FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17932
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Micron Electronics, Inc.
------------------------------------
(Exact name as specified in charter)
Minnesota 41-1404301
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
900 E. Karcher Road, Nampa, Idaho 83687
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (208) 893-3434
---------------
Indicate by check mark whether the registrant (1) has filed all
reports required to the filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
The number of outstanding shares of the registrant's Common Stock as
of December 20, 1995 was 91,368,659.
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Micron Electronics, Inc.
Balance Sheets
(Dollars in thousands, except par value amounts)
<TABLE>
<CAPTION>
As of November 30, August 31,
1995 1995
- --------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Cash and equivalents $ 69,529 $ 69,406
Receivables 164,508 128,744
Inventories 129,272 92,709
Deferred income taxes 19,512 16,086
Other current assets 1,753 1,810
-------- --------
Total current assets 384,574 308,755
Property, plant and equipment, net 65,640 58,254
Goodwill, net 11,398 12,612
Other assets 2,111 3,095
-------- --------
Total assets $463,723 $382,716
======== ========
Liabilities and shareholders' equity
Accounts payable and accrued expenses $240,437 $177,437
Accrued licenses and royalties 24,909 23,844
Current portion of long-term debt 988 1,022
-------- --------
Total current liabilities 266,334 202,303
Long-term debt 5,436 5,801
Other liabilities 950 949
-------- --------
Total liabilities 272,720 209,053
-------- --------
Commitments and contingencies
Common stock, $0.01 par value, authorized,
150.0 million shares, issued and
outstanding, 91.4 million shares 914 914
Additional capital 59,507 58,613
Retained earnings 130,582 114,136
-------- --------
Total shareholders' equity 191,003 173,663
-------- --------
Total liabilities and shareholders' equity $463,723 $382,716
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
Micron Electronics, Inc.
Statements of Operations
(Amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Fiscal quarter ended November 30, December 1,
1995 1994
- --------------------------------------------------------------------------
<S> <C> <C>
Net sales $438,578 $134,329
Cost of goods sold 379,866 105,305
-------- --------
Gross margin 58,712 29,024
Selling, general and administrative 31,387 10,250
Research and development 661 185
-------- --------
Operating income 26,664 18,589
Interest income, net 1,028 217
-------- --------
Income before income taxes 27,692 18,806
Income tax provision 11,077 7,200
-------- --------
Net income $ 16,615 $ 11,606
======== ========
Earnings per share $ 0.18 $ 0.14
Number of shares used in per share
calculation 92,566 83,933
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Micron Electronics, Inc.
Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Fiscal quarter ended November 30, December 1,
1995 1994
- --------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 16,615 $ 11,606
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 4,096 1,838
Amortization 1,319 2
(Increase) decrease in receivables (35,764) 3,636
Increase in inventories (36,563) (13,533)
Increase in accounts payable and
accrued expenses 59,365 3,894
Increase in accrued licenses and
royalties 1,064 463
Increase in net deferred income tax
assets (2,803) (1,010)
Other 690 (56)
-------- --------
Net cash provided by operating activities 8,019 6,840
-------- --------
Cash flows from investing activities
Property, plant and equipment expenditures (8,076) (8,094)
Proceeds from sale of equipment 396 17
Purchase of held-to-maturity investments - (987)
Proceeds from maturity of investments - 2,200
Other (39) (5)
-------- --------
Net cash used for investing activities (7,719) (6,869)
-------- --------
Cash flows from financing activities
Repayments of debt (253) (257)
Proceeds from issuance of common stock 334 47
Purchase and retirement of stock (258) (7)
-------- --------
Net cash used for financing activities (177) (217)
-------- --------
Net increase (decrease) in cash and
equivalents 123 (246)
Cash and equivalents at beginning of
period 69,406 35,048
-------- --------
Cash and equivalents at end of period $ 69,529 $ 34,802
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Micron Electronics, Inc.
Notes to Financial Statements
(Tabular dollar amounts in thousands, except per share amounts)
1. Unaudited Interim Financial Statements
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting solely of normal recurring
adjustments) necessary to present fairly the financial position of Micron
Electronics, Inc. and subsidiaries ("MEI" or the "Company") and their
results of operations and cash flows.
This report on Form 10-Q for the fiscal quarter ended November 30, 1995,
should be read in conjunction with the Company's Annual Report to
Shareholders on Form 10-K for the fiscal year ended August 31, 1995.
2. The Merger
On April 7, 1995, Micron Computer, Inc. ("MCI") and Micron Custom
Manufacturing Services, Inc. ("MCMS"), subsidiaries of Micron Technology,
Inc. ("MTI"), merged with and into ZEOS International, Ltd. ("ZEOS").
Pursuant to the terms of the merger, ZEOS issued approximately 82.5 million
shares of its common stock in exchange for all of the outstanding shares of
MCI and MCMS and the name of the surviving corporation was changed to
Micron Electronics, Inc. The merger resulted in a change of control of
approximately 89% of ZEOS wherein, assuming exercise of all outstanding
options, (a) MTI owned an approximate 79% interest in ZEOS, and (b) the
other shareholders of MCI and MCMS owned an approximate 10% interest in
ZEOS. The merger has been accounted for as a purchase of ZEOS by MCI and
MCMS. A new basis of accounting was established for the assets and
liabilities of ZEOS to the extent of the change of control. The new basis
reflects the allocation of the approximate $39,136,000 increased basis to
the ZEOS assets and liabilities on the basis of their fair values.
Goodwill of approximately $14,574,000 was recorded to the extent the
purchase price exceeded the fair value of the identifiable net assets for
which a change of control occurred. Goodwill is amortized on a straight
line basis over three years. Accumulated goodwill amortization as of
November 30, 1995 was approximately $3,176,000.
The Company's fiscal year is a 52 or 53 week period ending on the Thursday
closest to August 31, which was the fiscal year of MCI and MCMS.
Subsequent to the merger, the financial statements of the Company reflect
the combined results of operations, financial position and cash flows of
ZEOS, MCI and MCMS based on the new basis of accounting for ZEOS and the
historical cost basis of MCI and MCMS. Prior to April 7, 1995, the
financial statements of the Company include only the combined results of
operations, financial position and cash flows of MCI and MCMS.
<TABLE>
<CAPTION>
3. Receivables
November 30, August 31,
1995 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Trade receivables $162,036 $126,040
Receivables from affiliates, net 8,827 8,379
Other 1,718 1,070
Allowance for doubtful accounts (5,975) (5,458)
Allowance for returns and discounts (2,098) (1,287)
-------- --------
$164,508 $128,744
======== ========
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
4. Inventories
November 30, August 31,
1995 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies $ 89,394 $ 75,045
Work in progress 33,251 19,407
Finished goods 15,045 8,843
Allowance for inventory obsolescence (8,418) (10,586)
-------- --------
$129,272 $ 92,709
======== ========
</TABLE>
<TABLE>
<CAPTION>
5. Property, Plant and Equipment
November 30, August 31,
1995 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Land $ 987 $ 987
Buildings 15,899 15,643
Equipment 77,238 71,502
Construction in progress 13,934 7,259
-------- --------
108,058 95,391
Less accumulated depreciation and amortization (42,418) (37,137)
-------- --------
$ 65,640 $ 58,254
======== ========
</TABLE>
<TABLE>
<CAPTION>
6. Accounts Payable and Accrued Expenses
November 30, August 31,
1995 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Trade accounts payable $139,776 $ 99,065
Payables to affiliates 61,431 53,750
Salaries, wages and benefits 11,471 11,086
Income taxes payable to parent corporation 13,688 4,686
Other 14,071 8,850
-------- --------
$240,437 $177,437
======== ========
</TABLE>
<TABLE>
<CAPTION>
7. Long-Term Debt
November 30, August 31,
1995 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Notes payable to parent corporation in
quarterly installments through March 2002,
variable interest rates of 7.4% and 7.6%,
respectively $ 6,424 $ 6,672
Other - 151
-------- --------
6,424 6,823
Less current portion (988) (1,022)
-------- --------
$ 5,436 $ 5,801
======== ========
</TABLE>
5
<PAGE>
8. Income Taxes
The estimated effective income tax rate for fiscal 1996 is 40.0%.
The effective income tax rate principally reflects the statutory
corporate income tax rate, the net effect of state taxation and
goodwill amortization.
9. Earnings Per Share
Earnings per share is computed using the weighted average number of common
and common equivalent shares outstanding. Common equivalent shares result
from the assumed exercise of outstanding stock options and affect earnings
per share when they have a dilutive effect. All historical per share
amounts have been restated to reflect stock splits and the effect of the
merger transaction (see "2. The Merger").
10. Commitments
As of November 30, 1995, the Company had commitments of approximately
$12,904,000 for equipment purchases and $1,951,000 for the construction of
buildings.
11. Contingencies
Periodically, the Company is made aware that the technology used by the
Company may infringe on product or process technology rights held by others.
The Company has accrued a liability and charged operations for the estimated
costs of settlement or adjudication of these asserted claims for alleged
infringement and other unasserted claims arising prior to the balance sheet
date. The ultimate resolution of these claims is not expected to have a
material effect on the results of operations or financial position of the
Company.
The Company is currently a party to various other legal actions, none of
which are expected to have a material effect on the Company's financial
position or results of operations.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Micron Electronics, Inc. and its subsidiaries ("MEI" or the "Company")
manufactures electronic products for a wide range of computing and digital
applications. The Company develops, markets, manufactures, sells and
supports PC systems for consumer and business use, provides contract
manufacturing services to original equipment manufacturers and maintains
a component recovery operation.
The Company completed its first fiscal quarter of 1996 on November 30,
1995. On April 7, 1995, Micron Computer, Inc. ("MCI") and Micron Custom
Manufacturing Services, Inc. ("MCMS") merged with and into ZEOS
International, Ltd. ("ZEOS"), and the surviving company's name was changed
to Micron Electronics, Inc. (the "Merger"). The Company's fiscal year is a
52 or 53 week period ending on the Thursday closest to August 31. All
quarterly references are to the Company's fiscal quarters ended November
30, 1995, and December 1, 1994, unless otherwise indicated. All tabular
dollar amounts are presented in thousands.
Results of Operations
The Company's results of operations reflect the merged operations of
the Company subsequent to April 7, 1995, and the combined results of
operations of only MCI and MCMS prior thereto:
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------
November 30, 1995 December 1, 1994
----------------- ----------------
Percent Percent
Amount of Sales Amount of Sales
------ -------- ------ --------
<S> <C> <C> <C> <C>
Net sales $438,578 100.0% $134,329 100.0%
Cost of goods sold 379,866 86.6% 105,305 78.4%
Gross margin 58,712 13.4% 29,024 21.6%
Selling, general and
administrative expenses 31,387 7.2% 10,250 7.6%
Net income 16,615 3.8% 11,606 8.6%
</TABLE>
Pro Forma Discussion and Analysis
Due to the significance of the Merger, the Company believes that
discussion and analysis of the Company's results of operations on a pro
forma basis, which include ZEOS' results of operations prior to the Merger,
provides a more meaningful comparison than discussion and analysis of actual
results of operations which include only the combined operations of MCI
and MCMS prior to the Merger. The following discussion and analysis
presents the Company's results of operations for the first quarter of 1996
ended November 30, 1995, as compared to the Company's pro forma results of
operations for the first quarter of 1995 ended December 1, 1994, as if the
Merger had occurred at the beginning of the first quarter of 1995, after
giving effect to pro forma adjustments, including amortization of goodwill,
certain product and process technology costs and related income tax
effects.
The pro forma information is provided for illustrative purposes and is
not necessarily indicative of the combined results of operations that would
have occurred if ZEOS, MCI, and MCMS had been combined at the beginning of
the first fiscal quarter of 1995, nor does it represent a forecast of
results of operations for any future periods.
7
<PAGE>
The following is a summary of the Company's results of operations for
the quarter ended November 30, 1995, and the pro forma results of
operations for the quarter ended December 1, 1994:
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------
November 30, 1995 December 1, 1994
----------------- ----------------
Percent Percent
Amount of Sales Amount of Sales
------ -------- ------ --------
<S> <C> <C> <C> <C>
Net sales $438,578 100.0% $205,922 100.0%
Cost of goods sold 379,866 86.6% 168,101 81.6%
Gross margin 58,712 13.4% 37,821 18.4%
Selling, general and
administrative expenses 31,387 7.2% 19,868 9.6%
Net income 16,615 3.8% 10,877 5.3%
</TABLE>
Net Sales
Net sales for the quarter ended November 30, 1995 and pro forma net
sales for the quarter ended December 1, 1994, for the Company's separate
product lines are set forth below:
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------
November 30, 1995 December 1, 1994
----------------- ----------------
Percent Percent
Amount of Sales Amount of Sales
------ -------- ------ --------
<S> <C> <C> <C> <C>
PC systems $299,797 68.4% $136,863 66.5%
Contract manufacturing 100,552 22.9% 27,820 13.5%
Component recovery 38,229 8.7% 41,239 20.0%
-------- ------ -------- ------
Total net sales $438,578 100.0% $205,922 100.0%
======== ====== ======== ======
</TABLE>
In September 1995, the Company combined its component recovery and
peripheral add on module product operations. To conform to the
presentation in the first quarter of 1996, peripheral add-on memory
sales have been reclassified to component recovery sales. This
reclassification did not affect the results of operations.
Net sales for the first quarter of 1996 were approximately 113% higher
than pro forma net sales for the first quarter of 1995, primarily as a
result of a significant increase in the number of desktop PC systems sold
and significantly higher contract manufacturing sales, partially offset by
slightly lower component recovery sales over the comparable periods.
PC Systems
- ----------
PC system net sales were significantly higher in the first quarter of
1996 compared to the first quarter of 1995, primarily as a result of
significantly higher PC system unit sales and, to a lesser extent, higher
average selling prices. Unit sales of PC systems in the first quarter of
1996 increased approximately 111% compared to pro forma unit sales in the
first quarter of 1995, primarily as a result of a significant increase in
the number of desktop PC systems sold. Sales of notebook PC systems
remained relatively constant for the comparative periods. Approximately
99% of PC system unit sales in the first quarter of 1996 were of desktop
systems, whereas sales of notebook PC systems represented approximately 5%
of first quarter 1995 pro forma unit sales. The increase in unit sales of
desktop PC systems in the first quarter of 1996 resulted primarily from a
significantly higher direct unit sales of Micron brand PC systems and
higher government contract unit sales, offset in part by a decline in
direct unit sales of ZEOS brand desktop PC systems. The Company believes
that direct unit sales of Micron brand PC systems increased primarily as a
result of an increase in name recognition and market acceptance.
Increased name recognition and market acceptance resulted primarily
from the receipt of a number of awards from computer trade magazines
relating to the price/performance characteristics of Micron brand PC
systems and to the Company's service and support functions. In the
event that the Company is unsuccessful in winning awards from
8
<PAGE>
computer trade magazines in the future, consumer interest in its PC
systems could decline materially. In general, sales of Micron and
ZEOS brand PC systems benefited from continued strong demand in the
market for PC products during both periods reported.
Overall average selling prices of PC systems were slightly higher in
the first quarter of 1996 over the first quarter of 1995 due primarily to a
continuing shift from the 486 microprocessor based PC systems to the
relatively higher priced Pentium microprocessor based PC systems. The
increase in overall average selling prices was offset in part by reductions
in pricing of older models.
Government sales of the Company's PC products in the first quarter of
1996 constituted approximately 20% of the Company's overall PC system net
sales. Of this amount, a substantial majority is attributable to sales
under the Company's "PC-1" Subcontract Agreement. In the first quarter
of 1996, sales under the PC-1 contract increased substantially
due to full implementation of the PC-1 contract and seasonal government
purchasing trends. It is currently anticipated that sales under the PC-1
contract will decline in the second quarter of 1996 due primarily to
seasonal government purchasing trends resulting in reduced orders.
A substantial decrease in shipments of PC systems under the PC-1 contract
could have an adverse effect on overall PC system net sales.
The Company continues to evaluate its PC product and manufacturing
strategies, including (i) the coordination of Micron and ZEOS brand
marketing strategies, (ii) the coordination and potential integration of
Micron and ZEOS product lines, and (iii) the possible integration of
manufacturing operations. Integration of the Micron and ZEOS brand product
lines or integration of manufacturing operations could result in a number
of adverse consequences, including, but not limited to, a decrease in
overall PC unit sales and the recognition of associated expenses, which
could have a material adverse effect on the Company's results of
operations.
Contract Manufacturing
- ----------------------
Contract manufacturing sales were significantly higher in the first
quarter of 1996 compared to the first quarter of 1995 primarily due to
increased manufacturing capacity obtained through the addition of three
surface mount technology ("SMT") production lines and the upgrade of
existing production lines. This brings the Company's total number of SMT
lines to eight. The production line expansion and upgrades were made in
response to an increase in demand for the Company's contract manufacturing
services from OEM customers and an increase in demand for memory module
products manufactured for Micron Technology, Inc. ("MTI"), the Company's
parent corporation. Production from the Company's North Carolina facility
accounted for approximately 13% of the Company's contract manufacturing
sales for the first quarter of 1996.
In the first quarter of 1996, the five largest contract manufacturing
customers, including MTI, accounted for 75% of the Company's contract
manufacturing sales, compared to 62% for the five largest customers in the
first quarter of 1995. Modules manufactured for MTI represented 12% of
contract manufacturing sales in the first quarter of 1996 compared to 13%
in the comparable quarter of 1995. MTI is establishing a SMT operation
for a significant amount of its expected module requirements. In the
event that MTI adds SMT manufacturing lines at a rate which exceeds
its overall demand for module production, demand for those services from
the Company may decline. The loss of all or a significant portion of this
business could have an adverse effect on the Company's results of
operations.
Component Recovery
- ------------------
Component recovery sales were approximately 7% lower in the first
quarter of 1996 compared to the same period in 1995, but were 49% lower
compared to the fourth quarter of 1995. The decrease in component recovery
sales resulted primarily from a transition in nonstandard random access
memory ("RAM") product mix received from the Company's primary supplier,
MTI, and from a decrease in unit sales of products sold in module form.
Changes in nonstandard RAM product mix resulted in increased testing times
and reduced output. The decrease in unit sales of products sold in module
form resulted from the integration of the module operation into the
component recovery operation in September 1995 and a change in focus
of the Company's module production and engineering resources to the
capacity expansion and product development of component recovery products.
9
<PAGE>
In general, the Company's component recovery product sales benefited
from continued strong industry-wide demand for semiconductor memory
products. However, in recent weeks, the industry has experienced downward
pressure on pricing for RAM products. Competition in the area
of component recovery is developing both from semiconductor memory
manufacturers which conduct such operations in-house and from independent
component recovery operations. Increased competition could result in both
price reductions and a decline in the supply of nonstandard RAM components.
The Company believes that pricing for memory products in the first calendar
quarter of 1996 is likely to be modestly lower than in the first fiscal
quarter of 1996.
Historically, a substantial portion of the nonstandard RAM components
used in the Company's component recovery operations has been obtained
from MTI. Unless the Company is able to obtain significant quantities of
nonstandard RAM components from alternative sources, the Company's
component recovery operations will be limited by the volume of nonstandard
RAM components supplied by MTI. MTI's operating results are favorably
affected by improvements in device yields throughout its semiconductor
manufacturing processes and, accordingly, MTI seeks continuous improvements
of such yields. Any reduction in the availability or functionality of
nonstandard RAM components from MTI could have a material adverse effect on
the Company's operating results.
Gross Margin
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------
November 30, 1995 % Change December 1, 1994
----------------- -------- ----------------
<S> <C> <C> <C>
Cost of goods sold $379,866 126.0% $168,101
Gross margin percentage 13.4% 18.4%
</TABLE>
Gross margin for the quarter ended November 30, 1995 was $58.7 million
and pro forma gross margin for the quarter ended December 1, 1994 was $37.8
million. The Company's overall gross margin percentage was lower in the
first quarter of 1996 than in the first quarter of 1995, primarily due to
significant increases in PC system sales and contract manufacturing sales
as a percentage of total net sales. The gross margin percentage
experienced by the Company's PC system sales and contract manufacturing
sales are generally lower than those experienced by the Company's component
recovery operations.
Gross margin realized from the Company's component recovery operation
in the first quarter of 1996 was relatively constant compared to the first
quarter of 1995, but was significantly lower than in the quarter ended
August 31, 1995. The decline in gross margin compared to the quarter
ended August 31, 1995, resulted from a significant decline in net sales.
Although gross margin percentages for the Company's PC systems
declined slightly in the first quarter of 1996 compared to the first
quarter of 1995, gross margin percentages for PC systems remained
relatively stable for the first quarter of 1996, as compared to the quarter
ended August 31, 1995. The Company continues to experience significant
pressure on its gross margin percentage as a result of intense competition
in the PC industry and consumer expectations of more powerful PC systems at
lower prices. Many of the Company's competitors have substantial resources
and purchasing power relative to the Company. Although the Company has
begun to realize some cost reductions for raw materials following the
merger, the Company's PC systems gross margin percentage continues to be
lower than those of its primary competitors.
Selling, General and Administrative Expenses
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------
November 30, 1995 % Change December 1, 1994
----------------- -------- ----------------
<S> <C> <C> <C>
Selling, general and
administrative expenses, $ 31,387 58.0% $ 19,868
Percent of net sales 7.2% 9.6%
</TABLE>
Selling, general and administrative expenses increased in absolute
dollars, but decreased as a percentage of net sales as compared to the
first quarter of 1995. The increase in absolute dollars during the first
quarter of 1996 was primarily due to higher levels of personnel costs
associated with expanded PC system operations and credit card processing
fees associated with the increase in PC system net sales. Although
selling, general and administrative expenses for the Company's PC system
operations as a percentage of PC system net sales is higher than the same
percentages experienced by the Company's other operations, this PC system
percentage is generally in line with, or lower than, those experienced by
the Company's primary PC competitors.
10
<PAGE>
Income Taxes
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------
November 30, 1995 % Change December 1, 1994
----------------- -------- ----------------
<S> <C> <C> <C>
Income tax provision $ 11,077 56.0% $ 7,101
</TABLE>
The Company's effective tax rate of approximately 40% for all periods
presented reflects primarily the federal statutory income tax rate and the
net effect of state taxes.
Liquidity and Capital Resources
As of November 30, 1995, the Company had cash and equivalents of
$69.5 million, compared to $69.4 million as of August 31, 1995. The
slight increase resulted primarily from cash flows from operations, offset
by property, plant and equipment purchases of $8.1 million related to
expansions of the Company's manufacturing and administrative facilities
and the purchase of related equipment. The significant increase in
receivables, inventories and accounts payable and accrued expenses in
the first fiscal quarter of 1996 was primarily a result of increased sales.
As of November 30, 1995, the Company had $6.4 million in indebtedness
remaining under a ten-year loan from MTI and had no outstanding bank
borrowings. The Company established a revolving credit facility with MTI in
the first quarter of 1996 providing for borrowings of up to $40 million
increasing to $80 million, based on the Company's tangible net worth. The
loan agreement is collateralized by the Company's receivables, inventories
and equipment. The Company is also required to maintain a minimum level of
collateral relative to the borrowings made under the agreement. There were
no borrowings pursuant to this agreement as of November 30, 1995. The
Company's principal sources of liquidity at November 30, 1995 consisted of
cash, supplier credit lines and the credit facility.
At November 30, 1995, the Company had commitments of approximately
$14.9 million for capital expenditures for expansion and upgrade of existing
facilities and equipment. The Company anticipates additional expenditures
in excess of $70 million for capital additions in fiscal 1996. A
substantial portion of these expenditures is anticipated to be for
procurement of additional component recovery test and burn-in
equipment. The Company expects to fund such expenditures primarily through
equipment financing.
The Company is required to make guaranteed minimum royalty payments
under certain agreements and periodically enters into minimum purchase
commitments with certain suppliers.
The Company expects that its working capital requirements will
continue to increase throughout 1996 and beyond. The Company believes that
currently available cash and equivalents, funds generated from operations,
its credit facility with MTI, equipment financing and further expansion of
terms with trade creditors will be sufficient to fund its operations
through the end of fiscal 1996. However, maintaining an adequate level of
working capital through the end of 1996 and thereafter will depend in part
on the success of the Company's products in the marketplace, the relative
profitability of those products, continued availability of materials at
favorable pricing and the Company's ability to control operating expenses.
The Company may seek or require additional financing for growth
opportunities, including any expansion that the Company may undertake
internally, through strategic acquisitions or partnerships or through
expansion to additional sites. There can be no assurance that any such
financing will be available on terms acceptable to the Company, if at all.
Certain Factors
A substantial majority of the Company's nonstandard RAM components is
obtained from MTI. These components are acquired from MTI pursuant to the
Revenue Sharing Agreement which expires in September 1997. Under this
agreement, MTI is required to deliver to the Company all of the nonstandard
RAM components produced at MTI's operations. There can be no assurance
that MTI will continue to produce adequate nonstandard RAM components to
maintain the Company's component recovery operation at its existing or
historic levels. The Revenue Sharing Agreement may be amended or modified
by written consent of the Company and MTI. By virtue of MTI's control
position, MTI may be able to dictate future modifications to the terms
11
<PAGE>
of the agreement. Termination or renegotiation of the key terms of the
Revenue Sharing Agreement could have a material adverse effect on the
Company's operating results.
Fluctuations in the Company's net sales from quarter to quarter can be
expected and may be attributable to a number of factors, including without
limitation the timing of new product introductions, seasonal cycles
commonly seen in the computer industry, seasonal government purchasing
cycles, the impact of product reviews and industry awards, changes in
product mix, product pricing in the computer and memory market, further
developments in company structure and alignments, the timing of orders from
and shipments to OEM customers, fluctuating component costs, critical
component availability and industry competition. As a result, the
operating results for any particular period are not necessarily indicative
of the results of any future period.
High volumes of quality components are required for the manufacture of
PC systems. Any industry shortage or other supply constraint of any key
component could affect the Company's ability to ship products on schedule
or at expected gross margins. The Company is unable to purchase certain
components at costs comparable to those of certain PC manufacturers. From
time to time, the Company may also experience obsolescence of components in
inventory. Inventory obsolescence results from, among other things, the
fast pace of technological developments in components used in PC systems as
well as the short product life cycles of PC system products. There can be
no assurance that the Company will be able to effectively manage inventory
levels so as to avoid the adverse effects of inventory obsolescence.
Competition in the PC industry is based primarily upon performance,
price, quality, service and support. The PC industry is highly competitive
and has been characterized by intense pricing pressure, rapid technological
advances in hardware and software, frequent introduction of new products,
low gross margin percentages and declining product prices. The Company
must therefore introduce many new products each quarter and continue to
price its products competitively. Failure by the Company to make specific
product transitions or to accurately forecast its market demand for product
mix may adversely affect the Company's results of operations.
The Company's contract manufacturing customers generally require short
delivery cycles and quick turnaround for contract manufacturing services.
As the Company's OEM customers react to variations in demand for their
product and adjust their purchase orders to the Company, the Company is
exposed to the risk of being subject to noncancelable purchase orders with
its suppliers and to inventory risk for raw materials, work in process and
finished goods. OEM order fluctuations and deferrals have had an adverse
effect on the Company's contract manufacturing operations in the past and
there can be no assurance that the Company will not experience such adverse
effects in the future. The Company's contract manufacturing operations
rely on sales to a relatively limited number of customers. The Company has
no long term agreements with any of its contract manufacturing customers,
including MTI, which require such customers to purchase contract
manufacturing services from the Company. Should any of the Company's key
contract manufacturing customers reduce in any material respect their
purchases of the Company's contract manufacturing services, there can be no
assurance that the Company could obtain alternative business on a timely
basis, which could have a material adverse effect on the Company's
operating results.
It is common in the PC industry for certain companies to assert patent
and copyright infringement claims, as well as other intellectual property
rights claims, against other companies, including component suppliers and
PC manufacturers. Periodically, MEI is made aware that the technology used
by the Company may infringe on product or process technology rights held by
others. The Company has accrued a liability and charged operations for the
estimated costs of settlement or adjudication of these asserted claims for
alleged infringement and other unasserted claims arising prior to the
balance sheet date. The Company would be placed at a disadvantage if its
competitors were to obtain licenses with lower royalty fee payments or
other terms more favorable than those received by the Company. The Company
has entered into several patent and software license agreements with third
parties, some of which expire within the next quarter and all of which
require one-time or periodic royalty payments. The Company is unable to
predict whether these license agreements can be obtained or renewed on
terms acceptable to the Company. If the Company or its suppliers were
unable to obtain licenses necessary to use the protected technology in
their products, the Company may be forced to market products without
certain technological features. The Company could also incur substantial
costs to defend legal actions taken against it relating to patent or
copyright protected technology. The inability to obtain licenses necessary
to use certain technology or its inability to obtain such licenses on
competitive terms, or a finding of infringement against the Company, could
have a material adverse effect on the Company.
12
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Several states have enacted legislation which would require out-of-
state direct marketers to collect and remit sales and use taxes based on
certain limited contacts with the state. Taxation authorities in certain
states have solicited information from time to time from the Company to
determine whether the Company has sufficient contacts with such states as
would require payment of sales and use taxes in those states. In the event
that the Company is required to pay or collect and remit sales and use
taxes in states where the Company is not currently paying or collecting and
remitting such taxes, the future operating results and financial condition
of the Company could be materially and adversely affected.
The Company purchases a substantial portion of the full specification
RAM components used in its operations from MTI on a purchase order basis
with market terms and conditions. It is anticipated that the Company will
continue to purchase full specification RAM components from MTI. A number
of factors could affect MTI's ability or willingness to make full
specification RAM components available to the Company, including a
disruption of MTI's wafer processing, significant yield losses and
strategic and general business considerations. There can be no assurance
that MTI will provide the Company with a sufficient volume of full
specification RAM components to meet customer demand for PC systems,
contract assembly services or other products to be added to the Company's
product offering. In the event that MTI does not provide the Company with
an adequate supply of full specification RAM components in the future, and
the Company is unable to obtain an adequate supply from other sources, the
Company's business and operating results could be materially and adversely
affected.
The success of the Company will depend to a large extent on its
continuing relationship with MTI, including the continuation of various
favorable business arrangements between MTI and the Company. MTI owns
approximately 80% of the outstanding common stock of the Company. In
addition, four of the eight directors of the Company are directors of MTI,
including Steven R. Appleton, Chairman and Chief Executive Officer of MTI.
MTI has the power to control the outcome of substantially all matters
requiring shareholder approval, including the election of directors and has
the ability to control the management and affairs of the Company. MTI's
equity ownership has the effect of making certain corporate actions
impossible without its support. Because of MTI's significant share
ownership, only a limited percentage of the Company's outstanding common
stock can be traded in the public market unless MTI sells shares into the
public market or otherwise exchanges or transfers a portion of its
ownership. As a result of the relatively limited number of shares that are
publicly traded, sales of substantial amounts of the Company's common stock
in the public market could adversely affect prevailing market prices. In
addition, in the event that MTI is unwilling to allow the reduction of its
percentage of ownership, the Company may be unable to complete an equity
financing and could be forced to forego certain other corporate
opportunities.
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Part II. Other Information
Item 1. Legal Proceedings
The Company is party to various legal actions, none of which is
expected to have a material effect on the Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 1995 Annual Meeting of Shareholders on November
20, 1995. The following summarizes the proposals presented to shareholders
and the voting results:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
For Withhold Authority
--- ------------------
Steven R. Appleton 85,859,055 22,445
Joseph M. Daltoso 85,857,712 23,788
Jerry M. Hess 85,856,746 24,754
Robert A. Lothrop 85,823,159 58,341
T. Erik Oaas 85,858,512 22,988
John R. Simplot 85,820,883 60,617
Gregory D. Stevenson 85,859,235 22,265
Robert F. Subia 85,824,791 56,709
2. To ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants of the Company for fiscal year 1996.
BROKER
FOR 85,590,518 AGAINST 239,705 ABSTAIN 51,277 NON-VOTE 0
---------- ------- ------ ----
Item 6. Exhibits and Reports on Form 8-K
(a) The following are filed as a part of this report:
Exhibit
Number Description of Exhibit
10.40 Revolving Credit Facility between MTI and
the Company
11 Computation of per share earnings for the
quarters ended November 30, 1995 and
December 1, 1994
(b) Reports on Form 8-K:
On September 15, 1995, the Company filed a Report on Form 8-K
which announced the resignation of Chase S. Mart as a director
and as Executive Vice President, Business Development.
On October 16, 1995, the Company filed a Report on Form 8-K
which announced the appointment of Robert F. Subia as a director.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Micron Electronics, Inc.
--------------------------------------------
(Registrant)
Dated: December 22, 1995 /s/ T. Erik Oaas
--------------------------------------------
T. Erik Oaas, Vice President, Finance, and
Chief Financial Officer (Principal Financial
and Accounting Officer)
15
EXHIBIT 10.40
REVOLVING CREDIT FACILITY
This REVOLVING CREDIT FACILITY ("Loan Agreement"), dated as of
October 5, 1995, is entered into by and between:
(1) Micron Technology, Inc., a Delaware corporation
("Lender"); and
(2) Micron Electronics, Inc., a Minnesota corporation
("Borrower").
In consideration of the covenants, conditions and agreements set
forth herein, the parties agree as follows:
ARTICLE 1 DEFINITIONS.
1.01 "Advance" shall have the meaning given in
Section 2.01 of the Loan Agreement.
1.02 "Business Day" shall mean every day that most
commercial banks in Idaho, Oregon and Washington are open for
business.
1.03 "Collateral" shall have the meaning set forth in
Section 7.01.
1.04 "Collateral Net Book Value" shall mean an amount
equal to the sum of the Borrower's net book value of the following
assets as of the determination date: (i) Inventory, less any
reserves for obsolescence; (ii) Receivables, less (A) receivables
owed to Borrower by Lender or any of its Subsidiaries or by any of
Borrower's Subsidiaries, and (B) reserves for bad debts and
allowances for discounts and returns; and (iii) Equipment,
unencumbered by any Liens, except those that constitute a first
priority perfected security interest in favor of the Lender, less
accumulated depreciation.
1.05 "Commitment" shall mean an amount equal to
$40,000,000.
1.06 "Commitment to Net Worth Ratio" shall mean 1.00 to
1.00.
1.07 "Default" shall mean any event or circumstance not
yet constituting an Event of Default but which, with the giving of
any notice or the lapse of any period of time or both, would become
an Event of Default.
1.08 "Equipment" shall have that meaning set forth in
Section 7.01.
1.09 "Equity Securities" with respect to a Person shall
mean (a) all common stock, preferred stock, participations, shares,
partnership interests or other equity interests in and of such
Person (regardless of how designated and whether or not voting or
non-voting) and (b) all warrants, options, convertible securities
and other rights to acquire any of the foregoing.
1.10 "Event of Default" shall have the meaning given to
that term in Section 6.01.
1.11 "GAAP" shall mean generally accepted accounting
principles and practices as promulgated by the Financial Accounting
Standards Board and as in effect in the United States of America
from time to time, consistently applied. Unless otherwise indicated
in this Loan Agreement, all accounting terms used in this Loan
Agreement shall be construed, and all accounting and financial
computations hereunder or thereunder shall be computed, in
accordance with GAAP.
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1.12 "Governmental Authority" shall mean any domestic or
foreign national, state or local government, any political
subdivision thereof, any department, agency, authority or bureau of
any of the foregoing, or any other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
1.13 "Governmental Charges" shall mean all taxes, levies,
assessments, fees, claims or other charges imposed by any
Governmental Authority upon or relating to (i) Borrower, (ii) the
Advances, (iii) employees, payroll, income or gross receipts of
Borrower, (iv) the ownership or use of any of its assets by
Borrower or (v) any other aspect of the business of Borrower.
1.14 "Indebtedness" shall mean, as to the Borrower, to
the extent of the Borrower's liability, or potential liability
therefor, all items of indebtedness, obligation or liability,
whether matured or unmatured, liquidated or unliquidated, direct or
indirect, primary or otherwise, absolute or contingent, joint or
several.
1.15 "Inventory" shall have that meaning set forth in
Section 7.01.
1.16 "LIBOR Rate" shall mean the rate per annum,
calculated to the nearest .01%, at which U.S. dollar deposits are
offered in the London interbank market for three month periods as
quoted in the "Money Rates" column of The Wall Street Journal on
the first Business Day of each calendar month. All computations of
such interest shall be based on a year of 360 days and actual days
elapsed. Such LIBOR Rate shall remain in effect until it is
adjusted on the first Business Day of the following calendar month.
The effect of this definition is to cause the LIBOR Rate to change
on a month-to-month basis as of the first Business Day thereof.
1.17 "Lien" shall mean, with respect to any property, any
security interest, mortgage, pledge, lien, claim, charge or other
encumbrance in, of, or on such property or any proceeds therefrom,
including, without limitation, the interest of a vendor or lessor
under a conditional sale agreement, capital lease or other title
retention agreement, or any agreement to provide any of the
foregoing, or the filing of any financing statement or similar
instrument under the Uniform Commercial Code or comparable law of
any jurisdiction.
1.18 "Loan Agreement" shall have the meaning set forth in
the opening paragraph of this document.
1.19 "Loan Documents" shall mean and include this Loan
Agreement, the Note, each Notice of Borrowing, and any other
documents, instruments and agreements delivered to Lender in
connection with this Loan Agreement.
1.20 "Note" shall mean the Note as defined in Section
2.07 of the Loan Agreement, the form of which is set forth as
Exhibit B.
1.21 "Notice of Borrowing" shall mean the form set forth
herein as Exhibit A.
1.22 "Obligations" shall mean and include all Advances,
debts, liabilities, and financial obligations, howsoever arising,
owed by Borrower to Lender of every kind and description (whether
or not evidenced by any note or instrument), direct or indirect,
absolute or contingent, due or to become due, now existing or
hereafter arising pursuant to the terms of any of the Loan
Documents, including, without limitation, all interest, fees,
charges, expenses, reasonable attorneys' fees (and expenses) and
accountants' fees (and expenses) chargeable to Borrower or payable
by Borrower hereunder or thereunder.
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1.23 "Permitted Liens" shall mean and include:
(a) Liens that constitute a first priority
perfected security interest in favor of the Lender;
(b) Liens on Borrower's Equipment if, after taking
into account the effect of such Liens, the requirements of Sections
2.05 and 5.01(c) continue to be satisfied; and
(c) Liens, if any, that Lender and Borrower shall
have agreed in writing to be included within this definition.
1.24 "Person" shall mean and include an individual, a
partnership, a corporation (including a business trust), a joint
stock company, a limited liability company, an unincorporated
association, a joint venture or other entity or a Governmental
Authority.
1.25 "Receivables" shall have that meaning set forth in
Section 7.01.
1.26 "Subsidiary" of any Person shall mean (a) any
corporation of which more than 50% of the issued and outstanding
equity securities having ordinary voting power to elect a majority
of the Board of Directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of
such corporation shall or might have voting power upon the
occurrence of any contingency) is at the time directly or
indirectly owned or controlled by such Person, by such Person and
one or more of its other Subsidiaries or by one or more of such
Person's other Subsidiaries, or (b) any other Person included in
the financial statements of such Person on a consolidated basis.
Any reference to a Subsidiary without designation of the ownership
of such Subsidiary shall be deemed to refer to a Subsidiary of
Borrower.
1.27 "Tangible Net Worth" shall mean the Borrower's and
its Subsidiaries' consolidated net worth, less goodwill and other
intangibles.
1.28 "Termination Date" shall mean the date on which
Lender's commitment to make Advances under this Loan Agreement is
terminated following any required notice periods in accordance with
Article 8.
1.29 "UCC" shall mean the Uniform Commercial Code as in
effect in Idaho from time to time, unless the context requires
otherwise.
ARTICLE 2 ADVANCES.
2.01 Terms. Subject to the terms and conditions of this
Loan Agreement, Lender agrees to advance to Borrower from time to
time and until the Termination Date, such sums as Borrower may
request (the "Advances") but which shall not exceed, in the aggregate
principal amount at any one time outstanding, the Commitment, as
adjusted pursuant to Section 2.08. Advances shall be made in
lawful currency of the United States of America and shall be made
in same day or immediately available funds. Each Advance shall be
in an amount equal to at least $1,000,000 or any integral multiple
of $250,000 in excess thereof and shall be made no later than the
time period set forth in Exhibit C subsequent to the delivery to
Lender of a Notice of Borrowing in the manner specified in Section
9.01.
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<PAGE>
2.02 Payments of Principal.
(a) Borrowings. Subject to all other terms of this
Loan Agreement, including, but not limited to, Section 2.05,
Borrower may borrow, repay without penalty or premium, and reborrow
hereunder, from the date of this Loan Agreement until the
Termination Date, up to the full principal amount of the
Commitment, as adjusted pursuant to Section 2.08.
(b) Repayment Upon Downward Adjustment. If the
outstanding principal balance of Advances should exceed the
Commitment (in effect and as adjusted pursuant to Section 2.08),
due to a downward adjustment pursuant to Section 2.08, then
Borrower shall be required to repay within sixty (60) Business Days
of the adjustment date, so much of the principal balance of the
outstanding Advances such that the outstanding Advances no longer
exceed the Commitment (in effect and as adjusted pursuant to
Section 2.08) as of the adjustment date.
(c) Repayment Upon Termination. If not paid
earlier, the outstanding principal balance of all Advances shall be
due and payable to the Lender on the Termination Date.
2.03 Interest. Interest on the outstanding principal
balance under the Advances shall accrue at the LIBOR Rate in effect
plus 100 basis points. All computations of such interest shall be
based on a year of 360 days and actual days elapsed for each day
on which any principal balance is outstanding under the terms of
the Loan Agreement.
2.04 Interest Payments. All accrued and unpaid interest
shall be due on the first Business Day of each month. The parties
agree that Borrower shall have the right, without penalty or
premium, to remit such interest up to ten (10) calendar days
following the first Business Day of each month. If not paid
earlier, all outstanding accrued interest hereunder shall be due
and payable to the Lender on the Termination Date.
2.05 Total Outstanding Advances. At any time the
aggregate principal amount of the outstanding Advances shall not
exceed the lesser of (i) and (ii), where (i) equals seventy five
percent (75%) of the Collateral Net Book Value, and (ii) equals the
amount of the Commitment. Except as expressly provided for in
Section 2.02(b), at no time shall the aggregate principal amount of
outstanding Advances exceed the Commitment, as adjusted pursuant to
Section 2.08.
2.06 Other Payment Terms.
(a) Place and Manner. Borrower shall make all
payments due to Lender hereunder in lawful money of the United
States and in same day or immediately available funds.
(b) Date. Whenever any payment due hereunder
shall fall due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such
extension of time shall be included in the computation of interest
or fees, as the case may be.
(c) Default Rate. From and after the occurrence
of an Event of Default and during the continuance thereof, Borrower
shall pay interest on all Obligations not paid when due, from the
date due thereof until such amounts are paid in full at a per annum
rate equal to the three (3) percentage points in excess of the rate
otherwise applicable to Advances. All computations of such
interest shall be based on a year of 360 days and actual days
elapsed.
4
<PAGE>
2.07 Note. The obligation of Borrower to repay the
Advances hereunder, and to pay interest thereon at the rates
provided herein, shall be evidenced by a promissory note in the
form of Exhibit B (the "Note").
2.08 Adjustment to Revolving Line of Credit.
(a) Upward Adjustment. Upon written request of
the Borrower, the Commitment shall be increased to, but not in
excess of, an amount equal to the lesser of (i) and (ii), where (i)
equals the sum of (A) and (B), where (A) equals $40,000,000 and (B)
equals the product of (the Commitment to Net Worth Ratio)
multiplied by (Borrower's Tangible Net Worth determined as of the
most recent practicable date, less $175,000,000, provided, however,
such remainder shall not be less than zero); and (ii) equals
$80,000,000.
(b) Downward Adjustment. If the Tangible Net
Worth of Borrower and its Subsidiaries at the end of a fiscal
quarter is less than it was at the end of the immediately
preceeding fiscal quarter, then as of the first Business Day
immediately following the day on which financial results are
released to the public for such fiscal quarter then ended, the
Commitment shall be decreased to an amount equal to the greater of
(i) and (ii), where (i) equals the product of .5 multiplied by the
Tangible Net Worth of Borrower and its Subsidiaries determined as
of the end of such fiscal quarter then ended; and (ii) equals
$40,000,000. Additionally, during the term of this Loan Agreement,
Borrower may at any time request in writing Lender to reduce the
Commitment down to any amount, including zero, and if so requested
Lender shall reduce, the Commitment per Borrower's request.
(c) Condition to Adjustment. In no event shall
the adjustment provided by Section 2.08(a) be effective if, at the
time the adjustment would otherwise occur, the Borrower is not in
compliance with the covenants set forth in Sections 5.01(c) and
5.02. Furthermore, unless Lender agrees in writing to the
contrary, no more than one adjustment per month shall be made at
the request of the Borrower.
2.09 Commitment Fees. Borrow agrees to pay to Lender
a commitment fee for the period from and including October 5,
1995 to and excluding the Termination Date equal to the average
daily Commitment calculated for each calendar quarter ending on
March 31, June 30, September 30 and December 31 of each year,
multiplied by a rate equal to .0005 /360, times actual number of
days elapsed during such quarter. Such fee shall be due
quarterly in arrears on the first Business Day immediately
following the end of each such calendar quarter. The parties
agree that Borrower shall have the right, without penalty or
premium, to remit such fees up to ten (10) calendar days
following the first Business Day of each calendar quarter.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BORROWER.
To induce Lender to enter into this Loan Agreement and to make
Advances hereunder, Borrower represents and warrants to Lender as
follows:
3.01 Due Incorporation, Qualification, etc. Each of
Borrower and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its state
of incorporation.
3.02 Authority. The execution, delivery and
performance by Borrower of each Loan Document to be executed by
Borrower and the consummation of the transactions contemplated
thereby (i) are within the power of Borrower and (ii) have been
duly authorized by all necessary actions on the part of Borrower.
3.03 Enforceability. Each Loan Document executed, or to be
executed, by Borrower has been, or will be, duly executed and delivered
by Borrower and constitutes, or will constitute, a legal, valid
5
<PAGE>
and binding obligation of Borrower, enforceable against
Borrower in accordance with its terms, except as limited by
bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights
generally and general principles of equity.
3.04 Collateral. After due diligence and reasonable
inquiry, Borrower represents and warrants to Lender that (a)
Borrower is the owner of the Collateral (or, in the case of after-
acquired Collateral, at the time Borrower acquires rights in the
Collateral, will be the owner thereof) and that no other Person has
(or, in the case of after-acquired Collateral, at the time Borrower
acquires rights therein, will have) any right, title, claim or
interest (by way of Lien or otherwise) in, against or to the
Collateral, other than Permitted Liens; (b) Lender has (or in the
case of after-acquired Collateral, at the time Borrower acquires
rights therein, will have) a first priority perfected security
interest in the Collateral, except for Permitted Liens; (c) all
Inventory has been (or, in the case of hereafter produced
Inventory, will be) produced in compliance with applicable laws,
including the Fair Labor Standards Act; and (d) each Receivable is
genuine and enforceable against the party obligated to pay the
same.
3.05 Default. Borrower is not in default with respect to
any Indebtedness owed to Lender.
3.06 Total Outstanding Advances. Except as
expressly provided for in Section 2.02(b), the total aggregate
principal amount of outstanding Advances does not exceed the
Commitment, as adjusted pursuant to Section 2.08.
ARTICLE 4 CONDITIONS TO MAKING ADVANCES.
Lender's obligation to make the initial Advance and each
subsequent Advance is subject to the prior satisfaction or waiver
of all the conditions set forth in this Article 4.
4.01 Principal Loan Documents. Borrower shall have duly
executed and delivered to Lender: (a) the Loan Agreement; (b) the
Note; (c) one or more UCC-1 Financing Statements, in a form
acceptable to Lender; (d) a Notice of Borrowing; and (e) such other
documents, instruments and agreements as Lender may reasonably
request.
4.02 Representations and Warranties Correct. The
representations and warranties made by Borrower in Article 3 hereof
shall be true and correct as of the date on which each Advance is
made and after giving effect to the making of the Advance. The
submission by Borrower to Lender of the Notice of Borrowing with
respect to the Advance shall be deemed to be a certification by the
Borrower that as of the date of borrowing, the representations and
warranties made by Borrower in Article 3 hereof are true and
correct and that all matters set forth in such Notice of Borrowing
are true and correct.
4.03 No Event of Default or Default. No Event of Default
or Default has occurred or is continuing.
4.04 Total Outstanding Advances. The total aggregate
principal amount of outstanding Advances does not exceed the
Commitment, as adjusted pursuant to Section 2.08
ARTICLE 5COVENANTS OF BORROWER.
5.01 Affirmative Covenants. Until the termination of the
commitment to make Advances under this Loan Agreement and the
satisfaction in full by Borrower of all Obligations, Borrower shall
comply at all times with the following affirmative covenants unless
Lender shall otherwise consent in writing:
6
<PAGE>
(a) Certificates, Reports, etc. Borrower shall
furnish to Lender the following, each in such form and such detail
as Lender shall reasonably request:
(i) Within thirty (30) Business Days following
the end of each fiscal quarter of Borrower, a certificate from
Borrower's president or chief financial officer stating that
with respect to such quarter then ended and as of the date of
the certificate: (a) no Event of Default has occurred, or, if
any Event of Default has occurred, a statement as to the
nature thereof and what action Borrower proposes to take with
respect thereto; (b) the Lender has a valid and enforceable
first priority perfected security interest in and to the
Collateral, except for Permitted Liens; (c) Borrower is in
compliance with all covenants set forth in Article 5; and (d)
each of the representations and warranties contained in
Article 3 is true and correct in all respects. The
certificate shall be accompanied by an attachment, which shall
be incorporated into the certificate, that demonstrates
Borrower's compliance with the covenants set forth in (A)
Section 5.01(c), broken down by type of Collateral (i.e.,
Receivables, Inventory and Equipment) and (B) Section 5.02(c).
(ii) As soon as possible and in no event later
than five (5) Business Days after the occurrence or existence of:
any Event of Default or Default, a written statement of the
president or chief financial officer of Borrower setting forth
details of such event, condition, Event of Default or Default and
the action which Borrower proposes to take with respect thereto;
and
(iii) Such other instruments, agreements,
certificates, opinions, statements, documents and
information relating to the operations or condition
(financial or otherwise) of Borrower or its Subsidiaries,
and compliance by Borrower with the terms of this Loan
Agreement and the other Loan Documents as Lender may from
time to time reasonably request.
(b) Inspections. Borrower and its Subsidiaries
shall permit any Person designated by Lender, upon reasonable
notice and during normal business hours, to visit and inspect any
of the properties and offices of Borrower and its Subsidiaries, to
examine the books of account of Borrower, and its Subsidiaries and
to discuss the affairs, finances and accounts of Borrower and its
Subsidiaries with, and to be advised as to the same by, their
officers, auditors, consultants, advisors and accountants, all at
such times and intervals as Lender may reasonably request.
(c) Ratio. Borrower shall maintain a ratio of
outstanding Advances to Collateral Net Book Value equal to or less
than .75 to 1.00.
5.02 Negative Covenants. Until the termination of the
commitment to make Advances under this Loan Agreement and the
satisfaction in full by Borrower of all Obligations, Borrower shall
not at any time:
(a) create, incur, assume or permit to exist any
Lien on or with respect to any Collateral whether now owned or
hereafter acquired, except for Permitted Liens;
(b) except upon express written consent by Lender,
issue, offer or sell any Equity Securities the result of which
shall be, after taking into account the issuance, offering or sale
thereof, the failure by Lender to own at least sixty percent (60%)
of Borrower's outstanding Equity Securities; or
(c) except as expressly provided for in Section
2.02(b), allow the total aggregate principal amount of outstanding
Advances to exceed the Commitment, as adjusted pursuant to Section
2.08.
7
<PAGE>
ARTICLE 6 EVENTS OF DEFAULT.
6.01 Events of Default. The occurrence of any of the
following shall constitute an "Event of Default" under this Loan
Agreement and the Note:
(a) Failure to Pay. Borrower shall fail to pay (i)
the principal amount of all outstanding Advances on the Termination
Date hereunder; (ii) that portion of the principal amount of
outstanding Advances described in Section 2.02(b) within the time
period set forth therein; (iii) any interest, Obligation or other
payment required under the terms of this Loan Agreement, the Note
or any other Loan Document on the date due and such failure shall
continue for twenty (20) Business Days after Borrower's receipt of
Lender's written notice thereof to Borrower; or (iv) any
Indebtedness (excluding Obligations) owed by Borrower to Lender on
the date due and such failure shall continue for twenty (20)
Business Days after Borrower's receipt of Lender's written notice
thereof to Borrower.
(b) Breaches of Covenants. Borrower shall fail to
observe or perform any other covenant, obligation, condition or
agreement contained in this Loan Agreement or any other Loan
Document and (i) such failure shall continue for ten (10) Business
Days, or (ii) if such failure is not curable within such ten (10)
Business Day period, but is reasonably capable of cure within
thirty (30) Business Days, either (A) such failure shall continue
for thirty (30) Business Days or (B) Borrower shall not have
commenced a cure in a manner reasonably satisfactory to Lender
within the initial ten (10) Business Day period; or
(c) Representations and Warranties. Any
representation, warranty, certificate, or other statement (financial
or otherwise) made or furnished by or on behalf of Borrower to
Lender in writing in connection with any of the Loan Documents,
or as an inducement to Lender to enter into this Loan Agreement,
shall be false, incorrect, incomplete or misleading in any
material respect when made or furnished; or
(d) Voluntary Bankruptcy or Insolvency Proceedings.
Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidation or custodian of itself or of all or a
substantial part of its property, (ii) be unable, or admit in
writing its inability, to pay its debts generally as they mature,
(iii) make a general assignment for the benefit of its or any of
its creditors, (iv) be dissolved or liquidated in full or in part,
(v) become insolvent (as such term is defined in 11 U.S.C. Section
101 (32), as amended from time to time), (vi) commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or
consent to any such relief or to the appointment of or taking
possession of its property by any official in an involuntary case
or other proceeding commenced against it, or (vii) take any action
for the purpose of effecting any of the foregoing; or
(e) Involuntary Bankruptcy or Insolvency Proceedings.
Proceedings for the appointment of a receiver, trustee, liquidator
or custodian of Borrower or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings
seeking liquidation, reorganization or other relief with respect to
Borrower or the debts thereof under any bankruptcy, insolvency or
other similar law now or hereafter in effect shall be commenced and
an order for relief entered or such proceeding shall not be
dismissed or discharged within sixty (60) calendar days of
commencement.
6.02 Rights of Lender upon Default.
(a) Acceleration. Upon the occurrence or existence
of any Event of Default described in Sections 6.1(d) and 6.1(e),
immediately and without notice, (or at the option of the Lender
upon five (5) Business Days advance written notice upon the
occurrence of any other Event of Default), all outstanding
8
<PAGE>
Obligations payable by Borrower hereunder shall automatically
become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby
expressly waived, anything contained herein or in the Note to the
contrary notwithstanding.
(b) Remedies. Upon the occurrence and during the
continuance of any such Event of Default, Lender shall have the
rights of a secured creditor under the UCC (as enacted in any
jurisdiction in which Collateral may be located), all rights
granted by this Loan Agreement and by law, including, but not
limited to, the right to: (a) require Borrower to assemble the
Collateral and make it available to Lender at a place to be
designated by Lender; (b) prior to the disposition of the
Collateral, store, process, repair or recondition it or otherwise
prepare it for disposition in any manner and to the extent Lender
deems appropriate and in connection with such preparation and
disposition, without charge, use any trademark, tradename,
copyright, patent or technical process used by Borrower; provided,
however, that the use of such intellectual property rights granted
under this subparagraph (b) shall be used only in connection with
and to the extent necessary to effect Lender's remedies hereunder;
and (c) sell at public or private sale or otherwise realize upon in
any place where the Collateral may be located, the whole or, from
time to time, any part of the Collateral or any interest that the
Borrower may have therein. Borrower hereby agrees that ten (10)
Business Days notice of any intended sale or disposition of any
Collateral is reasonable. In furtherance of Lender's rights
hereunder, Borrower hereby grants to Lender an irrevocable, non-
exclusive license (exercisable without royalty or other payment by
Lender, but only in connection with and to the extent necessary to
effect Lender's remedies hereunder) to use, license or sublicense
any patent, trademark, tradename, copyright or other intellectual
property in which Borrower now or hereafter has any right, title or
interest together with the right of access to all media in which
any of the foregoing may be recorded or stored.
(c) Cumulative Rights, etc. The rights, powers and
remedies of Lender under this Loan Agreement shall be in addition
to all rights, powers and remedies given to Lender by virtue of any
applicable law, rule or regulation of any Governmental Authority,
any transaction contemplated thereby or any other agreement, all of
which rights, powers, and remedies shall be cumulative and may be
exercised successively or concurrently without impairing Lender's
rights hereunder. Borrower waives any right to require Lender to
proceed against any particular Collateral or to pursue any
particular remedy in Lender's power.
ARTICLE 7 GRANT OF SECURITY INTEREST.
7.01 Grant of Security Interest. As security for the
Obligations, Borrower hereby pledges and assigns to Lender and
grants to Lender a first priority perfected security interest,
except for Permitted Liens, in all right, title and interest of
Borrower now owned or hereafter acquired in and to the following
(all of which, collectively and severally, constitutes the
"Collateral"):
(a) All equipment (including, without limitation,
vehicles and other machinery and office equipment), together with
all additions and accessions thereto and replacements therefor
(collectively, the "Equipment");
(b) All inventory (including, without limitation,
(i) all raw materials, work in process and finished goods and (ii)
all such goods which are returned to or repossessed by Borrower),
together with all additions and accessions thereto, replacements
therefor, products thereof and documents therefor (collectively, the
"Inventory");
(c) All accounts receivables, chattel paper, contract
rights and rights to the payment of money (including without limitation,
tax refunds and royalties) (collectively, the "Receivables"); and
9
<PAGE>
(d) All proceeds of the foregoing (including, without
limitation, whatever is receivable or received when Collateral or
proceeds is sold, collected, exchanged, returned, substituted or
otherwise disposed of, whether such disposition is voluntary or
involuntary, including rights to payment and return premiums and
insurance proceeds under insurance with respect to any Collateral,
and all rights to payment with respect to any cause of action
affecting or relating to the Collateral).
7.02 Covenants Relating to Collateral. Borrower hereby
agrees (a) to perform all acts that may be necessary to maintain,
preserve, protect and perfect the Collateral, the Lien granted to
Lender therein and the first priority of such Lien, except for
Permitted Liens; (b) not to use or permit any Collateral to be used
(i) in violation of any provision of any transaction contemplated
thereby, (ii) in violation of any applicable law, rule or
regulation, or (iii) in violation of any policy of insurance
covering the Collateral; (c) to pay promptly when due all taxes and
other Governmental Charges (except where Lender has expressly
agreed to pay such taxes or Governmental Charges on Borrower's
behalf), all Liens and all other charges now or hereafter imposed
upon or affecting any Collateral; and (d) to procure, execute and
deliver from time to time any endorsements, assignments, financing
statements and other writings reasonably deemed necessary or
appropriate by Lender to perfect, maintain and protect its Lien
hereunder and the priority thereof.
7.03 Authorized Action by Agent. Borrower hereby irrevocably
appoints Lender as its attorney-in-fact and agrees that Lender may
perform (but Lender shall not be obligated to and shall incur no
liability to Borrower or any third party for failure so to do) any
act which Borrower is obligated by this Loan Agreement to perform,
and to exercise such rights and powers as Borrower might exercise
with respect to the Collateral, including but not limited to the
right to (a) collect by legal proceedings or otherwise and endorse,
receive and receipt for all dividends, interest, payments, proceeds
and other sums and property now or hereafter payable on or on
account of the Collateral; (b) enter into any extension, deposit,
or other agreement pertaining to the Collateral, or deposit,
surrender, accept, hold or apply other property in exchange for the
Collateral; (c) insure, process and preserve the Collateral; (d)
make any compromise or settlement, and take any action it deems
advisable, with respect to the Collateral; (e) pay any Indebtedness
of Borrower relating to the Collateral; and (f) execute UCC
financing statements and other documents, instruments and
agreements required hereunder; provided, however, that Lender shall
not exercise any such powers prior to the occurrence of an Event of
Default and shall only exercise such powers during the continuance
of an Event of Default. Borrower agrees to reimburse Lender upon
demand for any reasonable costs and expenses, including reasonable
attorneys' fees, Lender may incur while acting as Borrower's
attorney-in-fact hereunder.
ARTICLE 8 TERMINATION.
Lender's commitment to make Advances under this Loan Agreement
may be terminated at any time within Lender's sole discretion upon
twenty four (24) months prior written notice to Borrower. Borrower
may terminate its right to request Advances under the Loan
Agreement at any time within Borrower's sole discretion upon twenty
(20) Business Days prior written notice to Lender. Upon the
earlier to expire of the foregoing notice periods, Lender shall
have no obligation to make Advances hereunder. As of such
Termination Date, Borrower shall be required to pay Lender all
accrued interest then due, all principal amounts then outstanding
and any commitment fees, costs and expenses due or outstanding as
of the Termination Date or attributable to Advances made prior to
the Termination Date.
ARTICLE 9 MISCELLANEOUS.
9.01 Notices. Except as otherwise provided herein, all
notices, requests, demands, consents, instructions or other
communications to or upon Lender or Borrower under this Agreement
or the other Loan Documents
10
<PAGE>
shall be in writing and telecopied, mailed or delivered to each
party at its telecopier number or address set forth below (or
to such other telecopier number or address for any party as
indicated in any notice given by that party to the other party).
All such notices and communications shall be effective (a) when
sent by Federal Express or other overnight service of recognized
standing, on the Business Day following the deposit with such
service; (b) when mailed by registered or certified mail, first
class postage prepaid and addressed as aforesaid through the United
States Postal Service, upon receipt; (c) when delivered by hand,
upon delivery; and (d) when telecopied, upon confirmation of receipt;
provided, however, that any notice delivered to Lender under Article
2 shall not be effective until received by Lender.
Lender: Attention: Treasurer
Micron Technology, Inc.
8000 S. Federal Way
P.O. Box 6
Boise, ID 83707-0006
with copy to: Attention: Chief Financial Officer
Micron Technology, Inc.
8000 S. Federal Way
P.O. Box 6
Boise, ID 83707-0006
and
Attention: General Counsel
Micron Technology, Inc.
8000 S. Federal Way
P.O. Box 6
Boise, ID 83707-0006
Borrower: Attention: Chief Financial Officer
Micron Electronics, Inc.
900 E. Karcher Rd.
P.O. Box 9031
Nampa, ID 83687
9.02 Expenses. Borrower shall pay on demand all reasonable
fees and expenses, including reasonable attorneys' fees and
expenses, incurred by Lender with respect to the exercise of its
duties under this Loan Agreement and the other Loan Documents or
with respect to any amendments or waivers hereof requested by
Borrower or in the enforcement or attempted enforcement of any of
the Obligations or in preserving any of Lender's rights and
remedies (including, without limitation, all such fees and expenses
incurred in connection with any "workout" or restructuring
affecting the Loan Documents or the Obligations or any bankruptcy
or similar proceeding involving Borrower or any of its
Subsidiaries).
9.03 Waivers; Amendments. Any term, covenant, agreement or
condition of this Loan Agreement or any other Loan Document may be
amended or waived if such amendment or waiver is in writing and is
signed by Borrower and Lender. No failure or delay by Lender in
exercising any right hereunder shall operate as a waiver thereof or
of any other right nor shall any single or partial exercise of any
such right preclude any other further exercise thereof or of any
other right. A waiver or consent given hereunder shall be
effective only if in writing and in the specific instance and for
the specific purpose for which given.
9.04 Successors and Assigns. This Loan Agreement and the
other Loan Documents shall be binding upon and inure to the benefit
of Borrower, Lender, any future holder of the Note and their
respective
11
<PAGE>
successors and permitted assigns, except that (i)
Borrower may not assign or transfer (and any such attempted
assignment or transfer shall be void) any of its rights or
obligations under any Loan Document without the prior written
consent of Lender and (ii) Lender may not assign or transfer (and
any such attempted assignment or transfer shall be void) any of its
rights or obligations under any Loan Document without the prior
written consent of Borrower.
9.05 Set-off. In addition to any rights and remedies of
Lender provided by law, Lender shall have the right, without prior
notice to Borrower, any such notice being expressly waived by
Borrower to the extent permitted by applicable law, upon the
occurrence and during the continuance of a Default or an Event of
Default, to set-off and apply against any Indebtedness, whether
matured or unmatured, of Borrower to Lender (including, without
limitation, the Obligations), any amount owing from Lender to
Borrower. The aforesaid right of set-off may be exercised by
Lender against Borrower or against any trustee in bankruptcy,
Borrower-in-possession, assignee for the benefit of creditors,
receiver or execution, judgment or attachment creditor of Borrower
or against anyone else claiming through or against Borrower or such
trustee in bankruptcy, Borrower-in-possession, assignee for the
benefit of creditors, receiver, or execution, judgment or
attachment creditor, notwithstanding the fact that such right of
set-off shall not have been exercised by Lender prior to the
occurrence of a Default or an Event of Default. Lender agrees
promptly to notify Borrower after any such set-off and application
made by Lender, provided that the failure to give such notice shall
not affect the validity of such set-off and application.
9.06 No Third Party Rights. Nothing expressed in or to be
implied from this Agreement or any other Loan Document is intended
to give, or shall be construed to give, any Person, other than the
parties hereto and thereto and their permitted successors and
assigns, any benefit or legal or equitable right, remedy or claim
under or by virtue of this Agreement or any other Loan Document.
9.07 Partial Invalidity. If at any time any provision of this
Loan Agreement or any of the Loan Documents is or becomes illegal,
invalid or unenforceable in any respect under the law of any
jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of the Loan Agreement or such other Loan
Documents, nor the legality, validity or enforceability of such
provision under the law of any other jurisdiction, shall in any way
be affected or impaired thereby.
9.08 Governing Law. This Loan Agreement and each of the
other Loan Documents shall be governed by and construed in
accordance with the laws of the State of Idaho without reference to
conflicts of law rules.
9.09 Construction. Each of this Loan Agreement and the other
Loan Documents is the result of negotiations among, and has been
reviewed by, Borrower, Lender and their respective counsel.
Accordingly, this Loan Agreement and the other Loan Documents shall
be deemed to be the product of all parties hereto, and no ambiguity
shall be construed in favor of or against Borrower or Lender.
9.10 Entire Agreement. This Loan Agreement and the other Loan
Documents, taken together, constitute and contain the entire
agreement of Borrower and Lender with respect to the subject matter
hereby and supersede any and all prior agreements, negotiations,
correspondence, understandings and communications among the
parties, whether written or oral, respecting the subject matter
hereof.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Loan
Agreement as of the date first set forth above.
BORROWER:
Micron Electronics, Inc.
a Minnesota corporation
By: /s/ T. Erik Oaas
-----------------------------------
T. Erik Oaas,
Vice President, Finance and
Chief Financial Officer
LENDER:
Micron Technology, Inc.
a Delaware corporation
By: /s/ Wilbur G. Stover, Jr.
-----------------------------------
Wilbur G. Stover, Jr.,
Vice President, Finance and
Chief Financial Officer
13
<PAGE>
EXHIBIT A
NOTICE OF BORROWING
, 199
- ----------------- --
Micron Technology, Inc.
8000 S. Federal Way
P.O. Box 6
Boise, ID 83707-0006
Attn: Mr. Norman L. Schlachter
1. Reference is made to that certain Loan Agreement,
dated as of October 5, 1995 (the "Loan Agreement"), between Micron
Electronics, Inc. ("Borrower") and Micron Technology, Inc.
("Lender"). Unless otherwise indicated, all terms defined in the
Loan Agreement have the same respective meanings when used herein.
2. Pursuant to Section 2.01 of the Loan Agreement,
Borrower hereby requests a Advance upon the following terms:
(a) The principal amount of the requested
Advance is to be $__________;
(b) The date of the requested Advance is to be
__________, 199 .
3. Borrower hereby certifies to Lender that, on the
date of such Advance and after giving effect to the requested
Advance:
(a) The representations and warranties set
forth in Article 3 of the Loan Agreement will be true and
correct as if made on such date;
(b) No Event of Default or Default has
occurred or is continuing;
(c) Each of the Loan Documents remains in full
force and effect; and
(d) Borrower is in compliance with each of the
covenants contained in Article 5 of the Loan Agreement
and the attachment hereto setting forth Borrower's
compliance with Sections 5.01(c) and 5.02(c) of the Loan
Agreement is true and correct.
4. Please disburse the proceeds of the requested
Advance to Account No:___________.
IN WITNESS WHEREOF, Borrower has executed this Notice of
Borrowing on the date set forth above.
Micron Electronics, Inc.
By:_______________________________
<PAGE>
EXHIBIT B
PROMISSORY NOTE
(Revolving Line of Credit)
Date: October 5, 1995
Boise, ID
FOR VALUE RECEIVED, Micron Electronics, Inc., a Minnesota
corporation ("Borrower"), hereby agrees to pay to the order of
Micron Technology, Inc., a Delaware corporation ("Lender"), at
Lender's principal office, the principal balance of sums advanced
("Advances") to Borrower under a Revolving Credit Facility entered
into between Lender and Borrower as of October 5, 1995 (the "Loan
Agreement"), together with interest accrued as set forth in Section
2.03 of the Loan Agreement, all of which shall be payable at those
times set forth in Article 2 of the Loan Agreement. Except as
expressly provided for in Section 2.02(b), the aggregate principal
amount of the outstanding Advances shall not exceed at any time the
Commitment. The principal amount of Advances outstanding at any
time shall be the total principal amount advanced less the amount
of principal payments made from time to time.
Borrower shall make all payments hereunder to Lender as
indicated in the Loan Agreement, in lawful money of the United
States and in same day or immediately available funds.
This Note is the note referred to in the Loan Agreement and is
subject to the terms of the Loan Agreement, including all of the
remedies available to Lender in the Loan Agreement.
If any action should be undertaken to collect this Note or
enforce the Lender's security interest herein, Borrower agrees to
pay all costs and expenses, including reasonable attorney's fees,
incurred in connection with such action.
Borrower hereby waives notice of presentment, demand, protest
or notice of any other kind. This Note shall be governed by and
construed in accordance with the laws of the State of Idaho.
Micron Electronics, Inc.
By:/s/ T. Erik Oaas
-------------------------------
T. Erik Oaas
<PAGE>
EXHIBIT C
TIME PERIODS
Amount of the Advance Time Period in Which Lender Shall
(expressed in Millions of Dollars) Make Advances (exclusive of the
day on which the Notice of Borrowing
is Received)
- ---------------------------------- ------------------------------------
$0 to 5 3 Business Days
5+ to 20 5 Business Days
20+ to 40 10 Business Days
40+ to 60 20 Business Days
60+ to 80 30 Business Days
<PAGE>
REVOLVING CREDIT FACILITY
BETWEEN
MICRON TECHNOLOGY, INC.
AND
MICRON ELECTRONICS, INC.
October 5, 1995
Exhibit 11
Micron Electronics, Inc.
Computation of Per Share Earnings
(Amounts in thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Fiscal quarter ended November 30, December 1,
1995 1994
- --------------------------------------------------------------------------
<S> <C> <C>
Primary
Weighted average shares outstanding 91,341 83,924
Net effect of dilutive stock
options and warrants 1,225 9
-------- --------
Total 92,566 83,933
======== ========
Net income $ 16,615 $ 11,606
======== ========
Per share amount $ 0.18 $ 0.14
======== ========
Fully Diluted
Weighted average shares outstanding 91,341 83,924
Net effect of dilutive stock
options and warrants 1,224 9
-------- --------
Total 92,565 83,933
======== ========
Net income $ 16,615 $ 11,606
======== ========
Per share amount $ 0.18 $ 0.14
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the accompanying financial statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-29-1996
<PERIOD-END> NOV-30-1995
<CASH> 69,529
<SECURITIES> 0
<RECEIVABLES> 172,581
<ALLOWANCES> 8,073
<INVENTORY> 129,272
<CURRENT-ASSETS> 374,574
<PP&E> 108,058
<DEPRECIATION> 42,418
<TOTAL-ASSETS> 463,723
<CURRENT-LIABILITIES> 266,334
<BONDS> 5,436
0
0
<COMMON> 914
<OTHER-SE> 190,089
<TOTAL-LIABILITY-AND-EQUITY> 463,723
<SALES> 438,578
<TOTAL-REVENUES> 438,578
<CGS> 379,866
<TOTAL-COSTS> 411,914
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,028)
<INCOME-PRETAX> 27,692
<INCOME-TAX> 11,077
<INCOME-CONTINUING> 16,615
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,615
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
