<PAGE>
October 28, 1996
Securities and Exchange Commission
450 Fifth Street, M.S. 1-2
N.W. Washington, D.C. 20549
Re: Micron Electronics, Inc. 1996 Definitive Proxy Materials
Dear Ladies and Gentlemen:
On behalf of Micron Electronics, Inc. (the "Company"), transmitted
herewith for filing is the definitive copy of the Company's 1996 Notice of
Annual Meeting of Shareholders, Proxy Statement and form of Proxy. Payment
of the filing fee was made via Fed Wire prior to the time of transmission
on EDGAR. Proxy materials are being sent to shareholders on or about
October 28, 1996.
If you have questions, please contact the undersigned at (208) 893-4026.
We are requesting a return copy via CompuServe for our records.
Best regards,
JoAnne S. Pfeifer
Corporate Secretary
JSP/dm
Enclosures
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MICRON ELECTRONICS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
______________________________________________________________________
2) Aggregate number of securities to which transaction applies:
______________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
______________________________________________________________________
4) Proposed maximum aggregate value of transaction:
______________________________________________________________________
5) Total fee paid:
______________________________________________________________________
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
______________________________________________________________________
2) Form, Schedule or Registration Statement No.:
______________________________________________________________________
3) Filing Party:
______________________________________________________________________
4) Date Filed:
______________________________________________________________________
<PAGE>
MICRON-TM-
ELECTRONICS, INC.
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
MONDAY, NOVEMBER 25, 1996
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Shareholders of
Micron Electronics, Inc., a Minnesota corporation (the "Company"), will be held
on Monday, November 25, 1996, at 9:00 a.m., Mountain Standard Time, at the Nampa
Civic Center, 311 3rd Street South, Nampa, Idaho 83651, for the following
purposes:
1. To elect eight directors to serve for the ensuing year and until
their successors are duly elected and qualified.
2. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants of the Company for the fiscal year ending August
28, 1997.
3. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Shareholders of record at the close of business on September 27, 1996 are
entitled to notice of and to vote at the meeting.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN
All shareholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting in the event you cannot
attend, you are urged to vote, sign, date and return the enclosed Proxy as
promptly as possible in the postage-prepaid envelope provided. Shareholders
attending the meeting may vote in person even if they have returned a Proxy.
By Order of the Board of Directors
JoAnne S. Pfeifer
CORPORATE SECRETARY
Nampa, Idaho
October 28, 1996
<PAGE>
MICRON-TM-
ELECTRONICS, INC.
900 EAST KARCHER ROAD
NAMPA, IDAHO 83687
PROXY STATEMENT
1996 ANNUAL MEETING OF SHAREHOLDERS
MONDAY, NOVEMBER 25, 1996
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Micron Electronics, Inc., a Minnesota corporation (the "Company"), for use at
the 1996 Annual Meeting of Shareholders to be held on November 25, 1996, at 9:00
a.m., Mountain Standard Time, or at any adjournment(s) thereof (the "Annual
Meeting"). The purposes of the Annual Meeting are set forth herein and in the
accompanying Notice of 1996 Annual Meeting of Shareholders. The Annual Meeting
will be held at the Nampa Civic Center, 311 3rd Street South, Nampa, Idaho
83651. This Proxy Statement and the enclosed Proxy were mailed on or about
October 28, 1996 to all shareholders entitled to vote at the Annual Meeting.
The Company's principal executive offices are located at 900 East Karcher
Road, Nampa, Idaho, 83687 and its telephone number is (208) 893-3434.
REVOCABILITY OF PROXIES
Any Proxy given pursuant to this solicitation may be revoked by the person
giving it any time before it is voted by delivering to the Company a written
notice of revocation or a duly executed Proxy bearing a later date or by
attending the Annual Meeting and voting in person.
SOLICITATION
The cost of soliciting Proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to such beneficial owners. Proxies may be solicited by the Company's
directors, officers and employees personally or by telephone, facsimile or
telegram without additional compensation.
VOTING SECURITIES AND PRINCIPAL HOLDERS
RECORD DATE
Shareholders of record at the close of business on September 27, 1996 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting.
<PAGE>
OUTSTANDING SHARES
The Company has only one class of stock outstanding, the Company's common
stock, $.01 par value per share (the "Common Stock"). As of the Record Date,
92,474,517 shares of Common Stock were issued and outstanding.
VOTING RIGHTS
Each shareholder will be entitled to one vote for each share of Common
Stock held as of the Record Date for all matters, including the election of
directors. Shareholders do not have the right to cumulate their votes in the
election of directors.
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding as of the Record Date. Shares that are voted
"FOR," "AGAINST," "WITHHELD" or "ABSTAIN" are treated as being present at the
Annual Meeting for the purpose of establishing a quorum and are also treated as
shares entitled to vote at the Annual Meeting (the "Votes Cast") with respect to
such matter. Abstentions will have the same effect of voting against a
proposal. Broker non-votes will be counted for the purpose of determining the
presence or absence of a quorum for the transaction of business, but such non-
votes will not be counted for the purpose of determining the number of Votes
Cast with respect to the particular proposal on which a broker has expressly not
voted. Thus a broker non-vote will not effect the outcome of the voting on a
proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth ownership information with respect to the
Common Stock of the Company and the common stock, $.10 par value per share, of
Micron Technology, Inc., a Delaware corporation and the parent of the Company
(the "Micron Technology, Inc. Common Stock"), as of the Record Date, with
respect to (i) persons known by the Company to beneficially own more than five
percent (5%) of the Company's Common Stock, (ii) each director, (iii) each Named
Executive Officer listed in the "SUMMARY COMPENSATION TABLE" on page 8, and (iv)
all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
MICRON ELECTRONICS, INC. MICRON TECHNOLOGY, INC.
COMMON STOCK COMMON STOCK
------------------------------ ------------------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
BENEFICIAL PERCENT OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP CLASS OWNERSHIP CLASS
------------------------ --------- ----- --------- -----
<S> <C> <C> <C> <C>
Micron Technology, Inc.
8000 South Federal Way
Boise, Idaho 83707 . . . . . . . . . . 73,312,863 79.28% N/A N/A
Joseph M. Daltoso. . . . . . . . . . . . . 1,075,234 1.16 33,190 (1) *
Brian C. Klene . . . . . . . . . . . . . . 15,093(2) * 13,220 (1) *
T. Erik Oaas . . . . . . . . . . . . . . . 635,357 * 8,430 (1) *
Gregory D. Stevenson . . . . . . . . . . . 635,357 * 7,294 (1) *
Robert F. Subia. . . . . . . . . . . . . . 97,783(2)(3) * 2,176 (1) *
Steven R. Appleton . . . . . . . . . . . . --(4) -- 263,466 (1) *
Jerry M. Hess. . . . . . . . . . . . . . . -- -- 22,000 (5) *
Robert A. Lothrop. . . . . . . . . . . . . -- -- 39,625 (6) *
John R. Simplot. . . . . . . . . . . . . . -- -- 13,062,500 (7) 6.25%
All directors and executive officers as a
group (15 persons) . . . . . . . . . . . 3,202,339(2)(3)(4) 3.46% 13,481,291 (1)(5) 6.45%
(6)(7)
* Less than 1%.
</TABLE>
2
<PAGE>
(1) Includes options to purchase shares of Micron Technology, Inc. Common
Stock exercisable within 60 days of September 27, 1996 in the
following amounts: Mr. Daltoso, 15,000; Mr. Klene, 10,900; Mr. Oaas,
8,430; Mr. Stevenson, 7,294; Mr. Subia, 2,176; Mr. Appleton, 161,956;
and all officers and directors as a group (15 persons), 224,146.
(2) Includes options to purchase shares of the Company's Common Stock
exercisable within 60 days of September 27, 1996 in the following
amounts: Mr. Klene, 14,000; Mr. Subia, 2,000; and all officers and
directors as a group (15 persons), 50,000.
(3) Does not include 300 shares of the Company's Common Stock held by Mr.
Subia's spouse and 200 shares held by Mr. Subia's son.
(4) Mr. Appleton, a director of the Company, serves as Chairman of the
Board, President and Chief Executive Officer of Micron Technology,
Inc. In addition to the shares indicated in the above table, Mr.
Appleton may be deemed the beneficial owner of 73,312,863 shares of
the Company's Common Stock held by Micron Technology, Inc. Mr.
Appleton disclaims beneficial ownership of all of the shares of the
Company's Common Stock held by Micron Technology, Inc.
(5) Includes 2,000 shares of Micron Technology, Inc. Common Stock held by
J.M. Hess Construction Co., Inc.
(6) Does not include 424 shares of Micron Technology, Inc. Common Stock
held by Mr. Lothrop's spouse.
(7) Includes 917,600 shares of Micron Technology, Inc.'s Common Stock held
by a trust of which Mr. John R. Simplot is the trustee; 51 shares held
by a limited partnership of which such trust is the general partner;
12,122,449 shares held by a limited partnership of which Mr. John R.
Simplot is the general partner; and 22,400 shares held in joint
tenancy with his spouse. Does not include 15,200 shares held by Mrs.
Simplot. Also does not include 18,699,000 shares beneficially owned
by J.R. Simplot Company.
CHANGE IN CONTROL OF THE COMPANY
Pursuant to an Agreement of Merger dated October 30, 1994, as amended (the
"Merger Agreement"), by and among the Company, Micron Computer, Inc., an Idaho
corporation, and former Micron Custom Manufacturing Services, Inc., an Idaho
corporation, on April 7, 1995 Micron Computer, Inc. and former Micron Custom
Manufacturing Services, Inc., then subsidiaries of Micron Technology, Inc. were
merged with and into the Company (the "Merger"). Upon the effective time of the
Merger (the "Effective Time of the Merger"), the separate existence of Micron
Computer, Inc. and former Micron Custom Manufacturing Services, Inc. ceased, the
Company remained as the surviving corporation, the name of the Company was
changed from "ZEOS International, Ltd." to "Micron Electronics, Inc.," and all
of the rights, privileges, powers, franchises, properties, assets, liabilities
and obligations of Micron Computer, Inc. and former Micron Custom Manufacturing
Services, Inc. were vested in the Company.
Upon the Effective Time of the Merger, in accordance with formulas set
forth in the Merger Agreement, each outstanding share of Micron Computer, Inc.
Class A common stock was converted into 42.316865 shares of the Company's Common
Stock, each outstanding share of Micron Computer, Inc. Class B common stock was
converted into 9.057555 shares of the Company's Common Stock, and each
outstanding share of former Micron Custom Manufacturing Services, Inc. common
stock was converted into 20.475586 shares of the Company's Common Stock.
Subsequent to the Merger, assuming the exercise of all options and rights to
purchase the Company's Common Stock outstanding at the Effective Time of the
Merger, the shares of the Company's Common Stock owned by Micron Technology,
Inc. represented approximately 79% of the outstanding shares of the Company's
Common Stock, shares owned by shareholders of the Company immediately prior to
the Merger represented approximately 11% of the outstanding shares of the
Company's Common Stock, and shares owned by
3
<PAGE>
former shareholders of Micron Computer, Inc. and former Micron Custom
Manufacturing Services, Inc. aggregated approximately 10% of the outstanding
shares of the Company's Common Stock.
In April 1995, the Company transferred all of the assets of the Company
related to its contract manufacturing operations to Micron Custom Manufacturing
Services, Inc., an Idaho corporation, in exchange for 1,000 shares of common
stock of Micron Custom Manufacturing Services, Inc. (constituting 100% of the
outstanding common stock).
DIRECTORS
The directors of the Company, all of whom have been nominated for
reelection at the Annual Meeting, their ages, their business experience during
the past five years, and their principal occupations as of the Record Date are
set forth below:
STEVEN R. APPLETON, age 36, joined Micron Technology, Inc. in February 1983
and has served in various capacities with Micron Technology, Inc. and its
subsidiaries, including overseeing Micron Technology, Inc.'s semiconductor
operations as President and Chief Executive Officer of Micron Semiconductor,
Inc. (then a wholly-owned subsidiary of Micron Technology, Inc.) from July 1992
to November 1994. Except for a nine day period in January 1996, since May 1994
Mr. Appleton has served as a member of the Board of Directors of Micron
Technology, Inc. and since September 1994 Mr. Appleton has served as the Chief
Executive Officer, President and Chairman of the Board of Directors of Micron
Technology, Inc. At the Effective Time of the Merger, Mr. Appleton was named
Chairman of the Board, President and Chief Executive Officer of the Company. He
resigned from these positions on April 17, 1995, but continued as a director of
the Company until January 1996, when he resigned from that position. Mr.
Appleton was reappointed a director of the Company in February 1996.
JOSEPH M. DALTOSO, age 34, served as the Memory Applications Group Manager
of Micron Technology, Inc. from May 1990 until April 1992, when he was named
President and a director of former Micron Custom Manufacturing Services, Inc.
In July 1992, Mr. Daltoso was named Chairman of the Board of former Micron
Custom Manufacturing Services, Inc., and in August 1994, was also named Chief
Executive Officer of former Micron Custom Manufacturing Services, Inc. At the
Effective Time of the Merger, Mr. Daltoso was appointed Executive Vice
President, Operations and a director of the Company. He was named Chairman of
the Board, President and Chief Executive Officer of the Company on April 17,
1995.
JERRY M. HESS, age 58, has served as Chairman and Chief Executive Officer
of the J.M. Hess Construction Co., Inc., a general construction company, since
1959. Mr. Hess has served on the Board of Directors of Micron Technology, Inc.
since 1994. At the Effective Time of the Merger, Mr. Hess was appointed a
director of the Company.
ROBERT A. LOTHROP, age 70, served as the Senior Vice President of the J.R.
Simplot Company, a food processing, fertilizer, and agricultural chemicals
manufacturing company, from January 1986 until his retirement in January 1991.
Mr. Lothrop was elected to the Board of Directors of Micron Technology, Inc. in
1986. In 1992, he was elected to the Board of Directors of Micron
Semiconductor, Inc. (then a wholly-owned subsidiary of Micron Technology, Inc.)
and resigned as a director of Micron Technology, Inc. Mr. Lothrop was
re-elected to the Board of Directors of Micron Technology, Inc. in 1994. At the
Effective Time of the Merger, Mr. Lothrop was appointed a director of the
Company.
T. ERIK OAAS, age 43, served as the Memory Applications Group
Administration Manager of Micron Technology, Inc. from July 1988 until April
1992, and as the Administration Manager of former Micron Custom Manufacturing
Services, Inc. from April 1992 until July 1992, when he was named Vice
President, Finance and Treasurer, and a director of former Micron Custom
Manufacturing Services, Inc. At the Effective Time of the Merger, Mr. Oaas was
appointed Vice President, Finance and Chief Financial Officer, and a director of
the Company.
4
<PAGE>
JOHN R. SIMPLOT, age 87, founded the J.R. Simplot Company and served as the
Chairman of the Board of Directors until his retirement in April 1994. Mr.
Simplot is Chairman Emeritus of the J.R. Simplot Company. Mr. Simplot has
served on the Board of Directors of Micron Technology, Inc. since 1980. At the
Effective Time of the Merger, Mr. Simplot was appointed a director of the
Company.
GREGORY D. STEVENSON, age 35, served as the Partials Business Unit Manager
of Micron Technology, Inc. from April 1990 until April 1992. In April 1992, Mr.
Stevenson joined former Micron Custom Manufacturing Services, Inc. as Component
Recovery Business Unit Manager. In July 1992, he was appointed Vice President,
Component Recovery of former Micron Custom Manufacturing Services, Inc., and in
September 1992, was also appointed a director of former Micron Custom
Manufacturing Services, Inc. In August 1993, Mr. Stevenson was appointed Vice
President, Operations of former Micron Custom Manufacturing Services, Inc. At
the Effective Time of the Merger, Mr. Stevenson was appointed Vice President,
Nampa Operations of the Company and served in that position until July 1995 when
he was appointed Executive Vice President, Operations and a director of the
Company.
ROBERT F. SUBIA, age 34, served as a Regional Sales Manager for Micron
Technology, Inc. from 1989 until February 1993. In February 1993, Mr. Subia
joined former Micron Custom Manufacturing Services, Inc. as Director of Sales
and held this position until August 1994, when he was appointed Vice President,
Sales. On April 17, 1995, Mr. Subia was appointed Chairman, President and Chief
Executive Officer of Micron Custom Manufacturing Services, Inc., a wholly-owned
subsidiary of the Company. Mr. Subia was appointed a director of the Company in
October 1995.
There is no family relationship between any director or executive officer
of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the third quarter of fiscal 1996, the Company purchased
approximately 30 acres of land adjacent to its PC manufacturing operations in
Nampa, Idaho from Mr. Jerry M. Hess, a director of the Company, and a third
party for approximately $575,000.
Micron Technology, Inc. owns approximately 79% of the outstanding Common
Stock of the Company, and four (4) of the eight (8) directors and nominees for
director of the Company are also directors of Micron Technology, Inc. Micron
Technology, Inc. and its subsidiaries supply and purchase products and services
used and produced by the Company.
During fiscal 1996, Micron Technology, Inc. supplied a substantial portion
of the full specification random access memory ("RAM") components used in the
Company's operations. Purchases by the Company of these components from Micron
Technology, Inc., completed upon market terms and conditions, amounted to
approximately $198,753,000 in fiscal 1996.
Pursuant to a revenue sharing agreement (the "Revenue Sharing Agreement"),
Micron Technology, Inc. delivered to the Company all of the nonstandard RAM
components produced at Micron Technology, Inc.'s semiconductor memory
manufacturing operations. Under this agreement, the Company was obligated to
pay to Micron Technology, Inc. an amount generally equal to one-half the net
sales realized from sales of these nonstandard RAM components. In fiscal 1996,
the Company paid approximately $49,645,000 to Micron Technology, Inc. under the
Revenue Sharing Agreement.
On August 14, 1996 the Company and Micron Technology, Inc. entered into a
new component recovery agreement (the "Component Recovery Agreement"), effective
August 30, 1996 and expiring August 1999, which replaced the Revenue Sharing
Agreement. Pursuant to the Component Recovery Agreement, Micron Technology,
Inc. is required to provide its nonstandard RAM components exclusively to the
Company, and the Company is generally required to pay to Micron Technology, Inc.
an amount equal to one-half of the pre-tax income realized from the sale of
nonstandard RAM components received from Micron Technology, Inc.
5
<PAGE>
In fiscal 1996, Micron Technology, Inc. and its subsidiaries paid
approximately $41,509,000 to the Company for contract manufacturing services and
approximately $5,070,000 for purchases of PC systems. In fiscal 1996, the
Company paid Micron Technology, Inc. and its subsidiaries approximately $574,000
for equipment and approximately $940,000 for construction management services.
The Company relies on Micron Technology, Inc. for certain information
systems, payroll, employee benefits, risk management and other administrative
services. In fiscal 1996, the Company paid approximately $1,680,000 to Micron
Technology, Inc. for such services.
In 1992, former Micron Custom Manufacturing Services, Inc. was incorporated
as a wholly-owned subsidiary of Micron Technology, Inc. Micron Technology, Inc.
transferred the assets and liabilities related to its contract manufacturing and
component recovery operations to former Micron Custom Manufacturing Services,
Inc. in exchange for 1,591,304 shares of common stock of former Micron Custom
Manufacturing Services, Inc. and promissory notes in the aggregate amount of
approximately $9.6 million (the "Notes"). The Notes and related interest, which
were due over ten years, were paid in full in fiscal 1996. Aggregate principal
and interest payments in fiscal 1996 amounted to approximately $7,032,000.
At various times between January 1994 and April 1994, Joseph M. Daltoso, T.
Erik Oaas, Gregory D. Stevenson, Robert F. Subia and Jess Asla, Vice President,
Operations of Micron Custom Manufacturing Services, Inc., purchased 52,513,
31,030, 31,030, 6,000 and 14,363 shares, respectively, of former Micron Custom
Manufacturing Services, Inc. common stock pursuant to the former Micron Custom
Manufacturing Services, Inc. 1994 Stock Purchase Plan for amounts aggregating
$786,120, $464,519, $511,166, $89,820 and $223,489, respectively. The purchase
prices represented the fair market value of the former Micron Custom
Manufacturing Services, Inc. common stock on the dates of purchase as determined
by the former Micron Custom Manufacturing Services, Inc. Board of Directors.
Upon the Effective Time of the Merger, the shares of former Micron Custom
Manufacturing Services, Inc. common stock owned by Messrs. Daltoso, Oaas,
Stevenson, Subia and Asla were converted into 1,075,234, 635,357, 635,357,
122,853 and 294,090 shares, respectively, of the Company's Common Stock. See
"VOTING SECURITIES AND PRINCIPAL HOLDERS - Security Ownership of Certain
Beneficial Owners and Management; Change in Control of the Company." At the
time of their purchases, Messrs. Daltoso, Oaas and Stevenson were officers and
directors, Mr. Subia was an officer, and Mr. Asla was Director of Engineering,
of former Micron Custom Manufacturing Services, Inc. Eighty percent (80%) of
the funds used by Messrs. Daltoso, Oaas, Stevenson, Subia and Asla to purchase
former Micron Custom Manufacturing Services, Inc. common stock was obtained
through loans from Micron Technology, Inc. The loans were made pursuant to full
recourse promissory notes issued in favor of Micron Technology, Inc. The notes
bear interest at a rate of 7.5% per annum, which the parties believed
represented a commercially reasonable interest rate at the times of the loans.
The notes are payable, in full, five years from the date of each note. Each
note is secured by the stock purchased by the respective parties. The principal
balances together with accrued interest due on the notes at September 27, 1996
for Messrs. Daltoso, Oaas, Stevenson and Asla were $766,254, $452,781, $494,099
and $217,079, respectively, and the maximum principal and accrued interest
outstanding on the notes during the Company's 1996 fiscal year aggregated
$761,855, $450,181, $491,238 and $215,828, respectively. The maximum principal
and accrued interest outstanding on Mr. Subia's notes during the Company's 1996
fiscal year, at November 6, 1995, the date on which Mr. Subia repaid all
indebtedness to Micron Technology, Inc., aggregated $81,975.
At various times between August 1991 and April 1994, George A. Haneke, Vice
President, Chief Information Officer of the Company, Pete J. Scamardo, then Vice
President, Corporate Strategy of the Company, and Gene P. Thomas, Jr., Vice
President, Marketing of the Company, purchased 25,000, 25,000 and 12,500 shares,
respectively, of Micron Computer, Inc. Class B common stock pursuant to
restricted stock purchase agreements for amounts aggregating $140,750, $5,116
and $13,675, respectively. The purchase prices represented the fair market
value of the Micron Computer, Inc. Class B common stock on the dates of purchase
as determined by the Micron Computer, Inc. Board of Directors. In addition,
pursuant to an agreement with Mr. Thomas, in April 1994, Micron Computer, Inc.
issued an additional 12,500 shares of Class B common stock to Mr. Thomas at no
additional cost to him upon the one year anniversary of the commencement of his
employment with Micron Computer, Inc. Upon the Effective Time of the Merger,
the shares of Micron Computer, Inc. Class B common stock of Messrs. Haneke,
Scamardo and Thomas were converted into 226,438, 226,438 and 226,438 shares,
respectively, of the Company's Common Stock. See "VOTING SECURITIES AND
PRINCIPAL HOLDERS -
6
<PAGE>
Security Ownership of Certain Beneficial Owners and Management; Change in
Control of the Company." At the time of their purchases, Messrs. Haneke and
Thomas were officers, and Mr. Scamardo was Director of Marketing and Strategic
Relations, of Micron Computer, Inc. Eighty percent (80%) of the funds used by
Mr. Haneke to purchase the Micron Computer, Inc. common stock was obtained
through a loan from Micron Technology, Inc. The loan was made pursuant to a
full recourse promissory note issued in favor of Micron Technology, Inc. The
note bore interest at a rate of 7.5% per annum, which the parties believed
represented a commercially reasonable interest rate at the time of the loan.
The note was payable, in full, five years from the date of the note, and was
secured by the purchased stock. The maximum principal and accrued interest
outstanding on Mr. Haneke's note during the Company's 1996 fiscal year, at
October 17, 1995, the date on which Mr. Haneke repaid all indebtedness to Micron
Technology, Inc., aggregated $126,347.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own beneficially more than
ten percent (10%) (the "Beneficial Owners") of a registered class of the
Company's equity securities, to file initial reports of ownership and reports of
changes of ownership with the Securities and Exchange Commission and the
National Association of Securities Dealers. Copies of all filed reports are
required to be furnished to the Company pursuant to Section 16(a). Based solely
on the reports received by the Company and on written representations from
reporting persons, the Company believes that the Beneficial Owners complied with
all applicable Section 16(a) filing requirements during the fiscal year ended
August 29, 1996, except for Chase S. Mart, a former executive officer and
director of the Company, who filed late a Form 4 for the month of September
1995.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of twelve (12) meetings
during the Company's fiscal year ended August 29, 1996. The Board of Directors
has formed an Audit Committee and a Compensation Committee. A Nominating
Committee of the Board of Directors has not been formed.
The Audit Committee, which consists of Messrs. Hess, Lothrop and Simplot,
held one (1) meeting during fiscal 1996. The Audit Committee is primarily
responsible for reviewing the services performed by the Company's independent
accountants and evaluating the Company's accounting principles and system of
internal accounting controls.
The Compensation Committee, which consists of Messrs. Hess, Lothrop and
Simplot, held four (4) meetings during fiscal 1996. The Compensation Committee
is primarily responsible for reviewing and approving compensation for the
Company's officers.
During fiscal 1996, all directors attended 75% or more of the total number
of meetings of the Board of Directors and of meetings of all committees of the
Board on which they served except for John R. Simplot who attended 50% of the
total number of meetings of the Board of Directors, 25% of the total number of
meetings of the Compensation Committee and did not attend the meeting of the
Audit Committee.
7
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the cash and noncash compensation for each
of the last three fiscal years for services rendered to the Company, its
predecessors and its subsidiaries, awarded to or earned by any individual who
served as Chief Executive Officer of the Company during fiscal 1996 and for each
of the other four most highly compensated executive officers of the Company who
were serving as executive officers at the end of fiscal 1996 whose salary and
bonus earned in fiscal 1996 exceeded $100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
---------------------------------------------------- COMPENSATION
FISCAL OTHER ANNUAL OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2)(3) COMPENSATION(4) GRANTED(#) COMPENSATION(7)
- --------------------------- ------ --------- ----------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Daltoso 1996 $273,077 $235,288 $0 15,000(5) $20,119
Chairman, President and Chief 1995 165,865 180,979 0 0 11,450
Executive Officer 1994 104,261 76,239 0 75,000(6) 7,289
Brian C. Klene 1996 157,692 61,517 0 45,000(5) 22,400
Executive Vice President, 1995 19,423 25,306 0 70,000(5) 0
Sales and Marketing 1994 0 0 0 0 0
T. Erik Oaas 1996 165,385 173,873 0 15,000(5) 19,876
Vice President, Finance and 1995 108,750 135,614 0 0 10,301
Chief Financial Officer 1994 82,556 58,552 0 32,630(6) 8,848
Gregory D. Stevenson 1996 148,077 174,123 0 15,000(5) 15,200
Executive Vice President, 1995 102,500 135,614 0 0 9,120
Operations 1994 82,556 58,565 0 32,630(6) 8,406
Robert F. Subia 1996 148,077 91,446 0 45,000(5) 12,211
Chairman, President and Chief 1995 80,375 92,110 0 10,000(5) 7,930
Executive Officer, Micron 1994 63,650 67,772 0 10,880(6) 17,557
Custom Manufacturing
Services, Inc.
</TABLE>
(1) Includes compensation deferred by the employee under the Company's and its
parent's qualified 401(k) retirement plans.
(2) Includes amounts paid under the Company's, its predecessors' and its
subsidiary's profit sharing plans and patent bonus programs and amounts
paid for achievement of certain performance milestones.
(3) Includes bonuses earned and paid during each fiscal year under executive
bonus programs established in previous years. See "REPORT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS REGARDING EXECUTIVE
COMPENSATION."
(4) Excludes certain perquisites and other amounts which in the aggregate did
not exceed the lesser of $50,000 or 10% of the total annual salary and
bonuses for the officer.
(5) Consists of options to purchase shares of the Company's Common Stock under
the Company's 1995 Stock Option Plan.
(6) Consists of options to purchase shares of Micron Technology, Inc. Common
Stock. Option amounts reflect a 2-for-1 stock split and a 5-for-2 stock
split of Micron Technology, Inc. Common Stock outstanding, each effected in
the form of a stock dividend, as of May 4, 1995 and April 1, 1994,
respectively.
(7) Consists of contributions made by the Company, its predecessors and its
subsidiary under their respective qualified 401(k) retirement plans and
cash paid under their respective sabbatical and time-off plans.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to stock options
granted in fiscal 1996 to the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
POTENTIAL REALIZABLE
PERCENT OF VALUE AT
TOTAL MARKET ASSUMED ANNUAL RATES
NUMBER OF OPTIONS EXERCISE PRICE OF OF STOCK
SECURITIES GRANTED TO OR BASE SECURITIES PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES PRICE ON OPTION TERM
OPTIONS IN PER DATE OF EXPIRATION ---------------------------------------
NAME GRANTED (1) FISCAL YEAR SHARE GRANT DATE 0% 5% 10%
- --------------------- ----------- ----------- ----- ----- ---- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph M. Daltoso 14,764 1.14% $12.45 $12.45 5/1/02 $ -- $ 62,514 $141,822
236(2) 0.02 10.58 12.45 5/1/02 441 1,440 2,708
Brian C. Klene 8,032 0.62 12.45 12.45 5/1/02 -- 34,009 77,155
36,968(2) 2.85 10.58 12.45 5/1/02 69,038 225,567 424,150
T. Erik Oaas 10,019 0.77 12.45 12.45 5/1/02 -- 42,422 96,242
4,981(2) 0.38 10.58 12.45 5/1/02 9,302 30,393 57,149
Gregory D. Stevenson 10,654 0.82 12.45 12.45 5/1/02 -- 45,111 102,342
4,346(2) 0.34 10.58 12.45 5/1/02 8,116 26,518 49,864
Robert F. Subia 21,666 1.67 12.45 12.45 5/1/02 -- 91,738 208,122
23,334(2) 1.80 10.58 12.45 5/1/02 43,576 142,377 267,721
</TABLE>
(1) Options granted pursuant to the Company's 1995 Stock Option Plan typically
have a six (6) year term and vest over five (5) years in increments of
twenty percent (20%) per year. Options granted pursuant to the plan are
granted as incentive stock options ("ISOs") or nonstatutory stock options
("NSOs"). ISOs are granted with an exercise price equal to 100% of the
fair market value (as defined in the plan) of the Company's Common Stock on
the date of grant. All NSOs granted and set forth in the above table were
granted with an exercise price equal to 85% of the fair market value (as
defined in the plan) of the Company's Common Stock on the date of grant.
(2) Represents NSOs granted pursuant to the Company's 1995 Stock Option Plan.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information regarding Company and Micron
Technology, Inc. stock option exercises in fiscal 1996 by the Named Executive
Officers and the value of such officers' unexercised options at August 29, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END YEAR-END
NUMBER OF -------- --------
SHARES ACQUIRED VALUE EXERCISABLE (E)/ EXERCISABLE (E)/
NAME ON EXERCISE REALIZED UNEXERCISABLE (U) UNEXERCISABLE (U)
- ------------------------ ------------- --------- ----------------- -----------------
<S> <C> <C> <C> <C>
Joseph M. Daltoso 25,000(1) $788,258 0(E) $ 0(E)
80,000(U)(2) 966,644(U)
Brian C. Klene 0 0 14,000(E) 0(E)
101,000(U) 211,913(U)
T. Erik Oaas 18,430(1) 487,171 0(E) 0(E)
48,402(U)(2) 525,992(U)
Gregory D. Stevenson 12,300(1) 321,029 0(E) 0(E)
46,118(U)(2) 482,315(U)
Robert F. Subia 5,174(1) 232,836 2,000(E) 0(E)
65,532(U)(2) 365,041(U)
</TABLE>
(1) Reflects exercises of options to purchase Micron Technology, Inc. Common
Stock.
(2) Includes options to purchase Micron Technology, Inc. Common Stock
(reflecting a 2-for-1 stock split and a 5-for-2 stock split of Micron
Technology, Inc. Common Stock outstanding, each effected in the form of a
stock dividend, as of May 4, 1995 and April 1, 1994, respectively) in the
following amounts: Mr. Daltoso, 65,000; Mr. Oaas, 33,402; Mr. Stevenson,
31,118; and Mr. Subia, 12,532.
COMPENSATION OF DIRECTORS
Directors of the Company receive no remuneration for their service as
directors of the Company. The Company reimburses directors for travel and
lodging expenses, if any, incurred in connection with attendance at Board
meetings.
EMPLOYMENT TERMINATION AGREEMENTS AND ARRANGEMENTS
Subsequent to the Merger, the Company entered into separate termination
agreements with each executive officer relating to notice of termination and to
compensation upon notice of termination. Each agreement required that the
Company or each of the executive officers give six (6) months advance written
notice of the termination of the executive officer's employment, regardless of
the reason or justification for termination. The Company or each of the
executive officers may have discontinued each of the executive officer's active
duties at any time following notice of termination; however, subject to the
discretion of the Board of Directors, employment for purposes of salary,
bonuses, benefits, stock and option vesting, and for determining conflicts of
interest continued for at least six (6) months from the date of such notice.
During fiscal 1996, payments were made pursuant to these agreements to Mr.
Charles Henderson, Mr. Richard Apple, Mr. Chase Mart and Mr. Steve Schmidt, all
former executive officers of the Company.
During fiscal 1996, the Company entered into employment and severance
agreements (the "Agreements") with each of the Named Executive Officers and
certain other officers of the Company relating to termination and compensation
upon termination of the officer's active employment with the Company. The
Agreements supersede and replace the prior termination agreements with such
officers. The Agreements allow either the Company or the
10
<PAGE>
officer to terminate the officer's active employment with the Company for any
reason, voluntary or involuntary, with or without cause, by providing notice to
that effect in writing. The Agreements provide that during a one or two year
"Transition Period" following termination, the officer will continue to receive
all benefits "customarily provided" to such officer while employed including,
but not limited to, salary, bonuses, executive bonuses, benefits and continued
vesting of any granted stock options. "Customarily provided" refers to company
practices and plans with respect to the officer's benefits and compensation in
effect as of the date of termination of the officer's active employment with the
Company. However, such terminated officers will not be entitled to any new
grants of interest in future executive bonuses, any new grants of stock options,
or payment of any compensation under an incentive program that is deferred, due
to payment criteria of such incentive program, as those criteria existed as of
the date of termination of the officer's active employment with the Company,
beyond the Transition Period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996, the Compensation Committee members consisted of Jerry
M. Hess, Robert A. Lothrop and John R. Simplot, none of whom is an officer or
employee of the Company or any of its subsidiaries. Messrs. Hess, Lothrop and
Simplot are currently directors of Micron Technology, Inc. During the third
quarter of fiscal 1996, the Company purchased approximately 30 acres of land
adjacent to its PC manufacturing operations in Nampa, Idaho from Mr. Jerry M.
Hess, a director of the Company, and a third party for approximately $575,000.
11
<PAGE>
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND
THE PERFORMANCE GRAPH ON PAGE 14 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
REGARDING EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of the Company (the
"Committee") is comprised of Messrs. Jerry M. Hess, Robert A. Lothrop and John
R. Simplot. The Committee met four (4) times in fiscal 1996 and intends to meet
annually or more frequently as the Company's Board of Directors may request.
The Committee's primary responsibility is to review the compensation,
including salary, bonuses, benefits, stock option grants, and other
compensation, of the Company's executive officers. Compensation for the
Company's executive officers for fiscal 1996, including base salary, performance
bonuses, stock option grants and other compensation, was determined by the
Compensation Committee and reviewed by the Company's Board of Directors. The
executive officers of the Company are individuals employed by the Company or by
Micron Custom Manufacturing Services, Inc., a wholly-owned subsidiary of the
Company.
EXECUTIVE OFFICER COMPENSATION
The Company's executive officer compensation programs are described below
for the purpose of providing a general understanding of the various components
of executive officer compensation. These executive officer compensation
programs are designed to attract, retain and reward highly qualified executive
officers who are important to the success of the Company and to provide
incentives relating directly to the financial performance and long-term growth
of the Company. The various components of the Company's executive officer
compensation programs are, in most cases, the same as those generally made
available to employees of the Company.
CASH COMPENSATION
BASE SALARY. The base salary of each executive officer is established
primarily upon a subjective evaluation of the executive officer's contribution
to the Company, including (i) individual performance, (ii) level of
responsibility, (iii) technical expertise and (iv) length of service. Overall
Company performance and industry compensation levels are also evaluated.
PERFORMANCE BONUSES. Cash bonuses to executive officers are intended to
reward executive officers for the Company's financial performance during the
fiscal year and are earned and paid pursuant to the Executive Bonus Plan, which
was approved by the Company's shareholders in June 1995. Bonuses awarded under
the Executive Bonus Plan are based on performance criteria established at the
beginning of each fiscal year formulated primarily as a percentage of after-tax
net profit of the Company for the fiscal year. Performance bonus percentages
are established according to a subjective analysis by the Committee of each
executive officer according to criteria similar to those utilized to determine
the executive officer's base salary.
PROFIT SHARING. The Company distributes, on a quarterly basis,
approximately five percent (5%) of its consolidated quarterly after-tax net
profits equally to all eligible employees (including executive officers) of the
Company and its subsidiaries.
INCENTIVE BONUSES. From time to time, incentive cash bonuses are approved
for payment to employees (including executive officers) for the achievement of
milestones, the completion of projects identified as contributing substantially
to Company's success and the attainment of technological advances.
12
<PAGE>
EQUITY COMPENSATION
In order to provide long-term incentive to the executive officers and
employees of the Company and its subsidiaries linked to long-term growth in the
value of the Company's Common Stock, the Company may grant incentive and
nonstatutory stock options to such persons pursuant to the Company's 1995 Stock
Option Plan. The determination of who receives stock options and the number of
stock options granted to each such recipient is based upon the same criteria
utilized to determine base salary.
OTHER COMPENSATION
In addition to cash and equity compensation programs, executive officers
participate in various other employee benefit plans, including, but not limited
to, a time-off plan. Under the time-off plan, all full-time employees of the
Company and its subsidiaries (including executive officers) are allowed to
accumulate a predetermined nondiscriminatory number of hours for vacation,
holidays, sick time, emergencies and personal needs. Hours accumulated in
excess of 400 hours are paid in cash to the employee. Executive officer
participation in various clubs, organizations and associations may also be
funded by the Company or its subsidiaries.
PAYMENT/EXERCISE RESTRICTIONS
In an effort to encourage employees and executive officers to remain
employed and to promote Company performance, many compensation programs for
employees and executive officers contain provisions delaying payment and
requiring continuing Company profitability. In this regard, performance bonuses
for each executive officer are typically earned and paid in installments over a
five (5) year period provided that the Company is profitable on a consolidated
basis in the year of payment, the individual remains employed by the Company or
a subsidiary thereof, and the Board of Directors approves such bonuses.
Similarly, stock options granted to employees and executive officers typically
have a term of six (6) years and vest twenty percent (20%) each year for five
(5) years from the date of grant.
CEO COMPENSATION
Joseph M. Daltoso is the Chairman of the Board of Directors, President and
Chief Executive Officer of the Company. Prior to the Effective Time of the
Merger, Mr. Daltoso served as Chairman of the Board of Directors, President and
Chief Executive Officer of former Micron Custom Manufacturing Services, Inc.
Mr. Daltoso's base compensation was based on an analysis of compensation paid to
chief executive officers of comparable companies and on a subjective analysis of
Mr. Daltoso's level of responsibility, contribution and service to the Company.
The Compensation Committee expects to review Mr. Daltoso's salary, along with
those of the other executive officers, during fiscal 1997. Mr. Daltoso is
eligible to participate in the 1995 Stock Option Plan and the Executive Bonus
Plan, and other executive officer compensation programs, as outlined above, to
the same extent as other executive officers of the Company. See the
descriptions in PERFORMANCE BONUSES and PAYMENT/EXERCISE RESTRICTIONS above.
Effective May 1, 1996, the Board of Directors granted to Mr. Daltoso
options to purchase 15,000 shares of the Company's Common Stock. The
Compensation Committee does not have a predetermined number of shares subject to
stock options that it believes Mr. Daltoso should hold. The number of shares
granted to Mr. Daltoso was based upon subjective and objective factors,
including his current equity holdings, his individual performance, his position
in the Company relative to the other executive officers who received option
grants on the same date, the Company's overall performance, his length of
service with the Company, his past contributions to the success of the Company
and expectations of his future contributions to the Company's success.
Compensation Committee of the Board of Directors
Jerry M. Hess
Robert A. Lothrop
John R. Simplot
13
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's Common Stock for the period from August 31, 1991 through August 31,
1996 with the cumulative total return for the same period of (i) the Center for
Research in Securities Prices ("CRSP") Total Return Index for The Nasdaq Stock
Market (US Companies) and (ii) the CRSP Total Return Index for Nasdaq Computer
Manufacturer Stocks. These indices are prepared and made available to the
public by the Center for Research in Securities Prices at the University of
Chicago. Upon the Effective Time of the Merger, the Company's fiscal year
became a 52 or 53 week period ending on the Thursday closest to August 31, which
corresponded to the fiscal years of Micron Computer, Inc. and former Micron
Custom Manufacturing Services, Inc. Accordingly, the last trading day of the
Company's fiscal year varies. For consistent presentation and a more meaningful
comparison to the industry indices shown herein, the Company's stock performance
graph was plotted assuming an August 31 fiscal year-end. These comparisons
assume an investment of $100 at the commencement of the period and the
reinvestment of dividends paid during the period. On October 17, 1994, the
Company, then known as ZEOS International, Ltd., announced its intent to merge
with Micron Computer, Inc. and former Micron Custom Manufacturing Services, Inc.
The Merger was effective on April 7, 1995.
NOTE: MANAGEMENT CAUTIONS THAT THE STOCK PRICE PERFORMANCE INFORMATION
SHOWN IN THE GRAPH BELOW MAY NOT BE INDICATIVE OF CURRENT STOCK PRICE LEVELS OR
FUTURE STOCK PRICE PERFORMANCE.
[GRAPH]
The performance graph was plotted using the following data:
YEAR ENDING AUGUST 31
---------------------------------------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
MICRON ELECTRONICS, INC. $ 100 $ 16 $ 17 $ 16 $ 94 $ 82
CRSP Total Return Index for The
Nasdaq Stock Market (US Companies) 100 108 143 149 201 226
CRSP Total Return Index for Nasdaq
Computer Manufacturer Stocks 100 99 114 118 208 249
14
<PAGE>
PROPOSAL ONE:
ELECTION OF DIRECTORS
The Company's Board of Directors has fixed the authorized number of
directors at eight (8), and it is contemplated that a board of eight (8)
directors will be elected at the Annual Meeting. Unless otherwise instructed,
the proxy holders will vote the Proxies received by them for the eight (8)
nominees named below, all of whom are presently directors of the Company who are
identified in "DIRECTORS." In the event that any nominee is unable or declines
to serve as a director at the time of the Annual Meeting, the Proxies will be
voted for any nominee who shall be designated by the present Board of Directors
to fill the vacancy. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all Proxies received by
them in such a manner as will ensure the election of as many of the nominees
listed below as possible. It is not expected that any nominee will be unable or
will decline to serve as a director. The term of office of each person elected
as a director will continue until the next annual meeting of shareholders and
until such person's successor has been duly elected and qualified, or until such
person's earlier death, resignation, removal, or disqualification. Officers are
appointed by the Board of Directors and serve at the discretion of the Board.
The Board's nominees for re-election at the Annual Meeting are Steven R.
Appleton, Joseph M. Daltoso, Jerry M. Hess, Robert A. Lothrop, T. Erik Oaas,
John R. Simplot, Gregory D. Stevenson and Robert F. Subia. The Board recommends
a vote "FOR" the election of each of the foregoing nominees.
The eight nominees receiving the highest number of affirmative votes of the
shares of the Company's Common Stock entitled to vote on this matter shall be
elected as the directors.
PROPOSAL TWO:
TO RATIFY THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Coopers & Lybrand L.L.P., independent
accountants, to audit the consolidated financial statements of the Company for
the fiscal year ending August 28, 1997, and recommends that shareholders vote
"FOR" ratification of such appointment.
Ernst & Young LLP served as the independent accountants for ZEOS
International, Ltd. prior to its April 7, 1995 merger with Micron Computer, Inc.
and former Micron Custom Manufacturing Services, Inc. Coopers & Lybrand L.L.P.
serves as Micron Technology, Inc.'s independent accountants and audited the
financial statements of both Micron Computer, Inc. and former Micron Custom
Manufacturing Services, Inc. from incorporation through fiscal 1994. Because of
Coopers & Lybrand L.L.P.'s familiarity with the business and operations of
Micron Computer, Inc., former Micron Custom Manufacturing Services, Inc. and
Micron Technology, Inc., the Company engaged Coopers & Lybrand L.L.P. as the
auditors of the Company following the Merger.
The Company dismissed Ernst & Young LLP as its independent accountants on
April 7, 1995 following the Merger. The report of Ernst & Young LLP on the
financial statements of ZEOS International, Ltd. for fiscal 1994 and 1993
contained no adverse opinion or disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principle. The decision
to change independent accountants was approved by the Company's Board of
Directors, including the members of the Audit Committee. During ZEOS
International, Ltd.'s fiscal 1994 and 1993 and through the date of the Merger,
ZEOS International, Ltd. had no reportable events (as described in Item
304(a)(1)(v) of Regulation S-K).
The Company engaged Coopers & Lybrand L.L.P. as its new independent
accountants as of April 7, 1995. During the two most recent fiscal years and
through the date of this report, the Company, or ZEOS International, Ltd. as it
was previously known, did not consult with either Ernst and Young LLP or Coopers
& Lybrand L.L.P. on either (1) the application of accounting principles to a
specified transaction or the type of opinion that might be rendered on the
financial statements of the Company, or ZEOS International, Ltd. as it was
previously known, or (2) items which concerned the subject matter of a
disagreement or reportable event with the former auditor (as described in Item
304(a)(1)(iv) of Regulation S-K).
15
<PAGE>
The affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock present or represented and voting at the Annual
Meeting will be required for ratification of such appointment. In the event
that the shareholders fail to ratify such appointment, the Board of Directors
will reconsider its selection.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Annual Meeting, will have the opportunity to make a statement if they so
desire, and are expected to be available to respond to appropriate questions.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the Annual Meeting, the
persons named in the accompanying form of Proxy will vote, in their discretion,
the shares of the Company's Common Stock they represent.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR
1997 ANNUAL MEETING OF SHAREHOLDERS
In order to be included in the proxy statement and form of proxy relating
to the Company's 1997 Annual Meeting of Shareholders, proposals of shareholders
of the Company that are intended to be presented at such meeting must be
received by the Company no later than June 30, 1997, and must otherwise be in
compliance with applicable laws and regulations and the Bylaws of the Company.
THE BOARD OF DIRECTORS
Dated: October 28, 1996
16
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
[LOGO]
900 East Karcher Road
Nampa, Idaho 83687
1996 ANNUAL MEETING OF SHAREHOLDERS
November 25, 1996
The undersigned shareholder(s) of Micron Electronics, Inc., a Minnesota
corporation, hereby acknowledges receipt of the Notice of 1996 Annual Meeting of
Shareholders and the Proxy Statement, each dated October 28, 1996, and hereby
appoints Joseph M. Daltoso and T. Erik Oaas, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1996 Annual Meeting
of Shareholders of Micron Electronics, Inc., to be held November 25, 1996, at
9:00 a.m., Mountain Standard Time, at the Nampa Civic Center, 311 3rd Street
South, Nampa, Idaho 83651 and at any adjournment(s) thereof (the "Annual
Meeting"), and to vote all shares of Micron Electronics, Inc. common stock which
the undersigned would be entitled to vote if then and there personally present,
on the proposals set forth below:
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: / / FOR nominees listed below / / WITHHOLD authority to vote for all
(except as indicated) nominees listed below
</TABLE>
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME SET FORTH BELOW:
<TABLE>
<S> <C>
Steven R. Appleton; Joseph M. Daltoso; Jerry M. Hess; Robert A. Lothrop; T. Erik Oaas; John R.
Simplot; Gregory D. Stevenson; Robert F. Subia
</TABLE>
2. TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR FISCAL YEAR 1997:
/ / FOR / / AGAINST / / ABSTAIN
(to be signed on reverse side)
<PAGE>
(continued from other side)
and in their discretion, upon such other matter or matters which may properly
come before the Annual Meeting.
The shares represented by this Proxy when properly executed will be voted in the
manner directed herein by the undersigned shareholder(s). If no direction is
made, this proxy will be voted FOR items 1 and 2 above. If any other matters
properly come before the Annual Meeting, the persons named in this Proxy will
vote in their discretion.
Dated _____________________, 1996
_________________________________
Signature
_________________________________
Signature
(This proxy should be voted,
signed, and dated by the
shareholder(s) exactly as his or
her name appears hereon, and
returned promptly in the enclosed
envelope. Persons signing in a
fiduciary capacity should so
indicate. If shares are held by
joint tenants or as community
property, all persons having an
interest therein should sign.)
