<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
/ / Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(e) or sec.240.14a-12
</TABLE>
MICRONICS COMPUTERS, 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:
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<PAGE> 2
MICRONICS COMPUTERS, INC.
45365 NORTHPORT LOOP WEST
FREMONT, CALIFORNIA 94538
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO OUR STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of Micronics
Computers, Inc. (the "Company") will be held at The Newark-Fremont Hilton, 39900
Balentine Drive, Newark, California on February 27, 1997 at 10:00 a.m. for the
following purposes:
1. To elect three directors of the Company, with each director to serve until
the next Annual Meeting of Stockholders and until his successor has been
elected and qualified or until his earlier resignation, death or removal.
The Company's Board of Directors has nominated the following individuals to
serve: ______________, Shanker Munshani and William Earle Shelander.
2. To ratify the selection of KPMG Peat Marwick LLP as independent accountants
for the Company for the current fiscal year.
3. To consider a stockholder recommendation to the Board of Directors of the
Company that the Board of Directors take the steps necessary to achieve a
sale or cash merger of the Company on terms that will maximize values as
promptly as possible.
4. To transact any other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close of
business on January 2, 1997 are entitled to notice of and to vote at the meeting
and any adjournment thereof. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON, YOU ARE URGED TO SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY IN THE RETURN
ENVELOPE PROVIDED SO THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
______________________________________
Fremont, California SHANKER MUNSHANI
January 20, 1997 President, Chief Executive Officer
and Secretary
<PAGE> 3
TABLE OF CONTENTS
PAGE
VOTING RIGHTS AND SOLICITATIONS OF PROXIES..................... 1
PROPOSAL NO. 1 - ELECTION OF DIRECTORS......................... 2
Directors/Nominees.......................................... 2
Board of Directors' Meetings and Committees................. 3
Directors' Compensation..................................... 4
Certain Transactions........................................ 4
Security Ownership of Certain Beneficial Owners and
Management................................................ 5
Executive Compensation...................................... 6
Report of the Board Regarding Executive Compensation........ 8
Comparison of Stockholder Return............................ 10
PROPOSAL NO. 2 - RATIFICATION OF SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS............................................. 11
PROPOSAL NO. 3 - SALE OR CASH MERGER RECOMMENDATION............ 11
Stockholder Proposal........................................ 11
Proponent's Supporting Statement............................ 11
The Company's Statement..................................... 12
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934........................................................... 13
STOCKHOLDER PROPOSALS.......................................... 13
OTHER BUSINESS................................................. 13
<PAGE> 4
MICRONICS COMPUTERS, INC.
45365 NORTHPORT LOOP WEST
FREMONT, CALIFORNIA 94538
PROXY STATEMENT
January 20, 1997
The accompanying proxy (the "Proxy") is solicited on behalf of the Board of
Directors of Micronics Computers, Inc., a Delaware corporation ("Micronics" or
the "Company"), for use at the Annual Meeting of Stockholders of the Company to
be held at The Newark-Fremont Hilton, 39900 Balentine Drive, Newark, California
on February 27, 1997 at 10:00 a.m. (the "Annual Meeting"). Only holders of
record of the Company's Common Stock at the close of business on January 2, 1997
will be entitled to vote. At the close of business on that date, the Company had
___________ shares of Common Stock outstanding and entitled to vote. A majority,
or ___________ of these shares, will constitute a quorum for the transaction of
business. This Proxy Statement is being first mailed to stockholders on or about
January 25, 1997.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Holders of Common Stock are entitled to one vote for each share held as of
the above record date. Shares of Common Stock may not be voted cumulatively for
the election of directors. The aggregate number of votes entitled to be cast by
all stockholders present in person or represented by proxy at the Annual
Meeting, whether those stockholders vote "For," "Against," "Abstain" or give no
instructions, will be counted for purposes of determining the minimum number of
affirmative votes required to approve the actions proposed in Proposals No. 2
and 3 and the total number of shares cast "For" these proposals will be counted
for purposes of determining whether sufficient affirmative votes have been cast.
An abstention from voting on a matter by a stockholder present in person or
represented by proxy at the Annual Meeting has the same effect as a vote
"against" the matter. In the event that a broker indicates on a Proxy that it
does not have discretionary authority to vote certain shares on a particular
matter, those shares will not be considered present and entitled to vote with
respect to that matter.
Each nominee to serve on the Company's Board of Directors, to be elected,
must receive a plurality of the votes of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote on the election
of directors (provided a quorum is present). Votes "Withheld," as well as broker
non-votes, will not contribute to the number of votes required to elect a
director.
Proposal No. 2, "Ratification of Selection of Independent Public
Accountants" and Proposal No. 3 "Sale or Cash Merger Recommendation," require
for approval the affirmative vote (a vote "For") of a majority of the
outstanding shares of Common Stock of the Company present in person or by proxy
at the Annual Meeting and entitled to vote (provided a quorum is present). Votes
"Against" and "Abstain" will count toward the number of shares voted at the
Annual Meeting, but will not contribute toward the required number of votes
necessary to approve Proposals No. 2 and 3. Broker non-votes will be counted
toward the number of shares present at the Annual Meeting for determining
whether a quorum is present but will not be counted toward the number of shares
present and entitled to vote with respect to the matter on which the broker
non-vote is given. Therefore, if broker non-votes are received with respect to
Proposal No. 2 or 3, they will not be counted in determining the number of
affirmative votes necessary to approve such proposal.
Unless otherwise instructed by the stockholder or described herein, each
valid returned Proxy in the form accompanying this Proxy Statement that is not
revoked will be voted in the election of directors "For" the nominees of the
Board of Directors, "For" Proposal No. 2 and "Against" Proposal No. 3
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<PAGE> 5
described in this Proxy Statement, and at the Proxy holder's discretion, on such
other matters, if any, that may come before the Annual Meeting (including any
proposal to adjourn the Annual Meeting).
Any person signing a Proxy in the form accompanying this Proxy Statement
has the power to revoke it prior to the Annual Meeting or at the Annual Meeting
prior to the vote pursuant to the Proxy. A Proxy may be revoked by a writing
delivered to the Secretary of the Company stating that the Proxy is revoked, by
a subsequent Proxy that is signed by the person who signed the earlier Proxy and
is presented at the Annual Meeting or by attendance at the Annual Meeting and
voting in person.
The expenses of soliciting Proxies in the enclosed form will be paid by
the Company. Following the original mailing of the Proxy and other soliciting
materials, the Company will request brokers, custodians, nominees and other
record holders to forward copies of the Proxy and other soliciting materials to
persons for whom they hold shares of Common Stock and to request authority for
the exercise of Proxies. In such cases, the Company, upon the request of the
record holders, will reimburse such holders for their reasonable expenses.
Proxies may also be solicited by certain of the Company's directors, officers
and regular employees, without additional compensation, in person or by
telephone or telegram. The Company has retained a proxy solicitation firm,
Beacon Hill Partners, to aid it in its solicitation process and will pay a fee
of $2,000 to such firm, plus per stockholder fees and expenses, with total costs
expected to be approximately $3,500.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Board of Directors of the Company (the "Board" or "Board of
Directors") has nominated for election as directors each of the following
persons to serve until the next annual meeting of stockholders and until his
successor has been elected or until his earlier resignation, death or removal:
______ _________, Shanker Munshani and William Earle Shelander. Unless otherwise
instructed, the Proxy holders will vote the Proxies received by them for the
Company's nominees named below. Each of the nominees is currently a director of
the Company. The three nominees for election as directors who receive the
greatest number of votes cast for the election of directors at the Annual
Meeting, a quorum being present, will become directors at the conclusion of the
tabulation of votes. 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. It is not expected that any nominee will be unable, or will
decline, to serve as a director.
DIRECTORS/NOMINEES
The names of the current members of the Board, each of whom is a Company
nominee for the Board, and certain information about them (including their terms
of service), are set forth below:
<TABLE>
<CAPTION>
NAME OF NOMINEE AND/OR DIRECTOR AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ------------------------------- --- -------------------- --------------
<S> <C> <C> <C>
Shanker Munshani................. 41 President, Chief Executive Officer and Director of 1995
the Company
_________________ (1)(2)......... __ _________________________________ 199__
William Earle Shelander (1)(2)... 43 Private Investor 1990
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Mr. Shelander was re-elected, and Mr. Munshani was elected, to the Board
at the Company's annual meeting of stockholders held on February 13, 1996.
__________ was elected to the Board for the
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<PAGE> 6
first time on _____________. Each of the nominees, if elected, will serve as a
director until the next annual meeting of stockholders and until his successor
has been elected and qualified or until his earlier resignation, death or
removal. Vacancies on the Board occurring prior to an annual meeting may be
filled by the Board.
Further information regarding the Company's nominees is as follows.
Mr. __________ was elected to the Board for the first time on
___________. He currently serves as ________________ . [add background for
last 5 years, education and public company directorships for the nominee].
Mr. Munshani has been a director and the President and Chief Executive
Officer of the Company since October 1995. From August 1995 to October 1995,
Mr. Munshani served as the Company's Executive Vice President and Chief
Operating Officer and, from November 1994 to August 1995, its Vice President
Engineering. From October 1992 to November 1994, he was a Director of
Engineering at Wyse Technology, a computer systems and terminal
manufacturer. From March 1982 to October 1992, Mr. Munshani was employed by
Intel Corporation, a semiconductor and computer systems manufacturer, in
various management, engineering, marketing and manufacturing positions, most
recently as Engineering Manager. Mr. Munshani holds a B.E. in electrical
engineering from Regional Engineering College and a M.S. in electrical
engineering from the University of Kansas.
Mr. Shelander, a private investor, has been a director of the Company
since September 1990. From June 1995 to October 1996, he was Co-President of
JAFCO America Ventures, Inc., a venture capital firm and the United States
subsidiary of Japan Associated Finance Co., Ltd., a public company listed on
the Tokyo over-the-counter market. Japan Associated Finance Co., Ltd. and
two investment partnerships affiliated with JAFCO America Ventures, Inc. are
investors in the Company. From October 1988 to June 1995, Mr. Shelander was
General Manager, and from June 1986 to October 1988 he was an Associate, of
JAFCO America Ventures, Inc. He previously served as National Product
Manager of Liquid Air Corporation and was a systems engineer with Union
Carbide Corporation. Mr. Shelander holds a B.S. in industrial and systems
engineering from the Georgia Institute of Technology, an M.S.E. in chemical
engineering from West Virginia College of Graduate Studies and an M.B.A. from
Stanford University.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINATED DIRECTORS.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors met nine times and acted by unanimous written
consent once during the year ended September 30, 1996 ("fiscal 1996"). No
incumbent director attended fewer than 90% of the total number of meetings of
the Board of Directors and of the committees of the Board on which he served.
Standing committees of the Board currently include an Audit Committee and a
Compensation
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<PAGE> 7
Committee. The Board does not have a nominating committee or a committee
performing a similar function.
The Audit Committee met five times during fiscal 1996. The Audit Committee
exercises the following powers: (1) nominates the independent auditors of the
Company to be approved by the Board of Directors; (2) meets with the independent
auditors to review the annual audit; (3) assists the full Board in evaluating
the auditor's performance; and (4) reviews internal audit and control
procedures, related party transactions and, where appropriate, potential
conflict of interest situations. Messrs. __________ and Shelander are currently
members of the Audit Committee.
The Compensation Committee met five times and acted by unanimous written
consent once during fiscal 1996. The Compensation Committee administers the
Company's cash bonus and profit sharing plan and sets all stock and other
compensation for the Company's officers. Additionally, the Compensation
Committee administers the Company's 1992 Directors Option Plan, 1989 Stock
Option Plan, Employee Stock Purchase Plan and other stock benefit plans for
officers and employees. Messrs. _____________ and Shelander are currently
members of the Compensation Committee.
DIRECTORS' COMPENSATION
The Company has a compensation plan for directors who are not employees,
consultants or independent contractors of the Company ("Outside Directors"). For
the period subsequent to November 1995, each Outside Director receives
compensation for his services as a director at an annual rate of $24,000 (the
"Base Fee"). Each Outside Director also receives an additional $1,500 per annum
for each committee of the Board upon which the director serves. Outside Director
fees are paid quarterly. This plan was suspended by the Board in August 1995 and
was reinstated in November 1995. Prior to November 1995, the Base Fee received
by each Outside Director for his services as a director was set at an annual
rate of $30,000 ($60,000 for the Chairman of the Board, if an Outside Director).
During fiscal 1996, Mr. Shelander received $22,500 under this plan: Mr. _______
did not receive any compensation as a director of the Company for fiscal 1996.
Outside Directors are also reimbursed for their reasonable and necessary
expenses incurred on the Company's behalf.
Outside Directors are eligible for automatic option grants under the 1992
Directors Stock Option Plan (the "Directors Plan"). The Directors Plan provides
for the automatic grant of an option for 30,000 shares (60,000 shares for the
Chairman of the Board, if an Outside Director) of the Company's Common Stock
when an individual first becomes an Outside Director. If the individual is still
an Outside Director when his initial option under the Directors Plan has
completed vesting, he is automatically granted a second option for the same
number of shares. All options granted under the Directors Plan have an exercise
price equal to the fair market value of the Company's Common Stock on the date
of grant, become exercisable at a rate of one-sixth of the shares every six
months, and expire five years after the date of grant.
CERTAIN TRANSACTIONS
Steven P. Kitrosser, the Company's former Chairman of the Board, President
and Chief Executive Officer and a former director of the Company, entered into
an employment agreement with the Company in November 1992, which was renewed in
February 1995, under which he served as the Company's President and Chief
Executive Officer and was to be nominated for election to the Board. Mr.
Kitrosser's annual salary was initially $275,000, but was subject to change as
agreed to by the Company and Mr. Kitrosser. His annual salary was increased in
December 1994 to $325,000 but was returned to $275,000 in August 1995. Under the
employment agreement, Mr. Kitrosser was eligible to receive a special bonus of
up to $50,000 each year from 1993 through 1996 if the market price of the
Company's
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<PAGE> 8
Common Stock increased by certain targeted amounts. Mr. Kitrosser was also
eligible to receive annual bonuses of up to 60% of his salary per annum if
certain performance targets were met. The agreement provided that if Mr.
Kitrosser's employment were terminated by the Company without good cause, Mr.
Kitrosser would receive a severance payment equal to his remaining salary to be
earned during the term of the agreement, or one year's then-current salary,
whichever was greater. See also "Report of the Board of Directors Regarding
Executive Compensation - CEO Compensation" below.
In September 1995, Mr. Kitrosser retired as an employee of the Company. At
that time, Mr. Kitrosser and the Company entered into a consulting agreement
which superseded the earlier employment agreement. The consulting agreement
provided for a one-year consultancy period, from October 1, 1995 through
September 30, 1996, during which Mr. Kitrosser agreed to provide consulting
services as and when requested by the Company at a monthly compensation rate of
$10,000. Mr. Kitrosser resigned from the Board on____________.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of December 1, 1996
with respect to the beneficial ownership of the Company's Common Stock by: (a)
each stockholder known by the Company to be the beneficial owner of more than 5%
of the Company's Common Stock; (b) each director; (c) each of the Company's
executive officers who earned in excess of $100,000 from the Company during
fiscal 1996 ("Named Officers"); and (d) all current officers and directors as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL
OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF CLASS
- ------------------- ----------------- ----------------
<S> <C> <C>
Lindner Fund, Inc. ....................... 1,356,700 9.8%
7711 Carondelet, Suite 700
St. Louis, MO 63105
Merrill Lynch Group, Inc. ................ 1,412,500 10.2%
250 Vesey Street
World Financial Center & Tower
New York, NY 10281
Steven P. Kitrosser(2) ................... 383,083 2.8%
William Earle Shelander (3) .............. 62,000 *
Shanker Munshani (4) ..................... 85,209 *
David J. Nealon (5) ...................... 40,416 *
Wun-Yann Liao (6) ........................ 34,640 *
Larry Lummis (7) ......................... -- --
All current officers and directors
as a group (5 persons) (8)................ 605,348 4.2%
</TABLE>
- ------------------
*Less than 1%.
(1) Unless otherwise indicated below, the persons named in the table have sole
voting and sole investment power with respect to all shares beneficially
owned, subject to community property laws where applicable.
(2) Includes 1,000 shares held by Mr. Kitrosser plus 382,083 shares subject
to options exercisable within 60 days after December 1, 1996. Mr.
Kitrosser is a former officer and director of the Company.
-5-
<PAGE> 9
(3) Represents 17,000 shares owned by Mr. Shelander and 45,000 shares subject
to options exercisable within 60 days after December 1, 1996.
Mr. Shelander is a director of the Company.
(4) Represents 13,334 shares owned by Mr. Munshani and 71,875 shares subject
to options exercisable within 60 days after December 1, 1996. Mr.
Shanker is an executive officer and director of the Company.
(5) Represents 40,416 shares subject to options exercisable within 60 days
after December 1, 1996. Mr. Nealon is no longer affiliated with the
Company.
(6) Comprised of 21,307 shares owned by Mr. Liao and 13,333 shares subject to
options exercisable within 60 days after December 1, 1996.
(7) Mr. Lummis is no longer affiliated with the Company.
(8) Includes 552,707 shares subject to options exercisable within 60 days of
December 1, 1996, representing the option shares referenced in notes (2),
(3), (4), (5) and (6) above.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded, earned or paid
for services rendered in all capacities to the Company and its subsidiaries
during each of fiscal 1994, 1995 and 1996 to the Named Officers. This
information includes the dollar values of base salaries, bonus awards, the
number of stock options granted and certain other compensation, if any, whether
paid or deferred. The Company does not grant SARs and has no long-term
compensation benefits other than stock options.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------- ---------------
BONUS OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($)(2) (NO. OF SHARES) COMPENSATION ($)(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shanker Munshani 1996 $198,269 -- 100,000 $1,656
President, Chief Executive Officer 1995 146,154 $ 8,859 100,000 847
and Secretary 1994 -- -- -- --
Larry Lummis 1996 $199,364 -- 50,000 $2,359
Former Vice President, Sales 1995 -- -- -- --
1994 -- -- -- --
David J. Nealon 1996 $173,892 -- 30,000 $5,207
Former Vice President Worldwide 1995 153,308 $ 9,010 15,000 4,397
Operations 1994 139,731 11,726 -- 2,838
Wun-Yann Liao 1996 $162,039 -- 50,000 $1,541
Vice President 1995 141,678 $ 6,270 10,000 1,362
1994 110,526 -- -- 1,295
Steven P. Kitrosser 1996 $120,000 -- -- $3,474
Former Consultant and Former 1995 341,731 -- 100,000 4,827
Chairman of the Board 1994 276,060 $107,250 -- 4,827
</TABLE>
- ---------------
(1) Perquisites are excluded as their aggregate value did not meet the
reporting threshold of the lesser of $50,000 or 10% of the individual's
salary plus bonus. Represents insurance premiums paid by the Company with
respect to term life insurance for the benefit of the Named Officers
($3,672, $1,440 and $198 for Messrs. Kitrosser, Nealon and Liao,
respectively, in fiscal 1994; $3,672, $2,700, $77 and $206 for Messrs.
Kitrosser,
-6-
<PAGE> 10
Nealon, Munshani and Liao, respectively, in fiscal 1995; and $3,474,
$3,038, $791, $376 and $921 for Messrs. Kitrosser, Nealon, Munshani, Liao
and Lummis, respectively), and Company matching contributions to the
Company's 401(k) plan ($1,155, $1,085 and $1,097 for Messrs. Kitrosser,
Nealon and Liao, respectively, in fiscal 1994, $1,155, $2,094, $770 and
$1,156 for Messrs. Kitrosser, Nealon, Munshani and Liao, respectively, in
fiscal 1995, and $2,169, $865, $1,165 and $1,438 for Messrs. Nealon,
Munshani, Liao and Lummis, respectively).
(2) Represents bonuses earned for services rendered during the fiscal year
listed, even if paid after the end of the fiscal year.
Stock Options and Option Grants in Fiscal 1996
The following table sets forth information concerning option grants during
the fiscal year ended September 30, 1996 to each of the Named Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
---------------------------------------------------------- --------------------------
% of Total
Options
Options Granted to Exercise
Granted Employees in Price Expiration
Name (#) (2) Fiscal Year(3) ($/Sh) Date 5% ($) 10% ($)
- ------------------- ------- -------------- ------------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Shanker Munshani .. 100,000 13.4% $ 3.38 11/00 - 12/00 $100,328 $213,914
Larry Lummis ...... 50,000 6.7 3.38 9/96 -- --
David J. Nealon ... 30,000 4.0 2.16 - 3.50 12/96 19,719 43,571
Wun-Yann Liao ..... 50,000 6.7 2.16 - 3.50 12/00 - 7/01 33,488 73,987
Steven P. Kitrosser -- -- -- -- -- --
</TABLE>
- ------------
(1) The 5% and 10% assumed rates of annual compound stock price appreciation
are mandated by rules of the SEC and do not represent the Company's
estimate or projection of future Common Stock prices. No value is reported
for options that expired without being exercised.
(2) Stock options are granted with an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant. Options generally
become exercisable (a) as to grants made to optionees who have not yet
received an option under the plan and who have been hired by, or commenced
their relationship with, the Company within one year prior to the grant
date of the first such option, as to 25% of the shares subject to the
option on a date one year after the vesting start date specified by the
Board (generally, the hire date), with the remainder to vest in equal
amounts per month over the following three-year period and (b) as to
options granted to all other optionees, in equal amounts per month over the
four-year period commencing with the vesting start date specified by the
Board (generally the date of grant).
(3) The Company granted options to purchase 746,550 shares in fiscal 1996.
The following table sets forth information concerning the number and value
of unexercised stock options held at September 30, 1996 by each of the Named
Officers.
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<PAGE> 11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE OPTIONS AT 9/30/96 AT 9/30/96 ($)(2)
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Shanker Munshani .... -- -- 55,965 144,035 -- --
Larry Lummis ........ -- -- -- -- -- --
David J. Nealon ..... -- -- 39,167 55,833 -- --
Wun-Yann Liao ....... -- -- 8,333 51,666 -- --
Steven P. Kitrosser.. -- -- 332,501 -- -- --
</TABLE>
- -----------------
(1) Calculated by subtracting the aggregate exercise price from the aggregated
market value of the shares at an assumed fair market value of $2.125, the
closing price of the Company's Common Stock on Nasdaq on September 30,
1996.
(2) These values have not been and may never be realized. They are based on the
positive spread between the respective exercise prices of outstanding stock
options and the closing price of the Company's Common Stock on September
30, 1996 ($2.125).
REPORT OF THE BOARD OF DIRECTORS
REGARDING EXECUTIVE COMPENSATION
The Compensation Committee and the full Board generally review base salary
levels for officers each February. The Compensation Committee establishes the
general compensation policy of the Company for all executive officers and
recommends specific salary levels to the full Board.
To arrive at base salary levels, the Company's Human Resources Department
provides the Compensation Committee with executive compensation data from a
group of similar size high-technology companies. The factors used to determine
the participants in the survey group include annual revenue, industry, growth
rate and geography. The Company's executive level positions, including the Chief
Executive Officer ("CEO"), were matched to comparable survey positions and
competitive market compensation levels to determine base salary, target
incentives and target total cash compensation. Practices of such companies with
respect to stock option grants are also reviewed and compared.
In preparing the performance graph for this Proxy Statement (see page 10),
the Company used the Nasdaq Computer Manufacturer Index ("NCM Index") as its
published line of business index. The companies in the executive compensation
survey group prepared by the Human Resources Department are substantially
similar to the companies contained in the NCM Index in that they are all
computer or computer component manufacturers. However, the NCM Index includes
companies located throughout the United States and the executive compensation
survey is restricted to companies that are located in northern California.
The executive compensation survey data are reviewed with the CEO for each
executive level position and, are currently reviewed by the Board as to the
CEO's compensation. During fiscal 1996, the CEO's salary was based on
competitive market conditions as of the time his employment agreement was
entered into, as described below.
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<PAGE> 12
Fiscal Year 1996 Executive Compensation
The practice of the Company during fiscal 1996 was to establish base
salaries at the approximate median of comparative positions included in the
executive compensation survey data. In any case where the Board or the CEO
believed an executive officer was not working at a level expected of him, or was
exceeding the Board's or CEO's expectations, the executive officer's base
compensation was adjusted upward or downward, as appropriate. In any case where
the services of a particular executive officer were sought by the Company's
competitors, the executive officer's base compensation may then have been raised
to meet or exceed any competitive offers of competitors. The foregoing
information, along with the CEO's recommendations of base salary for fiscal 1996
for each executive officer, was presented to the Compensation Committee and then
to the full Board at the time salary levels were approved and again for
particular executive officers at various times throughout the year when the
executive officer was promoted or other changes in the officer's status were
made. At that time, the Board reviewed the recommendations outlined above and
established a base salary level for the executive officer in question.
Secondly, the Board believes that the compensation of the CEO and other
executive officers should be influenced by the Company's overall performance. As
a result, once base salary was determined, an additional portion of the
compensation of each executive was contingent upon corporate performance under
the Company's Bonus and Profit Sharing Plans. Under these plans, semi-annual
cash awards may be made to employees based upon the Company's overall
performance measured by pre-tax income. No distributions were made under either
plan for fiscal 1996.
The Bonus Plan provides for semi-annual distribution of cash awards to
employees and executive officers, including the CEO. The total amount of the
distribution to participants in the Plan (the "Bonus Pool") is based upon a
percentage of pre-tax income, not to exceed 6% Up to 40% of the Bonus Pool, at
the discretion of the Board, may be allocated for distribution to executive
officers as a group and the remainder to other employees of the Company.
Allocations for the CEO are made by the Board and further allocation among
executive officers is made by the CEO, in each case, based upon merit. Further
allocation among non-officer employees is made, again based upon merit, by the
CEO and Company department heads as to employees they supervise. No
distribution was made under the Bonus Plan for fiscal 1996.
Under the Profit Sharing Plan, semi-annual cash distributions are made to
all employees in amounts not to exceed 4% of pretax income. No distribution was
made under the Profit Sharing Plan with respect to fiscal 1996.
Third, the Board believes that stock options play an important role in
attracting and retaining qualified personnel because they provide personnel with
a reward directly tied to increased stock values. Stock options are granted at
fair market value to executive officers when they first join the Company. In
individual cases, follow-on options are granted, again at fair market value on
the date of grant, to executives after the initial options are partially or
fully vested. Both initial and follow-on options are granted based upon an
analysis, made by the Compensation Committee of the Board, of equity incentives
offered to executives in equivalent positions by similar companies with whom the
Company competes for available executive talent and, with respect to follow-on
options, the Committee's or the CEO's determination of whether or not the
executive officer's performance warrants an additional grant. Reference is made
to page 7 of this Proxy Statement for information on grants made to executive
officers during fiscal 1996.
CEO Compensation
In September 1995, Shanker Munshani, formerly the Company's Chief
Operating Officer, was appointed as President and Chief Executive Officer of the
Company. Mr. Munshani's annual salary is currently $200,000 per annum, subject
to increase and to a bonus arrangement to be set forth in an
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<PAGE> 13
Employment Agreement that has not yet been finalized by the Board. Mr. Munshani
is eligible to participate in the Bonus Plan and the Profit Sharing Plan. The
standards under which Mr. Munshani's compensation is set are the same standards
as apply to the other executive officers of the Company.
This report on compensation is given by the Board of Directors:
William Earle Shelander _____________________ Shanker Munshani
COMPARISON OF STOCKHOLDER RETURN
The graph below compares the cumulative stockholder return on the Common
Stock of the Company from September 30, 1991 to September 30, 1996 with the
cumulative return on the Nasdaq Market Index (U.S. Companies) and the Nasdaq
Computer Manufacturers Index over the same period (assuming the investment of
$100 in the Company's Common Stock and in each of the indexes on September 30,
1991 and reinvestment of all dividends).
COMPARISON OF CUMULATIVE TOTAL RETURN
[LINE GRAPH HERE USING DATA IN TABLE BELOW]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
9/30/91 9/30/92 9/30/93 9/30/94 9/30/95 9/30/96
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Micronics $100 $ 41 $ 69 $ 46 $ 54 $ 25
Computers, Inc.
- -------------------------------------------------------------------------------------
Nasdaq Market Index $100 $112 $147 $148 $204 $243
- -------------------------------------------------------------------------------------
Nasdaq Computer $100 $108 $113 $126 $223 $291
Manufacturers Index
- -------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------
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<PAGE> 14
PROPOSAL NO. 2 - RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected KPMG Peat Marwick LLP as its principal
independent accountants to perform the audit of the Company's financial
statements for fiscal 1997, and the stockholders are being asked to ratify such
selection. KPMG Peat Marwick LLP was engaged as the Company's principal
independent accountants in June 1992 and performed the Company's audit for
fiscal 1992, 1993, 1994, 1995 and 1996. Representatives of KPMG Peat Marwick LLP
will be present at the Annual Meeting, will be given an opportunity to make a
statement at the Annual Meeting if they desire to do so and will be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION
OF KPMG PEAT MARWICK LLP AS THE COMPANY'S PRINCIPAL
INDEPENDENT ACCOUNTANTS
-------------------------------------------------------
PROPOSAL NO. 3 - SALE OR CASH
MERGER RECOMMENDATION
The following proposal has been requested for inclusion by a stockholder.
For the reasons stated following the proposal and its supporting statement, the
Board recommends a vote "Against" this proposal.
STOCKHOLDER PROPOSAL
"RESOLVED, THAT THE SHAREHOLDERS OF MICRONICS COMPUTERS, INC. HEREBY
RECOMMEND TO THE BOARD OF DIRECTORS THAT THE BOARD TAKE THE STEPS
NECESSARY TO ACHIEVE A SALE OR CASH MERGER OF MICRONICS COMPUTERS ON TERMS
THAT WILL MAXIMIZE VALUES AS PROMPTLY AS POSSIBLE."
STATEMENT IN SUPPORT OF STOCKHOLDER PROPOSAL
Lindner Investments, which owns 1,356,700 shares of the Company's Common
Stock, believes the value that may be achieved for the shareholders of our
company by the cash merger or sale of the entire corporation or all its assets
is significantly greater than the current market price of its shares.
The market price of the stock on August 12, 1996 (the day prior to the
date this proposal was submitted) was $2.19, and representing a 65% decline from
early 1993 when the Fund began purchasing shares and representing a 45% discount
to book value as of June 30, 1996.
Fiscal year 1993 was the last in which the company earned over a 4% return
on equity. These results have been achieved during a period when the personal
computer market has undergone spectacular growth. Due to these facts and the
steady price decline, the Lindner Fund believes that all shareholders will
receive maximum value for our shares when, and only when, the board of directors
conducts a competitive auction for Micronics Computers business and/or assets.
This is substantially the same
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<PAGE> 15
proposal we submitted on August 14, 1995 for the 1996 annual meeting. Since that
time the stock price has declined 45%.
If you want to vote in favor of this proposal, you must mark the "FOR" box
on the proxy card next to this proposal.
YOUR VOTE IS IMPORTANT!
Please vote "FOR" this proposal and remember to sign and date your proxy
card before returning it.
Thank you for your consideration.
THE COMPANY'S STATEMENT
The Board of Directors recommends a vote "AGAINST" Proposal 3. While
neither management nor the Board of Directors is against the sale of the
Company, they believe that it is in the best interest of all stockholders to
pursue only those offers that fairly value the Company. Moreover, the forced
sale of the Company for cash is not a reasonable next step for Micronics.
First, the Board of Directors is sensitive to the desire of stockholders
that stockholder value be maximized. Management believes that all reasonable
means to maximize that value must be pursued, including considering merger and
sale of asset possibilities with other entities that might provide business and
economic synergies or might provide an attractive return to stockholders. The
Company has engaged the services of an investment banking firm to help identify
available alternatives. These alternatives might include a joint venture, an
acquisition of another company or a sale of the Company, among others. However,
even if the Company identifies a potential acquirer, it is possible that the
best value obtainable for the Company might be obtained by receiving the
securities of the acquirer, rather than cash. The Company must be free to
consider all available alternatives to maximize stockholder value, not just a
sale for cash that is the subject of the Proposal.
Secondly, the Board feels that passage of this Proposal would effectively
tie the Company's hands in negotiations with any potential acquirer. This is
because the Proposal gives the impression to the public, and to the class of
potential acquirers, that the Company's stockholders would like the Company to
accept any offer, for cash, as long as it is the highest offer and even if it is
the only offer made. The Board believes that it is unfair to stockholders to
enter into negotiations in a distress-sale posture and that a forced-sale
mentality would most likely not result in the best potential return to
stockholders.
Third, A forced-sale strategy may engender uncertainty in the minds of
employees, customers, suppliers and business partners of the Company and may
damage these relationships. As a result, the Company's business may be impaired.
If no purchase offer materializes or if an offer, once accepted, fails to be
consummated, the Board believes it may then be difficult or impossible to
continue the Company's ongoing business unimpaired.
Finally, the Board of Directors strongly believes it would be
counterproductive to divert management time and attention from ongoing
operations in an effort to attract and evaluate, in a short time period,
potential acquisition candidates. To focus principally on sale of the business
may result in diverting management time and attention from the Company's ongoing
operations. If no fair purchase offer materializes or is consummated,
management's focus on such short-term issues puts the Company's long-term
strategic position at risk.
Whether or not this proposal is adopted by the Company's stockholders, the
Board of Directors and other management personnel will continue to examine sale
or merger opportunities that do arise, each on its own terms and in light of the
specific circumstances in which these opportunities develop.
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<PAGE> 16
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST"
THE SALE OR CASH MERGER PROPOSAL.
----------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE
ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's Common Stock ("10% Stockholders"), to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership on a Form 3 and reports
of changes in ownership of Common Stock and other equity securities of the
Company on a Form 4 or Form 5. Officers, directors and 10% Stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, from October 1, 1995 through September 30, 1996 all
Section 16(a) filing requirements applicable to its officers, directors, and 10%
Stockholders were complied with, except as follows: Larry Lummis, former Vice
President of Sales, and Robert V. Mahoney, former Vice President, Secretary and
Chief Financial Officer, filed their initial forms 3 late; and Shanker Munshani,
Director, President and Chief Executive Officer, and Wm. E. Shelander, Director,
each made a late filing of a form 4.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the Company's Proxy Statement and
form of proxy relating to the Company's 1998 Annual Meeting of Stockholders must
be received by September 23, 1997.
OTHER BUSINESS
The Board of Directors does not presently intend to bring any other
business before the Annual Meeting and, so far as is known to the Board, no
matters are to be brought before the Annual Meeting except as specified in the
notice of such meeting. As to any business that may properly come before the
Annual Meeting, or any adjournment thereof, however, it is intended that
Proxies, in the form enclosed, will be voted in the respect thereof in
accordance with the judgment of the persons voting such Proxies.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO
SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY IN THE RETURN ENVELOPE PROVIDED SO
THAT YOUR SHARES WILL BE REPRESENTED AT THE ANNUAL MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
________________________________________________
SHANKER MUNSHANI
President, Chief Executive Officer and Secretary
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<PAGE> 17
MICRONICS COMPUTERS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Shanker Munshani and William Earle Shelander, or
either of them, each with power of substitution and revocation thereof, to
represent the undersigned at the Annual Meeting of Stockholders of Micronics
Computers, Inc. (the "Company") to be held at The Newark-Fremont Hilton, 39900
Balentine Drive, Newark, California on February 27, 1997 at 10:00 a.m., and any
adjournments thereof, and to vote the number of shares the undersigned would be
entitled to vote if personally present at the meeting as directed on the reverse
side of this proxy.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY AND
WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE OF THIS PROXY. IN THE ABSENCE OF
DIRECTION, THIS PROXY WILL BE VOTED FOR THE THREE NOMINEES FOR ELECTION, FOR
PROPOSAL 2 AND AGAINST PROPOSAL 3. In their discretion, the proxy holders named
above are authorized to vote upon such other business as may properly come
before the meeting and any adjournment thereof to the extent authorized by Rule
14a-4(c) promulgated by the Securities and Exchange Commission. The Board of
Directors recommends a vote for election of each of the three nominees and for
Proposal 2. The Board of Directors recommends a vote against Proposal 3. The
undersigned hereby acknowledges receipt of: (a) the Notice of Annual Meeting of
Stockholders of the Company; (b) the accompanying Proxy Statement; and (c) the
Annual Report to Stockholders for the year ended September 30, 1996.
Continued on reverse side
- --------------------------------------------------------------------------------
- ------------------
COMMON
1. ELECTION OF DIRECTORS (The Board recommends a vote "FOR" all nominees listed
below)
<TABLE>
<S> <C> <C>
FOR all nominees WITHHOLD (Instruction: To withhold authority to vote for any individual
listed to the right AUTHORITY nominee, strike through the nominee's name below.)
(except as marked to to vote for all
the contrary). nominees listed Shanker Munshani,__________________ and William Earle Shelander.
to the right.
[ ] [ ]
</TABLE>
<TABLE>
<S> <C>
2. RATIFICATION OF SELECTION OF KPMG PEAT 3. APPROVAL OF A STOCKHOLDER PROPOSAL REGARDING
MARWICK AS THE COMPANY'S INDEPENDENT A SALE OR CASH MERGER OF THE COMPANY (the Board
ACCOUNTANTS (the Board recommends a vote "FOR") recommends a vote "AGAINST" this proposal - failure to indicate
a choice below will be considered a vote "AGAINST")
</TABLE>
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
Please sign exactly as your name(s) appears on
your stock certificate. If shares of stock
stand of record in the names of two or more
persons or in the name of husband and wife,
whether as joint tenants or otherwise, both or
all of such persons should sign the proxy. If
shares of stock are held of record by a
corporation, the proxy should be executed by
the president or vice president and the
secretary or assistant secretary. Executors or
administrators or other fiduciaries who execute
the above proxy for a deceased stockholder
should give their full title. Please date this
proxy.
Date: ___________________________________, 1997
_______________________________________________
Signature(s)
_______________________________________________
Signature(s)
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE PROVIDED SO THAT YOUR SHARES
MAY BE REPRESENTED AT THE MEETING.
