the other party failing to cure a material
breach hereof committed by that party within 30 days after receiving written
notice thereof, such notice to provide adequate description of the nature of the
breach; (ii) the institution of proceedings by the other party under bankruptcy
or insolvency laws, for corporate reorganization, receivership or dissolution,
or similar proceedings; (iii) the pendency for more than 90 days of proceedings
against the other party under bankruptcy or insolvency laws, for corporate
reorganization, receivership or dissolution, or similar proceedings; (iv) the
other party making a general assignment for the benefit of creditors; (v) the
other party becoming insolvent; or (vi) either party ceasing to do business or
to do business relevant hereunder.

     7.   Hold Harmless.  Virtgame and Coast mutually agree to hold each other
          -------------
harmless against any damages resulting from, but not limited to, data
transmission delays, telecommunications errors, server failures, power failures,
or any other event that brings about a disruption of the use of the Service,
unless such damages are caused by the negligence of the other party.

     8.   Copyright and Licensing Rights.  Coast acknowledges and agrees that
          ------------------------------
the PrimeLine Software program is and shall remain the exclusive property of
Virtgame, subject to the non-exclusive license and source code access granted
under Section 2. Coast further acknowledges and agrees that the PrimeLine
Software comprises trade secrets protected by copyright law.  Coast agrees not
to use, copy, modify or transfer any element of the PrimeLine Software except as
expressly provided for herein.  Specifically, Coast agrees that it shall not
cause or allow the PrimeLine Software programs to be reverse engineered,
decompiled or disassembled, nor shall Coast otherwise attempt in any fashion to
obtain the source codes for the PrimeLine Software programs other than as
provided in paragraph 2. Coast acknowledges that Virtgame shall own all right,
title and interest in and to the PrimeLine Software program, along with the
underlying intellectual property and all modifications, translations and
improvements thereto.

     9.   Confidentiality
          ---------------

          9.1  Confidentiality Obligations.  During the term of this Agreement
               ---------------------------
and thereafter, except as specifically provided herein or to the extent
reasonably necessary to perform its obligations or exercise or enforce its
rights hereunder, neither party shall provide or disclose to any third party, or
itself use, unless authorized in writing to do so by the other party or required
by law, any information or matter that (i) constitutes or concerns the terms and
conditions of this Agreement, (ii) is provided to it by the other party
hereunder or as a result hereof, (iii) is owned by the other party as set forth
in Section 8, or (iv) regards any dealings or negotiations with the other party
related to this Agreement; provided, however, that the parties may consult with
their respective officers, employees, accountants, counsel, agents and advisors

                                      -5-
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                                                   DRAFT DATED NOVEMBER 17, 1999

with respect to such information and matters if said parties agree to abide by
the terms and conditions of this Section 9.

          9.2  Limitation on Confidentially.  Except with respect to information
               ----------------------------
and matter constituting or concerning the terms and conditions of this Agreement
or regarding any dealings or negotiations between the parties hereunder, the
parties shall have no confidentiality obligation under Section 9.1 hereof with
respect to any information or matter specified therein that (i) is already known
to them, (ii) is rightfully disclosed to them by a third party that is not
acting as an agent or representative for the other party, (iii) is independently
developed by or for them, (iv) is publicly known, or (v) is generally utilized
by unaffiliated third parties engaged in the same business or businesses as the
parties.  Any party claiming an exception to Section 9.1 hereof under this
Section 9.2 shall have the burden of proving the basis for the exception.

          9.3. Confidentiality Standards.  The parties shall follow the same
               -------------------------
procedures to ensure their compliance with the requirements of Section 9.1
hereof as they follow to protect their own confidential and proprietary
information and matter of a similar nature.

          9.4. Injunctive Relief Each party shall be entitled to injunctive
               -----------------
relief to enforce the other party's compliance with the obligations contained in
Section 9.1 hereof, it being understood and agreed that the parties will not
have an adequate remedy at law if such obligations are not complied with.

     10.  Miscellaneous
          -------------

          10.1 Relationship of the Parties.  The parties shall be independent
               ---------------------------
contractors hereunder and neither party shall have the power or authority to
bind the other party with respect to any third party.  Except as specifically
provided herein, each party shall bear its own costs and expenses.

          10.2.  Effect of Agreement.  This Agreement embodies the entire
                 -------------------
understanding between the parties with respect to the subject matter hereof and
supersedes any and all prior understandings and agreements, oral or written,
relating thereto.  Any amendment hereof must be in writing and signed by both
parties.

          10.3.  Force Majeure.  Each party's performance hereunder is subject
                 -------------
to interruption and delay due to causes beyond its reasonable control such as
acts of God, acts of any government, war or other hostility, the elements, fire,
explosion, industrial or labor dispute, inability to obtain necessary supplies
power failures, software failures, equipment failures, and telecommunication
failures and the like.  In the event of such interruptions or delays, the period
of performance shall be extended for a period of time equal to the interruption
or delay; provided, however, that, if any such interruption or delay continues
for more than 90 days, the party whose performance is not affected may terminate
this Agreement immediately upon giving written notice of termination to the
other party.

          10.4   LIMITATION OF LIABILITY.  EXCEPT AS SPECIFICALLY
                 -----------------------
PROVIDED HEREIN, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY
HEREUNDER FOR ANY PROFITS LOST BY THE OTHER PARTY OR FOR ANY
CONSEQUENTIAL, EXEMPLARY, INCIDENTAL, INDIRECT OR SPECIAL DAMAGES

                                     -6-
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                                                   DRAFT DATED NOVEMBER 17, 1999

SUFFERED BY THE OTHER PARTY, EVEN IF THE PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.

          10.5.  Limitation of Claims.  No claim, regardless of form, which in
                 --------------------
any way arises out of this Agreement or the parties' performance of this
Agreement may be made, nor action based upon such a claim brought, by either
party more than one year after the basis for the claim becomes known to the
party desiring to assert it.

          10.6.  Assignment.  Neither this Agreement nor any part or portion
                 ----------
hereof shall be assigned, sublicensed or otherwise transferred by either party
without the other party's prior written consent.

          10.7   Severability.  Should any provision of this Agreement be held
                 ------------
to be void, invalid, unenforceable or illegal by a court, the validity and
enforceability of the other provisions shall not be affected thereby.

          10.8.  Non-waiver.  Failure of either party to enforce any provision
of this Agreement shall not constitute or be construed as a waiver of such
provision nor of the right to enforce such provision.

          10.9.  Notices.  All notices required to be given hereunder shall be
given in writing by personal delivery or by overnight mail to Virtgame at 12625
High Bluff Drive, Suite 205A, San Diego, California 92130, Attention: Joseph R.
Paravia or such other address as Virtgame may so designate, and to Coast at 4500
West Tropicana Ave., Las Vegas, Nevada 89103, Attention: President or such other
address as Coast may designate, with a copy mailed to Barry Lieberman, Esq.,
General Counsel, 4500 West Tropicana Ave., Las Vegas, Nevada 89103.  Notice
shall be deemed given upon such delivery or when so mailed, respectively.

          10.10. Governing Law.  This Agreement shall be governed by and
                 -------------
construed under the laws of Nevada.

          10.11. Disputes.  The parties shall attempt to resolve all disputes
                 --------
arising out of this Agreement in a spirit of cooperation without formal
proceedings.  Any dispute which cannot be so resolved shall be subject to
arbitration upon written demand of either party.  Arbitration shall take place
in Las Vegas, Nevada, or at another location if the parties so agree.  The
arbitration shall take place before an arbitration panel chosen as follows: The
parties shall each choose an arbitrator, and the two arbitrators shall choose a
third arbitrator and determine the third arbitrator's compensation.  Each party
shall have one veto over the choice of the third arbitrator.  The three
arbitrators shall schedule an informal proceeding, hear the arguments, and
decide the matter by secret majority vote.  Unless the arbitrators decide
otherwise, each party shall pay the costs of its own arbitrator, and shall pay
half of the other costs of the arbitration proceeding.  Each party shall have
the right to have the proceedings transcribed.  The arbitrators shall not have
the authority to award punitive damages or any other form of relief not
contemplated in the contract.  The majority of arbitrators shall render a
written opinion setting forth the basis on which they arrived at the decision
regarding each issue submitted to arbitration; the dissenting arbitrator, if
any, shall not issue a dissenting opinion.  Regarding each issue submitted to
arbitration, the decision shall be final and binding only to the extent it is
accompanied by a

                                     -7-
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                                                   DRAFT DATED NOVEMBER 17, 1999

written explanation of the basis upon which it was arrived at.  Judgment upon
the award if any, rendered by the arbitrators may be entered in any court having
jurisdiction thereof Should any legal action permissible under this agreement be
instituted to enforce the terms and conditions of this agreement, in particular
the right to collect money due on unpaid invoices, the prevailing party shall be
entitled to recover reasonable attorney's fees and expenses incurred at both the
trail and appellate levels.

          10.12 Headings And Captions.  The headings and captions contained in
                ---------------------
this Agreement are inserted for convenience only and shall not constitute a part
hereof.

          11.   Warranties and Representations.  Virtgame warrants as follows:
                ------------------------------

          (a)   It has the legal authority and ability to enter into this
          Agreement and to license the software that is the subject of this
          agreement;

          (b)   That for a period of one year from the date of installation the
          software installed shall be free from any defects;

          (c)   If within the warranty period, any Software defect is
          discovered, Coast shall notify Virtgame of the defect. Within two
          business days of any receipt of written notice of a software defect to
          Virtgame, Virtgame shall repair the defect.

          (d)   Virtgame will provide service under the warranty and under the
          maintenance agreement 12 hours per day, seven days per week. Non-
          emergency support via telephone access will be provided from 6 a.m to
          6 p.m. Pacific Standard Time, seven days per week

     (e)  It will indemnify Coast for all costs and attorneys fees incurred by
Coast in connection with any claims of patent infringement by third parties
against Coast arising from the operation by Coast of the Virtgame Primeline
system.  Coast shall notify Virtgame of any claim of infringement within 20 days
after notice is received by Coast.  Virtgame shall have the right to assume the
defense of any action claiming infringement and will not be liable to indemnify
Coast for costs and attorneys fees incurred by Coast after Virtgame notifies
Coast of its decision to assume the defense of the infringement case.

                                      -8-
<PAGE>

                                                   DRAFT DATED NOVEMBER 17, 1999

    IN WITNESS WHEREOF, the parties have executed this Agreement by their
authorized representatives as of the day and year first written above.

                              "VIRTGAME.COM"

                        VIRTGAME.COM CORP.,
                         a Delaware corporation

                         By: ___________________________
                             J R. Paravia, Chief Executive Officer

                             "COAST"

                        COAST HOTELS AND CASINOS, INC.
                             a Nevada corporation

                         By:___________________________

                                      -9-<PAGE>

                                                                   EXHIBIT 10.17

                             EMPLOYMENT AGREEMENT
                             --------------------

Agreement by and between Gateway, Inc., a Delaware corporation (the "Company")
and Jeffrey Weitzen (the "Executive"), made as of the 8th day of December, 1999.

     1.   Employment Period.  The Company hereby agrees to employ the Executive,
          -----------------
and the Executive hereby accepts such employment, pursuant to the terms and
conditions set forth in this Agreement, for a period commencing January 1, 2000
(the "Commencement Date") and ending December 31, 2003, unless terminated
earlier as provided herein (the "Initial Employment Period"), provided that the
Initial Employment Term shall be automatically extended for successive one (1)
year periods ("Additional Periods") unless terminated earlier as provided herein
or a party gives written notice to the other party of non-extension at least
ninety (90) days prior to the end of the Initial Employment Period or the then
Additional Period.  A notice of non-extension by the Company shall be deemed a
Termination without Cause as of the end of the then Initial Employment Period or
Additional Period or such earlier date after notice as the Executive shall
elect.  The period of Executive's actual employment hereunder after the
Commencement Date shall be referred to herein as the "Employment Period."

     2.   Position and Duties.
          -------------------
          (a)  During the Employment Period, the Executive shall be employed as
President and Chief Executive Officer of the Company and shall report directly
to the Board of Directors of the Company (the "Board").  Executive shall have
the duties and authority commensurate with his positions in public companies of
similar size.
          (b)  The Executive shall devote substantially his full business time,
attention and efforts to his duties and responsibilities hereunder.  It shall
not be a violation of this Section for the Executive to (i) manage his personal
investments, (ii) be involved in charitable, civic and professional activities,
(iii) serve on for profit corporate boards or committees approved by the Board
or the Chairman of the Board or (iv) deliver lectures or fulfill speaking
engagements, provided that the activities referred to in subparts (i) through
(iv) do not interfere substantially with the performance of the Executive's
responsibilities as an employee of the Company or violate the Company's written
rules and policies.  In the event the Board notifies Executive in

                                       1
<PAGE>

writing that any such activity presents a conflict, or an appearance of a
conflict, of interest with the Company, or violates the Company's written rules
and policies, the Executive shall cease the activity as soon as reasonably
practicable. A copy of the Non-Competition Agreement signed by Executive as a
condition of employment is attached hereto as Exhibit "A" and made a part
hereof, provided that such agreement shall be deemed to have been modified to
provide that California rather than South Dakota law shall apply.

     3.   Salary, Bonus and Benefits.
          --------------------------
          (a)  Base Salary.  During the Employment Period, the Executive shall
               -----------
receive an annual base salary of at least $1,000,000 (as increased from time to
time, "Annual Base Salary"), payable pursuant to the Company's normal payroll
practices.  The Board may increase but not decrease Annual Base Salary from time
to time.
          (b)  Annual Bonus.  During the Employment Period, the Executive's
               ------------
annual target bonus shall be at least equal to 100% of the Executive's Annual
Base Salary (the "Target Bonus") and shall be increased or reduced in accordance
with the pay-out formula if established target performance goals are exceeded or
not met.  The target performance goals shall be established by the Compensation
Committee of the Board (the Compensation Committee) at the beginning of each
calendar year if pursuant to a plan subject to Section 162(m) of the Internal
Revenue Code or otherwise, by the Company.

          (c)  Benefits.  The Executive shall be treated in the same manner as,
               --------
and shall be entitled to such benefits and other perquisites as provided to,
other senior executive officers of the Company who are required to be listed in
the Company's annual proxy statement ("Reporting Officers"), as adjusted to
reflect his positions.  In this regard, the Executive shall be entitled to
benefits under the Company's vacation, benefit and welfare plans which are
generally applicable to other Reporting Officers including, without limitation,
the Company's relocation plan, 1996 Long-Term Incentive Equity Plan, Retirement
Savings Plan, Short-Term and Long-Term Disability Plans.

     4.   Stock Options.
          -------------

          (a)  Initial Option Grant. At the time Executive commenced employment
               --------------------
with the Company, Executive was given an initial option grant ("Initial
Options") to purchase 1,000,000 shares (which was thereafter adjusted for the
stock split that occurred on September 7,

                                       2
<PAGE>

1999) of Gateway common stock. The parties agree that the terms and conditions
of the grant of Initial Options (set forth in Executive's employment contract
dated January 19, 1998 and the grant) are incorporated herein by reference and
made a part hereof.

          (b)  New Option Grant.  The Executive is being granted by the
               ----------------
Compensation Committee, effective December 8, 1999, a ten year option to
purchase 2,000,000 shares of Gateway common stock (the "New Options").  The New
Options grant will have a grant price equal to the closing price on the New York
Stock Exchange of the Company's common stock on December 8, 1999 and is being
granted pursuant to, and be subject to, the terms of the Company's 1996 Long-
Term Incentive Equity Plan (the "Plan").  The New Options shall vest in four
equal installments on each of the first four anniversaries of the grant date,
provided that full vesting of the New Options shall occur upon any of the
following events (as each is defined in this Agreement):  (i) Termination
without Cause (Section 5(a)), (ii) Termination for Good Reason (Section 5(b)),
(iii) Change in Control (Section 5(c)), (iv) death while employed (Section
5(d)), or (v) termination as a result of Disability (Section 5(d)).  The
Executive shall have until the close of trading on the New York Stock Exchange
one (1) year from the date of (i) Termination without Cause, (ii) Termination
for Good Reason, (iii) termination for any reason on or after a Change in
Control, or (iv) death or termination on account of Disability to exercise all
vested New Options.  In all other cases of termination, the Executive shall have
ninety (90) days following termination to exercise all vested New Options.  In
the case of any termination, the above periods will be extended for a time
period equal to the length of any Company imposed blackout period because of
securities law restrictions (including without limitation Rule 10b-5) or
accounting limitations.  All New Options held by the Executive which are
unvested on the date of termination of employment will terminate and expire as
of the date of termination of employment.

          (c)  Recurring Options.  Commencing in calendar year 2000 and
               -----------------
thereafter in each calendar year during the Employment Period, the Company will
recommend to the Compensation Committee that the Executive receive, twice
annually in accordance with the terms of the Plan (or any replacement plan
therefor), an option grant (calculated using the Black Scholes formula of option
pricing) that would be equivalent to a Black Scholes value of $4,876,000.  For
example, using the Black Scholes formula, if the stock price of Gateway

                                       3
<PAGE>

common stock was $50/share at the time of the grant, the Executive would receive
160,026 shares of Gateway common stock ($4,876,000 divided by $30.47 [being the
Black Scholes value at $50/share], which equals 160,026 shares of stock). All
stock option grants under Sections 4(c) of this Agreement will be granted under,
and be subject to, the Plan (or its replacement). All recurring options granted
prior to those commencing in calendar year 2000 were, and shall continue to be,
subject to the terms of the grant and the Plan.

     5.   Termination of Employment.
          -------------------------
          (a)  Termination without Cause and Termination with Cause. The Company
               ----------------------------------------------------
may terminate the Executive's employment during the Employment Period without
Cause or with Cause. For purposes of this Agreement, Termination without Cause
shall mean any termination by the Company during the Employment Period other
than for Cause or as a result of death or Disability. Termination for Cause
shall mean termination, within one hundred twenty (120) days of the Chairman of
the Board becoming aware of the event, resulting from the Executive's (i)
conviction (including a plea of guilty or nolo contendere) of any felony of any
kind (other than Limited Vicarious Liability or a routine traffic infraction) or
any other crime (whether it is a felony or not) involving securities fraud or
theft of substantial assets of the Company, (ii) material breach of the Non-
Competition Agreement signed by Executive as a condition of employment (attached
hereto as Exhibit "A") which breach is not cured within twenty (20) days of
written notice thereof; (iii) willful misconduct with regard to the Company, or
gross neglect or dereliction of duty resulting in either case in material
economic harm to the Company; (iv) failure to attempt to follow in good faith
the reasonable lawful direction of the Board despite written instruction to do
so. Limited Vicarious Liability, as used above, shall mean any liability which
is (x) based on acts of the Company for which the Executive is charged solely as
a result of his offices with the Company and (y) in which he was not directly
involved or had prior knowledge of such actions or intended actions with, in
either case, knowledge or reasonable belief that a law was being violated by
such acts.

          Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless he has (i) had ten (10) days written
notice setting forth the reasons for the Company's intention to terminate for
Cause, (ii) had an opportunity to be heard before the Board, and (iii) received
a Notice of Termination from the Board stating that in the opinion of a

                                       4
<PAGE>

majority of the full Board that the Executive is guilty of the conduct set forth
above and specifying the particulars thereof.

          (b)  Good Reason.  The Executive may terminate employment for Good
               -----------
Reason.  Good Reason means:  (i) diminution in the Executive's titles, (ii) the
assignment of duties to the Executive that are materially and adversely
inconsistent with the Executive's positions, (iii) any material diminution in
Executive's authority, responsibility or reporting lines, including but not
limited to maintaining Executive's then positions in the Company but the Company
becoming more than fifty percent (50%) owned by another entity and Executive not
having the same titles, responsibilities and duties in the parent entity, (iv)
removal from, or failure to reelect Executive to, the Board, (v) any material
breach by the Company of this Agreement or (vi) the failure of the Compensation
Committee of the Board to make the grants to be recommended pursuant to Section
4(c).  If the Executive determines that Good Reason exists, the Executive must
notify the Company in writing, within 180 days following the Executive's
knowledge of the first event which the Executive determines constitutes Good
Reason, or such event shall not constitute Good Reason under this Agreement.  If
the Company remedies such event within thirty (30) days following receipt of
notice, the Executive may not terminate employment for Good Reason as a result
of such event.

          (c)  Change in Control.  Either the Company or the Executive may
               -----------------
terminate the Executive's employment for any reason within six (6) months
following the effective date of a Change in Control.  For purposes of this
Agreement, Change in Control shall have the same meaning as it does in the Plan.

          (d)  Death or Disability.  The Executive's employment shall terminate
               -------------------
automatically upon the Executive's death during the Employment Period.  The
Executive's employment under this Agreement shall terminate for "Disability"
where the Executive has been unable to render the material services required by
his position as President and Chief Executive Officer as a result of physical or
mental incapacity for a period of 180 consecutive days and the Company has
notified the Executive of such termination while he is so disabled.  The parties
agree that exceeding such a period would constitute an undue hardship for the
Company under Federal and state law including, without limitation, the Americans
with Disabilities Act and the California Fair Employment and Housing Act.

                                       5
<PAGE>

          (e)  Termination without Good Reason.  The Executive may terminate his
               -------------------------------
employment with the Company without Good Reason at any time.  Notice of non-
extension by the Executive shall be deemed a Termination without Good Reason at
the end of the Employment Period.

          (f)  Notice of Termination. Any termination of the Executive's
               ---------------------
employment by the Company or by the Executive shall be communicated by Notice of
Termination to the other party in accordance with Sections 5 and 9(b) of this
Agreement.  For purposes of this Agreement, a Notice of Termination means a
written notice which (i)  indicates the specific termination provision in this
Agreement being relied upon, (ii) to the extent practicable, sets forth in
reasonable detail the facts and circumstances claimed to provide the basis for
termination, and (iii) if the date of termination is other than the date of
receipt of such notice, specifies the termination date.

     6.   Payment Obligations of the Company upon Termination.
          ---------------------------------------------------

          (a)  Termination without Cause; Termination for Good Reason; Change in
     ---------------------------------------------------------------------------
Control. Upon (i) Termination without Cause (including notice of non-extension
-------
by the Company), (ii) Termination for Good Reason, or (iii) Termination for any
reason (other than Cause) within six (6) months after the effective date of a
Change in Control, the Company shall pay the Executive an amount equal to three
(3) times the sum of (i) Executive's Annual Base Salary plus (ii) the lesser of
(x) the highest annual incentive bonus received by the Executive during either
of the last two completed fiscal years and (y) an amount equal to the
Executive's Annual Base Salary. The amount will be paid in a single lump sum
payment within twenty (20) days after the date of termination. The parties agree
that this payment will be the Executive's sole and exclusive remedy for
termination under this Section 6(a) of the Agreement. The parties further agree
that if Executive gives Notice of Termination as a result of a Change in
Control, the Executive will (at the option of the Company) either (i) continue
in his then position as an employee of the Company (at Executive's then existing
Annual Base Salary) for a period of three (3) months following the effective
date of the Change in Control (unless terminated earlier by the Company for
Cause or by the Executive for Good Reason) or (ii) provide senior level
consulting services to the Company as an employee for a period of three (3)
months following the effective date of the Change in Control, in either case on
the same compensation terms as then existing,

                                       6
<PAGE>

prorated for the 3 month period. Any Company stock options or other equity, if
any, held by the Executive as of the date of termination will be handled in
accordance with Section 4 of this Agreement and the applicable plan and grants.
In addition, the Executive will be entitled to Accrued Amounts, as defined in
Section 6(d) below.

          (b)  Termination for Cause or without Good Reason.  If the Executive's
               --------------------------------------------
employment is terminated by the Company for Cause or by the Executive without
Good Reason during the Employment Period, the Company will pay to the Executive
the Executive's Annual Base Salary through the date of termination, to the
extent not yet paid, and the Company shall have no further obligations under
this Agreement.  In addition, all outstanding Company stock options and other
equity awards, if any, will be handled in accordance with Section 4 of this
Agreement and the applicable plan and grants.  In addition, the Executive will
also be entitled to other Accrued Amounts.

          (c)  Death or Disability.  If the Executive's employment is terminated
               -------------------
by reason of the Executive's death or Disability not covered by Section 6(a)
during the Employment Period, the Company will pay the Executive (or the
Executive's heirs or representatives, if applicable) the Executive's Annual Base
Salary through the date of termination, to the extent not yet paid and other
Accrued Amounts.  In addition, any Company stock options or other equity, if
any, held by the Executive as of the date of termination will be handled in
accordance with Section 4 of this Agreement and the applicable plans and grants.

          (d)  Accrued Amounts shall mean (i) Annual Base Salary, benefits,
fringes and expense reimbursements due for the period prior to any termination,
(ii) any bonuses earned but unpaid for any prior fiscal year and, unless a
termination covered by Section 6(b) above, a pro rata bonus (based on period of
service in the current fiscal year and on actual achievement against targets
during the fiscal year) and (iii) any other amounts due under the terms of any
plan or program.

     7.   Excise Tax.
          ----------

          (a)  In the event that any payment made, directly or indirectly, by
the Company to or for the benefit of the Executive (which payment is contingent
on a change in the ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company, as those terms
are defined under Internal Revenue Code ("Code") Section

                                       7
<PAGE>

280G) (a "Change in Ownership") (a "Payment") is subject to excise tax imposed
by Section 4999 of the Code on "Excess Parachute Payments" as defined in Section
280G of the Code ("Excise Tax"), then the Executive shall be entitled to receive
an amount equal to such Excise Tax (the "Gross-Up Payment") but will not be
reimbursed for any excise tax or additional taxes payable with respect to such
Gross-Up Payment.

          (b)  Subject to the provisions of 7(c), and any determination by the
Internal Revenue Service, all determinations required to be made under this
Section 7, including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment, shall be made by the Company's auditors
immediately prior to the Change in Ownership in consultation with the Executive
and his advisors.  Any Gross-Up Payment, as determined pursuant to this Section
7, shall be paid by the Company to the Executive within ten (10) days of the
auditor's determination.  Notwithstanding the foregoing, in the event that the
Gross-Up Payment, net of all applicable income, excise and payroll taxes, is
less than the amount that Executive would receive, net of all applicable income,
excise and payroll taxes, if Executive's total compensation were reduced to the
level that is the maximum amount Executive could receive without there being any
"Excess Parachute Payment" under Section 280G of the Code (the "No Parachute
Maximum"), Executive's compensation shall be reduced to the No Parachute Maximum
by reducing the lump sum payment due hereunder.

          (c)  If the Executive receives notice from the Internal Revenue
Service of any claim related to Excess Parachute Payments, the Executive shall
promptly notify the Company. If the Company notifies the Executive in writing
that it desires to contest any claim of Excess Parachute Payment, the Executive
shall:

               (i)    give the Company any information reasonably requested by
                      the Company relating to such claim;

               (ii)   take such action in connection with contesting such claim
                      as the Company shall reasonably request from time to time,
                      including, without limitation, accepting legal
                      representation with respect to such claim by an attorney
                      selected by the Company and reasonably acceptable to
                      Executive;

                                       8
<PAGE>

               (iii)  cooperate with the Company in good faith in order
                      effectively to contest such claim; and

               (iv)   permit the Company to participate in any proceeding
                      relating to such claim.

The Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such contest.  Without limitation on the foregoing
provisions of this Section 7(c), the Company shall control all proceedings taken
in connection with such contest (except to the extent there are issues unrelated
to Code Section 4999 being simultaneously contested) and, at its sole option,
may pursue or forgo any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct the Executive to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner, and the Executive
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free basis
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance.

          (d)  If, after receipt by the Executive of an amount advanced by the
Company pursuant to Section 7(c), the Executive becomes entitled to receive a
refund with respect to such claim, the Executive shall promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto).

     8.   Successors.
          ----------

          (a)  This Agreement is personal to the Executive and shall not be
assignable by the Executive except by will or the laws of descent and
distribution.  This Agreement shall inure to the benefit of and be enforceable
by the Executive's heirs or legal representatives.  Notwithstanding the
foregoing, any amounts that become payable hereunder pursuant to

                                       9
<PAGE>

Section 6, shall be payable to Executive's estate if not paid prior to the
Executive's death.

          (b)  This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns, provided that the Company may not
assign this Agreement except in connection with the assignment or disposition of
all or substantially all of the assets or stock of the Company or by law as a
result of a merger or consolidation and only if such assignee promptly delivers
to Executive a written assumption of this Agreement in form and substance
reasonably acceptable to Executive.

     9.   Miscellaneous.
          -------------
          (a)  This Agreement shall be governed, by, and construed in accordance
with, the laws of the State of California, without reference to its conflict of
law rules.  The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.  This Agreement may not be amended or
modified except by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
          (b)  All notices and other communications under this Agreement shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

               If to the Executive
               -------------------

               Jeffrey Weitzen
               Chief Executive Officer
               4545 Towne Centre Court
               San Diego, CA  92121

               If  to the Company
               ------------------

               Gateway Inc.
               4545 Towne Centre Court
               San Diego, CA 92121
               Attn: General Counsel

or to such other address as either party furnishes to the other in writing in
accordance with this Section 10(b).  Notices and communications shall be
effective when actually received by the addressee.

                                       10
<PAGE>

          (c)  The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.  If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.

          (d)  Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.

          (e)  The Executive's or the company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.

          (f)  Except as provided herein, the Executive and the Company
acknowledge that this Agreement constitutes the entire agreement between the
parties and supersedes any prior agreement between the Executive and the Company
concerning the subject matter hereof, including without limitation, as of the
Commencement Date the Executive's current employment agreement dated January 19,
1998 ("Prior Agreement").  The Executive agrees that, except as provided herein,
the Prior Agreement shall terminate as of the Commencement Date, and the
Executive explicitly waives any rights to payments or benefits under the Prior
Agreement, other than any accrued base salary or benefits owed and unpaid prior
to the Commencement Date.  The Executive shall not be entitled to participate in
any severance plans or severance programs of the Company during the Employment
Period.

          (g)  The Company shall indemnify Executive with respect to claims
(both during and after employment) relating to Executive's service as an
employee, officer and director of the Company and its affiliation and as a
fiduciary of any benefit plan of any of the foregoing to the full extent
permitted by applicable law and the Company shall cover the Executive under the
Company's Directors and Officers indemnification insurance policy (as in effect
from time to time) both during and after employment with regard to actions or
inactions in such capacities.

          (h)  The Company will reimburse Executive for all legal fees and
expenses incurred in reviewing this Agreement.  In addition, the prevailing
party in any litigation with regard to this Agreement or the grants hereunder,
as determined by the Court, shall be awarded

                                       11
<PAGE>

by the Court his or its reasonable legal fees and disbursements, provided that
such fees and disbursements shall not exceed one tenth of one percent of the
paying party's net worth at the time of the judgment.

          (i)  This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.

IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization of its Board of Directors, the Company has caused
this Agreement to be executed in its name on its behalf, all as of the day and
year first above written.

                                        COMPANY

                                        By:   _________________________________

                                        Title:_________________________________

                                              __________________________________
                                              Jeffrey Weitzen

                                       12

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