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 1998 Annual Meeting of Shareholders
Monday, November 23, 1998
--------------------------
To The Shareholders:
Notice Is Hereby Given that the 1998 Annual Meeting of
Shareholders of Micron Electronics, Inc., a Minnesota corporation
(the "Company"), will be held on Monday, November 23, 1998, at
9:00 a.m. Mountain Time, at the Nampa Civic Center, 311 3rd
Street South, Nampa, Idaho, 83651, for the following purposes:
1. To elect directors to serve for the ensuing year and
until their successors are duly elected and qualified.
2. To ratify the appointment of PricewaterhouseCoopers
L.L.P. as independent accountants of the Company for the
fiscal year ending September 2, 1999.
3. 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 October
2, 1998 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. Shareholders will be required to furnish proof of
ownership of the Company's Common Stock before being admitted to
the meeting. Shareholders holding shares in the name of a
broker, bank or other nominee are requested to bring a statement
from the broker, bank or nominee confirming their ownership of
the Company's Common Stock.
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. We are also pleased to announce that, as an
alternative to using the paper Proxy to vote, stockholders
holding shares registered in their name may vote by telephone if
they choose. Beneficial owners of shares held in "street name"
through a brokerage firm may also vote electronically via the
internet or by telephone. Please see "Telephone and Internet
Voting Alternatives" in the Proxy Statement for additional
details. Shareholders attending the meeting may vote in person
even if they have returned a Proxy.
Sincerely,
JoAnne S. Pfeifer
Vice President, Administration,
Corporate Secretary
Nampa, Idaho
October 30, 1998
<PAGE>
[Micron Electronics, Inc. Logo]
900 East Karcher Road
Nampa, Idaho 83687
--------------------------
PROXY STATEMENT
1998 ANNUAL MEETING OF SHAREHOLDERS
Monday, November 23, 1998
--------------------------
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 1998 Annual Meeting of
Shareholders to be held on Monday, November 23, 1998, at 9:00
a.m. Mountain 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
1998 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 provided on or about October 30, 1998 to all shareholders
entitled to vote at the Annual Meeting. An annual report to
shareholders for the fiscal year ended September 3, 1998 is also
provided 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
By executing and returning the Proxy (either by returning the
paper Proxy or by submitting your proxy by telephone or
electronically via the internet) you are authorizing Joel J.
Kocher and JoAnne S. Pfeifer to represent you and vote your
shares at the Annual Meeting according to your instructions. In
the event any nominee is unable or unwilling to serve as a
nominee, the proxies may be voted for the balance of those
nominees named and for any substitute nominee designated by the
present Board of Directors to fill such vacancy, or for the
balance of those nominees named without nomination of a
substitute. The Board of Directors has no reason to believe that
any of the persons named will be unable or unwilling to serve as
a nominee or as a director if elected.
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 statement 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
<PAGE>
and employees personally or by telephone, facsimile,
telegram or by electronic means without additional compensation.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Record Date
Only shareholders of record at the close of business on October
2, 1998 (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, 95,885,574 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.
A majority of the votes eligible to be cast by holders of
shares of Common Stock issued and outstanding as of the Record
Date is required for a quorum for the transaction of business at
the Annual Meeting. 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.
<PAGE>
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 of the Company, (iii) each Named Executive Officer
of the Company listed in the "SUMMARY COMPENSATION TABLE" on page
8, and (iv) all directors and executive officers of the Company
as a group:
<TABLE>
<CAPTION>
Micron Electronics, Inc. Micron Technology, Inc.
Common Stock Common Stock
------------------------ -----------------------
Amount and Amount and
Nature of Nature of
Beneficial Percent of Beneficial Percent of
Name of Beneficial Owner Ownership (1) Class Ownership (1) Class
- - -------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C>
Micron Technology, Inc.
8000 South Federal Way
Boise, Idaho 83707 60,882,863 63.5% N/A N/A
Joel J. Kocher - - - *
T. Erik Oaas 559,357(2) * 24,972(3) *
Dean A. Klein 79,759(2)(4) * - *
Michael S. Adkins 21,200(2)(9) * 59,893(3)(9) *
Judith A. Bitterli 20,000(2) * - *
Steven R. Appleton -(5) - 511,239(3) *
Jerry M. Hess - - 38,000(3)(6) *
Robert A. Lothrop - - 58,573(3)(7) *
John R. Simplot - - 13,027,499(3)(8) 5.4%
Joseph M. Daltoso (10) 974,234(2) * 47,958(3) *
All directors and executive
officers as a group
(20 persons)(1)(2)(3)(4)
(5)(6)(7)(8)(9) 1,913,018 2.0% 13,777,077 5.7%
</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 October 2, 1998 in the
following amounts: Mr. Oaas, 19,000; Mr. Klein, 71,000; Mr.
Adkins, 21,200; Ms. Bitterli, 20,000; Mr. Daltoso, 19,000; and
all directors and executive officers as a group (20 persons),
200,400.
(3) Includes options to purchase shares of Micron Technology,
Inc. Common Stock exercisable within 60 days of October 2, 1998
in the following amounts: Mr. Oaas, 24,972; Mr. Adkins, 59,893;
Mr. Appleton, 367,555; Mr. Hess, 16,000; Mr. Lothrop, 16,000; Mr.
Simplot, 16,000; Mr. Daltoso, 40,000; and all directors and
executive officers as a group (20 persons), 548,751.
(4) Includes options to purchase 15,000 shares of the Common
Stock awarded under the Zeos International, Ltd. 1991 Stock
Option Plan, which was terminated at the Effective Time of the
Merger. See "Certain Relationships and Related Transactions".
(5) 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.
(6) Includes 2,000 shares of Micron Technology, Inc. Common
Stock held by J.M. Hess Construction Co., Inc.
(7) Does not include 424 shares of Micron Technology, Inc.
Common Stock held by Mr. Lothrop's spouse. Includes
39,585 shares of Micron Technology, Inc. Common Stock held
in joint tenancy with Mr. Lothrop's spouse.
<PAGE>
(8) Includes 7,895,122 shares of Micron Technology, Inc.'s
Common Stock held by a trust of which Mr. John R. Simplot is the
trustee; 5,046,477 shares held by limited partnerships of which
Mr. Simplot is the general partner; 22,400 shares held in joint
tenancy with Mr. John R. Simplot's spouse; and 47,500 shares held
by a charitable foundation of which Mr. Simplot is a director.
Does not include 15,200 shares held by Mrs. Simplot. Also does
not include 16,899,000 shares beneficially owned by J.R. Simplot
Company.
(9) Does not include 264 shares of Company Common Stock held by
the spouse of Mr. Adkins; and 186 shares of Company Common Stock
held by Mr. Adkins' spouse for benefit of his minor children.
Also does not include 400 shares of Micron Technology, Inc.
Common Stock held by Mr. Adkins' spouse for benefit of his minor
children; and 210 shares of Micron Technology, Inc. Common Stock
held by Mr. Adkins' spouse.
(10) Mr. Daltoso resigned as Chairman and Chief Executive
Officer on June 22, 1998.
<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 38, joined Micron Technology, Inc.
("MTI") in February 1983 and has served in various capacities
with MTI and its subsidiaries, including overseeing MTI's
semiconductor operations as President and Chief Executive Officer
of Micron Semiconductor, Inc. (then a wholly-owned subsidiary of
MTI) and as Vice President, Manufacturing of MTI. Mr. Appleton
currently serves as the Chief Executive Officer, President and
Chairman of the Board of Directors of MTI. At the Effective Time
of the Merger (as defined under "Certain Relationships and
Related Transactions" below), 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.
Joel J. Kocher, age 42, was appointed President and Chief
Operating Officer, and a director of the Company in January 1998.
In June 1998, Mr. Kocher was appointed Chairman of the Board of
Directors, President, Chief Executive Officer and Chief Operating
Officer. Mr. Kocher previously served as President of Worldwide
Marketing, Sales and Service at Dell Computer Corporation from
1987 to September 1994. In October 1994, Mr. Kocher joined
Artisoft, Inc. where he served as Executive Vice President and
Chief Operating Officer until he was appointed President, Chief
Operating Officer, and Director in October 1995, serving in such
capacities until December 1996. From December 1996 to August
1997, Mr. Kocher served as President and Chief Operating Officer
at Power Computing Corporation, a manufacturer of Macintosh OS
compatible systems.
Robert A. Lothrop, age 72, 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 MTI in 1986. In 1992, he was elected
to the Board of Directors of Micron Semiconductor, Inc. (then a
wholly-owned subsidiary of MTI) and resigned as a director of
MTI. Mr. Lothrop was re-elected to the Board of Directors of MTI
in 1994. At the Effective Time of the Merger, Mr. Lothrop was
appointed a director of the Company.
T. Erik Oaas, age 45, served as Vice President, Finance and
Treasurer, and a director of former Micron Custom Manufacturing
Services, Inc., an Idaho corporation ("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 and
Chief Financial Officer.
John R. Simplot, age 89, 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 MTI since 1980. At the Effective Time of the
Merger, Mr. Simplot was appointed a director of the Company.
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, 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 MTI, 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. At the Effective Time of the
Merger, MTI owned approximately 79% of the outstanding Common
Stock of the Company.
<PAGE>
As of the Record Date, MTI owned approximately 63.5% of the
outstanding Common Stock of the Company. Three (3) of the five
(5) directors and nominees for director of the Company are also
directors of MTI. MTI and its subsidiaries supply and purchase
products and services used and produced by the Company.
During fiscal 1998, MTI 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 MTI, completed upon market terms and conditions,
amounted to approximately $38,177,000 in fiscal 1998.
The Company and MTI are parties to a Component Recovery
Agreement, effective as of August 30, 1996 (the "Component
Recovery Agreement"), under which MTI 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 MTI.
The Component Recovery Agreement, which expires September 2,
1999, may be terminated earlier by MTI in the event that MTI's
ownership of the Company falls below 30%. In fiscal 1998, the
Company paid approximately $27,350,000 to MTI pursuant to the
Component Recovery Agreement.
In fiscal 1998, MTI and its subsidiaries paid approximately
$15,782,000 to the Company for contract manufacturing services
and approximately $2,756,000 for purchases of PC systems. In
fiscal 1998, the Company paid MTI and its subsidiaries
approximately $611,000 for equipment.
The Company relies on MTI for certain information systems,
payroll, employee benefits, risk management and other
administrative services. In fiscal 1998, the Company paid
approximately $1,147,000 to MTI for such services.
On January 21, 1994 T. Erik Oaas purchased 31,030 shares of
former MCMS common stock pursuant to the former MCMS 1994 Stock
Purchase Plan for $464,519. The purchase price represented the
estimated fair market value of the former MCMS common stock on
the date of purchase as determined by the former MCMS Board of
Directors. Upon the Merger, the shares of former MCMS common
stock owned by Mr. Oaas were converted into 635,357 shares of the
Company's Common Stock. Eighty percent (80%) of the funds used by
Mr. Oaas to purchase former MCMS common stock was obtained
through a loan from MTI. The loan was made pursuant to a full
recourse promissory note bearing interest at a rate of 7.5% per
annum, which the parties believed represented a commercially
reasonable interest rate at the time of the loan. The note is
payable, in full, five years from the date of the note. The note
is secured by the stock purchased by Mr. Oaas. The principal
balance together with accrued interest due on the note on October
2, 1998 for Mr. Oaas was $446,091 and the maximum principal and
accrued interest outstanding on the note during the Company s
1998 fiscal year was $443,606, on September 3, 1998.
Gregory D. Stevenson, former President and Chief Operating
Officer of the Company, entered into a Severance Agreement with
the Company in January 1996, which was amended during fiscal 1998
by an Addendum to Severance Agreement (see "Employment and
Severance Arrangements"). Under this Addendum, Mr. Stevenson's
executive bonus awards under the Executive Bonus Plan (see
"Report of the Compensation Committee of the Board of Directors
Regarding Executive Compensation") with respect to his
performance at any time prior to fiscal 1998 were fixed in the
amounts previously approved by the Compensation Committee.
Additionally, his executive bonus award for fiscal 1998 was fixed
at 0.55% of consolidated after-tax net profits for the Company
for such fiscal year.
T. Erik Oaas entered into a Severance Agreement with the
Company in January 1996, which was amended during fiscal 1998 by
an Addendum to Severance Agreement (see "Employment and Severance
Arrangements"). Under this Addendum Mr. Oaas' executive bonus
awards under the Executive Bonus Plan with respect to his
performance at any time prior to fiscal 1998 were fixed in the
amounts previously approved by the Compensation Committee.
Additionally, his executive bonus award for fiscal 1998 was fixed
at 0.45% of consolidated after-tax net profits for the Company
for such fiscal year.
<PAGE>
On February 26, 1998, the Company completed the sale of 90% of
its interest in MCMS, Inc., an Idaho corporation ("current
MCMS"), previously a wholly-owned subsidiary of the Company. The
sale was structured as a recapitalization of current MCMS,
whereby Cornerstone Equity Investors IV, L.P., other investors
and certain members of current MCMS' management, including Robert
F. Subia, then a director of the Company, acquired the 90%
interest in current MCMS. In connection with this transaction,
Mr. Subia resigned his position as a director of the Company and
entered into a Termination Agreement under which the Company paid
Mr. Subia a lump sum severance amount of $1,026,223 and Mr. Subia
relinquished all rights to future payments of salary and bonus
and vesting of stock options under his employment and severance
agreement with the Company.
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 September 3,
1998.
Board Meetings and Committees
The Board of Directors of the Company held a total of eight (8)
meetings during the Company's fiscal year ended September 3,
1998. 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 consisted of Messrs. Hess, Lothrop
and Simplot, held two (2) meetings during fiscal 1998. 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 consisted of Messrs. Hess,
Lothrop and Simplot, held nine (9) meetings during fiscal 1998.
The Compensation Committee is primarily responsible for reviewing
and approving compensation for the Company's officers.
During fiscal 1998, 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.
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Compensation of Executive Officers
The following table sets forth the cash and non cash
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 1998 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 1998 whose combined salary and bonus earned in fiscal 1998
exceeded $100,000 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------------------- ------------
Other Securities
Fiscal Annual Underlying All Other
Name and Principal Postion Year Salary (1) Bonus (2) Compensation (5) Options (6) Compensation (9)
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joel J. Kocher 1998 $220,769 $300,362 - 650,000(7) $55,984(11)
Chairman, President, Chief 1997 - - - - -
Executive Officer and 1996 - - - - -
Chief Operating Officer
T. Erik Oaas 1998 $310,331 $468,173 - 30,000 $21,431
Executive Vice President, 1997 213,077 266,005 - 35,000 44,183(10)
Finance and Chief 1996 165,385 173,837 - 15,000 19,876
Financial Officer
Dean A. Klein 1998 $207,692 $259,344(3) - 125,000 $ 6,815
Executive Vice President, 1997 156,538 165,927(3) - 35,000 5,071
Product Development and 1996 124,615 75,242(3) - 45,000 42,828(11)
Chief Technical Officer
Michael S. Adkins 1998 $206,405 $186,204 - 135,000(8) $19,988
Senior Vice President, 1997 139,846 86,237 - 35,000 10,397
Manufacturing 1996 3,733 - - 3,000
Judith A. Bitterli 1998 $186,058 $146,303(4) - 135,365(8) $30,144(11)
Vice President and 1997 - - - - -
General Manager, Web 1996 - - - - -
- - ----------------------------
Joseph M. Daltoso 1998 $321,365 $ 425 - 30,000 $708,667(12)
Former Chairman and Chief 1997 334,808 348,634 - 35,000 28,707
Executive Officer 1996 273,077 235,288 - 15,000 20,119
</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 profit sharing
plans and amounts awarded and paid under the Executive Bonus
Plan for Fiscal 1998 and earned and paid under the Executive
Bonus Plan for prior fiscal years. See "REPORT OF THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS REGARDING
EXECUTIVE COMPENSATION."
(3) Includes awards under the Company's patent bonus program
of $46,617 in 1998, $45,817 in 1997 and $15,550 in 1996.
(4) Includes a bonus of $44,525 paid upon commencement of
employment.
(5) 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.
(6) Except as otherwise noted, consists of options to
purchase shares of the Company's Common Stock under the
Company's 1995 Stock Option Plan.
<PAGE>
(7) Consists of 500,000 options to purchase shares of the
Company's Common Stock granted under the Company's 1995 Stock
Option Plan and 150,000 options to purchase shares of the
Company's Common Stock granted outside the 1995 Stock Option
Plan. See "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS REGARDING EXECUTIVE COMPENSATION- CEO
Compensation".
(8) Includes options granted in exchange for previously
granted options which were canceled pursuant to an option
repricing program implemented in fiscal 1998 in the following
amounts: Mr. Adkins, 85,000; and Ms. Bitterli, 35,365. See
"OPTION GRANTS IN FISCAL 1998" and footnote 6 thereto. See
"REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS REGARDING EXECUTIVE COMPENSATION-1998 Stock Option
Repricing Program".
(9) Except as otherwise noted, consists of contributions
made by the Company under qualified 401(k) retirement plans
and cash paid under sabbatical and time-off plans.
(10) Includes $23,626 relating to interest forgiven by Micron
Technology, Inc. in February 1997 on indebtedness owed by Mr.
Oaas and related taxes thereon. See DIRECTORS-Certain
Relationships and Related Transactions .
(11) Includes payment by the Company for relocation costs in the
following amounts: Mr. Kocher $54,484; Mr. Klein $38,351; Ms.
Bitterli $28,644.
(12) Includes $686,275 paid to Mr. Daltoso under his
Severance Agreement with the Company. See "Employment and
Severance Arrangements".
<PAGE>
OPTION GRANTS IN FISCAL 1998
The following table provides information with respect to stock
options granted in fiscal 1998 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 1998 Share Grant Date 0% 5% 10%
- - -------------------- ----------- ------------ -------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joel J. Kocher 55,515 0.95 % $ 9.0062 $ 9.0062 1/13/04 $ - $ 170,041 $ 385,764
344,485(2) 5.90 9.0062 9.0062 1/13/04 - 1,055,147 2,393,769
100,000(3) 1.71 9.0062 9.0062 1/13/06 - 430,006 1,029,939
75,000(4) 1.28 9.0062 9.0062 1/13/08 - 424,796 1,076,517
75,000(4) 1.28 9.0062 9.0062 1/13/08 - 424,796 1,076,517
T. Erik Oaas 30,000(5) 0.51 16.0331 18.8625 9/29/03 84,882 277,334 521,489
Dean A. Klein 50,000(5) 0.86 16.0331 18.8625 9/29/03 141,470 462,223 869,148
8,519(5) 0.15 11.7437 11.7437 3/19/04 - 34,025 77,190
66,481(5) 1.14 9.9821 11.7437 3/19/04 117,113 382,637 719,496
Michael S. Adkins 644(7) 0.01 18.8625 18.8625 9/29/03 - - -
49,356(5)(7) 0.84 16.0331 18.8625 9/29/03 - - -
15,106(6) 0.26 13.0625 13.0625 1/28/03 - 52,371 115,200
4,894(6) 0.08 13.0625 13.0625 1/28/03 - 16,967 37,322
11,764(6) 0.20 13.0625 13.0625 11/25/02 - 39,128 85,680
3,236(6) 0.06 13.0625 13.0625 11/25/02 - 10,763 23,569
3,983(6) 0.07 13.0625 13.0625 9/29/03 - 15,991 35,796
46,017(6) 0.79 13.0625 13.0625 9/29/03 - 184,755 413,564
Judith A. Bitterli 64,635(5) 1.11 12.0169 14.1375 11/03/03 137,064 448,000 842,523
35,365(7) 0.61 14.1375 14.1375 11/03/03 - - -
35,365(6) 0.61 13.0625 13.0625 11/03/03 - 144,820 324,992
- - ------------------------
Joseph M. Daltoso 30,000(5) 0.51 16.0331 18.8625 9/29/03 84,882 277,334 521,489
</TABLE>
- - -----------------
(1) Unless otherwise noted, options vest over five (5) years
in increments of twenty percent (20%) per year. Options
granted pursuant to the Company s 1995 Stock Option 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.
Except as otherwise noted, 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 at 100% of fair market value (as defined in the plan).
(3) Represents NSOs granted pursuant to Company's 1995 Stock Option
Plan at 100% of fair market value (as defined in the plan).
These options vest after completion of seven (7) years of
employment, subject to early vesting if the Company achieves
certain performance goals relating to net profitability, cash
flow and revenue growth.
(4) Represents options granted as non-plan grants outside of 1995
Stock Option Plan. These options vest after completion of seven
(7) years of employment, subject to early vesting if the
Company achieves certain financial goals relating to net
revenue, gross margin, net income and cash flow.
<PAGE>
(5) Represents NSOs granted pursuant to the Company's 1995 Stock
Option Plan at 85% of fair market value (as defined in the plan).
(6) Represents options granted as a result of a stock option
repricing program pursuant to which certain employees having
options granted under the 1995 Stock Option Plan were entitled to
elect to cancel and exchange such options for new options having:
(i) an exercise price of $13.0625, which was the fair market
value (as defined in the plan) as of April 3, 1998; and (ii)
generally the same terms and conditions, including vesting and
expiration terms, as the options canceled and exchanged;
provided, however, that the new options could not be exercised
until the later of October 5, 1998 or the vesting date applicable
under the original grant. See "REPORT OF THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS REGARDING EXECUTIVE
COMPENSATION-1998 Option Repricing Program".
(7) These options were canceled and exchanged for new options
under the stock option repricing program described in footnote
(6) above.
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1998
AND SEPTEMBER 3, 1998 OPTION VALUES
The following table provides information regarding Company and
MTI stock option exercises in fiscal 1998 by the Named Executive
Officers and the value of such officers' unexercised options at
September 3, 1998:
<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 Realized Unexercisable (U) Unexercisable (U)
- - -------------------- --------------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
Joel J. Kocher - - 650,000(U) $3,245,970
T. Erik Oaas - - 31,440(E)(2) 346,565
73,532(U)(2) 99,943
Dean A. Klein - - 61,000(E) 226,515
194,000(U) 363,608
Michael S. Adkins - - 55,073(E)(2) 438,459
107,610(U)(2) 269,531
Judith A. Bitterli - - 100,000(U) 161,332
- - -------------------------
Joseph M. Daltoso 10,000(1) 211,900 38,000(E)(2) 429,192
82,000(U)(2) 231,751
</TABLE>
- - -------------------------
(1) Reflects exercise of options to purchase MTI Common
Stock.
(2) Includes options to purchase MTI Common Stock in the
following amounts: Mr. Oaas, 18,440 (E), 6,532 (U); Mr.
Adkins, 46,873 (E), 27,810 (U); and Mr. Daltoso, 25,000 (E),
15,000 (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 and Severance Arrangements
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-year 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.
Certain officers, not including any of the current Named
Executive Officers, have entered
<PAGE>
into employment and severance agreements which provide for a
lump sum payment of six (6) months base salary upon termination,
rather than for payments over a Transition Period as provided
under the Agreements.
During fiscal 1998, the following former Named Executive
Officers received the above described benefits under the
Agreements: Joseph M. Daltoso, former Chairman and Chief
Executive Officer, and Gregory D. Stevenson, former President and
Chief Operating Officer and Mr. George A. Haneke, former Senior
Vice President, Business Systems Planning. Mr. Daltoso's total
cash compensation for fiscal 1998 under his Agreement was
$686,275. Mr. Stevenson's total cash compensation for fiscal
1998 under his Agreement was $736,366. Mr. Haneke's total cash
compensation for fiscal 1998 under his Agreement was $234,911.
Change of Control Agreements
A Change of Control, for purposes other than the 1995 Stock
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 MTI and owning or controlling more than 35%
of the voting securities of the Company or, subject to MTI 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 MTI.
Upon a Change of Control of the Company (as defined above), 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 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
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 a comparable offer of employment,
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
management 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
of Directors 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.
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").
A Change of Control for purposes of the 1995 Stock 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 MTI 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 MTI. 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.
Compensation Committee Interlocks and Insider Participation
During fiscal 1998, the Compensation Committee 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. During fiscal 1998 Messrs. Hess, Lothrop and
Simplot were directors of MTI.
<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 18 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
During fiscal 1998, the Compensation Committee of the Board of
Directors of the Company (the "Committee") was comprised of
Messrs. Jerry M. Hess, Robert A. Lothrop and John R. Simplot. On
October 1, 1998 Mr. Hess resigned. The Committee met nine (9)
times in fiscal 1998 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 of the Company's officers, including
salary, bonuses, stock option grants and other compensation.
Compensation for the Company's executive officers for fiscal
1998, 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.
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. The following is a summary of the
executive officer compensation programs:
Cash Compensation
Base Salary. The base salary of each executive officer is
established primarily upon (i) a review of executive compensation
offered by companies generally comparable to the Company, and
(ii) a subjective evaluation of the executive officer's expected
contribution to the Company, including individual performance,
level of responsibility and technical expertise.
Performance Bonuses. Cash bonuses to executive officers are
intended to reward executive officers for the Company's financial
performance and achievement of individual performance goals
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 (i) after-tax net profit of the Company
for the fiscal year, and (ii) achievement of individual
performance criteria similar to those utilized to determine the
executive officer's base salary.
Performance bonuses for fiscal 1998 were paid in a lump sum.
Performance bonuses awarded for prior fiscal years 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.
<PAGE>
Equity Compensation
To provide long-term incentive to the executive officers and
employees of the Company and its subsidiaries, the Company grants
incentive and nonstatutory stock options to such persons pursuant
to the Company's 1995 Stock Option Plan. Such options provide a
link to long-term growth in the value of the Company's Common
Stock. The criteria used to determine who receives stock options
and the number of stock options granted is generally the same
criteria utilized in determining base salary. 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.
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 number of hours based on length of service 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.
CEO Compensation
Joel J. Kocher is the Chairman of the Board of Directors,
President, Chief Executive Officer and Chief Operating Officer of
the Company. Mr. Kocher'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. Kocher's
experience, level of responsibility and contribution to the
Company. In fiscal 1998, Mr. Kocher's annualized base salary was
$350,000.
In October, 1998, pursuant to the Executive Bonus Plan, Mr.
Kocher was awarded and paid $300,000 for fiscal 1998 performance.
During fiscal 1998, Mr. Kocher was granted options to purchase
a total of 650,000 shares of the Company's Common Stock. Of
these 650,000 options, 500,000 were granted under the Company's
1995 Stock Option Plan and 150,000 were granted as non-plan
grants outside of the 1995 Stock Option Plan. A total of 400,000
of these options vest at a rate of twenty percent (20%) each year
for five (5) years from the date of grant. The remaining 250,000
options vest after completion by Mr. Kocher of seven (7) years of
employment with the Company, subject to immediate vesting if the
Company achieves certain performance criteria relating to net
revenue, gross margin, net income and cash balance increases.
The number of shares granted to Mr. Kocher was based upon
subjective factors, including his experience and expected
contributions to the future success of the Company, and objective
factors, including industry practices.
Tax Deductibility of Executive Compensation
The Omnibus Budget Reconciliation Act of 1993 added Section
162(m) to the Internal Revenue 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 likely to
be subject to Section 162(m) and believes that at this time the
Company is in compliance with Section 162(m). The Company also
believes the 1995 Stock Option Plan is in compliance with Section
162(m). The Compensation Committee will continue to monitor
compliance with Section 162(m) and will take appropriate action
if warranted. Since corporate objectives may not always be
consistent with the requirement for full deductibility, it is
conceivable that the Company may enter into compensation
arrangements under which payments are not deductible under
Section 162(m). Deductibility is not the sole factor used by the
Compensation Committee in ascertaining appropriate levels or
modes of compensation.
<PAGE>
1998 Stock Option Repricing Program
On March 19, 1998, the Committee approved a stock option
repricing program pursuant to which most employees having options
granted under the 1995 Stock Option Plan were entitled to elect
to cancel and exchange such options for new options having: (i)
an exercise price of $13.0625, the average closing price of the
Company's Common Stock for the five business days preceding April
3, 1998; and (ii) generally the same terms and conditions,
including vesting and expiration terms, as the options
surrendered; provided, however, that the new options could not be
exercised until the later of October 5, 1998 or the vesting date
applicable under the original grant. Options to purchase
2,344,829 shares of Common Stock were exchanged pursuant to the
program.
The Committee believes that stock options are a critical
component of the compensation offered by the Company to promote
long-term retention of key employees, motivate high levels of
performance and recognize employee contributions to the success
of the Company. Prior to the repricing, the exercise price of a
majority of the outstanding options held by employees was in
excess of the market price, and the Committee believed that such
options were no longer an effective tool to encourage employee
retention or to motivate high levels of performance.
The repricing program was generally available to all executive
officers and employees of the Company. However, the following
executive officers and former executive officers did not
participate in this repricing program: Joseph M. Daltoso, former
Chairman and Chief Executive Officer; T. Erik Oaas, Executive
Vice President, Finance, and Chief Financial Officer; George A.
Haneke, former Senior Vice President, Business Systems Planning;
Nelson L. Hanks, former Vice President, Sales Operations
Planning; Dean A. Klein, Executive Vice President, Product
Development and Chief Technical Officer; Joel J. Kocher,
Chairman, President, Chief Executive Officer and Chief Operating
Officer; Brian C. Klene, former Executive Vice President, Sales
and Marketing; Gene P. Thomas, former Vice President, Consumer
and Small Business Sales; and Gregory D. Stevenson, former
President and Chief Operating Officer.
<PAGE>
The following table summarizes the repricing of any stock
options granted to any executive officer of the Company during
the past ten fiscal years.
<TABLE>
<CAPTION>
Ten-Year Option/SAR Repricings
Length of
Number of Original Option
Securities Market Price of Term
Underlying Stock at Time Exercise Price At Remaining at
Options/SARS Of Time of Date of
Repriced or Repricing or Repricing or New Exercise Repricing
Name Date Amended Amendment Amendment Price Amendment
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael S. Adkins 4/3/1998 13,420 $13.0625 $16.3375 $13.0625 4 years 7 months
Senior Vice President, 4/3/1998 1,580 13.0625 13.8869 13.0625 4 years 7 months
Manufacturing 4/3/1998 9,458 13.0625 21.9625 13.0625 4 years 9 months
4/3/1998 10,542 13.0625 18.6681 13.0625 4 years 9 months
4/3/1998 644 13.0625 18.8625 13.0625 5 years 5 months
4/3/1998 49,356 13.0625 16.0331 13.0625 5 years 5 months
Steven P. Arnold 4/3/1998 19,320 13.0625 21.9625 13.0625 5 years 5 months
Vice President, Legal, 4/3/1998 680 13.0625 18.6681 13.0625 5 years 5 months
General Counsel 4/3/1998 2,576 13.0625 18.8625 13.0625 4 years 9 months
4/3/1998 27,424 13.0625 16.0331 13.0625 4 years 9 months
Nemo C. Azamian 4/3/1998 37,310 13.0625 13.4000 13.0625 5 years 10 months
Vice President, Service
and Support
Judith A. Bitterli 4/3/1998 35,365 13.0625 14.1375 13.0625 5 years 7 months
Vice President and
General Manager, Web
Savino R. Ferrales 4/3/1998 37,735 13.0625 13.2500 13.0625 5 years 10 months
Senior Vice President
Worldwide Marketing
Mark Gonzales 4/3/1998 38,075 13.0625 13.1312 13.0625 5 years 10 months
Vice President,
Worldwide Marketing
Steven H. Laney 4/3/1998 18,489 13.0625 21.9625 13.0625 4 years 9 months
Vice President, 4/3/1998 1,511 13.0625 18.6681 13.0625 4 years 9 months
Investor Relations 4/3/1998 644 13.0625 18.8625 13.0625 5 years 5 months
4/3/1998 29,356 13.0625 16.0331 13.0625 5 years 5 months
Roderic W. Lewis 4/3/1998 5,791 13.0625 18.7250 13.0625 2 years 4 months
Former Vice President, 4/3/1998 54,209 13.0625 15.9160 13.0625 2 years 4 months
Legal, General Counsel
JoAnne S. Pfeifer 4/3/1998 15,000 13.0625 18.7250 13.0625 2 years 4 months
Vice President, 4/3/1998 7,990 13.0625 21.9625 13.0625 4 years 9 months
Administration, Corporate 4/3/1998 12,010 13.0625 18.6681 13.0625 4 years 9 months
Secretary 4/3/1998 644 13.0625 18.8625 13.0625 5 years 5 months
4/3/1998 29,356 13.0625 16.0331 13.0625 5 years 5 months
</TABLE>
Compensation Committee of the Board
of Directors
Robert A. Lothrop
John R. Simplot
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder
return on the Company's Common Stock for the period from August
31, 1993 through August 31, 1998 with the cumulative total return
for the same period as (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, as applicable. 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:
Year Ending August 31
1993 1994 1995 1996 1997 1998
Micron Electronics, $100 96 554 488 502 362
Inc.
CRSP Total Return Index
for The Nasdaq Stock 100 104 140 158 221 210
Market (US Companies)
CRSP Total Return Index
for Nasdaq Computer 100 104 183 218 346 422
Manufacturer Stocks
<PAGE>
PROPOSAL ONE:
ELECTION OF DIRECTORS
The Company's Board of Directors has fixed the authorized
number of directors at five (5), and it is contemplated that a
board of five (5) directors will be elected at the Annual
Meeting. Unless otherwise instructed, the proxy holders will
vote the Proxies received by them for the five (5) nominees named
below, all of whom are presently directors of the Company and are
identified in the proxy statement under "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 whom shall be designated by the present
Board of Directors to fill the vacancy or for the balance of
those nominees named without a substitute. 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, Joel J. Kocher, Robert A. Lothrop, T. Erik
Oaas and John R. Simplot. The Board recommends a vote "FOR" the
election of each of the foregoing nominees.
The five (5) nominees receiving the highest number of
affirmative votes of the shares of the Company's Common Stock
entitled to vote on this matter shall be elected as the
directors.
PROPOSAL TWO:
TO RATIFY THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed PricewaterhouseCoopers
L.L.P., independent accountants, to audit the consolidated
financial statements of the Company for the fiscal year ending
September 2, 1999, 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 PricewaterhouseCoopers 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.
TELEPHONE AND INTERNET VOTING ALTERNATIVES
For Shares Registered Directly in the Name of Shareholder.
Shareholders with shares registered directly with Norwest Bank
Minnesota, N.A. may vote telephonically by calling Norwest Bank
at (800) 240-6326. Votes submitted by telephone through the
Norwest Bank program must be received by noon Central Time on
November 20, 1998.
For Shares Registered in the Name of a Brokerage Firm or Bank.
A number of brokerage firms and banks are participating in a
program provided through ADP Investor Communication Services that
offers telephone and internet voting alternatives. This program
is different from the program offered by Norwest Bank for
telephonic voting of shares registered in the name of the
shareholder. If your shares are held in an account at a
brokerage
<PAGE>
firm participating in the ADP program, you may vote
those shares telephonically by calling the telephone number or
accessing the internet site referenced in your voting form.
Votes submitted electronically via the internet or by telephone
through the ADP program must be received by midnight, Eastern
Time on November 20, 1998.
The internet voting procedures are designed to authenticate
shareholder identities, to allow shareholders to give their
voting instructions and to confirm that the shareholders
instructions have been recorded properly. The Company has been
advised by counsel that the telephone and internet voting
procedures available through Norwest Bank are consistent with the
requirements of applicable law. Shareholders voting via the
internet should understand that there may be costs associated
with electronic access, such as usage charges from internet
access providers and telephone companies, that must be borne by
the shareholder.
The giving of a Proxy will not affect your right to vote in
person should you decide to attend the Annual Meeting.
Shareholders holding shares in the name of a broker or other
nominee who wish to vote in person at the Annual Meeting are
requested to bring a statement from the broker or nominee
confirming ownership of the Company's Common Stock.
<PAGE>
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR
1999 ANNUAL MEETING OF SHAREHOLDERS
In order to be included in the proxy statement and form of
proxy relating to the Company's 1999 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 July 3, 1999, and must otherwise be in
compliance with applicable laws and regulations and the Bylaws of
the Company.
THE MICRON ELECTRONICS, INC. BOARD OF
DIRECTORS
Dated: October 30, 1998
<PAGE>
October ___, 1998
Securities and Exchange Commission
450 Fifth Street, M.S. 1-2
N.W. Washington, D.C. 20549
Re: Micron Electronics, Inc. 1998
Definitive Proxy Materials
Dear Ladies and Gentlemen:
On behalf of Micron Electronics, Inc. (the "Company"),
transmitted herewith for filing is the definitive copy of the
Company's 1998 Notice of Annual Meeting of Shareholders, Proxy
Statement and form of Proxy. Proxy materials are being sent to
shareholders on or about October 30, 1998.
If you have questions, please contact the undersigned at
(208) 898-4026. We are requesting a return copy via CompuServe
for our records.
Best regards,
JoAnne S. Pfeifer
Vice President, Administration,
Corporate Secretary
JSP/sm
Enclosures
