<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
<TABLE>
<S> <C>
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 240.14a-11(c) or
Rule 240.14a-12
NEOMAGIC CORPORATION
-----------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/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:
N/A
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
N/A
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
N/A
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
----------------------------------------------------------
(5) Total fee paid:
N/A
----------------------------------------------------------
/ / 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:
N/A
----------------------------------------------------------
(2) Form, Schedule, or Registration Statement No.:
N/A
----------------------------------------------------------
(3) Filing Party:
N/A
----------------------------------------------------------
(4) Date Filed:
N/A
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</TABLE>
<PAGE>
[NEOMAGIC LOGO]
3260 JAY STREET
SANTA CLARA, CALIFORNIA 95054
(408) 988-7020
August 2, 2000
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
NeoMagic Corporation (the "Company"), which will be held on September 6, 2000 at
The Westin Santa Clara, 5101 Great America Parkway, Santa Clara, California.
This booklet includes the Notice of the Annual Meeting of Stockholders and
the Proxy Statement. The Proxy Statement describes the business to be transacted
at the Annual Meeting and also provides important information about the Company
and the items to be voted upon that you should consider when you vote your
shares. Also included with this booklet is a copy of the Company's Annual Report
for the fiscal year ended January 31, 2000. We encourage you to read the Annual
Report. It includes information on the Company's operations, markets, products
and services, as well as the Company's audited financial statements.
At this meeting, among other things, you will be asked to consider and vote
upon the election of five directors. All five nominees currently are directors
of the Company. In addition, you will be asked to approve the Board of
Directors' appointment of Ernst & Young LLP ("Ernst & Young") as the Company's
independent auditors for the 2001 fiscal year. Ernst & Young has audited the
Company's financial statements since the Company's inception, and the Board
considers this firm to be well qualified for this position. Consequently, your
Board of Directors recommends that you vote FOR this proposal.
Whether or not you plan to attend the Annual Meeting, it is important that
your shares of Common Stock be represented and voted at the Annual Meeting.
Accordingly, after reading the enclosed Notice of Annual Meeting and
accompanying Proxy Statement, please fill in, date and sign the enclosed proxy
card and mail it promptly in the envelope provided.
Very truly yours,
<TABLE>
<S> <C>
/s/ Kamran Elahian /s/ Prakash Agarwal
Kamran Elahian Prakash Agarwal
CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
<PAGE>
NEOMAGIC CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 6, 2000
------------------------
To the Stockholders of NeoMagic Corporation:
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of NeoMagic Corporation, a Delaware corporation (the "Company"), will
be held on Wednesday, September 6, 2000 at 8:00 a.m., local time, at The Westin
Santa Clara, 5101 Great America Parkway, Santa Clara, California.
At the Annual Meeting, Stockholders will be asked:
1. To elect five directors;
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ended January 31, 2000; and
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment of the Annual Meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice of Annual Meeting. Stockholders of record as
of the close of business on June 30, 2000 are entitled to notice of and to vote
at the Annual Meeting and any adjournment thereof. A complete list of
stockholders entitled to vote will be available at the Secretary's office, 650
Page Mill Road, Palo Alto, California, 94304-1050 for ten days before the Annual
Meeting.
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING. EVEN IF
YOU PLAN TO ATTEND THE ANNUAL MEETING, WE HOPE THAT YOU WILL PROMPTLY MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY. THIS WILL NOT LIMIT YOUR RIGHTS TO
ATTEND OR VOTE AT THE ANNUAL MEETING.
By Order of the Board of Directors
/s/ Arthur F. Schneiderman
Arthur F. Schneiderman
SECRETARY
Santa Clara, California
August 2, 2000
<PAGE>
NEOMAGIC CORPORATION
3260 JAY STREET
SANTA CLARA, CALIFORNIA 95054
------------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
MATTERS TO BE CONSIDERED
At the Annual Meeting of Stockholders (the "Annual Meeting"), the
Stockholders of NeoMagic Corporation (the "Company") will be asked to consider
and vote to elect five directors, and to ratify the appointment of Ernst & Young
LLP as the Company's independent auditors. The Board of Directors knows of no
matters that are to be brought before the Annual Meeting other than as set forth
in the Notice of the Annual Meeting. If any other matters properly come before
the Annual Meeting, the person named in the enclosed form of proxy or their
substitutes will vote in accordance with their best judgment on such matters.
This Proxy Statement and the accompanying form of Proxy are first being
mailed on or about August 2, 2000 to all stockholders entitled to vote at the
Annual Meeting.
DATE, TIME, PLACE, RECORD DATE AND SHARES ENTITLED TO VOTE
The enclosed proxy is solicited on behalf of the Company's Board of
Directors for use at the Annual Meeting to be held on Wednesday, September 6,
2000, at 8:00 a.m., local time, or any continuation or adjournment thereof, for
the purposes set forth herein and the accompanying Notice of Annual Meeting of
Stockholders. The Annual Meeting will be held at The Westin Santa Clara, 5101
Great America Parkway, Santa Clara, California. The telephone number at this
address is (408) 986-0700.
The Company has set June 30, 2000 as the record date (the "Record Date").
The stockholders of record at the close of business on that date are entitled to
notice of and to vote at the Annual Meeting. As of the close of business on such
date, the Company had 25,598,861 shares of Common Stock outstanding and entitled
to vote, with each share entitled to one vote.
QUORUM; REQUIRED VOTE
A majority of the shares entitled to vote, present in person or represented
by proxy, shall constitute a quorum at the Annual Meeting. If a quorum is
present, in all matters other than the election of directors, the affirmative
vote of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be required to approve
any matter presented at the Annual Meeting. Each stockholder voting for the
election of directors may cumulate his or her votes, giving one candidate a
number of votes equal to the number of directors to be elected multiplied by the
number of shares that the stockholder is entitled to vote, or distributing the
stockholder's votes on the same principle among as many candidates as the
stockholder chooses, provided that the votes may not be cast for more than
(5) candidates. However, no stockholder shall be entitled to cumulate votes for
any candidate unless the candidate's name has been properly placed in nomination
prior to the voting and the stockholder, or any other stockholder, has given
notice at the meeting prior to the voting of the intention to cumulate votes. On
all other matters, each share has one vote.
Under the General Corporation Law of the State of Delaware, an abstaining
vote and a broker "non-vote" are counted as present and entitled to vote and
are, therefore, included for purposes of determining whether a quorum of shares
is present at a meeting. However, broker "non-votes" are not deemed to be
<PAGE>
"votes cast." As a result, broker "non-votes" are not included in the tabulation
of the voting results on the election of directors or issues requiring approval
of a majority of the votes cast and, therefore, do not have the effect of votes
in opposition in such tabulations. A broker "non-vote" occurs when a nominee
holding shares for a beneficial owner does not vote on a particular proposal
because the nominee does not have discretionary voting power with respect to
that item and has not received instructions from the beneficial owner.
VOTING AND REVOCATION OF PROXIES
Stockholders are required to complete, date, sign and promptly return the
accompanying form of proxy in the envelope provided. Shares of Common Stock
represented by properly executed proxies received by the Company and not revoked
will be voted at the Annual Meeting in accordance with the instructions
contained therein. If instructions are not given, proxies will be voted FOR
election of each nominee for director named herein and FOR ratification of
appointment of independent auditors.
Any proxy signed and returned by a Stockholder may be revoked at any time
before it is voted. It may be revoked by filing, with the Secretary of the
Company at the Company's principal offices, located at 3250 Jay Street, Santa
Clara, California 95054, a written notice of revocation or a duly executed proxy
bearing a later date, or it may be revoked by attending the Annual Meeting and
voting in person. Attendance at the Annual Meeting will not in and of itself
constitute revocation of a proxy.
PROXY SOLICITATION
The cost for this solicitation will be borne by the Company. The Company has
retained the services of Corporate Investor Communications, Inc., to assist in
the solicitation of proxies at an estimated fee of less than $10,000, plus
reimbursement of reasonable out of pocket expenses. The Company may reimburse
brokerage firms and persons representing beneficial owners of shares for their
expenses in forwarding solicitation materials to such beneficial owners.
Original solicitation of proxies by mail may be supplemented by telephone,
telegram or personal solicitations by directors, officers or employees of the
Company. No additional compensation will be paid for any such services.
2
<PAGE>
PROPOSAL ONE--ELECTION OF DIRECTORS
A board of five (5) directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's nominees named below. All nominees are currently directors of
the Company. In the event that any nominee of the Company 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 current 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. In the event that additional persons are
nominated for election as director, or if any nominee becomes unable or declines
to serve as director, the proxy holders intend to vote all proxies received by
them in such a manner and in accordance with cumulative voting as will assure
the election of as many of the nominees listed below as possible, and in such
event the specific nominees to be voted for will be determined by the proxy
holders. The term of office of each person elected as a director will continue
until the next Annual Meeting of Stockholders or until a successor has been duly
elected and qualified. There are no arrangements or understandings between any
director or executive officer and any other person pursuant to which he is or
was to be selected as a director or officer of the Company.
NOMINEES FOR DIRECTORS
Set forth below is certain information regarding the nominees:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ------------------------------------------
<S> <C> <C>
Kamran Elahian............................ 45 Chairman of the Board
Prakash C. Agarwal........................ 46 President, Chief Executive Officer and
Director
Brian P. Dougherty(2)..................... 43 Director
James Lally(1)(2)......................... 55 Director
Klaus Wiemer(1)........................... 62 Director
</TABLE>
- ------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
KAMRAN ELAHIAN, a co-founder of the Company, has been Chairman of the Board
since the Company's inception in 1993. Mr. Elahian has co-founded several
Silicon Valley companies since 1981, including CAE Systems, Inc., a
computer-aided engineering software company, Cirrus Logic, a semiconductor
manufacturer and Momenta Corporation, a pen-based computer company. In addition
to his duties as Chairman of the Company, Mr. Elahian is the Chairman and
co-founder of PlanetWeb, Inc., an Internet software company, Chairman and
co-founder of Centillium Technology Corporation, a telecommunications
semiconductor company and the Co-Chairman and founder of Schools Online, a non-
profit public charity organization. Mr. Elahian holds a BS in Computer Science,
a BS in Mathematics and a Masters of Engineering from the University of Utah.
PRAKASH C. AGARWAL, a co-founder of the Company, has been President, Chief
Executive Officer, and a Director of the Company since its inception in 1993.
Mr. Agarwal has over 20 years of engineering, marketing and general management
experience in the semiconductor industry. Prior to joining the Company, he was
employed as Vice President and General Manager of Cirrus Logic's Portable
Products Division. Mr. Agarwal holds a BS and an MS degree in Electrical
Engineering from the University of Illinois.
BRIAN P. DOUGHERTY joined the Company as a Director in January 1997.
Mr. Dougherty is a founder and serves as Chairman of Wink Communications, a
developer of interactive television software. From its inception in 1983 through
1994, Mr. Dougherty served as Chief Executive Officer of Geoworks, a
3
<PAGE>
consumer computing device operating system manufacturer. Mr. Dougherty holds a
BS degree in Electrical Engineering from the University of California at
Berkeley.
JIM LALLY has served as a Director of the Company since July 1993.
Mr. Lally has been a general partner of Kleiner Perkins Caufield & Byers, a
venture capital firm, since 1981. He holds a BS degree in Electrical Engineering
from Villanova University.
DR. KLAUS WIEMER has served as a director since January 1998. Mr. Wiemer is
an independent consultant in microelectronics manufacturing. He also serves on
the Board of Directors of Simtek Corporation, an integrated circuits company,
and InterFET Corporation, a discrete semiconductor device company. Mr. Wiemer
holds a BS degree in physics from Texas Western College (now University of
Texas, El Paso), an MS in physics from University of Texas and a Ph.D. in
physics from Virginia Polytechnic Institute.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE NAMED NOMINEES.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held 7 meetings during the year ended January 31,
2000. No Director attended less than 85% of the aggregate number of meetings of
the Board of Directors.
The Board of Directors has two standing committees: the Audit Committee and
the Compensation Committee. Membership on these committees is limited to
non-employee directors.
The Audit Committee, which was comprised of Messrs. James Lally and Klaus
Wiemer during the year ended January 31, 2000, establishes and reviews the
activities of the independent auditors; reviews recommendations of the
independent auditors and responses of management; and reviews in consultation
with the independent auditors the financial statements, accounting and other
policies, accounting systems and system of internal controls. During the year
ended January 31, 2000 ("Last Fiscal Year"), the Audit Committee met four times.
The Compensation Committee, which is comprised of Messrs. Dougherty and
Lally, administers the Amended 1993 Stock Plan, the 1997 Employee Stock Purchase
Plan ("Stock Purchase Plan") and all other areas of executive compensation.
During the Last Fiscal Year, the Compensation Committee did not meet, and
compensation issues were addressed by the full Board of Directors. The
Compensation Committee has a subcommittee (appointed by the Board of Directors)
responsible for approval of the grant of stock options to employees other than
executive officers. The Subcommittee is comprised of Prakash Agarwal. During the
last fiscal year, the subcommittee met twelve times.
DIRECTOR COMPENSATION
Although the Company does not pay any compensation to directors for serving
in that capacity, it does reimburse directors for expenses incurred in attending
board meetings.
4
<PAGE>
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except for liability (i) for
any breach of their duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) for unlawful payments of
dividends or unlawful stock repurchases or redemptions as provided in
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify its directors
and executive officers and may indemnify its other officers and employees and
agents to the fullest extent permitted by law. The Company believes that
indemnification under its Bylaws covers at least negligence and gross negligence
on the part of indemnified parties. The Company's Bylaws also permit the Company
to secure, and the Company has secured, insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his other
actions in such capacity, regardless of whether the Bylaws would permit
indemnification.
The Company has entered into agreements to indemnify its directors and
officers in addition to indemnification provided for in the Company's Bylaws.
These agreements, among other things, indemnify the Company's directors and
officers for certain expenses (including attorneys' fees), judgments, fines and
settlement amounts incurred by any such person in any action or proceeding,
including any action by or in the right of the Company, arising out of such
person's services as a director or officer of the Company, any subsidiary of the
Company or any other Company or enterprise to which the person provides services
at the request of the Company. The Company believes that these provisions and
agreements are necessary to attract and retain qualified directors and officers.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of January 31, 2000,
as to shares of the Company's Common Stock beneficially owned by: (i) each of
the Named Officers listed in the Summary Compensation Table provided below,
(ii) each of the Company's directors, (iii) all directors and executive officers
of the Company as a group, and (iv) each person who is known by the Company to
own beneficially more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OWNED*
- ------------------------------------ ------------ ------------
<S> <C> <C>
State of Wisconsin Investment Board......................... 1,315,000 5.1
121 East Wilson Street
Madison WI 53702(1)
Kamran Elahian(2)........................................... 277,895 1.1
Prakash C. Agarwal(3)....................................... 1,144,360 4.5
Deepraj Puar(4)............................................. 182,126 **
Ron Jankov(5)............................................... 92,898 **
Daniel V. Hauck(6).......................................... 87,917 **
Brian Dougherty(7).......................................... 31,667 **
James Lally(8).............................................. 30,000 **
Klaus C. Wiemer(9).......................................... 21,667 **
Amnon Fisher................................................ 0 **
All directors and officers as a group(2)-(10)............... 3,046,179 11.9%
</TABLE>
- ------------------------
* Percent ownership is based on 25,535,569 shares of Common Stock outstanding
as of January 31, 2000. Unless otherwise indicated, the persons and
entities 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. Shares of Common Stock subject to options that are
currently exercisable or exercisable within 60 days of January 31, 2000 are
deemed to be outstanding and to be beneficially owned by the person holding
such options or warrants for the purposes of computing the percentage
ownership of such persons, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
** Less than 1%
(1) This information was obtained from filings made with the Securities and
Exchange Commission March 31, 2000 pursuant to Section 13(f) of the
Securities and Exchange Act of 1934.
(2) Includes an option to purchase 33,333 shares, exercisable within 60 days of
January 31, 2000.
(3) Includes an option to purchase 158,333 shares, exercisable within 60 days
of January 31, 2000.
(4) Includes an option to purchase 53,334 shares, exercisable within 60 days of
January 31, 2000.
(5) Includes an option to purchase 33,810 shares, exercisable within 60 days of
January 31, 2000.
(6) Includes an option to purchase 87,917 shares, exercisable within 60 days of
January 31, 2000.
(7) Includes an option to purchase 31,667 shares, exercisable within 60 days of
January 31, 2000.
(8) Includes an option to purchase 30,000 shares, exercisable within 60 days of
January 31, 2000.
(9) Includes an option to purchase 21,667 shares, exercisable within 60 days of
January 31, 2000.
(10) Includes options to purchase 465,001 shares for executives not named in
the table, exercisable within 60 days of January 31, 2000.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
by the Company during the fiscal year ended January 31, 2000 to the Company's
Chief Executive Officer and each of the Company's other most highly compensated
executive officers who earned in excess of $100,000 during such fiscal year
(collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
ANNUAL ------------------------------------------------
COMPENSATION SECURITIES
FISCAL ------------ UNDERLYING ALL OTHER
YEAR SALARY($) OPTIONS(#)(1) BONUS(2) COMPENSATION(3)
-------- ------------ ------------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Prakash C. Agarwal ............ 2000 $332,308 450,000 $ -- $ --
President and Chief Executive 1999 261,077 -- 294,500 5,851
Officer 1998 205,154 -- 180,000 6,229
Daniel V. Hauck ............... 2000 164,231 85,000(4)(5) 143,589 --
Vice President, Worldwide 1999 141,539 340,000 72,377 6,455
Sales
1998 -- -- -- --
Ron Jankov .................... 2000 255,770 180,000(4)(6) 33,750 --
Sr. VP and General Manager, 1999 236,055 80,000 110,000 2,613
Multimedia Products Division 1998 208,710 80,000 59,500 2,265
Amnon Fisher .................. 2000 233,468 210,000(4)(7) -- --
Sr. VP and General Manager, 1999 142,789 480,000 120,000 5,246
Consumer Products Division 1998 -- -- -- --
Deepraj Puar .................. 2000 220,771 130,000 -- --
Vice President, Technology 1999 171,161 -- 76,500 6,747
1998 146,308 -- 59,500 5,774
</TABLE>
- ------------------------
(1) Includes previously granted options that were repriced in 1998. See Option
Repricing discussion and Ten Year Option Repricings table. The original
option grant was cancelled and replaced with the repriced grant. However,
the information presented reflects both grants.
(2) Includes annual incentive compensation as well as discretionary bonus and
commissions.
(3) Includes matching contributions to the Company's 401(k) plan and premiums
paid for health and life insurance.
(4) Effective September 30, 1998, the Company offered repriced stock options to
all employees who held options to purchase Common Stock at exercise prices
above the September 30, 1998 market closing price of $11.50. The stock
options were repriced to $11.50, which was the market closing price on
September 30, 1998.
(5) Includes options to purchase 170,000 shares granted on March 9, 1998 that
were cancelled and subsequently reissued pursuant to the repricing on
September 30, 1998.
(6) Includes options to purchase 80,000 shares granted on January 2, 1998 that
were cancelled and subsequently reissued pursuant to the repricing on
September 30, 1998.
(7) Includes an option to purchase 240,000 shares granted on June 16, 1998 that
was cancelled and subsequently reissued pursuant to the repricing on
September 30, 1998.
7
<PAGE>
STOCK OPTIONS
The following table provides information concerning grants of options to
purchase the Company's Common Stock made to each of the Named Officers during
the fiscal year ended January 31, 2000. All options granted during the fiscal
year were granted under the Stock Plan. Each option becomes exercisable
according to a vesting schedule, subject to the employee's continued employment
with the Company.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
INDIVIDUAL GRANTS RATES OF STOCK PRICE
--------------------------------------------------------------------- APPRECIATION FOR OPTION
NUMBER OF % OF TOTAL TERM(1)
SECURITIES UNDERLYING OPTIONS GRANTED EXERCISE PRICE EXPIRATION -----------------------
OPTIONS GRANTED(#) TO EMPLOYEES PER SHARE(2) DATE 5% 10%
--------------------- --------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Prakash Agarwal...... 450,000(3) 11.5% $7.53 06/14/09 $2,131,349 $5,401,257
Amnon Fisher......... 210,000(3) 5.4% $7.53 06/14/09 $ 997,352 $2,520,587
Ron Jankov........... 180,000(3) 4.6% $7.53 06/14/09 $ 852,540 $2,160,503
Deep Puar............ 130,000(3) 3.3% $7.53 06/14/09 $ 615,723 $1,560,363
Daniel V. Hauck...... 85,000(3) 2.2% $7.53 06/14/09 $ 402,588 $1,020,237
</TABLE>
- ------------------------
(1) Potential gains are net of the exercise price but before taxes associated
with the exercise. The 5% and 10% assumed annual rates of compounded stock
appreciation based upon the deemed fair market value are mandated by the
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future common stock price. Actual
gains, if any, on stock option exercises are dependent on the future
financial performance of the Company, overall market conditions and the
option holders' continued employment through the vesting period. This table
does not take into account any appreciation in the deemed fair market value
of the Common Stock from the date of grant to the date of this Proxy
Statement, other than the columns reflecting assumed rates of appreciation
of 5% and 10%.
(2) Options were granted at an exercise price equal to the fair market value
based on the closing market value of Common Stock on the Nasdaq National
Market on the date of grant.
8
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth for each of the Named Officers certain
information concerning the number of shares subject to both exercisable and
unexercisable stock options at January 31, 2000. Also reported are values for
"in-the-money" options that represent the positive spread between the respective
exercise prices of outstanding stock options and the fair market value of the
Company's Common Stock as of January 31, 2000.
AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND FISCAL 2000 VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
JANUARY 31, 2000(1) JANUARY 31, 2000(1)(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Prakash C. Agarwal..... -- $ -- -- 600,000 $ -- $1,260,000
Daniel V. Hauck........ -- -- 77,917 177,083 -- 177,973
Ron Jankov............. -- -- 26,250 244,018 38,281 401,494
Deepraj Puar........... 111,667 838,752 1,667 180,000 14,711 378,444
Amnon Fisher........... -- -- 95,000 355,000 -- 439,698
</TABLE>
- ------------------------
(1) Certain of the options granted under the Stock Plan may be exercised
immediately upon grant and prior to full vesting, subject to the optionee's
entering a restricted stock purchase agreement with the Company with respect
to any unvested shares. Other options granted under the Stock Plan are
exercisable during their term in accordance with the Vesting Schedule set
out in the Notice of Grant.
(2) Market value of securities underlying in-the-money options at fiscal year
ended (based on $9.625 per share, the closing price of the Common Stock on
the Nasdaq National Market on January 30, 2000), minus the exercise price.
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 1996, in connection with the exercise of an option to purchase
restricted shares of Common Stock, the Company provided a loan to Mr. Agarwal,
the President, Chief Executive Officer, and a director of the Company, in the
aggregate principal amount of $400,000 at an annual interest rate of 5.88%
pursuant to two promissory notes secured by a pledge of an aggregate of 500,000
shares of Common Stock held by Mr. Agarwal. As of January 31, 2000, an aggregate
amount of $488,200, which includes interest payable, remained outstanding on the
remaining promissory note. The largest aggregate amount of indebtedness
outstanding during the last fiscal year was $488,200.
In April 1996, in connection with the exercise of an option to purchase
restricted shares of Common Stock, the Company provided a loan to Mr. Jankov,
Senior Vice President and General Manager, Multimedia Products Division of the
Company, in the aggregate principal amount of $40,000 at an annual interest rate
of 5.88% pursuant to a promissory note secured by a pledge of an aggregate of
50,000 shares of Common Stock held by Mr. Jankov. As of January 31, 2000, an
aggregate amount of $48,820, which includes interest payable, remained
outstanding on the remaining promissory note. The largest aggregate amount of
indebtedness outstanding during the last fiscal year was $48,820.
In April 1996, in connection with the exercise of an option to purchase
restricted shares of Common Stock, the Company provided a loan to Mr. Elahian,
the Chairman of the Board, in the aggregate principal amount of $100,000 at an
annual interest rate of 5.88% pursuant to a promissory note secured by a pledge
of an aggregate of 125,000 shares of Common Stock held by Mr. Elahian. In
September 1998, the Company provided a loan to Mr. Elahian, in the aggregate
principal amount of $110,000. On December 18, 1998, Mr. Elahian repaid the loan
in full. As of January 31, 2000, an aggregate amount of $72,596, which includes
interest payable, remained outstanding on the remaining promissory note. The
largest aggregate amount of indebtedness outstanding during the last fiscal year
was $120,090.
The Company believes that all related-party transactions described above
were on terms no less favorable than could have been otherwise obtained from
unrelated third parties. All future transactions between the Company and its
principal officers, directors and affiliates will be approved by a majority of
the independent disinterested members of the Board of Directors and will be on
terms no less favorable than could be obtained from unrelated third parties. In
addition, the Board of Directors has voted that any loans or guarantees in the
future by the Company for its officers, directors or affiliates will be approved
by a majority of the disinterested members of the Board on the basis that such
loans or guarantees will be made only for bona fide business purposes.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION*
The Company's compensation programs and policies applicable to its executive
officers are administered by either the Compensation Committee of the Board of
Directors or the Board of Directors. During the fiscal year ended January 31,
2000, the Board of Directors administered the Company's compensation programs
and policies. The Board did not modify or reject any action or recommendation by
the Compensation Committee. The Compensation Committee is made up entirely of
non-employee directors. The programs and policies are designed to provide
competitive compensation and to enhance stockholder value by aligning the
financial interests of the executive officers of the Company with those of its
stockholders.
COMPENSATION PHILOSOPHY
The Board of Directors has adopted a management compensation program based
on the following compensation principles:
- The Company provides the level of total compensation necessary to attract
and retain the best executives in its industry.
10
<PAGE>
- Compensation is linked to performance and to the creation of stockholder
value.
- Compensation balances rewards for short-term versus long-term results.
- Compensation programs include features that encourage executives to make a
long-term career commitment to the Company and its stockholders.
- Plans include measurements based on continuous growth and performance
relative to peer companies.
COMPENSATION METHODOLOGY
The Company strives to provide a comprehensive executive compensation
program that is both innovative and competitive, in order to attract and retain
superior executive talent.
Each year the Board of Directors reviews market data and assesses the
Company's competitive position in each component of executive compensation,
including base salary, annual incentive compensation and long-term incentives.
The descriptions below of the components of compensation contain additional
detail regarding compensation methodology. Compensation decisions regarding
individual executives may also be based on factors such as individual
performance, level of responsibility or unique skills of the executives.
COMPONENTS OF COMPENSATION
The Company's compensation package for executive officers consists of three
basic elements: (i) base salary; (ii) annual incentive compensation; and
(iii) long-term incentives in the form of stock options granted pursuant to the
Company's Amended 1993 Stock Plan. Other elements of compensation include a
defined contribution 401(k) plan and medical and life insurance benefits
available to employees, generally.
Each element of compensation has a different purpose. Salary and incentive
payments are mainly designed to reward current and past performance. Stock
options are primarily designed to provide a strong incentive for superior
long-term future performance and are directly linked to stockholders' interest
because the value of the awards will increase or decrease based upon the future
price of the Company's Common Stock.
BASE SALARY
Base salaries for fiscal 2000, reported herein, were determined by the Board
of Directors. The Board of Directors reviews salaries recommended by the Chief
Executive Officer for executive officers other than the Chief Executive Officer.
In conducting its review, the Board of Directors takes into consideration the
overall performance of the Company, the Chief Executive Officer's evaluation of
individual executive officer performance, the level of expertise, responsibility
and experience of executives and independent compensation surveys such as the
Radford Survey for High Technology Companies. Final decisions on base salary
adjustments for executives other than the Chief Executive Officer are made in
conjunction with the Chief Executive Officer. The Board of Directors
independently determines the base salary for the Chief Executive Officer by:
(i) examining the Company's performance against its preset goals,
(ii) examining the Company's performance within the semiconductor industry,
(iii) evaluating the overall performance of the Chief Executive Officer, and
(iv) comparing the base salary of the Chief Executive Officer to that of other
chief executive officers in the semiconductor, computer graphics and personal
computer software industries. Based upon the data and performance, the Chief
Executive Officer's base salary was raised from $270,000 to $315,000 in
April 1998.
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ANNUAL INCENTIVE COMPENSATION
The annual incentive compensation is a cash-based incentive bonus program.
The plan establishes a fixed percentage of the executive officer's annual salary
as their target annual incentive opportunity. The annual incentive compensation
provides for payment of cash bonuses to executive officers that are directly
related to the profitability and gross revenues of the Company, as well as
accomplishing specific milestone achievements, such as production related events
and achieving strategic design wins. In addition, the Board of Directors from
time to time may authorize the Company to pay individuals a discretionary bonus
based on the individual employee's overall performance.
The Committee approved no incentive compensation for the executive officers
for fiscal 2000. The bonus column of the Summary Compensation Table contains the
annual incentive payment as well as discretionary bonuses for fiscal 2000 for
each of the most highly compensated executive officers.
STOCK OPTIONS
Long-term incentives are provided through stock option grants to key
employees, including the Named Officers. The number of shares subject to each
stock option grant is based on the employee's current and anticipated future
performance and ability to affect achievement of strategic goals and objectives.
The Company grants options in order to directly link a significant portion of
each employee's total compensation to the long-term interest of stockholders.
Since options are granted at the fair market value of the Company's Common Stock
and vest over a multi-year period, employees will only receive value from the
options to the extent that they remain employed by the Company and the Company's
Common Stock price increases during the term of the options, thus generating
returns for both stockholders and executives.
It is the Company's policy generally to qualify compensation paid to
executive officers for deductibility under section 162(m) of the Internal
Revenue Code. Section 162(m) generally prohibits the Company from deducting the
compensation of executive officers that exceeds $1,000,000 unless that
compensation is based on the satisfaction of objective performance goals. The
Company's Stock Plan and the executive bonus programs are structured to qualify
awards under such plans as performance-based compensation and to maximize the
tax deductibility of such awards. However, the Company reserves the discretion
to pay compensation to its executive officers that may not be deductible.
STOCK PURCHASE PLAN
The Company maintains a qualified employee stock purchase plan subject to
provisions of the Internal Revenue Code, which is generally available to all
employees, and pursuant to which employees can purchase Company stock through
payroll deductions of up to 10% of their base salary. This plan allows
participants to buy Company stock at a discount from the market price.
OPTION REPRICING
On September 25, 1998, the Board of Directors approved the repricing of the
stock options, effective September 30, 1998, of all employees of the Company who
are not directors of the Company and who held options to purchase Common Stock
at exercise prices above the September 30, 1998 market closing price of $11.50.
These stock options were repriced to $11.50, which was the market closing price
on September 30, 1998. Two of the Named Officers, Ron Jankov and Amnon Fisher,
had options which qualified for repricing. The Board believes the repricing of
its stock options was essential to enable it to retain and attract its
workforce. The Company repriced these stock options because it believes that the
decline in its stock price reflects industry and Company specific conditions
that are likely to be long-term in nature. The existence of "out of the money"
options for such an extended period of time would severely impact the Company's
ability to retain its existing workforce and attract new employees. The Company
believes that the suspension of the ability to exercise options for six months
and possible forfeiture of all
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<PAGE>
options should the employee voluntarily resign during that period in exchange
for the new option pricing is a substantive contribution by the employee for the
new price. The Company does not believe that this repricing causes its stock
option plan to be subject to variable plan accounting.
TEN YEAR OPTION REPRICINGS
The following table sets forth certain information concerning the repricings
of options held by the executive officers of the Company over the past ten
years, all of which occurred on September 30, 1998:
<TABLE>
<CAPTION>
MARKET PRICE EXERCISE PRICE LENGTH OF ORIGINAL
NUMBER OF SECURITIES OF STOCK AT OF STOCK AT OPTION TERM
UNDERLYING OPTIONS/ TIME OF TIME OF NEW REMAINING AT DATE
SARS REPRICED OR REPRICING OR REPRICING OR EXERCISE OF REPRICING
NAME AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) PRICE($)
- ---- -------------------- ------------ -------------- -------- ------------------
<S> <C> <C> <C> <C> <C>
Amnon Fisher ........... 240,000 $11.50 $13.88 $11.50 9 years 252 days
Senior VP & General
Manager, Consumer
Products Division
Daniel V. Hauck ........ 170,000 11.50 17.25 11.50 9 years 161 days
VP, Worldwide Sales
Ron Jankov ............. 40,000 11.50 13.31 11.50 9 years 94 days
Senior VP & General 40,000 11.50 13.31 11.50 9 years 94 days
Manager, Multimedia
Products Division
Ibrahim Korgav ......... 25,000 11.50 13.31 11.50 9 years 94 days
VP, Manufacturing
Operations
</TABLE>
- ------------------------
The foregoing report has been furnished by the Board of Directors of NeoMagic
Corporation:
Kamran Elahian
Prakash Agarwal
Brian P. Dougherty
James Lally
Klaus Wiemer
- ------------------------
* The disclosures contained in this section of the Proxy Statement are not
incorporated by reference into any filings by the Company under the
Securities Act of 1933 or the Securities Act of 1934 that incorporated
filings or portions thereof (including this Proxy Statement or the
"Executive Compensation" section of this Proxy Statement) without specific
reference to the incorporation of this section of the Proxy Statement.
COMPENSATION COMMITTEE INTERLOCKS
Mr. Dougherty and Mr. Lally are members of the Compensation Committee. No
interlocking relationship exists between the Company's Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other Company, nor has any such interlocking relationship existed in the
past.
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<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who own more than 10
percent of a registered class of the Company's equity securities, to file
reports of ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission (the "SEC"). Officers, directors and greater than 10 percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received written representation from certain reporting persons that they were
not required to file Forms 5 for specified fiscal years, the Company believes
that all of its officers, directors and greater than 10 percent beneficial
owners complied with all filing requirements applicable to them with respect to
transactions during the fiscal year ended January 31, 2000.
14
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return of the
Company's Common Stock with The Nasdaq Stock Market Index (U.S.) and The Nasdaq
Electronic Components Stock Index. The comparison assumes the investment of $100
on March 13, 1997 (the date the Company's Common Stock became registered under
Section 12 of the Securities Exchange Act of 1934) based on the initial public
offering price of such stock on that date and that dividends were reinvested
when paid. The comparisons in the graph are required by the Securities and
Exchange Commission and are not intended to forecast or be indicative of
possible future performance of the Company's Common Stock.
COMPARISON OF 34 MONTH CUMULATIVE TOTAL RETURN AMONG NEOMAGIC CORPORATION, THE
NASDAQ STOCK MARKET INDEX (U.S.) AND THE NASDAQ ELECTRONIC COMPONENTS STOCK
INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
NEOMAGIC CORPORATION NASDAQ STOCK MARKET (U.S.) NASDAQ ELECTRONIC COMPONENTS
<S> <C> <C> <C>
3/14/97 100 100 100
1/98 142 126 115
1/99 117 198 185
1/00 77 308 359
</TABLE>
* $100 INVESTED ON 3/14/97 IN STOCK OR INDEX--
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JANUARY 31.
15
<PAGE>
PROPOSAL TWO--RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of Ernst & Young LLP as the Company's independent auditors
for the fiscal year ended January 31, 2001, subject to ratification by the
stockholders. Ernst & Young LLP has audited the Company's financial statements
since the Company's inception in May 1993. In the event that a majority of the
Votes Cast are against the ratification, the Board of Directors will reconsider
its selection.
Representatives of Ernst & Young LLP are expected to be present at the
Company's Annual Meeting. They will have an opportunity to make a statement, if
they desire to do so, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended January 31, 2000 is being furnished to stockholders concurrently herewith.
DEADLINE FOR RECEIPT OF PROPOSALS BY STOCKHOLDERS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's Annual Meeting of Stockholders for the
fiscal year ended January 31, 2001 must be received by the Secretary of the
Company no later than January 4, 2001, in order that they may be considered for
possible inclusion in the proxy statement and form of proxy relating to that
meeting.
OTHER MATTERS
The Company knows of no other business that will be presented at the Annual
Meeting. If any other business is properly brought before the Annual Meeting, it
is intended that proxies in the enclosed form will be voted in accordance with
the judgment of the persons voting the proxies.
Whether or not you intend to be present at the Annual Meeting, we urge you
to return your signed proxy promptly.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Arthur F. Schneiderman
Arthur F. Schneiderman
SECRETARY
Santa Clara, California
May 4, 2000
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<PAGE>
DETACH HERE
PROXY
NEOMAGIC CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 6, 2000
The undersigned stockholder of NeoMagic Corporation, a Delaware
corporation (the "Company"), hereby acknowledges receipt of the Notice of
Annual Meeting of Stockholders and Proxy Statement, each dated as of August
2, 2000, and hereby appoints PRAKASH AGARWAL and MARK A. SINGER, or either of
them, proxies and attorneys-in-fact, with full power to each of substitution,
on behalf and in the name of the undersigned, to represent the undersigned at
the Annual Meeting of Stockholders of NeoMagic Corporation to be held on
September 6, 2000, at 8:00 a.m., local time, at the Westin Santa Clara, 5101
Great America Parkway, Santa Clara, California, and at any adjournment or
adjournments thereof, and to vote all shares of Common Stock which the
undersigned would be entitled to vote, if then and there personally present,
on the matters set forth on the reverse side.
- ------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ------------- -------------
<PAGE>
[NEOMAGIC CORPORATION LOGO]
DIFFERENTIATION THROUGH INTEGRATION
NEOMAGIC DESIGNS, DEVELOPS AND MARKETS MULTIMEDIA ACCELERATORS FOR
SALE TO NOTEBOOK PC MANUFACTURERS.
DETACH HERE
- --- PLEASE MARK
X VOTES AS IN
- --- THIS EXAMPLE.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR THE
APPROVAL OF EACH OF PROPOSALS 2 AND 3 SET FORTH BELOW, AND AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING AND
ANY ADJOURNMENT(S) HEREOF.
1. ELECTION OF DIRECTORS
NOMINEES: Kamran Elahian, Prakash Agarwal, Brian P. Dougherty, James
Lally and Klaus Wiemer
FOR WITHHELD
ALL / / / / FROM ALL
NOMINEES NOMINEES
/ / ______________________________________
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE
2. Proposal to ratify the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending January 31,
2000:
FOR AGAINST ABSTAIN
/ / / / / /
3. In their discretion the proxies are authorized to vote upon such other
matter or matters which may properly come before the meeting or any
adjournment or adjournments thereof
FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
This proxy should be marked, dated, signed by the stockholder exactly as
his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as communal property, both should sign.
Signature:_________________ Date:______ Signature:_________________ Date:______
