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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) 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 Electronics, Inc. Logo]
900 East Karcher Road
Nampa, Idaho 83687
----------------------
Notice of 1997 Annual Meeting of Shareholders
Monday, November 24, 1997
----------------------
To The Shareholders:
Notice Is Hereby Given that the 1997 Annual Meeting of
Shareholders of Micron Electronics, Inc., a Minnesota corporation
(the "Company"), will be held on Monday, November 24, 1997, 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 approve an amendment to the Company's 1995 Stock
Option Plan increasing the number of shares of Common Stock
reserved for issuance thereunder from 5,000,000 to 10,000,000.
3. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants of the Company for the fiscal year
ending September 3, 1998.
4. To transact such other business as may properly come
before the meeting or any adjournment(s) or postponement(s)
thereof.
The foregoing items of business are more fully described in the
Proxy Statement accompanying this Notice.
Only shareholders of record at the close of business on
September 29, 1997 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 27, 1997
<PAGE>
[Micron Electronics, Inc. Logo]
900 East Karcher Road
Nampa, Idaho 83687
----------------------
PROXY STATEMENT
1997 ANNUAL MEETING OF SHAREHOLDERS
Monday, November 24, 1997
----------------------
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 1997 Annual Meeting of
Shareholders to be held on Monday, November 24, 1997, at 9:00
a.m. Mountain Standard Time, or at any adjournment(s) or
postponement(s) thereof (the "Annual Meeting"). The purposes of
the Annual Meeting are set forth herein and in the accompanying
Notice of 1997 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 first mailed on or about October 27, 1997 to all shareholders
entitled to vote at the Annual Meeting. An annual report to
shareholders for the fiscal year ended August 28, 1997 is also
enclosed with this Proxy Statement.
The Company's principal executive offices are located at 900
East Karcher Road, Nampa, Idaho, 83687 and its telephone number
is (208) 898-3434.
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. Please note, however, that if a shareholder's
shares are held of record by a broker, bank or other nominee and
that shareholder wishes to vote at the Annual Meeting, the
shareholder must bring to the Annual Meeting a letter from the
broker, bank or other nominee confirming that shareholder's
beneficial ownership of shares.
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,
telegram, or by electronic means without additional compensation.
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS
Record Date
Only shareholders of record at the close of business on
September 29, 1997 (the "Record Date") are entitled to notice of
and to vote at the Annual Meeting.
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, 95,553,127 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 affect 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 7, and (iv) all directors
and executive officers of the Company as a group:
2
<PAGE>
<TABLE>
<CAPTION>
Micron Electronics, Inc. Micron Technology, Inc.
Common Stock Common Stock
------------------------- -------------------------
Amount and Amount and
Nature of Nature of
Beneficial Percent Beneficial Percent
Name of Beneficial Owner Ownership (1) of Class Ownership (1) of Class
- ------------------------------------------------------ -------------------------
<S> <C> <C> <C> <C>
Micron Technology, Inc.
8000 South Federal Way
Boise, Idaho 83707 60,882,863 63.7% N/A N/A
Joseph M. Daltoso 878,234 (2) * 37,595 (3) *
George A. Haneke 94,438 (2) * 4,000 (3) *
T. Erik Oaas 543,357 (2) * 13,440 (3) *
Gregory D. Stevenson 488,357 (2) * 12,300 (3) *
Robert F. Subia 74,428 (2) * 5,174 (3) *
Steven R. Appleton - (4) - 497,239 (3) *
Jerry M. Hess - - 32,000 (3)(5) *
Robert A. Lothrop - - 49,625 (3)(6) *
John R. Simplot - - 13,122,500 (3)(7) 6.2%
All directors and
executive officers as a
group (18 persons)(1)
(2)(3)(4)(5)(6)(7)(8) 2,736,589 2.9% 13,867,505 6.5%
</TABLE>
- ----------------------------
* Less than 1%
(1) Unless otherwise indicated below, the persons and
entities named in the table have sole voting and investment
power with respect to all shares beneficially owned,
subject to community property laws where applicable.
(2) Includes options to purchase shares of the Company's
Common Stock exercisable within 60 days of September 29,
1997 in the following amounts: Mr. Daltoso, 3,000; Mr.
Haneke, 3,000; Mr. Oaas, 3,000; Mr. Stevenson, 3,000; Mr.
Subia, 13,000; and all officers and directors as a group
(18 persons), 153,560.
(3) Includes options to purchase shares of Micron Technology,
Inc. Common Stock exercisable within 60 days of
September 29, 1997 in the following amounts: Mr. Daltoso,
25,000; Mr. Haneke, 1,000; Mr. Oaas, 13,440; Mr.
Stevenson, 12,300; Mr. Subia, 5,174; Mr. Appleton,
395,669; Mr. Hess, 10,000; Mr. Lothrop, 10,000; Mr.
Simplot, 10,000; and all officers and directors as a group
(18 persons), 571,981.
(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 60,882,863 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 967,600 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 Mr. John R. Simplot's 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.
(8) Does not include 264 shares of Company Common Stock held
by the spouse of Mr. Michael Adkins, Vice President,
SpecTek, 186 shares of Company Common Stock held by Mr.
Adkins' spouse for benefit of his minor children, or
options held by his spouse to purchase 1,600 shares of the
Company's Common Stock exercisable within 60 days of
September 29, 1997. Includes 200 shares of Micron
Technology, Inc. Common Stock held by Mr. Adkins for
benefit of his minor child. Does not include 400 shares
of Micron Technology, Inc. Common Stock held by Mr.
Adkins' spouse for benefit of his minor children, or
options held by his spouse to purchase 580 shares of
Micron Technology, Inc. Common Stock exercisable within 60
days of September 29, 1997.
3
<PAGE>
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 37, 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 35, served as Chairman of the Board and
President of former Micron Custom Manufacturing Services, Inc.,
an Idaho corporation ("former MCMS"), from July 1992 until the
Effective Time of the Merger. In August 1994, he was also named
Chief Executive Officer of former MCMS. 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. On July 28, 1997, Mr. Daltoso
resigned as President of the Company.
Jerry M. Hess, age 59, 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 71, 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 44, served as Vice President, Finance and
Treasurer, and a director of former MCMS from July 1992 until the
Effective Time of the Merger, at which time he was appointed Vice
President, Finance and Chief Financial Officer, and a director of
the Company. In January 1997, Mr. Oaas was appointed Executive
Vice President, Finance of the Company.
John R. Simplot, age 88, 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 36, served as Vice President,
Component Recovery of former MCMS, from July 1992 to August 1993.
In September 1992, he was also appointed a director of former
MCMS. In August 1993, Mr. Stevenson was appointed Vice
President, Operations of former MCMS. In April 1995, 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. In January 1997, Mr. Stevenson was appointed Chief
Operating Officer of the Company and in July 1997 he was also
appointed President of the Company.
4
<PAGE>
Robert F. Subia, age 35, served as a Regional Sales Manager for
Micron Technology, Inc. from 1989 until February 1993. In
February 1993, Mr. Subia joined former MCMS as Director of Sales
and held this position until August 1994, when he was appointed
Vice President, Sales. In April 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
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 MCMS, on
April 7, 1995 Micron Computer, Inc. and former MCMS, 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 MCMS 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 MCMS were vested in the Company.
As of the Record Date, Micron Technology, Inc. owned
approximately 64% of the outstanding Common Stock of the Company.
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 1997, Micron Technology, Inc. supplied a
substantial portion of the full specification random access
memory 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 $82,337,000 in fiscal 1997.
The Company and Micron Technology, Inc. are parties to a
Component Recovery Agreement, effective as of August 30, 1996
(the "Component Recovery Agreement"), under which Micron
Technology, Inc. is required to deliver to the Company all of the
nonstandard dynamic random access memory components produced at
its semiconductor manufacturing operations. The Company's cost
of such components generally is determined as one-half of the
operating income generated from the Company's sales of
semiconductor memory products supplied by Micron Technology, Inc.
The Component Recovery Agreement, which expires August 31, 2000,
may be terminated earlier by Micron Technology, Inc. in the event
that Micron Technology, Inc.'s ownership of the Company falls
below 30%. In fiscal 1997, the Company paid approximately
$44,534,000 to Micron Technology, Inc. pursuant to the Component
Recovery Agreement.
In fiscal 1997, Micron Technology, Inc. and its subsidiaries
paid approximately $23,452,000 to the Company for contract
manufacturing services and approximately $3,339,000 for purchases
of PC systems. In fiscal 1997, the Company paid Micron
Technology, Inc. and its subsidiaries approximately $930,000 for
equipment and approximately $749,000 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 1997, the Company
paid approximately $934,000 to Micron Technology, Inc. for such
services.
At various times between January 1994 and April 1994, Joseph M.
Daltoso, T. Erik Oaas, Gregory D. Stevenson, and Jess Asla, Vice
President, Operations of Micron Custom Manufacturing Services,
Inc., purchased 52,513, 31,030, 31,030, and 14,363 shares,
respectively, of former MCMS common stock pursuant to the former
MCMS 1994 Stock Purchase Plan for amounts aggregating $786,120,
$464,519, $511,166, and $223,489, respectively. The purchase
prices represented the estimated fair market value of the former
MCMS common stock on the dates of purchase as determined by the
former MCMS Board of Directors. Upon the Effective Time of the
Merger, the shares of former MCMS common stock owned by Messrs.
Daltoso, Oaas, Stevenson, and Asla
5
<PAGE>
were converted into 1,075,234, 635,357, 635,357, and 294,090 shares,
respectively, of the Company's Common Stock. Eighty percent (80%)
of the funds used by Messrs. Daltoso, Oaas, Stevenson, and Asla to
purchase former MCMS common stock was obtained through loans from
Micron Technology, Inc. The loans were made pursuant to full
recourse promissory notes that 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 maximum principal and accrued interest outstanding on Mr.
Daltoso's note during the Company's 1997 fiscal year, at January 7,
1997, the date on which Mr. Daltoso repaid all indebtedness to
Micron Technology, Inc., aggregated $781,576. The principal balances
together with accrued interest due on the notes at September 29, 1997
for Mr. Oaas was $414,592, and the maximum principal and accrued
interest outstanding on the note during the Company's 1997 fiscal year,
at February 19, 1997, the date on which Mr. Oaas repaid a portion of
the indebtedness to Micron Technology, Inc., aggregated $465,887.
Micron Technology, Inc. forgave interest associated with the
indebtedness owed by Mr. Oaas in the amount of $14,141 during
fiscal 1997 and paid the related taxes of $9,485 on Mr. Oaas'
behalf. The maximum principal and accrued interest outstanding
on Mr. Stevenson's note during the Company's 1997 fiscal year, at
January 8, 1997, the date on which Mr. Stevenson repaid all
indebtedness to Micron Technology, Inc., aggregated $504,162.
The maximum principal and accrued interest outstanding on Mr.
Asla's note during the Company's 1997 fiscal year, at January 10,
1997, the date on which Mr. Asla repaid all indebtedness to
Micron Technology, Inc., aggregated $221,564.
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%)
(collectively, 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 (the "SEC") 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 28, 1997,
except for Micron Technology, Inc., a 10% beneficial owner of the
Company, which filed late a Form 4 for the month of February 1997
related to the sale of shares of Common Stock of the Company.
Board Meetings and Committees
The Board of Directors of the Company held a total of fifteen
(15) meetings during the Company's fiscal year ended August 28,
1997. 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 two (2) meetings during fiscal 1997. 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 six (6) meetings during fiscal 1997.
The Compensation Committee is primarily responsible for reviewing
and approving compensation for the Company's officers.
During fiscal 1997, all directors attended 75% or more of the
aggregate number of meetings of the Board of Directors and of
meetings of all committees of the Board on which they served.
6
<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 1997 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 1997 whose combined salary and bonus earned in fiscal 1997
exceeded $100,000 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
--------------
Annual Compensation Awards
------------------------------------------- --------------
Other Securities
Name and Principal Fiscal Annual Underlying All Other
Position Year Salary (1) Bonus (2)(3) Compensation (4) Options(#) (5) Compensation (6)
- -------------------- ------ ---------- ------------ ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Daltoso 1997 $ 334,808 $ 348,634 $ - 35,000 $ 28,707
Chairman and Chief 1996 273,077 235,288 - 15,000 20,119
Executive Officer 1995 165,865 180,979 - - 11,450
Gregory D. Stevenson 1997 213,077 266,105 - 35,000 16,495
President and Chief 1996 148,077 174,123 - 15,000 15,200
Operating Officer 1995 102,500 135,614 - - 9,120
T. Erik Oaas 1997 213,077 266,005 - 35,000 44,183(7)
Executive Vice 1996 165,385 173,873 - 15,000 19,876
President, Finance 1995 108,750 135,614 - - 10,301
and Chief Financial
Officer
Robert F. Subia 1997 206,538 172,082 - 35,000 16,928
Chairman, President 1996 148,077 91,446 - 45,000 12,211
Chief Executive 1995 80,375 92,110 - 10,000 7,930
Officer, Micron
Custom Manufacturing
Services, Inc.
George A. Haneke 1997 165,231 167,740 - 35,000 13,929
Senior Vice President, 1996 135,769 74,900 - 15,000 16,566
International 1995 102,500 51,909 - - 13,583
Markets
</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 for each fiscal year.
(3) Includes bonuses earned and paid for 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 contributions made by the Company, its
predecessors and its subsidiaries under qualified 401(k)
retirement plans and cash paid under sabbatical and time-off
plans.
(7) Includes $23,626 relating to interest forgiven by Micron
Technology, Inc. in February 1997 on indebtedness owed by Mr.
Oaas and the related taxes thereon. See "DIRECTORS - Certain
Relationships and Related Transactions."
7
<PAGE>
OPTION GRANTS IN FISCAL 1997
The following table provides information with respect to stock
options granted in fiscal 1997 to each of the Named Executive
Officers. In accordance with the rules of the SEC, the table
sets forth the hypothetical gains or "option spreads" that would
exist for the options at the end of their respective six-year
terms based on assumed annual rates of compound stock price
appreciation of 0%, 5% and 10% from the dates the options were
granted to the end of the respective option terms. Actual gains,
if any, on option exercises are dependent on the future
performance of the Company's Common Stock and overall market
conditions. There can be no assurance that the potential
realizable values shown in this table will be achieved.
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------
Potential Realizable
Value at
Percent of Market Assumed Annual Rates
Number of Total Price of of Stock
Securities Options Exercise Securities Price Appreciation for
Underlying Granted to Price on Option Term
Options Employees in Per Date of Expiration ----------------------------------
Name Granted (1) Fiscal 1997 Share Grant Date 0% 5% 10%
- -------------------- ----------- ------------ -------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph M. Daltoso 13,109 0.7 % $21.9625 $21.9625 1/28/03 $ - $ 97,916 $ 222,137
21,891 (2) 1.1 18.6681 21.9625 1/28/03 72,118 235,629 443,070
Gregory D. Stevenson 13,109 0.7 21.9625 21.9625 1/28/03 - 97,916 222,137
21,891 (2) 1.1 18.6681 21.9625 1/28/03 72,118 235,629 443,070
T. Erik Oaas 13,109 0.7 21.9625 21.9625 1/28/03 - 97,916 222,137
21,891 (2) 1.1 18.6681 21.9625 1/28/03 72,118 235,629 443,070
Robert F. Subia 4,553 0.2 21.9625 21.9625 1/28/03 - 34,008 77,152
30,447 (2) 1.6 18.6681 21.9625 1/28/03 100,305 327,724 616,241
George A. Haneke 14,772 0.8 21.9625 21.9625 1/28/03 - 110,337 250,318
20,228 (2) 1.1 18.6681 21.9625 1/28/03 66,639 217,729 409,411
</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.
8
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND AUGUST 28, 1997 OPTION VALUES
The following table provides information regarding Company and
Micron Technology, Inc. stock option exercises in fiscal 1997 by
the Named Executive Officers and the value of such officers'
unexercised options at August 28, 1997:
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options at Fiscal Options at Fiscal
Year-End Year-End
-------- --------
Shares Acquired Value Exercisable (E)/ Exercisable (E)/
Name on Exercise (1) Realized Unexercisable (U) Unexercisable (U)
- -------------------- --------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
Joseph M. Daltoso 15,000 $246,301 13,000 (E)(2) $ 418,201
87,000 (U)(2) 1,502,797
Gregory D. Stevenson 7,294 151,265 8,000 (E)(2) 219,248
65,824 (U)(2) 725,868
T. Erik Oaas 8,430 187,628 8,000 (E)(2) 220,165
66,972 (U)(2) 773,251
Robert F. Subia 2,176 30,834 16,000 (E)(2) 171,141
84,356 (U)(2) 440,657
George A. Haneke - - 3,000 (E) 11,961
47,000 (U) 47,844
</TABLE>
- -------------------------
(1) Reflects exercises of options to purchase Micron
Technology, Inc. Common Stock.
(2) Includes options to purchase Micron Technology, Inc.
Common Stock in the following amounts: Mr. Daltoso, 10,000
(E), 40,000 (U); Mr. Stevenson, 5,000 (E), 18,824 (U); Mr.
Oaas, 5,000 (E), 19,972 (U); and Mr. Subia, 3,000 (E), 7,356 (U).
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; Change of
Control Agreements
The Company has 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 prior termination agreements with such officers. The
Agreements allow either the Company or the 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 six month, 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.
9
<PAGE>
Upon a Change of Control of the Company (as defined below), a
cash lump-sum payment in the amount equal to the salary payable
under the Agreements shall be made to each officer in exchange
for any further salary obligations thereunder. In addition, (i)
the chief executive officer and each executive vice president and
vice president of the Company, and the president and vice
presidents of Micron Custom Manufacturing Services, Inc., shall
be entitled to receive two years' base salary, (ii) each
management director of the Company and each subsidiary of the
Company and officer of subsidiaries other than Micron Custom
Manufacturing Services, Inc. shall receive one year base
compensation or total target compensation and (iii) each other
employee of the Company and each subsidiary of the Company shall
receive six months base salary or total target compensation, in
each case if such employee has not received an offer of
employment providing comparable compensation, following such
Change of Control. An employee's right to terminate employment
under the Agreements shall terminate upon acceptance of such
comparable offer of employment. A comparable offer of employment
is defined as an agreement providing for responsibilities,
status, cash compensation, benefits and location comparable to
those in effect before the Change of Control as reasonably
determined by the employee (with a term of three years for the
chief executive officer and executive vice presidents, two years
for the vice presidents and one year for directors, providing one
year's salary and benefits in the event of death and disability
and which has severance consisting of continued compensation and
benefits through the end of the term).
The Micron Electronics, Inc. Executive Bonus Plan (the
"Executive Bonus Plan") provides that, upon a Change of Control
of the Company, the Company shall pay to each eligible executive
bonuses allocated, if any, under the Executive Bonus Plan for the
current fiscal year at the maximum level established by the Board
as of the most recent allocation and any bonuses that have been
awarded for previous years under the Executive Bonus Plan but not
previously paid.
The Micron Electronics, Inc. 1995 Stock Option Plan provides
that, in the event of a Change of Control of the Company, the
unexercised portion of any options under such plan shall be
immediately exercisable.
A Change of Control for all purposes other than the 1995 Option
Plan shall mean the acquisition by any person or entity of
securities of the Company which results in such person or entity
owning or controlling more of the combined voting power of the
Company than does Micron Technology, Inc. and owning or
controlling more than 35% of the voting securities of the Company
or, subject to Micron Technology, Inc. owning or controlling more
than 35% of the securities of the Company, the acquisition by any
person or entity of more than 35% of the common stock of Micron
Technology, Inc.
A Change of Control for purposes of the 1995 Option Plan shall
mean the acquisition by any person or entity of securities of the
Company which results in such person or entity owning or
controlling more of the combined voting power of the Company than
does Micron Technology, Inc. and owning or controlling more than
20% of the voting securities of the Company or the acquisition by
any person or entity of more than 35% of the Common Stock of
Micron Technology, Inc.
Upon a Change of Control, the Company shall pay all employees
such amounts, if any, that are necessary to place such employees
in the same after tax position as the employees would have been
in had no excise tax been imposed under Section 280G of the
Internal Revenue Code of 1986, as amended ( the "Code").
Compensation Committee Interlocks and Insider Participation
During fiscal 1997, 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.
10
<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 six (6)
times in fiscal 1997 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 and
establish 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 1997, 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 considered.
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. Individual 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. Performance bonuses are generally payable over a five-
year period.
Profit Sharing. The Company distributes, on a quarterly basis,
approximately five percent (5%) of its consolidated quarterly
after-tax net profits generally on an equal basis to 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.
11
<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, 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 and
Chief Executive Officer of the Company. Mr. Daltoso's base
compensation is 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 has increased Mr. Daltoso's salary to $400,000 per year
effective April 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.
In September 1997, pursuant to the Executive Bonus Plan, Mr.
Daltoso was awarded $565,720 for fiscal 1997 performance. The
award is to be earned and payable over five years. Effective
January 28, 1997, the Board of Directors granted to Mr. Daltoso
options to purchase 35,000 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.
The Omnibus Budget Reconciliation Act of 1993 added Section
162(m) to the Code. Section 162(m) limits deductions for certain
executive compensation in excess of $1 million. Certain types of
compensation are deductible only if performance criteria are
specified in detail, and payments are contingent upon stockholder
approval of the compensation arrangement. The Company believes
that it is generally in the best interests of its stockholders to
structure its compensation plans to achieve maximum deductibility
under Section 162(m) with minimal sacrifices in flexibility and
corporate objectives. With respect to non-equity compensation
arrangements, the Compensation Committee has reviewed the terms
of those arrangements most likely to be subject to Section
12
<PAGE>
162(m) and believes that at this time the Company is in
compliance with Section 162(m). The Company's equity
compensation arrangements are also in compliance with Section
162(m). The Compensation Committee will continue to monitor this
situation and will take appropriate action if and when it is
warranted. Since corporate objectives may not always be
consistent with the requirement for full deductibility, it is
conceivable that the Company may enter in compensation
arrangements in the future under which payments are not
deductible under Section 162(m); deductibility will not be the
sole factor used by the Compensation Committee in ascertaining
appropriate levels or modes of compensation.
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, 1992 through August 31, 1997 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 MCMS. Accordingly, the last trading day of the
Company's fiscal year varies. For consistent presentation and a
more meaningful comparison to the 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 MCMS. 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.
The performance graph was plotted using the following data:
<TABLE>
<CAPTION>
Year Ending August 31
---------------------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Micron Electronics, Inc. $100 104 100 576 508 522
CRSP Total Return Index
for The Nasdaq Stock
Market (US Companies) 100 132 137 185 209 291
CRSP Total Return Index
for Nasdaq Computer
Manufacturer Stocks 100 115 120 211 251 399
</TABLE>
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
and 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 APPROVE THE AMENDMENT TO THE 1995 STOCK OPTION PLAN
The Micron Electronics, Inc. 1995 Stock Option Plan (the "1995
Plan"), as currently in effect, reserved 5,000,000 shares of
Common Stock for issuance thereunder. On August 25, 1997, the
Board of Directors authorized an amendment to the 1995 Plan,
subject to shareholder approval, to increase by an additional
5,000,000 shares the number of shares available for grant under
the 1995 Plan. The purpose of the amendment is to provide the
Company with an additional 5,000,000 shares of Common Stock that
can be awarded or granted to officers, employees and consultants
of the Company in future years through the expiration of the 1995
Plan in 2005. All such awards or grants under the 1995 Plan
would be made only upon approval by the Board of Directors.
The 1995 Plan was approved by shareholders at the 1995 Annual
Meeting. The following is a summary of the material features of
the 1995 Plan. A copy of the 1995 Plan has been filed with the
SEC and the following summary is qualified in its entirety by
reference to the 1995 Plan.
Purpose of the 1995 Plan
The purpose of the proposed amendment is to ensure that the
Company has a sufficient number of shares of Common Stock
reserved under the 1995 Plan to accomplish the 1995 Plan's
objective i.e., to align employee and shareholder long-term
interest and to enable the Company to attract, motivate and
retain experienced and qualified personnel for positions of
substantial responsibility. Assuming approval of the proposed
amendment, the 10,000,000 total shares reserved for issuance
under the 1995 Plan will represent approximately 10.5% of the
Company's Common Stock outstanding as of the Record Date.
Administration
The 1995 Plan shall be administered by (i) the Board of
Directors if the Board may administer the 1995 Plan in compliance
with Rule 16b-3 ("Rule 16b-3") promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or (ii) a
committee appointed by the Board and constituted so as to permit
the 1995 Plan to comply with the provisions of Rule 16b-3 and
Section 162(m) of the Code. If permitted by Rule
15
<PAGE>
16b-3, the 1995 Plan may be administered by different bodies with
respect to employees who are directors, non-director officers,
employees who are neither directors nor officers, and
consultants. For purposes of the plan description, the term
"Committee" shall mean the Compensation Committee of the Board.
Members of the Board receive no additional compensation for their
services in connection with the administration of the 1995 Plan.
The Committee has the discretion to select the employees and
consultants to whom options may be granted (an "Optionee"), to
determine the number of shares granted under each option, and to
make all other determinations which it deems necessary or
appropriate in the interpretation and administration of the 1995
Plan. Historically, any grants approved by the Committee also
have been approved by the Board of Directors. The Committee, in
its discretion, may accelerate the vesting of any option, may
reduce the exercise price of any option, and amend or modify any
option provided such amendment does not impair the rights of any
Optionee unless mutually agreed otherwise by the Optionee and
Committee.
Eligible Participants
Only persons who are officers, employees or consultants of the
Company will be eligible to participate in, and to receive
options under, the 1995 Plan. Neither the members of the
Committee, nor any member of the Company's Board of Directors who
is not also an officer or employee of the Company, may
participate in the 1995 Plan. As of the Record Date, there were
approximately 4,600 employees of the Company who were eligible to
participate in the 1995 Plan and 3,313 actually participating.
As of the Record Date, 47,114 shares of Common Stock have been
issued upon exercise of options granted pursuant to the 1995
Plan. An additional 4,844,840 shares of Common Stock are subject
to options granted, but unexercised, under the 1995 Plan. An
Optionee may be granted more than one option under the 1995 Plan
and any option that terminates without being exercised reverts to
the 1995 Plan and becomes available for future grant. No person
shall be granted options to purchase more than 250,000 shares
during any fiscal year; provided, however, that in the fiscal
year in which an employee commences employment with the Company,
options granted to such employee shall be limited to 500,000
shares in such fiscal year.
Through September 29, 1997, the following executive officers
have been granted the following options to purchase shares under
the 1995 Plan: Mr. Daltoso 80,000; Mr. Haneke, 80,000; Mr. Oaas
80,000; Mr. Stevenson, 80,000; and Mr. Subia 90,000. During this
period, the Company's executive officers as a group have been
granted options to purchase an aggregate of 1,094,200 shares, and
all employees as a group (excluding executive officers) have been
granted options to purchase an aggregate of 3,797,754 shares
under the 1995 Plan. During this period, the Company's current
directors as a group (excluding officers) have been granted no
options to purchase shares under the 1995 Plan.
Term of Options
The 1995 Plan provides for the grant of incentive stock options
("ISOs") as defined in Section 422 of the Code, or nonstatutory
stock options ("NSOs"). Options granted to consultants shall be
NSOs.
The purchase price per share payable by an Optionee upon
exercise of each ISO granted under the 1995 Plan equals the fair
market value of the Company's Common Stock on the date of the
grant. The fair market value of the Company's stock is deemed to
be the average closing price of the Company's Common Stock as
quoted on the Nasdaq National Market for the five (5) business
days preceding the date an option is granted. As of the Record
Date, the fair market value of a share of Common Stock was
$18.86. The purchase price per share payable by an Optionee upon
the exercise of each NSO granted under the 1995 Plan is
determined by the Committee.
The exercise price of an option granted under the 1995 Plan may
be paid in cash, check, promissory note, a reduction in the
amount of any Company liability to the Optionee or, at the
discretion of the Committee, in shares of the Company's Common
Stock, or in any combination thereof. Other methods of payment
available under the 1995 Plan include the acceptance by the
Committee and a stock broker of documentation necessary to
perform a cashless exercise transaction. In general, if an
Optionee's employment with the Company is terminated for any
reason, options exercisable as of the date of termination may be
exercised for a period of 30 days following such date. Options
not yet exercisable terminate immediately upon the date of the
termination. However, the
16
<PAGE>
Committee may grant options under the 1995 Plan which survive the
termination of an Optionee's employment with the Company, and may
accelerate the vesting of options upon such terms and conditions
as the Committee may determine.
Options granted under the 1995 Plan cannot be assigned,
transferred, pledged, or otherwise encumbered in any way, except
in the event of the death of an Optionee, by the Optionee's will,
or by the applicable laws of descent or distribution. Options
granted under the 1995 Plan may be exercised during an Optionee's
lifetime only by the Optionee.
Options granted under the 1995 Plan are evidenced by a written
agreement between the Company and the Optionee, containing the
specific terms and conditions of each option. The current form
of agreement provides for an option term of six (6) years with
the shares vesting over a five (5) year period in increments of
twenty percent (20%) per year.
Adjustments upon Change in Capitalization; Corporate Transactions
Subject to adjustment in the case of certain changes in the
capital structure of the Company, and subject to shareholder
approval of the amendment to the 1995 Plan as proposed hereby, a
maximum of 10,000,000 shares of the Company's Common Stock will
be reserved for issuance pursuant to options granted under the
1995 Plan. In the event of a change in the number of issued
shares of the Company's Common Stock by reason of a stock split,
reverse stock split, stock dividend, combination or
reclassification of the Common Stock, a proportionate adjustment
will be made in the number of shares reserved for issuance under
the 1995 Plan and in the number and exercise price of shares
subject to any outstanding options under the 1995 Plan, in order
to maintain the purpose of the original grant. In addition, in
connection with any merger or sale of substantially all of the
assets of the Company, other than in either such case a Change in
Control (as defined in the 1995 Plan), each outstanding option
may be assumed or an equivalent option substituted by a successor
corporation. In lieu of such assumption or substitution, or if
the successor corporation does not assume the options or
substitute substantially equivalent options, the Board may
determine in its sole discretion that all or a portion of the
options outstanding should become exercisable. In the event of a
Change in Control of the Company other than pursuant to a merger
of the Company, the unexercised portion of outstanding options
shall become immediately exercisable, to the extent such
acceleration does not disqualify the 1995 Plan, or cause an ISO
to be treated as a NSO without consent of the Optionee.
Amendment and Termination of the 1995 Plan
The 1995 Plan was effective upon the adoption by the Company's
Board of Directors and approval by the Company's shareholders at
the 1995 Annual Meeting. It will terminate ten (10) years from
the date of Board approval, unless earlier terminated by the
Board of Directors. The Company's Board of Directors may, at any
time, amend or terminate the 1995 Plan, provided that such
termination will not adversely affect the rights of the Optionees
under any outstanding options previously granted. In addition,
and subject to the limitations in the 1995 Plan, the Company's
Board of Directors may amend the 1995 Plan at any time.
Federal Income Tax Consequences
The following discussion of the federal income tax consequences
of the 1995 Plan is intended to be a summary of applicable
federal law. State and local tax consequences may differ.
Because the federal income tax rules governing options and
related payment are complex and subject to frequent change,
Optionees are advised to consult their tax advisors prior to
exercise of options or dispositions of stock acquired pursuant to
option exercise.
ISOs and NSOs are treated differently for federal tax purposes.
ISOs are intended to comply with the requirements of Section 422
of the Code. NSOs need not comply with such requirements.
An Optionee is not taxed on the grant or exercise of an ISO.
The difference between the exercise price and the fair market
value of the shares on the exercise date will, however, be a
preference adjustment item for purposes of the alternative
minimum tax. If an Optionee holds the shares acquired upon the
exercise of an ISO
17
<PAGE>
for at least two years following grant and at least one year
following exercise, the Optionee's gain or loss, if any, upon a
subsequent disposition of such shares is long-term capital gain
or loss. The measure of the gain or loss is the difference
between the proceeds received on disposition and the Optionee's
basis in the shares (which generally equals the option exercise
price). If an Optionee disposes of stock acquired pursuant to
the exercise of an ISO before satisfying the one and two-year
holding periods described above, the disposition disqualifies the
option from favorable tax treatment as an ISO, and the Optionee
will recognize ordinary income in the year of disposition. The
amount of the ordinary income will be the lesser of (i) the
amount realized on disposition less the Optionee's adjusted basis
in the stock (usually the option exercise price) or (ii) the
difference between the fair market value of the stock on the
exercise date and the option exercise price. The balance of the
consideration received on such a disposition will be short-term,
mid-term (28%) or long-term capital gain. The Company is not
entitled to an income tax deduction on the grant or exercise of
an ISO or on the Optionee's disposition of the shares after
satisfying the holding period requirement described above. If
the holding periods are not satisfied, the Company will be
entitled to a deduction in the year the Optionee disposes of the
shares in an amount equal to the ordinary income recognized by
the Optionee.
An Optionee is not taxed on the grant of an NSO. On exercise,
however, the Optionee recognizes ordinary income equal to the
difference between the option exercise price and the fair market
value of the shares on the date of exercise. Different rules may
apply with respect to Optionees subject to Section 16(b) of the
Exchange Act. The Company is entitled to an income tax deduction
in the year of exercise in the amount recognized by the Optionee
as ordinary income. Any gain or loss on subsequent disposition
of the shares is mid-term capital gain or loss or long-term
capital gain or loss if the shares are held for at least one year
or eighteen months, respectively, following exercise. The
Company does not receive a deduction for this gain.
The 1995 Plan includes provisions necessary for the 1995 Plan
to comply with Section 162(m) of the Code. Section 162(m) places
a limit of $1,000,000 on the amount of certain compensation that
may be deducted by the Company in any tax year with respect to
each of the Company's highest paid executives, including
compensation relating to stock option exercises. The
compensation of the highest paid executives relating to stock
option exercises is not subject to the deduction limit if certain
limitations approved by shareholders are applied to stock options
granted to executive officers.
1995 Plan Benefits
Because options under the 1995 Plan are granted in the
discretion of the Board of Directors (or such committee, if any,
to whom the Board has delegated such authority), it is not
possible for the Company to determine and disclose the amount of
options that may be granted to the named executive officers and
the executive officers as a whole, if the amendment is approved.
However, see "Eligible Participants" above for a description of
the limitations as to granting options.
Proposed Amendment
Under the terms of the 1995 Plan, as originally approved by the
shareholders, there were 5,000,000 shares reserved for issuance.
The proposed amendment will increase the number of authorized
shares of Common Stock reserved for issuance by an additional
5,000,000 shares by revising the first sentence of Section 3 of
the 1995 Plan to read as follows:
"Subject to the provisions of Section 11 of
the Plan, the maximum number of Shares which
may be optioned and sold under the Plan is
10,000,000 Shares.
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
approval of such amendment. The Board of Directors recommends
that shareholders vote "FOR" approval of such amendment.
18
<PAGE>
PROPOSAL THREE:
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 September 3,
1998, and recommends that shareholders vote "FOR" ratification of
such appointment.
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
1998 ANNUAL MEETING OF SHAREHOLDERS
In order to be included in the proxy statement and form of
proxy relating to the Company's 1998 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 29, 1998, and must otherwise be in
compliance with applicable laws and regulations and the Bylaws of
the Company.
THE BOARD OF DIRECTORS
Dated: October 27, 1997
19
<PAGE>
This Proxy is solicited on behalf of the Board of Directors
MICRON ELECTRONICS, INC.
900 East Karcher Road, Nampa, Idaho 83687
1997 ANNUAL MEETING OF SHAREHOLDERS
November 24, 1997
The undersigned shareholder(s) of Micron Electronics, Inc., a
Minnesota corporation, hereby acknowledges receipt of the Notice of 1997
Annual Meeting of Shareholders and the Proxy Statement, each dated
October 27, 1997, 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 1997 Annual Meeting of Shareholders of
Micron Electronics, Inc., to be held on Monday, November 24, 1997, 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) or
postponement(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:
1. ELECTION OF DIRECTORS:
[ ] FOR nominees listed below [ ] WITHHOLD authority to vote
for all (except as indicated) nominees listed below
If you wish to withhold authority to vote for any individual nominee,
strike a line through that nominee's name set forth below:
Steven R. Appleton T. Erik Oaas
Joseph M. Daltoso John R. Simplot
Jerry M. Hess Gregory D. Stevenson
Robert A. Lothrop Robert F. Subia
2. TO APPROVE AN AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION PLAN
INCREASING THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE
THEREUNDER FROM 5,000,000 TO 10,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR FISCAL YEAR 1998:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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, 2 and 3
above. If any other matters properly come before the Annual Meeting, the
persons named in this Proxy will vote in their discretion.
Dated , 1997
-----------------
___________________________________________
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.)
<PAGE>
MICRON ELECTRONICS, INC.
1995 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock
Option Plan are:
* to attract, motivate and retain experienced and qualified
personnel for positions of substantial responsibility,
* to provide additional incentive to Employees and
Consultants, and
* to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at
the time of grant.
2. Definitions. As used herein, the following definitions
shall apply:
(a) "Administrator" means the Board or any of its
Committees as shall be administering the Plan, in accordance with
Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements
relating to the administration of stock option plans under
Minnesota corporate and securities laws and the Code.
(c) "Board" means the Board of Directors of the
Company.
(d) "Change in Control" means (i) the acquisition by
any person or entity of securities of Micron Electronics, Inc.
such that such person or entity, directly, indirectly or
beneficially, acting alone or in concert, (A) owns or controls
more of the combined voting power of all classes of voting
securities of Micron Electronics, Inc. than does Micron
Technology, Inc. and (B) owns or controls more than twenty
percent (20%) of the combined voting power of all classes of
voting securities of Micron Electronics, Inc.; or (ii) the
acquisition by any person or entity, directly, indirectly or
beneficially, acting alone or in concert, of more than thirty-
five percent (35%) of the common stock of Micron Technology, Inc.
outstanding at any time.
(e) "Code" means the Internal Revenue Code of 1986, as
amended.
(f) "Committee" means a Committee appointed by the
Board in accordance with Section 4 of the Plan.
(g) "Common Stock" means the Common Stock of the
Company.
(h) "Company" means Micron Electronics, Inc., a
Minnesota corporation.
(i) "Consultant" means any person, including an
advisor, engaged by the Company or a Parent or Subsidiary to
render services and who is compensated for such services. The
term "Consultant" shall not include Directors who are paid only a
director's fee by the Company or who are not compensated by the
Company for their services as Directors.
(j) "Continuous Status as an Employee or Consultant"
means that the employment or consulting relationship with the
Company, any Parent, or Subsidiary, is not interrupted or
terminated. Continuous Status as an Employee or Consultant shall
not be considered interrupted in the case of (i) any leave of
absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. A leave of absence approved by the
Company shall include sick leave, military leave, or any other
personal leave approved by an authorized representative of the
Company. For purposes of Incentive Stock Options, no such leave
may exceed 90 days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is not
so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option.
(k) "Director" means a member of the Board.
(l) "Disability" means total and permanent disability
as defined in Section 22(e)(3) of the Code.
(m) "Employee" means any person, including Officers
and Directors, employed by the Company or any Parent or
Subsidiary of the Company. Neither service as a Director nor
payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(n) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(o) "Fair Market Value" means, as of any date, the
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system including
without limitation the Nasdaq National Market of the National
Association of Securities Dealers, Inc. Automated Quotation
("Nasdaq") System, the Fair Market Value of a Share of Common
Stock shall be the average closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such
exchange or system (or the exchange with the greatest volume of
trading in the Common Stock) for the five (5) business days
preceding the day of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is quoted on the over-the-
counter market or is regularly quoted by a recognized securities
dealer, but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the
high bid and low asked prices for the Common Stock on the last
market trading day prior to the day of determination, as reported
in The Wall Street Journal or such other source as the
Administrator deems reliable;
(iii) In the absence of an established market
for the Common Stock, the Fair Market Value shall be determined
in good faith by the Administrator.
(p) "Incentive Stock Option" means an Option intended
to qualify as an incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated
thereunder.
(q) "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.
(r) "Notice of Grant" means a written notice
evidencing certain terms and conditions of an individual Option
grant. The Notice of Grant is subject to the terms and
conditions of the Option Agreement.
(s) "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder.
(t) "Option" means a stock option granted pursuant to
the Plan.
(u) "Option Agreement" means a written agreement
between the Company and an Optionee evidencing the terms and
conditions of an individual Option grant. The Option Agreement
is subject to the terms and conditions of the Plan.
(v) "Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with
a lower exercise price.
(w) "Optioned Stock" means the Common Stock subject to
an Option.
(x) "Optionee" means an Employee or Consultant who
holds an outstanding Option.
(y) "Parent" means a "parent corporation", whether now
or hereafter existing, as defined in Section 424(e) of the Code.
(z) "Plan" means this 1995 Stock Option Plan.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act
or any successor to Rule 16b-3, as in effect when discretion is
being exercised with respect to the Plan.
(bb) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(cc) "Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f)
of the Code. In the case of an Option that is not intended to
qualify as an Incentive Stock Option, the term "Subsidiary" shall
also include any other entity in which the Company, or any Parent
or Subsidiary of the Company, has a significant ownership
interest.
3. Stock Subject to the Plan. Subject to the provisions
of Section 11 of the Plan, the maximum aggregate number of Shares
which may be optioned and sold under the Plan is 10,000,000
Shares. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option expires or becomes unexercisable without having
been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject
thereto shall become available for future grant or sale under the
Plan (unless the Plan has terminated); provided, however, that
Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future
distribution under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted
by Rule 16b-3, the Plan may be administered by different bodies
with respect to (i) Directors, (ii) Officers who are not
Directors, and (iii) Employees who are neither Directors nor
Officers.
(ii) Administration With Respect to Employees
Subject to Section 16(b). With respect to Option grants made to
Employees who are also Officers or Directors subject to Section
16(b) of the Exchange Act, the Plan shall be administered by (A)
the Board, if the Board may administer the Plan in compliance
with the rules governing a plan intended to qualify as a
discretionary plan under Rule 16b-3, or (B) a committee
designated by the Board to administer the Plan, which committee
shall be constituted to comply with the rules governing a plan
intended to qualify as a discretionary plan under Rule 16b-3.
Once appointed, such committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and
appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however
caused), and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by the
rules governing a plan intended to qualify as a discretionary
plan under Rule 16b-3.
(iii) Administration With Respect to Other
Persons. With respect to Option grants made to Employees or
Consultants who are neither Directors nor Officers of the
Company, the Plan shall be administered by (A) the Board or (B) a
committee designated by the Board, which committee shall be
constituted to satisfy Applicable Laws. Once appointed, such
Board may increase the size of the Committee and appoint
additional members, remove members (with or without cause) and
substitute new members, fill vacancies (however caused), and
remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by Applicable
Laws.
(b) Powers of the Administrator. Subject to the
provisions of the Plan, and in the case of a Committee, subject
to the specific duties delegated by the Board to such Committee,
the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(o) of the Plan;
(ii) to select the Consultants and Employees to
whom Options may be
granted hereunder;
(iii) to determine whether and to what extent
Options are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each Option granted hereunder;
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted
hereunder. Such terms and conditions include, but are not
limited to, the exercise price, the time or times when Options
may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions,
and any restriction or limitation regarding any Option or the
shares of Common Stock relating thereto, based in each case on
such factors as the Administrator, in its sole discretion, shall
determine;
(vii) to reduce the exercise price of any
Option to the then current Fair Market Value if the Fair Market
Value of the Common Stock covered by such Option shall have
declined since the date the Option was granted;
(viii) to construe and interpret the terms of
the Plan and awards granted pursuant to the Plan;
(ix) to prescribe, amend, and rescind rules and
regulations relating to the Plan, including rules and regulations
relating to sub-plans established for the purpose of qualifying
for preferred tax treatment under foreign tax laws;
(x) to modify or amend each Option (subject to
Section 14(c) of the Plan), including the discretionary authority
to extend the post-termination exercisability period of Options
longer than is otherwise provided for in the Plan;
(xi) to authorize any person to execute on behalf
of the Company any instrument required to effect the grant of an
Option previously granted by the Administrator;
(xii) to institute an Option Exchange Program;
and
(xiii) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The
Administrator's decisions, determinations, and interpretations
shall be final and binding on all Optionees and any other holders
of Options.
5. Eligibility. Nonstatutory Stock Options may be granted
to Employees and Consultants. Incentive Stock Options may be
granted only to Employees. If otherwise eligible, an Employee or
Consultant who has been granted an Option may be granted
additional Options.
6. Limitations.
(a) Each Option shall be designated in the Notice of
Grant as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the
extent that the aggregate Fair Market Value of Shares subject to
an Optionee's Incentive Stock Options granted by the Company or
any Parent or Subsidiary, which become exercisable for the first
time during any calendar year (under all plans of the Company or
any Parent or Subsidiary) exceeds $100,000, such excess Options
shall be treated as Nonstatutory Stock Options. For purposes of
this Section 6(a), Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair
Market Value of the Shares shall be determined as of the time of
grant.
(b) Neither the Plan nor any Option shall confer upon
an Optionee any right with respect to continuing the Optionee's
employment or consulting relationship with the Company, nor shall
they interfere in any way with the Optionee's right or the
Company's right to terminate such employment or consulting
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of
Options to Employees:
(i) No Employee shall be granted, in any fiscal
year of the Company, Options to purchase more than 250,000
Shares; provided, however, that in the fiscal year in which an
employee commences employment with the Company, options granted
to such employee shall be limited to 500,000 Shares in such
fiscal year. The purchase price per Share payable by an Optionee
upon exercise of each Option intended to qualify under Section
162(m) of the Code shall be equal to the fair market value of the
Company's Common Stock on the date of grant.
(ii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's
capitalization as described in Section 11.
(iii) If an Option is canceled in the same
fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 11), the
canceled Option will be counted against the limit set forth in
Section 6(c)(i). For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Option. The term of each Option shall be
stated in the Notice of Grant; provided, however, that in the
case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be
provided in the Notice of Grant. Moreover, in the case of an
Incentive Stock Option granted to an Optionee who, at the time
Incentive Stock Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Notice of
Grant.
8. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for
the Shares to be issued pursuant to exercise of an Option shall
be determined by the Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of
stock of the Company or Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the Fair Market
Value per Share on the date of grant.
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per
Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option,
the per Share exercise price shall be determined by the
Administrator. The per Share exercise price of Nonstatutory
Stock Options intended to qualify under Section 162(m) of the
Code shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(b) Waiting Period and Exercise Dates. At the time an
Option is granted, the Administrator shall fix the period within
which the Option may be exercised and shall determine any
conditions which must be satisfied before the Option may be
exercised. In doing so, the Administrator may specify that an
Option may not be exercised until the completion of a service
period.
(c) Form of Consideration. The Administrator shall
determine the acceptable form of consideration for exercising an
Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator shall determine the
acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the
Optionee for more than six months on the date of surrender, and
(B) have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) delivery of a properly executed exercise
notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to
effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price;
(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable
to the Optionee's participation in any Company-sponsored deferred
compensation program or arrangement;
(vii) any combination of the foregoing methods
of payment; or
(viii) such other consideration and method of
payment for the issuance of Shares to the extent permitted by
Applicable Laws.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder.
Any Option granted hereunder shall be exercisable according to
the terms of the Plan and at such times and under such conditions
as determined by the Administrator and set forth in the Option
Agreement.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the
Company receives: (i) written notice of exercise (in accordance
with the Option Agreement) from the person entitled to exercise
the Option, and (ii) full payment for the Shares with respect to
which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan.
Shares issued upon exercise of an Option shall be issued in the
name of the Optionee or, if requested by the Optionee, in the
name of the Optionee and his or her spouse. Until the stock
certificate evidencing such Shares is issued (as evidenced by the
appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be
issued) such stock certificate, either in book entry form or in
certificate form, promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued,
except as provided in Section 11 of the Plan.
Exercising an Option in any manner shall decrease
the number of Shares thereafter available, both for purposes of
the Plan and for sale under the Option, by the number of Shares
as to which the Option is exercised.
(b) Termination of Employment or Consulting
Relationship. Upon termination of an Optionee's Continuous
Status as an Employee or Consultant, other than upon the
Optionee's death or Disability, the Optionee may exercise his or
her Option, but only within such period of time as is specified
in the Notice of Grant, and only to the extent that the Optionee
was entitled to exercise it as the date of termination (but in no
event later than the expiration of the term of such Option as set
forth in the Notice of Grant). In the absence of a specified
time in the Notice of Grant, the Option shall remain exercisable
for 30 days following the Optionee's termination of Continuous
Status as an Employee or Consultant. If, at the date of
termination, the Optionee is not entitled to exercise his or her
entire Option, the Shares covered by the unexercisable portion of
the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(c) Disability of Optionee. In the event that an
Optionee's Continuous Status as an Employee or Consultant
terminates as a result of the Optionee's Disability, the Optionee
may exercise his or her Option at any time within twelve (12)
months from the date of such termination, but only to the extent
that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant). If, at
the date of termination, the Optionee does not exercise his or
her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option
with respect to the shares covered by the exercisable portion of
the Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to
the Plan.
(d) Death of Optionee. In the event of the death of
an Optionee, the Option may be exercised at any time within
twelve (12) months following the date of death (but in no event
later than the expiration of the term of such Option as set forth
in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that the Optionee was
entitled to exercise the Option at the date of death. If, at the
time of death, the Optionee was not entitled to exercise his or
her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If,
after death, the Optionee's estate or a person who acquired the
right to exercise the Option by bequest or inheritance does not
exercise the Option within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Rule 16b-3. Options granted to individuals
subject to Section 16 of the Exchange Act must comply with the
applicable provisions of Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.
(f) Suspension. Any Optionee who is also a
participant in the Retirement at Micron or Micron Electronics
Retirement at Micron Section 401(k) Plan (each a "RAM Plan" and
together the "RAM Plans") and who requests and receives a
hardship distribution from any RAM Plan, is prohibited from
making, and must suspend, for a period of twelve (12) months
thereafter, his or her elective contributions and employee
contributions including, without limitation to the foregoing, the
exercise of any Option granted from the date of receipt by that
employee of the hardship distribution from any RAM Plan.
10. Non-Transferability of Options. An Option may not be
sold, pledged, assigned, hypothecated, transferred, or disposed
of in any manner other than by will or by laws of descent or
distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization,
Dissolution, Merger, or Asset Sale.
(a) Changes in Capitalization. Subject to any
required action by the shareholders of the Company, the number of
shares of Common Stock covered by each outstanding Option, and
the number of issued shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options
have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the
price per share of Common Stock covered by each such outstanding
Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock or any other
increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been "effected without
receipt of consideration." Such adjustment shall be made by the
Board, whose determination in that respect shall be final,
binding, and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject
to an Option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, to the extent
that an Option has not been previously exercised, it will
terminate immediately prior to the consummation of such proposed
action. The Board may, in the exercise of its sole discretion in
such instances, declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to
exercise his or her Option as to all or any part of the Optioned
stock, including Shares as to which the Option would not
otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of
the Company with or into another corporation, or the sale of
substantially all of the assets of the Company, other than in
either such case, a Change in Control, each outstanding Option
may be assumed or an equivalent option or right may be
substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In lieu of such
assumption or substitution, or in the event the successor
corporation does not assume the Option or substitute an
equivalent option or right, the Administrator may provide for the
Optionee to have the right to exercise the Option as to all or a
portion of the Optioned Stock, including Shares as to which it
would not otherwise be exercisable. If the Administrator makes
an Option exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall
notify the Optionee that the Option shall be fully exercisable
for a period of thirty (30) days from the date of such notice,
and the Option will terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be
considered assumed if, following the merger or sale of assets,
the option or right confers the right to purchase, for each Share
of Optioned Stock subject to the Option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale
of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or
sale of assets was not solely common stock of the successor
corporation or its Parent, the Administrator may, with the
consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Option, for
each Share of Optioned Stock subject to the Option, to be solely
common stock of the successor corporation or its Parent equal in
fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
(d) Change in Control. In the event of a Change in
Control, the unexercised portion of the Option shall become
immediately exercisable, to the extent such acceleration does not
disqualify the Plan, or cause an Incentive Stock Option to be
treated as a Nonstatutory Stock Option without the consent of the
Optionee.
12. Date of Grant. The date of grant of an Option shall
be, for all purposes, the date on which the Administrator makes
the determination granting such Option, or such other later date
as is determined by the Administrator. Notice of the
determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
13. Term of Plan. Subject to Section 18 of the Plan, the
Plan shall become effective upon the earlier to occur of its
adoption by the Board or its approval by the shareholders of the
Company as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years from the
effective date unless terminated earlier under Section 14 of the
Plan.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any
time amend, alter, suspend, or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain
shareholder approval of any Plan amendment to the extent
necessary and desirable to comply with Rule 16b-3 or with Section
422 of the Code (or any successor rule or statute or other
applicable law, rule, or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is
listed or quoted). Such shareholder approval, if required, shall
be obtained in such a manner and to such a degree as is required
by the applicable law, rule, or regulation.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension, or termination of the Plan shall impair
the rights of any Optionee, unless mutually agreed otherwise
between the Optionee and the Administrator, which agreement must
be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such
Option and the issuance and delivery of such Shares shall comply
with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange
Act, the rules and regulations promulgated thereunder, Applicable
Laws, and the requirements of any stock exchange or quotation
system upon which the Shares may then be listed or quoted, and
shall be further subject to the approval of counsel for the
Company with respect to such compliance.
(b) Investment Representations. As a condition to the
exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of
any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required.
16. Liability of Company.
(a) Inability to Obtain Authority. The inability of
the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel
to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such
requisite authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned
Stock covered by an Option exceeds, as of the date of grant, the
number of Shares which may be issued under the Plan without
additional shareholder approval, such Option shall be void with
respect to such excess Optioned Stock, unless shareholder
approval of an amendment sufficiently increasing the number of
shares subject to the Plan is timely obtained in accordance with
Section 14(b) of the Plan.
17. Reservation of Shares. The Company, during the term of
this Plan, will at all times reserve and keep available such
number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
18. Shareholder Approval. Continuance of the Plan shall be
subject to approval by the shareholders of the Company within
twelve (12) months before or after the date the Plan is adopted.
Such shareholder approval shall be obtained in the manner and to
the degree required under applicable federal and Minnesota law.
